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September 13, 2001

No. 2--00--0974 

_______________________________________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT

_______________________________________________________________________________________________

JUSTICE BYRNE delivered the opinion of the court:

This is an appeal from an order granting summary judgment toplaintiff, Bradley D. Wood, with respect to the limit of liabilityinsurance extended to him by defendant, National Liability & FireInsurance Company (National), and from an order dismissing thethird-party complaint against Larry Laux, the independent insuranceagent who procured the policy. We affirm.

The following facts are undisputed. Plaintiff applied forautomobile liability insurance on December 30, 1996, through Laux. Wood's application did not contain an election form to reject thelimits of uninsured/underinsured motorist (UM/UIM) coverage. Lauxcompleted the application on Wood's behalf and submitted it todefendant National. National issued Wood a policy of insurance onDecember 31, 1996, for the period from December 31, 1996, toDecember 31, 1997, insuring Wood against loss resulting fromliability. The bodily injury liability policy limit was $350,000.

National forwarded Wood's application to Transcom, its generalagent. Transcom notified Laux that the application was incompletebecause it did not include an election form allowing Wood to rejectUM/UIM limits higher than those statutorily required. According toTranscom, Wood's UM/UIM limits would automatically be increased tomatch the liability limits if the form was not submitted by January21, 1997. Laux submitted the form on Wood's behalf the followingday.

Wood was involved in an automobile accident several monthslater and made a UM/UIM claim upon his National policy for thepolicy amount of $350,000. National asserted that, because Woodrejected the higher amount, his UM/UIM policy coverage was reducedto the statutory minimums of $20,000/$40,000. Upon the denial ofhis claim, Wood filed this action seeking the reformation of theinsurance contract to reflect the intended limit of $350,000. National filed a third-party complaint against Laux, alleging that,if it was required to pay Wood the higher limit, then Laux wasliable for inappropriately handling the election form.

Wood filed a motion for summary judgment. He claimed that theapplication process was complete when National accepted hisapplication and issued him a policy. Wood also alleged that, evenif the application process was not completed, the election formthat rejected the higher limits did not contain an expressrejection of those limits and therefore was statutorilyineffective. Pursuant to section 2--615 of the Code of CivilProcedure (735 ILCS 5/2--615 (West 1998)), Laux filed a motion todismiss the third-party complaint, alleging that the duty to obtainan appropriate rejection of the higher limits was exclusive to theinsurer and that Laux, as an independent agent, had no such duty.

The trial court agreed with Wood's argument and enteredsummary judgment on the complaint for reformation. Because thejudgment also absolved Laux of any responsibility for the higherlimit, the court granted Laux's motion to dismiss the third-partycomplaint. National timely appeals.

We begin our analysis by addressing the issue of whether thetrial court properly granted the motion for summary judgment andthe motion to dismiss. A court should enter summary judgment whenthe pleadings, depositions, admissions, and affidavits show thereis no genuine issue of material fact and the movant is entitled tojudgment as a matter of law. 735 ILCS 5/2--1005(c) (West 1998). Summary judgment is a drastic remedy that should be granted onlywhen the right of the moving party to relief is free from doubt. Loyola Academy v. S&S Roof Maintenance, Inc., 146 Ill. 2d 263, 271(1992). The court must construe the evidence strictly against themovant and liberally in favor of the opponent. Gatlin v. Ruder,137 Ill. 2d 284, 293 (1990). Even if the facts are undisputed, ifrational persons could draw different inferences from those facts,summary judgment is inappropriate. Stephen v. Swiatkowski, 263Ill. App. 3d 694, 697 (1994).

As with a motion to dismiss, the standard of review of asummary judgment ruling is de novo. Crum & Forster Managers Corp.v. Resolution Trust Corp., 156 Ill. 2d 384, 390 (1993); Rodgers v.Peoples Gas, Light & Coke Co., 315 Ill. App. 3d 340, 347 (2000);Holloway v. Meyer, 311 Ill. App. 3d 818, 822 (2000).

National contends that the trial court erred in grantingsummary judgment because the UM/UIM election form was part of theapplication process and therefore fulfills the statutoryrequirement that the applicant be provided a place on theapplication to reject UM/UIM limits above the statutory minimum. National maintains that the application in this case consists ofthe four-page document and the UM/UIM election form.

National ignores that the linchpin of this case turns on thesalient fact that Wood never rejected the limits before the policyof insurance was issued in the manner required by statute. Section143a--2(1) of the Illinois Insurance Code (Code) (215 ILCS 5/143a--2(1) (West 1998)) requires that the amount of uninsured motoristcoverage be included in an insurance policy "in an amount equal tothe insured's bodily injury liability limits unless specificallyrejected by the insured." The statute further provides:

"(1) *** Each insurance company providing the coveragemust provide applicants with a brief description of thecoverage and advise them of their right to reject the coveragein excess of the [statutory minimum]. ***

(2) *** [E]very application for motor vehicle coveragemust contain a space for indicating the rejection ofadditional uninsured motorist coverage. No rejection of thatcoverage may be effective unless the applicant signs orinitials the indication of rejection." (Emphasis added.) 215ILCS 5/143a--2(1), (2) (West 1998).

Section 143a--2 mandates that the insurer providing coverage advisethe applicants of their right to reject the coverage in excess ofthe statutory minimum and that every application must contain aspace for the rejection of additional UM/UIM coverage. 215 ILCS5/143a--2 (West 1998). The Code requires insurance policies to beissued with UM/UIM coverage equal to the liability limits unlessthere is a specific rejection of this coverage by the applicant. 215 ILCS 5/143a--2 (West 1998). It logically follows that, if theinsurer does not obtain the UM/UIM rejection at the time the policyis issued, the UM/UIM limits must equal the bodily injury liabilitylimits.

In this case, National does not dispute that the initialapplication Wood completed did not contain an election provisionfor the rejection of additional UM/UIM coverage. Nor does Nationaldispute that the policy of insurance had been issued before theelection form was completed. Thus, because Wood had not rejectedthe limits when the policy of insurance was issued, the UM/UIMlimits, by law, equaled the bodily injury liability limits of thepolicy. See 215 ILCS 5/143a--2 (West 1998).

Moreover, it is clear that the legislature intended theapplication process to cease once an insurance policy is issued. In 1990, the legislature modified section 143a--2 so that the word"applicant" replaced the word "insured." Pub. Act 86--1156, eff.August 10, 1990. Before the change, the "insured" had the right toelect or reject UM coverage. In its present form, the statute"leaves no room for doubt as to whom UM coverage must beexplained." Messerly v. State Farm Mutual Automobile InsuranceCo., 277 Ill. App. 3d 1065, 1069 (1996). We believe that therevision makes it clear that the applicant, not the insured, beprovided with a description of the UM coverage and that theapplicant be given an opportunity to reject the coverage. Thealteration is significant because it is the applicant who needs toknow the extent and amount of his or her coverage before he or sheagrees to enter into a contract of insurance.

On the date the election form was signed, Wood was no longeran applicant because he had been issued a policy. Therefore, theelection form could not serve as a valid rejection of the UM/UIMcoverage. Because National failed to comply with the mandatoryprovisions of the Code, the trial court correctly granted summaryjudgment and reformed the contract. See Nila v. Hartford InsuranceCo. of the Midwest, 312 Ill. App. 3d 811 (2000)(insurer required toprovide UM coverage equal to the amount of bodily injury coverageprovided by policy since insured never rejected such additionalcoverage, regardless of continuous agreement included in policyissued to deceased husband).

National argues that the term "application" is not definedunder the Code and this supports its argument that the applicationprocess was "ongoing." We fail to see the logic of this argument.No matter how "application" is defined, once the policy was issued,the application process had ended. Regardless, we find nothingthat would allow an interpretation of "application" in the mannerNational suggests.

We further find National's reliance on Cloninger v. NationalGeneral Insurance Co., 109 Ill. 2d 419 (1985), and Meadows v. StateFarm Mutual Automobile Insurance Co., 237 Ill. App. 3d 240 (1992),in support of its argument that an application can be made up ofvarious documents, to be misplaced. The Cloninger court did notrefer to three separate documents as making up an "applicationprocess." The court merely stated that this was the insurancecompany's argument. More importantly, however, unlike in thepresent case, neither Cloninger nor Meadows involved an applicationprocess that continued after the applied-for policy had beenissued.

We note that National could have provided a separate documentaccompanying the application form. National could have refrainedfrom issuing the policy until it had all the documentation itdesired. Moreover, once the rejection form had been executed,National could have issued an addendum or a new policy reflectingthe change in UM/UIM limits. It is clear, however, that Nationalwas under no obligation to issue coverage if the applicationprocess was incomplete, and, having done so, it is in no positionnow to claim that the application was not complete until Woodrejected the UM/UIM limits.

Accordingly, we find that the trial court properly grantedsummary judgment to Wood. We further find that the trial courtproperly dismissed the complaint against Laux. Based on ourdecision, we need not address the issue of whether the electionform used by National was legally sufficient.

Based on the foregoing, the judgment of the circuit court ofKane County is affirmed.

Affirmed.

McLAREN and GROMETER, JJ., concur.