Issue Found Where Endorsement Contradicts Other Policy Terms

By Don R. Sampen, published, Chicago Daily Law Bulletin, November 17, 2020

The 5th District Appellate Court recently held that, despite language in a “named non-owner endorsement” that had the effect of eliminating uninsured motorist coverage for the named insured’s family members, the insurer was not entitled to judgment on the pleadings because the pleadings did not reflect whether the named insured “accepted” the endorsement.

The case is Strowmatt v. Sentry Insurance Co., 2020 IL App (5th) 190537 (Oct. 22). The insured, Kent Strowmatt, was represented by the Darr Law Offices Ltd. of Alton. Heyl Royster Voelker & Allen P.C. of Edwardsville represented the insurer, Sentry, doing business as Viking Insurance Company.

Strowmatt’s minor son Kent, while riding in an uninsured vehicle, was injured in an automobile crash, as a result of which he incurred about $13,000 in medical expenses. The driver of the uninsured vehicle was at fault. Strowmatt thus sought uninsured motorist and medical payments coverage on behalf of his son under an automobile insurance policy issued to him by Viking.

Viking’s policy contained a main coverage form that would have extended UM and other coverage to relatives of the named insured, Stromatt. The declarations page, however, stated that the coverage within the policy would apply only for the “named insured while driving non-owned cars.”

The policy also contained an endorsement titled “Named Non-Owner Endorsement — Illinois.” Under the definitions in that endorsement, coverage was limited to “you,” meaning the named insured.

Strowmatt nonetheless filed a claim for UM coverage seeking medical expenses incurred on behalf of his son. Viking denied the claim based on the policy’s provisions limiting coverage to Strowmatt himself.

Strowmatt then filed the instant case seeking a declaration that the policy provided UM and medical pay benefits for the injuries to his son. Viking subsequently filed a motion for judgment on the pleadings, based on the policy language. The trial court granted the motion, finding controlling the language of the endorsement limiting coverage to Strowmatt alone. Strowmatt appealed.

Analysis

In an opinion by Justice Thomas M. Welch, the 5th District reversed. He initially acknowledged the case law holding that where a policy and an endorsement conflict, the endorsement prevails, at least where, said Welch, “it is clear that the policy holder understood and accepted the language of the endorsement.”

Welch then observed contradictory language as between the main policy form, which would have provided broad coverage, and the Named Non-Owner Endorsement, which limited coverage just to Strowmatt himself. He also noted the terms of the declaration page limiting coverage to Strowmatt while driving non-owned cars.

In addition, Strowmatt’s application for coverage, which Strowmatt signed, stated that the policy provided coverage only for Strowmatt while driving non-owned cars.

Without finding an ambiguity, Welch nonetheless observed that Strowmatt’s application also required the applicant to report all persons of legal age who lived with the applicant. He said this requirement, along with the different definitions of “insured” in the policy, made it “uncertain who is covered” under the policy.

He proceeded to state that “there is no information contained in the record as to whether [Strowmatt] understood or accepted the limiting language of the policy.” Because of that fact, and the “conflict between the policy language and endorsement,” Welch concluded “there is at least some question of fact that needs resolution here.”

Welch also addressed whether Strowmatt as the named insured was entitled to recover as a parent responsible for paying his son’s medical expenses. Welch attempted to distinguish State Farm Mutual Automobile Insurance Co. v. George, 326 Ill.App.3d 1065 (2002), where the court concluded that claimed derivative bodily injury to someone not insured is outside the intended scope of UM coverage.

Welch’s grounds for distinguishing the case are not clear.

He ultimately suggested, without actually holding, that because Strowmatt was seeking to recover for his own economic loss for his son, that might provide a further basis for coverage.

The apparent main basis for the decision, however, was a “question of fact” as to whether Strowmatt’s son was an insured.

The 5th District thus reversed the judgment for Viking on the pleadings.

Key point

According to this decision, an insurance company may not be entitled to a judgment of non-coverage on the pleadings in the absence of evidence the insured accepted an endorsement limiting coverage; and even a signed application by the insured accepting the limitation may not be sufficient.