Price v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 30 June 1983
• Docket Number: No. 82-1687,82-1687
• Citation: 72 Ill.Dec. 117,116 Ill.App.3d 463,452 N.E.2d 49
• Parties: , 72 Ill.Dec. 117 James PRICE, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 49

452 N.E.2d 49

116 Ill.App.3d 463, 72 Ill.Dec. 117

James PRICE, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.

No. 82-1687.

Appellate Court of Illinois,

First District, Fourth Division.

June 30, 1983.

[72 Ill.Dec. 118] Burton I. Weinstein & Associates, Ltd., Chicago (Burton I. Weinstein, Robert L. Miller, Chicago, of counsel), for plaintiff-appellant

Victor J. Piekarski and Susan F. Swick of Querrey, Harrow Gulanick & Kennedy, Ltd., Chicago, for defendant-appellee.

LINN, Justice:

Plaintiff, James Price, filed a declaratory judgment action in the circuit court of Cook County against defendant, State Farm Mutual Automobile Insurance Company (State Farm). Price was seeking a declaration of his rights under the underinsured motorist provision of a policy issued by State Farm to Price's stepfather, Theodore Alferes. Because none of the facts was in controversy and the only issue involved interpretation of statutes and their application to the contested policy provision, both plaintiff and defendant filed cross motions for summary judgment. The trial court granted defendant's motion to deny plaintiff any recovery under the underinsured motorist clause in the automobile insurance policy.

Plaintiff now appeals, contending that the trial court erred in holding that an exclusion included in the Alferes policy was valid and enforceable on the date of the plaintiff's accident. We agree with plaintiff and we reverse and remand.

FACTS

On March 1, 1980, all automobile insurers in the state of Illinois became obligated by statute to offer, in addition to the long-standing uninsured motorist coverage, underinsured motorist coverage. The statute provided that, for an additional premium, legally recoverable damages incurred in excess of the applicable limits of the at-fault driver's insurance coverage could now be recoverable under the injured party's own insurance policy. Alferes, who had purchased automobile insurance from State Farm for several years, renewed his basic "When Coverage W [underinsured motorist coverage] does not apply.

[72 Ill.Dec. 119] policy on or about March 11, 1980; in addition, he contracted for both uninsured and underinsured coverage in newly authorized amounts equal to his bodily liability limit, $100,000 per person/$300,000 per occurrence. For this increased coverage, Alferes paid two premiums, one for the higher level of uninsured motorist coverage and one for the new underinsured motorist coverage. State Farm issued him an acknowledgement and an endorsement to the policy that verified the limits of both uninsured and underinsured coverages and contained the following exclusion:

There is no coverage:

* * *

* * *

3. If the uninsured motor vehicle coverage applies to the accident."

The policy, still containing the same exclusion, was renewed on September 11, 1980.

Meanwhile, during the six-month period between issuance of the new coverage to Alferes and its renewal, the Illinois legislature amended the underinsured motorist statute. Effective September 3, 1980, not only were insurers permitted to limit total recovery to either uninsured or underinsured coverage if both were applicable, but also the definition of "underinsured motorist coverage" changed. Instead of being obligated to make up any deficiency between the liability coverage limits of the at-fault vehicle and the uncompensated damages of the insured (up to the limits of the policy), insurance companies were now allowed to restrict recovery to only that deficiency between the total sum recoverable under the policy of the at-fault driver and the maximum limit of the injured party's underinsured motorist coverage provided that the injured party carried higher amounts of underinsured motorist coverage than did the at-fault driver. If the two policies provided the same limits of coverage, nothing could be recovered from the injured party's own insurer no matter how extensive his legally recoverable damages.

On October 4, 1980, James Price, a passenger in a car driven by an uninsured motorist, was severely injured when the car in which he was riding was struck by another car in an intersection. The driver of the at-fault vehicle carried insurance with maximum liability coverage of $25,000. Price, who has undergone brain surgery twice and continues to suffer physical impairment, collected the $25,000 from the insurer of the at-fault driver and $75,000 from State Farm; the $75,000 represented the difference between the $25,000 and the $100,000 maximum limit of the uninsured motorist coverage in the Alferes policy, coverage which both parties agree properly applied to Price because he had been riding with an uninsured driver.

However, when Price sought to recover an additional $100,000 under his underinsured motorist coverage, State Farm declined to pay, maintaining that the exclusion in the endorsement to the policy limited Price's recovery to the uninsured motorist coverage if both provisions arguably applied to the same accident, as here. Following State Farm's denial of his claim, Price filed his declaratory judgment action. At the time the trial judge ruled on the cross motions for summary judgment, he specifically stated,

"The only question in the Court's mind involved is whether or not the Court should apply an interpretation of the law as it existed at the time of the issuance of the policy, or whether it should interpret the law as it existed at the time of the issuance of the renewal.

* * * [W]here statutory regulations are written into contracts, * * * when a statute is amended and certain language is deleted, I think it is a settled rule that the effect of the amendment is to render the original statute as if it no longer existed or, if it ever existed.

So it seems to the Court that I have to interpret this case in accordance with the law that existed at the time of the occurrence and at the time of the policy, which would indicate that there was nothing against Illinois public policy that restricted this claim or made void this [clause], an unequivocal provision of the policy."

As a consequence of his application of the law as it existed at the time of the occurrence instead of at the time the policy was issued, the trial judge entered summary judgment in favor of State Farm.

OPINION

The sole issue before the appellate court is whether the exclusion denying James Price's simultaneous recovery under both the uninsured and underinsured motorist provisions "conflicts with provisions of the Illinois Insurance Code, thus rendering said exclusion null and void." (Doxtater v. State Farm Mutual Automobile Insurance Co. (1972), 8 Ill.App.3d 547, 549, 290 N.E.2d 284, 286.) A determination of the exclusion's validity must begin with an examination of two pertinent sections of the Illinois Insurance Code, section 143a-1(3). (S.H.A. ch. 73, par. 755a-1(3) (West Supp. 1980-1981) amended by Ill.Rev.Stat.1981, ch. 73, par. 755a-2(3)) and section 442 (Ill.Rev.Stat.1979, ch. 73, par. 1054), as they were worded when the Alferes policy was issued:

"755a-1. Additional uninsured motorist coverage--Underinsured motorist coverage.

§ 143a-1. No policy * * * shall be renewed or delivered or issued for delivery in this State * * * unless under-insured motorist coverage is offered in an amount equal to the insured's uninsured motor coverage limits. * * * Under underinsured motorist coverage the insurer agrees to pay damages the insured would be legally entitled to recover, but which are uncompensated because the total damages exceed the liability coverage limits of the owner of the at-fault vehicle."

* * *

* * *

"1054. Validation of Illegally Issued Policies.

§ 442. [W]hen any provision in such contract, * * * endorsement or rider is in conflict with any provision of this Code, the rights and obligations of the company thereunder shall not be less favorable to the holder of the contract and the beneficiary * * * thereunder than is required by the provisions of this Code applicable thereto."

Effective September 3, 1980, amended section 143a-2 replaced the earlier version and read as follows:

"755a-2. Additional Uninsured Motorist Coverage--Underinsured Motorist Coverage.

* * *

* * *

(3) * * * For the purpose of this Act the term 'underinsured motor vehicle' means a motor vehicle whose ownership, maintenance or use has resulted in bodily injury * * * and for which the sum of the limits of liability under all bodily injury liability insurance policies or under bonds or other security required * * * is less than the limits for underinsured coverage provided the insured as defined in the policy at the time of the accident. * * *"

* * *

* * *

(5) Scope. Nothing herein shall prohibit an insurer from setting forth policy terms and conditions which provide that if the insured has coverage available under the Section under more than one policy or provision of coverage, any recovery of benefits may be equal to, but may not exceed, the higher of the applicable limits of the respective coverage * * *."

As clearly stated in the original version of the statute, the purpose of underinsured motorist coverage was to provide protection against the risk of sustaining damages exceeding the liability limits of insurance carried by the owner of an at-fault vehicle. The original statute focused on the excess damages and defined "underinsured motorist" as an insured, at-fault driver whose liability coverage limits were insufficient to compensate the injured insured for all damages he was legally entitled to recover. After the statute was amended, however, "underinsured motor vehicle" was defined as one "for which the sum of the limits of liability * * * is less than the limits for underinsured coverage provided the insured * * *." The meaning of "underinsured" had been changed from "insured for less than the legally recoverable damages" to "insured for less than the insured's underinsured...