Smith v. Allstate Insurance Co.

FIRST DIVISION
OCTOBER 20, 1997

No. 1-95-1475

LARRY S. SMITH, ) APPEAL FROM THE
) CIRCUIT COURT OF
Plaintiff-Appellant, ) COOK COUNTY.
)
v. )
)
ALLSTATE INSURANCE COMPANY, ) HONORABLE
) ALBERT GREEN,
Defendant-Appellee. ) JUDGE PRESIDING.

MODIFIED ON DENIAL OF REHEARING
PRESIDING JUSTICE CAMPBELL delivered the opinion of the
court:
Plaintiff Larry Smith appeals an order of the circuit court
of Cook County granting judgment on the pleadings to defendant
Allstate Insurance Company (Allstate) in a declaratory judgment
action.
The record on appeal indicates that on July 8, 1994, plain-
tiff filed a complaint for declaratory judgment against defen-
dant. The complaint alleged that on January 21, 1993, plaintiff
was driving a car east on Golf Road, near the intersection with
Narragansett Street, in Morton Grove. Michael Garrity was
driving west on Golf Road; Brian Barry and Brendan Mahoney were
passengers in the car Garrity was driving. According to the
complaint, Garrity negligently caused a collision between the car
he was driving and Smith's car. Plaintiff's complaint further
alleges that the collision caused him to suffer severe and
permanent injuries, including spinal injuries, incomplete para-
plegia, prosthetic hypertrophy and sexual dysfunction.
Plaintiff, plaintiff's wife, Mahoney, the estate of Barry
and three Barrys individually (the Barrys), all filed suit
against Michael Garrity and John Garrity, the owner of the car
operated by Michael Garrity. On January 21, 1993, Michael
Garrity was an insured driver under a policy issued by State Farm
Insurance Company (State Farm) to John Garrity, the owner of the
car operated by Michael Garrity. The single limit liability
coverage under the State Farm Policy was $100,000 per
person/$300,000 per occurrence. Michael Garrity also had
$2,000,000 in umbrella coverage from State Farm at the time of
the collision. Thus, the maximum coverage available to satisfy
the aforementioned claims was $2,300,000.
During the pretrial proceedings in this related matter,
State Farm agreed to tender the policy limits on behalf of the
Garritys, provided that the matter was settled as to all four
claimants. On March 16, 1994, the trial court entered an order
granting the Garritys' motion for a good faith settlement order.
The order dismissed the claims against the Garritys with preju-
dice and without costs, with the following amounts being paid in
settlement: (1) Larry Smith -- $600,000; (2) Phyllis Smith --
$350,000; (3) the Barrys -- $950,000; and (4) Mahoney --
$400,000. A claim filed by the Barrys against Larry Smith was
also dismissed with prejudice, without costs or any amount being
paid in settlement.
Plaintiff's complaint for declaratory judgment alleged that
on January 21, 1993, plaintiff's car was insured by defendant
Allstate. Plaintiff had $1,000,000 of underinsured motorist
(UIM) coverage under the Allstate policy. Plaintiff demanded
that Allstate tender a $400,000 draft, representing the differ-
ence between the limit of the Allstate policy and the amount
plaintiff received in settlement of his claim against the Gar-
ritys. Allstate refused on the ground that the limits of the
Garritys' policies exceeded the Allstate UIM coverage.
On October 17, 1994, defendant Allstate filed a motion for
judgment on the pleadings, pursuant to section 2-615(e) of the
Illinois Code of Civil Procedure (735 ILCS 5/2-615(e)(West
1994)). On March 31, 1995, following a hearing on the matter,
the trial court granted defendant's motion. Plaintiff filed a
timely Notice of Appeal to this court on April 25, 1995.
I
On appeal, plaintiff contends that the trial court erred in
granting judgment on the pleadings. A motion for judgment on the
pleadings tests the sufficiency of the pleadings by determining
whether the plaintiff is entitled to the relief sought by the
complaint or, alternatively, whether the defendant by his or her
answer has set up a defense that would entitle him or her to a
hearing on the merits. TDC Development Corp. v. First Federal
Sav. and Loan Ass'n of Ottawa, 204 Ill. App. 3d 170, 173, 561 N.E.2d 1142, 1144 (1990). In deciding the motion, the trial
court must examine all pleadings on file to determine whether a
material factual dispute exists or whether the controversy can be
resolved strictly as a matter of law. TDC Development Corp., 204
Ill. App. 3d at 173, 561 N.E.2d at 1144. Judgment on the plead-
ings is proper if only questions of law and not of fact exist
after the pleadings have been filed. Walker v. State Board of
Elections, 65 Ill. 2d 543, 359 N.E.2d 113 (1976).
Although a motion for judgment on the pleadings is similar
to a motion for summary judgment insofar as both suggest that no
material issue of fact exists, a judgment on the pleadings must
rely on the allegations of the complaint to establish the absence
of material fact, whereas summary judgment may rely on affidavits
and other documents. Waterfront Estates Development, Inc. v.
City of Palos Hills, 232 Ill. App. 3d 367, 371-72, 597 N.E.2d 641, 645 (1992). In addition, the well-pleaded allegations of
the non-moving party and inferences therefrom are taken as true.
See Mitchell v. Waddell, 189 Ill. App. 3d 179, 182, 544 N.E.2d 1261, 1262-63 (1989). Given the procedural posture of the case
and that the issues concern the interpretation of a statute, the
standard of review is de novo.
II
The sole issue on appeal is the interpretation of section
143a-2(4) of the Illinois Insurance Code (215 ILCS 5/143a-2(4)
(West 1994)). In recent years, this court has been called upon
to rule on the issue of whether an insured may recover under his
or her underinsured motorist coverage where the person
responsible for the occurrence has coverage limits higher than
the insured's underinsured motorist coverage limit, but multiple
claimants have exhausted the coverage. On March 31, 1995, the
date the trial court granted judgment on the pleadings, every
district of this court to consider the issue had ruled in favor
of the insurer. Golladay v. Allied American Ins. Co., 271 Ill.
App. 3d 465, 648 N.E.2d 157 (1st Dist. 1995); Illinois Farmers
Ins. Co. v. Tabor, 267 Ill. App. 3d 245, 642 N.E.2d 159 (2nd
Dist. 1994); Purlee v. Liberty Mutual Fire Ins. Co., 260 Ill.
App. 3d 11, 631 N.E.2d 433 (5th Dist. 1994); Moriconi v. Sentry
Ins. of Illinois, Inc., 193 Ill. App. 3d 904, 550 N.E.2d 637 (4th
Dist. 1990). The Fifth District, however, has recently reversed
its position on this issue. Hathaway v. Standard Mutual Ins.
Co., 285 Ill. App. 3d 67, ___ N.E.2d ___ (1996); Cummins v.
Country Mutual Ins. Co., 281 Ill. App. 3d 5, 666 N.E.2d 909
(1996), appeal allowed, 168 Ill. 2d 586, ___ N.E.2d ___.[fn1]
The First District, Sixth Division, has followed Hathaway in a
case outside the multiple claimant context. Koperski v. Amica
Mutual Ins. Co., No. 1-96-0046 (1st Dist., 6th Div. March 31,
1997).
The fundamental principle of statutory construction is to
ascertain and give effect to the intention of the legislature.
Varelis v. Northwestern Memorial Hospital, 167 Ill. 2d 449, 454,
657 N.E.2d 997, 999 (1995). Our supreme court has stated that in
enacting section 143a-2(4), "the legislature intended to place
the insured in the same position he would have occupied if
injured by a motorist who carried liability insurance in the same
amount as the policyholder." Sulser v. Country Mutual Ins. Co.,
147 Ill. 2d 548, 558, 591 N.E.2d 427, 430 (1992). The Sulser
court also stated that the purpose of section 143a-2(4) was "to
place the insured in the same position he would have occupied if
the tortfeasor had carried adequate insurance." Sulser, 147 Ill. 2d at 555, 591 N.E.2d at 429. The Sulser court added that
section 143a-2(4) was intended to avoid "the absurdity of a
situation where a policyholder would receive fewer benefits in
the fortuitous event of being injured by an underinsured rather
than by an uninsured motorist." Sulser, 147 Ill. 2d at 557, 591 N.E.2d at 430; cf. Hoglund v. State Farm Mutual Automobile Ins.
Co., 148 Ill. 2d 272, 280, 592 N.E.2d 1031, 1035 (1992)(rejecting
insurer's interpretation of insurance policy that would violate
public policy behind uninsured motorist statute and deny policy-
holder substantial economic value for premiums paid).
In this case, the interpretation of section 143a-2(4)
offered by Allstate would lead to the sort of result condemned in
Sulser. If the sum of the applicable limits of the tortfeasor's
coverage exceeds the plaintiff's underinsured motorist limits,
the plaintiff would be placed in a worse position than he would
have occupied if injured by a motorist who carried liability
insurance in the same amount as the policyholder. In order to
place the insured in the same position he would have occupied if
the tortfeasor had carried adequate insurance, it is necessary to
consider that what may be adequate insurance in a single claimant
situation may not always be adequate coverage in a multiple
claimant situation. Otherwise, the insured could be left in the
situation of receiving no benefits under a policy for which he
has paid a premium due to the fortuitous event of being injured
along with others. In addition, cases such as Golladay did not
address the argument based on Sulser on Hoglund, as it apparently
was not raised there.
Accordingly, we conclude that Garrity's motor vehicle may be
considered an underinsured motor vehicle within the scope of
section 143a-2(4). This construction conforms to the legislative
intent announced by the supreme court. We do not decide any
issue regarding other subsections of section 143a-2 or the
language of the policy at this time, as section 143a-2(4) was the
sole issue before the trial court.
For all of the aforementioned reasons, the judgment of the
circuit court of Cook County is vacated and the case is remanded
for further proceedings consistent with this opinion.
Vacated and remanded.
O'BRIEN, J., specially concur.
GALLAGHER, J., specially concur.
JUSTICE O'BRIEN, specially concurring:
My concurrence today signals a dramatic change from my
concurrence in Golladay v. Allied American Insurance Co., 271
Ill. App. 3d 465, 648 N.E.2d 157 (1995), and requires comment.
After much thought and debate, I admit my error in Golladay and
am convinced that Cummins v. Country Mutual Insurance Co., 281
Ill. App. 3d 5, 666 N.E.2d 909 (1996), Hathaway v. Standard
Mutual Insurance Co., 285 Ill. App. 3d 67, 673 N.E.2d 725 (1996),
and Koperski v. Amica Mutual Insurance Co., 287 Ill. App. 3d 494,
678 N.E.2d 734 (1997), are the better view on two issues: (1) the
interpretation of the first sentence of the statute in question;
and (2) inquiry into legislative intent if the statute is not
ambiguous.
In Golladay, 271 Ill. App. 3d at 468, we held:
"The limit of liability provision in the second sentence
of section 143a\M2(4) is determinative of the amount the UIM
insurer is required to pay under its policy if the tortfeasor's
vehicle is in fact underinsured; it is not determinative of the
status of the tortfeasor's vehicle as underinsured. Whether a
vehicle is underinsured is determined solely by application of
the first sentence of section 143a\M2(4). (Moriconi, 193 Ill.
App. 3d at 908.)"

However, Cummins v. Country Mutual Insurance Co., 281 Ill.
App. 3d at 9-10, states:
"We are obligated to read a statute as a whole, not one
or two sentences selectively or with undue emphasis. The first
sentence defining 'underinsured motor vehicle' includes the term
'limits of liability.' That term is defined in the second sen-
tence *** clearly modifying the first and defining the term as to
the insurer's position. Read together, the insurer is subject to
a liability limit of its coverage, less whatever funds are
actually received from the underinsured vehicle's insurer."

In Golladay, 271 Ill. App. 3d at 469, we held:
"Plaintiff, arguing the public policy considerations
behind the enactment of the underinsured motorist provisions of
the Illinois Insurance Code, invites this court to adopt his
interpretation of section 143a\M2(4) and to reject the holding in
Moriconi (193 Ill. App. 3d 904, 550 N.E.2d 637). We cannot. An
inquiry into public policy in an attempt to construe a statute is
unnecessary where the statutory language is clear and unambigu-
ous. (Chapman v. Richey (1980), 78 Ill. 2d 243, 399 N.E.2d 1277.)
Where, as here, the language of a statute is clear and unambigu-
ous, there is no occasion for judicial construction; the only
proper function of a court is to enforce the law as enacted by
the legislature according to the plain meaning of the words used.
County of Du\tPage v. Graham, Anderson, Probst & White, Inc.
(1985), 109 Ill. 2d 143, 485 N.E.2d 1076."

The better view is elucidated in Hathaway v. Standard Mutual
Insurance Co., 285 Ill. App. 3d at 70-71:
"Most of the courts that have construed the statute
have focused on the first sentence and found it unambiguous.
Consequently, they have ignored the legislative history and ruled
in the insurance companies' favor. Although ambiguity in a
statute is one reason for a court to examine the legislative
history, it is not the only reason. An examination of the legis-
lative history is also appropriate if the examination helps to
prevent an absurd result. See W. Eskridge, Legislative History
Values, 66 Chi.-Kent L. Rev. 365 (1990)."

The analysis of the legislative intent of this statute in
Hathaway is definitive, persuasive and, as noted by Justice
Gallagher in his concurrence, reasonable and fair.
Accordingly, I concur.
JUSTICE GALLAGHER, specially concurring:
I concur with my colleagues' conclusion in this case.
I do believe, however, that it is important to comment
further upon the substantive issues in this case, which will most
probably need to be addressed by our supreme court, due to the
conflicting decisions of this court. The applicable statutory
provision (215 ILCS 5/143a\M2(4) (West 1992)) should fairly be
interpreted to allow for coverage to the insured for the short-
fall between the tortfeasor's limits actually recovered by the
plaintiff and the plaintiff's underinsured policy.
Basically, the statute says that the limits of liability for
the underinsured carrier are the limits of such coverage ($1
million herein), minus those amounts "actually recovered" from
the tortfeasor ($600,000 "actually recovered" by plaintiff
herein). Under a reasonable interpretation of the statute,
plaintiff would be entitled to a $400,000 payment ($1,000,000
minus $600,000 equals $400,000). Otherwise, the very existence of
underinsured coverage will depend upon the variable circumstances
involving the number of persons in the accident, who is at fault,
whether there is any contributory fault by the plaintiff, and
most importantly, what the total coverage of the tortfeasor turns
out to be. At the time an insured purchases underinsured cover-
age, all of these variables are unknown and unknowable to anyone.
Therefore, all an insured might be purchasing, as counsel for
defendant pointed out during oral argument, is the "potential"
for insurance, not real insurance. Unfortunately, an insured is
paying real premiums, not virtual or imaginary ones.
Under the defendant's proposed construction, there is no
connection between what an insured reasonably believes he pur-
chased and what he obtains. This outcome would be unique in the
annals of contract law. A person may think he purchased a million
dollars of underinsured coverage when, in truth, he has purchased
quite less.
The statutory language supports the following rule: where
several claimants vie for the insurance of a single tortfeasor,
such that the tortfeasor's coverage is inadequate to fully
compensate the injured parties, then an injured party's underin-
sured coverage should be defined as the difference between the
policy's limits and what the insured actually recovers from the
tortfeasor. In this case, that would clearly be $400,000.
[fn1] The Illinois Supreme Court issued an opinion affirm-
ing the appellate court in Cummins on October 2, 1997. Cummins
v. Country Mutual Ins. Co., No. 81455 (Ill. Oct. 2, 1997). We
note, however, that the opinion may be withdrawn, changed or
corrected pending the filing of a petition for rehearing or the
disposition of such a petition. See 155 Ill. 2d Rs. 367, 368.
Moreover, as this court is denying the petition for rehearing,
the date of judgment remains July 21, 1997. PSL Realty Co. v.
Granite Investment Co., 86 Ill. 2d 291, 427 N.E.2d 523 (1981).