American Family Mut. Ins. Co. v. Baaske

• Citation: 157 Ill.Dec. 239,572 N.E.2d 308,213 Ill.App.3d 683
• Decision Date: 08 May 1991
• Docket Number: No. 2-90-0905,2-90-0905
• Parties: , 157 Ill.Dec. 239 AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Plaintiff and Counterdefendant-Appellee v. Peter S. BAASKE, et al., Defendants and Counterplaintiffs-Appellants. Second District
• Court: United States Appellate Court of Illinois

Page 308

572 N.E.2d 308

213 Ill.App.3d 683, 157 Ill.Dec. 239

AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Plaintiff and Counterdefendant-Appellee v. Peter S. BAASKE, et al., Defendants and Counterplaintiffs-Appellants.

No. 2-90-0905.

Appellate Court of Illinois,

Second District.

May 8, 1991.

William S. Wojcik, Wojcik & Wojcik, Woodridge, for Peter S. Baaske, Miriam D. Baaske, Walter Baaske and Cynthia Baaske.

Robert L. Bartolone, Sandra Young, Purcell & Wardrope, Chtd., Chicago, for American Family Mut. Ins. Co.

Justice NICKELS delivered the opinion of the court:

Defendants and counterplaintiffs, Peter and Miriam Baaske, and Walter and Cynthia Baaske as guardians and next friends of Erin and Brittany Baaske (the Baaskes), appeal from a judgment entered on the pleadings on the Baaskes' counterclaim for declaratory judgment. On appeal, the Baaskes contend that the nonbinding arbitration clause in the uninsured motorist section of their policy with plaintiff and counterdefendant, American Family Mutual Insurance Company (American Family), violates the Illinois Insurance Code (Ill.Rev.Stat.1987, ch. 73, par. 613 et seq.) and is contrary to public policy.

In March 1988, Peter, Miriam, Erin and Brittany Baaske were injured when the car they were riding in was struck by a car driven by an uninsured motorist. At the time of the accident, Peter had an automobile insurance policy with American Family with limits of $100,000/$300,000. The Baaskes filed claims under the uninsured motorist coverage of the policy. Apparently, the parties were unable to agree on the amount of the claim, and the Baaskes requested arbitration. The "Arbitration" section in the uninsured motorist provision of the policy provides:

"We or an insured person may demand arbitration if we do not agree:

1. That the person is legally entitled to recover damages from the owner or operator of an uninsured motor vehicle.

2. On the amount of payment under this Part.

If the insured person requests arbitration, that person and we will each select one arbitrator. The two arbitrators will choose a third. If arbitrators are not selected within 45 days from the insured person's requests either that person or we may request that the arbitration be submitted to the American Arbitration Association.

Any arbitration award not exceeding the minimum limit of the Illinois Safety Responsibility Law:

1. Will be binding; and

2. May be entered as a judgment in any court having jurisdiction.

* * * * * *

If any arbitration award exceeds the minimum limit of the Illinois Safety Responsibility Law, either party has a right to trial on all issues in any court having jurisdiction."

The Baaskes and American Family named their arbitrators. A problem arose, however, concerning whether the Baaskes' arbitrator was discharged, and, as a result, the third arbitrator was not named within 45 days. The Baaskes then requested that the dispute be submitted to the American Arbitration Association (the AAA).

American Family filed a complaint for declaratory judgment requesting that the court determine whether the Baaskes were in compliance with the arbitration clause and whether, under the circumstances, they were entitled to submit the dispute to the AAA. The Baaskes responded with a counterclaim for declaratory judgment. They sought a declaration that the policy provision allowing for trial after arbitration if the award exceeds the minimum limit of the Illinois safety responsibility law (the nonbinding arbitration clause) was contrary to section 143a(1) of the Illinois Insurance Code (the Code) (Ill.Rev.Stat.1987, ch. 73, par. 755a) as well as public policy.

American Family filed a motion for judgment on the pleadings on the complaint and the counterclaim. Following a hearing, the court denied the motion for judgment on the pleadings as to the complaint, but it entered judgment on the counterclaim. The court found that there was "no specific language * * * in the statute which would preclude the form of nonbinding arbitration contained in the policy" and that the nonbinding arbitration clause was not contrary to public policy. Following the entry of a final order on the complaint, the Baaskes filed their notice of appeal from the judgment on the counterclaim.

Section 143a(1) of the Code requires automobile insurance carriers to provide uninsured motorist coverage to their policyholders. It also provides:

"No * * * policy shall be renewed or delivered or issued for delivery in this State * * * unless it is provided therein that any dispute with respect to [uninsured motorist] coverage shall be submitted for arbitration to the American Arbitration Association or for determination in the following manner: Upon the insured requesting arbitration, each party to the dispute shall select an arbitrator and the two arbitrators so named shall select a third arbitrator. If such arbitrators are not selected within 45 days from such request, either party may request that such arbitration be submitted to the American Arbitration Association." (Ill.Rev.Stat.1987, ch. 73, par. 755a(1).)

The Baaskes contend that where uninsured motorist claims are involved the statute provides for only one method of dispute resolution, which is arbitration. They conclude, therefore, that the policy provision permitting trial after arbitration violates the statute. American Family disagrees, contending that the statute merely requires the parties to arbitrate first and does not preclude subsequent trial. The issue is whether section 143a(1) mandates binding arbitration.

In construing a statute, courts must ascertain and give effect to the intent of the legislature and, accordingly, must look to the statutory language as the best indication of the intent of the drafters. (Kirwan v. Welch (1989), 133 Ill.2d 163, 165, 139 Ill.Dec. 836, 549 N.E.2d 348.) Under the statute, disputes involving uninsured motorist claims must be submitted for arbitration; the word "arbitration," however, is not defined in the statute or elsewhere in the Code. When a statutory term is undefined, it must be given its ordinary and popularly understood meaning. Lake County Board of Review v. Property Tax Appeal Board (1988), 119 Ill.2d 419, 423, 116 Ill.Dec. 567, 519 N.E.2d 459.

"Arbitration" is defined as the "hearing and determination of a case between pa...