Zimmerman v. Illinois Farmers Ins. Co.

• Decision Date: 15 November 2000
• Docket Number: No. 2-99-1164.,2-99-1164.
• Citation: 251 Ill.Dec. 57,317 Ill.App.3d 360,739 N.E.2d 990
• Parties: Judith ZIMMERMAN, Plaintiff-Appellee, v. ILLINOIS FARMERS INSURANCE COMPANY, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

739 N.E.2d 990

317 Ill.App.3d 360

251 Ill.Dec. 57

Judith ZIMMERMAN, Plaintiff-Appellee, v. ILLINOIS FARMERS INSURANCE COMPANY, Defendant-Appellant.

No. 2-99-1164.

Appellate Court of Illinois, Second District.

November 15, 2000.

Danny L. Worker and Mary F. Sitko, both of Worker & Power, Chicago, and Robert G. Black, of Law Offices of Robert G. Black, Naperville, for appellant.

Steven M. Gleason, of Nilson, Stookal, Gleason & Caputo, Chicago, for appellee.

Justice HUTCHINSON delivered the opinion of the court:

Plaintiff, Judith Zimmerman, presented an underinsured motorist claim to defendant, Illinois Farmers Insurance Company. The parties submitted the claim to arbitration, and the arbitrator entered an award in plaintiff's favor. After a dispute arose regarding the application of a setoff provision in the insurance policy, plaintiff filed suit to enforce the award. The trial court granted summary judgment in favor of plaintiff for the full amount of the arbitration award. Defendant appeals, contending that summary judgment was improper because (1) as a matter of law the arbitration award was subject to a setoff equal to the amount plaintiff recovered from the underinsured motorist and (2) genuine issues of material fact existed that precluded summary judgment. We affirm.

BACKGROUND

On September 15, 1994, plaintiff was struck by an automobile while crossing a public roadway. The driver of the automobile was insured under a policy with a limit of liability of $100,000. The driver's insurer subsequently tendered the full $100,000 to plaintiff in settlement of her claim against the driver.

At the time of the accident, plaintiff was covered by an automobile liability policy issued by defendant that included underinsured motorist coverage with a limit of liability of $250,000 per person. The policy included a setoff provision that limited the amount of underinsured motorist coverage to the lesser of:

"1. The limits of liability reduced by all amounts paid in damages to the insured person by or for any person or organization who may be liable for the bodily injury; or

2. The unrecovered amount of damages established by any agreement, settlement, or judgment with or for the person(s) or organization(s) legally liable for the bodily injury."

The terms of the policy applied the same procedural requirements to both underinsured and uninsured motorist coverage. The policy contained an arbitration provision that provides in pertinent part:

"The arbitrator shall determine (1) whether the Insured person is legally entitled to recover damages from the owner or operator of an uninsured motor vehicle, and (2) the amount of payment under this part, if any, as determined by this policy or any other applicable policy."

On November 16, 1995, plaintiff filed a demand for arbitration of the claim with the American Arbitration Association (the AAA). In a section of the arbitration demand form entitled "Amount Claimed," plaintiff wrote "$250,000.00 minus any contractual setoff."

On April 14, 1997, the parties arbitrated plaintiff's claim before an arbitrator selected by the AAA. On April 21, 1997, the arbitrator made an award in favor of plaintiff. The award provides:

"THE UNDERSIGNED ARBITRATOR(S), designated in accordance with the Arbitration Agreement entered into by the * * * Parties, and having been duly sworn and having heard the proofs and allegations of the Parties, AWARDS AS FOLLOWS:

ILLINOIS FARMERS INSURANCE shall pay to JUDITH ZIMMERMAN the sum of ONE HUNDRED FORTY-NINE THOUSAND TWO HUNDRED THIRTY-THREE ($149,233.00) DOLLARS.

This Award is in full settlement of all claims submitted to this arbitration."

Defendant subsequently tendered $49,233 to plaintiff. Plaintiff rejected the tender.

On August 15, 1997, plaintiff filed a complaint in the circuit court of Cook County praying for entry of a judgment on the award in the amount of $149,233. Plaintiff alleged that the arbitrator awarded her the full amount and that defendant refused to pay. Defendant responded with a motion to dismiss pursuant to section 2-619(a)(9) of the Code of Civil Procedure (the Code) (735 ILCS 5/2-619(a)(9) (West 1996)) and a motion to transfer the matter to the circuit court of Du Page County under the equitable doctrine of forum non conveniens. After continuing the matter several times, the trial court transferred the case to Du Page County on June 17, 1998.

On November 24, 1998, the trial court denied defendant's motion to dismiss and ordered defendant to answer plaintiff's complaint or otherwise plead. On December 10, 1998, defendant answered plaintiff's complaint. Defendant admitted all of plaintiff's factual allegations but denied that the arbitrator's award required it to pay plaintiff $149,233. Defendant averred that it was required to pay plaintiff only $49,233. As an affirmative defense, defendant alleged that it was entitled to a setoff of $100,000 against the arbitrator's award, even though the arbitrator's award did not mention the setoff. Defendant concluded that, based on the definition of underinsured motorist in the insurance policy, it was required to pay plaintiff only $49,233 and prayed for an order to that effect.

Plaintiff subsequently filed a motion for summary judgment pursuant to section 2-1005 of the Code (735 ILCS 5/2-1005 (West 1998)). Plaintiff filed a memorandum of law in support of her motion and attached as exhibits, among other things, the insurance policy, the demand for arbitration, the arbitration award, and a copy of the AAA's rules for arbitration of underinsured motorist claims.

Defendant responded to plaintiff's motion and filed a memorandum of law in support of its response. Defendant attached to its memorandum of law the affidavit of Edward Ouimet, the attorney who represented defendant at the arbitration. In his affidavit, Ouimet stated that he advised the arbitrator that plaintiff had received benefits from the allegedly underinsured driver's insurer and advised the arbitrator of the limits of liability of the driver's automobile insurance. Ouimet also stated that he "had advised the arbitrator * * * that the award was to be the total damages compensable to [plaintiff] with the intent that the award would be reduced after the hearing by the amount of the payment received from the underinsured driver."

On June 3, 1999, the trial court granted plaintiff's motion for summary judgment. The trial court held that the award was clear on its face, and defendant waived any alleged ambiguity by failing to seek clarification of the award from either the arbitrator or the circuit court within the applicable time period. The trial court entered judgment against defendant and in favor of plaintiff in the amount of $149,233. The trial court subsequently denied defendant's motion to reconsider and motion for leave to file a counterclaim, and defendant timely appeals.

ANALYSIS

Standard of Review

Summary judgment is appropriate when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90, 102, 180 Ill.Dec. 691, 607 N.E.2d 1204 (1992); Western States Insurance Co. v. Zschau, 298 Ill. App.3d 214, 219, 232 Ill.Dec. 360, 698 N.E.2d 198 (1998). Summary judgment is encouraged as an aid in the expeditious disposition of a lawsuit but is a drastic means and should be granted only when the right to summary judgment is clear and free from doubt. Loyola Academy v. S & S Roof Maintenance, Inc., 146 Ill.2d 263, 271, 166 Ill.Dec. 882, 586 N.E.2d 1211 (1992). Our review of an order granting summary judgment is de novo. Outboard Marine, 154 Ill.2d at 102, 180 Ill.Dec. 691, 607 N.E.2d 1204. Similarly, the construction of an insurance contract is a matter of law that we review de novo. American States Insurance Co. v. Koloms, 177 Ill.2d 473, 479-80, 227 Ill.Dec. 149, 687 N.E.2d 72 (1997).

Purpose of Underinsured Motorist Coverage

Defendant first argues that underinsured motorist coverage is intended to fill the gap when an insured's injuries exceed the amount recovered from a tortfeasor and that public policy supports the application of a setoff for amounts actually recovered. The purpose of underinsured motorist coverage is to place the insured in the same position as she or he would have occupied if the tortfeasor had carried adequate insurance. Roberts v. Northland Insurance Co., 185 Ill.2d 262, 268, 235 Ill.Dec. 579, 705 N.E.2d 762 (1998), citing Cummins v. Country Mutual Insurance Co., 178 Ill.2d 474, 483, 227 Ill.Dec. 539, 687 N.E.2d 1021 (1997). An insurer is entitled to enforce a contractual setoff when doing so is necessary to prevent a double recovery or windfall to the insured. Hoglund v. State Farm Mutual Automobile Insurance Co., 148 Ill.2d 272, 280, 170 Ill.Dec. 351, 592 N.E.2d 1031 (1992).

However, the issue before us is unrelated to the public policy concerns underlying the application of a setoff for amounts recovered from the tortfeasor. The question we must resolve is whether defendant was entitled to apply the setoff unilaterally to reduce the arbitrator's award. In other words, was defendant required to raise the issue of recovery from the tortfeasor during the arbitration and did waiver bar defendant from raising the issue after the arbitration was completed?

Arbitration Agreement

Defendant contends that, as a matter of law, it was entitled to set off the amount recovered from the underinsured driver against the arbitration award and that consequently summary judgment in favor of the plaintiff was improper. An arbitration agreement must be enforced to give effect to the intentions of the parties as expressed in the terms of the agreement. Mayflower Insurance Co. v. Mahan, 180 Ill.App.3d 213, 217, 129 Ill.Dec. 159, 535 N.E.2d 924 (1988). The language of an arbitration agreement itself governs the question of which issues are the subject of arbitration. Flood v. Country Mutual...