Interstate Bankers Cas. Co. v. Hernandez

• Decision Date: 18 December 2013
• Docket Number: No. 1–12–3035.,1–12–3035.
• Citation: 2013 IL App (1st) 123035,378 Ill.Dec. 73,3 N.E.3d 353
• Parties: INTERSTATE BANKERS CASUALTY COMPANY, a/s/o Jose Mendoza Gonzalez, and Jose Mendoza Gonzalez, Plaintiffs–Appellants, v. Alberto HERNANDEZ, Defendant–Appellee.
• Court: United States Appellate Court of Illinois

2013 IL App (1st) 123035

3 N.E.3d 353

378 Ill.Dec. 73

INTERSTATE BANKERS CASUALTY COMPANY, a/s/o Jose Mendoza Gonzalez, and Jose Mendoza Gonzalez, Plaintiffs–Appellants,

v.Alberto HERNANDEZ, Defendant–Appellee.

No. 1–12–3035.

Appellate Court of Illinois, First District, Third Division.

Dec. 18, 2013.

Held Unconstitutional

S.H.A. 215 ILCS 5/143.24d(a)Beermann Pritikin Mirabelli Swerdlove LLP, Chicago (Alvin R. Becker, Deane B. Brown, Katherine A. Grosh, of counsel), for Appellants.

Law Offices of Laura A. Holwell, Chicago (Laura A. Holwell, Christopher Holwell, of counsel), for Appellee.

OPINION

Justice PUCINSKI delivered the judgment of the court, with opinion.

¶ 1 The issue presented to us in this case is whether the mandatory binding arbitration of insurance subrogation claims enacted under section 143.24d of the Illinois Insurance Code (215 ILCS 5/143.24d (West 2012)), effective January 1, 2012 (Pub. Act 97–513, § 5 (eff. Jan. 1, 2012)), is unconstitutional because it violates the right to trial by jury. The constitutionality of section 143.24d is a matter of first impression.

¶ 2 BACKGROUND

¶ 3 On January 9, 2012, plaintiff, Jose Mendoza Gonzalez, was involved in a car accident with defendant, Alberto Hernandez, in Chicago, Illinois. On the date of the accident, Gonzalez was insured for collision coverage under a policy of automobile insurance issued by plaintiff Interstate Bankers Casualty (Interstate). Hernandez was insured by Unique Insurance Company.

¶ 4 On March 26, 2012, Gonzalez and Interstate, as Gonzalez's subrogee, brought a two-count negligence complaint, with a jury demand, against Hernandez. The complaint alleged that Interstate made payments to Gonzalez under its insurance policy as a result of the accident with Hernandez. Count I alleged that as a direct and proximate result of Hernandez's negligent acts, Interstate's subrogor, Gonzalez suffered property damage to his vehicle in the amount of $1,154.47, plus the costs of suit. Count II of the complaint alleged that as a direct and proximate result of Hernandez's negligent acts, Gonzalez suffered property damage to his vehicle and loss of use. Gonzalez sought judgment against Hernandez of $500, plus costs of suit.

¶ 5 On April 4, 2012, Hernandez filed a motion to dismiss pursuant to section 2–615 of the Illinois Code of Civil Procedure (735 ILCS 5/2–615 (West 2012)), arguing that the complaint should be dismissed because it is barred by section 143.24d of the Illinois Insurance Code (215 ILCS 5/143.24d (West 2012)), which became effective on January 1, 2012 (Pub. Act 97–513, § 5 (eff. Jan. 1, 2012)). In their response to the motion to dismiss, plaintiffs argued that section 143.24d is unconstitutional because it deprives plaintiffs of their constitutional right to trial by jury in a negligence action. Plaintiffs also argued that there was no way to adjudicate their property damage claim through the court system because section 143.24d requires arbitration unless both parties mutually agree to another forum and Hernandez did not agree to litigate the case in another forum.

¶ 6 On April 18, 2012, the circuit court entered an order allowing plaintiffs leave to file a brief in opposition to the motion to dismiss challenging the constitutionality of section 143.24d and required plaintiffs to provide a copy of their brief to the Illinois Attorney General as notification of the constitutional challenge. Defendant did not file a reply in support of his motion to dismiss. On September 27, 2012, the circuit court granted defendant's section 2–615 motion to dismiss both counts of plaintiffs' complaint with prejudice. Plaintiffs timely appealed.

¶ 7 ANALYSIS

¶ 8 Plaintiffs argue on appeal that dismissal of their complaint was improper because section 143.24d of the Illinois Insurance Code (215 ILCS 5/143.24d (West 2012)) is unconstitutional in that it violates the right to a jury trial. In reviewing the grant of a motion to dismiss, we accept as true all well-pleaded factual allegations. Majca v. Beekil, 183 Ill.2d 407, 416, 233 Ill.Dec. 810, 701 N.E.2d 1084 (1998). The dismissal of a complaint pursuant to section 2–615 of the Illinois Code of Civil Procedure (735 ILCS 5/2–615 (West 2012)) is reviewed de novo. Also, whether a statute is constitutional is a question of law, which we also review de novo. People v. Devenny, 199 Ill.2d 398, 400, 264 Ill.Dec. 105, 769 N.E.2d 942 (2002). Illinois courts have not had an opportunity to pass on the constitutionality of this particular provision yet, and so the constitutionality of section 143.24d is a matter of first impression.

¶ 9 Section 143.24d requires the arbitration of physical damage subrogation claims between insurers pursuant to the Nationwide Inter–Company Arbitration Agreement (NICAA), where the amount in controversy, exclusive of the costs of arbitration, is less than $2,500. 215 ILCS 5/143.24d(a) (West 2012). Notably, however, the enactment applies to all insurers, even those who did not agree to sign the NICAA, thus binding all insurance companies to this mandatory arbitration provision. Insurers are not required to sign the NICAA (215 ILCS 5/143.24d(b) (West 2012)), but they are bound to arbitration in accordance with the terms of and rules adopted pursuant to the NICAA, unless both parties agree to another forum (215 ILCS 5/143.24d(a) (West 2012)). There is no provision for rejection of an arbitration award under section 143.24d.

¶ 10 In Reed v. Farmers Insurance Group, 188 Ill.2d 168, 173–74, 242 Ill.Dec. 97, 720 N.E.2d 1052 (1999), the Illinois Supreme Court addressed the constitutionality of section 143a of the Insurance Code requiring mandatory binding arbitration for claims for uninsured motorist coverage, which foreclosed the right to appeal and have a jury trial. Like section 143.24d in this case, mandatory arbitration pursuant to section 143a(1) of the Insurance Code is binding ( Norris v. National Union Fire Insurance Co. of Pittsburgh, 368 Ill.App.3d 576, 590, 306 Ill.Dec. 460, 857 N.E.2d 859 (2006)). In Reed, the court upheld the constitutionality of section 143a because an action for uninsured motorist coverage was created by statute and did not exist at common law. In Grace v. Howlett, 51 Ill.2d 478, 283 N.E.2d 474 (1972), on the other hand, cited by plaintiffs and discussed by the Illinois Supreme Court in Reed, the court addressed the constitutionality of a statute that required the arbitration of automobile injury cases in counties with a population under 200,000, and, in other counties, the arbitration of cases in which the claimed loss was less than $3,000. The Reed court concluded, among other things, that the statute violated the right to a jury trial under the Illinois Constitution, stating:

“[T]he plaintiff cites Grace v. Howlett, 51 Ill.2d 478 (1972), which addressed the constitutionality of a statute that required the arbitration of automobile injury cases in counties with a population under 200,000, and, in other counties, the arbitration of cases in which the claimed loss was less than $3,000. The court concluded, among other things, that the statute violated the right to a jury trial under the Illinois Constitution.

More recently, this court revisited the issue in Martin v. Heinold Commodities, Inc., 163 Ill.2d 33 [205 Ill.Dec. 443, 643 N.E.2d 734] (1994). In that case the defendant argued that it was entitled to a jury trial in an action brought under the Consumer Fraud Act. This court rejected that contention. After reviewing the current constitutional guarantee and its predecessors, the Martin court observed that the jury trial right expressed in the Illinois Constitution is limited to actions existing at common law. Martin explained, ‘In Illinois, the right to a jury trial does not attach to every action at law. Instead, such right only attaches in those actions where such right existed under the English common law at the time the constitution was adopted.’ Martin, 163 Ill.2d at 73–74 [205 Ill.Dec. 443, 643 N.E.2d 734].

We do not believe that Grace is controlling here. The action at issue in Grace was a common law claim for personal injuries arising from a motor vehicle accident. In the present case, in contrast, the underlying claim is one for uninsured-motorist coverage, a remedy that did not exist at common law but instead was recently devised by the legislature. The state constitutional guarantee of a jury trial ‘ “was not intended to guarantee trial by jury in special or statutory proceedings unknown to the common law.” ’ People ex rel. Keith v. Keith, 38 Ill.2d 405, 408 (1967), quoting People v. Niesman, 356 Ill. 322, 327 (1934).” (Emphasis omitted.) Reed, 188 Ill.2d at 179–80, 242 Ill.Dec. 97, 720 N.E.2d 1052.

¶ 11 Plaintiffs argue generally that section 143.24d deprives plaintiffs of their constitutional right to trial by jury in “[n]egligence [c]ases.” Plaintiffs here, like the plaintiff in Reed, cite to Grace and argue generally that the instant case is one for personal injuries arising from a motor vehicle accident, and that the right to a jury trial applies because causes of action for personal injuries existed under common law.

¶ 12 The Illinois Supreme Court has held that the right to trial by jury “only attaches in those actions where such right existed under the English common law at the time the constitution was adopted.” Martin v. Heinold Commodities, Inc., 163 Ill.2d 33, 73–74, 205 Ill.Dec. 443, 643 N.E.2d 734 (1994).

¶ 13 There are two issues presented here. First, the test as to which actions carry a jury trial right must be stated accurately as to whether it includes only actions which existed at common law at the time of the adoption of the original 1870 Illinois Constitution, or whether it means at the time of adoption of the 1970 Illinois Constitution. Second, the case before us is not simply a negligence case but, rather (in count I), a negligence action brought by an insurer by way of subrogation, and thus we must...