Tucker v. Country Mut. Ins. Co., 4-83-0607

Citation465 N.E.2d 956,80 Ill.Dec. 610,125 Ill.App.3d 329
Decision Date21 June 1984
Docket NumberNo. 4-83-0607,4-83-0607
Parties, 80 Ill.Dec. 610 Martha TUCKER, Plaintiff-Appellee, v. COUNTRY MUTUAL INSURANCE COMPANY, a Corporation, Defendant-Appellant.
CourtUnited States Appellate Court of Illinois

Dunn, Goebel, Ulbrich, Morel & Hundman, Bloomington, for defendant-appellant; John L. Morel, Bloomington, of counsel.

G. Michael Prall, Yoder, Yoder, Zanoni, Flynn, Prall & Willard, Bloomington, for plaintiff-appellee.

TRAPP, Justice:

Defendant Country Mutual Insurance Company appeals from a declaratory judgment of the circuit court of McLean County, finding that defendant failed to offer underinsured coverage to its insured in a renewal policy of automobile insurance, as required by section 143-1 of the Illinois Insurance Code (1979 Ill.Laws 4771) and reading such coverage into plaintiff's policy by operation of law. We affirm.

The only count of plaintiff's complaint before this court upon which a declaratory judgment was entered by the trial court is count V. The allegations of count V and the agreed statement of facts submitted to the trial court by the parties discloses that on October 22, 1980, plaintiff Martha Tucker was injured in an automobile accident sustaining injuries in excess of $20,000. Plaintiff's husband, William Tucker, was the named insured on a policy of insurance issued by the defendant and plaintiff was covered under the policy as a spouse and resident of the same household. Under the policy of insurance, uninsured motorist coverage of $100,000/$300,000 was provided, but the policy did not contain coverage for underinsured protection to pay the difference between plaintiff's total damages and the liability limits of the at-fault driver's insurance policy. The driver of the at-fault vehicle was insured but the limits of his liability were $15,000 per person, which amount was tendered to plaintiff by State Farm Insurance Company.

The statutory provision at issue provided that, effective March 3, 1980, no policy could be issued or renewed unless an offer of underinsured coverage was made to the insured to provide coverage for the difference between the injured party's damages and the liability limits of the at-fault vehicle. Section 143a-1 provides as follows:

"No policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be renewed or delivered or issued for delivery in this State with respect to any motor vehicle * * *unless underinsured motorist coverage is offered in an amount equal to the insured's uninsured motorist coverage limits." (Emphasis added.)

Plaintiff's complaint sought a declaratory judgment that defendant had failed to offer the underinsured motorist protection upon renewal of her insurance policy and that such failure to make the offer required that the coverage be included in the insured's policy by operation of law.

The method devised by defendant to offer underinsurance coverage to policyholders was to include a one-time notice to that effect with the policyholder's notice of renewal. Plaintiff received a notice of the policy renewal in August 1980, along with a letter from defendant advising her of the additional coverage. The notice sent to plaintiff from defendant provided as follows:

"Dear Policyholder:

The Country Companies continually strive to control costs in order to avoid rate increases for our policyholders. We have been able to postpone a rate increase for several months in spite of the continuing impact of high inflation. It has, however, finally become necessary to adjust our rates upward to keep them better in line with costs. The rate increase has been kept to a minimum.

We would like you to be aware that Country Companies now offer underinsured motorist coverage. This coverage provides bodily injury protection for you if you are injured in an accident caused by another driver who does not have adequate liability insurance coverage. If you wish to add this coverage to your personal vehicle policy, please contact your Country Companies agent."

The trial court granted plaintiff's complaint for declaratory relief and implied underinsurance coverage in the policy in limits equal to her uninsured protection. In so doing, the trial court construed the word "offer" in the statute to require that the defendant meet a four-part test adopted in Hastings v. United Pacific Insurance Co. (Minn.1982), 318 N.W.2d 849. The trial court concluded that since no meaningful offer of underinsurance coverage had been made by the defendant, underinsurance coverage would be included in the policy in an amount equal to the limits for uninsured coverage.

The deciding issue we consider is whether the defendant made a proper offer of underinsurance coverage to its insured as required by section 143a-1 of the Illinois Insurance Code. This issue is one of first impression in the reviewing courts of this state.

Defendant takes the position that it was not the legislature's intention in using the word "offer" to require insurers to make a formal contractual offer to insureds of underinsurance protection and that "offer" was not intended to mean anything other than that the insurer should make such coverage available and offer it in a nonspecific, colloquial sense. While agreeing that the word "offer" is ambiguous, defendant argues that "offer" could not have been used in its legal sense as a requirement that the insured receive a detailed proposal to confer upon the insured a power of acceptance. Such a construction, argues defendant, would remove the underwriting function from insurers and alter dramatically the practice in the insurance industry where it is generally understood that acceptance by the insurer is as essential as acceptance by the insured.

Plaintiff replies that when a statute uses a word having a well-known legal significance, courts will, in the absence of any expression to the contrary, assume that the legislature used the word in its legal sense. (People ex rel. Mayfield v. City of Springfield (1959), 16 Ill.2d 609, 158 N.E.2d 582.) An offer, under plaintiff's interpretation, must be certain and unambiguous and confer upon the offeree a power of acceptance to form a contract. (See McCarty v. Verson Allsteel Press Co. (1980), 89 Ill.App.3d 498, 44 Ill.Dec. 570, 411 N.E.2d 936.) Plaintiff argues in the alternative that the term "offer," if it was not meant to mean a legal, contractual offer, must be construed to mean a meaningful, intelligent offer to implement the legislative purpose of section 143a-1.

We begin with the cardinal rule of statutory construction that courts should always interpret a statute with the foremost objective of arriving at the intention of the legislature. (Mayfield.) In deriving this intention, consideration must be given to the entire statute, its nature, object, and the consequences which would result from construing it one way or another. (Carrigan v. Illinois Liquor Control Com. (1960), 19 Ill.2d 230, 166 N.E.2d 574.) Although the question is not entirely free from doubt, we interpret section 143a-1 to require that insurers offer the optional coverage in definite and specific terms in renewal policies and original policies so as to make effective, what is to us, the insured's clear power of acceptance of the additional coverage.

We do not find that the offer has to be in the nature of a legal offer, but we do conclude that specific information must be communicated to the insured to make the offer meaningful. This conclusion is supported by the generally understood meaning of the word "offer" as requiring a definite statement of terms (McCarty ), legislative debate on the nature of an offer, and by other language in the added section which provides, in identical language, that uninsured motorist coverage shall also be offered and goes on to state that "[i]n those cases where the insured has failed to elect uninsured motorist coverage in excess of the mandatory limits set forth in section 7-203 of The Illinois Vehicle Code the insurer need not offer in any renewal or supplemental policy coverage in excess of that required in Section 7-203 of The Illinois Vehicle Code." (Emphasis added.) (1979 Laws 4771.) By stating that both uninsured and underinsurance coverage shall be offered and then noting that this offer creates a right of election, we think it clear that it is the insured who has the power to decide whether the additional coverages, both uninsured and underinsurance, shall be accepted. To confer upon the insured a right of election without providing sufficient information to make an intelligent decision is, we believe, contrary to the purpose of section 143a-1.

Legislative debate upon identical language in a subsequent bill makes this purpose clear. When section 143a-1 was repealed by Public Act 81-1426 (Ill.Rev.Stat.1981, ch. 73, par. 755a-2) which added a more comprehensive provision for offers of uninsured and underinsurance coverage, Public Act 81-1426 retained the same language that insurance companies shall offer specified amounts of underinsurance coverage. In commenting upon this same language that insurers shall offer underinsurance coverage, Senator Berman commented that "what we're saying is that it is going to be up to the insured upon being advised as to what is available to him to decide what he wants to buy and what he wants to pay for * *...

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