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Feerer v. North River Insurance Co.

OPINION FILED NOVEMBER 23, 1981.

MICHAEL FEERER, PLAINTIFF-APPELLEE,

v.

NORTH RIVER INSURANCE CO., DEFENDANT-APPELLANT.



APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR L. DUNNE, Judge, presiding.

JUSTICE O'CONNOR DELIVERED THE OPINION OF THE COURT:

In 1975 defendant, North River Insurance Company (insurer), issued an automobile liability insurance policy to plaintiff, Michael Feerer (insured). The policy contained an uninsured motorist provision and a provision for medical payment and personal injury protection. On February 26, 1976, insured was involved in a collision with an uninsured motorist. The insurer paid insured for damage to his vehicle under the collision coverage of the policy. The insured and insurer were unable to reach an agreement with regard to the uninsured motorist claim. In January 1978 the insured filed a demand for arbitration under the provisions of the policy. On February 6 and again on February 13, 1978, the insurer's attorney wrote letters to the insured's attorney requesting the insured to file a suit against the uninsured motorist to protect the insurer's subrogation rights against the running of the statute of limitations. The insured filed suit, and the insurer reimbursed him for the costs incurred. Insured and insurer prepared for arbitration of their dispute. On July 25, 1979, insured's attorney advised insurer's attorney that a default had been obtained against the uninsured motorist and that a prove-up was scheduled for September 12, 1979. On September 19, 1979, a $25,000 judgment was entered for insured against the uninsured motorist. The prove-up was uncontested. The insurer refused to pay this judgment and, on February 8, 1980, the insured filed this two-count declaratory judgment suit against the insurer for a declaration of his rights under the policy as to the uninsured motorist provision and the medical payment and personal injury protection provision. Count I sought to bind the insurer conclusively on the issues of liability and damages by reason of the default judgment and asked for a finding that arbitration was no longer necessary. Count II sought payment under the basic personal injury protection and medical payment coverages.

As to count I, the insured filed a motion for judgment on the pleadings and insurer filed a cross motion for summary judgment. On June 4, 1980, insured's motion was granted and judgment entered in his favor for $10,000 and costs; the insurer's motion for summary judgment was denied. Insured filed a motion for summary judgment on count II. On September 24, 1980, this motion was granted and judgment entered for the insured for $5967 and costs. The insurer appeals.

As to count I, the insurer contends that it was not bound by the default judgment against the uninsured motorist. We agree.

The letter of February 6, 1978, from the insurer's attorney to the insured's attorney stated:

"As you are aware, the statute of limitations on this particular matter will run on February 26, 1978. The insurance contract obligates the insured to protect the subrogation rights of the insurance company. Would you kindly advise me if a lawsuit has been filed against the uninsured motorist and if so, would you further advise me as to the court number of that suit. If, on the other hand, a lawsuit has not been filed, we would ask you at this time to prepare and timely file a lawsuit so as to protect the subrogation rights, if any, of the insurance company. Your costs in doing so will be reimbursed by the insurance company or, in the alternative, we will be happy to advance the costs to you prior to your filing the suit.

If you have any questions in this regard, please feel free to contact the undersigned.

Thank you very much for your anticipated cooperation."

This was followed by the letter of February 13, 1978, which stated:

"Pursuant to our phone conversation of February 7, 1978, you were to file a lawsuit in order to protect the subrogation rights of the insurance company. As I mentioned to you, the insurance company will reimburse you for the filing costs.

As the statute of limitations runs as of February 26, 1978, we ask that you do this immediately. As soon as the lawsuit has been filed we would appreciate a copy of the complaint which bears the court number.

Thank you for your cooperation in this matter."

In granting judgment on the pleadings as to count I, the trial court found that the above letters requesting the insured to file suit against the uninsured motorist to toll the statute of limitations to protect the insurer's subrogation rights constituted, under the following provision of the uninsured motorist coverage, consent to be bound by the default judgment:

"No judgment against any person or organization alleged to be legally responsible for the bodily injury shall be conclusive as between the insured and the company, of the issues of liability of such person or organization or of the amount of damages to which the insured is legally entitled unless such judgment is entered ...


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