Murphy v. U.S. Fidelity and Guar. Co.

• Decision Date: 08 December 1983
• Docket Number: No. 83-74,83-74
• Citation: 75 Ill.Dec. 886,120 Ill.App.3d 282,458 N.E.2d 54
• Parties: , 75 Ill.Dec. 886 Barbara E. MURPHY, Plaintiff-Appellee, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, an insurance company, Defendant- Appellant.
• Court: United States Appellate Court of Illinois

Page 54

458 N.E.2d 54

120 Ill.App.3d 282, 75 Ill.Dec. 886

Barbara E. MURPHY, Plaintiff-Appellee, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, an insurance company, Defendant- Appellant.

No. 83-74.

Appellate Court of Illinois,

Fifth District.

Dec. 8, 1983.

Campbell, Furnall, Moore & Jacobsen, P.C., John E. Jacobsen, Carl L. Favreau, Mount Vernon, for defendant-appellant.

Craig, Brandon & Murphy, Donald R. Brandon, Herrin, for plaintiff-appellee.

JONES, Justice:

At issue in the instant appeal is whether the plaintiff's action to compel arbitration of her uninsured motorist claim against the defendant insurance company is governed by the two-year statute of limitations applicable to personal injury actions (Ill.Rev.Stat.1981, ch. 83, par. 15, now ch. 110, par. 13-202) or by the ten-year statute of limitations applicable to contract actions (Ill.Rev.Stat.1981, ch. 83, par. 17, now ch. 110, par. 13-206). The trial court ruled that the plaintiff's action was not barred by the two-year statute of limitations for personal injury actions and ordered the defendant to submit the plaintiff's claim to arbitration as provided by the insurance contract between the parties. We affirm.

On September 10, 1979, the plaintiff, Barbara Murphy, was involved in an automobile accident with Delores Mulkins, who was later certified by the Illinois Department of Transportation as an uninsured motorist. At the time of the accident the plaintiff was covered by a policy of insurance issued by the defendant, United States Fidelity and Guaranty Company. Under the policy the defendant was obligated "to pay all sums which the insured * * * shall be legally entitled to recover as damages from [an uninsured motorist] because of bodily injury sustained by the insured * * *." The policy further provided that a determination as to whether the insured was legally entitled to recover such damages and the amount thereof was to be made by agreement between the insured and the company or, if they failed to agree, by arbitration. The policy contained no provision as to when such a demand for arbitration should be made.

The parties were unable to agree regarding the plaintiff's claim for uninsured motorist benefits, and, on September 23, 1981, the plaintiff made a written demand to the defendant for arbitration of her claim. When the defendant refused to submit to arbitration, the plaintiff, on December 1, 1981, filed a petition to compel arbitration against the defendant in the circuit court of Williamson County. The defendant filed a motion to dismiss the plaintiff's petition because the petition was filed more than two years after the accident in question. The defendant contended that since it was obligated to pay to its insured only such sums as the insured was legally entitled to recover from the uninsured motorist, and since the plaintiff's claim against the uninsured motorist was barred by the two-year statute of limitations for personal injury actions, the plaintiff could no longer seek to recover from the defendant under the uninsured motorist provisions of her policy.

The defendant's motion to dismiss was denied by the trial court, and the cause proceeded to trial. At the close of the plaintiff's case the defendant filed a motion for judgment in its favor in which it again raised the statute of limitations issue. The court denied the motion, ruling that the case was governed by the statute of limitations for contract actions because the plaintiff's cause of action arose out of the contractual obligation of the defendant insurer to pay damages caused by the negligence of an uninsured motorist. The court entered judgment for the plaintiff, and the defendant has appealed from that judgment.

On appeal the defendant contends that the policy language obligating it to pay those amounts that the plaintiff was "legally entitled to recover" from an uninsured motorist effectively precluded the plaintiff from seeking recovery from the defendant once the two-year period for filing an action against the uninsured motorist had passed. Since, the defendant asserts, the plaintiff's claim for uninsured motorist benefits under the policy depended upon her ability to recover against the uninsured motorist for injuries sustained in the accident, the instant action by the plaintiff must be governed by the statute of limitations applicable to personal injury actions rather than that applicable to contract actions. The defendant urges that this result is not only mandated by the essential nature of the claim involved but is also consistent with the legislative purpose behind the statute providing for uninsured motorist coverage (Ill.Rev.Stat.1981, ch. 73, par. 755a) and is necessary to protect the subrogation rights of an insurer against an uninsured motorist.

In other jurisdictions where courts have considered the applicable statute of limitations for making a claim based upon uninsured motorist insurance, it has been generally held that such claims are governed by the contract rather than the tort statute of limitations. (See Annot. 28 A.L.R.3d 580, 584-87 (1969 & Supp.1983); Widiss, a Guide to Uninsured Motorist Coverage § 2.25 (1969 & Supp.1981); Booth v. Fireman's Fund Insurance Co. (1968), 253 La. 521, 218 S.2d 580; Schleif v. Hardware Dealer's Mutual Fire Insurance Co. (1966), 218 Tenn. 489, 404 S.W.2d 490; DeLuca v. Motor Vehicle Accident Indemnification Corp. (1966), 17 N.Y.2d 76, 215 N.E.2d 482, 268 N.Y.S.2d 289, Lemrick v. Grinnell Mutual Reinsurance Co. (Iowa 1978), 263 N.W.2d 714; Pickering v. American Employers Insurance Co. (1971), 109 R.I. 143, 282 A.2d 584; Franco v. Allstate Insurance Co. (Tex.1974), 505 S.W.2d 789; North River Insurance Co. v. Kowaleski (1976), 275 Or. 531, 551 P.2d 1286; Sahloff v. Western Casualty and Surety Co. (1969), 45 Wis.2d 60, 171 N.W.2d 914; contra, Vaughn v. Collum (1976), 236 Ga. 582, 224 S.E.2d 416; Brown v. Lumbermens Mutual Casualty Co. (1974), 285 N.C. 313, 204 S.E.2d 829.) The Illinois appellate court has likewise held that, in the absence of a specific statutory provision regarding the period within which uninsured motorist claims must be brought, the statute of limitations to file contract actions must govern. (Burgo v. Illinois Farmers Insurance Co. (1972), 8 Ill.App.3d 259, 290 N.E.2d 371; see Hartford Accident & Indemnity Co. v. Holada (1970), 127 Ill.App.2d 472, 262 N.E.2d 359; Witkowski v. Covenant Security Insurance Co. (1971), 1 Ill.App.3d 1074, 275 N.E.2d 709.) The defendant contends, however, that these latter cases can be distinguished on their facts from the case at bar (cf. Holada: insured had filed timely suit against uninsured motorist so still an open question as to whether he was "legally entitled" to recover from uninsured motorist; Witkowski: insurer was put on notice that plaintiff demanded arbitration less than month after accident) and should not control the result here.

Upon consideration of the issue of the applicable statute of limitations in the instant case, we find persuasive the reasoning of the majority view that the phrase "legally entitled to recover," as used in the policy to denote a condition of the insured's right to recover from the insurer, was designed to indicate fault and not to bar recovery from the insurer merely because the tort-feasor, in an action against him by the insured, could have asserted a statute of limitations defense. (See DeLuca v. Motor Vehicle Accident Indemnification Corp.; Selected Risks Insurance Co. v. Dierolf (1975), 138 N.J.Super. 287, 350 A.2d 526; Edwards v. State Farm Insurance Co. (Mo.App.1978), 574 S.W.2d 505.) As such, this language means simply that the insured must be able to establish fault on the part of the uninsured motorist that gives rise to damages and prove the extent of those damages. (Allstate Insurance Co. v. Elkins (1978), 63 Ill.App.3d 62, 21 Ill.Dec. 66, 381 N.E.2d 1, aff'd (1979), 77 Ill.2d 384, 33 Ill.Dec. 139, 396 N.E.2d 528; Booth v. Fireman's Fund Insurance Co.; contra, Brown v. Lumbermens Mutual Casualty Co.) We therefore find no merit in the defendant's contention that this provision served to incorporate the two-year statute of limitations for tort actions into the parties' insurance contract.

In dealing with a similar argument that an arbitration demand filed more than two years after the occurrence in question was untimely, the court in Hartford Accident & Indemnity Co. v. Holada stated:

" * * * [I]n the nature of a true statute of limitations, such as the one for personal injuries involved in this case, a defense based thereon must be affirmatively raised to be successful, and, if not so raised, the insured could still be 'legally entitled' even though his lawsuit were filed after the running of the statute." (127 Ill.App.2d 472, 482, 262 N.E.2d 359, 364.)

The court thus indicated that the statute of limitations defense, being personal to the uninsured motorist tort-feasor (see 25 I.L.P. Limitations § 8, 164 (1956); Conley v. Rust (1973), 12 Ill.App.3d 26, 297 N.E.2d 397), could be raised only by that party and did not affect the insurer's obligation under its contract to pay those amounts which the insured would otherwise be legally entitled to recover from the tort-feasor. (See Schulz v. Allstate Insurance Co. (1968), 17 Ohio Misc. 83, 244 N.E.2d 546; Booth v. Fireman's Fund Insurance Co.; see also Witkowski v. Covenant Security Insurance Co.) Similarly, in the instant case, since the insurer's obligation derived not from the uninsured motorist but from its insurance contract, the insurer did not stand in the shoes of the uninsured motorist (Allstate Insurance Co. v. Elkins ) and could not raise that party's statute of limitations defense on its own behalf.

We likewise reject the defendant's contention in the same vein that the plaintiff's claim against the defendant insurer was essentially an action to recover for personal injuries and thus should be governed by the statute of...