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Sponemann v. Country Mutual Insur. Co.





Appeal from the Circuit Court of Madison County; the Hon. John Day, Judge, presiding.


Plaintiffs appeal from the trial court's judgment in favor of the defendant insurance company in the plaintiffs' action upon the uninsured motorist clause of an automobile insurance policy issued by the defendant. The trial court found that the plaintiffs' action was barred by a two-year limitation period provision contained in the policy and that the defendant was not estopped from asserting this provision as a defense to the plaintiffs' action. Upon consideration of the record we find that the trial court's decision was contrary to the manifest weight of the evidence on the issue of the defendant's estoppel to assert the policy limitation provision. We accordingly reverse the judgment of the trial court and remand this cause for further proceedings.

On August 26, 1972, the plaintiffs, Wilbur, Frieda, Susan and Peggy Sponemann, were involved in an automobile accident in Craig County, Oklahoma, with a motorist named Joseph Hajjar. At the time of the accident the plaintiffs were insured under a policy of insurance issued by the defendant, Country Mutual Insurance Company, which provided uninsured motorist protection to the plaintiffs.

An investigation initiated by the defendant upon being notified of the accident revealed that Hajjar was uninsured at the time of the accident and that he had recently moved from New York to California to commence work. Based upon this information, the defendant's claimsman, Darrell Tripp, concluded in a report to his supervisor that the plaintiffs would be making an uninsured motorist claim to the defendant. Tripp met with the plaintiffs periodically in the months following the accident, and payments were made to the plaintiffs by the defendant under the personal injury protection provision of the policy.

In the spring of 1974 the plaintiffs retained attorney John Leskera to represent them on their claim for uninsured motorist benefits. Leskera notified the defendant of his representation on March 6, 1974, and, on March 18, 1974, claimsman Tripp contacted Leskera, offering to discuss the plaintiffs' claim when he had secured sufficient medical information. Tripp advised Leskera that he was awaiting receipt of a medical report from Dr. Semon, who had recently operated on Frieda Sponemann.

On August 20, 1974, before Dr. Semon's report was received, the plaintiffs filed suit in Oklahoma against the uninsured motorist, Joseph Hajjar. The defendant had requested the plaintiffs to file this action prior to the running of the two-year statute of limitations on the plaintiffs' cause of action in order to protect the defendant's subrogation rights against Hajjar.

Tripp received Dr. Semon's report on Frieda Sponemann on December 24, 1974, and the report was forwarded to Leskera. On January 17, 1975, Tripp met with the plaintiffs and Leskera to negotiate a settlement of the plaintiffs' uninsured motorist claim. The parties were unable to come to an agreement regarding this claim, and, on that same date, Leskera wrote to the defendant demanding arbitration of the plaintiffs' claim.

In March 1975 Victor Rochelle, claims attorney for the defendant, wrote to Leskera indicating that there was a dispute regarding the plaintiffs' coverage under the uninsured motorist provision that would have to be resolved before arbitration could proceed, as arbitration concerned only the issues of liability of the uninsured motorist and the extent of damages. The parties held further negotiations in August 1975 to discuss settlement of the coverage issue as well as the liability and damages issues.

Upon failure of the parties to reach a settlement, the defendant sought and obtained leave to intervene in the plaintiffs' suit against Hajjar in Oklahoma. In its petition in intervention, filed October 7, 1975, the defendant denied both the plaintiffs' injuries and Hajjar's negligence and alleged that plaintiff Frieda Sponemann was guilty of contributory negligence that proximately caused the accident. The defendant also filed a cross-claim against the uninsured motorist Hajjar, claiming its right to subrogation and indemnity in the event the defendant became liable to the plaintiffs under the uninsured motorist provision of their policy.

On October 23, 1975, the plaintiffs filed the instant declaratory judgment action in Illinois. In their complaint the plaintiffs alleged the applicability of the uninsured motorist provision of the policy and the defendant's refusal to arbitrate upon written demand by the plaintiffs. The defendant filed a motion to dismiss this action on the grounds that the demand to arbitrate was not timely filed within the two-year limitation period contained in the policy.

In January 1977 the defendant amended its petition in intervention in the Oklahoma action, alleging that the plaintiffs' cause of action against Hajjar was barred by the Oklahoma statute of limitations because Hajjar had not been served within two years of the accident. The amendment also stated that the plaintiffs' action against the defendant was barred by failure to comply with the provisions of the plaintiffs' policy. The Oklahoma court, in July 1977, granted summary judgment for the defendant insurance company, finding that the action against Hajjar was not timely filed in Oklahoma and that the plaintiffs' claim was not commenced within the limitation period contained in the policy.

The defendant then sought to assert the Oklahoma judgment as a bar to the plaintiffs' declaratory judgment action in Illinois. The trial court granted the defendant's motion for summary judgment based on the res judicata effect of the Oklahoma judgment. On appeal this court in Sponemann v. Country Mutual Insurance Co. (1981), 98 Ill. App.3d 352, 424 N.E.2d 416 (Sponemann I), reversed the trial court's grant of summary judgment, holding that the Oklahoma judgment did not have res judicata effect as to the defendant's policy limitation defense and that the trial court erred in dismissing the plaintiffs' action without giving them an opportunity to show that the defendant's actions estopped it from asserting the policy limitation provision as a defense.

Upon remand the plaintiffs filed a third amended complaint in which they alleged that the defendant had engaged in a course of conduct "calculated to lull the plaintiffs into a reasonable belief that their claim for uninsured motorist coverage would be settled without arbitration." Specifically, the plaintiffs asserted that the defendant had discussed settlement of the plaintiffs' claim with their attorney both before and after expiration of the policy limitation period and had further "required and induced plaintiffs to file an action against the uninsured motorist Hajjar in Oklahoma." Because of the defendant's conduct encouraging delay in the filing of their demand for arbitration, the plaintiffs contended, the defendant was equitably estopped from asserting the two-year limitation provision of the policy.

At a hearing on the complaint held July 21, 1982, the defendant's claimsman Tripp, called as an adverse witness by the plaintiffs, testified that he had met with the Sponemanns shortly after the August 1972 accident and had informed them that Hajjar, the driver of the other vehicle, was uninsured. Tripp stated that his company had known almost from the beginning that an uninsured motorist claim would be presented by the plaintiffs. He testified, however, that payments were made to the plaintiffs only under the ...

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