The Illinois Appellate Court recently reinstated insurance coverage for an insured who had no knowledge of material misrepresentations made by another insured during policy renewal.   Illinois State Bar Ass’n Mut. Ins. Co. v. Law Office of Tuzzolino & Terpinas, No. 1-12-2660 (1st Dist. Nov. 22, 2013).  Will Terpinas, Jr. was an insured along was his law partner Sam Tuzzolino under a malpractice insurance policy.  As part of the renewal of that policy, Tuzzolino, unbeknownst to Terpinas, made misrepresentations on the renewal application as to circumstances that might give rise to a malpractice claim.  When Terpinas subsequently sought coverage under the policy for a malpractice suit, the insurer sought to rescind the policy as to all insureds based on Tuzzolino’s material misrepresentations as to such claim in the renewal application.  The trial court granted such policy rescission.  On appeal, the appellate court reversed the policy rescission as to Terpinas.  The court first reasoned that an “innocent insured” provision of the policy did not apply because its language was explicitly limited to circumstances where coverage would be lost due to failure to provide timely notice under a renewal policy; it did not apply to nondisclosure on a renewal application.  However, the court then held that the Illinois common law innocent insured doctrine protected Terpinas.  The doctrine “applies in a situation where two or more insureds have an insurance policy and one of the insureds commits acts that would normally void the insurer’s contractual obligations,” so long as “a reasonable person would not understand that the wrongdoing of a co-insured would prevent recovery under the policy.”  The court reasoned that this doctrine applied to material misrepresentations made during the formation of the policy, and that Illinois law favors innocent insureds and protects them from insurance companies seeking to void their policies.  The court also found that the severability clause in the policy created separate and distinct contracts as between Terpinas and Tuzzolino, allowing rescission as to the latter but not the former.