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Docket No. 90993-Agenda 18-January 2002.

GENERAL CASUALTY INSURANCE COMPANY, Appellee, 
v. GEORGE W. LACEY, Appellant.

JUSTICE THOMAS delivered the opinion of the court:

The issue presented is whether, under the facts of this case,the liability-limit exhaustion clause in General Casualty InsuranceCompany's underinsured-motorist policy is valid and enforceable.We hold that it is.

BACKGROUND

On June 22, 1991, George W. Lacey was operating a car thatwas involved in a motor vehicle accident. At the time of theaccident, Lacey was covered by an underinsured-motorist policyissued by General Casualty. That policy provided coverage limitsof $100,000 per accident and $300,000 per occurrence, andincluded the following liability-limit exhaustion clause:

"We will pay under this coverage only after the limits ofliability under any applicable bodily injury liability bondsor policies have been exhausted by payment of judgmentor settlements, unless we:

(1) Have been given written notice in advance of asettlement between an 'insured' and the owner or operatorof the 'underinsured motor vehicle;' and

(2) decide to advance payment to the 'insured' in anamount equal to the tentative settlement."

The other driver involved in the accident was insured by AllstateInsurance Company under a policy providing bodily injury liabilitylimits of $50,000 per person and $100,000 per accident.

In the summer of 1997, Lacey settled with Allstate for$42,500. Lacey then filed a claim with General Casualty forunderinsured-motorist benefits. General Casualty denied theunderinsured-motorist claim, insisting that underinsured-motoristcoverage was not triggered because the $42,500 settlement did notexhaust the at-fault driver's bodily injury liability limits. Inaddition, General Casualty sought a declaration from the trial courtthat Lacey was not entitled to underinsured-motorist benefits. Inresponse, Lacey conceded that the $42,500 settlement withAllstate failed to exhaust the at-fault driver's bodily injury liabilitylimits. Nevertheless, Lacey argued that he was entitled tounderinsured-motorist benefits because General Casualty'sliability-limit exhaustion clause was void as against public policy.Both parties moved for summary judgment, and the trial courtentered summary judgment in General Casualty's favor. With onejustice dissenting, the appellate court affirmed. No. 3-99-0977(unpublished order under Supreme Court Rule 23). We grantedLacey's petition for leave to appeal. 177 Ill. 2d R. 315(a).

ANALYSIS

Summary judgment is proper where, when viewed in the lightmost favorable to the nonmoving party, the pleadings, depositions,admissions, and affidavits on file reveal that there is no genuineissue as to any material fact and that the moving party is entitledto judgment as a matter of law. 735 ILCS 5/2-1005(c) (West2000); Ragan v. Columbia Mutual Insurance Co., 183 Ill. 2d 342,349 (1998). The standard of review for the entry of summaryjudgment is de novo. Ragan, 183 Ill. 2d at 349.

Before this court, Lacey again argues that General Casualty'sliability-limit exhaustion clause is void as against public policy. Insupport of this argument, Lacey points to the current enactment ofsection 143a-2(7) of the Illinois Insurance Code, which provides:

"A policy which provides underinsured motor vehiclecoverage may include a clause which denies paymentuntil the limits of liability or portion thereof under allbodily injury liability insurance policies applicable to theunderinsured motor vehicle and its operators have beenpartially or fully exhausted by payment of judgment orsettlement. A judgment or settlement of the bodily injuryclaim in an amount less than the limits of liability of thebodily injury coverages applicable to the claim shall notpreclude the claimant from making an underinsuredmotorist claim against the underinsured motoristcoverage." 215 ILCS 5/143a-2(7) (West 2000).

Conceding that this version of section 143a-2(7) did not becomeeffective until January 1, 1997, Lacey nevertheless argues-withoutany citation to authority-that the validity of General Casualty'sliability-limit exhaustion clause "should be governed by the law ineffect at the time of settlement."

We must reject Lacey's argument. While we agree with Laceythat statutes represent an expression of public policy (State FarmMutual Automobile Insurance Co. v. Smith, 197 Ill. 2d 369, 372(2001)), it is equally well settled that "[s]tatutes in force at thetime an insurance policy was issued are controlling." (Emphasisadded.) State Farm, 197 Ill. 2d at 372; Cummins v. CountryMutual Insurance Co., 178 Ill. 2d 474, 482 (1997). This principleis rooted, of course, in both the constitutional prohibition on theimpairment of contracts (U.S. Const., art. I,