Mercury Indem. Co. of Illinois v. Kim

• Citation: 830 N.E.2d 603
• Decision Date: 23 May 2005
• Docket Number: No. 1-04-1808.,1-04-1808.
• Parties: MERCURY INDEMNITY COMPANY OF ILLINOIS, Plaintiff-Appellee, v. Susanne KIM, Individually and as Special Administrator of the Estate of Sam Kim, deceased, Defendant-Appellant.
• Court: Illinois Supreme Court

Page 603

830 N.E.2d 603

MERCURY INDEMNITY COMPANY OF ILLINOIS, Plaintiff-Appellee, v. Susanne KIM, Individually and as Special Administrator of the Estate of Sam Kim, deceased, Defendant-Appellant.

No. 1-04-1808.

Appellate Court of Illinois, First District, First Division.

May 23, 2005.

Philip J. Ryan, Ryan & Landa, Waukegan, for Appellant.

David E. Neumeister, Megan A. Byrnes, Querrey & Harrow, Ltd., Chicago, for Appellee.

Justice GORDON delivered the opinion of the court:

Susanne Kim, individually and as special administrator of the estate of her late husband, Sam Kim, appeals the grant of summary judgment to Mercury Indemnity Company of Illinois in its declaratory judgment action where it sought a declaration of no coverage as to the Kims' uninsured motorist claims. We affirm.

FACTUAL BACKGROUND

Hong Yel Khang, of Lindenhurst, Illinois, drove a 1999 Hyundai Sonata in Munsing, Michigan, on September 15, 2001. Accompanying her in the car as passengers were her husband, Bokim Khang, as well as the Kims. Hong Yel failed to obey a stop sign at the intersection of two highways and drove her car into another (the second car). The force of the impact forced that car to roll onto its side and into the path of other oncoming traffic, where it was struck again by a third car. The local sheriff's department and fire department responded to the scene. Approaching the crash site, a fire truck driver lost control of his vehicle and struck a sheriff's deputy. As a result of these cumulative collisions three people died: Sam Kim, the deputy, and a passenger in the second car. The driver of the second car, Susanne Kim and Bokim Khang were also seriously injured.

The Khangs' vehicle was insured through Mercury. Bokim was the named insured, and Hong Yel was listed as an additional driver. The policy had bodily injury liability coverage limits of $100,000 per person and $300,000 per accident, as well as uninsured and underinsured motorist coverage with the same limits.

After investigating the incident, Mercury concluded that four of the crash victims, the three deceased and Susanne Kim, each suffered individual damages of at least $300,000, the maximum liability insurance payout available to all of the victims under the liability coverage. Mercury, therefore, attempted to prorate the $300,000 between the six victims, offering to provide $71,250 each to the estate of Sam Kim, the estate of the deputy, the estate of the second car's passenger, and to Susanne Kim, as well as offering $12,000 to Bokim Khang and $3,000 to the driver of the second car. The Kims, however, also sought to recover $28,500 each under the Khangs' underinsured motorist coverage, so that they would each receive the $100,000-per-person limit provided for bodily injuries.

In response to the Kims' underinsured motorist claims, Mercury filed this declaratory judgment action.¹ In its complaint, Mercury contended that underinsured motorist coverage was unavailable to the Kims as the Khangs' car was not an underinsured vehicle as defined in the policy. Specifically, Mercury relied on the following exclusion:

"An underinsured motor vehicle does not include a land motor vehicle:

1. insured under the liability coverage of this policy."

In their countercomplaint, the Kims contended that the exclusion violated the provision of the Insurance Code requiring the inclusion of underinsured motorist coverage and defining "underinsured motor vehicle," which provided as follows:

"For the purposes of this Code, the term `underinsured motor vehicle' means a motor vehicle whose ownership, maintenance or use has resulted in bodily injury or death of the insured, as defined in the policy, and for which the sum of the limits of liability under all bodily injury liability insurance policies or under bonds or other security required to be maintained under Illinois law applicable to the driver or to the person or organization legally responsible for such vehicle and applicable to the vehicle, is less than the limits for underinsured coverage provided the insured as defined in the policy at the time of the accident. The limits of liability for an insurer providing underinsured motorist coverage shall be the limits of such coverage, less those amounts actually recovered under the applicable bodily injury insurance policies, bonds or other security maintained on the underinsured motor vehicle. However, the maximum amount payable by the underinsured motorist coverage carrier shall not exceed the amount by which the limits of the underinsured motorist coverage exceeds the limits of the bodily injury liability insurance of the owner or operator of the underinsured motor vehicle." 215 ILCS 5/143a-2(4) (West 2000).

As shall be discussed further below, the Kims also argued that their receipt of underinsured motorist benefits was mandated under Cummins v. Country Mutual Insurance Co., 178 Ill.2d 474, 227 Ill.Dec. 539, 687 N.E.2d 1021 (1997), which the Kims represented as holding that a car was considered to be underinsured according to statute when the amount of liability benefits received by an injured party was less than the policy limits for underinsured motorist coverage. Finally, the Kims alleged that Mercury intended to pay liability and uninsured motorist coverage in claims such as theirs as evidenced by subsequent policy provisions stating:

"Limits of Liability-Bodily Injury

Caused by an Uninsured or Underinsured Motorist

Regardless of the number of cars insured by us or others, separate premiums paid, insureds, claims made, claimants, policies or vehicles involved or lawsuits brought, the most we will pay is the limit of liability shown in the Declarations subject to the following:

* * *

3. Any amount payable shall be reduced by any amount paid or payable to or for the insured:

* * *

b. for bodily injury under the liability coverage of this policy * * *.

* * *

4. Any payments made to a person for bodily injury under the uninsured or underinsured motorist coverage shall reduce any amount payable to that person under the bodily injury liability coverage of this policy."

The Kims argued that, at the very least, these later provisions created an ambiguity in the policy as a whole that required a construction in favor of coverage for them under the underinsured motorist provisions.

In response to the arguments of the Kims' countercomplaint, Mercury argued, among other things, that Cummins had been superseded by an amendment to the underinsured motor vehicle coverage statute. Mercury contended that under the amendment, as recognized in Thurman v. Grinnell Mutual Reinsurance Co., 327 Ill.App.3d 920, 261 Ill.Dec. 839, 764 N.E.2d 130 (2002), an insurer's limit of liability to an injured party was restricted to the difference between the policy limits of any applicable liability coverage and the limits of the underinsured motorist coverage. Since the Khangs' liability and underinsured motorist policy limits were identical, Mercury argued that no underinsured motorist payments could be due to the Kims by statute.

Both sides moved for summary judgment and the circuit court granted that relief to Mercury. The Kims appeal presenting the arguments discussed above as well as contending that Illinois' underinsured motorist coverage statute violates constitutional due process and the freedom to contract.

ANALYSIS

The Kims first contend that the exclusion of a vehicle insured under the liability coverage of a policy from the underinsured motorist coverage would violate the provisions of the underinsured motorist statute and is therefore unenforceable. For the following reasons, we disagree.

While there is no particular case upholding the application of the insured car exclusion to prohibit the stacking of underinsured and liability coverage under the same policy, Illinois courts twice upheld the application of a named driver exclusion² to preclude uninsured motorist coverage in Heritage Insurance Co. of America v. Phelan, 59 Ill.2d 389, 321 N.E.2d 257 (1974), and Rockford Mutual Insurance Co. v. Economy Fire & Casualty Co., 217 Ill.App.3d 181, 160 Ill.Dec. 187, 576 N.E.2d 1141 (1991).

The Phelan court observed:

"It is clear from the holdings of Barnes [v. Powell, 49 Ill.2d 449, 454, 275 N.E.2d 377 (1971)], Doxtater [v. State Farm Automobile Insurance Co., 8 Ill.App.3d 547, 290 N.E.2d 284 (1972),] and [Madison County Automobile Insurance Co. v.] Goodpasture [49 Ill.2d 555, 276 N.E.2d 289 (1971),] and from the language of the statute itself that the legislative intent was to provide extensive uninsured-motorist protection for those who are `insureds' under an automobile liability policy. But neither the statute nor any of these decisions places any restriction on the right of the parties to an insurance contract to agree on which persons are to be the `insureds' under an automobile insurance policy. It is only after the parties designate the `insureds' that the statute and case law become applicable and prohibit an insurance company from either directly or indirectly denying uninsured-motorist coverage to an `insured.'" Phelan, 59 Ill.2d at 395, 321 N.E.2d 257.

In Rockford Mutual, an Economy policy otherwise covering the Fred family automobile precluded all coverage if such vehicle was operated by John Durbin. Rockford Mutual, 217 Ill.App.3d at 183, 160 Ill.Dec. 187, 576 N.E.2d 1141. While driving that vehicle, Durbin caused a crash killing his passenger, Larry Sneed. Rockford Mutual, 217 Ill.App.3d at 183-84, 160 Ill.Dec. 187, 576 N.E.2d 1141. Sneed's mother, as administrator of his estate, made a liability claim against Economy and, after it was denied based on the named insured exclusion, sought uninsured motorist benefits through her own Rockford Mutual policy that also covered her son as a member of her household. Rockford Mutual, 217 Ill.App.3d at 183, 160 Ill.Dec. 187, 576 N.E.2d 1141. Rockford Mutual, in turn, sought a judicial declaration that uninsured motorist...