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Worley v. Fender

Court of Appeals of Illinois, Fifth District

May 15, 2017

MICHAEL BRUCE WORLEY, Plaintiff-Appellee and Cross-Appellant,
v.
P. JEAN FENDER, DAVIS & SONS OIL COMPANY, STATE AUTO PROPERTY & CASUALTY INSURANCE COMPANY, and FEDERATED MUTUAL INSURANCE COMPANY, Defendants Federated Mutual Insurance Company, Defendant-Appellant and Cross-Appellee.

          Rule 23 Order Filed: March 16, 2017

          Motion to Publish Granted: May 15, 2017

         Appeal from the Circuit Court of Wayne County. No. 12-L-3 Honorable Larry D. Dunn, Judge, presiding.

          Attorneys for Appellant Daniel G. Hasenstab, John P. Cunningham, Brown & James, P.C., Richland for Plaza

          Attorneys for Appellee William P. Gavin, Catherine E. Gavin, Gavin Law Firm

          JUSTICE GOLDENHERSH delivered the judgment of the court, with opinion. Justices Chapman and Cates concurred in the judgment and opinion.

          OPINION

          GOLDENHERSH JUSTICE.

         ¶ 1 BACKGROUND

         ¶ 2 This appeal arises from a dispute regarding underinsured motorist coverage. Plaintiff, Michael B. Worley, sustained serious injuries in an automobile accident on May 12, 2011, when he collided with a vehicle operated by P. Jean Fender. At the time of the accident, plaintiff was operating a 2005 Freightliner FLD132 box truck during the course and scope of his employment with Davis & Sons Oil Company (Davis & Sons). Davis & Sons owned the box truck. Fender caused the accident by failing to stop at a stop sign and yield to the vehicle plaintiff was driving.

         ¶ 3 After the accident, plaintiff filed a personal injury claim against Fender. Fender's automobile was covered by an automobile liability insurance policy issued by State Auto Property & Casualty Insurance Company (State Auto). State Auto offered the $100, 000 limits of Fender's policy to plaintiff in exchange for a release of all causes of action plaintiff had against Fender as a result of the accident. Plaintiff accepted State Auto's offer, and State Auto tendered $100, 000 to plaintiff.

         ¶ 4 Plaintiff also made a claim against Davis & Sons' commercial automobile insurance policy (policy) issued by defendant, Federated Mutual Insurance Company, which covered the vehicle plaintiff was driving at the time of the accident. The policy was initially issued to Davis & Sons in April 2004 and was subsequently renewed each year thereafter through the date of the accident. At the time of the accident, the policy stated it was effective from April 1, 2011, to April 1, 2012. With respect to coverage, the policy provided bodily injury liability limits of $1 million. It further provided underinsured motorist coverage limits of $500, 000 for directors, partners, officers, or owners of the named insured and family members who qualified as insureds. The policy provided underinsured motorist coverage limits of $40, 000 for any other person who qualified as an insured. Defendant denied plaintiff's demands for underinsured motorist benefits on grounds that the limits of the policy's underinsured motorist coverage for plaintiff was $40, 000, and plaintiff had already received $100, 000 from Fender's policy.

         ¶ 5 Initially, plaintiff filed a four-count complaint against defendants Fender, Davis & Sons, and State Auto. Counts III and IV of the original complaint were settled and dismissed, and Fender and State Auto were also dismissed.

         ¶ 6 Defendant subsequently removed this case to the United States District Court for the Southern District of Illinois. While the case was in federal court, plaintiff filed a two-count first amended complaint which remains the subject of this appeal. The first count sought declaratory relief and a reformation of defendant's policy so that it provided underinsured motorist coverage and benefits to plaintiff with limits of $1 million rather than $40, 000. Specifically, plaintiff argued the underinsured motorist limits had to be reformed to match the policy's bodily injury liability limits of $1 million because Davis & Sons did not effectively reject the policy's bodily injury liability limits. Plaintiff further alleged that the structure of the policy, which included step-down underinsured motorist limits for different classes of insureds, violated Illinois law and public policy because the terms restricted the limits of coverage based solely on an insured's status at the time of a loss. Plaintiff also sought that defendant be required to participate in binding arbitration with plaintiff. The second count alleged defendant's failure to acknowledge plaintiff's claim for underinsured motorist benefits under the policy with reasonable promptness was "vexatious and unreasonable and constitute[d] an improper claims practice" under section 154.6 of the Illinois Insurance Code (215 ILCS 5/154.6 (West 2010)). Plaintiff sought money damages and attorney fees.

         ¶ 7 On May 19, 2014, after this case was remanded by the federal court to Wayne County, plaintiff filed a motion for summary judgment on count I of plaintiff's first amended complaint. On June 10, 2014, defendant filed a motion for summary judgment on both counts of plaintiff's first amended complaint asserting plaintiff was not an "underinsured motorist" as defined by the policy because the limits available under Fender's policy ($100, 000) exceeded the underinsured motorist limits available to plaintiff under the policy at issue ($40, 000). As plaintiff had already received an amount ($100, 000) in excess of the limits available to plaintiff under the policy ($40, 000), defendant argued no underinsured motorist coverage was available to plaintiff.

         ¶ 8 A hearing on the cross-motions was held on July 23, 2014. On November 10, 2015, the trial court entered an order which granted partial summary judgment in favor of plaintiff on the first count, and granted summary judgment in favor of defendant on the second count. With respect to count I, the court granted plaintiff's request that the policy be reformed to provide underinsured motorist coverage limits equal to the policy's bodily injury liability limit of $1 million but rejected plaintiff's argument that the structure of the policy's underinsured motorist coverage was void under Illinois law. The court further determined no arbitration was required concerning plaintiff's underinsured motorist claim. Regarding count II, the court concluded there was no vexatious and unreasonable delay on the part of defendant.

         ¶ 9 Defendant subsequently filed a motion to reconsider, which was denied. Defendant then timely filed a notice of appeal, and ...


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