Obenland v. Economy Fire & Cas. Co.

• Decision Date: 30 June 1992
• Docket Number: 1-91-0888,Nos. 1-90-3641,s. 1-90-3641
• Citation: 234 Ill.App.3d 99,174 Ill.Dec. 915,599 N.E.2d 999
• Parties: , 174 Ill.Dec. 915 Bettie Jo OBENLAND and John F. Obenland, Plaintiffs-Appellants, v. ECONOMY FIRE & CASUALTY COMPANY, Defendant-Appellee (Milwaukee Guardian Insurance Company, Defendant-Appellee/Cross-Appellant).
• Court: United States Appellate Court of Illinois

Page 999

599 N.E.2d 999

234 Ill.App.3d 99, 174 Ill.Dec. 915

Bettie Jo OBENLAND and John F. Obenland, Plaintiffs-Appellants, v. ECONOMY FIRE & CASUALTY COMPANY, Defendant-Appellee (Milwaukee Guardian Insurance Company Defendant-Appellee/Cross-Appellant).

Nos. 1-90-3641, 1-91-0888.

Appellate Court of Illinois First District, Fourth Division.

June 30, 1992.

Rehearing Denied Sept. 11, 1992.

Edward M. Burnes, Isadore M. Bernstein Ltd., Chicago, for plaintiffs-appellants.

Williams & Montgomery, Ltd., Chicago (James K. Horstman, Barry L. Kroll, Lloyd E. Williams, Jr., of counsel), for defendant-appellee.

McKenna, Storer, Rowe, White & Farrug, Chicago (James P. DeNardo, Richard M. Clark, Christine L. Olson, of counsel), for defendant-appellee, cross-appellant.

Presiding Justice JIGANTI delivered the opinion of the court:

These consolidated appeals stem from a declaratory judgment action brought by the plaintiffs, Bettie Jo Obenland and John F. Obenland, to construe the limits of underinsured motorist coverage contained in insurance policies issued to the plaintiffs by the defendants, Milwaukee Guardian Insurance Company (Milwaukee) and Economy Fire & Casualty Company (Economy). The Milwaukee policy insured three vehicles and charged a premium of $15 ¹ for underinsured motorist coverage limits of $300,000 each person/$300,000 each accident. The Economy policy insured one vehicle and provided a single underinsured motorist coverage limit of $300,000 per each accident.

The plaintiffs were injured as pedestrians by a motorist whose insurance company tendered its policy limits of $100,000 per person. The plaintiffs then sought a declaration that because of alleged ambiguities in the Milwaukee policy and the payment of three identical premiums, they were entitled to receive $300,000 per person of underinsured motorist coverage for each of the three cars insured by Milwaukee. They also sought the $300,000 coverage limit from Economy for a combined total of $2.1 million in coverage. The plaintiffs asked the court to declare that the amounts paid by Milwaukee and Economy were not to be shared proportionately pursuant to the policies' "other insurance" clauses as long as the plaintiffs did not recover more than the amount of their damages. They subsequently filed an amended complaint alleging a cause of action against Milwaukee based on the Consumer Fraud and Deceptive Business Practices Act. Ill.Rev.Stat.1989, ch. 121 1/2, par. 261 et seq.

On cross-motions for summary judgment, the trial court ruled that the plaintiffs were not entitled to "stack" the coverages under the Milwaukee policy and that the plaintiffs were entitled to a maximum coverage of $300,000 less the $200,000 paid by the underinsured motorist's insurer. The remaining $100,000 would be shared proportionately by Milwaukee and Economy, resulting in $50,000 of coverage from Milwaukee and $50,000 of coverage from Economy. On the plaintiffs' motion for reconsideration, the trial court stated that Milwaukee's limits of liability provision was ambiguous and that the plaintiffs should accordingly be entitled to $300,000 of coverage per person notwithstanding the policy limit of $300,000 per accident. The court then declared that Milwaukee's coverage limit was $350,000 and that Economy owed $50,000. The court dismissed the Consumer Fraud Act counts for failure to state a cause of action.

On appeal, the plaintiffs contend that the Milwaukee policy does not unambiguously preclude the stacking of underinsured motorist coverages. They further contend that, in the absence of a double recovery to the plaintiffs, neither the amounts paid by the underinsured motorist nor the coverage afforded by Economy pursuant to its policy should serve to reduce the limits of Milwaukee's coverage. Similarly, the plaintiffs contend that Economy owes the full amount of its underinsured motorist coverage without regard to the amounts paid by the underinsured motorist or the coverage owed by Milwaukee under its policy. The plaintiffs further contend that the trial court erred in dismissing the Consumer Fraud Act counts for failure to state a cause of action. Milwaukee has cross-appealed, contending that its policy unambiguously limits the amount of underinsured motorist coverage to $300,000 for a single accident regardless of the number of persons injured. Thus, Milwaukee claims that it owes the plaintiffs $50,000 in coverage rather than the $350,000 as declared by the trial court.

At the time of the accident, the plaintiffs had underinsured motorist coverage under two insurance policies, one from Milwaukee and the other from Economy. The Milwaukee policy, as renewed on September 26, 1986, insured three cars and showed a $15 premium for underinsured motorist coverage. The declarations page of the policy indicated that the policy limits for underinsured motorist coverage were "$300,000 each person/$300,000 each accident." The Milwaukee policy contains three clauses that are particularly significant to this appeal. The first is a "limits of liability" clause for uninsured and underinsured motorist coverage that provides in pertinent part:

"The limits of liability shown in the Declarations [$300,000 each person/$300,000 each accident] apply subject to the following:

(1) The limit for 'each person' is the maximum for bodily injury sustained by any person in any one accident.

(2) Subject to the limit for 'each person,' the limit for 'each accident' is the maximum for bodily injury sustained by two or more persons in any one accident.

We will pay no more than these maximums regardless of the number of vehicles described in the Declarations, insured persons, claims, claimants, policies, or vehicles involved in the accident.

Any amounts payable will be reduced by:

(1) All payments made by the owner or operator of the uninsured motor vehicle or organization which may be legally liable."

The limits of liability clause was revised in July of 1986 but not issued to policyholders in its new form until 1987. In its revised form, the clause provides in part that "[w]e will pay no more than these maximums regardless of the number of vehicles described or premiums shown in the Declarations, insured persons, claims, claimants, policies, or vehicles involved in the accident. It is the intent of this paragraph not to allow stacking of the limit of liability under this coverage." (Emphasis added to indicate revisions.)

The second clause at issue is the underinsured motorist endorsement which provides in part:

"The limits of liability for underinsured motorist coverage * * * shall be reduced by the sum of the limits of liability for all bodily injury liability bonds and insurance policies which apply to the underinsured automobile."

Third, the Milwaukee policy contains an "other insurance" clause which provides as follows:

"If there is other applicable uninsured motorist insurance on a loss covered by this Part, we will pay our proportionate share as our limit of liability bears to the total of all applicable limits. But any insurance for a vehicle you do not own is excess over any other applicable uninsured motorist insurance."

The policy made this last clause applicable to underinsured as well as uninsured motorist coverage.

The Economy policy, issued September 19, 1986, provides a single underinsured motorist coverage limit of $300,000 "each accident." The uninsured motorist coverage amendatory endorsement, which confers both uninsured and underinsured motorist coverage, contains a "limit of liability" clause that provides in pertinent part:

"The limit of liability shown in the Declarations for Uninsured Motorists Coverage [$300,000 each accident] is our maximum limit of liability for all damages for bodily injury resulting from any one accident.

* * * * * *

This is the most we will pay regardless of the number of covered persons, claims made, vehicles or premiums shown in the Declarations, or vehicles involved in the accident.

Any amounts otherwise payable for damages under this coverage shall be reduced by all sums: Paid because of the bodily injury or property damage by or on behalf of persons or organizations who may be legally responsible."

The Economy policy also contains an "other insurance" clause which provides in pertinent part:

"[I]f the insured has other similar insurance available to him and applicable to the accident * * * the Company shall not be liable for a greater proportion of any loss to which this coverage applies than the limit of liability hereunder bears to the sum of the applicable limits of liability of this insurance and such other insurance * * *."

Before addressing the specific issues raised in this appeal, we will briefly examine the nature of underinsured motorist coverage and the statutory provisions in effect during the relevant time period.

Section 143a-2(3) of the Illinois Insurance Code (Code) defines an underinsured motor vehicle as one which has resulted in bodily injury or death to the insured, and for which "the sum of the limits of liability under all bodily injury liability insurance policies or under bonds or other security" maintained by the person responsible for the vehicle is less than the limits of underinsured coverage provided the insured under his policy at the time of the accident. The statute then states that the liability of an insurer providing underinsured motorist coverage "shall be the limits of such coverage, less those amounts actually recovered under the applicable bodily injury insurance policies, bonds or other security maintained on the underinsured motor vehicle." (Ill.Rev.Stat.1985, ch. 73, par. 755a-2(3).) Significantly, section 143a-2(6) allows an insurer to include policy language prohibiting stacking. Section 143a-2(6) provides as follows:

"Scope. Nothing herein shall prohibit an insurer from setting forth policy terms and conditions which provide that if the insured has coverage available under this...