DeGrand v. Motors Ins. Corp.

• Decision Date: 30 May 1990
• Docket Number: No. 89-2487,89-2487
• Citation: 903 F.2d 1100
• Parties: Luke DeGRAND and Karen Kies DeGrand, Plaintiffs-Appellants, v. MOTORS INSURANCE CORPORATION, a foreign corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1100

903 F.2d 1100

Luke DeGRAND and Karen Kies DeGrand, Plaintiffs-Appellants, v. MOTORS INSURANCE CORPORATION, a foreign corporation Defendant-Appellee.

No. 89-2487.

United States Court of Appeals Seventh Circuit.

Argued Feb. 15, 1990.

Decided May 30, 1990.

Donald C. Clark, Jr., McDermott, Will & Emery, Chicago, Ill., for plaintiff-appellant Luke DeGrand.

Donald C. Clark, Jr., Karen K. DeGrand, McDermott, Will & Emery, Luke DeGrand, Clark & DeGrand, Chicago, Ill., for plaintiff-appellant Karen K. DeGrand.

John T. Hickey, Jr., Ronald Betman, Kirkland & Ellis, Chicago, Ill., for defendant-appellee.

Before BAUER, Chief Judge, and CUDAHY and POSNER, Circuit Judges.

CUDAHY, Circuit Judge.

Shortly after they purchased a new car, Luke DeGrand and Karen Kies DeGrand were involved in an automobile accident in Evanston, Illinois. Karen sustained a severe and permanent ankle injury as a result of the two-car collision; to obtain compensation for Karen's injuries, the DeGrands sued the driver of the other car. Unfortunately, that driver carried only minimal bodily injury liability coverage--$50,000--which was insufficient to compensate Karen.

Karen and Luke DeGrand turned to their own automobile insurance policy to determine whether their policy covered the excess damage. When they discovered that it did not, they sued their insurer, Motors Insurance Corporation ("MIC"), in state court for reformation of their insurance contract, claiming that MIC had violated Illinois law by failing to offer them underinsured motorist coverage in an amount equal to their bodily injury liability coverage. MIC removed the action to federal district court, which, pursuant to its diversity jurisdiction, granted MIC's motion for summary judgment. This appeal followed.

I.

On February 8, 1986, the DeGrands purchased a 1986 Chevrolet Nova from Ruby Chevrolet in Chicago. Before driving their new car from the lot, the DeGrands applied for and received automobile insurance from MIC. Their insurance policy provided bodily injury and property damage coverage of $100,000 per person/$300,000 per occurrence. The policy also provided uninsured motorist coverage of $15,000 per person/$30,000 per occurrence ¹ and--although allegedly unknown to the DeGrands--underinsured motorist coverage in the same amounts. Indeed, the DeGrands claim that they never knew about the underinsured motorist coverage until after their accident. There is no question, however, that the DeGrands had sufficient knowledge (whether actual or imputed) of their uninsured motorist coverage. Luke DeGrand's signature appears underneath the following text in the insurance application: "I acknowledge that I have been provided an opportunity to purchase uninsured motorists coverage up to the limits of my bodily injury limits." Approximately one month after their new automobile rolled off Ruby Chevrolet's lot, the DeGrands were involved in the accident that led to this lawsuit.

Put simply, the question presented by these facts is whether Illinois law requires insurers to offer underinsured motorist coverage to automobile purchasers who opt for minimum uninsured motorist coverage. The DeGrands argue that MIC's failure to offer them underinsured motorist coverage--irrespective of their policy's provision of underinsured motorist coverage in the same amount as uninsured motorist coverage--constituted a breach of its legal responsibilities under the Illinois Insurance Code. MIC, on the other hand, counters that recent amendments to the Illinois Insurance Code make such an offer unnecessary when an individual elects minimum uninsured motorist coverage: so long as the policy contains an equivalent amount of uninsured and underinsured coverage, as it did in this case, Illinois law does not require insurers to offer additional underinsured motorist coverage. The district court sided with MIC and granted MIC's motion for summary judgment, explaining that the Illinois Insurance Code did not require insurers to offer additional underinsured motorist coverage when individuals elect uninsured motorist coverage at the statutory minimum:

Because plaintiffs' insurance policy provided uninsured motorist coverage at the minimum limit, MIC was under no statutory duty to make an offer of underinsured motorist coverage. As of July 1, 1983, an insurer's obligation to include--not merely offer--underinsured motorist coverage turns on whether the policy provides for uninsured motorist coverage in excess of the statutory minimum. Since plaintiffs' policy was issued after July 1, 1983 and provided uninsured motorist coverage only at the statutory minimum level, their claim against MIC must fail.

Opinion at 5, 1989 WL 68400 (N.D.Ill. June 14, 1989). Of course, we review de novo a district court's grant of summary judgment. Puckett v. Soo Line R.R., 897 F.2d 1423, 1425 (7th Cir.1990); Colan v. Cutler-Hammer, Inc., 812 F.2d 357, 360 (7th Cir.) (per curiam), cert. denied, 484 U.S. 820, 108 S.Ct. 79, 98 L.Ed.2d 42 (1987).

II.

The parties do not dispute that before July 1, 1983, Illinois law required insurers to offer underinsured motorist coverage in an amount commensurate with the policy limits governing bodily injury liability. This requirement is clear from the face of the statute itself; Section 143a-2 of the Illinois Insurance Code provides, in pertinent part:

(1) Required offer of additional uninsured motor vehicle coverage. No policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be renewed or delivered or issued for delivery in this State unless uninsured motorist coverage as required in Section 143a of this Act is offered in an amount up to the insured's bodily injury liability limits.

. . . . .

(3) Required offer of underinsured motorist coverage. Until July 1, 1983, any offer made under subsection (1) of this Section shall also include an offer of underinsured motorist coverage.

Ill.Ann.Stat. ch. 73, p 755a-2 (Smith-Hurd Supp.1989) (footnote omitted). Under this statutory scheme, Illinois required the insurer to make a meaningful offer of underinsured motorist coverage that could then be accepted or rejected by each insured individual. Ill.Ann.Stat. ch. 73, p 755a-2(4) (Smith-Hurd Supp.1989); Cloninger v. National Gen. Ins. Co., 109 Ill.2d 419, 429, 94 Ill.Dec. 549, 551, 553, 488 N.E.2d 548, 550, 552 (1985).

Illinois lawmakers substantially altered this scheme in August 1982, P.A. 82-920, by amending the Illinois Insurance Code. That amendment provides, again in pertinent part:

(5) On or after July 1, 1983, no policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be renewed or delivered or issued for delivery in this State with respect to any motor vehicle registered or principally garaged in this State unless underinsured motorist coverage is included in such policy in an amount at least equal to the total amount of uninsured motorist coverage provided in that policy where such uninsured motorist coverage exceeds the limits set forth in Section 7-203 of the Illinois Vehicle Code.

Ill.Ann.Stat. ch. 73, p 755a-2 (Smith-Hurd Supp.1989). Put simply, the statute seems to state that whenever an individual purchases uninsured motorist coverage in an amount greater than the statutory minimum, the insurer must also provide underinsured motorist coverage in the same amount. The insurer must provide and the insured must accept the underinsured motorist coverage; Illinois law, after July 1, 1983, did not permit the insurer or the insured to reject this coverage.

This new statutory scheme provided, by operation of law, additional coverage for many individuals purchasing automobile insurance after July 1, 1983. This result seems to be consistent with the legislature's purpose in enacting the statute's predecessor; as the Illinois Supreme Court observed in Cloninger,

[T]he legislature recognized that soaring medical costs often left injured parties only partially compensated for their injuries. The legislature was obviously concerned with adequately compensating injured parties. As stated by Representative Epton during a House debate on what would later be codified as section 143a-2(3): "[T]his Bill is in behalf of the consumer." House Debate, June 20, 1980, at 48.

109 Ill.2d at 424, 94 Ill.Dec. at 551, 488 N.E.2d at 550. This rationale applies with equal force to each automobile purchaser who elects, after July 1, 1983, to purchase uninsured motorist coverage in an amount above the statutory minimum: he or she must also purchase underinsured motorist coverage in the same amount.

But here we are presented with an anomaly. Seemingly, according to the language of the statute, any automobile owner who purchases the minimum amount of uninsured motorist coverage is entitled neither to an offer of underinsured motorist coverage nor to automatic inclusion of such coverage in an amount commensurate with uninsured motorist coverage. The former entitlement apparently applies only to those policies purchased before July 1, 1983; the latter apparently applies only to those policies that include uninsured motorist coverage in an amount greater than the statutory minimum.

We cannot discern any reason why Illinois lawmakers left this apparent window of underinsured motorist non-coverage for owners of automobiles who have the least amount of uninsured motorist coverage. ² The legislative history supporting the amendment does not shed clear light on the matter, nor does either party to the appeal offer cogent reasons why the legislature would have adopted this course. Instead, the parties focus upon Illinois case law to interpret this statutory language. Since this is a diversity case, such focus is proper. Cf. United States v....