United States District Court, Northern District of Illinois, E.D
February 14, 1984
CHARLENE OROLIN, PLAINTIFF,
HARTFORD ACCIDENT AND INDEMNITY COMPANY, DEFENDANT.
The opinion of the court was delivered by: Getzendanner, District Judge:
MEMORANDUM OPINION AND ORDER
This diversity action is before the court on defendant's
motion for summary judgment. For the reasons stated below, the
court grants defendant's motion.
Plaintiff Charlene Orolin alleges that the negligence of
James C. Pate, the driver of another automobile, was the
proximate cause of an automobile accident that occurred on
November 25, 1980, in which she was injured. At the time of
the collision, Orolin's vehicle was insured by defendant,
Hartford Accident and Indemnity Company ("Hartford"), and
Orolin was a named insured. Orolin admits that she did not
have underinsured motorist coverage prior to
the time of the accident (Amended Complaint for Declaratory
Judgment ¶ 15). However, state law at the time of the accident
required Hartford to offer this optional coverage.*fn1 Orolin
denies receiving this offer of underinsured motorist coverage
from Hartford and claims that she would have purchased the
maximum amount of such coverage. She further claims that
Hartford's choice of compliance with the statutory requirement
of an "offer" — namely a simple insert or "stuffer" describing
underinsured motorist coverage — did not satisfy the statute.
Hence, even had she received Hartford's stuffer, the statute
would have been violated. As a result of Hartford's failure
properly to offer such coverage, Orolin has not been fully
compensated for losses sustained in the accident. As relief,
Orolin requests that underinsured motorist coverage be read
into her policy by operation of law.
Hartford argues that it attempted to notify all insureds,
including Orolin, of the availability of underinsured motorist
coverage by enclosing an informational stuffer with each
renewal mailed between February 1, 1980 and September 3, 1981.
Hartford characterizes this attempt as commercially reasonable
and therefore claims that this procedure satisfies the
statutory requirement that it offer underinsured motorist
coverage. In addition, Hartford contends that the stuffer
substantively complied with the statute. Hence, despite
Orolin's denial of receipt of the stuffer, Hartford asserts it
complied with sections 143a and 143a-2 of the Illinois
Insurance Code and that summary judgment in its favor is
appropriate. If there is no genuine issue of a material fact,
the court can resolve the issues by applying the law to the
undisputed facts and render summary judgment.
This being a diversity case involving the interpretation of
two sections of the Illinois Insurance Code, specifically the
construction of the word "offer" in those sections, the court
must apply the law of the State of Illinois. Erie R.R. Co. v.
Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Both
parties rely on decisions from other jurisdictions that
interpret similar insurance statutes when arguing whether
Hartford's notification procedures and the language of the
stuffer comply with the pertinent provisions of the Illinois
Insurance Code. It is clear, however, that the court must look
to the decisions of the Illinois state courts to resolve the
issue before it.
However, research and the supporting memoranda indicate that
the question regarding the construction of the word "offer" in
sections 143a and 143a-2 of the Illinois Insurance Code is one
of first impression in Illinois. It is the task of a federal
court, when faced with an unsettled question of state law, to
render a decision which it believes the highest court of the
state would issue if it were faced with the same question.
Strader v. Union Hall, Inc., 486 F. Supp. 159, 161 (N.D.Ill.
1980); 1A, Pt. 2, J. Moore, Moore's Federal Practice ¶
0.309. In doing so, the federal court should consider all
the data which the highest court of the state would consider,
Huff v. White Motor Corp., 565 F.2d 104, 106 (7th Cir. 1977),
including decisions of sister states on the same issue. See
Robak v. United States, 658 F.2d 471, 475 (7th Cir. 1981).
Communication of the Offer
Hartford's obligations under the statutes must be considered
by examining the intended scope of the mandatory "offer" of
underinsured motorist coverage. Although the implicit
conclusion is that the insurer must introduce sufficient
evidence of its efforts to offer the coverage to its insureds,
see Holman v. All Nation Insurance Co., 288 N.W.2d 244 (Minn.
1980), the court thinks it untenable that the statute imposes
an affirmative obligation upon insurers to give their insureds
actual personal knowledge of the option to purchase
underinsured motorist coverage. See McCloe v. Utah Home Fire
Insurance Co., 121 Ariz. 402, 590 P.2d 941 (Ariz. App. 1978). A
requirement that the insurer establish commercially reasonable
procedures for notifying insureds of the availability of the
coverage, however, is a judicially manageable standard that
gives primary effect to the spirit, intent and purpose of the
The court must now consider whether the steps taken by
Hartford in this case sufficiently "offered" underinsured
motorist coverage within the contemplation of sections 143a
and 143a-2 of the Illinois Insurance Code. As appears from the
affidavits of several Hartford employees, five copies of each
automobile renewal policy were received in Davenport, Iowa
from Hartford, Connecticut between forty-five and thirty days
before the effective date of the renewal policy. (Affidavit of
Sandra Hurwitz, ¶ 3.) To provide notice of the optional
coverage, Hartford employees attached a "stuffer" which
explained underinsured motorist coverage to the insured's copy
of all automobile renewal policies. This stuffing procedure was
performed in the manner customarily used by Hartford to attach
or insert other material applicable to the insured's renewal
policy. In addition, one employee made periodic checks of the
assembly process and she could not remember finding a single
error during the relevant period. (Affidavit of Beverly Curtis,
Orolin counters that Hartford's files reveal such confusion
and contradictions, such as processing delays, with respect to
this particular policy, that it is reasonable to infer that
the procedure for mailing the stuffers must have failed.
However, none of these alleged incidents bears directly on the
question of whether the procedures outlined in the affidavits
for notifying Orolin of the availability of the optional
coverage were commercially reasonable or whether they were in
fact followed. Since the court has adopted an objective
standard for determining compliance with the statutory
requirement, the fact that a particular insured did not
receive a stuffer is largely irrelevant.
The court concludes, therefore, that Hartford established
commercially reasonable procedures for notifying Orolin of the
availability of underinsured motorist coverage. The stuffer
was attached to important renewal policies rather than sent in
a separate, more obscure mailing. Hartford obviously
considered the procedures trustworthy since they were also
used for mailing important renewal policies. This relatively
simple process, while undoubtedly not foolproof, is sufficient
to comply with the statutory requirement. See Jacobson v.
Illinois Farmers Insurance Co., 264 N.W.2d 804 (Minn. 1978).
Content of the Offer
Orolin also argues that Hartford's "offer" did not
substantively comply with the mandatory offer requirement of
sections 143a and 143a-2 of the Illinois Insurance Code. The
requirement that the availability of underinsured motorist
be communicated to the insured in a meaningful way is
certainly implicit within the statute. However, the manner in
which insurance companies must convey this information is not
readily apparent. Since there is no issue as to the content of
the communication used by Hartford, here, a stuffer, to notify
its insureds of the availability of underinsured motorist
coverage,*fn2 this question is a proper one for summary
One possible construction of the term "offer" is the
contract definition. Orolin argues that the "offer"
contemplates an acceptance by merely an affirmative answer and
must contain all the terms necessary for the definiteness of
a contract. (Response to Motion for Summary Judgment, page
11.) However, this construction ignores the practicalities of
the insurance field where it is understood that acceptance by
the insured is as essential as is acceptance by the insurer.
J. Appleman, Insurance Law and Practice § 171 (1981). For
example, an application for insurance is a mere offer that
creates no rights and imposes no duty on the insurer. Reynolds
v. Guarantee Reserve Life Insurance Co., 44 Ill.App.3d 764, 3
Ill.Dec. 397, 358 N.E.2d 940 (1976). Thus, it is doubtful that
the Illinois legislature intended to empower an insured with
the ability to create a contract solely by his or her
acceptance in this particular context. See League General
Insurance Co. v. Tvedt, 317 N.W.2d 40 (Minn. 1982).
In order to determine the legislative intent and purpose of
the offer provision, this court may consider a subsequent
amendment to the statute being considered. O'Connor v. A & P
Enterprises, 81 Ill.2d 260, 41 Ill.Dec. 782, 408 N.E.2d 204
(1980). In 1982 the Illinois General Assembly adopted Public
Act 82-920, section 1, which amended Illinois Insurance Code
section 143a-2 by making the inclusion of underinsured motorist
coverage mandatory with respect to policies renewed, delivered
or issued for delivery on or after July 1, 1983. Since some
states already make this coverage mandatory (Defendant's Reply
in Support of Motion for Summary Judgment, page 6), the "offer"
sections, when considered in relation to the statutory scheme
as a whole, appear to reflect a meaning consistent with
"optional" or "not mandatory."
Therefore, this court holds that the Illinois Supreme Court
would construe these statutes to require only that the offer
provide the insured with information sufficient to make an
intelligent decision. Information sufficient to make such a
decision would at a minimum apprise an insured of the
availability of underinsured motorist coverage and prompt a
reasonable insured to make further inquiry of his agent or
insurance company. This approach is consistent with the
practicalities of the insurance field and gives proper notice
to an insured.
The court is further convinced that the language of
Hartford's stuffer sufficiently offered underinsured motorist
to Orolin.*fn3 The stuffer makes the insured aware of the
limits of liability that may be purchased. It provides
examples of accidents for which coverage would be provided and
affirmatively recommends the coverage. Finally, it states that
an agent can provide information concerning coverages, cost
and choices available to an insured. This is, as matter of
law, information sufficient for an insured to make an
intelligent decision with respect to the optional
Hartford's motion for summary judgment is therefore granted.
No genuine issue of material fact exists that Hartford's
notification procedures were commercially reasonable and that
its stuffer provided Orolin with information sufficient to
constitute an "offer" under sections 143a and 143a-2 of the
Illinois Insurance Code. This memorandum opinion and order
also establishes that an award of Orolin's attorneys' fees and
costs under section 155 of the Code and a decision on any
other issues raised by the parties would be inappropriate.
It is so ordered.