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

• Decision Date: 29 March 2016
• Docket Number: No. 2–15–0462.,2–15–0462.
• Citation: 51 N.E.3d 1082,402 Ill.Dec. 330
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff and Counterdefendant–Appellant, v. Patrick BURKE and Lisa Burke, Individually and as Parents and Guardians of Jonathon Burke, a Minor, Defendants (Granite State Insurance Company, Defendant and Counterplaintiff–Appellee).
• Court: United States Appellate Court of Illinois

51 N.E.3d 1082

402 Ill.Dec. 330

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff and Counterdefendant–Appellant

v.Patrick BURKE and Lisa Burke, Individually and as Parents and Guardians of Jonathon Burke, a Minor, Defendants (Granite State Insurance Company, Defendant and Counterplaintiff–Appellee).

No. 2–15–0462.

Appellate Court of Illinois, Second District.

Opinion Filed March 29, 2016.

Rehearing Denied May 2, 2016.

Kristin L. Matej and Phillip W. Rehani, both of Taylor Miller, LLC, Chicago, for appellant.

Perry M. Shorris, of Lewis Brisbos Bisgaard & Smith, LLP, Chicago, for appellee.

OPINION

Justice BIRKETT delivered the judgment of the court, with opinion.

¶ 1 Plaintiff and counterdefendant, State Farm Mutual Automobile Insurance Company, appeals the judgment of the circuit court of DuPage County granting summary judgment in favor of defendant and counterplaintiff, Granite State Insurance Company. At issue is the applicability of uninsured motorist coverage through a policy issued by Granite State. State Farm argues that the uninsured motorist provision in the Granite State policy is unenforceable because it violates Illinois law and public policy requiring that all motorists have uninsured motorist coverage, notwithstanding the choice-of-law provision spelled out in the policy. Alternatively, State Farm argues that GraniteState waived its policy defenses by extending coverage to defendants Patrick and Lisa Burke and their son Jonathon. Last, State Farm argues generally that it would be unjust to allow Granite State to evade the requirements of Illinois public policy embodied in the mandatory insurance laws. We agree that Granite State waived its policy defenses, and we reverse and remand.

¶ 2 I. BACKGROUND

¶ 3 Patrick Burke (Burke) worked as an insurance investigator for Ryan R. Robison and Company, a Michigan-based company. Burke resided in Naperville, Illinois, at all times relevant to this case. On December 17, 2010, Burke's wife, Lisa, and their sons Zack and Jonathon, were riding with him in a Chevrolet Trailblazer. The Trailblazer was a Robison company car provided to Burke for his employment, delivered to his home in Naperville, but there were no restrictions on its use by Burke. At approximately 7 p.m., the Trailblazer was involved in a motor vehicle accident with a vehicle driven by James Drascal, an uninsured driver. Burke, Lisa, and Jonathon all reported injuries resulting from the collision.

¶ 4 The Trailblazer was insured at the relevant time under the Granite State policy, issued to Robison. Burke personally insured Lisa's car, a Toyota minivan, under a State Farm policy. Both policies provided uninsured motorist coverage; however, the Granite State policy contained a Michigan uninsured motorist endorsement while the State Farm policy provided uninsured motorist coverage pursuant to the requirements of Illinois law.

¶ 5 Isabell Kendl, an insurance broker with an office in Illinois, procured the Granite State policy for Robison's company vehicles. When Burke joined Robison in 2010, the Trailblazer was added to the policy as a covered vehicle. The Granite State policy provided Robison with uninsured motorist coverage of up to $1 million for owned automobiles. In the Michigan uninsured motorist endorsement, the policy contained several provisions relevant to our discussion.

¶ 6 Under section A, “Coverage,” the policy provided:

“We will pay those sums, and only those sums, that an ‘employee’ is ‘legally entitled to recover’ as compensatory damages because of ‘bodily injury’ sustained in an ‘accident’ with an ‘uninsured motor vehicle’ while such ‘employee’ was ‘occupying’ a covered ‘auto’ in the ‘course and scope of employment’ with the ‘Named Insured’.”

¶ 7 Section B, “Who is an Insured,” of the endorsement provided:

“The uninsured and underinsured motorists coverage of this Endorsement is provided solely and exclusively for ‘employees' of the ‘Named Insured’, while such ‘employees' are ‘occupying’ a covered ‘auto’. Only such ‘employees' are ‘insureds' for uninsured and underinsured motorists coverage under this Endorsement. Neither the Company nor the ‘Named Insured’ intend or reasonably expect to provide such coverage to any other persons, or with respect to any ‘automobiles' other than covered ‘auto’.”

¶ 8 Section C, “Exclusions,” included:

“Anyone other than an ‘employee’ in the ‘course and scope of employment’ with the Named Insured at the time of the ‘accident’ for which a claim is being made under this endorsement.”

¶ 9 Section E.3 of the endorsement provided that the “ ‘employee’ must file any suit against [Granite State] for coverage under this endorsement within three hundred sixty five (365) calendar days of the ‘accident’.” The limitations period would not apply if the parties agree or if the employee has filed suit for bodily injury against the uninsured motorist within the 365–calendar–day period.

¶ 10 Section F of the endorsement included the following relevant “Additional Definitions” pertaining specifically to the policy language used in the endorsement:

“ ‘Accident’ means actual physical contact between an ‘automobile’ and a covered ‘auto’ that occurs during the policy period, on a ‘public highway’ in the State of Michigan, causing ‘injury’ to an ‘employee’ for which a ‘claim’ is made under this Endorsement.

‘Auto’ or ‘Automobile’ means a vehicle propelled other than by human power, having a minimum of four (4) wheels, that must be registered with a State under applicable law for use solely and exclusively on a ‘public highway’ to transport people or property.

* * *

‘Course and scope of employment’ means that the ‘employee has in fact applied for and received benefits under applicable Worker's Compensation law for the injuries for which a claim is being made under this Endorsement.

‘Employee’ means:

1. A person who is a full-time ‘employee’ of the ‘Named Insured’, who has in fact applied for and received benefits under applicable Worker's Compensation law for the injuries for which a claim is being made under this Endorsement; or

2. The personal representative of the estate of an ‘employee’ appointed by a court of competent jurisdiction if the ‘injury’ for which a ‘claim’ is made under this Endorsement has resulted in the death of such ‘employee’.”

¶ 11 Finally, section H, “Choice of Law,” provided:

“This Endorsement, and the Michigan uninsured/underinsured motorists coverage provided by this Endorsement, are to be governed and interpreted in accordance with the law of the State of Michigan, but without reference to the choice of law principles of the State of Michigan, irrespective of whether such choice of law principles are set forth by statute, regulation, common law, equity, or otherwise.”

¶ 12 After the accident, Burke notified his office manager at Robison, and the insurance claim process began. Eventually, the Burkes' claims were reported to Granite State. Granite State turned to York Risk Services, a third-party administrator, to handle the claims. Katherine Heyl, a senior analyst, was assigned to the claims. Heyl did not have the authority to settle the claims or to extend uninsured motorist coverage. Thomas Del Monte, a claims management analyst, supervised Heyl's work on the claims. Del Monte had the authority to enter a settlement as well as to extend uninsured motorist coverage.

¶ 13 On December 9, 2011, Heyl apparently communicated to Del Monte that she believed that the Burkes' claims were within the uninsured motorist coverage offered under the Granite State policy. Del Monte cautioned Heyl not to give Burke the impression that the claims would be covered and informed her that his initial assessment left him with concerns over whether the claims would be covered. On December 16, 2011, after further investigation, Heyl confirmed to Del Monte that Burke had not filed a workers' compensation claim for the accident. On January 26, 2012, Heyl sent Del Monte a report noting that Burke might not have been within the scope of his employment at the time of the accident and further noting that this presented a potential coverage issue.

¶ 14 On February 10, 2012, Del Monte informed Heyl that Granite State would “agree to provide [the] mandatory minimum” coverage pursuant to Illinois uninsured motorist requirements for the Burkes' claims. On February 27, 2010, Heyl informed Burke in an email that Granite State would “be granting coverage” to Burke and requested copies of medical records. Heyl also offered to investigate further regarding Lisa and Jonathon's coverage under the Granite State policy. As a result of that investigation, Heyl drafted reports to Del Monte concluding that Lisa and Jonathon did not have coverage under the policy, because they were not on company business at the time of the accident. Heyl drafted letters denying coverage to Lisa and Jonathon. Del Monte, however, did not authorize the release of the denial letters. On June 19, 2012, Del Monte decided to provide coverage for Lisa and Jonathon, again in the minimum amount required under Illinois uninsured motorist law.

¶ 15 On July 16, 2012, Granite State extended offers of $12,000 to Burke and $200 each to Lisa and Jonathon. Burke countered, requesting a total of $85,000. Granite State countered Burke's request, and offered $20,000 to Burke and $300 each to Lisa and Jonathon. Burke again rejected Granite State's offer. Burke retained an attorney and filed an arbitration demand under the policy. In December 2012, Granite State, by letter, denied coverage for all of the Burkes' claims.

¶ 16 After Granite State refused coverage to the Burkes, Burke made a demand for arbitration pursuant to his individual State Farm policy. On February 25, 2013, State Farm filed a declaratory judgment action against Granite State and the Burkes, seeking a declaration that Granite State's policy would provide the primary uninsured motorist coverage. Granite State counterclaimed, seeking a declaration that its policy did not apply.

¶ 17 The...