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Robert Wehrle and Heike Wehrle v. Cincinnati Insurance Company

August 21, 2012


The opinion of the court was delivered by: Judge Feinerman


Plaintiffs Robert and Heike Wehrle, a married couple, were in a car accident caused by a drunk driver. Doc. 14-2 at ¶¶ 1, 5. Robert's injury claim exceeded $750,000 and Heike's exceeded $1,500,000. Id. at ¶ 9. The drunk driver's GEICO insurance policy had per person liability limits of $100,000. Id. at ¶¶ 6-7. With the consent of Defendant Cincinnati Insurance Company, the Wehrles' insurer at the time of the accident, Robert and Heike each accepted $100,000 from GEICO. Id. at ¶¶ 7-8, 10, 12. The Wehrles' Cincinnati policy had $1,000,000 in underinsured motorist coverage for situations like this one, where the at-fault driver's liability coverage does not cover the injuries sustained by Cincinnati's insureds. Id. at ¶ 11; Doc. 1-1 at 9, 34-37. Cincinnati paid $800,000 to the Wehrles, which it calculated by offsetting the $1,000,000 policy limit by the $200,000 they received from GEICO. Doc. 14-2 at ¶ 16.

The Wehrles filed this lawsuit against Cincinnati to recover the $200,000 that it offset from the $1,000,000 policy limit. Cincinnati believes that the offset is proper under its policy and Illinois law. The Wehrles disagree; they say that the $100,000 they each received from GEICO should be applied not to the $1,000,000 policy limit, but rather to their individual claims, so that Robert should be deemed to have a $650,000 claim and Heike a $1,400,000 claim. The parties filed cross-motions for summary judgment on a set of stipulated facts. Docs. 13, 14, 14-2. Cincinnati's motion is granted, and the Wehrles' motion is denied.

The parties agree that Illinois law governs. The Seventh Circuit summarized Illinois law pertaining to the interpretation of insurance policies as follows:

In Illinois, insurance policies are contracts; the general rules governing the interpretation and construction of contracts govern the interpretation and construction of insurance policies. Illinois courts aim to ascertain and give effect to the intention of the parties, as expressed in the policy language, so long as doing so does not contravene public policy. In doing so, they read the policy as a whole and consider the type of insurance purchased, the risks involved, and the overall purpose of the contract. If the policy language is unambiguous, courts apply it as written. Policy terms that limit an insurer's liability are liberally construed in favor of coverage, but only when they are ambiguous, or susceptible to more than one reasonable interpretation.

Clarendon Nat'l Ins. Co. v. Medina, 645 F.3d 928, 933 (7th Cir. 2011) (citations omitted). Although ambiguities are construed in the insured's favor, "a court will not search for ambiguity where there is none." Valley Forge Ins. Co. v. Swiderski Elecs., Inc., 860 N.E.2d 307, 314 (Ill. 2006); see also Native Am. Arts, Inc. v. Hartford Cas. Ins. Co., 435 F.3d 729, 732 (7th Cir. 2006). "[I]n construing a policy, governing legal authority must . be taken into account as well, for a policy term may be considered unambiguous where it has acquired an established legal meaning." Ace Am. Ins. Co. v. RC2 Corp., 600 F.3d 763, 766 (7th Cir. 2010) (internal quotation marks omitted).

The Cincinnati policy's underinsured motorist provision is unambiguous. It states: "We will pay all sums the insured is legally entitled to recover as compensatory damages from the owner or operator of an underinsured motor vehicle." Doc. 14-2 at ¶ 13. It further states: "Regardless of the number of covered 'autos,' 'insureds,' premiums paid, claims made or vehicles involved in the 'accident,' the most [Cincinnati] will pay for all damages resulting from any one 'accident' is the Limit of Insurance for Underinsured Motorists Coverage shown in the Schedule or Declarations." Id. at ¶ 14. It then states: "The Limit of Insurance for this coverage [$1,000,000] shall be reduced by all sums paid or payable. [b]y or for anyone who is legally responsible." Id. at ¶ 15. The drunk driver was underinsured. There was one accident, so the $1,000,000 policy limit applies. And GEICO paid the Wehrles $200,000 on behalf of the drunk driver. Cincinnati therefore was entitled to offset the $1,000,000 policy limit by $200,000. Having already tendered $800,000 to the Wehrles, Cincinnati owes them nothing more. The Wehrles' position-that the GEICO payment should offset their individual claims and not the policy limit-cannot be reconciled with the underinsured motorist provision's plain terms.

Illinois law holds that insurance policies in general, and underinsured coverage provisions in particular, must not contravene public policy as expressed in the Illinois Insurance Code. See Ill. Farmers Ins. Co. v. Cisco, 687 N.E.2d 807, 810 (Ill. 1997); Severs v. Country Mut. Ins. Co., 434 N.E.2d 290, 292 (Ill. 1982). The Cincinnati policy fully comports with the Illinois underinsured motorist statute. Like the policy, the statute provides that "[t]he limits of liability for an insurer providing underinsured motorist coverage shall be the limits of such coverage, less those amounts actually recovered under the applicable bodily injury insurance policies . on the underinsured motor vehicle." 215 ILCS 5/143a-2(4) (emphasis added). As the Supreme Court of Illinois explained in Sulser v. Country Mutual Insurance Co., 591 N.E.2d 427 (Ill. 1992), the purpose of underinsured coverage is "to place the insured in the same position he would have occupied if the tortfeasor had carried adequate insurance"; such coverage is "designed to offer insurance to 'fill the gap' between the claim and the tortfeasor's insurance," and thus is "obviously not intended to allow the insured to recover amounts from the insurer over and above the coverage provided by the underinsured motorist policy." Id. at 429, 430. Accordingly:

Under a $100,000 policy, the policyholder is assured of compensation for his injuries in the amount of $100,000. However, the policyholder is not necessarily assured of receiving the total $100,000 from the insurer, but only of receiving that portion of the $100,000 which is not recovered from third parties. . For example, if the policyholder received $100,000 in a settlement with the uninsured tortfeasor, the insurance company would have no obligation to make payment to the insured policyholder. Similarly, if the insured policyholder received workers' compensation benefits of $100,000, the insurance company's obligation under the policy would be reduced to zero.

Id. at 430. Thus, "[w]hen the insured opts for $100,000 in coverage against . underinsured motorist risks, he is assured of receiving no more than that amount." Ibid. The Wehrles received the $1,000,000 they contracted for and to which the statute entitles them-$200,000 from GEICO and $800,000 from Cincinnati. They have no basis in law or logic to demand an extra $200,000 from Cincinnati.

This result accords with Erie Insurance Exchange v. Triana, 923 N.E.2d 861 (Ill. App. 2010), a case presenting materially identical circumstances. Triana and Wagner were injured in a car accident caused by an underinsured driver. Id. at 862. The underinsured driver's insurer paid $100,000 each to Triana and Wagner. Ibid. Triana and Wagner were insureds under an Erie Insurance Exchange policy providing $300,000 in underinsured motorist coverage per accident. Ibid. The terms were nearly identical to those in the Wehrles' Cincinnati policy, including the offset provision, which in the Erie policy stated that the underinsured motorist policy limit "will be reduced by . the amounts paid by or for those liable for bodily injury to anyone we protect." Id. at 865. The Appellate Court of Illinois held that Erie owed Triana and Wagner (together) only $100,000, which it calculated by subtracting the $200,000 they received from the other driver's insurer from the Erie policy's $300,000 policy limit:

The Erie policy clearly and unambiguously states that . the per-accident limit is the most that will be applied to all persons involved in any one accident, regardless of the number of people involved. Here, two persons were injured in the accident, Triana and Wagner. Therefore, the $300,000 per-accident policy limit applies, and that amount is the most that Erie contracted to pay for injuries arising from any one accident. Additionally, the Erie policy clearly and unambiguously provides that the policy limits would be reduced by the amounts paid on behalf of the tortfeasor. In this case, $200,000 has already been paid to the injured parties, Triana and Wagner, by State Farm on behalf of the other driver. Thus, only $100,000 of the $300,000 per-accident policy limit remains for Triana and Wagner to recover under the Erie policy. Accordingly, we find that the trial court did not err in concluding that the setoff provisions of the Erie policy were unambiguous and in granting summary judgment in favor of Erie.

Id. at 865-66; see also Obenland v. Econ. Fire & Cas. Co., 599 N.E.2d 999 (Ill. App. 1992) (reaching the same result on essentially the same facts). Likewise, Cincinnati is entitled to offset its $1,000,000 underinsured motorist policy limit by the $200,000 that the Wehrles received from the drunk driver's insurer.

The Wehrles attempt to distinguish Triana on the ground that the Erie policy's offset provision stated that the per accident limit "will be reduced by . the amounts paid by or for those liable for bodily injury to anyone we protect," Triana, 923 N.E.2d at 865, while the Cincinnati policy's offset provision states that the per accident limit "shall be reduced by all sums paid or payable. [b]y or for anyone who is legally responsible," Doc. 40-1 at ΒΆ 15. The argument is beside the point; even if Triana did not exist, this court would have interpreted the Cincinnati policy in precisely the same way. The distinction between the two policies is illusory in any event. The Wehrles submit that the phrase "to anyone we protect" in the Erie policy expressly permits the insurer to offset the per accident policy limit by amounts received from other sources by more than one insured, and not simply by a single insured. But the Cincinnati ...

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