Anti-Stacking Clauses Didn't Apply To Divorced Parents
September 22, 2009
By Don Sampen
In a case of first impression in Illinois, the 2d District Appellate Court recently held that anti-stacking provisions applicable to under-insured motorist coverage in two automobile insurance policies, limiting the amount of recovery under the policies by common insureds, were not applicable to claims by insureds whose recovery was limited to benefits under only one policy. Economy Premier Assurance Co. v. Jackson, 2009 WL 2184659 (July 17).
The insureds were represented by Philip J. Ryan of Ryan, Ryan & Landa, Waukegan. Joseph P. Postel of Lindsay, Rappaport & Postel LLC, Chicago, represented Economy Premier Assurance Company, and James F. Best of Best, Vanderlaan & Harrington, Wheaton, represented Safeco Insurance Company of Illinois.
Ellen Hall and Tommy Jackson were divorced and living apart. They had a son, Thomas, who was killed in an automobile accident while riding as a passenger in an automobile owned and operated by Christian DeFilippo. That vehicle was insured by Allstate with liability limits of $50,000 per person/$100,000 per occurrence. As part of the settlement under the Allstate policy, Hall, Jackson and Jackson's sister each received $15,000, for a total of $45,000, with the balance of the limit going to others also injured in the accident.
Hall had her own automobile insurance policy with Safeco, which included UIM coverage of $100,000 each person/$300,000 each accident. Jackson had his own automobile insurance policy with Economy, with the same UIM limits of $100,000 per person/$300,000 per occurrence. Neither Hall nor Jackson was an insured under the other's policy. Thomas, their son, however, was an insured under both.
Both the Economy and Safeco policies contained anti-stacking clauses that indicated that if another policy provided UIM coverage, recovery of UIM benefits could not exceed the highest applicable limit for any one vehicle under any insurance providing coverage. Both also had "other insurance" provisions requiring a sharing of loss with other applicable policies.
Economy acknowledged that the DeFilippo vehicle was underinsured because its bodily injury liability limit of $50,000 per person was less than the $100,000 per-person limit of the Economy policy. Economy took the position, however, that its $100,000 UIM limit had to be reduced by the $50,000 per person bodily injury liability limit of the Allstate policy, leaving $50,000 available as Economy's maximum UIM coverage. It further contended that that amount was to be further reduced to $25,000 under the provisions of the Economy policy requiring the sharing of loss with Safeco.
Safeco appears to have taken the position that its $100,000 UIM limit had to be reduced by the $45,000 paid to Thomas's heirs, and then reduced another $10,000 in medical payments coverage, leaving a maximum of $45,000 of coverage. Safeco further contended that the $45,000 had to be further reduced to $22,500 based on its sharing provisions applicable to the Economy policy.
Three declaratory judgment actions were filed to determine the amount of UIM benefits payable under the Economy and Safeco policies. As the result of motion practice, the trial court held that the $100,000 UIM limit in each policy would be reduced by the $45,000 amount paid by Allstate, giving each insurer a setoff of $22,500. The court further held that the anti-stacking provisions were not applicable, and it entered judgment in favor Hall against Safeco for $77,500, and in favor of Jackson against Economy for $77,500. The insurers appealed.
In an opinion by Justice Kathryn E. Zenoff, the 2d District affirmed. She began by addressing the insureds' argument that Safeco was estopped from pursuing the appeal because the trial court found that it had breached its insurance contract with Hall by wrongfully trying to deduct medical payment benefits from the UIM coverage. The claim of estoppel was based on Dinn Oil Co. v. Hanover Ins. Co., 87 Ill.App.2d 206 (5th Dist. 1967), which held that an insurer that breaches the portions of policy inuring to the benefit of the insured cannot insist that the insured be bound by the provisions that inure to the benefit of the insurer.
Zenoff, however, construed the trial court's ruling as not a finding of breach by Safeco, but as merely declaring the rights of the parties. She said that Safeco therefore was not estopped.
For purposes of addressing the stacking clauses of the policies, Zenoff defined "stacking" as the process of obtaining benefits from a second insurance policy on the same claim when recovery on the first policy alone would be inadequate. She noted that Illinois law generally allows insurers to insert anti-stacking provisions into their policies.
Economy and Safeco here contended that the anti-stacking provisions applied because Thomas, the decedent, was a common insured under both policies, and that the combined effect of the policies was to allow for a maximum of one $100,000 UIM recovery. Zenoff found, however, that the proper focus was not on Thomas, but on Hall and Jackson who were covered by one insurance policy each. Neither had coverage available under more than one policy, and consequently neither the anti-stacking clauses, nor the other insurance clauses, came into play.
Safeco countered that if Thomas had survived, he would have been entitled to no more than a total of $100,000 in UIM benefits. Zenoff responded that that did not happen, and that the claims asserted by Hall and Jackson under the Wrongful Death Act, moreover, were their claims and not claims being made on behalf of Thomas.
Economy argued that the provisions of the Wrongful Death Act were irrelevant because the policies specifically provide that one single per-person limit was recoverable for Thomas's death, regardless of the number of claimants. That would be true, according to Zenoff, only if Jackson and Hall had been insureds under each other's policies. Since they were not, the anti-stacking limitations would not apply.
Zenoff acknowledged that she could find no Illinois decision with similar facts. She nevertheless cited Boullt v. State Farm Mutual Automobile Ins. Co., 752 So.2d 739 (La. 1999), where, under analogous facts, the Louisiana Supreme Court held that no stacking would occur where each of two parents were not insureds under the other's policy. While Economy and Safeco tried to distinguish the case as relying on dissimilar state law, Zenoff said the case was persuasive.
The 2d District therefore affirmed the judgment of the circuit court.
