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04/29/88 Charles Elliott Et Al., v. Surance Exchange of the

April 29, 1988





523 N.E.2d 1086, 169 Ill. App. 3d 702, 120 Ill. Dec. 175 1988.IL.634

Appeal from the Circuit Court of Cook County; the Hon. Thomas J. O'Brien, Judge, presiding.


JUSTICE MURRAY delivered the opinion of the court. SULLIVAN and PINCHAM, JJ., concur.


This is an appeal by plaintiffs, five members of the Elliott family, from a grant of summary judgment in favor of defendant, Inter-Insurance Exchange of the Chicago Motor Club, on one count (count I) of a three-count complaint. This cause of action arose out of

In February 1984, plaintiffs filed their three-count complaint against defendant. They sought a declaratory judgment in count I, alleging that after plaintiffs had fully complied with the terms of the insurance contract, defendant refused to settle their accident claim in response to repeated demands to do so. Plaintiffs further alleged that defendant requested them to file a lawsuit against the uninsured motorist. Plaintiffs did file suit and received default judgments in October 1983 in the aggregate of $215,000. Plaintiffs claimed that defendant refused to compensate them for the judgments as requested under the uninsurance provisions of their policy and that such refusal was a breach of contract. Plaintiffs requested the court to declare defendant liable for that portion of the judgments covered under the policy. Count II alleged bad-faith conduct by defendant for failure to give plaintiffs written consent to sue the tortfeasor and vexatious and unreasonable conduct in refusing to process their claim. Count III alleged a class action against defendant on behalf of persons similarly situated to plaintiffs.

Defendant filed a motion to strike in lieu of answer asserting, among other things, that the dispute was arbitrable pursuant to the policy's arbitration clause. The trial court ordered defendant to answer. In August 1984, defendant answered, denying knowledge that the other driver was uninsured and asserting affirmative defenses, including a policy clause that required written consent by the insurer to any lawsuit against a tortfeasor by the insured before the insurer could be bound by any resulting judgment. The arbitration clause of the policy was also asserted as a defense. That clause provided that if the insurer and insured do not agree concerning the claimant's legal entitlement to damages or to the amount thereof, either party may make written demand for arbitration and the dispute shall then be settled by arbitration in accordance with the rules of the American Arbitration Association. Defendant also filed a two-count counterclaim for a declaratory judgment asserting that the tortfeasor was not an uninsured motorist, and also that plaintiffs breached the insurance contract. As part of their response to defendant's counterclaim, plaintiffs set forth the affirmative defenses of laches and estoppel.

After the subsequent filing of many motions and pleadings, defendant filed a demand for arbitration in February 1985, requesting resolution of the disputes over liability and the alleged injuries and damages. In opposition to the motion, plaintiffs argued that the issues of liability and damages had already been determined by the judgments and that, in any event, defendant had waived arbitration. In July 1985, the trial court granted plaintiffs' motion to stay arbitration. After the demand for arbitration, plaintiffs filed a complaint in the United States District Court under the Racketeering Influenced and Corrupt Organizations Act (18 U.S.C. § 1961 et seq. (1984)) containing many of the same allegations as those in the complaint in the present case. (Elliott v. Chicago Motor Club (N.D. Ill. May 2, 1986), No. 85C -- 03180 (memorandum opinion), aff'd on other grounds (7th Cir. 1986), 809 F.2d 347.) In May 1986, the district court dismissed the complaint with prejudice.

In the present case, cross-motions for summary judgment were filed and a hearing was held in October 1986. At the hearing, the trial court noted that the question of whether the tortfeasor was uninsured had not been determined, and further, that the court was not concerned with the arbitration issue until after it had determined whether the provisions of the policy's judgment consent clause had been met or waived. In February 1987, the trial court issued a memorandum opinion and a subsequent order granting summary judgment in defendant's favor as to count I of plaintiffs' complaint, i.e., no breach of contract by defendant for failure to pay the judgments under the policy. The court expressly found that there was no waiver by defendant and that it was not bound by the judgments because no written consent for suit had been given. The court further stated that there was no vehicle left to plaintiffs to recover damages except by arbitration. In so holding, the court relied on the case of Feerer v. North River Insurance Co. (1981), 102 Ill. App. 3d 1042, 430 N.E.2d 36. The court also vacated that portion of an October 1986 order that had granted summary judgment for defendant on count II of its countercomplaint and transferred the matter to the law division for trial on issues raised therein, i.e., whether there was an uninsured motorist, the arbitration issue, and whether plaintiffs had breached the contract.

Plaintiffs appealed from the granting of summary judgment to defendant on count I of their complaint, which order was made final and appealable. Although this appeal only involves count I, it is necessary to discuss certain intertwined issues raised in the other counts of both parties' pleadings.

On appeal, plaintiffs contend that defendant cannot rely on the judgment consent clause because it is estopped as a result of its bad-faith conduct in refusing to give written consent. Plaintiffs also argue that defendant has waived its right to arbitration because of its wrongful and vexatious conduct.

Under Illinois law, both estoppel and waiver must be affirmatively pleaded or they are waived. (Dayan v. McDonald's Corp. (1984), 125 Ill. App. 3d 972, 466 N.E.2d 958.) A defense not properly pleaded is deemed waived although it may appear to be within the evidence. (M. Loeb Corp. v. Brychek (1981), 98 Ill. App. 3d 1122, 424 N.E.2d 1193.) Here, plaintiffs did not plead estoppel or waiver in count I of their complaint although they did raise the doctrines as affirmative defenses to defendant's counterclaim, which claim is not before this court. Moreover, defects in pleadings cannot be cured by argument. (Burnett v. Donath (1984), 127 Ill. App. 3d 131, 468 N.E.2d 501.) These rules regarding the doctrines of estoppel and waiver apply to situations in which a plaintiff raises the defenses in his pleadings as well as when they are asserted as affirmative defenses by a defendant. Payne v. Mill Race Inn (1987), 152 Ill. App. 3d 269, 504 N.E.2d 193.

However, affirmative defenses may be raised in a motion for summary judgment even though they were not raised in the pleadings. (Midwest Bank & Trust Co. v. Village of Lakewood (1983), 113 Ill. App. 3d 962, 447 N.E.2d 1358.) In the case at bar, plaintiffs did not raise the defenses in their summary judgment motion. However, it has been held that the issue of failure to plead the defenses of estoppel and waiver may be waived by the defendant's failure to object when the defenses were raised in a plaintiff's ...

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