Roth v. Illinois Ins. Guar. Fund

• Decision Date: 19 June 2006
• Docket Number: No. 1-05-0025.,1-05-0025.
• Citation: 852 N.E.2d 289
• Parties: Thomas W. ROTH, Plaintiff-Appellant, v. ILLINOIS INSURANCE GUARANTY FUND, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

852 N.E.2d 289

Thomas W. ROTH, Plaintiff-Appellant, v. ILLINOIS INSURANCE GUARANTY FUND, Defendant-Appellee.

No. 1-05-0025.

Appellate Court of Illinois, First District, First Division.

June 19, 2006.

Costello, McMahon & Burke, Ltd. (Andrew P. Allen, of counsel), Chicago, for Appellant.

Ronald J. Lucaccioni, Ltd. (Roger LeRoy, of counsel); Lord, Bissell & Brook LLP (Hugh C. Griffin, Don W. Fowler, of counsel), Chicago, for Appellee.

Justice BURKE delivered the opinion of the court:

Plaintiff Thomas Roth appeals from an order of the circuit court granting summary judgment in favor of defendant Illinois Insurance Guaranty Fund (the Fund) on plaintiff's complaint for declaratory judgment against the Fund, arising from the Fund's denial of plaintiff's claim for payment of the policy limits of an insurance policy issued to the driver of a vehicle who injured plaintiff by an insurer that subsequently became insolvent. On appeal, plaintiff contends that the trial court erred in granting the Fund summary judgment because: (1) payments to him under a medical insurance plan or policy and/or payments under his disability plan or policy should not, pursuant to section 546(a) of the Illinois Insurance Guaranty Fund Act (Act) (215 ILCS 5/546(a) (West 2004)), reduce the obligation of the Fund under section 537.2 of the Act (215 ILCS 5/537.2 (West 2004)); and (2) the "covered claim" definition in section 534.3(b)(v) of the Act (215 ILCS 5/534.3(b)(v) (West 2004)) does not exclude negotiated lien claims of plaintiff's medical insurers against the Fund. For the reasons set forth below, we affirm.

STATEMENT OF FACTS

On June 7, 1998, plaintiff was injured when he was struck by a car being driven by Jamilla Bryant at or near 4025 West Marquette Road in Chicago, Illinois. Bryant was insured under an automobile liability insurance policy issued by Valor Insurance (Valor), with a liability limit of $20,000. Plaintiff filed a complaint against Bryant and, in November 2001, settled the case for Valor's policy limits of $20,000. Plaintiff was also insured by HMO Illinois and Chicago Partners, Inc./Meyer Medical Group (plaintiff's medical insurers), who ultimately paid plaintiff $128,067.82 in medical benefits, and Liberty Mutual Insurance Company (plaintiff's disability insurer), who paid him $7,259.02 in long-term disability benefits, for his June 7 injuries.

Prior to plaintiff receiving the $20,000 settlement funds, Valor became insolvent and an order of liquidation was entered against it. Thereafter, plaintiff submitted a claim to the Fund, a nonprofit entity created by article 34 of the Illinois Insurance Code (Insurance Code) (215 ILCS 5/535 (West 2004)) for the $20,000 limits of Bryant's policy with Valor. The Fund denied plaintiff's claim pursuant to section 546(a) of the Act, maintaining that plaintiff was required to set off any amount received from his medical and disability insurers from his $20,000 claim against the Fund. On January 26, 2004, plaintiff filed a complaint against the Fund, seeking a declaration that the Fund violated section 537.4 of the Act by refusing to pay plaintiff's claim equal to Valor's applicable policy limits of $20,000.

The Fund filed an answer to plaintiff's complaint. As affirmative defenses, the Fund alleged that: (1) pursuant to section 546(a) of the Act, the Fund's obligation is reduced by any amount recovered or recoverable from an "other insurer" and, since plaintiff had recovered in excess of the $20,000 policy limits of the Valor policy, the amount recoverable from the Fund was zero; and (2) pursuant to section 534.3 of the Act, which pertains to what is and is not a "covered claim," "plaintiff's medical insurer's [sic ] claim for reimbursement of those medical insurance benefits, by way of subrogation or otherwise, is not included within the definition of covered claims payable by the [Fund]."

In reply to the Fund's affirmative defenses, plaintiff denied that he had "`recovered' in excess of $20,000 from said insurers within the meaning of [section 546(a) of the Act]" or "that the obligation of the [Fund] is reduced by any sums paid by Plaintiff's medical insurance carrier or plan." Plaintiff further stated that his "insurers and medical plans are limited to $6,917.35" (representing the negotiated liens of his medical insurers); denied "that said insurers/medical plans have claims by way of subrogation"; and denied that section 534.3 is applicable to the purported reimbursement claims of his medical insurers.

The Fund filed a motion for summary judgment on September 27, 2004. In its motion, the Fund argued that, pursuant to section 546(a) of the Act, it was "entitled to set-off the $128,067.82 in medical insurance payments made to or on behalf of the plaintiff by [plaintiff's] two solvent medical insurers * * * and the $7,259.01 in disability payments made to plaintiff by [his] solvent disability insurer" because they were in excess of Valor's $20,000 policy limits and because plaintiff's claim arose from the same injuries as his claim against the Fund. The Fund also made the same subrogation/lien argument as to the nonapplicability of section 534.3(b)(v) of the Act.

On October 26, 2004, plaintiff filed a cross-motion for summary judgment and response to the Fund's motion for summary judgment, arguing that, while section 546(a) provides that the Fund's obligation is to be reduced by the amount recovered or recoverable under other insurance policies, he did not receive any recovery within the meaning of this section. Plaintiff defined "recovery" as being obtained by a judicial action or proceeding. Plaintiff also asserted that the medical expenses and disability benefits he had received were "not the kind of payments which have historically been interpreted as offsets to claims against the Guaranty Fund." Plaintiff also again argued that the liens of his two medical insurers were not excluded by the "covered claim" definition of section 534.3(b)(v), and, with respect to Liberty's payment of $7,259.01 for long-term disability, Liberty would not be entitled to reimbursement from plaintiff's settlement and, therefore, the Fund would not be entitled to a setoff of that amount under section 534.3(b)(v). Plaintiff concluded that he was entitled to the same benefit that he would have received under the negotiated $20,000 settlement had Valor not become insolvent.

On November 16, 2004, the Fund filed its reply to plaintiff's response to its motion for summary judgment and to plaintiff's cross-motion for summary judgment, making arguments similar to those in its motion for summary judgment. The Fund further argued that plaintiff's assertion that the other insurance benefits paid to plaintiff did not constitute "recovered" insurance amounts under section 546(a) was "senseless," since that section contains no requirement that the other insurance must have been recovered in a judicial proceeding. The Fund also argued that the legislature amended section 546(a) in 1997 "to expressly cover all other insurance recoveries `arising from the same facts, injury, or loss that gave rise to the covered claim against the Fund.'" According to the Fund, the addition of language in section 546(a) that stated, "`whether or not such other insurance policy was written by a member company,'" made it clear that medical insurance payments were required to be set off. In support thereof, the Fund relied on MacDougall v. Hartford Insurance Group, No. 197637, 2003 WL 1563436 (Va.Cir.Ct. February 20, 2003), as an analagous case to the facts of the case at bar with a statutory provision similar to Illinois' section 546(a), in which the Virginia court agreed with the defendant Virginia Property and Casualty Insurance Guaranty Association "that health insurance benefits actually paid are an offset from covered claims." MacDougall, slip op. at 7-8. Accordingly, the Fund argued, since section 546(a) "expressly applies to the insured's recovery of a claim under any other insurance policy as long as that claim `arises from the same facts, injury or loss that gave rise to the covered claim against the Fund,'" and plaintiff's recovery of $128,067.82 from his medical insurers and $7,259.01 from his disability insurer "were undeniably claims arising from `the same injury' that gave rise to plaintiff's covered claim against the Fund, the Fund's $20,000 obligation must be reduced by those other insurance payments."

In plaintiff's reply in support of his cross-motion for summary judgment, plaintiff argued that the Fund's interpretation of what constituted "other insurance" went against "the statutory intent of placing the injured party in the same position as he would have been had the tortfeasor's insurer remained solvent." Plaintiff also maintained that the Virginia court's construction of a statute similar to Illinois' section 546(a) was not binding on Illinois courts. In conclusion, plaintiff requested that the trial court declare that the Fund was not entitled to set off the $128,067.82 paid to him by his medical insurers and $7,259.02 received by him as disability benefits and that the Fund was obligated to pay plaintiff the $20,000 limits of Bryant's Valor policy. In the alternative, plaintiff requested that the trial court declare that the Fund was obligated to pay plaintiff the $20,000 limits of Bryant's Valor policy, less the negotiated liens of plaintiff's medical insurers, in the amount of $6,917.35, and declare the liens null and void as subrogated interests against the Fund.

On November 30, 2004, the trial court held a hearing on the parties' motions. The parties presented similar arguments to those contained in their pleadings. The court granted the Fund's motion for summary judgment and denied plaintiff's cross-motion, stating that no genuine issue of material fact existed and that the Fund "is entitled to set-off the $128,067.82 in medical insurance paid by HMO Illinois and Chicago Partners/Meyer...