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

• Decision Date: 31 October 2012
• Docket Number: No. 2–12–0272.,2–12–0272.
• Citation: 979 N.E.2d 551
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff–Appellee, v. Dianna McFADDEN and Todd McFadden, Defendants–Appellants.
• Court: United States Appellate Court of Illinois

979 N.E.2d 551

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff–Appellee,

v.Dianna McFADDEN and Todd McFadden, Defendants–Appellants.

No. 2–12–0272.

Appellate Court of Illinois, Second District.

Oct. 31, 2012.

Michael B. Lulay, Lulay Law Offices, Naperville, IL, for Appellants.

Frank C. Stevens, Taylor Miller LLC, Chicago, IL, for Appellee.

Presiding Justice JORGENSEN delivered the judgment of the court, with opinion.

¶ 1 Defendant Dianna McFadden was injured in an auto crash. She and her husband, defendant Todd McFadden, sought to collect underinsured motorist coverage from plaintiff, State Farm Mutual Automobile Insurance Company. The McFaddens claimed that, because they had five separate policies with State Farm, each with a $100,000 limit of liability for underinsured motorist coverage, their total limit was $500,000, and it was this amount that should be offset against the tortfeasor's liability limit to determine whether the tortfeasor was underinsured.

¶ 2 State Farm filed a complaint for declaratory judgement, presenting two bases by which the McFaddens were unable to accumulate more than $100,000 in underinsured motorist coverage to be offset against the tortfeasor's $250,000 policy, resulting in no underinsured coverage. For the reasons that follow, we agree with State Farm's primary basis for denying coverage: as a matter of law, express "antistacking" language in the policies prohibits the aggregation, or "stacking," of said policies to provide total underinsured coverage in excess of the amount set forth in the single policy providing the highest limit of liability, i.e. , $100,000. One basis by which to deny coverage is sufficient. Therefore, we need not address the second basis: in the absence of express antistacking language, default stacking methodology would not result in coverage that exceeds $100,000. There is antistacking language, and this antistacking language conflicts with either stacking methodology proposed by the parties, making a determination on stacking methodology purely advisory. We affirm the denial of coverage.

¶ 3 I. BACKGROUND

¶ 4 In May 2009, Mark Nies (not a party to this case) negligently crashed into a motorcycle driven by Dianna McFadden. Nies carried automobile insurance coverage in the amount of $250,000, and his insurer paid the McFaddens that amount in settlement. However, the McFaddens' damages exceeded $250,000, and they sought to collect an additional $250,000 from their own insurer, State Farm. The McFaddens claimed that Nies was underinsured by $250,000.

¶ 5 State Farm had issued to the McFaddens five automobile insurance policies, one for each of their five vehicles:

		Underinsured
Policy No.	Named Insured	Vehicle	Limit
* * *D10–13	Dianna	2004 Harley Davidson (in crash)	$100,000
* * *F03–13B	Todd and Dianna	2008 Ford Escape	$100,000
* * *E02–13E	Todd	1995 Saturn	$100,000
* * *F09–13	Dianna	1997 Honda	$100,000
* * *C01–13	Todd	1995 Harley Davidson	$100,000

Each policy contained its own "declarations sheet," listing the relevant vehicle, premium amount, and underinsured coverage amount. The declarations sheet is the first page of each policy and can be thought of as a summary of the document. Each declarations sheet showed that its respective policy contained $100,000 in underinsured coverage. The McFaddens reasoned that, because they owned five policies, each with $100,000 in underinsured coverage, they carried a total of $500,000 in underinsured coverage. The McFaddens concluded that Nies was therefore underinsured by $250,000 (i.e., their total $500,000 underinsured coverage minus $250,000 from Nies) and that State Farm should pay them that difference.

¶ 6 In June 2011, State Farm filed a complaint for declaratory judgment, arguing that: (1) express language in each of the McFaddens' policies, which will be set forth in our analysis, prohibits the aggregation or "stacking" of said policies to provide total underinsured coverage in excess of the amount set forth in the single policy providing the highest coverage, i.e., $100,000 (Hobbs v. Hartford Insurance Co. of the Midwest, 214 Ill.2d 11, 17, 291 Ill.Dec. 269, 823 N.E.2d 561 (2005) ; Grzeszczak v. Illinois Farmers Insurance Co., 168 Ill.2d 216, 229–30, 213 Ill.Dec. 606, 659 N.E.2d 952 (1995) ); and, (2) even if the McFaddens' policies did not contain said antistacking language, precedent requires that Nies's policy be offset one-by-one against each policy's underinsured coverage amount before a policy amount may be stacked with the others, and, here, each $100,000 underinsured coverage amount is less than $250,000, so no offset amount ever accumulates (Jones v. Country Mutual Insurance Co., 371 Ill.App.3d 1096, 309 Ill.Dec. 552, 864 N.E.2d 793 (2007) ; Kapinus v. State Farm Mutual Automobile Insurance Co., 317 Ill.App.3d 185, 250 Ill.Dec. 534, 738 N.E.2d 1003 (2000) (ruling based on the statutory definition of "underinsured motor vehicle" in section 143a–2(4) of the Illinois Insurance Code ( 215 ILCS 5/143a–2(4) (West 2008)))). In other words, State Farm presented two bases by which the McFaddens were prevented from accumulating more than $100,000 in underinsured coverage to be offset against Nies's $250,000 policy, resulting in no underinsured coverage.¹

¶ 7 As to the first issue, the McFaddens responded that the policies' antistacking language, which limited underinsured coverage to $100,000, was rendered ambiguous by: (1) the policies' proration clauses; and (2) the policies' declaration sheets. They argued that, if the antistacking language was ambiguous, it did not effectively prevent them from accumulating more than $100,000 in underinsured coverage.

¶ 8 As to the second issue, the McFaddens conceded that Jones and Kapinus establish an offset-first, stack-second computation method. They further conceded that, under the offset-first, stack-second computation method, there is no underinsured coverage. However, the McFaddens argued that Jones and Kapinus were wrong.

¶ 9 The trial court recognized that it was compelled to rule in favor of State Farm on the second issue. Jones and Kapinus, which come from the First and Third Districts, respectively, stand unrebutted. A decision by an appellate court, while not binding on other appellate districts, is binding on circuit courts throughout the state. State Farm Fire & Casualty Co. v. Yapejian, 152 Ill.2d 533, 539, 178 Ill.Dec. 745, 605 N.E.2d 539 (1992). Because State Farm need prevail on only one of its arguments in order to deny coverage, the court did not address the first issue. This appeal followed.

¶ 10 II. ANALYSIS

¶ 11 The two questions of law presented to the trial court may be thought of as: (1) can we stack? (whether the policies' antistacking language effectively limits coverage to the amount contained in the single policy providing the highest limit); and, (2) if we can, how do we stack? (whether the methodology is offset first, stack second, or the other way around). From an analytic perspective, it makes sense to determine if the policies can be aggregated so as to exceed $100,000 before determining whether such an aggregation must be accomplished by offsetting first, stacking second, or the other way around. Although the trial court did not answer the first question, we may. This court may address questions of law presented to, but not decided by, the trial court. See, e.g., Myers v. Health Specialists, S.C., 225 Ill.App.3d 68, 75–76, 167 Ill.Dec. 225, 587 N.E.2d 494 (1992).²

¶ 12 Therefore, we move to the first issue. The McFaddens argue that each policy's antistacking provision is ineffective to limit coverage to the highest amount contained in a single policy, i.e., $100,000, because: (1) it is internally inconsistent (the antistacking provision is rendered ambiguous by its own proration clause); and, (2) even if it would have been effective on its own, it is rendered ambiguous when read in conjunction with each policy's declarations sheet. We reject each of these arguments.

¶ 13 A. Antistacking Provision Is Internally Consistent

¶ 14 An insurance provision that limits the total liability from all policies to that of the single policy providing the highest limit is referred to as an "antistacking provision." However, this is in some ways a misnomer, because an underinsured coverage antistacking provision does not necessarily preclude aggregation of portions of multiple policies. Rather, an antistacking provision limits the total coverage to that set forth in the single policy with the highest limit. See, e.g., Armstrong v. State Farm Mutual Automobile Insurance Co., 229 Ill.App.3d 971, 974–76, 172 Ill.Dec. 109, 595 N.E.2d 172 (1992). This concept is consistent with the section of the Illinois Insurance Code authorizing antistacking provisions:

"Nothing herein shall prohibit an insurer from setting forth policy terms and conditions which provide that if the insured has coverage available under this Section under more than one policy * * *, any recovery or benefits may be equal to, but may not exceed, the higher of applicable limits of the respective coverage * * *." 215 ILCS 5/143a–2(5) (West 2008).

¶ 15 Here, the issue is whether the policies' antistacking language effectively limits coverage to the amount contained in the single policy providing the highest limit, i.e., $100,000. Each of the five policies contains the same antistacking provision. It is comprised of the express antistacking language (paragraph 1), the proration clause (paragraph 3), and a definition clause (paragraph 2), which is necessary to understand the proration clause:

"If There is Other Underinsured Motor Vehicle Coverage * * *

1. If underinsured motor vehicle coverage for bodily injury is available to an insured from more than one policy provided by us or any other insurer, the total limit of liability available from all policies provided by all insurers shall not exceed the limit of liability of the single policy providing the highest limit of liability. This is the most that will be paid

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