Find Legal Information

November 16, 2001

1-99-3374

JUSTICE REID delivered the opinion of the court:

This is an appeal from the grant of cross-motions for summary judgments in a declaratoryjudgment action. Both cross-motions were granted in part and denied in part. On appeal, theissues are: (1) whether the circuit court correctly reformed the commercial trucking policy torequire that the insurer was obligated to provide uninsured motorist coverage only in the amountof the statutory minimum requirements rather than in an amount equal to the liability limits of thepolicy; (2) whether plaintiff's receipt of workers' compensation benefits in excess of the statutoryminimum for uninsured motorist coverage served as a set-off, barring plaintiffs' uninsuredmotorist claim; (3) whether the exclusive remedy afforded by the Workers' Compensation Act toworkers who are accidentally injured in the scope of their employment bars plaintiffs' claim foruninsured motorist coverage against the decedent's employer or its insurer; and (4) whetherplaintiffs' claim for uninsured motorist coverage is barred where the commercial trucking policyspecifically excludes from coverage employees who are injured during the course of employmentand are covered by workers' compensation. The trial court found that the policy should bereformed to include the statutory minimum uninsured motorist coverage. Therefore, the workers'compensation set-off would bar plaintiffs' uninsured motorist claim. We reverse and remand.

Tommy J. Norris (decedent) was killed in a traffic accident on October 4, 1989. He wasdriving a truck owned by Jones Truck Lines, Inc., an Arkansas corporation headquartered inSpringdale, Arkansas, with a fleet of approximately 3,500 trucks. The other party, Tommy E.Kidd (Kidd), was an uninsured motorist. The truck the decedent was driving was registered inIllinois and garaged in Chicago. At the time of the accident, the decedent owned an automobileinsured through the Allstate Insurance Company under policy number 032911574. At the time ofhis death, the decedent was survived by his wife Joanne Norris, his minor son Tommy J., hisadult son Thadeus and his adult daughter Nicolette. The workers' compensation insurer paidJoanne and Tommy J. over $200,000.

Thadeus and Nicolette Norris (the Norris plaintiffs) brought a declaratory judgmentaction against Allstate, based on the Norrises' automobile insurance policy with Allstate, seekinga declaration that Allstate was obliged to pay uninsured motorists' benefits to Tommy Norris'adult children. They allege that the adult children were not recipients of benefits under theIllinois Workers' Compensation Act (Act) (820 ILCS 305/1 et seq. (West 2000)) because the Actonly applies to spouses and minor children. Allstate brought a motion for judgment on thepleadings which was sustained, the trial court holding that the benefits received under theWorkers' Compensation Act were in excess of the $20,000 uninsured motorist limits in theAllstate policy and the setoff provisions contained therein. That order was not appealed, soAllstate is not a party to this appeal.

The original complaint was amended to add defendant AIG Risk Management, Inc.(AIG). By the time the second amended complaint was allowed, the trial court had authorized thesubstitution of the National Union Fire Insurance Company of Pittsburgh, Pennsylvania (NationalUnion) as a defendant. National Union had issued commercial fleet general liability policynumber RMCA53357-76 to Jones Truck Lines. Said policy was to be in effect from September26, 1989, until September 26, 1990. That policy had personal injury limits of $2 million peraccident but contained no uninsured motorist coverage whatsoever.

While arguing before the trial court on September 3, 1999, the Norris plaintiffs arguedthat the trial court should apply the liability limits of the policy, $2 million. National Unionargued that it was more appropriate to apply the statutory limits of $20,000 per person and$40,000 per occurrence. The trial court, commenting that the relief sought by the Norrisplaintiffs was more in the nature of a punitive sanction for National Union's failures in draftingthe policy, found in favor of National Union on that issue. The trial court, in granting bothmotions in part and denying them in part, ordered the policy reformed to the minimum statutorylimits.

National Union had previously filed a motion for summary judgment based upon theexclusivity provisions of the Workers' Compensation Act. The trial court denied that motion onSeptember 18, 1998, but the parties requested no finding pursuant to Supreme Court Rule 304(a)(155 Ill. 2d R. 304(a)). Appeal from that order is included in National Union's cross-appeal.

ANALYSIS

I

The Norris plaintiffs argue that the trial court, while correct in reforming the policy, erredin limiting the reformation to the statutory minimum of $20,000 per person and $40,000 peraccident. Instead, the Norris plaintiffs argue the correct reformation was to the bodily injurylimits of $2 million. They argue that the uninsured motorist statute, by operation of law,becomes a part of every insurance contract entered into in Illinois. According to the Norrisplaintiffs, the statute requires that no insurance policy should be issued or renewed unlessuninsured coverage is offered that is equal to the personal injury limits. The named insured canelect to take or reject the offer of uninsured coverage in excess of the minimum statutory limits. The Norris plaintiffs argue that, where there exists an insufficient offer of uninsured motoristcoverage which justifies reformation, the courts should impose the higher level, not the lowerone. Plaintiffs further argue it would be unfair to require the injured party or his or her heirs tobear the burden of the fact that the insurer failed to make the proper offer. We agree.

The Norris plaintiffs next contend that any purported rejection by Jones Truck Lines ofthe excess uninsured motorist coverage, even a rejection that is consistent with its commonlyused business practices, was invalid because the policy of insurance did not comply with the law. The Norris plaintiffs claim there is no way Jones could have consented to an insurance policywithout uninsured coverage, so any purported rejection was against public policy.

National Union responds that the purpose of the uninsured motorist statute is "to placethe insured policyholder in substantially the same position he would occupy if the uninsureddriver had been minimally insured." Luechtefeld v. Allstate Insurance Co., 167 Ill. 2d 148, 152(1995). Though they agree that a failure to make an offer of coverage equal to the bodily injurylimits level can result in the reformation of coverage to the higher level, they argue that this doesnot apply when the rejection of coverage is clear and specific. National Union argues that Jones,as a sophisticated insured, had the business practice of rejecting all coverage except theminimum, choosing to be a self-insurer to the greatest extent possible. To that end, Jones has aself-insured retention of a $500,000 deductible. Jones contends that Larry May, Jones' riskmanager, negotiated the policy in face-to-face negotiations. As a result of those negotiations,National Union argues that it offered Jones Truck Lines uninsured motorist coverage up to the $2million limits of the policy and Jones Truck Lines made a knowing and intelligent rejection ofthat offer.

The Norris plaintiffs next contend that the Illinois Workers' Compensation Act (820 ILCS305/1 et seq. (West 2000)) does not bar recovery under the policy. The claims at issue are notbarred, as National Union suggests, by the exclusive remedy provisions of the Workers'Compensation Act, since the object of that act is to afford financial protection for employeesinjured at work without regard to fault and to limit the employer's liability for work injuries. Zurowska v. Berlin Industries, Inc., 282 Ill. App. 3d 540 (1996). The Norris plaintiffs argue thatthe inclusion of the employer's insurer in the Act does not compromise the uninsured motoristclaim, since those claims are from injured persons legally entitled to recover. They argue that theintent of the statute is to place a claimant in the same position as if the tortfeasor causing theinjuries had been insured. Scudella v. Illinois Farmers Insurance Co., 174 Ill. App. 3d 245(1988). The other driver in the underlying accident, Kidd, is a complete stranger to the decedentand his employer and employee relationship with Jones Truck Lines. The Norris plaintiffs arguethat they would be legally entitled to recover from Kidd, assuming they could sustain theirburden of proving he was at fault. Because there is no form of immunity at work here, the Norrisplaintiffs argue that National Union would not be precluded from pursuing subrogation rightsagainst Kidd as it would against a co-employee. They argue that National Union's contractualrights are not impaired and there is no reason to preclude the Norris plaintiffs' claim foruninsured motorist benefits.

National Union responds that, since the Norris plaintiffs received workers' compensationbenefits, there should be a setoff of any recovery here against those benefits. Since NationalUnion argues the policy reformation should be limited to the statutory minimum limits, and theNorris plaintiffs have received workers' compensation benefits in excess of $200,000, recoveryshould be precluded as a result. National Union also argues that the policy itself, underExclusion 3, precludes coverage for "[a]ny obligation for which the `insured' or the `insured's'insurer may be held liable under any workers' compensation, disability benefits or unemploymentcompensation law or any similar law." They further argue that Illinois courts have enforced theset-off of workers' compensation benefits received with respect to uninsured motorist coverage. Sulser v. Country Mutual Insurance Co., 147 Ill. 2d 548 (1992); State Farm Mutual AutomobileInsurance Co. v. Murphy, 263 Ill. App. 3d 100 (1994).

Alternatively, in its cross-appeal, National Union argues that workers' compensation isthe exclusive remedy for workers injured in the course of their employment, not only againstemployers and co-employees, but against the employer's insurer as well. They also argue that thefacts of this case do not qualify for an escape from the exclusivity of remedy rule, since theNorris plaintiffs would have to prove the decedent's injuries were not accidental, did not arisefrom his employment, were not received during the course of his employment or werenoncompensable under the Act. Meerbrey v. Marshall Field & Co., 139 Ill. 2d 455 (1990).

The standard of review is de novo since this appeal arises from an order grantingsummary judgment. Aetna Casualty & Surety Co. of Illinois v. Allsteel, Inc., 304 Ill. App. 3d 34,39 (1999). "In ruling on a motion for summary judgment, the trial court must view all evidencein the light most favorable to the nonmovant." Boldini v. Owens Corning, 318 Ill. App. 3d 1167,1170 (2001). The judgment sought shall be rendered without delay if the pleadings, depositions,and admissions on file, together with the affidavits, if any, show that there is no genuine issue asto any material fact and that the moving party is entitled to a judgment as a matter of law. 735ILCS 5/2-1005(c) (West 2000).

"When a court interprets an insurance policy, there are only two sources upon which itmay base its analysis: the plain language of the policy and the plain language of the InsuranceCode of 1937 as it existed at the time the policy was written." Cincinnati Insurance Co. v.Miller, 190 Ill. App. 3d 240 (1989), citing Bailey v. State Farm Fire & Casualty Co., 156 Ill.App. 3d 979, 984 (1987). Statutes that are in force at the time a policy is issued are controlling. Brooks v. Cigna Property & Casualty Cos., 299 Ill. App. 3d 68, 72 (1998), citing AmericanFamily Mutual Insurance Co. v. Baaske, 213 Ill. App. 3d 683, 688 (1991). "Where a statuteprovides for uninsured motorist coverage, the statute becomes a part of each policy to which thestatute applies to the same effect as if the statutory language were written in the policy." Brooksv. Cigna, 299 Ill. App. 3d at 72, citing 8C J. Appleman & J. Appleman, Insurance Law &Practice