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Boyd v. Madison Mutual Insurance Co.

OPINION FILED AUGUST 14, 1986.

NORMA BOYD, PLAINTIFF-APPELLEE,

v.

MADISON MUTUAL INSURANCE COMPANY ET AL., DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of St. Clair County; the Hon. Jan V. Fiss, Judge, presiding.

JUSTICE HARRISON DELIVERED THE OPINION OF THE COURT:

This action for declaratory judgment is before the court on a permissive interlocutory appeal pursuant to Supreme Court Rule 308 (87 Ill.2d R. 308). The question of law presented for our consideration is whether section 143a-2(7) of the Illinois Insurance Code (Ill. Rev. Stat. 1985, ch. 73, par. 755a-2(7)), which became effective on January 1, 1985, applies retroactively to a claim made under an automobile insurance policy last renewed in December 1983 for damages resulting from bodily injury sustained by the insured in an accident which occurred on February 23, 1984. The pertinent facts follow.

Plaintiff, Norma Boyd, alleges that on February 23, 1984, she was riding as a passenger in an automobile driven by her husband when that automobile collided with a car driven by defendant Richard M. Muir. The collision took place at or near the intersection of Illinois State Route 157 and Illinois State Route 13 in St. Clair County. On the date of the collision, defendant Muir had in full force and effect a policy of automobile insurance issued by defendant State Farm Insurance Company (State Farm). That policy contained coverage for bodily injury claims with a limit of liability of $15,000 per person. The automobile in which plaintiff was riding was insured under an automobile liability policy issued to plaintiff by defendant Madison Mutual Insurance Company (Madison Mutual). The Madison Mutual policy, last renewed by plaintiff for a six-month period beginning December 1, 1983, contained underinsured-motorist coverage for bodily injury claims with a limit of $100,000 per person.

On October 16, 1984, plaintiff filed a negligence action against defendant Muir in the circuit court of St. Clair County seeking in excess of $15,000 in damages for the injuries she sustained in the February 23, 1984, collision. Defendant State Farm offered to settle the cause on defendant Muir's behalf by tendering to plaintiff the $15,000 limit of Muir's insurance policy, but that offer was contingent on plaintiff's executing a release of liability. Plaintiff wanted to accept the offer. She also wanted to make sure that she could obtain payment from defendant Madison Mutual pursuant to the underinsured-motorist provision of her policy for any damages she sustained in excess of the settlement amount. The problem was that her policy grants Madison Mutual rights of subrogation as a condition of such payments and requires the plaintiff do nothing to prejudice those rights. There is no dispute that execution of the release required by State Farm would have jeopardized Madison Mutual's subrogation rights in contravention of the policy's terms. Although Madison Mutual had the option of waiving its contractual subrogation rights, it expressly declined to do so. Accordingly, plaintiff could not accept State Farm's settlement offer without risking loss of the benefits of the uninsured-motorist coverage provided by her Madison Mutual policy.

Effective January 1, 1985, section 143a-2 of the Illinois Insurance Code (Ill. Rev. Stat. 1985, ch. 73, par. 755a-2) governing underinsured-motorist coverage, was amended to include the following provision:

"(7) Subrogation against underinsured motorists. No insurer shall exercise any right of subrogation under a policy providing additional uninsured motorist coverage against an underinsured motorist where the insurer has been provided with written notice in advance of a settlement between its insured and the underinsured motorist and the insurer fails to advance a payment to the insured, in an amount equal to the tentative settlement, within 30 days following receipt of such notice."

On January 20, 1985, plaintiff sent a demand letter to Madison Mutual pursuant to this provision notifying it of State Farm's settlement offer and requesting, inter alia, that Madison Mutual advance to her within 30 days a sum equivalent to the settlement offer ($15,000) in order to preserve any subrogation rights it might have. The letter further requested that Madison Mutual pay plaintiff an additional $85,000, i.e., the balance of her policy limits, in accordance with her policy's underinsured-motorist coverage. These requests were refused. On June 6, 1985, plaintiff therefore filed a complaint for declaratory judgment against defendants Madison Mutual, State Farm and Muir to obtain a determination by the court as to the parties' rights and obligations under plaintiff's policy with Madison Mutual in light of the aforementioned amendment to section 143a-2.

Although neither Muir nor State Farm opposed the relief sought by plaintiff, defendant Madison Mutual promptly moved to dismiss, arguing that plaintiff's complaint was "improper" and failed to state a cause of action. When that motion was denied, defendant Madison Mutual filed a second motion to dismiss, raising the additional argument that section 143a-2(7) of the Illinois Insurance Code (Ill. Rev. Stat. 1985, ch. 73, par. 755a-2(7)) should be applied prospectively only and is therefore inapplicable to plaintiff's claim under her Madison Mutual policy to recover payments for the bodily injuries she sustained in the February 23, 1984, collision involving defendant Muir. Madison Mutual's second motion was also denied. At Madison Mutual's request, however, the circuit court certified in writing that its orders denying Madison Mutual's motions to dismiss involved a question of law as to which there was substantial ground for difference of opinion and that an immediate appeal from those orders might materially advance the ultimate termination of the litigation. Madison Mutual then applied for leave to appeal pursuant to Supreme Court Rule 308 (87 Ill.2d R. 308). Leave was granted by this court on December 16, 1985, and the matter is now before us for review.

• 1 The question of law identified by the circuit court and presented for our consideration is, as indicated at the outset of this opinion, whether section 143a-2(7) of the Illinois Insurance Code (Ill. Rev. Stat. 1985, ch. 73, par. 755a-2(7)), applies retroactively to plaintiff's claim under her Madison Mutual policy for damages resulting from the bodily injuries she sustained in the automobile accident with defendant Muir. For the reasons which follow, we find that it does not so apply.

In the absence of express language declaring otherwise, new statutes and amendments to statutes are ordinarily given only prospective application. (Economy Fire & Casualty Co. v. Green (1985), 139 Ill. App.3d 147, 149, 487 N.E.2d 100, 102.) A reading of the amendment in question here reveals no indication that it was intended to apply other than prospectively. Plaintiff nevertheless argues that section 143a-2(7) should be given retroactive effect on the theory that it is concerned simply with the procedure which must be followed in order to protect an insurer's subrogation rights. In support of this view, plaintiff relies on Maiter v. Chicago Board of Education (1980), 82 Ill.2d 373, 390, 415 N.E.2d 1034, 1042, cert. denied (1981), 451 U.S. 921, 68 L.Ed.2d 312, 101 S.Ct. 2000, where our supreme court held:

"When a change of law merely affects the remedy or law of procedure, all rights of action will be enforceable under the new procedure, without regard to whether they accrued before or after such change of law and without regard to whether or not the action has been instituted, unless there is a saving clause as to existing litigation."

Maiter further recognized, however, that not even changes in procedure or existing remedies will be applied retroactively where a vested, constitutionally protected right will be deprived by such application. (Maiter v. Chicago Board of Education (1980), 82 Ill.2d 373, 390-91, 415 N.E.2d 1034, 1042.) We believe this to be such a case.

Maiter involved an amendment to a statute governing the procedure for selection of principals for the Chicago public school system. In determining that the amendment could be applied retroactively, the court reasoned that no vested rights would be defeated because the candidates affected had no right or entitlement to a principalship, a public office. (Maiter v. Chicago Board of Education (1980), 82 Ill.2d 373, 391, 415 N.E.2d 1034, 1042.) Here, by contrast, the statutory amendment affects the rights and obligations of plaintiff and Madison Mutual under a contractual agreement, the policy of insurance. This distinction is fundamental.

• 2, 3 Pursuant to article I, section 10, of the United States Constitution (U.S. Const., art. I, sec. 10), the legislature may not impair the obligations of contracts. (See Maiter v. Chicago Board of Education (1980), 82 Ill.2d 373, 390, 415 N.E.2d 1034, 1042; McAleer Buick-Pontiac Co. v. General Motors Corp. (1981), 95 Ill. App.3d 111, 113-14, 419 N.E.2d 608, 610.) As with any other type of contract, statutory provisions applicable to insurance policies which are in effect at the time the policy is issued or renewed are treated as part of the agreement. (Weisberg v. Royal Insurance Co. (1984), 124 Ill. App.3d 864, 868, 464 N.E.2d 1170, 1173.) Correspondingly, whatever version of the applicable statutory provisions is in force when the policy is issued or renewed determines any questions arising under that policy and is normally controlling throughout the policy's term. (Coronado v. Fireman's Fund Insurance Co. (1985), 131 Ill. App.3d 450, 453, 475 N.E.2d 1048, 1051.) Subsequent enactments will not be construed as part of policies issued or renewed prior to their effective dates. (See, e.g., Smiley v. Estate of Toney (1968), ...


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