The opinion of the court was delivered by: Justice Heiple
Plaintiff Kirk Roberts appeals from a decision of the appellate court which reversed in part a declaratory judgment entered by the circuit court of Peoria County. The circuit court held that when a victim of an automobile accident is covered by two underinsured motorist policies, each issued by a different insurance company, the amount of workers' compensation benefits received by the insured for the accident may be deducted only once from the insured's total coverage under the two policies. The appellate court reversed this holding, ruling that two deductions may be taken, one by each company. The appellate court affirmed, however, the circuit court's holding that neither company may deduct the amount of social security disability payments received by the insured. 291 Ill. App. 3d 727. For the reasons that follow, we reverse the appellate court's holding regarding workers' compensation, but affirm as to social security disability.
FACTUAL AND PROCEDURAL HISTORY
Plaintiff was seriously injured in an accident while driving a truck in the course of his employment. The driver of another vehicle involved in the accident, Thomas Fortune, was insured under an automobile liability policy with limits of $50,000. Fortune's insurer paid plaintiff $50,000 pursuant to this policy. Plaintiff was also awarded $196,114.26 in workers' compensation benefits as a result of the accident. In addition, plaintiff was awarded social security disability benefits of approximately $300 per month.
At the time of the accident, plaintiff was covered by two separate insurance policies issued by defendants Chicago Motor Club Insurance Company and Northland Insurance Company. These policies provided underinsured-motorist coverage in the amounts of $300,000 and $500,000, respectively. All parties agree that Chicago Motor Club's policy was "primary" while Northland's policy was "excess," meaning that Northland was required to pay under its policy only after other applicable insurance, such as the Chicago Motor Club coverage, was exhausted. The Chicago Motor Club policy contained the following provision: "Amounts payable for damages under Under-Insured Motorists Coverage will be reduced by *** the present value of all amounts payable under any workmen's compensation, disability benefits or similar law ***." The Northland policy contained a similar provision:
"Any amount payable for damages under this [underinsured] coverage shall be reduced by all sums paid or payable under any workers' compensation, disability benefits or similar law."
In correspondence with plaintiff, Chicago Motor Club and Northland asserted that each company was entitled to "set off," or reduce, its payments to plaintiff by the amount of workers' compensation and social security disability benefits awarded to plaintiff for the accident. Plaintiff thereupon filed a declaratory judgment action in the circuit court of Peoria County to determine whether defendants could legally claim the workers' compensation and social security disability setoffs. Plaintiff alleged in his complaint that his damages exceeded $1 million. The circuit court concluded that it was impermissible for both insurance companies to apply setoffs for the full amount of plaintiff's workers' compensation benefits. The court reasoned that because plaintiff received only one workers' compensation payment, only one setoff in the amount of that payment should be allowed. The court ruled that to enforce the literal language of each policy by applying two setoffs would create an unfair windfall for the insurers in violation of public policy.
The circuit court further held that the single setoff for workers' compensation benefits should be applied first to payments made to plaintiff by the primary insurance carrier, Chicago Motor Club. Because the amount of the workers' compensation setoff was less than the amount of plaintiff's coverage under the Chicago Motor Club policy, the circuit court ruled that the entire setoff should be applied to Chicago Motor Club, and none of it to Northland.
Finally, the circuit court ruled that no setoff would be allowed by either insurer for social security disability payments received by plaintiff, citing Pearson v. State Farm Mutual Automobile Insurance Co., 109 Ill. App. 3d 649 (1982).
The appellate court reversed the circuit court's judgment with regard to the workers' compensation setoff. The appellate court held that because the Chicago Motor Club and Northland insurance policies were separate, the setoff provisions in each should be applied separately. The court acknowledged that if, instead of purchasing one $300,000 policy and one $500,000 policy, plaintiff had instead purchased a single $800,000 policy, only a single setoff would apply. Nevertheless, the court held that because it knew of no Illinois law requiring setoffs to be applied to primary carriers only or multiple policies to be treated as one combined policy, each defendant was entitled to enforce the terms of its own policy by deducting the full amount of the workers' compensation benefits from plaintiff's coverage under each policy.
The appellate court affirmed, however, the circuit court's ruling that no setoff is allowed for social security disability benefits. The appellate court noted that, while a recipient of workers' compensation is required to reimburse the workers' compensation carrier for any amounts recovered from a tortfeasor, no such reimbursement is required in the case of social security benefits. Consequently, the court concluded, a setoff by the underinsured carrier for social security disability benefits received by the plaintiff would be unjustified. We allowed plaintiff's petition for leave to appeal the appellate court's holding regarding the workers' compensation setoff. 166 Ill. 2d R. 315. In addition, defendants have requested cross-relief reversing the appellate court's holding regarding the social security disability setoff. 166 Ill. 2d R. 315.