Opinion
No. 1-12-2877
02-21-2014
UNITED NATIONAL INSURANCE COMPANY, Plaintiff-Appellee, v. DONNA KEMPER, Defendant-Appellant.
NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances under Rule 23(e)(1).
Appeal from the
Circuit Court of
Cook County, Illinois
No. 09 CH 34327
Honorable
Kathleen M. Pantle,
Judge Presiding.
JUSTICE delivered the judgment of the court.
Justice Palmer concurred in the judgment.
Presiding Justice Gordon dissented.
ORDER
HELD: Defendant's notification to plaintiff underinsured motorist insurance carrier after settling with the alleged tortfeasor was unreasonable given the relevant factors. The terms of the settlement deny the carrier any subrogation rights, in violation of both the Illinois Insurance Code (215 ILCS 5/133a-2(6-7) (West 2002)) and the policy's subrogation provision. We find this substantially prejudiced carrier's right to recover. The trial court's judgment is affirmed. ¶ 1 Following cross-motions for summary judgment, the trial court granted plaintiff United National Insurance Company's motion and denied defendant Donna Kemper's motion. The motion granted a declaratory judgment that underinsured motorist (UIM) coverage was not available to defendant for her May 22, 2002, accident. On appeal, defendant contends that the trial court erred for three reasons. First, the trial court erred in finding that defendant's failure to provide United with notice of a lawsuit against the tortfeasor and her UIM claim until seven months after she settled that lawsuit constituted a breach of United's policy condition requiring notice "as soon as practical." Second, the trial court erred in finding that defendant failed to comply with the requirement under the Illinois Insurance Code that insureds seeking UIM benefits may not settle with a tortfeasor without first preserving the subrogation rights of the UIM insurer. Finally, defendant contends that the trial court erred in finding that defendant's failure to secure United's subrogation rights against the tortfeasor and others was a breach of the express condition in United's policy requiring her to do so. For the reasons discussed below, we affirm.
¶ 2 BACKGROUND
¶ 3 Defendant Donna Kemper was a police officer employed by the Village of Romeoville. On May 22, 2002, defendant and her partner were responding to a robbery call when a vehicle driven by Emilia Rolfe (or "tortfeasor") pulled out in front of the police car causing an accident. As a result of the accident, defendant was injured and underwent multiple back surgeries. ¶ 4 Defendant filed a workers' compensation claim with the Village of Romeoville for her injuries. Plaintiff United National Insurance Company (United) provided the Village of Romeoville with worker's compensation coverage, underinsured motorist (UIM) coverage, and other types of coverage in a "custom package policy." Under the Village's workers' compensation coverage, the Village satisfies the first $250,000 of each loss as a self-insured retention (SIR), and plaintiff covers losses over that amount, up to $150,000 in additional coverage. The Village's third-party claims administrator notified plaintiff of defendant's workers' compensation claim on November 1, 2004. Plaintiff responded by indicating it would not be following defendant's claim, as the claim was within the Village's $250,000 SIR, and requested to be notified immediately if the cost incurred for defendant's claim reached $225,000. The Village contested the claim and that matter is still pending before the Illinois Industrial Commission. ¶ 5 On May 21, 2004, defendant filed suit in the Circuit Court of Will County, Illinois, against the alleged tortfeasor for her injuries sustained in the May 22, 2002, accident. The parties in the suit engaged in limited discovery. Defendant's counsel determined that the alleged tortfeasor was driving a rental vehicle at the time of the accident, but counsel never secured a copy of the rental agreement, method of payment, or even the name of the rental company. In fact, counsel never secured a copy of the alleged tortfeasor's insurance policy with Cincinnati Insurance Company. ¶ 6 On August 28, 2007, defendant settled the lawsuit with the alleged tortfeasor for $100,000. The settlement agreement fully released the alleged tortfeasor, the Cincinnati Insurance Company, as well as "all other persons, firms, corporations, who may be responsible or liable therefore, of and from any and all actions, liens, causes of action, claims [or] demands." The agreement also provided that defendant would hold harmless and defend the released parties from "any action of any lienholders, known or unknown." Pursuant to a stipulation of the parties, the lawsuit with the alleged tortfeasor was dismissed with prejudice by the Will County Court on August 1, 2007. ¶ 7 On March 26, 2008, defendant provided first notice to plaintiff of her intent to seek UIM coverage under the Village's policy with the plaintiff. This notice was also plaintiff's first notice of defendant's settlement with the alleged tortfeasor. The policy provided UIM coverage with limits of $2,000,000 for any one occurrence. The UIM coverage contains the following relevant Insuring Agreements:
"A. AUTOMOBILE LIABILITY: The Company agrees, subject to the policy limitations, terms and conditions, to indemnify the ASSURED for all sums which the ASSURED is obligated to pay by reason of the liability imposed upon the ASSURED by law or assumed by the ASSURED under contract or agreement, including non-owned and hired AUTOMOBILES, for damage direct or consequential, and expenses, all as more fully defined by the term ULTIMATE NET LOSS, arising out of any OCCURRENCE on account of BODILY INJURY, suffered or alleged to have been suffered by any person(s) or organization(s) and/or PROPERTY DAMAGE, arising out of the ownership, maintenance or use of any AUTOMOBILE, occurring during the PERIOD OF INSURANCE.¶ 8 The policy contains the following relevant General Policy Conditions:
* * *
C. UNINSURED MOTORIST / UNDERINSURED MOTORIST:
Uninsured/Underinsured Motorist Coverage is afforded in respect of any OCCURRENCE at least to the minimum extent permitted by the law of the State in which each owned or hired AUTOMOBILE is principally garaged. This coverage applies only if a limit is stated in PART I A. SCHEDULE OF SPECIFIC EXCESS LIMITS OF INSURANCE."
"6. OCCURRENCE OR CLAIM: The ASSURED shall as soon as practical notify the Company through the ASSURED'S third party claim administrator of any OCCURRENCE or CLAIM or SUIT meeting the following criteria:¶ 9 On September 18, 2009, plaintiff filed a declaratory judgment action seeking a determination from the circuit court regarding the availability of UIM coverage to defendant. During the course of the action, Steven Reilly, a United employee knowledgeable about defendant's UIM claim, testified that if plaintiff had been timely notified about defendant's UIM claim before her settlement with the tortfeasor, plaintiff would have been able to investigate its subrogation rights. However, plaintiff was not notified until after defendant's settlement. ¶ 10 On June 4, 2012, both parties filed cross-motions for summary judgment. On September 6, 2012, the circuit court granted plaintiff's motion for summary judgment. This appeal followed. There are three issues are raised on appeal. First, whether the trial court erred in finding that defendant's failure to provide United with notice of the lawsuit against the tortfeasor and her UIM claim until seven months after she settled the lawsuit with the tortfeasor constituted a breach of United's policy condition requiring notice "as soon as practical." Second, whether the trial court erred in finding that defendant failed to comply with the Illinois Insurance Code's requirement that an insured seeking UIM benefits may not settle with a tortfeasor without first preserving the subrogation rights of the UIM insurer. Finally, whether the trial court erred in finding that defendant's failure to secure United's subrogation rights against the tortfeasor and others was a breach of the express condition in United's policy requiring her to do so.
(a) the cost of which is likely to result in payment by the Company under this policy.14. SUBROGATION, SALVAGE, AND RECOVERY: The Company shall be subrogated to all rights which the ASSURED may have against any person or other entity in respect of any claim or payment made under this policy and the ASSURED shall execute all papers required by the Company and shall cooperate with the Company to secure the Company's rights."
* * *
¶ 11 ANALYSIS
¶ 12 Defendant appeals from an order granting summary judgment to plaintiff and denying her motion. Appellate review of a summary judgment ruling is de novo. Delaney v. McDonald's Corp., 158 Ill. 2d 465, 467 (1994). The standard of review for the interpretation of provisions of an insurance policy is also de novo. Pekin Insurance Co. v. Wilson, 391 Ill. App. 3d 505, 509 (2009).
¶ 13 A. NOTICE PROVISION
¶ 14 Defendant argues that plaintiff attempts to avoid coverage by invoking an exclusion, namely, the notice provision of the policy, such that the burden of proof would fall to the insurance carrier to show that the claim falls within the exclusion. American States Insurance Company v. Fire Equipment, Inc., 157 Ill. App. 3d 34, 42 (1987). However, notice provisions are a "condition precedent to the triggering of the insurer's contractual duties," rather than an exclusionary provision. Northbrook Property & Casualty Insurance Co. v. Applied Systems, Inc., 313 Ill. App. 3d 457, 464 (2000). Generally, "the timeliness of the notice given pursuant to a policy provision is a question of fact for the trier of fact, although it may be decided by the court if no genuine issue of material fact exists." University of Illinois v. Continental Casualty Co., 234 Ill. App. 3d 340, 363 (1992). ¶ 15 Lack of timeliness of notification is a defense only when the facts and circumstances show the insured's delay was unreasonable. Northbrook, 313 Ill. App. 3d at 465. In assessing the validity of an insured's excuse, the court examines several factors:
"(1) the specific language of the policy's notice provision; (2) the degree of the insured's sophistication in the world of commerce and insurance; (3) the insured's awareness that a 'lawsuit' as defined under the terms of the policy has taken place; and (4) once this awareness arises, the insured's diligence and reasonable care in ascertaining whether policy coverage is available." Id. at 466.See also Ankus v. Government Employees Ins. Co. 285 Ill. App. 3d 819, 825 (1996). Another factor to be considered in assessing the reasonableness of notice is whether the delay prejudiced the insurer. Id. However, if it is determined that the insured's delay was unreasonable, the insured may not recover, regardless of whether any prejudice occurred. Country Mutual Ins. Co. v. Livorsi Marine, Inc., 222 Ill. 2d 303, 317 (2006) (overruling cases to the contrary); see also Ankus, 285 Ill. App. 3d at 825 (prejudice does not need to be proven because it is "merely a factor in assessing the reasonableness of the notice"). ¶ 16 The specific language of the notice provision states, "The ASSURED shall as soon as practical notify the Company through the ASSURED'S third party claim administrator of any OCCURRENCE or CLAIM or SUIT meeting the following criteria: (a) the cost of which is likely to result in payment by the Company under this policy ***." (Emphasis added.) Illinois courts have determined that the language "as soon as practicable" requires notification within a reasonable time. State Security Insurance Co. v. Burgos, 145 Ill. 2d 423, 431 (1991); see also Sears, Roebuck & Co. v. Seneca Insurance Co., 254 Ill. App. 3d 686, 692 (1993). ¶ 17 It is undisputed that the automobile accident occurred on May 22, 2002, defendant filed her suit against the alleged tortfeasor on May 21, 2004, and she settled with the tortfeasor on August 28, 2007, but she did not inform the plaintiff of her intention to seek UIM coverage until more than six months after the settlement, on March 26, 2008. The letter that defendant sent to plaintiff on that date states, "Please allow this correspondence to serve as notice of our uninsured/under-insured motorist claim with your company under [the Village's policy]." (Emphasis added.) Defendant nevertheless argues, as she did before the trial court, that plaintiff received adequate notice of her UIM claim when the Village's third-party claims administrator submitted her workers' compensation claim to plaintiff on November 1, 2004. Although defendant was not yet seeking UIM benefits at that time, she nevertheless argues that notice of her workers' compensation claim was sufficient to alert the plaintiff to the possibility that she might wish to seek UIM benefits at some time in the future. The circuit court rejected this argument, stating:
"Kemper's position that United should have undertaken its own analysis that a worker's compensation claim could lead to a UIM claim is untenable. There is no presumption in Illinois that a vehicle driven by a putative tortfeasor is underinsured. *** Under Kemper's logic, United would be responsible for investigating a potential claim that was not made by anyone and which may never exist."¶ 18 We agree with the circuit court. In Illinois, a determination of whether a vehicle is underinsured is based on the sum of all applicable coverage available to the tortfeasor or the organization legally responsible for the vehicle. 215 ILCS 5/143a-2(4) (West 2002); see also Moriconi v. Sentry Insurance of Illinois, 193 Ill. App. 3d 904, 908 (1990) (finding that a vehicle is considered underinsured only where the total sum of all insurance is less than the UIM policy). Thus, plaintiff could not have known whether the tortfeasor was underinsured and defendant intended to pursue UIM coverage from the filing of a workers' compensation claim against the Village. This is reinforced by the language in defendant's March 26, 2008, letter to plaintiff, which shows that defendant did not believe plaintiff knew or should have known about the UIM claim because the intent of the letter was to provide notice of the UIM claim. We therefore find that defendant's March 26, 2008 letter to plaintiff was plaintiff's first notice of both the UIM claim and the defendant's suit against the alleged tortfeasor. ¶ 19 The dissent nevertheless argues that notice of defendant's workers' compensation claim was sufficient to constitute notice of her UIM claim, relying on Casualty Insurance Co. v. E.W. Corrigan Construction Co., 247 Ill. App. 3d 326 (1993). We note initially that neither party in this case cites Casualty Insurance in their briefs. Regardless, for the reasons that follow, we find Casualty Insurance to be distinguishable. ¶ 20 In Casualty Insurance, the insurer provided workers' compensation coverage as well as general liability coverage. Id. at 327. When an employee was injured on the job, his employer promptly notified the insurer of his potential workers' compensation claim. Id. at 328. Subsequently, the employee sued for personal injuries. Id. A year after the suit was filed, the employee amended his complaint to add the employer as a defendant. Id. On the same day that the employer was served with summons and complaint in that suit, it tendered its defense to the insurer. Id. The insurer denied the employer's request to defend the suit, stating that notice was not timely under the policy since the employer had waited a year after the suit was originally filed. Id. The Casualty Insurance court disagreed, holding that notice of the workers' compensation claim was sufficient to satisfy the notice requirement of the general liability policy. Id. at 334. The court explained its decision as follows:
"We recognize that there is potentially a distinct difference between an investigation undertaken pursuant to a workers' compensation claim and an investigation started in connection with a general liability policy. An insurer should not be able to claim prejudice on this ground, however, simply because the insured referenced his workers' compensation file and not any general liability policies he may have had with the insurer when he sent notice." (Emphasis added.) Id.¶ 21 To the extent that the Casualty Insurance court was suggesting that an insurer must prove prejudice to raise lack of timely notification as a defense, our supreme court squarely rejected this view in Country Mutual, 222 Ill. 2d at 317. Rather, the Country Mutual court held that once it is determined that an insurer did not receive reasonable notice, the policyholder may not recover, regardless of whether any prejudice occurred to the insurer. Id. Thus, the continued vitality of Casualty Insurance is at least questionable in light of Country Mutual. ¶ 22 Moreover, we note that, in reaching its decision, the Casualty Insurance court was careful to distinguish the case of Employers' Liability Assurance Corp. v. Travelers Insurance Co., 411 F.2d 862, 866-67 (2d Cir. 1969), where the court held that notice to an insurer of a workers' compensation claim was insufficient to serve as notice of a subsequent liability claim. In that case, a truck driver was injured on the job, and a workers' compensation claim was promptly filed with the defendant insurer. Id. at 864. Subsequently, the driver filed a personal injury suit against the employer. Id. The insurer was not informed of that suit until nearly a year later. Id. The Employers' Liability court found that this untimely notice served to void coverage, rejecting the notion that the prior notice of the workers' compensation claim was sufficient. Id. at 866-67. ¶ 23 The Casualty Insurance court distinguished Employers' Liability based upon the fact that the driver who filed the personal injury suit in that case was an additional insured who was not named in the policy. Casualty Insurance, 247 Ill. App. 3d at 334. The Casualty Insurance court stated, "Short of being expressly notified of the insured's existence, the insurer would never know of him." Id. at 334-45. Thus, the Casualty Insurance court implicitly acknowledged that notice is inadequate where it does not serve to alert the insurer to the potential existence of coverage. ¶ 24 Applying this principle to the case at hand, we find that the facts are much closer to Employers' Liability than to Casualty Insurance. In this case, when defendant filed her workers' compensation claim, United would have had no way of knowing whether the potential tortfeasor was underinsured. United's position was therefore comparable to the position of the insurer in Employers' Liability, where untimely notice of a lawsuit was held to void liability coverage. Accordingly, we disagree with the dissent's argument that Casualty Insurance requires a reversal in this case. ¶ 25 Next, we will examine defendant's level of sophistication of insurance knowledge and her knowledge of whether a suit as defined by the notice provision had taken place. Defendant was represented by an attorney in her action against the alleged tortfeasor. Attorneys are "charged with knowledge of the law and contract obligations surrounding the uninsured policy provisions." Standard Mutual Insurance Co. v. Petreikis, 183 Ill. App. 3d 272, 283 (1989). Thus, defendant, through her attorney, had a high level of sophistication in insurance matters and knew of the suit as defined by the notice provision because defendant brought the suit. ¶ 26 In determining whether defendant used due diligence to inform plaintiff of her UIM claim once she was aware of a suit as defined by the policy's notice provision, there is debate as to what the triggering event was. The circuit court held that the triggering event was the filing of the suit against the tortfeasor. The defendant argues in her reply brief that because plaintiff states that the triggering event could have been in January 2005, when defendant knew of tortfeasor's policy limits, the circuit court erred in finding the triggering event to be the date of filing suit. This argument is without merit because regardless of which event triggered the notice provision, defendant's notice was unreasonable because it occurred after defendant settled her suit against the alleged tortfeasor. The circuit court held:
"Kemper's delay in notifying United of the Rolfe [tortfeasor] lawsuit or the UIM claim until after the settlement and subsequent dismissal of the lawsuit where the settlement included a release of the tortfeasor, the tortfeasor's insurer, and all other persons or entities who may be responsible or liable was unreasonable as a matter of law (citing Kerr v. Illinois Central R.R. Co., 283 Ill. App. 3d 574, 584)."¶ 27 In Kerr v. Illinois Central Railroad Company, 283. Ill. App. 3d 574, 584 (1996), an excess insurer brought suit seeking declaratory judgment against the primary insurer for failure to provide notice of an excess claim until after the lawsuit was fully litigated and appealed. The court noted several events prior to notification to the excess insurer that could have been triggering events in which the primary insurer would have been obligated to notify the excess insurer. Id. The court did not resolve what the triggering event was, nor did it need to in order to determine that notice was unreasonable. The court reasoned "it is enough here that the excess insurers were denied any opportunity to assess the loss and thereby protect their interests." Id. at 585; see also Safety National Casualty Corp. v. Village of Cahokia, No. 09-cv-482, 2010 WL 3724296, *5 (N.D. Ill. Sept. 15, 2010) (holding seven month delay unreasonable and insurer was prejudiced when notice given after underlying lawsuit was settled). Similarly, in the instant case, plaintiff was also denied the opportunity to assess the loss. The circuit court's reliance on Kerr in determining that defendant's notice to plaintiff was unreasonable is well reasoned, and we find no error here. After examining all of the relevant factors, we find defendant's notice unreasonable, which is a material breach of the policy's notice provision, precluding her from UIM coverage. See Country Mutual, 222 Ill. 2d at 317.
The Employers' Liability court was applying Connecticut law. However, Connecticut law is substantially similar to Illinois law on the issue of notice, in that it interprets policy language "as soon as practicable" as requiring notification within a reasonable time, and failure to comply voids coverage, even in the absence of prejudice. Employers' Liability, 411 F.2d at 866.
¶ 28 B. THE ILLINOIS INSURANCE CODE
¶ 29 The second issue on appeal is whether the defendant violated the Illinois Insurance Code by failing to preserve plaintiff's subrogation rights. The Illinois Insurance Code requires an insured to secure the subrogation rights of the UIM insurer prior to a settlement with the tortfeasor. 215 ILCS 5/143a-2(6-7) (West 2002). These subsections provide as follows:
"(6) Subrogation against underinsured motorists. No insurer shall exercise any right of subrogation under a policy providing additional uninsured motorist coverage against an underinsured motorist where the insurer has been provided with written notice in advance of a settlement between its insured and the underinsured motorist and the insurer fails to advance a payment to the insured, in an amount equal to the tentative settlement, within 30 days following receipt of such notice.¶ 30 Defendant argues that this statute should not apply and plaintiff's subrogation rights were nonexistent, relying on Guese v. Farmers Inter-Insurance Exchange, 238 Ill. App. 3d 196, 200 (1992). In Guese, an insured settled an injury suit against the tortfeasor for the tortfeasor's policy limits. Id. at 197. The insured notified his insurance carrier of his intent to file a UIM claim before settling with the tortfeasor, but the insured did not get consent from his insurance carrier to settle. Id. at 199. The court then goes into an analysis of the 1989 version of the Illinois Insurance Code, Ill. Rev. Stat. 1989, ch. 73, ¶ 755a-2(7), and reasons that because the carrier did not have written notice of the settlement offer, the code did not apply. Id. at 200. Guese is distinguishable for several reasons. First, the insurance carrier in Guese was provided with notice of the suit before settlement, even if it was not provided with notice of the actual settlement offer, unlike United. Second, and most importantly, the 1989 version of the Illinois Insurance Code, Ill. Rev. Stat. 1989, ch. 73, ¶ 755a-2(7), was changed in 1990 to 215 ILCS 5/143a-2(7) and the language cited above was added to clarify the legislative intent of the statute that the burden is on the insured to "preserve the rights of the insurer providing underinsured motor vehicle coverage." 215 ILCS 5/143a-2(7) (West 2002). Given the plain language of the statute and the release executed in the settlement with the tortfeasor, the defendant failed to preserve plaintiff's subrogation rights, which is a violation of Illinois Insurance Code.
(7) *** No such settlement agreement shall be concluded unless: (i) the insured has complied with all other applicable policy terms and conditions; and (ii) before the conclusion of the settlement agreement, the insured has filed suit against the underinsured
motor vehicle owner or operator and has not abandoned the suit, or settled the suit without preserving the rights of the insurer providing underinsured motor vehicle coverage in the manner described in paragraph (6) of this Section." 215 ILCS 5/143a-2(6-7) (West 2002).
¶ 31 C. SUBROGATION POLICY PROVISION
¶ 32 In addition to the subrogation requirements in the Illinois Insurance Code (215 ILCS 5/143a-2(6-7) (West 2002)), the United policy also included a subrogation provision, General Condition 14, which provides:
14. SUBROGATION, SALVAGE, AND RECOVERY: The Company shall be subrogated to all rights which the ASSURED may have against any person or other entity in respect of any claim or payment made under this policy and the ASSURED shall execute all papers required by the Company and shall cooperate with the Company to secure the Company's rights."¶ 33 First, it is important to note that the provision uses the word "shall." "Illinois courts interpret the word 'may' as permissive and 'shall' as mandatory in private contracts." Professional Executive Center v. LaSalle National Bank, 211 Ill. App. 3d 368, 379 (1991); see also In re Marriage of Ackerley, 333 Ill. App. 3d 382, 398 (2002) (finding the word "shall" a mandatory obligation in contract provisions). Thus, this provision requires cooperation from the defendant. "Any condition in the policy requiring cooperation on the part of the insured is one of great importance, and its purpose should be observed." Waste Management., Inc. v. International Surplus Lines Insurance. Co., 144 Ill. 2d 178, 191 (1991). ¶ 34 United must show it was substantially prejudiced, or actually hampered in its defense, a breach of a cooperation clause. See Piser v. State Farm Mutual Automobile Insurance Co., 405 Ill. App. 3d 341, 347 (2010). The limited discovery conducted of the alleged tortfeasor by the defendant shows there are several possible avenues for additional recovery that were never investigated. A copy of the Cincinnati Policy was never obtained, thus the $100,000 policy limit was never verified. It is unknown whether the tortfeasor had an umbrella policy available. The tortfeasor's vehicle was found to be a rental vehicle, but the rental company was never identified, thus it was never investigated whether there could possibly be additional funds available from the rental company. The method of payment for the rental vehicle was never investigated, which could have been another possible avenue for recovery as many credit card companies provide supplemental rental vehicle insurance as a benefit. These were all possible means of recovery that can never be pursued after the execution of the release with the alleged tortfeasor. We agree with the Circuit Court's finding that "[g]iven the plain language of the release executed in connection with the settlement, United has no rights of subrogation. Had Kemper timely notified united of the pending Rolfe [tortfeasor] litigation, United could have made sure that Kemper had secured its subrogation rights." ¶ 35 Defendant's notification to United after settling with the alleged tortfeasor was unreasonable given the relevant factors. The terms of the settlement deny United of any subrogation rights, in violation of both the Illinois Insurance Code, 215 ILCS 5/143a-2(6-7) (West 2002), and the policy's subrogation provision. We find this substantially prejudiced United's right to recover.
¶ 36 CONCLUSION
¶ 37 For the foregoing reasons, the order of the circuit court granting summary judgment in favor of plaintiff United National Insurance Company is affirmed. ¶ 38 Affirmed. ¶ 39 Justice Gordon, dissenting: ¶ 40 In the case at bar, the majority holds that, where an insurer provides workers' compensation coverage and other types of coverage as part of a comprehensive "package policy" and the insured provides notice of a vehicular accident in connection with a claim for workers' compensation, that notice does not also serve as notice for a claim, stemming from the same accident, under an underinsured motorist provision. This court has squarely held the opposite in a prior case. In Casualty Insurance Co. v. E.W. Corrigan Construction Co., Inc., 247 Ill. App. 3d 326, 333 (1993), this court held that, "if any insured notifies its insurer of any occurrence and references its worker's compensation policy, it should be considered notice in regards to any general liability policy the insured might have with the same insurer." Since the majority offers no explanation of why this case is no longer good law or why we should ignore this precedent, I must respectfully dissent. ¶ 41 In addition, the majority concludes that plaintiff had subrogation rights which defendant failed to preserve. Since I conclude, for the reasons explained below, that defendant provided notice and that plaintiff did not have any subrogation rights which defendant failed to preserve, I must dissent.
¶ 42 I. Notice
¶ 43 In the case at bar, the policy contained the following notice provision:
"6. OCCURRENCES OR CLAIMS: The ASSURED shall as soon as practical notify the Company through the ASSURED'S third party claim administrator of any OCCURRENCE or CLAIM or SUIT meeting the followingThere is no dispute that defendant "as soon as practical notif[ied] the Company through the Assured's third party claim administrator of" the occurrence, which was the May 22, 2002, vehicular accident that caused defendant's injuries. As plaintiff writes in its brief to this court, "[s]hortly after the accident," defendant submitted a claim to her employer for workers' compensation benefits. Since plaintiff insurance company provided the workers' compensation coverage for defendant's employer, plaintiff received notice on November 1, 2004, of the "occurrence" or accident. ¶ 44 On appeal, plaintiff insurance company argues that its policy required defendant to provide separate notice of both her "claim" under the underinsured motorist provision and her "suit" against the motorist.
criteria:
(a) the cost of which is likely to result in payment by the Company under this policy."
Defendant did not learn until much later that her employer's policy with plaintiff also provided for underinsured motorist coverage.
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¶ 45 A. Standard of Review
¶ 46 Since this issue requires us to interpret the provision of an insurance policy, our review is de novo. Supra ¶ 13 (citing Pekin Insurance Co. v. Wilso, 391 Ill. App. 3d 505, 509 (1994)). The insurer has the burden of establishing that its duties under the contract were not triggered. Pekin Insurance Co. v. Roszak/ADC, L.L.C., 402 Ill. App. 3d 1055, 1059 (2010) (discussing an insurer's duty to defend); see also American States Insurance Co. v. Action Fire Equipment, Inc., 157 Ill. App. 3d 34, 42 (1987) ("Where an insurer attempts to limit liability by excluding coverage under certain circumstances, it has the burden of showing that the claim falls within the exclusion relied upon."). While the determination of whether notice was timely provided is "typically a question of fact, it may be properly resolved as a matter of law where, as here, the material facts are not in dispute." Northbrook Property & Casualty Insurance Co., 313 Ill. App. 3d 457, 465 (2000). In addition, we must construe any ambiguity in an insurance policy against the insurer which drafted it and in favor of coverage. St. Paul Fire & Marine Insurance Co. v. Antel Corp., 387 Ill. App. 3d 158, 164 (2008) ("Insurance policies are to be liberally construed in favor of coverage, and courts will resolve any existing ambiguity against the insured.").
¶ 47 B. Our Precedent
¶ 48 The majority concludes that the insurance company lacked sufficient notice from the workers' compensation claim, because the claim did not inform the insurance company that the other motorist was underinsured or that the insured intended to file a claim under the underinsured motorist provision. This conclusion assumes that it is the insured's duty to investigate the occurrence and to inform the insurance company of any facts that it would like to know. Actually, the burden is on the insurance company to investigate an occurrence, once the company has been notified of it. Casualty Insurance, 247 Ill. App. 3d at 334. ¶ 49 This same argument was made in Casualty Insurance, 247 Ill. App. 3d at 334, and rejected with good reason. In Casualty Insurance, 247 Ill. App. 3d at 327-28, an employee was injured on the job and the employer mailed notice of the accident to its insurance company, which provided workers' compensation coverage as well as general liability coverage against any claims of bodily injury or property damage. After the employee's workers' compensation claim was settled, he filed a suit for personal injuries. Casualty Insurance, 247 Ill. App. 3d at 328. The insurance company denied the employer's request to defend the suit, on the ground that the employer had waited a year until after a suit was originally filed to notify the insurance company of a suit and, thus, notice was not timely under the policy. Casualty Insurance, 247 Ill. App. 3d at 328. ¶ 50 On appeal, the insurance company "argued that notice of a workers' compensation claim should not be deemed to satisfy the notice requirement of a general liability policy." Casualty Insurance, 247 Ill. App. 3d at 331. Although we acknowledged that "there is potentially a distinct difference between an investigation undertaken pursuant to a workers' compensation claim and an investigation started in connection with a general liability policy[,] [a]n insurer should not be able to claim prejudice *** simply because the insured referenced his workers' compensation file and not any general liability policies he may have had with the insurer when he sent notice." Casualty Insurance, 247 Ill. App. 3d at 334. We observed that "the burden of determining how to treat an insured's notice of occurrence should fall solely upon the insurer. If [the insurer] treated [the insured's] notice of occurrence solely as a workers' compensation case, the decision was solely [the insurer's] and the burden of any difference in the focus of their investigation must be with the insurance company." Casualty Insurance, 247 Ill. App. 3d at 334; see Northbrook Property & Casualty Insurance Co. v. Applied Systems, Inc., 313 Ill. App. 3d 457, 464 (2000) ("notice by an insured to its insurance company is sufficient to charge the insurer on all policies running in the insured's policy"). ¶ 51 Similarly, in the case at bar as in Casualty Insurance, 247 Ill. App. 3d at 327-28, an employee was injured on the job and notice of the accident was sent to the employer's insurance company, which provided workers' compensation coverage as well as other types of coverage. In the case at bar, as in Casualty Insurance, 247 Ill. App. 3d at 328, 331, the insurance company argued that it did not receive timely notice of a claim for a different type of coverage and that notice of a workers' compensation claim should not be deemed to satisfy the notice requirement for a different type of coverage. For the same reasons that this court already stated in Casualty Insurance, I do not find this argument persuasive. If the insurance company in the case at bar did not realize that the other motorist in the accident was underinsured, the burden was on the insurance company to investigate the occurrence and it cannot be heard to complain now about its own failure to investigate.
¶ 52 C. The Meaning of the Word "Or"
¶ 53 As noted above, the insurance policy requires the insured to notify the insurer, as soon as practical "of any occurrence or claim or suit." (Emphasis added.) On appeal, the insurer argues that this provision requires the insured to notify it of an occurrence, and then again if the insured intends to file a claim concerning this occurrence, and yet a third time if the insured intends to file a suit stemming from this same occurrence. However, as the insured observes on appeal, the word which the insurance company chose to use when it drafted this policy was "or" not "and." The company's interpretation flies, not only in the face of the plain language of its own policy, but also in the face of Illinois Supreme Court precedent. ¶ 54 In People v. Herron, 215 Ill. 2d 167, 191 (2005), our supreme court was called upon to discuss the meaning of the word "or." In Herron, the State argued that a jury instruction which told jurors that they "should consider" one factor "or" the next factor "or" the next factor meant that the jurors should consider the first factor "and" the next factor "and" the next factor. Herron, 215 Ill. 2d at 190-91, 191 n.3. Our supreme court rejected this argument, stating that the word "or" is disjunctive, and thus this part of the instruction "direct[ed]" jurors to consider only one of the factors on the list. Herron, 215 Ill. 2d at 191, 191 n.3. Similarly, in the case at bar, the word "or" is disjunctive and the policy provision, as drafted by the insurance company, directs the insured to notify the insurance company of only one of the events on the list. ¶ 55 To the extent that the provision is ambiguous, the insurance company cannot be heard now to complain about the contract that it drafted. As we stated above, the burden is on the insurer to establish that its duties under the contract were not triggered (Pekin Insurance Co., 402 Ill. App. 3d at 1059; see also American States Insurance Co., 157 Ill. App. 3d at 42), and we must construe any ambiguity in an insurance policy against the insurer which drafted it and in favor of coverage (St. Paul Fire and Marine Insurance Co., 387 Ill. App. 3d at 164). ¶ 56 In addition, there are good policy reasons for interpreting the contract with the word "or," as it is written. In the case at bar, defendant stated that she was completely unaware that her employer's insurer provided underinsured motorist coverage until after she had settled with the underinsured motorist. It makes sense then to place the burden on the insurance company, which presumably is aware of the provisions that it negotiated and drafted with the employer, to investigate fully an occurrence of which it was promptly notified.
¶ 57 III. Subrogation
¶ 58 A. The Statute
¶ 59 In the case at bar, the majority concludes that the insured violated the Illinois Insurance Code by failing to preserve the insurance company's subrogation rights. The insured argues that the statutory section at issue did not provide the insurance company with any rights that she was required to protect. I find the insured's argument persuasive. ¶ 60 The majority begins quoting subsection 7 of section 143a-2 of the Insurance Code (215 ILCS 5/143a-2(7) (West 2002)) in the middle of the subsection with a reference to "such agreement." Supra ¶ 29. The prior omitted sentences describe the specific type of agreement being discussed, and the quoted line refers back to "such" agreement. The subsection calls the type of an agreement "an underinsured motor vehicle insurance settlement agreement" and it occurs between the insurer and the insured. 215 ILCS 5/143a-2(7) (West 2002). ¶ 61 The subsection provides in relevant part:
"A judgment or settlement of the bodily injury claim in an amount less than the limits of liability of the bodily injury coverage applicable to the claim shall not preclude the claimant from making an underinsured motorist claim against the underinsured motorist coverage. Any such provision in a policy of insurance shall be inapplicable if the insured or the legal representative of the insured, and the insurer providing underinsured motor vehicle coverage agree that the insured has suffered bodily injury or death as the result of the negligent operation, maintenance, or use of an underinsured motor vehicle and, without arbitration,The last line, quoted in italics above, simply does not apply to the settlement at issue in the case at bar, which was between the insured and the alleged tortfeasor and not between the insured and the insurer, as discussed in the statutory section quoted above. Thus, I find persuasive defendant's argument that this statutory section did not confer any subrogation rights on the insurance company which she failed to protect.
agree also on the amount of damages that the insured is legally entitled to collect. The maximum amount payable pursuant to such an underinsured motor vehicle insurance settlement agreement shall not exceed the amount by which the limits of the underinsured motorist coverage exceed the limits of the bodily injury liability insurance of the owner or operator of the underinsured motor vehicle. Any such agreement shall be final as to the amount due and shall be binding upon both the insured and the underinsured motorist insurer regardless of the amount of any judgment or any settlement reached between any insured and the person or persons responsible for the accident. No such settlement agreement shall be concluded unless: (i) the insured has complied with all other applicable policy terms and conditions; and (ii) before the conclusion of the settlement agreement, the insured has filed suit against the underinsured motor vehicle owner or operator, and has not abandoned the suit, or settled the suit without preserving the rights of the insurer providing underinsured motorist coverage ***." (Emphasis added.) 215 ILCS 5/143a-2(7) (West 2002).
¶ 62 B. Policy
¶ 63 Finally, the insurance company claims on appeal that the insured violated the subrogation clause contained in the policy. This clause provides:
"14. SUBROGATION, SALVAGE, AND RECOVERY: The Company shall be subrogated to all rights which the ASSURED may have against any person or other entity in respect of any claims or payment made under this policy and the Assured shall execute all papers required by the Company and shall cooperate with the Company to secure the Company's rights."¶ 64 First, the insurance company does not allege that the insured failed to execute any papers "required by the Company." Second, the insurance company does not allege any "cooperation" that it requested which defendant failed to provide. Third, no "claims or payments" had been "made under this policy" for underinsured motorist coverage at the time of the insured's settlement with the tortfeasor, since the insured was unaware that such coverage even existed. The word "made" is in the past tense. As a result, the phrase "claims or payments made" refers to claims or payments that had already been made in the past. Thus, applying the plain words of the policy to the facts of the case shows that this clause was not violated. ¶ 65 As we stated above, the burden is on the insurer to establish that its duties under the contract were not triggered (Pekin Insurance Co., 402 Ill. App. 3d at 1059; see also American States Insurance Co., 157 Ill. App. 3d at 42), and we must construe any ambiguity in an insurance policy against the insurer which drafted it and in favor of coverage (St. Paul Fire & Marine Insurance Co., 387 Ill. App. 3d at 164). Thus, to the extent that this language in the policy is ambiguous, we must construe it against the insurance company which drafted it. ¶ 66 The majority opinion assumed, without discussion, that the insured had violated the clause and analyzed only the issue of whether the insurance company had suffered prejudice. In its brief to this court, the insurance company asserted that the insured's appellate brief conceded that she had violated the clause. This is incorrect. In the insured's brief, the first point heading about the policy's subrogation clause concerns why the insured did not violate the clause and the body of the following argument discusses the difference in language between this clause and clauses in other cases. In her next point heading, the insured argues in the alternative that, if defendant violated the clause, plaintiff was not prejudiced. After each point heading, the insured has subheadings entitled "Standard of Review" and "Argument." Under the subheading "Argument" under the second subrogation-clause point heading, defendant states, "for purposes of this argument only," plaintiff acknowledges that the settlement agreement extinguished any subrogation rights that the insurance company "may have had" against the tortfeasor. To construe this sentence as a concession that she violated the clause would require us to regard her prior point heading and argument as meaningless. The plain language of the sentence, which used the words "may have had" when describing the company's rights under the clause, is not a concession that those rights definitively existed. Thus, contrary to what the insurance company asserted and the majority seems to have assumed, the insured did not concede this point.
¶ 67 Conclusion
¶ 68 In sum, since I conclude, for the reasons explained above, that defendant provided notice and that the insurance company did not have any subrogation rights which she failed to protect, I 28 must respectfully dissent.