Appeal from the Circuit Court of Cook County. Honorable Barbara A. McDonald, Judge Presiding.
The opinion of the court was delivered by: Presiding Justice South
This appeal arises from an order of the circuit court of Cook County granting plaintiff's petition to confirm an arbitration award and denying defendant's cross-motion for judgment on the pleadings.
The relevant facts are as follows: Plaintiff filed a claim with her insurance carrier, Liberty, under her underinsured motorist coverage, presumably due to an accident in which her vehicle was involved with an underinsured motorist. The record does not provide us with the details of that accident; however, that information is not necessary for the disposition of this case.
Liberty denied the claim submitted by Samek, and in accordance with the policy provisions, the claim was submitted to a three-person arbitration panel. Subsequent to a hearing, the arbitration panel granted Samek an award in the amount of $50,000. In a letter to Samek's attorney, Liberty rejected the arbitration award and made a demand for trial de novo pursuant to the arbitration provision contained within the underinsured motorists coverage section of the automobile policy at issue.
Samek then filed a petition in the circuit court of Cook County to confirm the arbitration award. It is that petition which is the subject of this appeal. Liberty filed its response and cross-motion for judgment on the pleadings, which is also the subject of this appeal. In that response/cross-motion, Liberty invoked the trial de novo provision contained in the insurance policy and argued that under the terms and conditions of that policy it had the right to demand trial de novo since the arbitration award exceeded $20,000. Furthermore, while Liberty acknowledged that Illinois case law has declared trial de novo provisions to be contrary to public policy, it pointed out that those Illinois cases were not out of the First District and that the circuit court of Cook County should decline to follow those decisions.
After a hearing the circuit court denied Liberty's cross-motion for judgment on the pleadings and granted Samek's petition to confirm the arbitration award in the amount of $50,000 on the basis that the trial de novo clause in the insurance policy was void as being contrary to public policy.
The sole issue presented for our review is whether trial de novo clauses violate public policy. While this issue has been addressed by other districts in this state, we in the First District have never been called upon to address it until now.
The insurance policy issued to Samek contained a provision that permitted either party to reject an arbitration award that exceeded $20,000 and to demand trial de novo. Specifically, the clause stated:
THE AMOUNT OF DAMAGES. This applies only if the amount does not exceed the minimum limit for bodily injury liability specified by the financial responsibility law of the state in which your covered auto is principally garaged. If the amount exceeds that limit, either party may demand the right to a trial."
This provision has come to be known in the insurance industry as the "trial de novo provision" or in judicial parlance as the "escape hatch."
Our supreme court has addressed this question. In Reed v. Farmers Insurance Group, 188 Ill. 2d 168 (1999), plaintiff filed a declaratory judgment suit seeking a declaration that the arbitration requirement in the uninsured motorist portion of her automobile insurance policy was unenforceable. As required by section 143a of the Illinois Insurance Code (Insurance Code) (215 ILCS 5/143a (West 1996)), the policy contained a clause calling for arbitration if the plaintiff and her insurer were unable to agree on the amount of compensation she was entitled to receive under the policy's uninsured motorist coverage. The policy further provided, again as required by statute, that the arbitrators' award would be binding on the parties if it fell below a specified amount, which was the minimum required limits for bodily injury as set forth in the Illinois Safety and Family Financial Responsibility Law at $20,000 per person (626 ILCS 5/7-100 et seq. (West 1996)). If the arbitrators awarded more than that amount, either party could reject it, invoke the trial de novo clause, and the case would proceed to trial. Reed, 188 Ill. 2d at 170.
Section 143a of the Insurance Code requires that disputes with respect to "uninsured" motorist coverage be submitted to arbitration and that the arbitrator's determination is binding only with respect to awards below $20,000. That statute permits either party to reject an award which exceeds that amount and to resolve the claim through the judicial process. Specifically, Section 143a(1) states:
"Any decision made by the arbitrators shall be binding for the amount of damages not exceeding the limits for bodily injury or death set forth in Section 7-203 of the Illinois ...