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September 10, 1997


Appeal from the Circuit Court of the 10th Judicial Circuit, Tazewell County, Illinois, No. 95--L--298. Honorable Donald C. Courson, Judge, Presiding.

Released for Publication October 22, 1997.

Present - Honorable Kent Slater, Justice, Honorable Thomas J. Homer, Justice, Honorable John F. Michela, Justice. Justice Slater delivered the opinion of the court. Homer and Michela, J.j., concur.

The opinion of the court was delivered by: Slater

The Honorable Justice SLATER delivered the opinion of the court:

The plaintiff, Julie Reed, filed a two count complaint against defendant, Farmers Insurance Group. The first count sought to have a clause in her insurance policy issued by defendant declared void as against public policy, and section 143(a) of the Insurance Code mandating the presence of such clause in her policy declared unconstitutional. 215 ILCS 5/143(a) (West 1996). In the second count of her complaint, plaintiff sought to recover damages for injuries allegedly suffered as a result of the negligent driving of an uninsured motorist. Defendant moved to dismiss both counts. The trial court granted defendant's motion finding that there was no constitutional impediment to enforcing the statute and that the action was not ripe for declaratory judgment. The plaintiff appeals.

As a threshold matter, we are obliged to determine whether plaintiff's declaratory judgment action was ripe for adjudication. Section 2--701 (a) of the Code of Civil Procedure states in pertinent part, that a trial court

"may, in cases of actual controversy, make binding declarations of rights, having the force of final judgments, whether or not any consequential relief is or could be claimed, including the determination, at the instance of anyone interested in the controversy, of the construction of any statute *** and a declaration of the rights of the parties interested." 735 ILCS 5/2--701 (West 1996).

In order to be sufficient, a claim for declaratory judgment must recite in detail an actual and legal controversy between the parties and must demonstrate that the plaintiff is interested in the controversy. First of America Bank, Rockford N.A. v. Netsch, 166 Ill. 2d 165, 651 N.E.2d 1105, 209 Ill. Dec. 657 (1995). The term "actual controversy" is defined as a legitimate dispute admitting of an immediate and definite determination of the parties' rights, the resolution of which would aid in the termination of all or part of the dispute. Kerr Steamship Co. v. Chicago Title and Trust Co., 120 Ill. App. 3d 998, 458 N.E.2d 1009, 76 Ill. Dec. 355 (1983).

The purpose behind the declaratory judgment procedure was to determine and fix rights before there has been an irrevocable change in the position of the parties that will jeopardize their respective claims of right. Netsch, 166 Ill. 2d 165, 651 N.E.2d 1105, 209 Ill. Dec. 657. In order to effectuate this purpose, the declaratory judgment statute has been liberally construed and should not be restricted by unnecessarily technical interpretations. Illinois Gamefowl Breeders Association v. Block, 75 Ill. 2d 443, 389 N.E.2d 529, 27 Ill. Dec. 465 (1979).

Guided by the above principles, we find that plaintiff's complaint represents an actual controversy regarding the validity of her policy's arbitration clause, as well as the constitutionality of section 143(a) of the Insurance Code. The plaintiff has alleged that the arbitration clause in her policy and the statute requiring its presence therein are unfairly structured to favor the insurer by allowing the insurer to unilaterally reject a high arbitration award while binding an insured in the event of a low award. Plaintiff contends that the enforcement of the clause and statute in her case could act to unfairly bind her to a low arbitration award while requiring her to proceed to litigation in the event of a high award. In view of Calabrese v. State Farm Mutual Automobile Insurance Co., 187 Ill. App. 3d 349, 543 N.E.2d 215, 134 Ill. Dec. 932 (1989), which held that where a plaintiff submitted his claim to arbitration as required by the policy, his rights to challenge the constitutionality of compulsory arbitration were waived, it is clear that her suit must have been brought prior to the submission of any claim to arbitration in order to avoid a potentially irrevocable change in her position. As it was this very situation the statute was designed to address, we conclude that plaintiff's claim was ripe for declaratory judgment.

Having determined that plaintiff's claim was ripe, we now address her substantive arguments. Plaintiff first contends that the clause in her policy requiring her to submit her claim for uninsured motorist benefits to arbitration which is binding only if it does not exceed minimum financial liability limits, but is subject to trial de novo should the award exceed those limits, is unconscionable and unenforceable. Specifically, plaintiff contends that the arbitration clause was unfairly structured to favor the insurer, allowing the insurer to bind the insured to a low award and permitting the insurer to unilaterally reject a high award.

The insurance policy in question provides in pertinent part, that:

"if an insured person and we do not agree (1) whether the person is legally entitled to recover damages from the owner or operator of an uninsured motor vehicle, or (2) as to the amount of payment under this part, either that person or we may demand, in writing, that the issue be determined by arbitration. The amount of the award will be binding unless the amount of the award for damages exceeds the minimum required limits set forth in the Illinois Financial Responsibility Law. *** When we arbitrate, any decision made by any two of the arbitrators in writing shall be binding for the amount of damages not exceeding the minimum required limits for bodily injury set forth in the Illinois Financial Responsibility Law and may be entered as a judgment in a proper court. When an award exceeds those limits, either party has a right to reject the award and to a trial on all issues in a court of competent jurisdiction. This right must be exercised within sixty (60) days of the award by filing suit in a court of competent jurisdiction. In that event, costs, including attorney fees, are to be paid by the party incurring them". [Emphasis in the original].

Pointing to our decision in Herriford v. Boyles, 193 Ill. App. 3d 947, 550 N.E.2d 654, 140 Ill. Dec. 769 (1990), defendant contends that arbitration clauses like the one in question have been enforced in Illinois. We note however, that it was neither argued nor ruled upon in Herriford whether an arbitration clause was structurally unfair when it provided that only awards of $20,000 and lower were binding, while awards in excess of that amount were subject to trial de novo. Furthermore, since the plaintiffs in Herriford did not challenge the mandatory arbitration of their dispute with the insurance ...

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