State Farm Mut. Auto. v. Ill. Farmers Ins.
| Citation | 306 Ill.Dec. 722,858 N.E.2d 519 |
| Decision Date | 02 November 2006 |
| Docket Number | No. 1-04-0839.,1-04-0839. |
| Parties | STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY and James Machak, Plaintiffs-Appellees, v. ILLINOIS FARMERS INSURANCE COMPANY, Mid-Century Insurance Company, and George Young, Defendants-Appellants. |
| Court | United States Appellate Court of Illinois |
Worker, Sitko & Hoffman, LLC, Chicago (Danny L. Worker, Mary F. Sitko, of counsel), for Defendants-Appellants.
Momkus McCluskey McAndrew & Monroe, LLC, Downers Grove (Mark W. Monroe, James P. Marsh, Steven B. Ekker, of counsel), for Plaintiffs-Appellees.
MODIFIED UPON DENIAL OF PETITION FOR REHEARING
The plaintiffs, State Farm Mutual Automobile Insurance Company (State Farm) and James Machak (Machak), sought declaratory and other relief from the defendants, Illinois Farmers Insurance Company and its affiliate, Mid-Century Insurance Company (hereinafter Farmers and its affiliate, Mid-Century, will be referred to as Farmers). On February 18, 2004, the trial court entered an order which granted State Farm and Machak's motion for partial summary judgment on counts I through IV but stayed all other proceedings in the trial court. The trial court also made a special finding that, as to the partial summary judgment order, "there is no just reason for delaying either enforcement or appeal or both." Official Reports Advance Sheet No. 22 (October 26, 2005), R. 304(a), eff. January 1, 2006. Farmers presents two issues for our review: (1) whether State Farm's direct action lawsuit against Farmers was proper; and (2) whether the trial court erred in granting State Farm's motion for partial summary judgment. For the reasons that follow, we reverse the trial court's order granting the motion for partial summary judgment and remand this matter for further proceedings.
State Farm and Machak sought declaratory, injunctive and monetary relief from Farmers with respect to step-down provisions contained in Farmers' automobile liability policies issued to Illinois policyholders. A step-down provision in an insurance policy decreases the coverage for drivers who are not the insured person, a family member or a listed driver but, under the permissive user limitation in the policy, are insured while using the insured's automobile with the permission of the owner. Country Cos. v. Universal Underwriters Insurance Co., 343 Ill. App.3d 224, 228, 277 Ill.Dec. 553, 796 N.E.2d 639 (2003).
Farmers' step-down provisions reduce the policy liability limits to the minimum liability limits required under sections 7-203 and 7-317(b) of the Illinois Safety and Family Financial Responsibility Law (625 ILCS 5/7-203, 7-317(b) (West 2002)) (Financial Responsibility Law) when the insured's vehicle is being operated by a permissive user who is neither a resident of the named insured's household (nonresident permissive user) nor a family member or a listed driver. Farmers usually places its step-down provision in the additional definitions subsection of the liability section of the main body of the insurance policy or in the limits of coverage section in the main body of the insurance policy or in an endorsement to the policy.
On May 21, 2003, the trial court granted leave to State Farm to file a second amended complaint. Each of the first four counts in the second amended complaint was predicated on the claim of one of Farmers' insureds and each claim was based on the facts that apply to that insured's case. The common thread in each insured's case is that Farmers invoked its step-down provision.
In count I of the second amended complaint, State Farm alleged that Susan Case was a State Farm insured and that she had a policy with underinsured motorist (UIM) coverage of $100,000. Case was riding as a passenger on a motorcycle being operated by Frank Mendoza when she was struck by a motorcycle being operated by James Turk. Case was severely injured in the motorcycle accident. Mendoza owned the motorcycle he was driving and he was insured by Farmers. He had a policy with liability coverage of $250,000 per person. Mendoza also owned the motorcycle that was being operated by Turk, a nonresident permissive user. Farmers also insured the motorcycle that Turk was operating, but stepped-down the liability limits on the policy covering Turk's motorcycle from $250,000 to $20,000 per person. State Farm paid $80,000 in UIM benefits to Case. However, her damages exceeded $500,000. In count I of its second amended complaint, State Farm seeks reimbursement from Farmers for payments it made as a result of Farmers implementing the step-down provisions in its policy.
In count II of the second amended complaint, State Farm alleged that Karen Bolen was a State Farm insured who was injured by Floyd Shirin, a nonresident permissive user of a Farmers-insured vehicle owned by Paul Imig. Shirin was also a State Farm insured with excess liability coverage. At the time of the accident, Bolen and Shirin were insured by State Farm, and they have assigned all of their rights against Farmers to State Farm. Farmers invoked the step-down provision of its policy and reduced the amount available to Bolen to $20,000 for liability and $15,000 for property damage. State Farm maintains that it has been damaged in the amount of $64,256.46, which is the total of the $40,000 paid by State Farm to Bolen under Shirin's State Farm policy, plus $24,265.46 net property damage paid by State Farm on behalf of Bolen. State Farm seeks reimbursement from Farmers.
In count III of the second amended complaint, State Farm alleged that Mid-Century, an affiliate of Farmers, insured a vehicle owned by Steven Olsen with policy limits of $250,000 for bodily injury liability. Steve Olsen's vehicle was being driven by his son, Nicholas Olsen. Patricia Yawn, a State Farm insured, was injured in an accident with Nicholas Olsen, a permissive user of the Olsen vehicle. State Farm paid its insured $5,000 from the medical payments coverage and $45,000 under its UIM coverage from the policy issued to Yawn. State Farm seeks reimbursement of these first-party benefits directly from Farmers.
In count IV of the second amended complaint, State Farm alleges that George Young was injured by a vehicle driven by Charles Hovis, a permissive user of the vehicle owned by Mark Burr, a Farmers insured. Farmers insured Burr's vehicle with liability limits of $250,000 per occurrence. Hovis was a State Farm insured under a policy issued to his parents. Farmers was defending Hovis as the primary carrier with step-down liability limits of $20,000. State Farm insured Hovis as an excess carrier. State Farm seeks reimbursement of all costs and attorney fees incurred in providing additional defense counsel to Hovis and seeks reimbursement of any monies it may be obligated to pay up to its $100,000 policy limits that may be available to Hovis under the State Farm policy should there be a settlement or judgment.
In addition to seeking reimbursement for the monies paid to its insureds, in counts I through IV of its second amended complaint, State Farm also seeks a declaration that Farmers' step-down provisions are void, invalid and unenforceable. State Farm also seeks a declaration that the liability policy limits available to nonresident permissive users must be the same as other insureds under Farmers' policies. State Farm further seeks reimbursement for monetary losses caused by Farmers invoking the step-down provisions.
In count V of the second amended complaint, Machak, a Farmers insured, seeks injunctive relief, monetary damages, punitive damages and attorney's fees for a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. 815 ILCS 505/1 et seq. (West 2002) (Consumer Fraud Act). In count VI of the second amended complaint, Machak and State Farm seek injunctive relief to prevent Farmers from invoking or enforcing its step-down provisions in the future. These counts are not at issue in this appeal.
Farmers filed a motion to dismiss the second amended complaint. State Farm responded to Farmers' motion by filing a motion for partial summary judgment on counts I through IV. The trial court found that the step-down provisions in the Farmers' insurance policies violate the public policy of the State of Illinois. Accordingly, the trial court denied Farmers' motion to dismiss but granted State Farm's motion for partial summary judgment on counts I through IV of its second amended complaint. In addition, the trial court included the Supreme Court Rule 304(a) language that "there is no just reason for delaying either enforcement or appeal or both." Official Reports Advance Sheet No. 22 (October 26, 2005), R. 304(a), eff. January 1, 2006. Finally, the trial court stayed the proceedings concerning all remaining counts "pending a resolution of the public policy issue on appeal."
The standards governing summary judgment motions are well established. Northern Illinois Emergency Physicians v. Landau, Omahana & Kopka, Ltd., 216 Ill.2d 294, 305, 297 Ill.Dec. 319, 837 N.E.2d 99 (2005). The purpose of summary judgment is not to try a question of fact, but to determine whether a genuine issue of material fact exists. Northern Illinois, 216 Ill.2d at 305, 297 Ill.Dec. 319, 837 N.E.2d 99, citing Adams v. Northern Illinois Gas Co., 211 Ill.2d 32, 42-43, 284 Ill.Dec. 302, 809 N.E.2d 1248 (2004). Summary judgment is appropriate when, after viewing the case in the light most favorable to the nonmoving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Northern Illinois, 216 Ill.2d at 305, 297 Ill.Dec. 319, 837 N.E.2d 99, citing General Casualty Insurance Co. v. Lacey, 199 Ill.2d 281, 284, 263 Ill.Dec. 816, 769 N.E.2d 18 (2002) (...
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