Greenawalt v. State Farm Ins. Co.

• Decision Date: 05 March 1991
• Docket Number: No. 1-88-3177,1-88-3177
• Citation: 210 Ill.App.3d 543,569 N.E.2d 154
• Parties: , 155 Ill.Dec. 154 Patricia GREENAWALT, Plaintiff-Appellant, v. STATE FARM INSURANCE COMPANY, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 154

569 N.E.2d 154

210 Ill.App.3d 543, 155 Ill.Dec. 154

Patricia GREENAWALT, Plaintiff-Appellant, v. STATE FARM INSURANCE COMPANY, Defendant-Appellee.

No. 1-88-3177.

Appellate Court of Illinois First District, First Division.

March 5, 1991.

Edward R. Vrdolyak, Ltd., Chicago, for plaintiff-appellant.

Taylor, Miller, Sprowl, Hoffnagle & Merletti, Chicago (Yvonne M. Kaminski, of counsel), for defendant-appellee.

Justice CAMPBELL delivered the opinion of the court:

Plaintiff, Patricia Greenawalt, appeals from a judgment entered on the pleadings in favor of defendant, State Farm Insurance Co., in an action seeking a declaratory judgment as to State Farm's obligations pursuant to the uninsured motorist provision of an automobile policy issued to plaintiff and her husband (the "Policy"). The sole issue on appeal is whether the trial court properly granted State Farm's motion for judgment on the pleadings based on its determination that State Farm's obligation under its uninsured motorist provision was offset and fully satisfied by the joint tortfeasor's settlement. For the following reasons, the judgment of the trial court is reversed and the cause is remanded for further proceedings.

The underlying facts are undisputed. On May 11, 1986, plaintiff was a passenger in an automobile driven by her husband, which was involved in a collision with an automobile driven by Timothy Anderson. As a result of the collision, plaintiff allegedly suffered severe injuries. Plaintiff filed insurance claims against both drivers. Anderson's insurance company settled with plaintiff for $100,000, the maximum amount under his policy. Because section 1 of AN ACT to revise the law in relation to husband and wife (Ill.Rev.Stat.1985, ch. 40, par. 1001), in effect at the time of the accident, prevented plaintiff from filing a tort action against her husband, she filed a claim with defendant, her insurer, seeking damages pursuant to the uninsured and underinsured motorist provisions of the three automobile policies she and her husband had with State Farm. ¹ State Farm denied that it owed any coverage to plaintiff, and plaintiff filed a complaint for declaratory judgment seeking a declaration as to the rights and obligations of the parties and compelling State Farm to proceed to arbitrate plaintiff's claims.

State Farm then moved for judgment on the pleadings on the grounds that pursuant to the uninsured motorist provision of the Policy, any amount received by an insured from or on behalf of a person legally liable for her personal injuries was to be set off against the liability limits of the uninsured motorist provision. Because the Policy's liability limit for uninsured motorist coverage was $100,000 and plaintiff had already received $100,000 from Anderson's insurer, State Farm claimed that there was no uninsured motorist coverage available. In response, plaintiff argued that her damages exceeded $100,000 and that she had valid claims against both tortfeasors, Anderson and her husband, and, that as joint tortfeasors, each is liable for damages based upon his percentage share of liability.

Following a hearing on the motion, the trial court granted State Farm's motion. In entering its decision, the trial court stated:

"[T]he state of the law is, with regard to contribution, * * * inadequately stated. But the contractual provisions here are not, in my opinion, vague. And to the extent that they impact on those rights of contribution among joint tortfeasors, is not violative of public policy as well. So she is limited to the contractual limitation of recovery with regard to the setoff of $100,000 that was made. And since their liability is a maximum of $100,000 minus the setoff, there is no liability contractually, and therefore judgment on the pleadings is granted in favor of State Farm."

Plaintiff's appeal followed.

On appeal, plaintiff claims that because her damages exceed the amount of the settlement with Anderson, State Farm remains obligated on behalf of her husband, as a joint tortfeasor, pursuant to the Policy's uninsured motorist coverage. Plaintiff further argues that because she is not seeking double recovery, the settlement with Anderson should not be set off against State Farm's uninsured motorist liability limits. Instead, the settlement should merely reduce the amount of recoverable damages by $100,000.

In response, State Farm argues that the plain language of the Policy provides that payment by any person who is legally liable for bodily injury to the insured reduces the amount payable under the Policy's uninsured motorist provision. The Policy limits uninsured motorist coverage to $100,000. Therefore, Anderson's $100,000 settlement acted to eliminate any obligation State Farm had under the Policy's uninsured motorist provision.

Section III of the Policy, entitled "Limits of Liability--Coverage U", provides, in relevant part, that:

"1. The amount of coverage is shown on the declarations page under 'Limits of Liability--U--Each Person, Each Accident'. Under 'Each Person' is the amount of coverage for all damages due to bodily injury to one person [$100,000]. * * *

2. Any amount payable under this coverage shall be reduced by any amount paid or payable to or for the insured:

a. by or for any person or organization who is or may be held legally liable for the bodily injury to the insured;

b. for bodily injury under the liability coverage; or

c. under any workers' compensation, disability benefits or similar law."

As a general rule, clear and unambiguous policy provisions are to be applied as written and policy language will be given its plain and ordinary meaning unless it contravenes public policy. (Scudella v. Illinois Farmers Insurance Co. (1988), 174 Ill.App.3d 245, 123 Ill.Dec. 673, 528 N.E.2d 218; Potts v. Madison County Mutual Automobile Insurance Co. (1983), 112 Ill.App.3d 50, 67 Ill.Dec. 741, 445 N.E.2d 33.) The public policy behind uninsured motorist provisions is to place the injured policyholder in substantially the same position he would be in if the wrongful driver had had at least the minimum liability insurance required by law. (Glidden v. Farmers Automobile Insurance Association (1974), 57 Ill.2d 330, 312 N.E.2d 247; Stryker v. State Farm Mutual Automobile Insurance Co. (1978), 74 Ill.2d 507, 24 Ill.Dec. 832, 386 N.E.2d 36; Wilhelm v. Universal Underwriters Insurance Co. (1978), 60 Ill.App.3d 894, 17 Ill.Dec. 872, 377 N.E.2d 62.) At the time of the collision, the minimum liability insurance was $15,000. (Ill.Rev.Stat.1985, ch. 95 1/2, par. 7-203.) However, because the legislature never intended that the statutory minimum be deemed the maximum permissible limit for uninsured motorist coverage (Ill.Rev.Stat.1985, ch. 73, par. 755a-2, repealed by P.A. 81-899, eff. Dec. 31, 1989), parties may contract to increase the limits of the uninsured motorist provision to more than the statutory minimum. (Putnam v. New Amsterdam Casualty Co. (1970), 48 Ill.2d 71, 269 N.E.2d 97.) As a result, the insured who has paid additional premiums may end up in a better situation than if the uninsured motorist had been insured at the statutory minimum. The supreme court addressed such a situation in Glidden v. Farmers Automobile Insurance Association (1974), 57 Ill.2d 330, 336, 312 N.E.2d 247, and stated, "If there is to be a 'windfall' in this situation, it should be to the insured, who paid the several premiums, rather than to the insurer, which collected them."

Plaintiff argues that application of the setoff provision violates public policy because it puts her in a less favorable position than she would be in if she could have proceeded against her husband as an insured joint tortfeasor. Generally, the amount paid by one tortfeasor acts to reduce the recoverable damages from the remaining tortfeasors. Without such a reduction, a plaintiff could receive damages in excess of her injuries, resulting in double recovery. (Schutt v. Allstate Insurance Co. (1985), 135 Ill.App.3d 136, 88 Ill.Dec. 329, 478 N.E.2d 644.) Although, as a general rule, section 143a(4) of the Illinois Insurance Code (Ill.Rev.Stat.1985, ch. 73, par. 755a(4), repealed by P.A. 81-999, eff. Dec. 31, 1989), allowed the insurer to be subrogated to the proceeds of any settlement or judgment received by its insured from anyone who was legally responsible for the injury, in a situation where one of the joint tortfeasors is insured and the other is uninsured, the pivotal public policy issue is whether subrogation or setoff would prevent double recovery or whether it would act to deprive the plaintiff of damages she might otherwise receive if the uninsured tortfeasor had been at least minimally insured. (Glidden v. Farmers Automobile Insurance Association (1974), 57 Ill.2d 330, 312 N.E.2d 247.) If the total proven or undisputed damages incurred by the plaintiff are greater than the amount paid on behalf of the insured tortfeasor, application of the setoff provision of the uninsured motorist provision would contravene public policy because the plaintiff would not be placed in substantially the same position she would have been in had the uninsured motorist been insured and the "windfall" would be to the insurer. If the uninsured motorist had been insured, settlement with one joint tortfeasor would have acted only to reduce recoverable damages. (Schutt v. Allstate Insurance Co.) Whereas, in an uninsured setoff situation, settlement with one joint tortfeasor acts to reduce the liability limits of the insurer. Because of this public policy dichotomy, setoff provisions apply only where necessary to prevent double recovery. Glidden v. Farmers Automobile Insurance Association.

The effect of an insured joint tortfeasor's settlement on uninsured motorist liability was addressed in Schutt v. Allstate Insurance Co. (1985), 135 Ill.App.3d 136, 88 Ill.Dec. 329, 478 N.E.2d 644. The issue in Schutt was whether a settlement with an insured joint tortfeasor...