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Vasilakis v. Safeway Insurance Co.





APPEAL from the Circuit Court of Cook County; the Hon. L. SHELDON BROWN, Judge, presiding.


Rehearing denied March 18, 1977.

Plaintiffs filed suit for specific performance to compel the defendant insurance company to comply with the arbitration clause of the uninsured motorist provisions of an automobile insurance policy issued by defendant to plaintiff Vasilakis. The trial court found that the arbitrator whom defendant had appointed was an interested party and ordered defendant to remove him and select another person to act as arbitrator. A second order was later entered estopping defendant from raising the issue of coverage. Defendant appeals only from the order finding that an estoppel has arisen.

The pertinent facts are not now in dispute. Defendant issued plaintiff Vasilakis an automobile insurance policy on July 10, 1971. The policy contained, inter alia, provisions relating to uninsured motorist coverage which allowed either defendant or the insured to demand arbitration in the event of disagreement over the resolution of a claim. *fn1

On September 25, 1971, plaintiffs, while in Vasilakis's automobile, were struck by a vehicle operated by a person named Larry Carver. On September 6, 1972, the Illinois Department of Transportation informed plaintiffs' attorney that Carver had not submitted evidence of financial responsibility. Shortly thereafter, on September 21, 1972, defendant's claims manager wrote to plaintiffs' attorney instructing plaintiffs to complete a claim form, give a statement under oath to defendant's attorneys, and submit to a physical examination by a physician designated by defendant. The letter also advised plaintiffs that defendant had chosen John Moss as its arbitrator, and concluded by stating:

"Please be further advised that the above requests and the naming of an arbitrator and any other actions taken in regard to the above captioned matter are not to be construed as a waiver of the requirement that the above named individual(s) must come within the coverage by sustaining the burden of proving (1) there was contact in the case of a hit and run accident, or (2) the adverse driver was not covered by public liability insurance at the time of the accident."

From the record, it appears that plaintiffs complied with defendant's instructions.

On June 8, 1973, plaintiffs filed suit for specific performance. The complaint, after setting forth the contract of insurance and the facts of the collision, alleged that John Moss was a member of the law firm of Parillo, Sims and Bresler, that such firm represents defendant, and that the senior partner of the firm owns a controlling interest in defendant company. The prayer for relief asked the court to compel defendant to select a disinterested arbitrator, and further requested the court to select the third arbitrator. Defendant's answer, filed July 20, 1973, denied, inter alia, that Carver was an uninsured motorist at the time of the collision with plaintiffs. This was the first instance in which defendant had specifically indicated that it was disputing coverage under its policy.

On October 24, 1973, following a hearing, the court found that John Moss was an interested party and therefore disqualified to act as an arbitrator, and ordered defendant to select another arbitrator not associated with defendant's attorneys. On January 10, 1975, the court held a rehearing and sustained its previous order.

In the fourteen month interim between the two hearings, correspondence was received from the Illinois Secretary of State's Office indicating that a hearing had been held for Larry Carver and that in accordance with the Illinois Safety Responsibility Law (Ill. Rev. Stat. 1971, ch. 95 1/2, par. 7-201 et seq.) his driving privileges were suspended.

On September 25, 1975, plaintiffs filed a petition asking the court to award costs incurred by plaintiffs in preparation for the arbitration hearing. Plaintiffs alleged that defendant falsely stated to the arbitration panel that the two parties had agreed that the question of whether the third-party tortfeasor was uninsured at the time of the accident would be submitted to them for determination, and that defendant refused to proceed to arbitration unless it was agreed that the question of coverage was so decided. Further, plaintiffs asked the court to find that defendant was estopped from denying coverage. Following a hearing, the court found that defendant was estopped.

On appeal, defendant's sole contention is that the trial court erred in making this finding.

• 1, 2 Initially, we note that the arbitration agreement between the parties governs the scope of the arbitrator's power. (Safeway Insurance Co. v. Parker (1969), 105 Ill. App.2d 208, 245 N.E.2d 75.) The issues subject to arbitration are governed by the agreement, and the parties are bound to arbitrate only those issues which by clear language they have agreed to arbitrate. (Flood v. Country Mutual Insurance Co. (1968), 41 Ill.2d 91, 242 N.E.2d 149.) In Flood, a virtually identical arbitration provision was held to be limited to the issues of the liability of the uninsured motorist to the insured and the amount thereof. Here, plaintiffs similarly were not bound to submit the question of coverage under the policy to arbitration. Rather, this question was properly one for determination by the trial court.

• 3-5 Resolution of the question of coverage, however, may in certain circumstances be made unnecessary. One may be estopped to assert rights otherwise accruing where one's voluntary conduct has been such as to have caused another party, against whom those rights are sought to be asserted, to have relied upon such conduct and to have altered his position for the worse. (Anderson v. Safeway Insurance Co. (1973), 10 Ill. App.3d 597, 295 N.E.2d 117.) Strong proof is not required to show a waiver of a policy defense, but only such facts as would make it unjust, inequitable or unconscionable to allow the defense to be interposed. (Kenilworth ...

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