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03/09/94 WILLIE HARRELL AND LELA HARRELL v.

March 9, 1994

WILLIE HARRELL AND LELA HARRELL, PLAINTIFFS-APPELLEES,
v.
RELIABLE INSURANCE COMPANY, DEFENDANT-APPELLEE, AND SAFEWAY INSURANCE COMPANY, DEFENDANT-APPELLANT. ILLINOIS INSURANCE GUARANTY FUND, INTERVENOR-APPELLEE.



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. Honorable Anthony Scotillo, Judge Presiding.

Cerda, Tully, Rizzi

The opinion of the court was delivered by: Cerda

JUSTICE CERDA delivered the opinion of the court:

The plaintiffs, Willie Harrell and Lela Harrell, filed a declaratory judgment action on July 23, 1986, seeking to determine the amount of uninsured motorist coverage available under insurance policies issued to them by the defendants, Reliable Insurance Company (Reliable) and Safeway Insurance Company (Safeway). Reliable subsequently became insolvent and the Illinois Insurance Guaranty Fund the (Fund) was allowed to intervene in the lawsuit. The trial court then granted summary judgment in favor of the Fund, finding that Safeway was obligated to provide its policy limit of $15,000 in uninsured motorist coverage. Safeway has appealed, contending that the trial court erred in determining that Safeway, rather than the Fund, was obligated to provide the portion of coverage originally allocated to the now-insolvent Reliable. We affirm.

The Fund claims that, where the plaintiff pedestrian is injured by an uninsured motorist and the plaintiffs have two uninsured motorist insurance policies on the date of the accident and subsequent to one of the insurance companies becomes insolvent, the policy limits of the solvent insurance company must be exhausted before the assets of the Fund can be reached.

Plaintiff Willie Harrell was struck as a pedestrian by an uninsured motorist on March 31, 1985. At the time of the accident, Willie owned a vehicle insured by Reliable, and his wife Lela owned a vehicle insured by Safeway. Both policies provided uninsured motorist coverage in the amount of $15,000, and both contained identical "other insurance" clauses which stated, in pertinent part:

"If the insured has other similar insurance available to him and applicable to the accident, the damages shall be deemed not to exceed the higher of the applicable limits of liability of this insurance and such other insurance, and the company shall not be liable for a greater proportion of any loss to which this coverage applies than the limit of liability hereunder bears to the sum of the applicable limits of liability of this insurance and such other insurance."

The plaintiffs filed a complaint for declaratory judgment against Reliable and Safeway seeking a determination of the amount of uninsured motorist coverage provided under both policies. Motions for summary judgment were filed by the plaintiffs and both defendants. The court granted Reliable's motion for summary judgment, finding that pursuant to the "other insurance" clauses, Reliable and Safeway each owed the plaintiffs $7,500 in coverage. Subsequently, Reliable became insolvent and the Fund filed its petition to intervene in the lawsuit.

The trial court allowed the Fund to intervene and file a complaint for declaratory judgment. The complaint stated that Reliable had been placed into liquidation and the Fund was assuming its obligations subject to the provisions of Article XXXIV of the Illinois Insurance Code (Code). (Ill. Rev. Stat. 1991, ch. 73, par. 1065.82 et seq.) The complaint further stated that the Code requires a person bringing a claim against the Fund to first exhaust all his rights under any provision in any other insurance policy which may be applicable to the claim. (Ill. Rev. Stat. 1991, ch. 73, par. 1065.96(a).) The Fund's complaint asserted that because Reliable was insolvent, it no longer constituted "other insurance" for purposes of prorating the $15,000 uninsured motorist coverage afforded by the Safeway policy. The Fund asked the court to declare that Safeway owed the plaintiffs the full $15,000 of uninsured motorist coverage provided for in its policy and that the Fund had no obligation to provide coverage under the Reliable policy. The trial court granted the Fund's motion for summary judgment and determined that Safeway owed the plaintiffs $15,000 in coverage.

On appeal, Safeway contends that the trial court erred in determining that it rather than the Fund, was obligated to provide the $7,500 in coverage originally allocated to Reliable.

In Lucas v. Illinois Insurance Guaranty Fund (1977), 52 Ill. App. 3d 237, 239, 367 N.E.2d 469, 10 Ill. Dec. 81, this court found that "the intention of the legislature in establishing the Illinois Insurance Guaranty Fund was to protect the public from losses arising from the insolvency of Illinois insurers." All insurers transacting business in this State are required to contribute to the Fund in direct proportion to their premium income. (Ill. Rev. Stat. 1991, ch. 73, par. 1065.87-6.) Because all insurers must contribute, it is the philosophy of the Fund to have all potential claims against the Fund's assets reduced by a solvent insurer, and not the Fund, whenever possible. ( Pierre v. Davis (1988), 165 Ill. App. 3d 759, 760, 520 N.E.2d 743, 117 Ill. Dec. 392.) To this end, section 546(a) of the Code provides in pertinent part that:

"any insurer or claimant having a covered claim against the Fund shall be required first to exhaust his rights under any provision in any other insurance policy which may be applicable to the claim." Ill. Rev. Stat. 1991, ch. 73, par. 1065.96(a).

Safeway argues that the plaintiffs' rights under their policy with Safeway must be determined as of the date of the accident rather than the date Reliance became insolvent. On the date of the accident, Reliable was solvent and provided uninsured motorist coverage similar to that provided by Safeway. Therefore, under the terms of Safeway's "other insurance" clause, each company was liable for one-half of the coverage limits. According to Safeway, Reliable's subsequent insolvency does not affect the amount of coverage owed by Safeway, and the consequences of the insolvency should be borne by the Fund.

The parties agree that there seems to be no Illinois case law on the issue of allocating responsibility among collateral insurers of the same risk when one of the insurers becomes ...


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