Progressive N. Ins. Co. v. Cosmutto

• Docket Number: 21 CV 5026
• Decision Date: 15 March 2023
• Parties: PROGRESSIVE NORTHERN INSURANCE COMPANY, Plaintiff, v. BEAU COSMUTTO, Defendant.
• Court: U.S. District Court — Northern District of Illinois

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PROGRESSIVE NORTHERN INSURANCE COMPANY, Plaintiff, v. BEAU COSMUTTO, Defendant.

No. 21 CV 5026

United States District Court, N.D. Illinois, Eastern Division

March 15, 2023

MEMORANDUM OPINION AND ORDER

HEATHER K. MCSHAIN, UNITED STATES MAGISTRATE JUDGE

Pending before the Court is plaintiff Progressive Northern Insurance Company's motion for summary judgment. [36].^[1] For the following reasons, the motion is granted.

Background

Plaintiff Progressive Northern Insurance Company issued an Illinois Motorcycle Policy (Motorcycle Policy), to defendant Beau Cosmutto. [44] 2. On July 17, 2021, while on vacation in Hawaii, defendant was involved in a motorcycle accident and suffered personal injuries. [Id.] 5. Defendant incurred $223,407.45 in medical expenses. [45-1] 2-3. The at-fault driver was insured under liability policies with Allstate Property and Casualty Insurance Company (Allstate) and Liberty Mutual. [44] 5. The driver's policies' liability limits were $250,000 and $20,000, per person respectively. [Id.]. Both Allstate and Liberty Mutual offered defendant the limits of the policies, $270,000 total, in full satisfaction of defendant's claims against the driver. [Id.] 5-6. After plaintiff advised defendant that it had no objection to and consented to defendants' acceptance of the settlement offer, defendant accepted and executed a full settlement agreement releasing any claims defendant may have had against the driver. [44] 6 [45-1] 5-9.

Six months before defendant settled with the driver, defendant sent plaintiff a letter demanding the limits of the under-insured motorist (UIM) coverage pursuant to the Motorcycle Policy. [20] 9. The relevant UIM coverage section in defendant's agreement with plaintiff states, in relevant part, that:

If you [(the insured)] pay the premium for this coverage, we [(Progressive)] will pay for damages that an insured person is legally entitled to recover from the owner or operator of an uninsured motor vehicle or underinsured motor vehicle because of bodily injury:

1. sustained by an injured person;

2. caused by an accident; and

3. arising out of the ownership, maintenance, or use of an uninsured motor vehicle or underinsured motor vehicle.

We will pay under this Part III only after the limits of liability under all applicable bodily injury liability bonds and policies have been exhausted by payments of judgment or settlements. However, this shall not apply if we and the insured person agree, without arbitration, that the insured person has suffered bodily injury or death, and also agree on the amount of damages within the limit of liability that the insured person is legally entitled to collect under this coverage.

[37-3] 19.

Two weeks later, on September 22, 2021, plaintiff filed the instant Declaratory Judgment action in the Northern District of Illinois, seeking a declaration that it does not owe defendant any UIM benefits under the Motorcycle Policy for the July 17, 2021 accident [1].

According to plaintiff, defendant is not entitled to UIM coverage under the Motorcycle Policy's terms, for two reasons: (1) the at-fault driver is not the owner or operator of an "uninsured motor vehicle" as defined by the Motorcycle Policy for UIM coverage to apply; and (2) the Motorcycle Policy's limit reduction provision precludes the possibility of UIM coverage. [36] 2. The Motorcycle Policy defines an underinsured motor vehicle as a “vehicle of any type to which a bodily injury liability bond or policy applies at the time of the accident, but the sum of all applicable limits of liability for bodily injury is less that the coverage limit for [UIM] Coverage shown on the declarations page.” [37-3] 20. Parties agree the coverage limit for UIM under the Motorcycle Policy is $100,000 per person, $300,000 per accident. [46] 1 (citing 37-3 [3]). Plaintiff argues that because the sum of the at-fault driver's liability coverage, totaling $270,000, exceeds the Motorcycle Policy's UIM coverage limit of $100,000, the at-fault driver is not the owner or operator of an underinsured motor vehicle. [36] 2. The Motorcycle Policy also contains a limit reduction provision that reads, “[t]he limits of liability under this Part III for bodily injury will be reduced by all sums . . . paid because of bodily injury by or on behalf of any persons or organizations that may be legally responsible ....” [37-3] 23. Like plaintiff's first argument, plaintiff contends that under the limits reduction provision defendant's UIM coverage is reduced to zero because defendant was paid $270,000 to settle claims against the driver and this amount is greater than the Motorcycle Policy's $100,000 UIM coverage limit. [36] 2.

Defendant does not dispute that the Motorcycle Policy contains these provisions. [44] 3-4. Instead, defendant argues the limit reduction provision does not apply to the July 17, 2021 accident because the accident occurred in Hawaii and “Hawaii law applies to provide coverage to policyholders in the event out-of-state auto insurance policies deprive policyholders of benefits that would be available under Hawaii law.” [43] 3-4 (citing Abramson v. Aetna Cas. & Surety Co., 76 F.3d 304, 305 (9th Cir. 1996)). In support defendant contends there is no express choice-of-law provision in the Motorcycle Policy selecting Illinois law to govern. [Id.] at 5. Defendant points out there is no heading titled “Choice of Law” nor do the words “Choice of Law” or “Governing Law” appear anywhere in the Motorcycle Policy. [Id.] at 6. Plaintiff disagrees, arguing the Motorcycle Policy does contain a choice-of-law provision under the section titled “Terms of Policy Conformed to Statutes.” [37] 3. The section states:

If any provision of this policy fails to conform with the statutes of the state listed on your application as your residence, the provision shall be deemed amended to conform to such statutes. All other provisions shall be given full force and effect. Any disputes as to the coverages provided or the provisions of this policy shall be governed by the laws of the state listed on your application as your residence.

[37-3] 41.

Plaintiff contends that because defendant listed Illinois as his state of residence on his application for the Motorcycle Policy, coverage disputes are governed by Illinois law. [47] 3 n.1 (citing [44] 4). Defendant responds the “Terms of Policy Conformed to Statutes” provision is a conformity-to-statute clause that does not also operate as a choice-of-law provision. [43] 7.

During discovery plaintiff filed the pending motion for summary judgment.^[2]Defendant filed a response [43], and plaintiff replied [47]. The motion is fully briefed and before the Court.

Legal Standard

A party is entitled to summary judgment only if it demonstrates that “there is no genuine dispute as to any material fact and [it] is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A genuine dispute about a material fact exists “if the evidence is such that a reasonable [factfinder] could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “The controlling question is whether a reasonable trier of fact could find in favor of the non-moving party on the evidence submitted in support of and opposition to the motion for summary judgment.” White v. City of Chi., 829 F.3d 837, 841 (7th Cir. 2016) (citation omitted). In answering this question, the Court construes all facts and draws all reasonable inferences “in favor of the party against whom the motion under consideration was filed.” Richardson v. Chi. Transit Auth., 926 F.3d 881, 886 (7th Cir. 2019) (citation omitted).

Discussion

The Motorcycle Policy's “Terms of Policy Conformed to Statutes” section contains a provision that reads “Any disputes as to the coverages provided or the provisions of this policy shall be governed by the laws of the state listed on your application as your residence.” [37-3] 41. This case concerns whether this policy term constitutes a choice-of-law provision that effectively selects Illinois law to govern the UIM coverage dispute between the parties. The Court holds that the policy term does operate as a choice-of-law provision, that the provision unambiguously selects Illinois law to govern the instant UIM coverage dispute, and applying Illinois law to the dispute, plaintiff is entitled to declaratory judgment.

I. Illinois's Choice of Law Rules Govern.

A district court exercising jurisdiction based on diversity, as it is in this case, must follow the choice-of-law rules of the forum state to determine the applicable substantive law. Auto-Owners Ins. Co. v. Websolv Computing, Inc., 580 F.3d 543, 547 (7th Cir. 2009) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). As this suit was filed in Illinois, Illinois's choice-of-law rules will govern. ProAssurance Specialty Ins. Co. v. Imperial Realty Co., 545 F.Supp.3d 618, 620-621 (N.D. Ill. 2021) (internal quotations and citations omitted)). “Under Illinois's rules, an express choice of law clause in an insurance policy will determine which state's law to apply.” Id. Generally, a contract's choice-of-law clause is respected “as long as the contract is valid and the law chosen is not contrary to Illinois's fundamental public policy.” Tradesman Intern., Inc., v. Black, 724 F.3d 1004, 1012 (7th Cir. 2013) (quoting Thomas v. Guardsmark, Inc., 381 F.3d 701, 705 (7th Cir. 2004)). A choice-of-law clause is unenforceable if it is unconscionable, immoral, illegal, contrary to public policy, or injures the public welfare.” Jackson v. Payday Financial, LLC, 79 F.Supp.3d 779, 785 (N.D. Ill. 2015) (citing Thomas, 381 F.3d at 705-06).

II. Motorcycle Policy Contains a Choice-of-Law Provision.

To determine whether the...