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Hoel v. Crum & Forster Ins. Co.





APPEAL from the Circuit Court of Winnebago County; the Hon. WILLIAM R. NASH, Judge, presiding.


Rehearing denied September 16, 1977.

Vivian K. Hoel, deceased, was a passenger in an automobile driven by Leea Case, which was involved in a collision on December 19, 1973, with an uninsured motorist, Della Smith. Mrs. Hoel and her unborn child died as a result of injuries received in the accident. The plaintiff, Gailen R. Hoel, individually and as administrator of his wife's estate filed a complaint against the defendants Crum and Forster Insurance Company and International Insurance Company under an insurance policy issued by the defendants which named his wife and himself as insureds. Defendants answered and subsequently moved for summary judgment based on the pleadings, affidavits and the discovery deposition of Gailen R. Hoel. The trial court entered summary judgment for the defendants from which plaintiff appeals.

Count I of the complaint sought $10,000 under the uninsured motorist provision of the policy issued to the Hoels on behalf of the deceased wife and $10,000 on behalf of the unborn child. Count II was a claim for $50,000 coverage under the excess personal injury protection clause for the death of the wife and an additional $50,000 on behalf of the child claimed to be an additional insured. Count III sought damages for vexatious refusal to pay.

In a motion for summary judgment defendants alleged that the 4 1/2-month-old fetus is not an "insured" under the policy and as a result alleged that no recovery was due for its death. Defendants further alleged that William A. Siivonen, the owner of the car in which Vivian Hoel was the passenger, was insured with the American Mutual Insurance Companies (hereinafter American) and that plaintiff's claim was barred because he entered into a settlement with Leea M. Case, the driver of the Siivonen car, without consent and in violation of the subrogation, trust agreement and cooperation clauses of the defendants' policy. Plaintiff was alleged to have received the sum of $7,000 in settlement of the uninsured motorist claim in consideration for which American took a trust agreement and release in full satisfaction of all claims. It is also alleged that plaintiff individually and on behalf of the estate entered into a covenant not to sue which recited the consideration of $10 in settlement of the bodily injury claim of the estate, and that American paid the sum of $1125 under the terms and provisions of the medical payments coverage of its policy of insurance. The defendants finally alleged that they had paid out to the plaintiff $2803.87 in the form of wage continuation payments prior to the time they learned of the settlement and that they were entitled to the repayment of that sum.

Plaintiff answered the motion for summary judgment and attached supporting affidavits. Plaintiff alleged that American's insurance had $10,000/$20,000 limits and that American had exhausted that coverage by paying a total of $20,000 to Leea Case, Gailen R. Hoel and Patricia Zimmerman, another passenger in the car. Plaintiff also alleged that the medical payments by American were for burial expenses for which no claim was being made against the defendants, and the other payments made by American were for additional loss and not a duplication of the payment made by defendants to the plaintiff. Further, it is alleged that the survivor's benefits paid by defendants were unrelated to uninsured motorist coverage and not a duplication of any other payment. Plaintiff also alleged that the exposure and liability under the excess personal injury protection clause is $50,000/$100,000 based upon no-fault for which a premium was paid separate and apart from the uninsured motorist coverage and the usual liability coverage. The answer further stated that plaintiff cooperated with defendants by pursuing the uninsured motorist coverage against American as the primary carrier.

Portions of the defendants' office files and correspondence between plaintiff's attorney and defendants were attached to the answer to the motion for summary judgment. In a letter dated January 16, 1974, plaintiff's counsel notified defendants that he represented the plaintiff, stated that he was seeking recovery against American, insurer of the automobile involved in the accident and was also seeking recovery against defendants. Defendants responded in a letter dated January 22, 1974, stating that they did not have any uninsured motorist liability on the policy because American had primary liability. The letter also noted that excess personal injury protection under coverage "L" would be applicable in this instance.

Defendants referred to subrogation rights as follows: "In the event any payment is made by this company to our insured we would have his right of subrogation and will process against the primary carrier." Thereafter defendants sent a letter to American "for the purpose of putting you * * * on notice of our subrogation rights." Plaintiff's counsel replied to defendants' letter on March 28, 1974. Counsel stated that he interpreted defendants' letter to say that no payment was due under either uninsured motorist coverage or basic personal injury protection. The letter noted that defendants had admitted liability under the excess personal injury protection coverage "L" and contended that there would be no duplication of payment under that coverage and thus suggested that there would be no subrogation difficulty. The letter finally suggested that defendants tender the limits of the policy to plaintiff and then proceed with the claim that plaintiff might have had against other parties.

On April 17, 1974, defendants began to make payments to plaintiff although it is not clear under which provision of the policy the payments were made. It further appeared that American telephoned defendants notifying them of the settlement. Defendants requested details and American provided the details in a letter dated December 2, 1974. American indicated in that letter that it desired to settle defendants' subrogation claim. Defendants stopped monthly payments in September 1974 and plaintiff's counsel wrote to defendants on October 10, 1974, seeking an explanation. In a response dated October 25, 1974, defendants requested that plaintiff return the $2803.87 and stated:

"Reviewing your correspondence indicates you were having difficulty in understanding the fact that the only portion of our policy applicable to our insured in this instance is under Coverage L, Paragraph D, the survivor's benefit, which provides for maximum of 260 weeks after date of death of the spouse figured on 85 percent of the amount earned as stipulated. The limit of $50,000 gives reference to the total amount payable under Coverage L."

In two letters following the settlement, one dated December 2, 1974, and the other dated January 24, 1975, American noted that it was amenable to settling defendants' "subrogation lien."

In interoffice correspondence dated January 8, 1974, a reserve of $29,000 was established. In a "Casualty Large Claim Summary" dated January 23, 1974, the following legend appears:


Named insured is represented by an attorney. Driver at fault deceased was uninsured. Insured['s] attorney is proceeding against uninsured motorist carrier and is looking to us for survivor's benefit and uninsured motorist coverage. Uninsured motorist coverage not stackable in Illinois. Upon verification of deceaseds wages will pay death ...

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