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05/17/89 Standard Mutual Insurance v. Roy W. Petreikis Et Al.

May 17, 1989





538 N.E.2d 1327, 183 Ill. App. 3d 272, 131 Ill. Dec. 771 1989.IL.755

Appeal from the Circuit Court of Sangamon County; the Hon. Simon L. Friedman, Judge, presiding.


JUSTICE LUND delivered the opinion of the court. McCULLOUGH, P.J., and GREEN, J., concur.


After an evidentiary hearing, a declaratory judgment order was entered by the circuit court of Sangamon County, holding defendants Roy W. Petreikis and Mary Frances Petreikis were not entitled to the benefits or payments under the uninsured motorist coverage of Roy Petreikis' automobile insurance policy with plaintiff Standard Mutual Insurance Company, a corporation. Defendants appeal.

On May 24, 1985, Mary Frances Petreikis, the 16-year-old daughter of Roy W. Petreikis, was hit by an automobile driven by Albert M. Olson and critically injured. As a result of the accident, Mary Frances has suffered permanent injuries, resulting in medical expenses far exceeding $100,000. Olson's automobile insurance coverage provided a liability limit of $15,000 per person. Petreikis' automobile insurance policy provided for uninsured coverage up to $100,000, and the coverage would normally extend to the injuries received by Mary Frances. Basically, the trial court held that defendants could not collect under the uninsured provisions because they released claims against Olson upon the payment of the $15,000 limits of his automobile insurance policy without affording plaintiff the right to subrogate its claims against Olson for any payment it might make to defendants.

Section 143a-2 of the Illinois Insurance Code (Code) (Ill. Rev. Stat. 1987, ch. 73, par. 755a-2) provides for "Additional uninsured motorist coverage-Underinsured motorist coverage," and effective January 1, 1985 (Ill. Rev. Stat. 1985, ch. 73, par. 755a-2(7)), and all times since, section 143a-2(7) has provided:

"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." Ill. Rev. Stat. 1987, ch. 73, par. 755a-2(7).

Defendants contend, on appeal, that the trial court erred (1) in finding that section 143a -- 2(7) applied where the insurer expressly waived its subrogation rights, (2) in failing to find that the insurer was estopped from asserting its subrogation rights, (3) in finding that section 143a -- 2(7) controlled where a conflict existed between the procedure set forth in the statute and the procedure set forth in the insurance contract, and (4) in finding that the insureds did not comply with section 143a -- 2(7).

The evidence in the present action consists of the examination of Fred C. Ray, an employee of Standard Mutual Insurance Company, and 19 exhibits. Ray basically identified and explained the exhibits but also related to the timing of insurance policy endorsement changes relating to section 143a -- 2(7). At the time of the accident, May 24, 1985, there was no reference in plaintiff's automobile policy to section 143a -- 2(7). The relevant provisions in the Petreikises' policy provided:

"Underinsured Motorists Insurance is included subject to the following:

(a) The company will pay uncompensated damages which the insured or his legal representative shall be legally entitled to recover from the owner or operator of an underinsured motor vehicle because of bodily injury, caused by accident and arising out of the ownership, maintenance or use of such underinsured motor vehicle.

The Company shall not be obligated to make any payment because of bodily injury to which this insurance applies until after the limits of liability under all bodily injury liability bonds or insurance policies applicable at the time of the accident have been exhausted by payment of judgments of settlements.


In the event of any payment under this insurance, the company shall be subrogated to all the insured's rights of recovery therefor against any person or organization and the insured shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. The insured shall do nothing after loss to prejudice such rights."

Ray testified an endorsement incorporating the section 143a -- 2(7) provision had been adopted for the various policies by October 1985. The record does not include any evidence of such endorsements.

The exhibits establish the following chronology:

(1) May 24, 1985: The accident happened at 9:44 p.m., taking place on Ridgeland Avenue and 126th Place in Palos Heights, with Mary Frances and a boy, both pedestrians, being hit on the east side of the northbound lines by an automobile driven by Albert Michael Olson. A ticket was issued to Olson for violation of section 11-1003.1 of the Illinois Vehicle Code (Ill. Rev. Stat. 1985, ch. 95 1/2, par. 11-1003.1), which charges drivers to exercise due care to avoid colliding with any pedestrian.

(2) May 30, 1985: The loss report by the insurance agent to plaintiff referred only to the medical coverage portion of the Petreikises' automobile insurance policy.

(3) July 10, 1985: The insurance agent forwarded Mary Frances' medical bills to plaintiff.

(4) August 12, 1985: A negligence action was filed in the circuit court of Cook County (case No. 85 -- L -- 18662) on behalf of Mary Frances against Olson. Attorney for Mary Frances is Anthony C. Scrementi.

(5) February 17, 1986: Letter by Scrementi to plaintiff, provides as follows:

"Please be advised that we have been retained to represent Mary Petreikis, a minor, for injuries she received on or about May 24, 1985, as a pedestrian struck by a motor vehicle.

Claim is hereby being made for payment under the medical pay provision and the underinsured motorist provision of policy #FD 833695 for the two automobiles insured by her father, Roy Petreikis. A copy of the face sheet of the policy is enclosed.

Claim is also being made under the applicable provisions of the homeowner's policy, number HD 725374, of her parents' Roy and Katherine Petreikis, a copy of the face sheet is enclosed.

Also enclosed for your convenience is a copy of the police report.

If you should be in need of any additional information in order to process these claims, please ...

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