APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIFTH DIVISION
513 N.E.2d 50, 159 Ill. App. 3d 1035, 111 Ill. Dec. 804 1987.IL.1182
Appeal from the Circuit Court of Cook County; the Hon. Charles E. Freeman, Judge, presiding.
JUSTICE PINCHAM delivered the opinion of the court. SULLIVAN, P.J., and MURRAY, J., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE PINCHAM
Plaintiffs Allied American Insurance Company and Coronet Insurance Company issue automobile insurance policies and are insurance companies licensed and regulated by the State of Illinois. The defendant, John E. Washburn, is the Director of Insurance of the State of Illinois. Section 143(2) of the Illinois Insurance Code (Ill. Rev. Stat. 1985, ch. 73, par. 755) empowers the Director of Insurance to prohibit the issuance of any insurance policy that "contains inconsistent, ambiguous or misleading clauses, or contains exceptions and conditions that will unreasonably or deceptively affect the risks that are purported to be assumed by the policy." Pursuant to the powers conferred by this statute, and in response to complaints from insured motorists and others, the Director of Insurance promulgated Rule 937.30 (adopted at 9 Ill. Reg. 3717 (eff. March 15, 1985)). Said rule provides in pertinent part as follows:
"No policy of automobile insurance which provides physical damage coverage on a stated amount or stated value basis shall contain a provision that the limit of liability of the insurance company will be decreased based on a schedule of depreciation from the amount stated in the policy."
On March 14, 1985, plaintiff filed a complaint for declaratory judgment in which plaintiffs sought a declaration from the court that Rule 937.30 was invalid on the ground that the Director of Insurance lacked authority to enact it. Plaintiffs alleged, inter alia, that they issued "stated value" automobile insurance policies and had done so for many years, that those policies provided for coverage on the basis of a stated value of the automobile less its depreciation and that the Director of Insurance had never directed plaintiffs not to issue such a policy.
The Director of Insurance filed a motion for summary judgment in which the Director contended that an automobile insurance policy which provided for physical damage coverage based on a stated value of the vehicle less its depreciation is inherently unreasonable and unconscionable and that plaintiffs' policies were manifestly inconsistent, misleading, and unreasonably affected the risks purportedly assumed by plaintiffs and the insurers. Therefore, the Director contended, he was authorized, indeed mandated, by sections 143(2) and 401 of the Illinois Insurance Code (Ill. Rev. Stat. 1985, ch. 73, pars. 755, 1013) to promulgate Rule 937.30, to prohibit the issuance of such policies.
Plaintiffs admitted in their cross-motion for summary judgment that the Director was authorized to prohibit the issuance of misleading, inherently unreasonable and unconscionable insurance policies. Plaintiffs urged, however, that the Director lacked authority to totally bar the issuance of all automobile insurance policies which covered physical damage based on a stated value of the vehicle less its depreciation. Plaintiffs argued that Rule 937.30 did not outlaw a misleading policy, but instead outlawed a type of insurance coverage, i.e., physical damage based on a stated value less depreciation, which the Director was powerless to bar.
The trial court held that Rule 937.30 was a proper promulgation of the Director's authority and granted the Director's motion for summary judgment. Plaintiffs appeal. The sole issue before this court on appeal is whether the Director had the authority to enact Rule 973.30, completely banning the issuance of all automobile insurance for physical damage coverage based on a stated value of the automobile less its depreciation. We reverse.
"Casualty, fire and marine. The Director shall require the filing of all policy forms issued by any company transacting . . . business . . .. . . . If the Director shall find from an examination of any such policy form . . . that it violates any provision of this Code, contains inconsistent, ambiguous or misleading clauses, or contains exceptions and conditions that will unreasonably or deceptively affect the risks that are purported to be assumed by the policy, he shall order the company or companies issuing such forms to discontinue the use of the same."
"General Powers of the Director. The Director is charged with the rights, powers and duties appertaining to the enforcement and execution of all the insurance ...