The opinion of the court was delivered by: Justice Burke
Appeal from the Circuit Court of Cook County. Honorable Lester D. Foreman, Judge Presiding
Defendant Assurance Company of America (Assurance) appeals from an order of the circuit court granting plaintiff Dennis Kenny's renewed motion for summary judgment and from an order vacating the trial court's prior grant of summary judgment to Assurance. On appeal, Assurance contends that the trial court erred in granting summary judgment in favor of Kenny because Kenny, by allowing entry of a dismissal order in a separate lawsuit filed by him against Gregory Burdo based upon an accident in which Burdo was driving a vehicle that rear ended a vehicle in which Kenny was a passenger and which was also the accident underlying Kenny's claim against Assurance, extinguished any subrogation rights Assurance possessed against Burdo and, therefore, Assurance was not liable for underinsured motorist benefits to Kenny. For the reasons set forth below, we affirm.
Kenny was injured on December 21, 1989, while riding in a vehicle operated by Scott Kent and owned by Bill Sullivan Pontiac, Kenny's and Kent's employer, when the vehicle was rear ended by a car driven by Burdo. Kenny's employer was insured under a policy issued by Assurance. The policy contained an uninsured motorist limit and an underinsured motorist limit of $1 million and provided that Assurance would make damage payments to the insured, but
"only after all liability bonds or policies have been exhausted by judgments or payments, unless we:
a. Have been given written notice in advance of a settlement between an 'insured' and the owner or operator of the 'underinsured motor vehicle;' and
b. Decide to advance payment to the 'insured' in an amount equal to the tentative settlement."
The policy further provided that "[a]ny judgment for damages arising out of a 'suit' brought without written notice to [Assurance was] not binding on [it]." The policy also contained an exclusion provision that the policy would not apply if "[a]ny claim [was] settled without [Assurance's] consent." Lastly, the policy provided that if the insured was entitled to recover damages from another, those rights were transferred to Assurance and that the insured "must do everything necessary to secure [Assurance's] rights and must do nothing after 'accident' or 'loss' to impair them."
On November 28, 1990, because Kenny's counsel had been advised by the State of Illinois that Burdo was uninsured, Kenny notified Assurance of his claim for uninsured benefits, and the parties agreed to arbitrate this claim. On October 16, 1991, Kenny filed a negligence action against Burdo (the Burdo case). Kenny's action was dismissed, but Kenny later refiled it. In September 1992, Kenny's counsel forwarded a demand letter to Assurance, seeking $800,000 under the policy.
In February 1994, Kenny requested a copy of the insurance policy, but never received one. In November, Kenny requested that Assurance make a settlement offer. There is no evidence in the record that Assurance responded to this request.
In June 1995, Assurance learned that Burdo was in fact insured with Allstate and had a policy with a limit of $100,000. Although Assurance offered the services of its counsel to Allstate to represent Burdo, Allstate retained its own counsel. Assurance then requested to be kept informed of any negotiations with Kenny. Thereafter, Kenny's claim against Assurance was suspended. On July 20, 1995, Kenny's counsel wrote to Assurance, recognizing its subrogation rights and asking it to take over representation of the lawsuit against Burdo. There is no evidence in the record whether Assurance responded to this letter.
On November 3, 1997, Kenny and Burdo reached a settlement in the amount of $100,000, Burdo's policy limit. On November 6, at a case management conference, Burdo's counsel had the court enter an agreed order dismissing the case with prejudice based on the parties' settlement of Kenny's claim. The order further provided that "[s]aid dismissal shall be a bar to the bringing of any action against the Defendant based on or including the claim for which this action has been brought." On November 10, Kenny signed an unlimited general release of all claims against Burdo. On November 18, Kenny's counsel wrote to Assurance with respect to the settlement, attaching a copy of the release, renewing his demand for underinsured benefits, and specifically asking Assurance whether Kenny should retain Allstate's settlement draft. There is no evidence in the record that Assurance responded to Kenny's letter.
On December 1, Burdo's counsel wrote to Assurance, advising it that Burdo had settled with Kenny and attaching a copy of the release. On December 5, Burdo's counsel faxed a copy of the release and dismissal order to Assurance. In response, Assurance wrote to Kenny on December 31, denying underinsured benefits to him based on its contention that Kenny had violated the terms of the insurance policy by failing to advise Assurance of a limits offer prior to ...