FIRST DIVISION June 19, 2006
No. 1-05-0025
THOMAS W. ROTH, ) Appeal from the ) Circuit Court of Plaintiff-Appellant, ) Cook County. ) v. ) ) ILLINOIS INSURANCE GUARANTY FUND, ) Honorable ) Dorothy Kirie Kinnaird, Defendant-Appellee. ) Judge Presiding.
JUSTICE BURKE delivered the opinion of the court:
Plaintiff Thomas Roth appeals from an order of the circuit
court granting summary judgment in favor of defendant Illinois
Insurance Guaranty Fund (the Fund) on plaintiff's complaint for
declaratory judgment against the Fund, arising from the Fund's
denial of plaintiff's claim for payment of the policy limits of an
insurance policy issued to the driver of a vehicle who injured
plaintiff by an insurer that subsequently became insolvent. On
appeal, plaintiff contends that the trial court erred in granting
the Fund summary judgment because: (1) payments to him under a
medical insurance plan or policy and/or payments under his
disability plan or policy should not, pursuant to section 546(a) of
the Illinois Insurance Guaranty Fund Act (Act) (215 ILCS 5/546(a)
(West 2004)), reduce the obligation of the Fund under section 537.2
of the Act (215 ILCS 5/537.2 (West 2004)); and (2) the "covered 1-05-0025
claim" definition in section 534.3(b)(v) of the Act (215 ILCS
5/534.3(b)(v) (West 2004)) does not exclude negotiated lien claims
of plaintiff's medical insurers against the Fund. For the reasons
set forth below, we affirm.
STATEMENT OF FACTS
On June 7, 1998, plaintiff was injured when he was struck by a
car being driven by Jamilla Bryant at or near 4025 West Marquette
Road in Chicago, Illinois. Bryant was insured under an automobile
liability insurance policy issued by Valor Insurance (Valor), with
a liability limit of $20,000. Plaintiff filed a complaint against
Bryant and, in November 2001, settled the case for Valor's policy
limits of $20,000. Plaintiff was also insured by HMO Illinois and
Chicago Partners, Inc./Meyer Medical Group (plaintiff's medical
insurers), who ultimately paid plaintiff $128,067.82 in medical
benefits, and Liberty Mutual Insurance Company (plaintiff's
disability insurer), who paid him $7,259.02 in long-term disability
benefits, for his June 7 injuries.
Prior to plaintiff receiving the $20,000 settlement funds,
Valor became insolvent and an order of liquidation was entered
against it. Thereafter, plaintiff submitted a claim to the Fund, a
nonprofit entity created by article 34 of the Illinois Insurance
Code (Insurance Code) (215 ILCS 5/535 (West 2004)) for the $20,000
limits of Bryant's policy with Valor. The Fund denied plaintiff's
claim pursuant to section 546(a) of the Act, maintaining that
plaintiff was required to set off any amount received from his
2 1-05-0025
medical and disability insurers from his $20,000 claim against the
Fund. On January 26, 2004, plaintiff filed a complaint against the
Fund, seeking a declaration that the Fund violated section 537.4 of
the Act by refusing to pay plaintiff's claim equal to Valor's
applicable policy limits of $20,000.
The Fund filed an answer to plaintiff's complaint. As
affirmative defenses, the Fund alleged that: (1) pursuant to
section 546(a) of the Act, the Fund's obligation is reduced by any
amount recovered or recoverable from an "other insurer" and, since
plaintiff had recovered in excess of the $20,000 policy limits of
the Valor policy, the amount recoverable from the Fund was zero;
and (2) pursuant to section 534.3 of the Act, which pertains to
what is and is not a "covered claim," "plaintiff's medical
insurer's [sic] claim for reimbursement of those medical insurance
benefits, by way of subrogation or otherwise, is not included
within the definition of covered claims payable by the [Fund]."
In reply to the Fund's affirmative defenses, plaintiff denied
that he had " 'recovered' in excess of $20,000 from said insurers
within the meaning of [section 546(a) of the Act]" or "that the
obligation of the [Fund] is reduced by any sums paid by Plaintiff's
medical insurance carrier or plan." Plaintiff further stated that
his "insurers and medical plans are limited to $6,917.35"
(representing the negotiated liens of his medical insurers); denied
"that said insurers/medical plans have claims by way of
subrogation"; and denied that section 534.3 is applicable to the
3 1-05-0025
purported reimbursement claims of his medical insurers.
The Fund filed a motion for summary judgment on September 27,
2004. In its motion, the Fund argued that, pursuant to section
546(a) of the Act, it was "entitled to set-off the $128,067.82 in
medical insurance payments made to or on behalf of the plaintiff by
[plaintiff's] two solvent medical insurers *** and the $7,259.01 in
disability payments made to plaintiff by [his] solvent disability
insurer" because they were in excess of Valor's $20,000 policy
limits and because plaintiff's claim arose from the same injuries
as his claim against the Fund. The Fund also made the same
subrogation/lien argument as to the nonapplicability of section
534.3(b)(v) of the Act.
On October 26, 2004, plaintiff filed a cross-motion for
summary judgment and response to the Fund's motion for summary
judgment, arguing that, while section 546(a) provides that the
Fund's obligation is to be reduced by the amount recovered or
recoverable under other insurance policies, he did not receive any
recovery within the meaning of this section. Plaintiff defined
"recovery" as being obtained by a judicial action or proceeding.
Plaintiff also asserted that the medical expenses and disability
benefits he had received were "not the kind of payments which have
historically been interpreted as offsets to claims against the
Guaranty Fund." Plaintiff also again argued that the liens of his
two medical insurers were not excluded by the "covered claim"
definition of section 534.3(b)(v), and, with respect to Liberty's
4 1-05-0025
payment of $7,259.01 for long-term disability, Liberty would not be
entitled to reimbursement from plaintiff's settlement and,
therefore, the Fund would not be entitled to a setoff of that
amount under section 534.3(b)(v). Plaintiff concluded that he was
entitled to the same benefit that he would have received under the
negotiated $20,000 settlement had Valor not become insolvent.
On November 16, 2004, the Fund filed its reply to plaintiff's
response to its motion for summary judgment and to plaintiff's
cross-motion for summary judgment, making arguments similar to
those in its motion for summary judgment. The Fund further argued
that plaintiff's assertion that the other insurance benefits paid
to plaintiff did not constitute "recovered" insurance amounts under
section 546(a) was "senseless," since that section contains no
requirement that the other insurance must have been recovered in a
judicial proceeding. The Fund also argued that the legislature
amended section 546(a) in 1997 "to expressly cover all other
insurance recoveries 'arising from the same facts, injury, or loss
that gave rise to the covered claim against the Fund.' " According
to the Fund, the addition of language in section 546(a) that
stated, " 'whether or not such other insurance policy was written
by a member company,' " made it clear that medical insurance
payments were required to be set off. In support thereof, the Fund
relied on MacDougall v. Hartford Insurance Group, No. 197637, (Va.
Cir. Ct. February 20, 2003), as an analagous case to the facts of
the case at bar with a statutory provision similar to Illinois'
5 1-05-0025
section 546(a), in which the Virginia court agreed with the
defendant Virginia Property and Casualty Insurance Guaranty
Association "that health insurance benefits actually paid are an
offset from covered claims." MacDougall, slip op. at 7-8.
Accordingly, the Fund argued, since section 546(a) "expressly
applies to the insured's recovery of a claim under any other
insurance policy as long as that claim 'arises from the same facts,
injury or loss that gave rise to the covered claim against the
Fund,' " and plaintiff's recovery of $128,067.82 from his medical
insurers and $7,259.01 from his disability insurer "were undeniably
claims arising from 'the same injury' that gave rise to plaintiff's
covered claim against the Fund, the Fund's $20,000 obligation must
be reduced by those other insurance payments."
In plaintiff's reply in support of his cross-motion for
summary judgment, plaintiff argued that the Fund's interpretation
of what constituted "other insurance" went against "the statutory
intent of placing the injured party in the same position as he
would have been had the tortfeasor's insurer remained solvent."
Plaintiff also maintained that the Virginia court's construction of
a statute similar to Illinois' section 546(a) was not binding on
Illinois courts. In conclusion, plaintiff requested that the trial
court declare that the Fund was not entitled to set off the
$128,067.82 paid to him by his medical insurers and $7,259.02
received by him as disability benefits and that the Fund was
obligated to pay plaintiff the $20,000 limits of Bryant's Valor
6 1-05-0025
policy. In the alternative, plaintiff requested that the trial
court declare that the Fund was obligated to pay plaintiff the
$20,000 limits of Bryant's Valor policy, less the negotiated liens
of plaintiff's medical insurers, in the amount of $6,917.35, and
declare the liens null and void as subrogated interests against the
Fund.
On November 30, 2004, the trial court held a hearing on the
parties' motions. The parties presented similar arguments to those
contained in their pleadings. The court granted the Fund's motion
for summary judgment and denied plaintiff's cross-motion, stating
that no genuine issue of material fact existed and that the Fund
"is entitled to set-off the $128,067.82 in medical insurance paid
by HMO Illinois and Chicago Partners/Meyer Medical Group to or on
behalf of plaintiff, and therefore the defendant Fund has no
obligation to pay plaintiff the $20,000 limit of the policy of the
insolvent insurer, Valor Insurance Company." This appeal followed.
ANALYSIS
This court reviews the granting of a summary judgment motion
de novo. Mack v. Ford Motor Co., 283 Ill. App. 3d 52, 56, 669
N.E.2d 608 (1996). "Summary judgment is appropriate when there is
no genuine issue of material fact and the moving party's right to
judgment is clear and free from doubt." Espinoza v. Elgin, Joliet
& Eastern Ry. Co., 165 Ill. 2d 107, 113, 649 N.E.2d 1323 (1995).
The granting of summary judgment is a drastic method of disposing
of a case and should not be employed unless the right of the moving
7 1-05-0025
party is free from doubt. Murphy v. Urso, 88 Ill. 2d 444, 464, 430
N.E.2d 1079 (1981).
On appeal, plaintiff contends that payments under a medical
insurance plan or policy and/or payments under a disability plan or
policy should not, pursuant to section 546(a) of the Act (215 ILCS
5/546(a) (West 2004)), reduce the Fund's obligation under section
537.2 of the Act (215 ILCS 5/537.2 (West 2004)). Plaintiff
maintains that the Act's purpose is to place a claimant in the same
position that he would have occupied if the defendant's liability
insurer had remained solvent. Plaintiff further states that
section 546, "formerly known as the 'Non-Duplication of Recovery'
section," requires only that a claimant first exhaust any available
coverage applicable to the "same claim," e.g., coverage under a
liability policy issued by a solvent insurer where the policy
issued by an insolvent insurer was for liability coverage, rather
than a solvent health insurer and an insolvent automobile liability
insurer, as here. Plaintiff maintains that if health insurance
benefits were determined to reduce the Fund's obligation, the
effect would be to penalize "the proverbial ant and reward the
grasshopper," as would, hypothetically, setoffs for Medicare and
Medicaid, medical benefits under a company funded medical plan,
disability insurance payments, and long-term disability benefits,
which reduce a claimant's retirement benefits. Plaintiff maintains
that such a result would be harsh and unfair and that the
legislature could not have intended same.
8 1-05-0025
Plaintiff lastly argues that further evidence of the
legislature's intention regarding the setoff provision of section
546 is the fact that the section speaks of amounts "recovered or
recoverable" under other insurance. Plaintiff interprets this to
mean such amounts be recovered or recoverable as a result of
judicial action or by cause of law. According to plaintiff, if the
legislature had intended otherwise, it could have included medical
or disability benefits under section 546 of the Act as a reduction,
as well as that the Fund's obligation be reduced by the amount
"paid or payable" under such other insurance.
The Fund counters that the trial court applied section 546(a)
of the Act exactly as the language and intent of the statute
required and that the "other insurance" setoff is not harsh or
unfair to persons who purchase medical insurance. The Fund
maintains that the Illinois legislature created the Fund to provide
a minimal amount of insurance from some source to claimants and
insureds when insurers become insolvent; the Fund is "not
insurance" and it does not undertake all the obligations of an
insolvent insurer for all purposes, nor is the Fund's liability on
a "covered claim" coextensive with the obligations of an insolvent
insurer's obligations to its insured under its policy. The Fund
further maintains the provisions of the Act were enacted to insure
that the Fund is a recovery of "last resort" by requiring that a
claimant seek to cover his loss first with funds available from
other insurers. The Fund also maintains, contrary to plaintiff's
9 1-05-0025
contention that the legislature's purpose was to place a claimant
in the same position that he would have occupied if his liability
insurer had remained solvent, that Illinois courts have repeatedly
recognized that the Fund and the Act "do not always make the
insured or the claimant whole or avoid a loss."
The Fund further contends that the language of section 546(a)
of the Act makes clear that a claimant must exhaust all coverage
provided by any insurance company where the insurance claim arises
"from the same facts, injury or loss" that gave rise to the claim
against the Fund, and that the amount recovered or recoverable
therefrom must be set off from the Fund's obligation. Accordingly,
the Fund argues that the trial court properly determined that the
payments made to plaintiff by his medical insurers in the amount of
$128,067.82 were a proper setoff from the Fund's liability to
plaintiff.
The interpretation of a statute is reviewed de novo. Kroke v.
City of Bloomington, 204 Ill. 2d 392, 395, 789 N.E.2d 1211 (2003).
The primary goal when construing a statute is to determine and give
effect to the intent of the legislature. Illinois Health
Maintenance Organization Guaranty Ass'n v. Shapu, 357 Ill. App. 3d
122, 149, 826 N.E.2d 1135 (2005). The most reliable indicator of
the legislature's intent in enacting a particular law is the
language of the statute. Seasons-4, Inc. v. Hertz Corp., 338 Ill.
App. 3d 565, 571, 788 N.E.2d 179 (2003). Statutory language must
be given its plain and ordinary meaning, and when the language is
10 1-05-0025
clear and unambiguous, we must apply the statute without resorting
to additional aids of statutory construction. Seasons-4, Inc., 338
Ill. App. 3d at 571; Allen v. Lin, 356 Ill. App. 3d 405, 411, 826
N.E.2d 1064 (2005); Cargill v. Czelatdko, 353 Ill. App. 3d 654,
658, 818 N.E.2d 898 (2004). In construing a statute, the reason
and necessity for the statute and the evils it was intended to
remedy may be considered. Shapu, 357 Ill. App. 3d at 149; Allen,
356 Ill. App. 3d at 411. When construing a provision of a statute,
no phrase or word is to be rendered meaningless or superfluous.
Compton v. Ubilluz, 351 Ill. App. 3d 223, 229, 811 N.E.2d 1225
(2004). " 'Where statutes are enacted after judicial opinions are
published, it must be presumed that the legislature acted with
knowledge of the prevailing case law.' " Cargill, 353 Ill. App. 3d
at 658, quoting People v. Hickman, 163 Ill. 2d 250, 262, 644 N.E.2d
1147 (1994).
The Fund was established by the Insurance Code and created to
protect policyholders of insolvent insurers and third parties who
make claims under policies issued by insurers that become
insolvent. IPF Recovery Co. v. Illinois Insurance Guaranty Fund,
356 Ill. App. 3d 658, 663, 826 N.E.2d 943 (2005). The Fund's
members include all insurance companies authorized to transact
business in Illinois. IPF Recovery Co., 356 Ill. App. 3d at 663.
All insurers transacting business in Illinois are required to
contribute to the Fund in direct proportion to their premium
income, and, since all insurers must contribute, " 'it is the
11 1-05-0025
philosophy of the Fund to have all potential claims against the
Fund's assets reduced by a solvent insurer, and not the Fund,
whenever possible.' " Harrell v. Reliable Insurance Co., 258 Ill.
App. 3d 728, 730, 631 N.E.2d 296 (1994), quoting Pierre v. Davis,
165 Ill. App. 3d 759, 760, 520 N.E.2d 743 (1987); Norberg v. Centex
Homes Corp., 247 Ill. App. 3d 267, 275, 616 N.E.2d 1342 (1993).
These contributions "are passed along to the insurance-buying
public in the form of higher premiums." Norberg, 247 Ill. App. 3d
at 274. The legislative intent in establishing the Fund as set out
in the Act was to create
"a mechanism for the payment of covered claims
under certain insurance policies, to avoid
excessive delay in payment, to avoid financial
loss to claimants or policyholders because of
the entry of an Order of Liquidation against
an insolvent company, and to provide a Fund to
assess the cost of such protection among
member companies." Illinois Insurance
Guaranty Fund v. Farmland Mutual Insurance
Co., 274 Ill. App. 3d 671, 674, 653 N.E.2d 856
(1995).
Under the the Act, the Fund is to be "a source of last resort" in
the event of the insolvency of an insurer. Farmland Mutual
Insurance Co., 274 Ill. App. 3d at 673; Urban v. Loham, 227 Ill.
App. 3d 772, 776, 592 N.E.2d 292 (1992).
12 1-05-0025
The Fund's liability, however, is subject to the limitations
of the Act, which include, inter alia, that the claim must be a
"covered claim" (215 ILCS 5/534.3 (West 2004)), the liability of
the Fund is to be reduced by "other insurance" before a claimant or
insured can recover from the Fund (215 ILCS 5/546 (2004)), and the
Fund's liability on any claim shall not exceed $300,000, except as
to workers compensation claims or certain unearned premiums (215
ILCS 5/537.2 (West 2004)). The Fund is entitled to set off the
full limits of a policy's coverage of an insolvent insurer even
though said limits were not recovered in a judicial proceeding, but
rather through a settlement. Hasemann v. White, 177 Ill. 2d 414,
420-21, 686 N.E.2d 571 (1997). Section 534.3 of the Act,
defining "covered claim," states:
"(a) 'Covered claim' means an unpaid
claim for a loss arising out of and within the
coverage of an insurance policy to which this
Article applies and which is in force at the
time of the occurrence giving rise to the
unpaid claim, *** made by a person insured
under such policy or by a person suffering
injury or damage for which a person insured
under such policy is legally liable ***[;]
(b) 'Covered claim' does not include:
***
(v) any claim for any amount due any
13 1-05-0025
reinsurer, insurer *** as subrogated
recoveries, reinsurance
recoverables, contribution,
indemnification or otherwise. No
such claim held by a reinsurer,
insurer, *** may be asserted in any
legal action against a person
insured under a policy issued by an
insolvent company other than to the
extent such claim exceeds the Fund's
obligation limitations set forth in
Section 537.2 of this Code." 215
ILCS 5/534.3(a), (b)(v) (West 2004).
Section 546(a), currently entitled "Other insurance," requires a
claimant to first exhaust all coverage provided by any other
insurance policy before he can recover from the Fund due to the
insolvency of an insurer. 215 ILCS 5/546(a) (West 2004).
Prior to its amendment in 1997, section 546(a) of the Act was
referred to as the nonduplication of recovery provision, and
stated:
"Any insured or claimant having a covered
claim against the Fund shall be required first
to exhaust his rights under any provision in
any other insurance policy which may be
applicable to the claim. Any amount payable
14 1-05-0025
on a covered claim under this Article shall be
reduced by the amount of such recovery under
such insurance policy." (Emphasis added.)
215 ILCS 5/546(a) (West 1994).
This section was interpreted in Bukema v. Yomac, Inc., 284 Ill.
App. 3d 790, 672 N.E.2d 755 (1996). Bukema involved a lawsuit
filed by the plaintiff against the defendant on the grounds of
negligence and liability under the Dram Shop Act. The defendant
was the owner of a tavern where the plaintiff was injured by a
patron. The defendant was insured under two insurance policies, a
general liability policy issued by Travelers Insurance Co.
(Travelers), which excluded coverage for any liability incurred in
connection with the distribution of alcohol, and a separate dram
shop policy issued by State Security Insurance Co. (State
Security), which only covered liability arising from the
distribution of alcoholic beverages. Bukema, 284 Ill. App. 3d at
791.
State Security subsequently became insolvent. The plaintiff
settled its negligence claims with Travelers, the defendant's
solvent insurer. The Fund, which assumed the obligation of the
dram shop insolvent insurer State Security, moved to dismiss the
plaintiff's dram shop claim based on section 546(a). Bukema, 284
Ill. App. 3d at 791-92. The trial court granted the Fund's motion,
finding: a "claim" meant "injury," and therefore section 546(a)
was applicable to the plaintiff's "claim"; the plaintiff had
15 1-05-0025
settled his negligence claims with the defendant's solvent
liability insurer for less than the policy limits; and, because the
plaintiff was required to exhaust his rights under the liability
policy, which he failed to do, he was barred from pursuing his
action against the Fund.
On appeal, the Bukema court reversed the trial court, finding
that because the Travelers policy explicitly excluded dram shop
liability from coverage, that policy was not a " 'policy which may
be applicable to the claim,' as would be required for the the non-
duplication of recovery provision to bar plaintiff's dram shop
claim against the Fund." Bukema, 284 Ill. App. 3d at 793.
Specifically, the Bukema court stated:
"[I]n this case, plaintiff's claim with
Travelers was that defendant failed to protect
its patrons from attack by others in the
tavern, whereas his claim with the Fund is
that defendant caused Miller [employed by the
defendant] to become intoxicated and attack
plaintiff. There is no 'other insurance
policy which may be applicable to
[plaintiff's] claim' that defendant caused
Miller to become intoxicated and assault
plaintiff. The Travelers policy specifically
excludes such a claim from its coverage."
(Emphasis added.) Bukema, 284 Ill. App. 3d at
16 1-05-0025
793.
Following the Bukema decision, in which the appellate court
had rejected the Fund's argument that the term "claim" should be
equated with the term "injury," section 546(a) was amended by
Public Act 90-499, section 91, effective August 19, 1997, and the
term "injury" was, inter alia, added. Specifically, that section
was amended as follows:
"An insured or claimant shall be required
first to exhaust all coverage provided by any
other insurance policy, regardless of whether
or not such other insurance policy was written
by a member company, if the claim under such
other policy arises from the same facts,
injury, or loss that gave rise to the covered
claim against the Fund. The Fund's obligation
under Section 537.2 shall be reduced by the
amount recovered or recoverable, whichever is
greater, under such other insurance policy.
Where such other insurance policy provides
uninsured or underinsured motorist coverage,
the amount recoverable shall be deemed to be
the full applicable limits of such coverage.
To the extent that the Fund's obligation under
Section 537.2 is reduced by application of
this Section, the liability of the person
17 1-05-0025
insured by the insolvent insurer's policy for
the claim shall be reduced in the same
amount." (Emphasis added.) 215 ILCS 5/546(a)
(West 2004).
Black's Law Dictionary defines "claim" as "[t]he aggregate of
operative facts giving rise to a right enforceable by a court";
"[a] demand for money or property to which one asserts a right
insurance claim> (Black's Law Dictionary 240 (7th ed. 1999)) and "an
act that damages, harms, or hurts," "a demand for compensation,
benefits, or payment (as one made *** under any insurance policy
upon the happening of the contingency against which it is issued"
(Webster's Third New International Dictionary 414 (1993)). "Arise"
is defined as "[t]o originate; to stem (from)"; "[t]o result th (from)." Black's Law Dictionary 102 (7 ed. 1999). "Fact" is
defined as "[s]omething that actually exists." Black's Law
Dictionary 610 (7th ed. 1999). "Injury" is defined as "an act that
damages, harms, or hurts"; a violation of another's rights for
which the law allows an action to recover damages or specific
property or both"; and "appl[ies] to an act or result involving an
impairment or destruction of *** health *** or loss of something of
value." Webster's Third New International Dictionary 1164 (1993).
"Loss" is defined as "the amount of an insured's financial
detriment due to the occurrence of a stipulated contingent event
(as *** injury, destruction, or damage) in such a manner as to
charge the insurer with a liability under the terms of the
18 1-05-0025
policy)." Webster's Third New International Dictionary 1338
(1993).
In the case at bar, there is no dispute that upon Bryant's
insurer, Valor, becoming insolvent after plaintiff had negotiated
the $20,000 settlement with Valor, plaintiff had a "covered claim"
against the Fund arising out of and within the coverage of Bryant's
automobile liability policy issued by Valor. However, pursuant to
section 546(a) of the Act, plaintiff was required to exhaust all
coverage provided by any other insurance policy where the claim
under such other policy arose from the same facts, injury or loss
that gave rise to his claim against the Fund. The main issue
before this court, therefore, is whether the health insurance
policy benefits received by plaintiff from his solvent medical
insurers fall within the meaning of "other insurance" as provided
in amended section 546(a). As stated above, plaintiff's position
is that health insurance benefits do not, since a health insurance
"claim" is not the same type of "claim" as automobile liability
insurance. The Fund's position is that health insurance benefits
do fall within the meaning of "other insurance" because plaintiff's
"claim" for same arose out of the same "injury" that was the basis
of his "claim" against the Fund for which he received the health
insurance benefits.
The 1997 amendment of section 546(a) excised the phrase,
"applicable to the claim," regarding exhaustion of a claimant's
19 1-05-0025
rights under any provision in any other insurance policy, which
occurred after the Bukema decision, and added the words, regarding
any other insurance policy, (1) "regardless of whether or not such
other insurance policy was written by a member company," and (2)
"if the claim under such other policy arises from the same facts,
injury, or loss that gave rise to the covered claim against the
Fund." We find it clear that the legislature, by excising the
language, "applicable to the claim," intended to broaden the scope
of the types of insurance that a claimant under the Act must
utilize in exhausting his rights from solvent insurers before
seeking recovery from the Fund and to limit the Fund's liability.
We believe the addition of the words "regardless of whether a
member company" was intended to broaden the solvent "other
insurance" provision to other insurers than only an insurer who
insures for the same kind of insurance as an insolvent insurer,
which was how the preamended section 546(a) had been interpreted in
Bukema. We also believe that this comports with the legislative
intent to prevent the nonduplication of recoveries and to have
claimants exhaust their rights by recovering from solvent insurers,
rather than the Fund. Moreover, there would have been no reason
for the legislature to amend section 546(a) if it had not intended
a change to that section; otherwise, the additional words,
"regardless of whether a member company" and "arises from the same
facts, injury or loss that gave rise to the covered claim," would
simply be superfluous and meaningless. The fact that the
20 1-05-0025
legislature chose not to specify certain types of insurance
companies were excepted, such as health insurance companies as
plaintiff argues, is, contrary to plaintiff's argument, further
indicative that health insurance companies, or other specific
types, are not to be excepted, especially since the amendment
occurred following the Bukema decision. Section 546(a) simply does
not impose any such restriction. In fact, the legislature's
addition of the words, "regardless of whether or not such insurance
policy was written by a member company," which health insurance
companies are not (215 ILCS 5/533(a) (West 2004)), supports our
conclusion.
We therefore find that plaintiff's claim against the Fund to
recover the $20,000 negotiated settlement he would have received
from Valor was for the same "injury" he received as a result of the
car accident, and that his claims under his medical insurance
policies, for which he received $128,067.82 in medical benefits,
arose from the same "injury." In other words, plaintiff's injury
arose out of (originated/stemmed from) the same facts (physically
injured while a pedestrian by Bryant), injury (physical injury) or
loss (incurrence of medical bills for the same injury) that gave
rise to his $20,000 claim against the Fund. Because plaintiff had
recovered more than the $20,000 already, requiring the Fund to pay
him an additional $20,000 would be a duplication of his recovery
for the same injury, and counter to the legislature's intention
that the Fund be a source of last resort and not an insurer of
21 1-05-0025
other insurance companies.
Since there are no cases by an Illinois reviewing court
addressing whether medical benefits received by a claimant, who
seeks to recover from the Fund due to the insolvency of an insurer,
are to be set off from the Fund's obligation, we may look to other
jurisdictions. See Pekin Insurance Co. v. Fidelity & Guaranty
Insurance Co., 357 Ill. App. 3d 891, 898, 830 N.E.2d 10 (2005).
We find that MacDougall, a Virginia circuit court case in
which the legislative history of the Virginia statute is similar to
section 546(a) of our statute, supports our conclusion that health
insurance benefits are to be set off. MacDougall involved a motor
vehicle accident in which a number of people were killed. The
plaintiffs filed a motion for declaratory judgment against the
defendants, seeking to recover from the defendant Virginia Property
and Casualty Guaranty Association (the Guaranty Association), which
was named as a defendant as a result of the insolvency of two
insurance companies. The Guaranty Association filed a counterclaim
for declaratory relief. MacDougall, slip op. at 2.
The MacDougall plaintiffs sought a declaration that, inter
alia, the Guaranty Association had no right to set off any amounts
paid by health insurers to "anyone" on the bases that the Virginia
Code (Va. Code Ann. '38.1-1600 et seq. (1986)) (the Virginia Code)
specifically excluded health insurers from its scope and was
limited to liability policy insurers of the same or similar type to
the insolvent insurer. MacDougall, slip op at 3. The Guaranty
22 1-05-0025
Association sought a declaration, inter alia, that any of the
plaintiffs having a claim against an insurer under any provision in
an insurance policy, other than a policy of an insolvent insurer,
was required to first seek recovery under the policy covered by the
solvent insurer and any health insurance benefits received by the
plaintiffs for their treatment of injuries was to be set off from
the Guaranty Association's obligation. MacDougall, slip op. at 4.
Under the Virginia Code, like Illinois' Act, a "covered claim"
is defined as "[a]n unpaid claim *** submitted by a claimant, which
arises out of and is within the coverage and is subject to the
applicable limits of a policy covered by this chapter and issued by
an insurer who has been declared to be an insolvent insurer."
MacDougall, slip op. at 5. The MacDougall plaintiffs argued that
covered claims could only be set off by recoveries on other covered
claims, i.e., "by payments received from insurers on a claim that
'arises out of and is within the coverage of a policy issued by an
insolvent insurer.' " MacDougall, slip op. at 5. The plaintiffs
maintained that "medpay" and "seat belt" claims, " ' although
occasioned by the same accident, [were] not the "covered claim"
that arises out of the occurrence and to which [one of the
insolvent insurer's] policies would have applied.' " MacDougall,
slip op. at 5.
The Guaranty Association argued that, under section 38.1-
767(1) of the former Virginia Code (the exhaustion of remedies
provision and the predecessor statute to section 38.2-1610(A)),
23 1-05-0025
that it would not have been entitled to a setoff for medpay, seat
belt coverage or first party insurance, since the predecessor
statute provided:
"Any person having a claim against an insurer
under any provision in an insurance policy
other than a policy of an insolvent insurer
which is also a covered claim, shall be
required to exhaust first his right under such
policy. Any amount payable on a covered claim
under this chapter shall be reduced by the
amount of any recovery under such insurance
policy." (Emphasis in original.) MacDougall,
slip op. at 6.
The Guaranty Association pointed out, however, that the same was
not true based on the 1986 revision of the exhaustion of remedies
provision (revisions underlined and deletions in italics), which
provided:
"Any person having a claim against an insurer
under any provision in an insurance policy,
other than a policy of an insolvent insurer
which is also a covered claim under which the claim is also covered, shall be required to
exhaust first his right first seek recovery
under such the policy covered by the insurer which is not insolvent. Any amount payable of
24 1-05-0025
a covered claim under this chapter shall be
reduced by the amount of any recovery under
such the insurance policy." MacDougall, slip
op. at 6.
The MacDougall court went on to clarify the revisions, stating
that,
"[a]s presently enacted, the exhaustion of
remedies provision requires the claimant to
first seek recovery from a solvent insurer.
Any 'amount payable [by the Guaranty
Association] on a covered claim' is then
reduced by the claimant's recovery from a
solvent insurer. The statute does not
distinguish between claims that are 'within
the coverage' provided by the insolvent
insurer and ancillary claims. In short, there
is no longer the restriction that covered
claims are offset only by recoveries from
solvent insurers on 'covered claims.' "
(Emphasis added.) MacDougall, slip. op. at 6.
Accordingly, the court agreed with the Guaranty Association,
concluding that the amount it was obligated to pay on the covered
claim should be reduced by any amounts that the claimants had
received under the medpay or seat belt provisions of any insurance
policies issued by their solvent insurers. MacDougall, slip op. at
25 1-05-0025
6.
The MacDougall court then considered whether the Guaranty
Association's obligation should be reduced by health insurance
benefits paid to the plaintiffs. The plaintiffs argued that the
Virginia Code did not apply to health or disability insurance;
rather, the Act applied only to property or casualty insurance
benefits payable from the same loss.
In response, the Guaranty Association maintained that the
section of the Virginia Code relied on by the plaintiffs in support
of their argument only excluded health insurers from membership in
the Guaranty Association; it did not limit the broad reach of the
exhaustion of remedies provided in section 38.2-1610(A) of the
Viginia Code. MacDougall, slip op. at 7. The Guaranty Association
further argued that health insurance benefits are no different than
benefits paid pursuant to medpay or seat belt coverage for purposes
of the exhaustion of remedies provision of the Act, and that a
claimant therefore " 'must first seek recovery' from any insurance
from a solvent insurer." (Emphasis in original.) MacDougall, slip
op. at 7.
The MagDougall court held that health insurance benefits
"actually paid" to the plaintiffs were to be set off from covered
claims made against the Guaranty Association. MacDougall, slip op.
at 7-8. In rendering its decision, the MacDougall court relied on
Bogle Development Co., Inc. v. Buie, 250 Va. 431, 463 S.E.2d 467
26 1-05-0025
(1995). In Buie, the plaintiff was injured on the job and received
workers' compensation benefits from his employer's subsequently
insolvent insurer, as well as some health insurance payments from
his solvent health insurer. Buie, 250 Va. at 433. The Guaranty
Association paid the plaintiff for his out-of-pocket medical
expenses, but refused to reimburse him or his health insurer for
his medical bills that were paid by his health insurer. Buie, 250
Va. at 433. The Buie court held that once the plaintiff had been
reimbursed for his out-of-pocket medical expenses, he "had no right
to seek compensation from the Guaranty Association for medical
bills covered by his health insurance." Buie, 250 Va. at 434. See
also Sulkowski v. Pennsylvania Property & Casualty Insurance
Guaranty Ass'n, ___ Pa. ___, ___, 871 A.2d 227, 230-31 (2005)
(Pennsylvania Guaranty Association was entitled to set off
disability insurance benefits paid to a victim of medical
malpractice, pursuant to a nonduplication of recovery provision,
where the setoff was for the same loss, i.e., lost wages); Shepard
v. Washington Insurance Guaranty Ass'n, 120 Wash. App. 263, 268, 84
P.3d 940 (2004) (the insolvent liability carrier's coverage applied
to the same claims the plaintiff's underinsured motorist, personal
injury protection and medical insurance covered and, therefore, the
Guaranty Association was entitled to setoffs for these payments);
Strickler v. Desai, 571 Pa. 621, 656-57, 813 A.2d 650, ___ (2002)
(the Guaranty Association was entitled, pursuant to the
nonduplication of recovery provision, to set off health insurer's
27 1-05-0025
payment in a medical malpractice action).
We find several similarities between Illinois' section 546(a)
of the Act and Virginia's section 38.2-1610(A) of its Code. First,
prior to amendment of section 546(a) and the revision of section
38.1-767(1) of the Virginia Code, both had been interpreted as
allowing a setoff only of claims against the Fund or Guaranty
Association on recoveries from insolvent insurers providing
insurance policies for the same type of claims, e.g., claims made
pursuant to a liability policy issued by a solvent insurer with a
claim under a liability policy issued by an insolvent insurer.
Second, after amendment and revision of the predecessor statutes,
both statutes deleted and added language broadening the word
"claim." With respect to section 546(a) of Illinois' Act, the
language, "applicable to the claim," was deleted, and the following
language was added: "regardless of whether or not such other
insurance policy was written by a member company" and "if the claim
under such other policy arises from the same facts, injury or loss
that gave rise to the covered claim against the Fund." With
respect to the Virginia statute, the language, "which is also a
covered claim," was deleted and, substituted therefor with the
language, "under which the claim is also covered," thereby deleting
any requirement that a claim against a solvent insurer had to be a
"covered claim" before it was required to be set off. Third, both
statutes, while created to protect claimants or policyholders from
loss as a result of insolvent insurers, also clearly require the
28 1-05-0025
exhaustion of rights from solvent insurers and a setoff, where
applicable, from the liability of the Fund and Guaranty
Association.
We therefore find that the legislature never intended that the
Fund step into the shoes of an insolvent insurer and make a
claimant or policyholder "whole." In light of the changes in both
statutes, it defies common sense and the very concepts of
nonduplication of recovery and exhaustion of rights to state that
the Illinois and Virginia legislatures intended claimants or
policyholders of insolvent insurance companies to receive a double
recovery for the same injury, i.e., first, recovery from a solvent
insurer for an injury covered by that insurer and, secondly, an
additional recovery from the Fund or Guaranty Association for the
policy limits on a policy issued by an insolvent insurer for
coverage arising from the same injury. Additionally, plaintiff's
claim against the Fund arose out of his claim for his physical
injuries, for which his medical insurers paid him $128,067.82, and
the $20,000 settlement was for those same physical injuries.
Accordingly, we find that the trial court correctly determined that
no genuine issue of material fact existed, and that the Fund was
entitled to set off the health insurance benefits received by
plaintiff in the amount of $128,067.82 from plaintiff's claim
against the Fund for the $20,000 Valor policy limits, thereby
resulting in the Fund owing no amount to plaintiff.
In light of our disposition above, it is unnecessary to
29 1-05-0025
address the remaining issues raised by plaintiff. We briefly note
only that, with respect to plaintiff's assertion that in order for
a setoff to apply to the Fund's obligation, the "other insurance"
benefits recovered by a plaintiff must have been in a judicial
proceeding, plaintiff has failed to cite to any applicable case law
supporting such a "rule." See Obert v. Saville, 253 Ill. App. 3d
677, 682, 624 N.E.2d 928 (1993) ("Bare contentions in the absence
of argument or citation of authority do not merit consideration on
appeal and are deemed waived"). Moreover, in instances where a
claimant seeking recovery from the Fund has settled for less than
the policy limits issued by a subsequently insolvent insurer,
Illinois courts have held that the Fund is entitled to set off the
full amount of the policy limits that the claimant could have
recovered from the policy. With respect to plaintiff's
hypotheticals about various unpaid future benefits, we find these
hypotheticals to be irrelevant, since this case involved only the
medical insurance benefits that were actually paid to plaintiff by
solvent health insurers in the amount of $128,067.82 for the same
injury involved in his claim against the Fund. We similarly need
not address plaintiff's arguments concerning disability insurance,
the negotiated liens, or the covered claim exception in section
534.3(b)(v) of the Act, since plaintiff has failed to cite to any
authority in support of his "arguments" and, again, the Fund's
obligation was reduced by the $128,067.82 actually paid to
plaintiff from his medical insurers.
30 1-05-0025
CONCLUSION
For the reasons stated, we affirm the judgment of the circuit
court of Cook County.
Affirmed.
GORDON and McBRIDE, JJ., concur.