with Ness' expectation, the public policy behind underinsurance, and the intended coverage, a latent ambiguity surfaces as to the phrase "in connection with that loss." In the context of this case, the phrase may be construed to mean that Chubb and Vigilant have the right to recover the underinsurance proceeds from any money recovered in connection with Ness' bodily injury. In the alternative, however, the "loss" may be limited to the loss caused by Moseley and his being underinsured. The second interpretation is reasonable given the last clause in the provision which reads "to the extent [Chubb and Vigilant] have paid for the loss." Chubb and Vigilant have paid $ 750,000 for the loss caused by Moseley. Chubb and Vigilant have not paid Ness any amount for the loss caused by Ford. Because there are at least two ways of reasonably interpreting the "Transfer of rights," such provision will be construed in favor of Ness and strictly against Chubb and Vigilant. See Gibbs, 610 N.E.2d 148.
It is a fundamental principle that parties may agree to any terms they choose in entering a contract. Nonetheless, if the contract is contrary to public policy, such agreement will not be enforced. Banes, 616 N.E.2d at 1023. The subrogation provision contained in the Release is contrary to the public policy behind underinsurance coverage. Chubb and Vigilant's exercise of their subrogation right as specified will cause Ness to be in a worse position than if Moseley purchased adequate insurance coverage. The intent of the Illinois General Assembly in enacting underinsurance motorist coverage is "to place the insured in the same position he would have occupied if the tortfeasor had carried adequate insurance." Sulser v. Country Mut. Ins. Co., 147 Ill. 2d 548, 591 N.E.2d 427, 429, 169 Ill. Dec. 254 (Ill. 1992). Thus, the subrogation provision in the Release must be limited to settlement or judgement recovered from Moseley and not Ford.
Additionally, the language employed in the Release is broader than the language used in the "Transfer of rights" provision. It is well established that parties to a contract may freely modify their agreement. A valid modification to an existing agreement must meet all the criteria necessary for a valid contract: offer, acceptance and consideration. Pankow v. WestAmerica Mortg. Co., 740 F. Supp. 1309, 1313 (N.D. Ill. 1990) (interpreting Illinois law). The subrogation clause in the Release is a modification of the subrogation clause contained in the "Transfer of rights" provision. However, Chubb and Vigilant provided no new and additional consideration to validate the modification. Therefore, the broader subrogation clause in the Release will not expand the rights of Chubb and Vigilant.
The authorities cited by Chubb and Vigilant in support of their subrogation right, Remsen and Glidden, are not persuasive. The court in Glidden adhered to the holding of Remsen, that the insurer was subrogated to the rights of the insured to any proceeds recovered from one legally responsible for the injury, without discussion of the basis or prevailing public policy reasons for following Remsen. Therefore, the court will analyze the Remsen opinion to explain the inapplicability of these two cases.
In Remsen, the insurer was able to recover the payment made to the plaintiffs under the uninsurance coverage from the settlement proceeds the plaintiffs recovered from the Dramshop defendants. The liability of the Dramshop defendants was independent from the liability of the uninsured driver. The decision of the Remsen court was consistent with the existing public policy in 1961. The court in applying the subrogation right in Remsen discussed the public policy behind the uninsurance motorist coverage. The court opined that "insurance for protection against bodily injury as a result of the wrongful acts of an uninsured motorist is of relative recent origin. The purpose is to provide some form of compensation for innocent victims of accidents." Remsen, 174 N.E.2d at 11-12 (emphasis added). Thus, the insurer's assertion of its right to reimbursement from the settlement proceeds paid by the Dramshop defendants did not violate the applicable public policy because the plaintiffs remained compensated by the initial fund provided by the insurer.
The question of law involved in Remsen is strikingly similar to the case at bar. The Remsen holding is not applicable to the instant case, however, because the current public policy behind uninsurance and underinsurance is not merely to compensate the innocent victim, but to place him in a substantially the same position he would occupy if the tortfeasor had carried adequate insurance. Hoglund, 592 N.E.2d at 1035; Banes, 616 N.E.2d at 1025-1026.
In sum, Chubb and Vigilant do not have a right of recovery or subrogation against the proceeds of any recovery Ness may obtain by settlement or judgment from Ford. Accordingly, any lien or claim of a right of recovery or subrogation by Chubb and Vigilant against such proceeds is void.
For the foregoing reasons, Ness' motion for summary judgment is granted and Chubb and Vigilant's joint motion for summary judgment is denied.
IT IS SO ORDERED.
CHARLES RONALD NORGLE, SR., Judge
United States District Court