Stofer v. Motor Vehicle Cas. Co.

• Decision Date: 05 October 1977
• Docket Number: No. 48290,48290
• Citation: 12 Ill.Dec. 168,369 N.E.2d 875,68 Ill.2d 361
• Parties: , 12 Ill.Dec. 168 Robert R. STOFER, Appellee, v. MOTOR VEHICLE CASUALTY CO., et al., Appellants. Joseph N. FOX, Appellee, v. The HARTFORD FIRE INSURANCE CO., et al., Appellants.
• Court: Illinois Supreme Court

Page 875

369 N.E.2d 875

68 Ill.2d 361, 12 Ill.Dec. 168

Robert R. STOFER, Appellee, v. MOTOR VEHICLE CASUALTY CO., et al., Appellants.

Joseph N. FOX, Appellee, v. The HARTFORD FIRE INSURANCE CO., et al., Appellants.

No. 48290.

Supreme Court of Illinois.

Oct. 5, 1977.

Rehearing Denied Nov. 23, 1977.

Conklin, Leahy & Eisenberg, and Keck, Cushman, Mahin & Cate, Chicago (Daniel J. Leahy, Franklin A. Nachman, Joseph Keig, Jr., Bennet B. Harvey, Jr. and Brock R. Landry, Chicago, of counsel), for appellants.

William J. Scott, Atty. Gen., Chicago (Patricia Rosen, Asst. Atty. Gen., of counsel), for intervenor appellant.

Sidney Z. Karasik and Max A. Abrams, Chicago, for appellees.

CLARK, Justice.

This is a consolidated, direct, interlocutory appeal pursuant to our Rules 302(b) and 308 (58 Ill.2d Rules 302(b), 308) from decisions of the circuit court of Cook County holding sections 397 and 401 of the Insurance Code of 1937 (Ill.Rev.Stat.1975, ch. 73, pars. 1009, 1013) invalid on the grounds that the power thereby granted the Director of Insurance to prescribe uniform insurance contracts (including contractual limitations on the time within which suits may be brought against the insurer by the insured) violated the separation of governmental branches and powers mandated by section 1 of article II of our constitution (Ill.Const.1970, art. II, sec. 1). We reverse, because we conclude that the powers thus exercised by the Director of Insurance are of the type which the legislature could (and did) properly lodge in an executive officer.

Section 397 of the Insurance Code of 1937 (Ill.Rev.Stat.1975, ch. 73, par. 1009) provides "The Director of Insurance shall promulgate such rules and regulations as may be necessary to effect uniformity in all basic policies of fire and lightning insurance issued in this State, to the end that there be concurrency of contract where two or more companies insure the same risk."

Section 401 (Ill.Rev.Stat.1975, ch. 73, par. 1013) further provides:

"The Director * * * shall have the power

(a) to make reasonable rules and regulations as may be necessary for making effective such laws."

Pursuant to that authority, the Director had promulgated Rule 23.01, which prescribed "the Standard Policy for fire and lightning insurance of the State of Illinois" and prohibited the making, issuance, and delivery of insurance contracts and policies which did not conform to the standard policy.

The standard policy includes the following clause:

"No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all of the requirements of this policy shall have been complied with, and unless commenced within twelve months next after inception of the loss."

The plaintiffs in these two actions, Robert Stofer and Joseph Fox, and the defendant insurance companies entered into temporary contracts of fire insurance ("binders") which incorporated the above-quoted standard clause.

Stofer allegedly suffered a loss on October 29, 1972. On December 18, 1972, Stofer submitted a written claim to his insurer, accompanied by a sworn statement of "proof of loss." On May 22, 1973, the insurer rejected the claim, and on November 5, 1973, Stofer filed suit against his insurer in the circuit court of Cook County. As an affirmative defense, the insurance company pleaded the expiration of the 12-month period provided for such suits in the contract.

Fox's insured property allegedly was exposed to shock waves from a nearby explosion on March 6, 1972, and collapsed on June 13, 1972. Fox's insurers rejected his claim on or about October 2, 1972, and Fox filed suit against them on December 3, 1973. Fox's insurers raised the same affirmative defense as was raised against Stofer.

The circuit court struck the affirmative defense in each case on the ground that the 12-month limitation on the time for bringing suit following a loss had been prescribed by the Director of Insurance pursuant to an unconstitutional delegation of authority to him by the legislature. The circuit court consolidated the cases and rendered the findings necessary to certify the constitutional question for interlocutory appeal (see 58 Ill.2d R. 308(a)), and we granted the insurance companies' motion for direct appeal to this court pursuant to our Rule 302(b).

It is clear that the circuit court did not decide whether the insurance companies had, by their conduct, waived the 12-month limitation. That issue is not before us, and our opinion should not be interpreted as expressing any view on that question.

The only question brought to us from the trial court is the constitutionality of the promulgation of Rule 23.01 by the Director of Insurance. Nonetheless, we need not address the constitutionality of the Director's promulgation of Rule 23.01 if either the enabling statute or the rule may be construed to avoid the constitutional question.

The insurance companies thus claim that the terms imposed by Rule 23.01 are enforceable between the parties even if the Director acted unconstitutionally in imposing those terms. They argue that the terms imposed by Rule 23.01 are no different than any other contractual terms, and thus bind the parties which have agreed to them. We disagree. These terms were in no way bargained for by the parties, but rather, were imposed in haec verba as a matter of law. This particular term obviously is for the sole benefit of the insurer and only benefits the insured to the extent that (like any term which benefits the insurer) there is a possibility that it may tend to lower insurance rates. Accordingly, if the law imposing the term is invalid, its enforceability would be called into serious question. The contractual form of the underlying obligation thus does not prevent us from reaching the constitutional question.

Plaintiffs also suggest a ground for our decision which stops short of addressing the constitutional question. They claim that the legislature did not delegate to the Director of Insurance the power to prescribe the time limit at issue here. That contention does not withstand scrutiny of the history of Rule 23.01 and its counterparts in other jurisdictions.

The predecessor of Rule 23.01 was not merely another administrative rule, but was itself part of the Insurance Code. When the legislature first enacted the Insurance Code of 1937, section 397 of the Code incorporated by reference the New York standard fire insurance policy. After the insurance industry proposed several revisions of that policy. Illinois amended section 397 to eliminate the reference to the old New York standard policy and to give the Director of Insurance the power to provide by rule for "concurrency of contract" among insurers insuring the same risk. (1945 Ill.Laws 950, Ill.Rev.Stat.1945, ch. 73, par. 1009.) It is thus clear to us that the legislature intended the rule-making authority of the Director of Insurance to replace the old New York standard policy as the substantive basis for the regulation of fire insurance. While it would have been more artful for the legislature to have expressly stated that the Director's rule-making authority included the authority to promulgate a standard policy, the absence of such a statement does not indicate a contrary intent.

Soon after being given this rule-making authority, the Director used it to promulgate a standard policy pursuant to Rule 23.01. For over 30 years the legislature has not seen fit to overturn the Director's contemporaneous interpretation of the authority given him in 1945. We decline to do so today.

We now address the constitutional question. The separation of powers and branches of government raises extremely complex and subtle questions about the nature and function of government itself. (See generally People v. Reiner (1955), 6 Ill.2d 337, 342-43, 129 N.E.2d 159.) As attitudes toward the functions of government have changed over the years, so have our interpretations of how government is to perform and allocate those functions among its various branches. In the interest of flexibility, therefore, perhaps a little stare decisis has been lost. (Compare, e. g., People v. Roth (1911), 249 Ill. 532, 94 N.E. 953, and Brown v. City of Chicago (1969), 42 Ill.2d 501, 250 N.E.2d 129, with People ex rel. Moore v. J. O. Beekman & Co. (1931), 347 Ill. 92, 179 N.E. 435, and People v. Tibbitts (1973), 56 Ill.2d 56, 305 N.E.2d 152.) We are reminded of Mr. Justice Jackson's memorable expression of the frustration of dealing with questions such as these:

"Just what our forefathers did envision, or would have envisioned had they foreseen modern conditions, must be divined from materials almost as enigmatic as the dreams Joseph was called upon to interpret for Pharaoh. A century and a half of partisan debate and scholarly speculation yields no net result but only supplies more or less apt quotations from respected sources on each side of any question." Youngstown Sheet & Tube Co. v. Sawyer (1952), 343 U.S. 579, 634-35, 72 S.Ct. 863, 869-70, 96 L.Ed. 1153, 1199 (Jackson, J., concurring).

Fox and Stofer argue that, while it may be clear that the Director can promulgate reasonable regulations to effectuate the legislature's desire to provide "concurrency of contract" and while the legislature itself could have enacted a uniform one-year limit on the time for actions against the insurer under the contract, the legislature could not give the Director the power to prescribe such a limit. They reason that limiting a person's access to judicial remedies is a "legislative act" which only can be done by statute and not by regulation, and that, even if it could be done by regulation, the enabling statute does not set forth sufficient standards to cabin the administrator's discretion in promulgating such a regulation.

We hold that the legislature may delegate to the Director the power to prescribe a uniform insurance contract containing a clause...