Appeal from the Circuit Court of McLean County; the Hon. Wayne
C. Townley, Jr., Judge, presiding.
JUSTICE TRAPP DELIVERED THE OPINION OF THE COURT:
Rehearing denied July 30, 1984.
Defendant Country Mutual Insurance Company appeals from a declaratory judgment of the circuit court of McLean County, finding that defendant failed to offer underinsured coverage to its insured in a renewal policy of automobile insurance, as required by section 143a-1 of the Illinois Insurance Code (1979 Ill. Laws 4771) and reading such coverage into plaintiff's policy by operation of law. We affirm.
The only count of plaintiff's complaint before this court upon which a declaratory judgment was entered by the trial court is count V. The allegations of count V and the agreed statement of facts submitted to the trial court by the parties discloses that on October 22, 1980, plaintiff Martha Tucker was injured in an automobile accident sustaining injuries in excess of $20,000. Plaintiff's husband, William Tucker, was the named insured on a policy of insurance issued by the defendant and plaintiff was covered under the policy as a spouse and resident of the same household. Under the policy of insurance, uninsured motorist coverage of $100,000/$300,000 was provided, but the policy did not contain coverage for underinsured protection to pay the difference between plaintiff's total damages and the liability limits of the at-fault driver's insurance policy. The driver of the at-fault vehicle was insured, but the limits of his liability were $15,000 per person, which amount was tendered to plaintiff by State Farm Insurance Company.
The statutory provision at issue provided that, effective March 3, 1980, no policy could be issued or renewed unless an offer of underinsured coverage was made to the insured to provide coverage for the difference between the injured party's damages and the liability limits of the at-fault vehicle. Section 143a-1 provides as follows:
"No policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be renewed or delivered or issued for delivery in this State with respect to any motor vehicle * * * unless underinsured motorist coverage is offered in an amount equal to the insured's uninsured motorist coverage limits." (Emphasis added.) (1979 Ill. Laws 4771.)
Plaintiff's complaint sought a declaratory judgment that defendant had failed to offer the underinsured motorist protection upon renewal of her insurance policy and that such failure to make the offer required that the coverage be included in the insured's policy by operation of law.
The method devised by defendant to offer underinsurance coverage to policyholders was to include a one-time notice to that effect with the policyholder's notice of renewal. Plaintiff received a notice of the policy renewal in August 1980, along with a letter from defendant advising her of the additional coverage. The notice sent to plaintiff from defendant provided as follows:
The Country Companies continually strive to control costs in order to avoid rate increases for our policyholders. We have been able to postpone a rate increase for several months in spite of the continuing impact of high inflation. It has, however, finally become necessary to adjust our rates upward to keep them better in line with costs. The rate increase has been kept to a minimum.
We would like you to be aware that Country Companies now offer underinsured motorist coverage. This coverage provides bodily injury protection for you if you are injured in an accident caused by another driver who does not have adequate liability insurance coverage. If you wish to add this coverage to your personal vehicle policy, please contact your Country Companies agent."
The trial court granted plaintiff's complaint for declaratory relief and implied underinsurance coverage in the policy in limits equal to her uninsured protection. In so doing, the trial court construed the word "offer" in the statute to require that the defendant meet a four-part test adopted in Hastings v. United Pacific Insurance Co. (Minn. 1982), 318 N.W.2d 849. The trial court concluded that since no meaningful offer of underinsurance coverage had been made by the defendant, underinsurance coverage would be included in the policy in an amount equal to the limits for uninsured coverage.
The deciding issue we consider is whether the defendant made a proper offer of underinsurance coverage to its insured as required by section 143a-1 of the Illinois Insurance Code. This issue is one of first impression in the reviewing courts> of this State.
Defendant takes the position that it was not the legislature's intention in using the word "offer" to require insurers to make a formal contractual offer to insureds of underinsurance protection and that "offer" was not intended to mean anything other than that the insurer should make such coverage available and offer it in a nonspecific, colloquial sense. While agreeing that the word "offer" is ambiguous, defendant argues that "offer" could not have been used in its legal sense as a requirement that the insured receive a detailed proposal to confer upon the insured a power of acceptance. Such a construction, argues defendant, would remove the underwriting function from insurers ...