Carnduff v. Columbia Mutual Insurance Company

Filing 18

ORDER denying 3 Motion to Dismiss: For the reasons articulated in the attached Memorandum and Order, the Court DENIES Defendant's motion to dismiss (Doc. 3) and, as set forth in the Scheduling Conference minutes entered today herein (Doc. 16), awaits Plaintiff's motion to voluntarily dismiss the complaint without prejudice. See Order for details. Signed by Judge Michael J. Reagan on 1/17/13. (soh )

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
GREGORY CARNDUFF,
Plaintiff,
vs.
COLUMBIA MUTUAL INS. CO.,
Defendant.

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Case No. 12-cv-1231-MJR-PMF

MEMORANDUM AND ORDER
REAGAN, District Judge:
This lawsuit involves a claim for uninsured motorist coverage following a
vehicular accident. In a complaint filed in Madison County Circuit Court in November
2012, Gregory Carnduff sought to recover compensatory and punitive damages from
Columbia Mutual Insurance Company for breaching a contract of insurance issued to
him on his 2003 Dodge 1500.

The policy (No. AUIL 154360) provided uninsured

motorist benefits of $100,000 per person, $300,000 per accident, and property damage.
Carnduff alleged that he was injured in a December 2010 accident with an
unidentified driver, that Carnduff “demanded arbitration of the uninsured motorist
coverage claim and named an arbitrator pursuant to policy terms,” and that Defendant
failed to name an arbitrator (Complaint, Count I). Carnduff further alleged that that
Defendant’s breach – failing to name an arbitrator -- constituted vexatious refusal to pay
and entitled Carnduff to statutory damages (Complaint, Count II). Carnduff asks the
Court to declare the rights of the parties and reform the insurance contract by ordering

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that Carnduff’s “underinsured motorist claim”1 be submitted to binding arbitration and
by designating Tom Falb as the sole arbitrator for binding arbitration of Carnduff’s
claims (Complaint, Count III, p. 5).
Defendant Columbia, having removed the case from Madison County Circuit
Court to this Court, moves to dismiss Carnduff’s complaint with prejudice. The motion
does not specify the Federal Rule of Civil Procedure under which dismissal is sought –
e.g., Rule 12(b)(1) for lack of subject matter jurisdiction, or Rule 12(b)(6) for failure to
state a claim upon which relief can be granted. This is significant, because the parties
have submitted various documents -- not all of which can properly be considered on a
12(b)(6) motion. See, e.g., Fed. R. Civ. P. 12(d); Santana v. Cook County Bd. of Review,
679 F.3d 614, 619 (7th Cir. 2012)(reiterating general rule that consideration of materials
outside the pleadings on a Rule 12(b)(6) dismissal motion may result in reversible
error).2
Part of the motion arguably falls within Rule 12(b)(1) – it seeks dismissal of two
of the counts based on the argument that the exclusive remedy for uninsured motorist
claims is furnished by Illinois statute, that statute requires arbitration via a set
procedure, and thus “no court has jurisdiction to hear Illinois uninsured motorist claims
for damages” (Doc. 3,p. 2). The memorandum supporting the dismissal motion fleshes
The reference to an underinsured motorist claim appears to be merely a
typographical error; the remainder of the complaint and the parties’ briefs in this
Court refer only to the uninsured coverage.

1

Of course, the Court can properly consider matters attached to the
complaint and referred to in the complaint which are central to the plaintiff’s
claim. See, e.g., Hecker v. Deer & Co., 556 F.3d 575, 582 (7th Cir. 2009); Tierney v.
Vahle, 304 F.3d 734, 738 (7th Cir. 2002).
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out the argument that Carnduff cannot end-run the Illinois statutory procedures for
uninsured motorist claims for damages but does not mention subject matter jurisdiction
or clarify the Federal Rule of Civil Procedure under which dismissal is sought.
The dismissal motion ripened with the filing of a reply brief on January 11, 2013.3
The parties essentially agree that the Illinois statute in question – 215 ILCS 5/143a –
furnishes the exclusive remedy for uninsured motorist claims for damages, providing
for arbitration of such claims. They dispute when Plaintiff first made his demand for
arbitration.
Defendant says it was October 5, 2012, so Plaintiff’s November 14, 2012 lawsuit
came before Defendant had the allotted statutory 45 days to respond (by naming an
arbitrator). Plaintiff counters that he first demanded arbitration by submitting a letter
to his insurance company on August 31, 2011.4

As to Defendant’s argument that

Plaintiff jumped the gun by filing suit before allowing the statutory procedure for
arbitration to take its natural course, Plaintiff further responds that the two-year
“statute of limitations for personal injury” was about to expire, and he filed suit “so as
not to let any of the contractual statute of limitations expire” (Doc. 14).

The undersigned Judge directed Defendant to specifically identify in the
reply brief the Federal Rule under which dismissal is sought (see Order at Doc.
6), but Defendant failed to do so. In future motions filed herein, counsel shall
identify with specificity the Rule under which any dispositive motion is filed.
See Judge Reagan’s Case Management Procedures, part of District Court web-site
at www.ilsd.uscourts.gov.
3

Plaintiff attaches a copy of that letter (Doc. 14, p. 3). Again, such
materials may properly be considered if this is a jurisdictionally-based dismissal
motion but cannot necessarily be considered if Defendant seeks dismissal for
failure to state a claim upon which relief can be granted.
4

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Defendant replies that at this point Plaintiff has made a proper demand for arbitration,
the arbitrators have been chosen, and Plaintiff’s claim should proceed to arbitration
subject to Defendant’s counterclaim for declaratory relief (Reply brief, Doc. 15, p. 1).5
As a general rule, all motor vehicles registered in Illinois must be covered by a
liability insurance policy, with minimum amounts specified in the Financial
Responsibility Law. 625 ILCS 5/7-601(a) and 5/7-203 (West 2006).

Motor vehicle

liability policies also must include uninsured motorist coverage. 215 ILCS 5/143a (West
2006).

The Illinois Supreme Court has explained that the primary purpose of the

mandatory liability insurance requirement is to “protect the public by securing payment
of their damages,” and uninsured motorist coverage furthers that goal by placing the
policyholder “in substantially the same position he would occupy, … if the wrongful
driver had had the minimum liability insurance required by the Financial
Responsibility Act.” Phoenix Ins. Co. v. Rosen, 949 N.E.2d 639, 645-46 (Ill. 2011).
Additionally, the Illinois Insurance Code mandates that “any dispute with
respect to the coverage and the amount of damages” under an uninsured-motorist
policy must be submitted for arbitration. Phoenix, 949 N.E.2d at 646, quoting 215 ILCS
5/143a(1). The Illinois Supreme Court has clarified the scope of this requirement:
Section 143a(1) of the Code requires the arbitration of “any dispute with
respect to” uninsured motorist coverage…. Our supreme court in State
Farm Fire & Casualty Co. v. Yapejian, … 605 N.E.2d 539 (1992), defined
the scope of that language when it reversed an appellate court's ruling
Defendant’s December 5, 2012 “Counterclaim for Declaratory Judgment”
seeks a declaration that the policy in question affords no coverage to Carnduff
for the injuries he allegedly sustained in the accident on December 12, 2010 (Doc.
5, p. 2).
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that section 143a(1) unambiguously required arbitration of all disputes
relating to uninsured motorist coverage. In defining the scope of that
section, the supreme court construed it narrowly to limit the matters
submitted to arbitration to disputes concerning covered claims, once
coverage had been established, noting that such a limitation would allow
the resolution of a number of issues in the courts and contribute to the
body of case law on the subject of uninsured motorist coverage. State
Farm, … 605 N.E.2d 539.
Smith v. State Farm Ins. Companies, Inc., 861 N.E.2d 183, 188 (Ill. App. 2006)(emphasis
added).
Clearly, then, the Illinois statute sets forth a procedure for resolving uninsured
motorist claims.

The parties to this suit apparently now have each designated an

arbitrator under that procedure and agree that the arbitration process should go
forward pursuant to Illinois law (as to Plaintiff Carnduff’s uninsured motorist claims).
While the undersigned District Judge was finalizing this Order he learned that
Plaintiff’s counsel will move to voluntarily dismiss the existing complaint without
prejudice and without costs, leaving Defendant’s counterclaim (Doc. 5) pending. See
January 17, 2013 entry reflecting minutes of Scheduling Conference before the
Honorable Philip M. Frazier (Doc. 16).

Accordingly, the Court DENIES Defendant’s

motion to dismiss (Doc. 3) and will await Plaintiff’s motion to voluntarily dismiss the
complaint without prejudice, which shall be filed on or before January 23, 2013.
IT IS SO ORDERED.
DATED January 17, 2013.
s/ Michael J. Reagan
Michael J. Reagan
United States District Judge

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