Appeal from the Municipal Court of Chicago; the Hon. CHARLES
R. BARRETT, Judge, presiding. Judgment reversed, and cause
MR. JUSTICE BRYANT DELIVERED THE OPINION OF THE COURT.
Rehearing denied and opinion modified May 9, 1961.
The plaintiffs filed an action against the defendant insurance company to recover under their "Uninsured Motorist Insurance" endorsement for damages sustained by them as a result of an accident with an allegedly uninsured motorist. They obtained a judgment for $10,500 from the defendant insurance company and this appeal followed.
The principal questions on this appeal are: (1) whether the plaintiffs' action in reducing the claim to judgment against the allegedly uninsured motorist without first obtaining the written consent of the insurance company, as required by the endorsement to the policy, prevents their recovery on the policy, and (2) whether competent evidence was adduced at the trial to prove the uninsured status of the person allegedly liable for the injury and the amount of damages for bodily injury.
The "Family Protection Coverage", (commonly known as the Uninsured Motorist Insurance), endorsement to the insurance contract provides that the company agrees "to pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile because of . . . `bodily injury', sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured automobile; provided, for the purposes of this endorsement, determination as to whether the insured or such representative is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the insured or such representative and the Company, or, if they fail to agree (and the insured so demands), by arbitration."
An uninsured automobile is defined in the endorsement as "an automobile with respect to the ownership, maintenance or use of which there is no bodily injury liability bond or insurance policy applicable at the time of the accident with respect to any person or organization legally responsible for the use of such automobile. . ." .
Under "Conditions", the insured is required "as soon as practicable" to give to the Company a written proof of claim, under oath if required, including full particulars of the nature and extent of the injuries, treatment and other details entering into the determination of the amount payable hereunder. He is also required to submit to physical examinations by physicians selected by the Company when and as often as the Company may reasonably require and to submit to examinations under oath by any person named by the Company, and subscribe the same, as often as may be reasonably required.
It is further provided under "Conditions":
"3. Notice of Legal Action. If, before the Company makes payment of loss hereunder, the insured or his legal representative shall institute any legal action for bodily injury against any person or organization legally responsible for the use of an automobile in the accident, a copy of the summons and complaint or other process served in connection with such legal action shall be forwarded immediately to the Company by the insured or his legal representative."
"6. Arbitration. If any person making claim hereunder and the Company do not agree that such person is legally entitled to recover damages from the owner or operator of an uninsured automobile because of bodily injury to the insured, or do not agree as to the amount of payment which may be owing under this endorsement, then, upon written demand of such person, the matter or matters upon which such person and the Company do not agree shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Such person and the Company each agree to consider itself bound and to be bound by any award made by the arbitrators pursuant to this endorsement."
"9. Action Against Company. No action shall lie against the Company unless, as a condition precedent, thereto, the insured or his legal representative has fully complied with all the terms of this endorsement."
It is admitted that the policy was in full force and effect on the date of the accident, December 1, 1957. The driver of the allegedly uninsured automobile was identified in the Police Report as Howard Perkins and the owner was identified as Walter A. Smith. Plaintiffs' attorney sent letters to these individuals requesting that they inform their insurance company of the accident. Suit was filed against Perkins and Smith on December 18, 1957. On February 15th and 16th, the plaintiffs' attorney contacted Perkins and Smith, and, according to his testimony, they told him that they were not insured. The following day, plaintiffs' attorney contacted the defendant insurance company in regard to the accident and the possible coverage under his clients' uninsured motorist insurance. Mr. Koppes, an adjuster from the defendant company, contacted the plaintiffs thereafter, and several days later, the plaintiffs sent the defendant a copy of the summons and the complaint in the case of Levys v. Smith and Perkins. The parties submitted to a physical examination as requested by the defendant, and later sent their "specials" to the company. After a series of fruitless negotiations with the company, the talks broke down and Mr. Koppes, defendant's adjuster, said that he wanted the matter submitted to arbitration. Plaintiffs' attorney refused, and thereupon Mr. Koppes said that they needed the company's written consent before going to judgment against Perkins and that they wouldn't get the written consent. On December 15, 1958, the plaintiffs obtained a default judgment against Perkins and sent a notice of this to the company. The defendant now says that the plaintiffs are not covered by the endorsement because they obtained a judgment against Perkins without first obtaining the Company's written consent.
The defendant's basic premise is that proof of a right to recover and the amount recoverable may be made in an action on the contract directly against the insurance company and that no other action is necessary or relevant. We are not informed as to how this could be, for the plaintiffs have no cause of action against the company on the policy endorsement until it is first determined that they are legally entitled to recover damages from the owner or operator of an uninsured automobile. Indeed, this argument is directly contrary to the express provisions of the endorsement, which provide that "the determination as to whether the insured or such representative is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the insured or such representative and the Company, or, if they fail to agree (and the insured so demands), by arbitration."
The parties failed to agree and the plaintiffs' attorney declined to submit the dispute to arbitration. The only other recourse available was to obtain a judgment against the third party, however, the insurance endorsement required the written consent of the insurer as a condition precedent to the ascertainment of its liability by this method of enforcement. The undisputed evidence is that the defendant refused to grant its written consent unless the plaintiffs submitted the dispute to arbitration. The defendant had no right to demand arbitration for the express terms of the endorsement provide that only the insured had the option to select arbitration. To condone this improper use of the "written consent" provision would in effect force the insured to submit the entire future controversy to arbitration, and it is well established that such provisions are not valid in this state. Niagara Fire ...