Appeal from the Circuit Court of Cook County, County Department, Chancery Division. No. 10 CH 08408 The Honorable Richard J. Billik, Jr., Judge Presiding.
The opinion of the court was delivered by: Justice Harris
JUSTICE HARRIS delivered the judgment of the court, with opinion.
Presiding Justice Quinn and Justice Connors concurred in the judgment and opinion.
¶ 1 Here we are called upon to determine whether the circuit court properly granted summary judgment in favor of defendant State Farm Mutual Automobile Insurance Company (State Farm). Plaintiff, Phillip R. Katz, filed an amended complaint against State Farm claiming that he was owed additional underinsured motorist benefits under three insurance policies issued to him by State Farm. At issue is: (1) whether State Farm is Katz's excess underinsurer; (2) whether the circuit court properly calculated the applicable setoffs to Katz's underinsured motorist benefits; and (3) whether State Farm's conduct in denying Katz's claims of additional underinsured motorist benefits was unreasonable and vexatious such that Katz is entitled to damages under section 155 of the Illinois Insurance Code. 215 ILCS 5/155 (West 2008). We hold that State Farm is the only underinsurer and not an excess underinsurer. The circuit court properly calculated the applicable setoffs to Katz's underinsured motorist benefits. We do not need to address whether State Farm's conduct in denying Katz's claims of additional underinsured motorist benefits warrants further damages because State Farm is not liable to Katz for any further underinsured motorist benefits
¶ 3 On March 18, 2011, the circuit court granted State Farm's motion for summary judgment on Katz's amended complaint for declaratory judgment and denied Katz's cross-motion for summary judgment. On March 25, 2011, Katz timely filed his notice of appeal. Accordingly, this court has jurisdiction pursuant to Illinois Supreme Court Rules 301 and 303 governing appeals from final judgments entered below. Ill. S. Ct. R. 301 (eff. Feb. 1, 1994); R. 303 (eff. May 30, 2008).
¶ 5 The facts of this appeal are undisputed. On February 26, 2008, Katz was involved in an automobile accident. At the time of the accident, Katz was the named insured on three automobile policies issued by State Farm under policy numbers 360 9364-F24-13J; 360 9363-E15-13K, and 153 4222-F08-13. The relevant provisions of these policies are identical and each included underinsured motorist benefit coverage limits of $250,000 per person.*fn1 At the time of the incident, Katz was driving a vehicle owned by his employer and insured by Sentry Select Insurance Company (Sentry). The underinsured motorist coverage under the Sentry policy included coverage limits of $50,000 per person. The other vehicle involved in the accident, driven by Gregory Belt, was also insured by State Farm and contained a primary liability policy limit of $100,000 per person.
¶ 6 Katz filed the underlying personal injury lawsuit against Belt in the circuit court of Du Page County. In settlement of the underlying action, State Farm tendered its primary liability policy limits of $100,000 under Belt's policy to Katz. The settlement order allocated 60%, or $60,000, of the $100,000 settlement amount to Katz and 40%, or $40,000, to Katz's spouse in compensation for her loss of consortium claim.
¶ 7 Katz also received a workers' compensation benefit, of which $47,654.08 was paid to Katz and was available for setoff.*fn2
¶ 8 Sentry paid Katz $2,345.92 under its policy. Although Sentry is not part of this appeal, it appears from the record that Sentry applied a setoff for the workers' compensation benefits Katz received. Sentry's policy limit for underinsured motorist benefits was $50,000. After applying the workers' compensation setoff of $47,654.08 to the policy limits, $2,345.92 of underinsurance motorist benefits remained to be tendered to Katz.
¶ 9 State Farm, under the policies it issued to Katz, paid him $161,876 in underinsured motorist benefits. This amount is $88,124 less than State Farm's underinsured motorist coverage limits of $250,000 under the polices issued to Katz.
¶ 10 On May 3, 2010, Katz filed his amended complaint for declaratory judgment and attached as exhibits the three policies issued to him by State Farm. In his amended complaint, Katz characterized Sentry as the primary underinsurance policy and State Farm as the excess underinsurance policy. Katz stated that Sentry had already tendered him the benefits it owed him, after it applied a set-off for Katz's workers' compensation benefits. Katz sought to have State Farm pay him "the remaining benefit available of $88,124 arising out of the occurrence of February 26, 2008." Katz pointed to the following policy language in the State Farm policy to support his position:
"If There Is Other Underinsured Motor Vehicle Coverage- Coverage W
2. Subject to item 1 above, any coverage applicable under this policy shall apply:
a. on a primary basis if the insured sustains bodily injury while occupying your car, or while not occupying a motor vehicle or trailer.
b. on an excess basis if the insured sustains bodily injury while occupying a vehicle other than your car." (Emphasis in original).
Katz also sought attorney fees, costs, and statutory penalties.
¶ 11 On July 7, 2010, State Farm filed its motion for summary judgment pursuant to section 2-1005 of the Illinois Code of Civil Procedure (Code). 735 ILCS 5/2-1005 (West 2008). In its motion, State Farm argued that Katz did not have an underinsured motorist claim under the Sentry policy because the primary liability limit on Belt's car in the underlying lawsuit was more than the underinsured motorist limits of the Sentry policy. Specifically, the primary liability limit for the insurance on Belt's car was $100,000, whereas the Sentry policy contained a $50,000 underinsured motorist limit. State Farm argued that under the Sentry policy, Katz did not have a claim for underinsured motorist coverage. State Farm relied upon the following language in the Sentry policy, which it attached to its motion:
1. We will pay all sums the "insured" is legally entitled to recover as compensatory damages from the owner or driver of an "underinsured motor vehicle."
The policy defined the term "underinsured motor vehicle" as:
" 'Underinsured motor vehicle' means a land motor vehicle or 'trailer' for which the sum of all liability bonds or policies at the time of an 'accident' provides at least the amounts required by the applicable law where a covered 'auto' is principally garaged but their limits are less than the limit of this coverage."
State Farm argued further that it did not know why Sentry paid Katz $2,345.92, and described this payment as a "windfall" for Katz. State Farm noted that "the fact that Mr. Katz received a windfall can have no effect on State Farm's rights or obligations." Therefore, State Farm argued that it is the ...