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Liberty Mutual Ins. Co. v. Morgan

OPINION FILED JUNE 19, 1985.

LIBERTY MUTUAL INSURANCE COMPANY, PLAINTIFF-APPELLEE,

v.

LORENZO MORGAN, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County; the Hon. James C. Murray, Judge, presiding.

JUSTICE MCGILLICUDDY DELIVERED THE OPINION OF THE COURT:

Following a dispute over the amount of uninsured motorist coverage available under his automobile liability policy, the defendant, Lorenzo Morgan (Morgan), filed a demand for arbitration with the American Arbitration Association. Subsequently, the plaintiff, Liberty Mutual Insurance Company (Liberty), filed an action in the circuit court of Cook County, seeking a stay of the arbitration proceedings and a declaratory judgment as to the amount of uninsured motorist coverage available under Morgan's policy. The trial court granted Liberty's motion for summary judgment. The defendant appeals.

The issues presented for review are: (1) whether Liberty's failure timely to inform Morgan that an amendment to the Illinois Insurance Code entitled him to increased uninsured motorist coverage was a violation of its fiduciary duty and of sections 143a and 143a-1 of the Illinois Insurance Code (Ill. Rev. Stat., 1979 Supp., ch. 73, pars. 755a, 755a-1); *fn1 (2) whether the trial court erred in granting Liberty's motion for summary judgment based on a finding that Morgan's uninsured motorist coverage was $50,000; (3) whether Morgan's policy was ambiguous, thus requiring resolution of the ambiguity in his favor; (4) whether the issuance of Endorsement 07 Corrected constituted an admission by Liberty that its Endorsement 07 provided Morgan with uninsured motorist coverage of $300,000; (5) whether the trial court erred in refusing to submit the coverage question to arbitration; (6) whether Liberty by its actions consented to uninsured motorist coverage of $300,000 for Morgan; and (7) whether the trial court improperly dismissed Morgan's counterclaim based on res judicata.

On March 10, 1979, Morgan purchased an automobile liability insurance policy from Liberty. He renewed the policy on March 10, 1980, retaining bodily injury liability coverage of $50,000 per occurrence and uninsured motorist coverage of $10,000 per person/$20,000 per accident. On July 9, 1980, an automobile driven by an uninsured motorist struck and injured Morgan as he jogged in Jackson Park in Chicago.

Sections 143a and 143a-1 of the Illinois Insurance Code provided that effective March 1, 1980, insurance companies were required to offer coverage for uninsured motorists in an amount at least equal to coverage for bodily injury liability in automobile liability policies. (Ill. Rev. Stat., 1979 Supp., ch. 73, pars. 755a, 755a-1.) Accordingly, Liberty sent a form letter to Morgan on November 14, 1980, offering increased uninsured motorist coverage up to the bodily injury limit of his policy. Enclosed with the letter was a form directing the policyholder to indicate the amount of uninsured motorist coverage he desired. Four choices were offered: $15,000 per person/$20,000 per accident; $25,000/$50,000; $50,000/$100,000; and $100,000/$300,000. Printed directly below the list was the following: "NOTE: Your Uninsured Limit may not exceed your Bodily Injury Limit of Liability." The letter gave the option of making the increased coverage effective prospectively, or retroactive to any date on or after March 1, 1980.

Upon receipt of the form letter, on November 21, 1980, Morgan telephoned Liberty's sales office and spoke with Sally Ann Troppe. According to affidavits attached to his motion for summary judgment and his reply to Liberty's response thereto, Morgan instructed Troppe to increase his uninsured motorist limit to the maximum amount possible. The affidavits stated that Troppe agreed to increase Morgan's uninsured motorist limit to $300,000, effective March 1, 1980, and his bodily injury liability limit to $300,000, effective November 21, 1980. However, the record indicates that at 11:30 a.m. on November 21, 1980, Troppe completed and signed a form to amend Morgan's policy, writing only: "Increased Liability to $300,000." There was no reference to uninsured motorist coverage.

On January 6, 1981, Liberty issued Itemized Change Endorsement 07, which indicated that Morgan's uninsured motorist coverage was retroactively increased from March 1 to November 22, 1980; however, no amount was designated. Several days later, Itemized Change Endorsement 07 Corrected was issued, explaining that the retroactive uninsured motorist coverage increase was to $50,000/$100,000 from March 1, 1980, to November 22, 1980.

On March 3, 1981, Morgan filed a demand for arbitration with the American Arbitration Association, claiming that his uninsured motorist limits were $300,000 under the policy. On December 4, 1981, Liberty filed an action for declaratory judgment. On December 10, 1981, Liberty filed an amended complaint for declaratory judgment. The amended complaint sought an order staying the arbitration proceedings and declaring that uninsured motorist limits of $50,000/$100,000 applied to Morgan's accident.

On December 11, 1981, Morgan filed a motion to compel arbitration of the dispute over his uninsured motorist limits. The trial court denied the motion on December 17, 1981.

On January 21, 1982, Liberty filed a motion for summary judgment. Morgan filed a response thereto and a cross-motion for summary judgment on February 17, 1982.

On February 22, 1982, arbitrator Sheldon C. Garber issued the following finding:

"At the hearing, the parties were requested to submit a copy of the policy for the purpose of determining what the policy limits were. However, I am unable to determine what the policy limit is. Only the Court can determine Coverage therefore, I AWARD as follows: LIBERTY MUTUAL INSURANCE COMPANY shall pay to LORENZO MORGAN the sum of THREE HUNDRED THOUSAND DOLLARS ($300,000.00). If the Amount of the policy limits are [sic] less than the above sum, then I AWARD the policy limits."

On June 18, 1982, the trial court granted Liberty's motion for summary judgment and ruled that on July 9, 1980, the policy provided uninsured motorist coverage of $50,000. The trial court denied Morgan's motion for summary judgment.

On June 25, 1982, Morgan filed a motion to reconsider and vacate the order granting summary judgment to Liberty. He also filed a motion for leave to file a counterclaim, asserting that "a counterclaim would properly frame the issues and delineate the respective legal arguments raised by Morgan." The trial court granted such leave, and Morgan filed his counterclaim on June 29, 1982. On July 7, 1982, Liberty filed a motion to strike and dismiss the counterclaim. The trial court vacated its June 18, 1982, order of summary judgment in favor of Liberty. On November 5, 1982, the trial court granted Liberty's motion to strike and dismiss Morgan's counterclaim, denied Morgan's motion for summary judgment, entered a final ...


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