Greenawalt v. State Farm Insurance

569 N.E.2d 154, 210 Ill. App. 3d 543, 155 Ill. Dec. 154, 1991 Ill. App. LEXIS 292

• Court: Appellate Court of Illinois
• Decided: March 5, 1991
• Docket: 1-88-3177
• Status: Published

Opinions

JUSTICE CAMPBELL

delivered the opinion of the court:

Plaintiff, Patricia Greenawalt, appeals from a judgment entered on the pleadings in favor of defendant, State Farm Insurance Co., in an action seeking a declaratory judgment as to State Farm’s obligations pursuant to the uninsured motorist provision of an automobile policy issued to plaintiff and her husband (the Policy). The sole issue on appeal is whether the trial court properly granted State Farm’s motion for judgment on the pleadings based on its determination that State Farm’s obligation under its uninsured motorist provision was offset and fully satisfied by the joint tortfeasor’s settlement. For the following reasons, the judgment of the trial court is reversed and the cause is remanded for further proceedings.

The underlying facts are undisputed. On May 11, 1986, plaintiff was a passenger in an automobile driven by her husband, which was involved in a collision with an automobile driven by Timothy Anderson. As a result of the collision, plaintiff allegedly suffered severe injuries. Plaintiff filed insurance claims against both drivers. Anderson’s insurance company settled with plaintiff for $100,000, the maximum amount under his policy. Because section 1 of “An Act to revise the law in relation to husband and wife” (Ill. Rev. Stat. 1985, ch. 40, par. 1001), in effect at the time of the accident, prevented plaintiff from filing a tort action against her husband, she filed a claim with defendant, her insurer, seeking damages pursuant to the uninsured and underinsured motorist provisions of the three automobile policies she and her husband had with State Farm.¹ State Farm denied that it owed any coverage to plaintiff, and plaintiff filed a complaint for declaratory judgment seeking a declaration as to the rights and obligations of the parties and compelling State Farm to proceed to arbitrate plaintiff’s claims.

State Farm then moved for judgment on the pleadings on the grounds that pursuant to the uninsured motorist provision of the Policy, any amount received by an insured from or on behalf of a person legally liable for her personal injuries was to be set off against the liability limits of the uninsured motorist provision. Because the Policy’s liability limit for uninsured motorist coverage was $100,000 and plaintiff had already received $100,000 from Anderson’s insurer, State Farm claimed that there was no uninsured motorist coverage available. In response, plaintiff argued that her damages exceeded $100,000 and that she had valid claims against both tortfeasors, Anderson and her husband, and that, as joint tortfeasors, each is liable for damages based upon his percentage share of liability.

Following a hearing on the motion, the trial court granted State Farm’s motion. In entering its decision, the trial court stated:

“[T]he state of the law is, with regard to contribution, *** inadequately stated. But the contractual provisions here are not, in my opinion, vague. And to the extent that they impact on those rights of contribution among joint tortfeasors, is [sic] not violative of public policy as well. So she is limited to the contractual limitation of recovery with regard to the setoff of $100,000 that was made. And since their liability is a maximum of $100,000 minus the setoff, there is no liability contractually, and therefore judgment on the pleadings is granted in favor of State Farm.”

Plaintiff’s appeal followed.

On appeal, plaintiff claims that because her damages exceed the amount of the settlement with Anderson, State Farm remains obligated on behalf of her husband, as a joint tortfeasor, pursuant to the Policy’s uninsured motorist coverage. Plaintiff further argues that because she is not seeking double recovery, the settlement with Anderson should not be set off against State Farm’s uninsured motorist liability limits. Instead, the settlement should merely reduce the amount of recoverable damages by $100,000.

In response, State Farm argues that the plain language of the Policy provides that payment by any person who is legally liable for bodily injury to the insured reduces the amount payable under the Policy’s uninsured motorist provision. The Policy limits uninsured motorist coverage to $100,000. Therefore, Anderson’s $100,000 settlement acted to eliminate any obligation State Farm had under the Policy’s uninsured motorist provision.

Section III of the Policy, entitled “Limits of Liability — Coverage U,” provides, in relevant part:

“1. The amount of coverage is shown on the declarations page under ‘Limits of Liability-U-Each Person, Each Accident’. Under ‘Each Person’ is the amount of coverage for all damages due to bodily injury to one person [$100,000]. ***

2. Any amount payable under this coverage shall be reduced by any amount paid or payable to or for the insured:

a. by or for any person or organization who is or may be held legally liable for the bodily injury to the insured;

b. for bodily injury under the liability coverage; or

c. under any workers’ compensation, disability benefits or similar law.”

As a general rule, clear and unambiguous policy provisions are to be applied as written and policy language will be given its plain and ordinary meaning unless it contravenes public policy. (Scudella v. Illinois Farmers Insurance Co. (1988), 174 Ill. App. 3d 245, 528 N.E.2d 218; Potts v. Madison County Mutual Automobile Insurance Co. (1983), 112 Ill. App. 3d 50, 445 N.E.2d 33.) The public policy behind uninsured motorist provisions is to place the injured policyholder in substantially the same position he would be in if the wrongful driver had had at least the minimum liability insurance required by law. (Glidden v. Farmers Automobile Insurance Association (1974), 57 Ill. 2d 330, 312 N.E.2d 247; Stryker v. State Farm Mutual Automobile Insurance Co. (1978), 74 Ill. 2d 507, 386 N.E.2d 36; Wilhelm v. Universal Underwriters Insurance Co. (1978), 60 Ill. App. 3d 894, 377 N.E.2d 62.) At the time of the collision, the minimum liability insurance was $15,000. (Ill. Rev. Stat. 1985, ch. 951/2, par. 7 — 203.) However, because the legislature never intended that the statutory minimum be deemed the maximum permissible limit for uninsured motorist coverage (Ill. Rev. Stat. 1985, ch. 73, par. 755a — 2, repealed by Pub. Act 81 — 899), parties may contract to increase the limits of the uninsured motorist provision to more than the statutory minimum. (Putnam v. New Amsterdam Casualty Co. (1970), 48 Ill. 2d 71, 269 N.E.2d 97.) As a result, the insured who has paid additional premiums may end up in a better situation than if the uninsured motorist had been insured at the statutory minimum. The supreme court addressed such a situation in Glidden v. Farmers Automobile Insurance Association (1974), 57 Ill. 2d 330, 336, 312 N.E.2d 247, and stated, “If there is to be a ‘windfall’ in this situation, it should be to the insured, who paid the several premiums, rather than to the insurer, which collected them.”

Plaintiff argues that application of the setoff provision violates public policy because it puts her in a less favorable position than she would be in if she could have proceeded against her husband as an insured joint tortfeasor. Generally, the amount paid by one tortfeasor acts to reduce the recoverable damages from the remaining tortfeasors. Without such a reduction, a plaintiff could receive damages in excess of her injuries, resulting in double recovery. (Schutt v. Allstate Insurance Co. (1985), 135 Ill. App. 3d 136, 478 N.E.2d 644.) Although, as a general rule, section 143a(4) of the Illinois Insurance Code (Ill. Rev. Stat. 1985, ch. 73, par. 755a(4), repealed by Pub. Act 81 — 999) allowed the insurer to be subrogated to the proceeds of any settlement or judgment received by its insured from anyone who was legally responsible for the injury, in a situation where one of the joint tortfeasors is insured and the other is uninsured, the pivotal public policy issue is whether subrogation or setoff would prevent double recovery or whether it would act to deprive the plaintiff of damages she might otherwise receive if the uninsured tortfeasor had been at least minimally insured. (Glidden v. Farmers Automobile Insurance Association (1974), 57 Ill. 2d 330, 312 N.E.2d 247.) If the total proven or undisputed damages incurred by the plaintiff are greater than the amount paid on behalf of the insured tortfeasor, application of the set-off provision of the uninsured motorist provision would contravene public policy because the plaintiff would not be placed in substantially the same position she would have been in had the uninsured motorist been insured and the “windfall” would be to the insurer. If the uninsured motorist had been insured, settlement with one joint tortfeasor would have acted only to reduce recoverable damages. (Schutt v. Allstate Insurance Co. (1985), 135 Ill. App. 3d 136, 478 N.E.2d 644.) Whereas, in an uninsured setoff situation, settlement with one joint tortfeasor acts to reduce the liability limits of the insurer. Because of this public policy dichotomy, setoff provisions apply only where necessary to prevent double recovery. Glidden v. Farmers Automobile Insurance Association (1974), 57 Ill. 2d 330, 312 N.E.2d 247.

The effect of an insured joint tortfeasor’s settlement on uninsured motorist liability was addressed in Schutt v. Allstate Insurance Co. (1985), 135 Ill. App. 3d 136, 478 N.E.2d 644. The issue in Schutt was whether a settlement with an insured joint tortfeasor should be set off against the liability limits of an uninsured motorist provision. In Schutt, plaintiff, a passenger in a car driven by Cynthia Long, was injured when Long’s car collided with a car driven by Tony Munos. Long was insured; Munos was not. Plaintiff filed a suit for personal injuries. Subsequently, judgment was entered against Long for $2,500 and against Munos for $25,000. The judgment against Long was affirmed on appeal and satisfied by her insurer, Allstate.

Because Munos was uninsured, plaintiff filed a declaratory judgment action against his own insurer, Great Central Insurance Co., and against Long’s insurer, Allstate, seeking to recover under the uninsured motorist provisions. Plaintiff and Allstate agreed to submit the uninsured motorist claim to arbitration and stipulated to a voluntary dismissal of plaintiff’s declaratory judgment action against Allstate. The dispute between plaintiff and Grand Central was settled pursuant to a covenant not to sue.

Thereafter, plaintiff and Allstate submitted written issues to the arbitrators regarding what injuries plaintiff had incurred as the result of the accident and the size of the award. The arbitrators awarded plaintiff $2,500 in full settlement of his claim. As a result, Allstate claimed that, pursuant to its policy, the uninsured motorist award was to be reduced by all sums paid by any other person jointly or severally liable. Because Allstate had already paid $2,644.40 on behalf of Long and the claim was $2,500, Allstate claimed that it had no further obligation. The trial court found that Allstate was entitled to a setoff. On appeal, the reviewing court affirmed the trial court’s decision as to setoff on the ground that, “Since plaintiff has already received [the sum awarded by the arbitrators], the application of the setoff clause did not deprive him of any damages and fairly awarded him only that to which he is entitled.” (135 Ill. App. 3d at 141.) Thus, the Schutt court’s main consideration in allowing setoff was whether by doing so, plaintiff would be deprived of any damages awarded to him by the arbitrators. In reaching its determination, the Schutt court indicated that had the setoff provision deprived plaintiff of any damages, the provision would have been unenforceable. The pivotal distinction between Schutt and the present case is that a determination as to damages had been made in Schutt, whereas in the present case, damages have not been determined.

In the present case, plaintiff has alleged damages in excess of the settlement amount of $100,000. If this allegation proves to be true, setoff of the settlement against the uninsured motorist liability limits would deprive plaintiff of damages she would otherwise have been able to recover had her husband been insured. This result is void as against public policy. (Wilhelm v. Universal Underwriters Insurance Co. (1978), 60 Ill. App. 3d 894, 377 N.E.2d 62.) Conversely, if plaintiff’s damages are found to be $100,000 or less, application of the setoff provision would act to prevent double recovery and, therefore, would be enforceable. Glidden v. Farmers Automobile Insurance Association (1974), 57 Ill. 2d 330, 312 N.E.2d 247.

Thus, a determination of damages is a prerequisite to a decision as to whether a setoff provision in an uninsured motorist provision contravenes public policy or whether it properly prevents double recovery. At the hearing on State Farm’s motion, plaintiff’s counsel recognized the importance of a damage determination to a resolution of whether setoff under the uninsured motorist provision was void as against public policy.

“COUNSEL: Can I ask how there can be a setoff when the maximum involved [sic] of responsibility has yet to be determined?

THE COURT: A setoff is provided for in the contract because it says any amount that you recover shall be applied to the uninsured motorist coverage, which is $100,000.”

In reaching its conclusion, the trial court failed to consider the public policy concerns enunciated in Glidden and based its ruling strictly on the unambiguous language of the Policy. In our view, the trial court’s decision was premature as State Farm is not entitled to setoff unless it can show duplication of payments. Hoel v. Crum & Forster Insurance Co. (1977), 51 Ill. App. 3d 624, 366 N.E.2d 901.

As previously indicated, at this juncture in the proceedings, no facts have been proved entitling plaintiff to damages in excess of $100,000. It is well settled that a cause of action should not be dismissed on the pleadings unless it clearly appears that no set of facts can be proved which would entitle plaintiff to recover. (Lanier v. Associates Finance, Inc. (1985), 134 Ill. App. 3d 183, 479 N.E.2d 1227, aff’d (1986), 114 Ill. 2d 1, 499 N.E.2d 440.) Conversely, judgment on the pleadings is proper when the pleadings disclose only questions of law. (Howard v. County of Cook (1986), 145 Ill. App. 3d 538, 495 N.E.2d 1166.) In the present case, before any determination of damages had been made, the trial court ruled, as a matter of law, that the $100,000 settlement paid by the insured tortfeasor was properly set off against the $100,000 uninsured motorist policy limitations, thereby limiting recoverable damages to $100,000. Had plaintiffs damages been determined to be $100,000 or less, this conclusion would have been proper on the ground that the setoff would prevent double recovery. However, no determination as to damages has been made. If plaintiff proves that her damages are in excess of $100,000, she should be entitled to recover the difference between the $100,000 settlement and her assessed damages, up to the limits of the $100,000 uninsured motorist limitation. Accordingly, because a set of facts does exist which, if proved, would render the setoff provision void as against public policy, and entitle plaintiff to recover under the uninsured motorist provision, judgment on the pleadings was premature and, therefore, improper.

In reaching our decision, we decline to follow Ackermann v. Prudential Property & Casualty Insurance Co. (1980), 83 Ill. App. 3d 590, 404 N.E.2d 534, on the ground that its narrow reading of Glidden mandates a strict application of unambiguous setoff provisions and fails to consider the public policy aspects of setoff. In Ackermann, plaintiff was insured when the vehicle in which he was riding, driven by Short, collided with a vehicle driven by Wallete. Short was uninsured. Wallete was insured by Allstate under a policy with a liability limit of $25,000. Plaintiff’s policy with Prudential included uninsured motorist coverage. Plaintiff pursued a claim against Wallete and sought uninsured motorist benefits from Prudential. When Wallete’s insurer offered a $20,000 settlement, Prudential asserted its policy right to subrogation against the settlement offer.

Plaintiff filed his complaint for declaratory judgment alleging that his damages were in excess of $20,000 and requesting a declaration that he was entitled to recovery under the uninsured motorist provision and that Prudential was entitled to subrogation rights only as to the assets of the uninsured motorist. Prudential moved to strike and to dismiss the complaint. The trial court denied Prudential’s motion and ruled that Prudential’s subrogation rights were limited to the assets of the alleged insured. On appeal, the Ackermann court reversed and remanded, stating:

“In Glidden the supreme court decided the issue of subrogation in connection with the uninsured-motorist clauses of insurance policies. Therefore, even though the plaintiff’s argument and the authorities he cites are persuasive, under the Glidden decision we find that Prudential is entitled to reimbursement from the plaintiff to the extent that it makes payment to him for uninsured motorist coverage, if he recovers from either tortfeasor.” 83 Ill. App. 3d at 594.

If this court follows Ackermann’s strict interpretation of Glidden, plaintiff ends up in a worse position than if the uninsured tortfeasor (her husband) had been insured to at least the statutory minimum and State Farm enjoys a “windfall.” As previously stated, a setoff of uninsured motorist payments is appropriate only if duplication of payment can be shown. (Scudella v. Illinois Farmers Insurance Co. (1988), 174 Ill. App. 3d 245, 528 N.E.2d 218; Hoel v. Crum & Forster Insurance Co. (1977), 51 Ill. App. 3d 624, 366 N.E.2d 901. See Becker v. Country Mutual Insurance Co. (1987), 158 Ill. App. 3d 63, 510 N.E.2d 1316; Wilhelm v. Universal Underwriters Insurance Co. (1978), 60 Ill. App. 3d 894, 377 N.E.2d 62.) Therefore, proof of damages is a necessary issue to be resolved.

Based on the aforementioned, the judgment of the trial court is reversed and the cause is remanded for further proceedings consistent with this opinion.

Reversed and remanded.

BUCKLEY, J., concurs.

1 At the time of the accident, plaintiff and her husband owned three automobiles, each of which was insured under a separate policy with State Farm. Initially, plaintiff’s complaint for declaratory judgment sought relief under all three policies. However, at the hearing on State Farm’s motion for judgment on the pleadings, the parties agreed that plaintiff was proceeding only on the theory that her husband was an uninsured motorist pursuant to the policy issued on the automobile involved in the collision.