Martin v. Government Employees Insurance

206 Ill. App. 3d 1031 · 1990

Facts

Royce L. Martin, a postal employee, sought new automobile insurance for his 1985 Pontiac Firebird from Government Employees Insurance Company (GEICO) as his existing policy was expiring in March 1986. He obtained and returned a GEICO form for a free quotation, after which GEICO sent him a personal quote sheet, an application, a cover letter, and instructions. Martin, who is deaf, completed the application, which included a new question about physical impairments, and mailed it with his premium check on March 14, 1986. He believed GEICO's materials constituted an offer that he accepted by mailing his application and payment. On March 27, 1986, Martin's automobile was stolen, and he reported the loss to GEICO the same day. GEICO subsequently returned his application and uncashed check, stating it could not consider his application until certain questions were completed, and later denied liability on the grounds that the application had not been completed and approved.

Issue

The sole question before the court was whether GEICO and Martin had entered into a contract of insurance at the time Martin reported the loss of his automobile.

Holding

The court held that no enforceable contract of insurance existed between Martin and GEICO on the date Martin's automobile was stolen. Therefore, the trial court's dismissal of the action was affirmed.

Rule

Contract formation requires an offer, a strictly conforming acceptance, and supporting consideration. Generally, an application for insurance is considered the applicant's offer to purchase insurance, which the insurer must accept after evaluating underwriting risk before a binding contract is formed. An insurer's express reservation of the right to approve an application before extending coverage means no contract is formed until such approval is objectively manifested to the applicant. Internal processing actions by the insurer, such as stamping a check for deposit, do not constitute an objective manifestation of acceptance. While ambiguous language in solicitation materials or representations of immediate coverage can lead to a contract upon application, this is not the case when the materials unequivocally condition coverage on approval.

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