Brooks v. Digna Property & Casualty Cos.

Annotate this Case
Second Division
September 1, 1998

No. 1-97-4260

EUGENE BROOKS, ) Appeal from the
) Circuit Court of
Plaintiff-Appellant, ) Cook County.
)
v. )
)
CIGNA PROPERTY AND CASUALTY COMPANIES, ) Honorable
) Richard E. Neville,
Defendant-Appellee. ) Judge Presiding.

JUSTICE RAKOWSKI delivered the opinion of the court:

While working for Illinois Trailer Equipment Company, plaintiff Eugene Brooks was
injured by an uninsured motorist. He notified his employer's insurance carrier, Cigna Property
and Casualty Companies (Cigna), of his uninsured motorist claim under section 143a of the
Illinois Insurance Code (Code) (215 ILCS 5/143a (West 1996) (formerly Ill. Rev. Stat. 1983,
ch. 73, par. 755a)) and demanded arbitration. Eleven years after the accident with no
resolution of his claim, Brooks filed suit against Cigna, alleging breach of contract and
"vexatious delay." Cigna moved to compel arbitration, which the circuit court granted.
Brooks now argues he cannot be compelled to arbitrate the claim. Because we conclude that
arbitration under the Code is mandatory and cannot be waived, we affirm.
FACTS
Brooks was injured in 1984 when involved in an automobile accident with Preston
Strickland, an uninsured driver. At the time of the accident, Brooks was driving a truck
owned by his employer, Illinois Trailer Equipment Company. Illinois Trailer Equipment
Company had a policy of automobile insurance with Cigna that provided for uninsured
motorist benefits. Brooks notified Cigna of his claim. At some point, Cigna offered to settle.
Brooks rejected the settlement offer and renewed his previous demand for arbitration. His
demand went unanswered and, in 1995, Brooks filed suit. Cigna's motion to dismiss based on
the statute of limitations was granted. We reversed that decision in an unpublished order
under Supreme Court Rule 23 (Brooks v. Cigna Property & Casualty Cos., No. 1-96-2101
(January 23, 1997)), and remanded to the circuit court for further proceedings. On remand,
Cigna filed a motion to compel arbitration that was granted. The trial court did not address
Brooks' "vexatious delay" count and that count remains pending in the trial court. We have
jurisdiction pursuant to Supreme Court Rule 307(a). 166 Ill. 2d R. 307(a).
ANALYSIS
I. MOTION TO STAY APPEAL
Taken with the case is Brooks' motion to stay appeal. Because the constitutionality of
section 143a is presently pending before the Illinois Supreme Court and the validity of section
143a is key to his appeal, Brooks contends this appeal must be stayed until the supreme court
resolves the issue.
In Reed v. Farmers Insurance Group, 291 Ill. App. 3d 1068 (1997), the third district
declared section 143a unconstitutional. The supreme court granted leave to appeal (Reed v.
Farmers Insurance Group, 175 Ill. 2d 553 (1997)).
After thoroughly reviewing the merits of Brooks' motion and considering the benefits
of staying this appeal, we deny Brooks' motion to stay. The statute found unconstitutional in
Reed is the 1996 version of the statute, not the 1983 statute that is relevant to the instant case.
The 1996 version contains different provisions, in particular, the "escape hatch" provision
allowing for review of arbitration awards above minimal financial liability limits but binding
awards below those limits. The crux of the Reed decision was the inequity and
unconscionability of this provision in that it favors insurers because arbitration awards above
liability limits are nonbinding and awards lower than those limits are binding. See Reed, 291
Ill. App. 3d 1068. In the instant case, the relevant version of section 143a contains no
"escape hatch" provision. The statutory language is neutral and there is no differentiation
between awards below the limits and those above the limits. Based on the difference in the
statutory provisions and because the third district's decision centered on the offensive nature
of the distinction between high and low awards, we conclude that the supreme court s
resolution of Reed would not affect the issues before us.
Accordingly, we deny Brooks' motion to stay appeal.
II. STANDARD OF REVIEW
"A motion to compel arbitration is in the nature of a prayer for injunctive relief, and a
denial [or grant] of that motion can be reviewed by an appellate court as an interlocutory
appeal pursuant to Supreme Court Rule 307(a)(1)." Yandell v. Church Mutual Insurance Co.,
274 Ill. App. 3d 828, 830 (1995). The standard is whether the trial court abused its discretion
in granting or denying the motion to compel. Yandell, 274 Ill. App. 3d at 831. "The sole
issue before the appellate court on an interlocutory appeal is whether a sufficient showing was
made to sustain the order of the trial court." Yandell, 274 Ill. App. 3d at 830.
III. PROPRIETY OF GRANTING MOTION TO COMPEL ARBITRATION
Brooks first contends that he cannot be compelled to arbitrate because he is not a party
to the arbitration agreement contained in the insurance policy; he is merely a third-party
beneficiary.
Arbitration was designed to speed the resolution and determination of disputed issues.
M. Rhodes, 14 Couch on Insurance 2d 50:305, at 55 (Supp. 1998). See also State Farm
Fire & Casualty Co. v. Yapejian, 152 Ill. 2d 533, 541 (1992) (arbitration provision added to
statute to "expedite the processing of uninsured motorist claims"). Generally, "[a]rbitration is
a matter of contract, and a party cannot be required to arbitrate any dispute which he or she
has not agreed to arbitrate." Kennedy v. Commercial Carriers, Inc., 258 Ill. App. 3d 939, 943
(1994). Similarly, a nonparty to the contract or a third-party beneficiary cannot be compelled
to arbitrate. See Yandell v. Church Mutual Insurance Co., 274 Ill. App. 3d 828, 833 (1995);
City of Peru v. Illinois Power Co., 258 Ill. App. 3d 309, 312-13 (1994); Jacob v. C&M
Video, Inc., 248 Ill. App. 3d 654, 659 (1993); Property Management, Ltd. v. Howasa, Inc., 14
Ill. App. 3d 536, 540 (1973).
However, in Illinois, arbitration of uninsured motorist claims is provided for by statute.
Statutes that are in force at the time a policy is issued are controlling. American Family
Mutual Insurance Co. v. Baaske, 213 Ill. App. 3d 683, 688 (1991). Where a statute provides
for uninsured motorist coverage, the statute becomes a part of each policy to which the statute
applies to the same effect as if the statutory language were written in the policy. 8C J.
Appleman & J. Appleman, Insurance Law & Practice 5067.35, at 36 (1981). As such, in
the case of arbitration of uninsured motorist claims more is involved than simply a matter of
contract rights and remedies.
Section 143a of the Illinois Insurance Code states:
"No such policy shall be renewed *** unless it is provided
therein that any dispute with respect to such coverage shall be
submitted for arbitration to the American Arbitration Association
or for determination in the following manner: Upon the insured
requesting arbitration, each party to the dispute shall select an
arbitrator ***. If such arbitrators are not selected within 45 days
from such request, either party may request that such arbitration
be submitted to the American Arbitration Association." Ill. Rev.
Stat. 1983, ch. 73, par. 755a(1).
Arbitration under section 143a is binding on the parties. American Family Mutual Insurance
Co., 213 Ill. App. 3d at 688. The Illinois Supreme Court has interpreted section 143a to
require arbitration of disputes "once coverage [is] established.' " Topps v. Unicorn Insurance
Co., 271 Ill. App. 3d 111, 114 (1995), quoting Yapejian, 152 Ill. 2d at 541. Thus, the Illinois
Supreme Court has interpreted this section to require that the issues of liability and damages
be submitted to arbitration for resolution and are not subject to judicial resolution or to
judicial review, except under limited circumstances. Yapejian, 152 Ill. 2d at 541-43. See also
Reed v. Farmers Insurance Group, 291 Ill. App. 3d 1068, 1073 (1997) (arbitration under
section 143a is "compulsory arbitration *** mandated by statute"; "section 143a of the
Insurance Code *** requires that all disputes regarding liability and damages be submitted to
arbitration"); Yandell, 274 Ill. App. 3d at 831-32 ("[t]oday [unlike prior to 1978], by statute,
all U[ninsured] M[otorist] claims are subject to mandatory arbitration"; "[s]ection 143a of the
Illinois Insurance Code [citation] mandates binding arbitration, even if the policy provides for
nonbinding arbitration"); Topps, 271 Ill. App. 3d at 114 (the Illinois Supreme Court has
"interpreted section 143a(1) of the Illinois Insurance Code regarding uninsured motorist
coverage [citation] to require arbitration of disputes concerning covered claims once coverage
was established' [citation])"; American Family Mutual Insurance Co., 213 Ill. App. 3d at 686
("[u]nder [section 143a], disputes involving uninsured motorist claims must be submitted for
arbitration"). More specifically, in Herriford v. Boyles, 193 Ill. App. 3d 947 (1990), the court
was called upon to answer the following certified question: "Does [section 143a] require that
an insured submit uninsured motorist claims to arbitration or does the statute merely require
that insurance contracts afford the insured the option of arbitration?" Herriford, 193 Ill. App.
3d at 949. The court concluded that section 143a "clearly requires mandatory arbitration of
all disputed uninsured motorist claims." Herriford, 193 Ill. App. 3d at 951. Thus, the
arbitration process is compulsory and the statute does not merely provide for optional
arbitration.
Moreover, under provisions such as section 143a, "[t]he intent and effect of such a
statute is to remove from the court and transfer to an arbitration panel the function of
determining *** all issues as to coverage." 46A C.J.S. Insurance 1691, at 675 (1993).
"[A]ny statutory provisions concerning the arbitration proceedings must be followed." M.
Rhodes, 14 Couch on Insurance 2d 50:305, at 56 (Supp. 1998).
Based on the above, we conclude that arbitration under section 143a differs from
contractual arbitration. The legislature intended that certain issues in uninsured motorist
claims be determined solely through arbitration. Unlike parties to contractual arbitration
provisions or in underinsured motorist claims such as Yandell, the parties in uninsured
motorist claims must submit to arbitration.
When Brooks filed his claim for uninsured benefits, he voluntarily subjected himself to
the Code mandates. The Code compels mandatory arbitration of uninsured motorist claims as
to liability and damages; these issues cannot be resolved in the judicial forum. The circuit
court correctly determined that Brooks' claim was subject to arbitration.
IV. WAIVER AND ESTOPPEL
Notwithstanding that arbitration may be the proper forum, Brooks contends that
Cigna's acts both before and after the filing of his complaint constitute waiver and that Cigna
should be estopped from asserting its right to compel arbitration. Specifically, he argues that
Cigna never attempted to assert its right to arbitration prior to Brooks filing suit and that it
postponed Brooks' first request for arbitration and left unanswered Brooks' second and third
requests for arbitration.
Although Illinois as well as other jurisdictions have stated that a party may waive the
right to arbitration, these cases involve contractual arbitration provisions and, thus, rely solely
on interpretation of contract law. Independent research has located no case addressing the
issue of whether statutorily mandated arbitration may be waived. For the following reasons,
we conclude that, unlike contractual arbitration provisions, parties cannot waive statutorily
mandated arbitration absent some express statutory provision providing such a remedy.
First, unlike common law arbitration, statutory arbitration provisions, "instead of being
revocable at will by either party, can now be specifically enforced by either party." 4 Am.
Jur. 2d Alternative Dispute Resolution 95, at 150 (1995). Moreover, if a provision in the
insurance contract provided that arbitration was nonbinding, it would be void. American
Family Mutual Insurance Co. v. Baaske, 213 Ill. App. 3d 683, 688 (1991) (any provision in
conflict with the statute is void). Similarly, if a provision in the insurance contract provided
that arbitration was optional, it would be void. From this, one can reasonably deduce that
arbitration of uninsured motorist claims cannot be waived.
Uninsured motorist coverage is provided for by statute and the right to compensation
under such a theory is conditioned upon the parties following the statutory procedures. In
other words, the parties must proceed to arbitration on the issues of liability and damages if
they dispute these issues. As such, we conclude that this is one of those "legal rights and
doctrines which the parties cannot waive or stipulate away." See, e.g., Country Mutual
Insurance Co. v. National Bank, 109 Ill. App. 2d 133, 137 (1969).
Finally, even assuming arguendo that Cigna could waive the mandatory statutory
arbitration, we conclude that its conduct did not amount to waiver or estoppel. While it is
true that Cigna did nothing to proceed to arbitration, Brooks did nothing either. Although
Brooks claims to have made three demands for arbitration, the first request was not made
until 1991, some seven years after the accident. Cigna postponed this arbitration, awaiting an
additional witness statement. Brooks provided Cigna with this statement two months later;
however, the record is devoid of what, if anything, transpired for some time thereafter. A
settlement offer was made in February of 1994, but Brooks rejected this offer at the end of
July of 1994, renewing his demand for arbitration. Again, he did nothing to facilitate
arbitration at this time. At no time did Brooks utilize the statutory remedies available to him.
Nor did he not even comply with the statute in demanding arbitration. Pursuant to the statute,
after Brooks requested arbitration, he was to appoint an arbitrator. If Cigna did not appoint
its arbitrator or if Brooks' and Cigna's appointed arbitrators did not appoint a third arbitrator
within 45 days from Brooks' request for arbitration, then Brooks could request that arbitration
be submitted to the American Arbitration Association. On none of the three occasions Brooks
demanded arbitration did he appoint an arbitrator. Further, on none of the occasions did he,
after Cigna's failure to respond, request that arbitration be submitted to the American
Arbitration Association.
Based on the above, we conclude that Cigna could not waive arbitration under section
143a. Further, even if Cigna could waive its right to proceed to arbitration, its conduct in this
case did not amount to waiver or estoppel.
CONCLUSION
For the foregoing reasons, we affirm the decision of the circuit court of Cook County
granting Cigna's motion to compel arbitration. Because the trial court did not rule on Brooks'
"vexatious delay" count, we remand.
Affirmed and remanded.
COUSINS, J., concurs.
TULLY, J., concurs, specially concurs, or dissents [decision to follow].