410_C140

COVERAGE FOR NEW VEHICLE WITHIN 30 DAYS OF PURCHASE

Personal Automobile	Uninsured Motorist
Newly Acquired Vehicle

On October 12, 1999, Corey Smith bought a 1986 Chevrolet Caprice. He also owned a 1995 Chevrolet Monte Carlo, which he had purchased early in 1999. Smith had insurance coverage for the Monte Carlo with American Freedom Insurance Company.

The day after he purchased the Caprice, Smith was involved in an auto accident. The Caprice was totaled, and Smith and his passenger sustained injuries. Smith testified that as of the day of the accident he had not notified American Freedom of his purchase of the Caprice. He also testified that the Monte Carlo was still working and that he was going to sell it later that week.

Five days after the accident Smith made a claim for the Caprice under the uninsured motorist provision of the policy he had obtained for the Monte Carlo. American Freedom filed a declaratory judgment action seeking a finding that the accident was not covered by the policy.

The American Freedom policy contained two applicable provisions. The first covered an automobile "acquired by the named insured during the policy period, provided it replaces an insured automobile." The second covered an automobile acquired by the insured if the insured notified the company in writing within 30 days of his election to make the coverage applicable to the newly acquired automobile.

The trial court found that the Caprice was an insured automobile as defined by both provisions of the policy. American Freedom appealed.

The Appellate Court of Illinois disagreed with the trial court's finding that the Caprice was an insured automobile under the theory it was purchased to replace the Monte Carlo. It found a vehicle cannot be a "replacement" vehicle if the insured retains ownership of the "replaced" vehicle and if it remains operable, regardless of the insured's intent to replace the vehicle. However, the court agreed with the trial court's finding that the Caprice was an insured automobile under the second applicable provision. The court acknowledged Smith did not provide notice to American Freedom of his intent to apply insurance coverage to the Caprice, but this didn't matter. Where an accident occurs before the lapse of a grace period, Illinois law provides coverage whether or not notice has been given. The judgment of the circuit court was affirmed.

American Freedom Insurance Company v. Smith-No. 1-02-2343-Appellate Court of Illinois, First District, First Division-March 8, 2004-806 North Eastern Reporter 2d 1136