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09/22/87 Debra Shelton, v. Country Mutual Insurance

September 22, 1987

DEBRA SHELTON, PLAINTIFF-APPELLANT

v.

COUNTRY MUTUAL INSURANCE COMPANY, DEFENDANT-APPELLEE



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, SECOND DIVISION

515 N.E.2d 235, 161 Ill. App. 3d 652, 113 Ill. Dec. 426

Appeal from the Circuit Court of Cook County; the Hon. Charles E. Freeman, Judge, presiding. 1987.IL.1402

APPELLATE Judges:

PRESIDING JUSTICE SCARIANO delivered the opinion of the court. STAMOS and HARTMAN, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE SCARIANO

Plaintiff-appellant Debra Shelton (Shelton) brought suit against defendant-appellee Country Mutual Insurance Company (Country Mutual) seeking a declaratory judgment that she was entitled to underinsured motorist benefits pursuant to the terms of an insurance policy issued by that company. Country Mutual filed a section 2-619 (Ill. Rev. Stat. 1985, ch. 110, par. 2-619) motion to dismiss, alleging that Shelton failed to comply with that provision of the policy requiring that any legal action against it be brought "within two years after the date of the accident." The circuit court granted the motion, and Shelton appealed. The only issue on review is whether Shelton's cause of action was barred by the two-year limitations provision.

A review of the record discloses that Shelton was injured in an automobile accident on July 31, 1983. The other driver's automobile insurance policy, underwritten by State Farm Insurance Company, had a liability maximum of $25,000, which that company paid on November 19, 1984. On January 21, 1985, Country Mutual received via certified mail a "Notice of Attorney's Lien" from Shelton's attorney asserting that she had hired him to prosecute her claim for underinsured motorist benefits, that she agreed to pay him one-third of any amount that might be recovered, and that he now claimed a lien therefor. The record indicates that no further course of action against Country Mutual was pursued on Shelton's claim for underinsured coverage. Consequently, on October 7, 1985, Country Mutual denied the claim "due to the fact that the two-year statute for demand for the same has passed."

Shelton thereafter filed the instant "Complaint for Declaratory Judgment," alleging that Country Mutual issued her an automobile insurance policy containing underinsured motorist benefits with a per person limit of $50,000, which she asserted covered the injuries she incurred as a result of her accident. Country Mutual then filed its section 2 -- 619 motion to dismiss the action, alleging that Shelton failed to comply with the condition of the policy requiring the filing of a lawsuit within two years of the date of the accident. The circuit court granted the motion, and Shelton appealed.

The disputed underinsured motorist provisions of the insurance policy Country Mutual issued to Shelton read as follows:

"Agreement. . . .

We will pay only after all liability bonds or policies have been exhausted by judgments or payments. [Hereinafter referred to as the exhaustion clause.]

Conditions. . . .

7. Legal Action Against Us. No suit, action or arbitration proceedings for recovery of any claim may be brought against us until the Insured has fully complied with all the terms of this policy. Further, any suit, action or arbitration will be barred unless commenced within two years after the date of the accident." (Hereinafter referred to as the limitations clause.)

Shelton raises five arguments in support of her contention that her action was not barred by the policy's two-year limitations period: (1) a contradiction or ambiguity existed between the limitations clause and the exhaustion clause, and therefore, in the absence of a specific provision governing when suit can be brought, the 10-year statute of limitations for actions upon written contracts should have applied; (2) by suing under the insurance policy, Shelton's complaint stated a cause of action in contract to which the contract statute of limitations applied; (3) under the "discovery rule," the two-year limitations period began to run on November 19, 1984, when a settlement was negotiated with State Farm; (4) the running of the two-year limitations period was tolled by the notice of attorney's lien received by Country Mutual on January 21, 1985, and did not begin to run ...


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