Appeal from the Circuit Court of Cook County. Honorable Stephen A. Schiller, Judge Presiding.
Released for Publication August 5, 1997.
The Honorable Justice Burke delivered the opinion of the court. Wolfson, P.j., and Cerda, J., concur.
The opinion of the court was delivered by: Burke
JUSTICE BURKE delivered the opinion of the court:
Defendant Revere Copper and Brass Incorporated Tax Deferred Savings Plan and Trust (the Trust) appeals from an order of the circuit court reversing the determination of the Illinois Director (Director) of the Department of Insurance that the Trust was an Illinois resident for purposes of the Illinois Life and Health Insurance Guaranty Law (Guaranty Law) (215 ILCS 5/531.01 et seq. (West 1993)) and was entitled to coverage from plaintiff Illinois Life and Health Guaranty Association (Association). On appeal, the Trust contends that: (1) the issue of residency under the Guaranty Law is a question of fact and the trial court's determination that the Trust was not a resident of Illinois was against the manifest weight of the evidence, (2) alternatively, if residency is a question of law, the Director's decision was entitled to deference by the trial court; and (3) assuming arguendo that the Trust was not a resident of Illinois, the trial court erred in failing to rule whether the Association was required to determine in which other state the Trust was a resident. For the reasons set forth below, we affirm.
The Trust was created on January 1, 1985, to administer retirement benefits for the employees of Revere Copper and Brass, Inc. (Revere Copper and Brass) and related companies. The trust agreement was executed in Illinois and provided that it be construed, enforced and regulated under Illinois law.
In 1988 and 1989, the Trust entered into three guaranteed investment or group annuity contracts with Inter-American Insurance Company of Illinois (Inter-American). When the first contract was obtained, Revere Copper and Brass's activities in Illinois were carried out by Revere Ware, Inc., all of the Trust's trustees lived in Illinois, the Trust's bank account was in Illinois and the majority of the Trust's beneficiaries lived in Illinois. In late 1988, the assets of Revere Ware, Inc. were sold. In April 1989, most of the Illinois beneficiaries were "cashed out" of the Trust.
On December 23, 1991, Inter-American became insolvent and was liquidated. Pursuant to the Guaranty Law, the Association then became responsible for all contracts issued by Inter-American to persons covered by the Guaranty Law. The Guaranty Law provides that in the event of an insurer's insolvency, residents' and certain nonresidents' claims under their insurance policies are covered by the Association. The facts existing at the time of Inter-American's liquidation concerning the Trust were: (1) the Trust's three trustees lived in Florida, New Hampshire and Massachusetts; (2) there was no record of where or how the trustees communicated about the Trust; (3) the Trust did not maintain an office in any state; (4) the Trust's bank account remained in Illinois; (5) the majority of the beneficiaries were employees of Revere Graphic Products, Inc. in Massachusetts; and (6) the Trust's administrative records were kept in Pennsylvania.
On June 23, 1992, the Trust made a claim to the Association for coverage for the Inter-American contracts pursuant to the Guaranty Law. On May 25, 1994, the Association notified the Trust that coverage was denied because the Trust was not a resident of Illinois as defined in the Guaranty Law. The Trust appealed the Association's decision to the Director, who assigned the case to a hearing officer. The parties submitted briefs in which they agreed to all material facts. The parties further agreed that the Trust was a non-natural "person" as defined in the Guaranty Law and that its principal place of business controlled in determining whether it was a resident of Illinois at the time of Inter-American's insolvency. No hearing was held. The hearing officer subsequently determined that: (1) the Trust was a resident of Illinois at the time of Inter-American's insolvency for the purposes of the Guaranty Act; (2) the definition of residence was ambiguous because "courts have applied different meanings to the term 'Resident' when determining the statutory intent of the term"; and (3) while historical significance (past events and conditions) is discounted under the Guaranty Law "based on the statutes [sic] requirement that residence be determined at the time of the [insurer's] insolvency," here the insurance contracts were obtained in Illinois by an Illinois trust from an Illinois insurer and the facts existing at the time of the insolvency did not outweigh that "correlation." The Director subsequently adopted the hearing officer's findings of fact, conclusions of law and recommendations, reversed the Association's decision denying the Trust coverage and ordered that the Association provide coverage.
In November 1995, the Association filed a complaint for administrative review against the Director and the Trust, seeking reversal of the Director's order. In its brief in support of its complaint, the Association argued that the issue of residency under the Guaranty Law was a question of law and that deference need not be granted to the Director's decision. The Association further argued that the Director's conclusion that the Trust was a resident of Illinois was not supported by the evidence because the Trust's only contacts with Illinois as of December 1991, when Inter-American became insolvent, were the Inter-American contracts and the Illinois bank account. The Association also argued that it was not "necessary or appropriate" for the trial court to determine in which other state the Trust was a resident because the court's decision would not be binding on any other state's guaranty association.
The Director filed his answer to the Association's complaint, which consisted of a certified copy of the administrative file, and requested that the trial court dismiss the complaint with prejudice.
In its response to the Association's brief in support of its complaint, the Trust argued that the Director correctly determined that it was a resident of Illinois for purposes of the Guaranty Law and that the trial court should affirm the Director's decision. While the Trust agreed that the issue of residency was a question of law, it argued that the trial court should give deference to the Director's decision on this issue. The Trust further argued that given the lack of a physical location of administrative activities by the Trust on the date of Inter-American's insolvency, the Director appropriately considered other factors, including the prior location of the Trust's activities, i.e., Illinois. Alternatively, the Trust argued that if the Trust's residence was found not to be in Illinois, the trial court should rule that the Association was required by the Guaranty Law to determine the state of its residence.
In May 1996, the trial court heard arguments on the Association's complaint. The Association maintained that, pursuant to the Guaranty Law: (1) one can only be a resident of one state; (2) the place of residence of a non-natural person is its principal place of business; and (3) one must be a resident of a state at the time of the insurer's insolvency. According to the Association, these three requirements provide "focal points" of time and place for determining residency. The Association contended that the Trust was not a resident of Illinois at the time of Inter-American's insolvency and, therefore, the Trust was not entitled to coverage under the Guaranty Law. The Association also argued that if the trial court determined that the Trust was an Illinois resident based on facts existing outside of the "focal points" of time and place, the Trust could make claims against other states' guaranty associations and improperly receive double recovery. The Association lastly argued that the trial court should make its decision without deference to the Director because the Director had no special expertise in interpreting the Guaranty Law and that the Association was not required to determine the state of the Trust's residency pursuant to the Guaranty Law if the Trust was not an Illinois resident.
The Director argued that he relied on the legislative intent of the Guaranty Law in holding that the Trust was a resident of Illinois. He stated that he analyzed factors to determine which were the most significant in light of the Guaranty Law's statutory scheme and the intent of the legislature. The Director conceded that the Guaranty Law "discounted" prior events because of the statute's requirement that the residence of an insured be determined at the time of the insurer's insolvency. However, he argued that in this case the "correlation" between an Illinois trust obtaining insurance contracts from an Illinois insurer was the most significant factor. He further stated that because the statute requires a single state of residency and no other state could be established as the situs of residency from the record, the "status quo is *** Illinois and *** nothing that has been further introduced outweighs that historical evidence."
The Trust agreed with the Director that the question of where a principal place of business of an insured is located was a question of law. The Trust argued, however, that there was no single place where the business of the Trust was conducted, and further stated:
"What we were left with was the fact that the trust was created in Illinois law, under Illinois law, that our trust documents specifies application of Illinois law. The checking account is a relatively minor issue, but I think it shows that it was certainly the trust's intention that it still had some ...