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November 4, 1994


Appeal from Circuit Court of Cook County. Honorable Aaron Jaffe, Judge Presiding.

Released for Publication December 16, 1994. Petition for Leave to Appeal Denied February 1, 1995.

McNULTY, Gordon, Cousins

The opinion of the court was delivered by: Mcnulty

JUSTICE McNULTY delivered the opinion of the court:

Plaintiff Donald Hermanson appeals the dismissal of his declaratory judgment complaint seeking uninsured motorist benefits under an automobile insurance policy issued by defendant, Country Mutual Insurance Company. We affirm.

On December 16, 1989, plaintiff sustained injuries while a passenger in a car owned and operated by Elaine Hofer which was struck by an uninsured motorist. Plaintiff made a bodily injury claim under Hofer's Country Mutual insurance policy for injuries caused by Hofer's negligence and settled this claim for the policy's liability limit of $100,000, plus $10,000 in medical payments.

On May 25, 1990, plaintiff made a claim for benefits under the uninsured motorist provisions of the Country Mutual policy. On May 31, 1990, Country Mutual denied, in writing, plaintiff's claim contending that a set-off provision barred any recovery of uninsured motorist benefits in this case. Country Mutual stated in the letter that according to the policy, the limit of liability for an uninsured motorist is reduced by the total payments of bodily injury liability insurance. Country Mutual therefore explained that because Country Mutual paid plaintiff the $100,000 policy limit under bodily injury coverage and the uninsured motorist coverage is $100,000, plaintiff would not have an insured motorist claim for this accident. On July 10, 1991, and September 18, 1991, plaintiff wrote to Country Mutual contending that Hoglund v. State Farm (1991), 211 Ill. App. 3d 600, 570 N.E.2d 553, 156 Ill. Dec. 77, precluded any setoff. On September 23, 1991, Country Mutual sent plaintiff's attorney a letter distinguishing Hoglund and reiterating its denial of coverage.

The policy also provided that if Country Mutual and the insured disagreed over whether the insured is legally entitled to recover damages from the owner of an uninsured vehicle, a written demand for arbitration could be made. On October 9, 1991, plaintiff's attorney wrote a letter to Country Mutual demanding arbitration. On October 31, 1991, Country Mutual denied, in writing, plaintiff's arbitration demand. On November 7, 1991, plaintiff's attorney wrote Country Mutual asking it to reconsider. On January 16, 1992, Country Mutual wrote plaintiff's attorney, refusing to participate in arbitration. On March 19 and March 26, 1992, plaintiff's attorney wrote additional letters requesting reconsideration. On April 14, 1992, Country Mutual wrote a letter refusing to waive its setoff rights and anticipating plaintiff filing a declaratory judgment action.

On August 12, 1992, plaintiff filed this declaratory judgment action. On January 29, 1993, defendant filed a motion to dismiss claiming that plaintiff's complaint was filed beyond the two year limitations provision contained in the policy and that the policy's setoff provision precluded any recovery. On May 12, 1993, the trial court granted the motion to dismiss on the ground that the complaint was untimely. Plaintiff filed this timely appeal.

The limitations provision of the Country Mutual insurance policy at issue here provides:

"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."

Plaintiff demanded arbitration within two years after the accident. However, he failed to file his lawsuit within the two year period. We must therefore determine whether the insured must commence arbitration and file a civil suit within two years, or whether it is sufficient to simply commence arbitration within two years.

Plaintiff claims that the provision is ambiguous because it is does not make it clear to the insured that although he has commenced arbitration within the two year period, he must also commence a lawsuit under the policy within the same two years. The construction of an insurance policy presents a question of law. ( Outboard Marine Corp. v. Liberty Mutual Insurance Co. (1992), 154 Ill. 2d 90, 607 N.E.2d 1204, 180 Ill. Dec. 691.) If the words in the policy are unambiguous, a court must afford them their plain, ordinary and popular meaning. ( United States Fidelity and Guaranty Co. v. Wilkin Insulation Co. (1991), 144 Ill. 2d 64, 578 N.E.2d 926, 161 Ill. Dec. 280.) If the words in the policy are susceptible to more than one reasonable interpretation they are ambiguous and will be construed in favor of the insured and against the insurer who drafted the policy. Western Casualty and Surety Co. v. Brochu (1985), 105 Ill. 2d 486, 475 N.E.2d 872, 86 Ill. Dec. 493.

Several cases have discussed whether the provision at issue here is ambiguous. In Hannigan v. Country Mutual Insurance Co. (First Dist., First Division, May 31, 1994) 92-1751, the court found that the provision unambiguously stated that an arbitration demand must be made within two year of the accident. In Shelton v. Country Mutual Insurance (1987), 161 Ill. App. 3d 652, 515 N.E.2d 235, 113 Ill. Dec. 426, the court rejected plaintiff's claim that when the limitations provision and the policy's exhaustion clause are read together, they become ambiguous and contradict each other. In Buchalo v. Country Mutual Insurance Co. (1980), 83 Ill. App. 3d 1040, 404 N.E.2d 473, 39 Ill. Dec. 89, the court found that the provision adequately informed the insured of the required form of an arbitration demand. None of these cases, however, discuss the specific ...

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