Auto-Owners Insurance Company v. Beck

Filing 42

ORDER DISMISSING CASE, granting 21 MOTION for Partial Summary Judgment filed by Auto-Owners Insurance Company, denying 31 MOTION for Summary Judgment filed by Stephen Beck, John Beck, Joyce Beck, Lisa Beck, denying as moot 23 MOTION for Judgment on the Pleadings filed by Auto-Owners Insurance Company. Defendants are DIRECTED to jointly submit a proposed distribution of the deposited $200,000 to the Court no later than March 27, 2018, after which time, judgment will be entered. Signed by Judge David R. Herndon on 3/7/2018. (lmp)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
AUTO-OWNERS INSURANCE COMPANY,
Plaintiff,
v.
JOHN BECK, JOYCE BECK, STEPHEN
BECK, AND LISA BECK,
Defendants.

No. 16-cv-555-DRH-RJD
MEMORANDUM AND ORDER

HERNDON, District Judge:
I.

INTRODUCTION

Now before the Court are cross-motions for summary judgment filed by
plaintiff Auto-Owners Insurance Company (hereinafter “Auto-Owners”) (Doc. 21)
and defendants John Beck, Joyce Beck, Lisa Beck, and Stephen Beck (Doc. 31).
Auto-Owners also filed a motion for judgment on the pleadings (Doc. 21).
Responses were filed opposing all motions (Docs. 28 & 39) and Auto-Owners filed
a reply addressing defendants’ response to its motions for partial summary
judgment and for judgment on the pleadings (Doc. 38). For the following reasons,
plaintiff’s motion for summary judgment is GRANTED.
II.

BACKGROUND

This matter arises out of a traffic accident during which defendants John
Beck, Joyce Beck, Lisa Beck, and Stephen Beck were injured. On December 15,
2014, defendants collided with a driver insured by Allstate. That driver, found to
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be at fault, had a liability policy with limits of $50,000 per person and $100,000
per occurrence. As a result of the accident, defendants made a claim for damages
against the at-fault driver for the $100,000 policy limit.
Defendants also made a claim seeking underinsured motorist benefits
under their policy with Auto-Owners Insurance Company. Defendants allege that
Auto-Owners underinsured motorist coverage (UIM) provided them with a
$300,000 per person and $300,000 per occurrence limit (Doc. 1-1). On January
16, 2016, defendants informed Auto-Owners that they received an offer from
Allstate for the full $100,000 policy limit.1
On May 17, 2016, Plaintiff Auto-Owners Insurance Company filed a two
count complaint seeking declaratory relief and interpleader against John Beck,
Joyce Beck, Stephen Beck and Lisa Beck arising out of the aforementioned auto
accident (Doc. 1). Defendants filed their answers (Docs. 14&15), and following
discovery, plaintiff filed the pending motion for partial summary judgment (Doc.
21) and motion for judgment on the pleadings (Doc. 23). Thereafter, defendants
filed their pending motion for summary judgment (Doc. 31), in which they allege
that on May 24, 2017, defendants each separately settled with Allstate on behalf of
the at-fault driver for combined total $100,000. The allocation of the settlement
funds was $25,000 to Joyce Beck; $25,000 to John Beck; $25,000 to Stephen
Beck; and $25,000 to Lisa Beck. The dispute at issue in this case involves the
terms of the Auto-Owners underinsured motorist coverage under policy number

1

The Allstate settlement was not finalized until May 24, 2017, when each defendant settled with
Allstate for a combined $100,000.

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96-872-326-00, and whether Auto-Owners is entitled to the $100,000 setoff based
on the settlement proceeds received from Allstate. The Court now turns to the
pending cross-motions for summary judgment.
III.

LEGAL STANDARD

Summary judgment is proper when the pleadings, discovery, and
disclosures establish that there is no genuine issue of material fact and the
movant is entitled to judgment as a matter of law. Winsley v. Cook Cnty., 563
F.3d 598, 602–03 (7th Cir. 2009); Fed. R. Civ. P. 56(a); see Celotex Corp. v.
Catrett, 477 U.S. 317, 322–23 (1986). All reasonable inferences are drawn in
favor of the nonmovant and all factual disputes are resolved in favor of the
nonmovant. Scott v. Harris, 550 U.S. 372 (2007); Fischer v. Avanade, Inc., 519
F.3d 393, 401 (7th Cir. 2008). The movant bears the burden of establishing the
absence of fact issues and entitlement to judgment as a matter of law. Santaella
v. Metro. Life Ins. Co., 123 F.3d 456, 461 (7th Cir. 1997) (citing Celotex, 477
U.S. at 323). The same standard applies to cross-motions for summary judgment.
Laskin v. Siegel, 728 F.3d 731, 734 (7th Cir. 2013). That is, the Court construes
the facts and inferences in favor of the party against whom the motion under
consideration is made. See, e.g., Tompkins v. Central Laborers' Pension Fund,
712 F.3d 995, 999 (7th Cir. 2013). But the district court may not resolve issues of
credibility when deciding a summary judgment motion: “Those are issues for a
jury at trial, not a court on summary judgment.” Williams v. City of Chi., 733
F.3d 749, 752 (7th Cir. 2013).
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IV.

ANALYSIS

a. The Policy
The policy issued by Auto-Owners to defendants John and Joyce Beck
provides in pertinent part as follows:
COVERAGES
Combined Liability
Uninsured and Underinsured Motorist
Uninsured Motorist
Medical Payments

LIMITS
$300,000 occurrence
$300,000 person/$300,000 occurrence
$15,000 occurrence
$10,000 person

The limit of liability for the coverages listed may not be added to the limits for the
same or similar coverage applying to other automobiles insured by this policy to
determine the amount of coverage available for any one occurrence regardless of
the number of: (1) automobiles shown in the Declarations; (2) premiums charged
in the Declarations or premiums paid; (3) claims presented or suits brought; (4)
persons injured; or (5) automobiles involved in the occurrence.
***
Illinois
UNDERINSURED MOTORIST COVERAGE
Automobile Policy
1. DEFINITIONS
b. Settlement agreement means an agreement between the injured
person and us:
(1)
that the injured person is legally entitled to recover
damages for bodily injury from the owner or
operator of the underinsured automobile;
(2)
to the amount of such damages, only if the amount of
such damages is agreed to without arbitration.
The settlement agreement is binding on the injured person
and us regardless of any future judgment or settlement
between the injured person and the owner or operator of
the underinsured automobile.
c. Underinsured automobile means as automobile to which a bodily
injury liability bond or liability insurance policy applies at the time of
the occurrence:
(1)
with limits of liability at least equal to or greater than
the limits required by the Illinois Safety
Responsibility Act; and

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(2)

such limits of liability are less than the amount of
damages the injured person is legally entitled to
recover for bodily injury.
***

4. LIMIT OF LIABILITY
a. The limit of our liability for Underinsured Motorist Coverage of any one
occurrence shall be as follows:
(1) Our payment to any one injured person for any one occurrence
shall not exceed the smallest of the following:
(a) The “each person” limit of liability stated in the
Declarations for Underinsured Motorist coverage which is the
most we shall pay for all compensatory damages, including but
not limited to loss of consortium, because of or arising out of
bodily injury to such injured person; or
(b) The amount of compensatory damage, including but not
limited to loss of consortium, because of or arising out of the
bodily injury to such injured person, that are not recovered
from the liability bond(s) or liability insurance policy(s)
applying to the owner and operator of the underinsured
automobile because such bond(s) or policy(s) has been
exhausted by payment of judgments or settlements.
(2) Subject to the provisions of 4a.(1) above, our payment to two or
more injured persons for any one occurrence shall not exceed the
smallest of the following:
(a) The “each occurrence” limit of liability stated in the
Declarations for Underinsured Motorist coverage which is the
most we will pay for all compensatory damages, including but
not limited to loss of consortium, because of or arising out of
all bodily injury to two or more such injured persons; or
(b) The amount of compensatory damage, including but not
limited to loss of consortium, because of or arising out of the
bodily injury to two or more injured persons that are not
recovered from the liability bond(s) or liability insurance
policy(s) applying to the owner and operator of the
underinsured automobile because such bond(s) or policy(s)
has been exhausted by payment of judgments or settlements.
(3) In the event of a settlement agreement, our payment under
4.a.(1) or 4.a.(2) above shall not exceed the amount by which
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the limits of liability stated in the Declarations for
Underinsured Motorist coverage exceed the Limits of bodily
injury liability bond or Liability insurance policy of the owner
or operator of the underinsured automobile.
(4) In the event there is not a settlement agreement, our
payment under 4.a.(1) or 4.a.(2) above shall not exceed the
limits of liability stated in the Declarations for Underinsured
Motorist coverage, less those amounts actually recovered
under the applicable bodily injury liability bond or liability
insurance policy or other security maintained for the
underinsured automobile.
b. The limit of our liability is not increased because of the number of:
(1) automobiles shown or premiums charged in the Declarations;
(2) claims made or suits brought;
(3) persons injured; or
(4) automobiles involved in the occurrence.
c. The amount we pay will be reduced by any amounts paid or payable for
the same bodily injury:
(1) under SECTION II-LIABILITY COVERAGE of the policy; or
(2) under any workers compensation or similar law; or
(3) by or on behalf of any person or organization who may be legally
responsible for the bodily injury.
(Doc. 1-1).2
b. Discussion
In this case, a dispute has arisen between the parties regarding the amount
of underinsured motorist coverage available to defendants under their AutoOwners policy. The dispute centers on whether Auto-Owners’ policy language
entitles defendants to a combined-total of $300,000 or $200,000 in coverage.
Because this is a diversity case, Illinois law applies. Illinois law treats the
interpretation of an insurance policy as a question of law that the Court may
resolve summarily. See Connecticut Indem. Co. v. DER Travel Service, Inc., 328
2

The parties are in agreement that the UIM policy, drafted by plaintiff Auto-Owners and excerpted
above, was in effect at the time of the defendants’ accident.

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F.3d 347, 349 (7th Cir. 2003) (citing Crum & Forster Managers Corp. v.
Resolution Trust Corp., 620 N.E.2d 1073, 1077 (Ill. 1993)). 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., 223 Ill.2d 352, 307 Ill.Dec. 653, 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). Further, Menke v. Country Mutual Insurance Co. (1980), 78
Ill.2d 420, 426, 36 Ill.Dec. 698, 401 N.E.2d 539, notes that public policy does not
require the Court to invalidate clearly written policy language simply to avoid
disappointment to the insured. In the event of an ambiguity, the policy's terms
should be construed strictly against the drafter (here, Auto-Owners). Am. States
Ins. Co. v. Koloms, 177 Ill.2d 473, 227 Ill.Dec. 149, 687 N.E.2d 72, 75 (1997)..
However, a policy will be considered ambiguous only where its language is subject
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to more than one reasonable interpretation—we “will not strain to find an
ambiguity where none exists.” Hobbs, 291 Ill.Dec. 269, 823 N.E.2d at 564.
Considered in the context of the policy as a whole, and applying Illinois law, the
Court concludes that the language at issue addressing limits of liability is
susceptible to only one reasonable interpretation.
In

Auto-Owners’

motion

for

summary

judgment

and

response

to

defendants’ motion for summary judgment (Docs 21. & 39), Auto-Owners takes
the position that in light of the $100,000 settlement with Allstate under the atfault driver’s liability policy, the maximum combined payout for all four
defendants under its UIM policy is now $200,000.3 The parties agree that the
underinsured motorist coverage limits are $300,000 per person and $300,000
per occurrence, citing the declarations page for the policy (Doc. 22-1). AutoOwners argues that, in the event of a settlement agreement, the policy clearly and
unambiguously provides for a setoff against the UIM limits equal to the limits of
the at-fault motorist’s liability policy. Because each defendant settled with the atfault driver for a combined $100,000, Auto-Owners asserts that the maximum
owed to defendants under the underinsured motorist coverage is $200,000. AutoOwners goes on to argue that the $200,000 coverage limit places defendants in
the same position as they would have been in, had the at-fault driver carried the
same limits as their underinsured motorist coverage. See Berrey v. Travelers
Indem. Co. of Am., 770 F.3d 591, 594 (7th Cir. 2014)(citing Phoenix Ins. Co. v.
3

Although originally disputed, defendants’ motion for summary judgment notes that a settlement
was in fact reached with the at-fault motorist’s insurance company for a combined total of
$100,000.

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Rosen, 242 Ill.2d 48, 350 Ill.Dec. 847, 949 N.E.2d 639, 646 (2011)(“The Illinois
Supreme Court has noted that the underlying purpose of underinsured motorist
coverage is to “place the insured in the same position he would have occupied if
the tortfeasor had carried adequate insurance.”).
Defendants, in turn, argue that each defendant asserts a claim for
underinsured motorist coverage under the policy at issue, and they are entitled to
a combined total of $300,000 (Doc. 31). Defendants contend that they are entitled
to a maximum combined payout of $300,000 because that defendant shall enter
into a separate settlement agreement with Auto-Owners, and none of the four
individual settlements will exceed the monetary limitations set by Section 4.a.(3).
Although the defendants concede that the language contained in the declarations
page and policy controls, and that this Court’s interpretation of said language will
resolve the case, this dispute arises over the language contained in the AutoOwners policy, specifically with regard to the terms of the policy’s underinsured
motorist coverage, and whether the policy language entitles defendants to a
combined-total of $300,000 or $200,000.
In cases involving UIM coverage, 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 as a result 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.”

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Sulser v. Country Mutual Insurance Co., 147 Ill.2d 548, 169 Ill.Dec. 254, 591
N.E.2d 427, 429-30 (Ill.1992). Therefore, had the defendants been injured by a
motorist who carried insurance equal to defendants’ underinsured motorist
coverage, they would have received a total of $300,000. Sulser notes that the atfault driver’s insurance was not intended to allow the insured to recover more
than the amount of coverage provided under his policy's underinsured motorist
coverage. Significantly, Sulser offered the following example to illustrate the
applicability of a setoff provision:
“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.”
Sulser, 147 Ill.2d at 556.
The declarations page of the Auto-Owners policy indicates that the policy
limits for underinsured motorist coverage are “$300,000 person/$300,000
occurrence.” The limit of liability provision states that listed policy limits are the
most Auto-Owners will pay regardless of the number of vehicles shown in the
declarations, claims, or suits brought, persons injured, or vehicles involved in the
occurrence.

Under

Section

4.a.(2),

the

Auto-Owners

policy

clearly

and

unambiguously provides policy limits of $300,000 per occurrence. Section 4.a.(2)
applies to instances where there are two or more persons injured by one
occurrence, as is the case here. 4 In the event of a settlement agreement, section

4

The $300,000 per accident limit (Section 4.a.(2)(a)) is smaller than the amount of compensatory
damage not recovered)(Section 4.a.(2)(b)) from the Allstate policy ($2,550,000).

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4.a.(3) includes a setoff provision, thus reducing the maximum coverage amount
by the amounts paid on behalf of the tortfeasor in the settlement.
Defendants argue that the limitation set forth by 4.a.(3) refers to “a
settlement agreement” as in, any single settlement agreement with any single
individual claimant. Defendants contend that Auto-Owners cannot resolve the four
claims at issue in this case with a single settlement agreement, and therefore,
must resolve the four claims with four separate settlement agreements.
Defendants go on to note that none of the four proposed individual settlement
agreements contemplated ($70,000; $190,000; $20,000; $20,000) exceed the
$200,000 limitation set forth in 4.a(3), thus allowing each to recover their
proposed amounts totaling $300,000. However, defendants’ argument fails to take
into account that once the setoff applies, the limits are reduced. Defendants argue
that because each of the four claims, taken individually, do not exceed $200,000
(representing the reduction for the at fault motorist’s limits), then defendants are
entitled to collect up to $300,000 from Auto-Owners . However, this argument
fails under the policy and under Illinois law. Defendants fail to consider that the
policy limit does not increase based on the number of claims made under the
terms of the policy.
As mentioned above, four defendants were injured by a single underinsured
motorist during one occurrence, thus triggering the applicability of Section 4.a.(2).
The underinsured motorist's insurer paid its policy limits of $100,000. Thus, the
policy limit of $300,000 per accident under Section 4.a.(2) is reduced by the

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$100,000 settlement with Allstate under Section 4.a.(3) of the policy. Applying the
setoff provision in Section 4.a.(3) to the facts of this case results in the defendants
receiving $100,000 from the underinsured motorist's insurer and $200,000 from
their underinsured motorist coverage for a total of $300,000. See, e.g., Sulser,
147 Ill.2d at 556; Obenland v. Econ. Fire & Cas. Co., 234 Ill. App. 3d 99, 111,
599 N.E.2d 999, 1006 (1992), aff'd, 623 N.E.2d 748 (Ill. 1993). Defendants have
no basis in law or logic to demand an extra $100,000 from Auto-Owners. UIM
coverage is intended only to assure compensation for an insured's injuries in an
amount equal to his or her policy limit for the coverage. Sulser, 147 Ill.2d at 556
It is “not intended to allow the insured to recover amounts from the insurer over
and above the coverage provided by the underinsured motorist policy.” Id.
Here, there is no dispute that defendants recovered $100,000 from Allstate.
Given that there is a settlement agreement under the policy definitions, the limits
must be reduced by the at-fault driver’s liability limit ($100,000). Under these
circumstances, the defendants are not entitled to recover more than $200,000
based upon the clear language of the Auto-Owners insurance policy and the
relevant case law. Therefore, the Court grants plaintiff’s motion for partial
summary judgment.
a. CONCLUSION
For the reasons stated above, the Court GRANTS plaintiff’s motion for
partial summary judgment (Doc. 21) and DENIES defendants’ motion for

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summary judgment (Doc. 31). Further, plaintiff’s motion for judgment on the
pleadings (Doc. 23) is DENIED as moot.
The Court hereby DECLARES that Auto-Owners Insurance Company Policy
number 96-872-326-00 affords a maximum of $200,000 UIM coverage, to
defendants for the automobile collision alleged to have occurred on December 15,
2014, following the $100,000 setoff based on the proceeds received from Allstate,
thus satisfying Auto-Owners’ obligations under the policy.
In light of the varied medical costs and economic losses incurred by each
defendant, defendants are DIRECTED to jointly submit a proposed distribution of
the deposited $200,000 to the Court no later than March 27, 2018, after which
time, judgment will be entered.

Judge Herndon
2018.03.07
17:29:19 -06'00'

IT IS SO ORDERED.

United States District Judge

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