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Norris v. National Union Fire Insurance Co. of Pittsburgh

November 16, 2001


The opinion of the court was delivered by: Justice Reid


Appeal from the Circuit Court of Cook County. Honorable John K. Madden, Judge Presiding.

This is an appeal from the grant of cross-motions for summary judgments in a declaratory judgment action. Both cross-motions were granted in part and denied in part. On appeal, the issues are: (1) whether the circuit court correctly reformed the commercial trucking policy to require that the insurer was obligated to provide uninsured motorist coverage only in the amount of the statutory minimum requirements rather than in an amount equal to the liability limits of the policy; (2) whether plaintiff's receipt of workers' compensation benefits in excess of the statutory minimum for uninsured motorist coverage served as a set-off, barring plaintiffs' uninsured motorist claim; (3) whether the exclusive remedy afforded by the Workers' Compensation Act to workers who are accidentally injured in the scope of their employment bars plaintiffs' claim for uninsured motorist coverage against the decedent's employer or its insurer; and (4) whether plaintiffs' claim for uninsured motorist coverage is barred where the commercial trucking policy specifically excludes from coverage employees who are injured during the course of employment and are covered by workers' compensation. The trial court found that the policy should be reformed to include the statutory minimum uninsured motorist coverage. Therefore, the workers' compensation set-off would bar plaintiffs' uninsured motorist claim. We reverse and remand.


Tommy J. Norris (decedent) was killed in a traffic accident on October 4, 1989. He was driving a truck owned by Jones Truck Lines, Inc., an Arkansas corporation headquartered in Springdale, Arkansas, with a fleet of approximately 3,500 trucks. The other party, Tommy E. Kidd (Kidd), was an uninsured motorist. The truck the decedent was driving was registered in Illinois and garaged in Chicago. At the time of the accident, the decedent owned an automobile insured through the Allstate Insurance Company under policy number 032911574. At the time of his death, the decedent was survived by his wife Joanne Norris, his minor son Tommy J., his adult son Thadeus and his adult daughter Nicolette. The workers' compensation insurer paid Joanne and Tommy J. over $200,000.

Thadeus and Nicolette Norris (the Norris plaintiffs) brought a declaratory judgment action against Allstate, based on the Norrises' automobile insurance policy with Allstate, seeking a declaration that Allstate was obliged to pay uninsured motorists' benefits to Tommy Norris' adult children. They allege that the adult children were not recipients of benefits under the Illinois Workers' Compensation Act (Act) (820 ILCS 305/1 et seq. (West 2000)) because the Act only applies to spouses and minor children. Allstate brought a motion for judgment on the pleadings which was sustained, the trial court holding that the benefits received under the Workers' Compensation Act were in excess of the $20,000 uninsured motorist limits in the Allstate policy and the setoff provisions contained therein. That order was not appealed, so Allstate is not a party to this appeal.

The original complaint was amended to add defendant AIG Risk Management, Inc. (AIG). By the time the second amended complaint was allowed, the trial court had authorized the substitution of the National Union Fire Insurance Company of Pittsburgh, Pennsylvania (National Union) as a defendant. National Union had issued commercial fleet general liability policy number RMCA53357-76 to Jones Truck Lines. Said policy was to be in effect from September 26, 1989, until September 26, 1990. That policy had personal injury limits of $2 million per accident but contained no uninsured motorist coverage whatsoever.

While arguing before the trial court on September 3, 1999, the Norris plaintiffs argued that the trial court should apply the liability limits of the policy, $2 million. National Union argued that it was more appropriate to apply the statutory limits of $20,000 per person and $40,000 per occurrence. The trial court, commenting that the relief sought by the Norris plaintiffs was more in the nature of a punitive sanction for National Union's failures in drafting the policy, found in favor of National Union on that issue. The trial court, in granting both motions in part and denying them in part, ordered the policy reformed to the minimum statutory limits.

National Union had previously filed a motion for summary judgment based upon the exclusivity provisions of the Workers' Compensation Act. The trial court denied that motion on September 18, 1998, but the parties requested no finding pursuant to Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)). Appeal from that order is included in National Union's cross-appeal.



The Norris plaintiffs argue that the trial court, while correct in reforming the policy, erred in limiting the reformation to the statutory minimum of $20,000 per person and $40,000 per accident. Instead, the Norris plaintiffs argue the correct reformation was to the bodily injury limits of $2 million. They argue that the uninsured motorist statute, by operation of law, becomes a part of every insurance contract entered into in Illinois. According to the Norris plaintiffs, the statute requires that no insurance policy should be issued or renewed unless uninsured coverage is offered that is equal to the personal injury limits. The named insured can elect to take or reject the offer of uninsured coverage in excess of the minimum statutory limits. The Norris plaintiffs argue that, where there exists an insufficient offer of uninsured motorist coverage which justifies reformation, the courts should impose the higher level, not the lower one. Plaintiffs further argue it would be unfair to require the injured party or his or her heirs to bear the burden of the fact that the insurer failed to make the proper offer. We agree.

The Norris plaintiffs next contend that any purported rejection by Jones Truck Lines of the excess uninsured motorist coverage, even a rejection that is consistent with its commonly used business practices, was invalid because the policy of insurance did not comply with the law. The Norris plaintiffs claim there is no way Jones could have consented to an insurance policy without uninsured coverage, so any purported rejection was against public policy.

National Union responds that the purpose of the uninsured motorist statute is "to place the insured policyholder in substantially the same position he would occupy if the uninsured driver had been minimally insured." Luechtefeld v. Allstate Insurance Co., 167 Ill. 2d 148, 152 (1995). Though they agree that a failure to make an offer of coverage equal to the bodily injury limits level can result in the reformation of coverage to the higher level, they argue that this does not apply when the rejection of coverage is clear and specific. National Union argues that Jones, as a sophisticated insured, had the business practice of rejecting all coverage except the minimum, choosing to be a self-insurer to the greatest extent possible. To that end, Jones has a self-insured retention of a $500,000 deductible. Jones contends that Larry May, Jones' risk manager, negotiated the policy in face-to-face negotiations. As a result of those negotiations, National Union argues that it offered Jones Truck Lines uninsured motorist coverage up to the $2 million limits of the policy and Jones Truck Lines made a knowing and intelligent rejection of that offer.

The Norris plaintiffs next contend that the Illinois Workers' Compensation Act (820 ILCS 305/1 et seq. (West 2000)) does not bar recovery under the policy. The claims at issue are not barred, as National Union suggests, by the exclusive remedy provisions of the Workers' Compensation Act, since the object of that act is to afford financial protection for employees injured at work without regard to fault and to limit the employer's liability for work injuries. Zurowska v. Berlin Industries, Inc., 282 Ill. App. 3d 540 (1996). The Norris plaintiffs argue that the inclusion of the employer's insurer in the Act does not compromise the uninsured motorist claim, since those claims are from injured persons legally entitled to recover. They argue that the intent of the statute is to place a claimant in the same position as if the tortfeasor causing the injuries had been insured. Scudella v. Illinois Farmers Insurance Co., 174 Ill. App. 3d 245 (1988). The other driver in the underlying accident, Kidd, is a complete stranger to the decedent and his employer and employee relationship with Jones Truck Lines. The Norris plaintiffs argue that they would be legally entitled to recover from Kidd, assuming they could sustain their burden of proving he was at fault. Because there is no form of immunity at work here, the Norris plaintiffs argue that National Union would not be precluded from pursuing subrogation rights against Kidd as it would against a co-employee. They argue that National Union's contractual rights are not impaired and there is no reason to preclude the Norris plaintiffs' claim for uninsured motorist benefits.

National Union responds that, since the Norris plaintiffs received workers' compensation benefits, there should be a setoff of any recovery here against those benefits. Since National Union argues the policy reformation should be limited to the statutory minimum limits, and the Norris plaintiffs have received workers' compensation benefits in excess of $200,000, recovery should be precluded as a result. National Union also argues that the policy itself, under Exclusion 3, precludes coverage for "[a]ny obligation for which the `insured' or the `insured's' insurer may be held liable under any workers' compensation, disability benefits or unemployment compensation law or any similar law." They further argue that Illinois courts have enforced the set-off of workers' compensation benefits ...

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