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Cloninger v. Nat'l General Insur. Co.

OPINION FILED DECEMBER 20, 1985.

DUANE CLONINGER, APPELLEE,

v.

NATIONAL GENERAL INSURANCE COMPANY, APPELLANT.



Appeal from the Appellate Court for the Second District; heard in that court on appeal from the Circuit Court of Lake County, the Hon. William D. Block, Judge, presiding.

CHIEF JUSTICE CLARK DELIVERED THE OPINION OF THE COURT:

Rehearing denied February 4, 1986.

On November 20, 1981, the plaintiff, Duane Cloninger, was injured while a passenger in an automobile. Cloninger sued the driver of the automobile in which he was a passenger and received a settlement in the amount of $16,000. The settlement amount represented the limits of the driver's insurance coverage.

Cloninger claimed that his damages exceeded the settlement amount and sought to recover additional sums under his own automobile insurance policy which was issued by the defendant, National General Insurance (National). The policy covered the plaintiff's three automobiles. National denied liability, and although Cloninger's policy did not expressly provide underinsured-motorist coverage, Cloninger brought a declaratory judgment action against National in the circuit court of Lake County seeking a declaration that underinsured-motorist coverage was implied by law for each of the three vehicles insured under the policy.

The complaint alleged that the defendant failed to offer underinsured-motorist coverage to Cloninger as required under section 143a-2(3) of the Illinois Insurance Code (Ill. Rev. Stat. 1981, ch. 73, par. 755a-2(3)). The complaint further alleged that the defendant failed to adequately advise the plaintiff of his right to elect or reject such coverage.

The defendant's motion to dismiss the complaint was denied. The defendant then filed an answer to the complaint asserting that it had offered underinsured-motorist coverage to the plaintiff and that he rejected the offer. National claimed that the "Notice to Policyholders" which it had mailed to Cloninger along with a quotation-application form and a cover letter contained the offer.

The plaintiff subsequently filed a motion for summary judgment which was granted. The circuit court found that the defendant failed to make an offer of underinsured-motorist coverage to the plaintiff in a manner and form required by law and held that Cloninger had the right to accept or reject any of the defendant's optional underinsured-motorist coverages. The court ordered the defendant to submit the premium quotations for each optional coverage to the plaintiff. The plaintiff was to then tender the premium for the option he selected. The defendant failed to comply with the circuit court's order, and the court held that by implication of law the plaintiff had underinsured-motorist coverage available to him of up to $250,000 for the occurrence alleged in his complaint. The court also held that the defendant waived its right to receive additional premiums since the defendant failed to tender the premium quotations as required by the court's earlier order. The defendant appealed to the appellate court, which affirmed the circuit court in a Rule 23 order (127 Ill. App.3d 1166), and we granted the defendant's petition for leave to appeal.

We have been asked to decide the following issues: (1) whether the defendant made a proper offer of underinsured-motorist coverage to the plaintiff as required by section 143a-2(3) of the Illinois Insurance Code (Ill. Rev. Stat. 1981, ch. 73, par. 755a-2(3)); (2) if there was a proper offer, whether the plaintiff rejected that offer; and (3) whether the circuit court erred in reforming the contract.

Before we begin our analysis we note that this is a case of first impression before this court. Additionally, we note that section 143a-2(3), the section we have been asked to interpret, repealed section 143a-1 of the Illinois Insurance Code (Ill. Rev. Stat., 1979 Supp., ch. 73, par. 143a-1). Both sections had identical language mandating that insurers offer underinsured motorist coverage to their insured.

Section 143a-2(3) of the Illinois Insurance Code (Ill. Rev. Stat. 1981, ch. 73, par. 755a-2(3)) provides in pertinent part:

"Required offer of underinsured motorist coverage. Any offer made under subsection (1) of this Section shall also include an offer of underinsured motorist coverage. For the purpose of this Act the term `underinsured motor vehicle' means a motor vehicle whose ownership, maintenance or use has resulted in bodily injury or death of the insured, as defined in the policy, and for which the sum of the limits of liability under all bodily injury liability insurance policies or under bonds or other security required to be maintained under Illinois law applicable to the driver or to the person or organization legally responsible for such vehicle and applicable to the vehicle, is less than the limits for underinsured coverage provided the insured as defined in the policy at the time of the accident. The limits of liability for an insurer providing underinsured motorist coverage shall be the limits of such coverage, less those amounts actually recovered under the applicable bodily injury insurance policies, bonds or other security maintained on the underinsured motor vehicle." (Emphasis added.)

The legislature did not specifically define what it meant by the term "offer" in section 143a-2(3). "In such a case, the primary purpose of statutory construction is to ascertain the legislature's intention, not only from the language which it has used, but also from the reason and necessity for the act, the evils sought to be remedied, and the objects and purposes sought to be obtained." Lincoln National Life Insurance Co. v. McCarthy (1957), 10 Ill.2d 489, 494.

The language of section 143a-2(3) and the legislative debates surrounding its passage, as well as the passage of its predecessor, section 143a-1, indicate that the legislature recognized that soaring medical costs often left injured parties only partially compensated for their injuries. The legislature was obviously concerned with adequately compensating injured parties. As stated by Representative Epton during a House debate on what would later ...


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