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26 October 2000

No.3--99--0884

IN THE

APPELLATECOURT OF ILLINOIS

THIRDDISTRICT

A.D., 2000

JUSTICE HOMER delivered the opinion of the court:

The plaintiff, Nancy M. Kapinus, brought a declaratoryjudgment action in the circuit court of Will County against thedefendant, State Farm Mutual Automobile Insurance Company (StateFarm). The plaintiff owned State Farm policies on two vehicleswhen she was injured in an accident in 1998. She sought adeclaration limiting the aggregate setoff under the underinsuredmotorist clauses of the two policies to $50,000, the amount paidby the underinsured driver. Both parties filed motions forsummary judgment. The trial court granted State Farm's motion. The plaintiff appeals, and we affirm.

In her complaint, the plaintiff alleged that on April 4,1998, she was insured by two State Farm policies, each providingunderinsured motorist coverage limits of $100,000 per person and$300,000 per accident. On that date, she was injured in anautomobile accident caused by the negligence of Richard L. Pope. Pope was insured by Guidant Insurance Company with a policyproviding bodily injury liability limits of $50,000 per personand $100,000 per accident. Guidant tendered its $50,000 limit.

Both of the plaintiff's policies contain provisions definingthe insurer's liability for underinsured motorist coverage. Theseprovisions provide, in relevant part, as follows:

"The most we will pay any one insured is *** :

a. the difference between the 'each person' limit of thiscoverage and the amount paid to the insured by or for anyperson or organization who is or may be held legally liablefor the bodily injury." (Emphasis in original.)

State Farm agreed to "stack" the policies. It then issuedthe plaintiff two separate payments of $50,000, after subtractingthe $50,000 paid by Guidant from the $100,000-per-personunderinsured motorist coverage limit of each State Farm policy. The plaintiff filed suit asking the court to declare that StateFarm was allowed a single $50,000 setoff, thereby entitling theplaintiff to an aggregate sum of $150,000 from State Farm.

On cross-motions for summary judgment, the trial court ruledthat (1) the underinsured motorist clauses of the State Farmpolicies were not ambiguous with respect to setoffs for amountspaid by third-party tortfeasors; (2) no ambiguities were createdwhen reading the policy provisions in connection with theIllinois Insurance Code (Code) (215 ILCS 5/1 et seq. (1998)); and(3) no public policy of this state would be violated by allowingState Farm a $50,000 setoff against each of the plaintiff'spolicies. Accordingly, the court granted State Farm's summaryjudgment motion and denied the plaintiff's. The plaintiffappeals.

ISSUES AND ANALYSIS

In construing the language of an insurance policy, a courtmust ascertain and give effect to the intention of the parties asexpressed in their agreement. State Farm Mutual AutomobileInsurance Co. v. Villicana, 181 Ill. 2d 436, 441, 692 N.E.2d1196, 1199 (1998). To that end, terms utilized in the policy areaccorded their plain and ordinary meaning and those terms will beapplied unless such application contravenes public policy. Villicana, 181 Ill. 2d at 441-42, 692 N.E.2d at 1199. Inaddition, a court must read the policy as a whole and considerthe type of insurance purchased, the nature of the risksinvolved, and the overall purpose of the contract. Villicana,181 Ill. 2d at 442, 692 N.E.2d at 1199.

The construction of an insurance policy is a question of lawsubject to de novo review. Villicana, 181 Ill. 2d at 441, 692N.E.2d at 1199. Likewise, our review of a trial court's award ofsummary judgment is de novo. King v. Allstate Insurance Co., 269Ill. App. 3d 190, 192, 645 N.E.2d 503, 505 (1994).

We first consider plaintiff's contention that section 143a--2(4) of the Code creates ambiguities in the computation of aninsurer's liability when multiple policies are issued by a singleinsurer.

It is well settled that, when an insurance policy is issued,applicable statutory provisions in effect at the time are treatedas part of the policy. Chester v. State Farm Mutual AutomobileInsurance Co., 227 Ill. App. 3d 320, 591 N.E.2d 488 (1992). Inpresenting her first two arguments, the plaintiff relies on thefollowing language contained in section 143a--2(4) of the Code:

"The limits of liability for an insurer providingunderinsured motorist coverage shall be the limits of suchcoverage, less those amounts actually recovered under theapplicable bodily injury insurance policies, bonds or othersecurity maintained on the underinsured motor vehicle." (Emphasis added.) 215 ILCS 5/143a--2(4) (West 1998).

The plaintiff argues that the Code's reference to "aninsurer" entitled State Farm, as the sole insurer, to a singlesetoff of the amount recovered from the underinsured motorist($50,000).

When considering the above-referenced statutory provision inisolation, the plaintiff's position seems reasonable. However, astatute will not be construed as creating ambiguities where theydo not exist. See Obenland v. Economy Fire & Casualty Co., 234Ill. App. 3d 99, 599 N.E.2d 999 (1992). Within the context ofthe full paragraph of section 143a--2(4), it is apparent that the"limits of liability" provision refers to an insurer's liabilityon a "per policy" rather than a "per insurer" basis. Section143a--2(4) defines the term "underinsured motor vehicle" withreference to "the policy" providing underinsured motoristcoverage.⁽¹⁾ Read in context, it is clear that the Code limits anyone insurer's liability on each policy to the limit ofunderinsured motorist coverage provided in each policy, less theamount recovered from the underinsured motorist. Applying theCode to the policies in question, State Farm's liability forunderinsured motorist coverage under each policy was $100,000,less $50,000--or a total of $50,000 under each policy. Therefore, the trial court did not err in denying the plaintiff'srequest for a ruling that State Farm's liability under the twopolicies was $150,000.

The plaintiff next argues that the term "actuallyrecovered," as used in section 143a--2(4) of the Code, creates anambiguity in the underinsured motorist coverage provision of herinsurance policies. She contends that if "actually recovered" isgiven its literal meaning, State Farm would be entitled to asingle setoff of $50,000.

This argument was considered and rejected in Chester v.State Farm Mutual Automobile Insurance Co., 227 Ill. App. 3d 320,591 N.E.2d 488 (1992), and Obenland, 234 Ill. App. 3d 99, 599N.E.2d 999. In Chester, the plaintiff had underinsured motoristcoverage under two policies issued by two insurers. Theunderinsured motorist paid $25,000. The plaintiff argued thatthe actual recovery of $25,000 could be deducted only from theexcess carrier's coverage. The appellate court disagreed,allowing both State Farm, as the primary insurer, and WorldwideInsurance Group, as the excess insurer, to reduce the limit oftheir underinsured motorist coverage by $25,000. Citing thestatutory provision here at issue, the court explained:

"[t]he particular limits of any underinsured motoristcoverage are established by the difference between theamount recovered by the plaintiff from a bodily injuryliability insurance policy and the stated limit for theunderinsured motorist coverage." Chester, 227 Ill. App. 3dat 327, 591 N.E.2d at 493.

The same result was reached by the court in Obenland, 234 Ill.App. 3d at 107-12, 599 N.E.2d at 103-05.

We hold that the Code does not require a different result inthis case merely because the two policies in question here wereissued by the same insurer. Accordingly, we affirm the trialcourt's ruling declaring that no ambiguities were created byreading the terms of State Farm's policies in connection with theCode.

The plaintiff contends that this State's public policy isviolated by allowing State Farm to limit its liability under theunderinsured motorist provisions of the two policies to anaggregate of $100,000. In support of this argument, theplaintiff cites Roberts v. Northland Insurance Co., 185 Ill. 2d262, 705 N.E.2d 762 (1998).

In Roberts, the plaintiff was covered by two underinsuredmotorist policies issued by different companies, both of whichsought to set off the insured's coverage by the full amount ofworkers' compensation received by the insured. Our supremecourt, ruling in favor of the plaintiff, held that only theprimary insurer was entitled to deduct from its coverage the fullamount of workers' compensation benefits. Any remaining setoffcould be applied to the excess insurer's coverage. The courtdistinguished Chester and Obenland by noting that the purpose ofthe workers' compensation setoff was to simulate thereimbursement required by the Workers' Compensation Act (805 ILCS305/5(b) (West 1992)). Thus, the court explained, the workers'compensation setoff implicated different considerations thansetoffs for amounts received from a tortfeasor's liabilityinsurance. Roberts, 185 Ill. 2d at 270, 705 N.E.2d at 766.

Unlike Roberts, the deductions applied against theunderinsured motorist coverage limits in this case involved nomore than an interpretation of contracts of insurance. Thepublic policy of this state does not require that courtsinvalidate clearly written policy language simply to avoiddisappointment to the insured. Menke v. Country Mutual InsuranceCo., 78 Ill. 2d 420, 401 N.E.2d 539 (1980). State Farm'sunderinsured motorist policies contained "limits of liability"provisions that tracked the language of section 143a--2(4) of theCode. Each policy clearly and unambiguously allowed a deductionfor the full amount paid by the underinsured motorist. Therefore, the trial court did not err in concluding that StateFarm was entitled to reduce the underinsured motorist coveragepayable under each policy by $50,000.

For the reasons stated, we affirm the judgment of thecircuit court of Will County.

Affirmed.

BRESLIN and LYTTON, JJ., concurring.

1. ¹The section begins as follows:

"For the purpose of this Code the term 'underinsuredmotor vehicle' means a motor vehicle whose ownership,maintenance or use has resulted in bodily injury ordeath of the insured, as defined in the policy, and forwhich the sum of the limits of liability under allbodily injury liability insurance policies *** is lessthan the limits for underinsured coverage provided theinsured as defined in the policy at the time of theaccident." (Emphasis added.) 215 ILCS 5/143a--2(4)(West 1998).