Johnson v. Safeco Ins. Co. of America

• Decision Date: 21 December 1992
• Docket Number: No. 92 C 20186.,92 C 20186.
• Parties: William JOHNSON and Linda Johnson, Plaintiffs, v. SAFECO INSURANCE COMPANY OF AMERICA, a Washington Corporation, Defendant.
• Court: U.S. District Court — Northern District of Illinois

809 F. Supp. 602

William JOHNSON and Linda Johnson, Plaintiffs, v. SAFECO INSURANCE COMPANY OF AMERICA, a Washington Corporation, Defendant.

No. 92 C 20186.

United States District Court, N.D. Illinois, W.D.

December 21, 1992.

Duane Donahue, Cary, Ill., for plaintiffs.

James F. Best, Fraterrigo, Best & Beranek, Wheaton, Ill., for defendant.

ORDER

REINHARD, District Judge.

INTRODUCTION

On May 28, 1992, plaintiffs William and Linda Johnson filed a two-count complaint in the Circuit Court of the 19th Judicial Circuit, McHenry County, Illinois, against defendant Safeco Insurance Company of America. The cause was subsequently removed to this court, defendant having invoked diversity jurisdiction pursuant to 28 U.S.C. § 1332. In Count I, plaintiffs seek a declaratory judgment that in accordance with three insurance policies defendant issued to plaintiffs, plaintiffs are entitled to recover the maximum limit under the uninsured and underinsured motorist coverage of each policy. Plaintiffs also seek a declaratory judgment in Count I that defendant is entitled to an offset equal to the amount of money actually collected by plaintiffs from unrelated insurance policies. In Count II, plaintiffs seek certification of a class action to recover insurance premiums fraudulently charged and collected by defendant. Defendant has moved to dismiss both counts of plaintiffs' complaint pursuant to Fed.R.Civ.P. 12(b)(6).

FACTS¹

The facts alleged in plaintiffs' complaint are as follows. On December 13, 1986, defendant sold, through its agent, two automobile insurance policies to plaintiffs. The policies were in effect from December 13, 1986 to June 13, 1987, during which time plaintiffs made full payment.

On June 10, 1987, plaintiffs' son was killed in a one-car accident in McHenry County, along with three others. A fourth was seriously injured. The automobile involved in the collision was insured by Farmers Insurance Company, and the liability limits of the insurance policy were $15,000 per person and $30,000 per occurrence. A second insurance policy, issued by Dairyland Insurance Company, applied to the driver of the car and its liability limits were $15,000 per person and $30,000 per occurrence.

On December 24, 1987, Dairyland filed an interpleader in the Circuit Court of the 19th Judicial Circuit and paid the liability limits of its policy ($30,000) to the clerk of the court. Farmers also intervened and paid the liability limits of its policy ($30,000) to the clerk of the court. Following a settlement agreement, the estate of plaintiffs' son received $12,000 representing 20% of the $60,000 in funds available from the policies issued by Dairyland and Farmers. Defendant approved plaintiffs' agreement to the settlement.

The policy defendant issued for plaintiffs' 1984 Dodge Ram Wagon (Policy 1) provided Uninsured and Underinsured Motorists coverage for bodily injury in the amount of $100,000 for each person and $300,000 for each accident. (Complaint ¶ 15.) The premium charged for this coverage was $25.40. The same insurance policy provided the same Uninsured and Underinsured Motorists coverage for plaintiffs' 1975 Chevrolet Malibu. Plaintiffs paid an additional premium of $25.40 for this coverage. Safeco also issued a second policy insuring plaintiffs' "1885 sic Subaru GL station wagon" (Policy 2), which provided the same Uninsured and Underinsured Motorists coverage as Policy 1. Plaintiffs paid a premium of $25.40 for this coverage.

CONTENTIONS

Plaintiffs contend that they are entitled to recover for their son's death under the Uninsured and Underinsured Motorists coverage for each of the three automobiles insured by defendant on the date of the fatal accident. Plaintiffs concede that defendant is entitled to an offset of $12,000, the amount plaintiffs actually collected from the settlement agreement with Dairyland and Farmers. Defendant contends plaintiffs may recover for the death of their son under the Uninsured and Underinsured Motorist coverage for one automobile. Defendant also contends that in accordance with the language of its insurance policies issued to plaintiffs, it is entitled to an offset equal to the policy limits available to plaintiffs ($30,000) under the Dairyland and Farmers Insurance policies.

DISCUSSION

When addressing a state law claim, a federal district court in Illinois is bound to follow Illinois Supreme Court interpretations. Shields Enter., Inc. v. First Chicago Corp., 975 F.2d 1290, 1297 (7th Cir.1992). And, absent authoritative statements from the Illinois Supreme Court, the district court is bound to follow Illinois appellate court interpretations of state law unless there is good reason to think the Illinois Supreme Court would reject the appellate court's decision. Shields, 975 F.2d at 1297. Under Illinois law, the language of an insurance policy is interpreted as a matter of law. Granite State Ins. Co. v. Degerlia, 925 F.2d 189, 191 (7th Cir. 1991); Armstrong v. State Farm Mut. Auto. Ins. Co., 229 Ill.App.3d 971, 974-75, 172 Ill.Dec. 109, 112, 595 N.E.2d 172, 175 (2d Dist.1992).

I. Count I

Plaintiffs, in essence, want to "stack" insurance coverage under three uninsured and underinsured motorist provisions. Defendant argues that Menke v. County Mut. Ins. Co., 78 Ill.2d 420, 36 Ill.Dec. 698, 401 N.E.2d 539 (1980) is directly on point and controlling in this case. In Menke, the Illinois Supreme Court did not allow an insured to "stack" uninsured insurance coverage. Central to the dispute was a clause in the insurance policies which appeared under the heading "Other Automobile Insurance in the Company":

With respect to any occurrence, accident, death or loss to which this and any other automobile insurance policy issued to the Named Insured by the Company also applies, the total limit of the Company's liability under all such policies shall not exceed the highest applicable limit of liability or benefit amount under any one such policy.

Menke, 78 Ill.2d at 423, 36 Ill.Dec. at 700, 401 N.E.2d at 541.

The court held that the clause was not ambiguous and operated to bar stacking. Menke, 78 Ill.2d at 423-24, 36 Ill.Dec. at 700, 401 N.E.2d at 541. Moreover, the court refused to consider evidence of the parties' subjective intent in the face of clear and unambiguous policy language. Menke, 78 Ill.2d at 425-26, 36 Ill.Dec. at 701, 401 N.E.2d at 542. Finally, the court held that disallowing "stacking" was not contrary to public policy. Menke, 78 Ill.2d at 425-26, 36 Ill.Dec. at 701, 401 N.E.2d at 542. Even without stacking the policies, the plaintiff would recover, which satisfied the legislature's purpose of requiring insurance companies to provide uninsured motorist coverage. Menke, 78 Ill.2d at 425-26, 36 Ill.Dec. at 701, 401 N.E.2d at 542; see also Sulser v. Country Mut. Ins. Co., 147 Ill.2d 548, 556, 169 Ill.Dec. 254, 257, 591 N.E.2d 427, 430 (1992) (the underinsured motorists coverage legislation was designed to fill the gap between a claim and a tortfeasor's insurance, and was "not intended to allow the insured to recover amounts from the insurer over and above the coverage provided by the underinsured motorist policy").

The clause at issue in the instant case is found in provision 4 of the "Conditions" section, and states:

Uninsured and Underinsured Motorists Coverage:

If this policy insures two or more automobiles or if any other automobile insurance policy issued by SAFECO applies to the same accident, the maximum limit of SAFECO's liability shall not exceed the highest limit applicable to any one automobile.

In accordance with Illinois law, this court finds the above clause is expressed in clear and unambiguous language, and is not contrary to public policy. See Menke, 78 Ill.2d at 425, 36 Ill.Dec. at 700-01, 401 N.E.2d at 541-42.

Plaintiffs argue the antistacking language in Menke is more detailed and specific than the antistacking provision found in defendant's policy. This court disagrees. In Menke, the antistacking provision applied to any accident covered by the plaintiff's policy "and any other automobile insurance policy issued to the plaintiff by the defendant also applies." Menke, 78 Ill.2d at 423, 36 Ill.Dec. at 700, 401 N.E.2d at 541. In the instant case, the antistacking provision applies if the policy in question "insures two or more automobiles or if any other automobile insurance policy issued by defendant applies to the same accident." The policy at issue here mirrors the antistacking language found to be valid in Menke. Plaintiffs attempt to read in ambiguity where none exists.

Plaintiffs also argue that the policy's $100,000 per person/$300,000 per accident, when read in conjunction with the antistacking provision, creates an ambiguity. The antistacking provision itself refutes this argument—"the maximum limit of defendant's liability shall not exceed the highest limit applicable to any one automobile." Thus, the $100,000/$300,000 liability limitations, commonly used throughout the insurance industry, does not render the antistacking provision ambiguous.

Next, plaintiffs argue the location of the antistacking provision renders it ambiguous. Plaintiffs emphasize that the provision is found within the "Conditions" section of the policy, not the "Damages for Bodily Injury Caused by Uninsured and Underinsured Motor Vehicles" section, where a person would normally expect to find an antistacking provision. Plaintiffs argue that placing the provision in the "Conditions" section is misleading, because a "condition" is a requirement an insured must fulfill before receiving insurance coverage. However, a "condition" is defined as, inter alia: "something that limits or modifies the existence or character of something else: a restriction or qualification." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 473 (1986) (unabridged). The antistacking provision modifies or limits the uninsured and underinsured motorists coverage. Thus, placement of the antistacking...