author: JUSTICE CAMPBELL

text:
    EMPLOYERS MUTUAL COMPANIES/ILLINOIS EMCASCO INSURANCE COMPANY, Plaintiff-Appellant, v. COUNTRY COMPANIES, a/k/a Country Mutual Insurance Company, a/k/a Country Casualty Insurance Company, Defendant-Appellee.
    First District (1st Division)
    No. 1—89—0114
    Opinion filed March 18, 1991.

      Judge & Knight, Ltd., of Park Ridge (Jay S. Judge and Colleen H. Considine, of counsel), for appellant.
    John J. Foley, of Chicago, for appellee.
   JUSTICE CAMPBELL

delivered the opinion of the court:

Plaintiff, Employers Mutual Companies/Illinois Emcasco Insurance Company (Emcasco), appeals an order of the circuit court of Cook County granting the motion of defendant Country Companies, a/k/a Country Mutual Insurance Company, a/k/a Country Casualty Insurance Company (Country), to dismiss Emcasco’s complaint for a declaratory judgment. For the reasons which follow, we affirm.

The record on appeal indicates the following. Emcasco issued an automobile policy effective March 11, 1983, through September 11, 1983, to Clara Doyle, covering a 1972 Plymouth Duster. The liability coverage of the Emcasco policy defines a “covered person” as including “[a]ny person using your covered auto.”

In April 1983, Clara Doyle’s driver’s license was revoked. John M. Elsbury, Clara’s nephew, later took possession of the 1972 Duster, indicating he intended to sell the car for Clara. For an indeterminate period of time, John M. Elsbury exercised control over the car, treating it as his own.

Country issued an automobile policy effective May 26, 1983, through November 26, 1983, to John M. Elsbury, covering a 1979 Pontiac. The Country policy does not specify which model. The liability coverage of the Country policy obligates Country to pay sums on behalf of an “insured” for bodily injury or property damage “caused by an accident resulting from the ownership, maintenance and use of an ‘insured vehicle,’ *** or of any ‘nonowned vehicle.’ ” An “insured vehicle” includes, in relevant part, “any vehicle described on the declarations page.” A “nonowned vehicle”

“refers to a land motor vehicle you or your relatives do not own and which is not available for regular use by you or a relative.”

A “relative” includes “a person related to you by blood, marriage or adoption who is a resident of your household.”

The Country policy also defines the term “insured” as including, in relevant part:

“1. With respect to an insured vehicle:
a. you and any resident of your household;
b. anyone using an insured vehicle with your permission or the permission of an adult relative;
c. anyone else, but only with respect to liability resulting from acts or omissions of an insured as defined in a. or b. above.
2. With respect to a nonowned vehicle:
a. you, when you are operating a nonowned vehicle or when that vehicle is operated by your agent (for example, an agent would include someone acting in your behalf);
b. your relatives.
3. you with respect to the operation and use of a motor vehicle owned or driven by your agent (for example, an agent would include someone acting on your behalf), provided you do not own, rent or lease that vehicle.”

Finally, the Country policy contains an “other insurance” clause, which provides:

“If there is other applicable liability insurance for a loss covered by this policy we will pay our share of the loss. *** However, any insurance we provide with respect to a vehicle you do not own will be excess over any other collectible insurance.”

Edward M. Elsbury is the son of John M. Elsbury. On June 17, 1983, Edward was driving the 1972 Plymouth Duster on State Line Road in Lake County, Illinois. Edward collided with a motorcycle, causing injuries to William Dorsey, who was the driver of the motorcycle, and Peter J. Campanella, who was Dorsey’s passenger. It is undisputed that both policies were in effect on this date.

Dorsey filed a personal injury suit against Edward Elsbury; Campanella filed a personal injury suit against Dorsey, Edward Elsbury and John Elsbury. Emcasco accepted the defense of both the Dorsey and Campanella suits, subject to a reservation of rights. Later, Emcasco tendered the defense of these suits to Country, which declined to defend.

The Emcasco policy limit was $100,000. Emcasco settled the Dorsey suit for $35,000 and the Campanella suit for $23,000. Emcasco also incurred $26,733.83 in legal expenses regarding these lawsuits.

Emcasco then filed a complaint seeking a declaratory judgment in the circuit court of Cook County. The complaint sought a declaration that Country owed a duty to defend in the two lawsuits and that Country’s refusal to defend estops it from asserting any policy defenses. The complaint also sought reimbursement of settlement and legal expenses resulting from Country’s alleged breach of duty to defend.

Country filed a motion to dismiss the complaint, arguing that Country was an excess carrier and therefore had no duty to defend because Emcasco had not alleged that the limits of the primary policy had been exhausted. Country also argued that Emcasco’s complaint did not allege coverage potentially within the scope of the Country policy.

Following a hearing on the matter, the circuit court of Cook County granted Country’s motion to dismiss in an order entered on December 12, 1988. Emcasco then timely filed its notice of appeal to this court.

In reviewing a dismissal, this court may affirm the decision of the trial court on any basis found in the record. E.g., In re Marriage of Wilson (1990), 193 Ill. App. 3d 473, 549 N.E.2d 1348.

Emcasco first contends that the trial court erred in granting Country’s motion to dismiss on the basis that Country was an excess carrier. Emcasco argues that the threshold issue is whether Country had a duty to defend the insured. Emcasco contends that an insurer, when faced with a complaint it believes is not covered by its policy, must either defend the suit under a reservation of rights or seek a declaratory judgment that there is no coverage. Thus, Emcasco concludes, if the insurer does neither and refuses to defend, it is estopped from alleging later that the insured was not covered by the policy or that there are policy defenses. See La Rotunda v. Royal Globe Insurance Co. (1980), 87 Ill. App. 3d 446, 451, 408 N.E.2d 928, 934.

This court rejected a similar argument in Federal Insurance Co. v. Economy Fire & Casualty Co. (1989), 189 Ill. App. 3d 732, 545 N.E.2d 541, appeal denied (1990), 129 Ill. 2d 563, 550 N.E.2d 555, which involved a policy which provided excess coverage on its face. Excess coverage, however, may arise not only by drafting a policy which, on its face provides excess coverage, but also by “coincidence” where, as here, the judicial interpretation of two policies renders one policy excess. See Marick, Excess Insurance: An Overview of General Principles & Current Issues, 24 Tort & Ins. L.J. 715, 717-18 (1989) (and citations therein).

For example, in New Amsterdam Casualty Co. v. Certain Underwriters at Lloyds, London (1966), 34 Ill. 2d 424, 216 N.E.2d 665, our supreme court held that a New Amsterdam policy was excess by coincidence with a Lloyds policy. Lloyds, which then had the primary duty to defend, had refused to defend the insured. Consequently, there was no “valid and collectible other insurance” with which the New Amsterdam policy could coincide, and New Amsterdam had been forced to defend the insured. The supreme court therefore allowed the excess carrier to recoup defense costs from the primary carrier, rejecting the argument that the “other insurance” clauses applied only to the duty to pay losses and not to the duty to defend and pay defense costs. See New Amsterdam Casualty Co., 34 Ill. 2d at 431, 216 N.E.2d at 669.

New Amsterdam Casualty Co. lends support to the conclusion that the rule of Federal Insurance Co., that an excess carrier, faced with a complaint it believes is not within the scope of its coverage, is not invariably forced to defend the insured or seek a declaratory judgment, also applies in this case of excess coverage by coincidence.

The cases cited by Emcasco are distinguishable from this case. Some involve an insurer’s failure to indemnify an action based on an exclusion in the insurance policy. These cases are inapposite because failure to defend estops an insurer from raising exclusionary defenses. (See Aetna Casualty & Surety Co. v. Coronet Insurance Co. (1976), 44 Ill. App. 3d 744, 358 N.E.2d 914.) An excess insurance clause, however, is conceptually distinct from an exclusionary clause; the latter limits liability, whereas the former apportions it. (Western Casualty & Surety Co. v. Western World Insurance Co. (7th Cir. 1985), 769 F.2d 381, 385.) The remainder of the cases cited by Emcasco involve the primary insurer’s duty to defend its insured, not the excess insurer’s duty to defend.

In any event, even if Country were not an excess carrier, Emcasco’s argument that Country had a duty to defend these claims would not persuade this court. When an insurer contracts to defend its insured, it must do so unless it is clear from the face of the complaint that the allegations fail to state facts which bring the case potentially within the policy’s coverage. (Conway v. Country Casualty Insurance Co. (1982), 92 Ill. 2d 388, 393, 442 N.E.2d 245, 247.) In deciding whether a duty to defend exists, only the allegations of the complaint and the terms of the policy are consulted. Clemmons v. Travelers Insurance Co. (1981), 88 Ill. 2d 469, 476, 430 N.E.2d 1104, 1108.

Accordingly, two conditions must be met before an insurer’s duty to defend arises: (1) the action must be brought against an insured, and (2) the allegations of the complaint must disclose potential coverage under the policy. (Murphy v. Peterson (1984), 129 Ill. App. 3d 952, 957, 473 N.E.2d 480, 484.) If the allegations of the complaint reveal that the action was not brought against an insured or that there was no potential for coverage under the policy, there is no duty to defend the underlying action, and the insurer can justifiably refuse to defend. MFA Mutual Insurance Co. v. Crowther, Inc. (1983), 120 Ill. App. 3d 387, 390, 458 N.E.2d 71, 73; La Rotunda, 87 Ill. App. 3d at 451, 408 N.E.2d at 933.

We therefore turn to the question of whether the underlying complaints alleged an action against an insured under the Country policy in this case. The Dorsey complaint alleged negligence on the part of Edward M. Elsbury, but the record indicates that Edward is not a named insured under the Country policy. Moreover, the Dorsey complaint does not even mention either John M. Elsbury or Phyllis L. Elsbury, who the record indicates are the named insureds under the Country policy. In short, the Dorsey complaint is devoid of allegations that would allow Country to determine that this action had been brought against an “insured” under the terms of the policy. Under the facts and circumstances in this case, potential “coverage cannot be inferred merely because the son of the insured is named in a lawsuit.” Federal Insurance Co., 189 Ill. App. 3d at 736, 545 N.E.2d at 545; Murphy, 129 Ill. App. 3d at 958, 473 N.E.2d at 484.

By contrast, the Campanella complaint named John M. Elsbury as a defendant and alleged that Edward M. Elsbury was the agent of John M. Elsbury. This complaint therefore brings an action against an “insured” under the Country policy both because John M. Elsbury was a named insured and because John could be considered an insured if Edward was operating a “nonowned vehicle” or a motor vehicle owned or driven by Edward and not owned, rented or leased by John.

The question remains, however, as to whether the Campanella complaint stated facts which would bring the case potentially within the Country policy’s coverage. The relevant section of the Country policy states that the accident must result from the ownership, maintenance or use of either an “insured vehicle” or a “nonowned vehicle.” The Campanella complaint alleges that Edward negligently operated a 1971 Plymouth Duster. Emcasco admits in its brief that the vehicle is actually a 1972 Plymouth Duster. The record shows that the only vehicle covered as an “insured vehicle” under the Country policy is a 1979 Pontiac. The Campanella complaint further alleges that the automobile at issue was owned by John; this allegation affirmatively removes the possibility that John would be covered under the “nonowned vehicle” provisions of the Country policy.

In sum, the Dorsey complaint fails to allege an action against an insured and the Campanella complaint alleges an action which falls outside the potential coverage of the Country policy. Country could not be estopped from asserting these defects because they relate to the scope of coverage afforded by the definitions contained in the policy, rather than exclusions. See Graman v. Continental Casualty Co. (1980), 87 Ill. App. 3d 896, 901-02, 409 N.E.2d 387, 391-92.

Emcasco, therefore, has failed to show that the trial court erred in dismissing its complaint for a declaratory judgment. For all of the aforementioned reasons, we affirm the judgment of the circuit court of Cook County.

Affirmed.

BUCKLEY and O’CONNOR, JJ., concur.


source: Caselaw Access Project

license: Public Domain

text:
    JOAN CHESNICK, Plaintiff-Appellant, v. SAINT MARY OF NAZARETH HOSPITAL et al., Defendants-Appellees.
    First District (1st Division)
    No. 1—89—1549
    Opinion filed March 18, 1991.

      Jacob N. Gross, of Chicago, for appellant.
    Hinshaw, Culbertson, Moelmann, Hoban & Fuller, of Chicago (James E. McFarland and Tom H. Luetkemeyer, of counsel), for appellees.
   JUSTICE CAMPBELL

delivered the opinion of the court:

Plaintiff Joan Chesnick appeals an order of the circuit court of Cook County granting summary judgment in favor of defendants Saint Mary of Nazareth Hospital (Hospital) and Thomas Meirink on plaintiffs claim of breach of contract.

The facts giving rise to this appeal are as follows.

On October 8, 1984, plaintiff was hired by defendant Hospital as nurse-administrator and occupational health nurse of the Hospital’s occupational and environmental medicine department. On November 1, 1984, plaintiff received a copy of the Hospital’s employee manual. That manual contained the following provisions:

“SPECIAL UNPAID ABSENCE
* * *
Absence of four or more consecutive weeks:
1. A leave of absence does not guarantee that your job will be available to you when you return ***. ***
* * *
3. If you do not return to work on the date of expiration of your leave of absence, you will be automatically terminated.
* * *
SEPARATIONS AND DISCIPLINARY ACTION
* * *
5. Disciplinary Procedures])] For violation of the Hospital code of conduct, the Hospital will employ any of the following disciplinary actions: written warning, suspension, or discharge from the Hospital. ***
d. Separation of Service:
* * *
The department head will notify you of any dismissal in writing, together with the reasons for the dismissal. All dismissals are effective on the date of the dismissal notice.”

Plaintiff was also given a document which read as follows:

“I have received a copy of the Saint Mary of Nazareth Hospital Center Employee Handbook. I will accept the responsibility for reading this handbook to become familiar with the rules, regulations and benefits of the Hospital. I understand that the employment relationship between myself and the Hospital is not contractual in nature.
I understand that the Personnel policies of Saint Mary of Nazareth Hospital Center are presented in this handbook in summarized form. For more information about any policy I may consult with my superior, department head of the Personnel Department. These policies are subject to change without my prior notification, and I am subject to policy changes as they are made.
Name_ Date _
Please return this page to the Personnel department after you have signed it.”

Plaintiff signed this document on November 1, 1984, and returned it to the Hospital.

On June 9, 1986, the personnel department granted plaintiff a 90-day leave of absence. A leave of absence form in the record is stamped “ENTERED JUN 111986.”

Plaintiff was subsequently terminated from her employment with the Hospital. The record contains conflicting dates of termination. On July 21, 1986, plaintiff telephoned defendant Meirink to inform him that she was ready to return to work. Plaintiff alleges that Meirink told her that she had been terminated from her employment and that her replacement had been hired. Meirink states in a deposition that he told plaintiff that her position had been filled, but denies that plaintiff was terminated at this time.

On September 4, 1986, defendant Hospital sent plaintiff a letter regarding her intention to return to work and informing her that unless she contacted the personnel department, she would be automatically terminated on September 10, 1986. In response to a telephone inquiry by plaintiff, defendant Hospital sent plaintiff a letter dated September 23, 1986, which listed nursing positions open at the Hospital and stated that if plaintiff did not contact the Hospital by October 3, 1986, that date would be her termination date. Plaintiff’s attorney sent the Hospital a letter stating that the Hospital’s offer of other positions was not a good-faith offer. Defendant Hospital later sent a letter dated October 10, 1986, stating that plaintiff’s failure to contact the Hospital in reply to the September 23, 1986, letter had resulted in her termination.

A “termination of service” form, stamped “ENTERED OCT 6 1986,” has “Failure to return from LOA” indicated as the reason for separation, indicates that plaintiff was “eligible to re-employ” and indicates June 12, 1986, as the last day of work. Defendant Meirink stated in his deposition that a computer terminal in the personnel department indicated that plaintiff’s date of termination was June 12, 1986.

Plaintiff filed suit against defendants on October 30, 1986, alleging breach of contract and retaliatory discharge. On May 23, 1989, after proceedings on the matter, the trial court granted defendants’ motion for summary judgment on both counts. Plaintiff timely filed a notice of appeal as to the breach of contract claim only.

Therefore, the sole issue on appeal is whether the trial court erred in granting summary judgment regarding plaintiff’s breach of contract claim. Plaintiff contends that she may maintain a breach of contract claim because a reasonable person could believe that her employee handbook constituted a contractual offer. Summary judgment is appropriate where there are no issues of material fact and judgment for the moving party is correct as a matter of law. E.g., Futurevision, Inc. v. Dahl (1985), 139 Ill. App. 3d 61, 487 N.E.2d 127.

Generally, an employment relationship of indefinite duration is terminable “at will” by either party with or without cause. (Duldulao v. Saint Mary of Nazareth Hospital Center (1987), 115 Ill. 2d 482, 489, 505 N.E.2d 314, 317; Palmateer v. International Harvester Co. (1981), 85 Ill. 2d 124, 128, 421 N.E.2d 876, 878.) Nevertheless, the common law presumption of “at will” employment can be overcome by demonstrating that the parties contracted to the contrary. (Duldulao, 115 Ill. 2d at 489, 505 N.E.2d at 318.) As our supreme court stated in Duldulao:

“[A]n employee handbook or other policy statement creates enforceable contractual rights if the traditional requirements for contract formation are present. First, the language of the policy statement must contain a promise clear enough that an employee would reasonably believe that an offer has been made. Second, the statement must be disseminated to the employee in such a manner that the employee is aware of its contents and reasonably believes it to be an offer. Third, the employee must accept the offer by commencing or continuing to work after learning of the policy statement. When these conditions are present, then the employee’s continued work constitutes consideration for the promises contained in the statement, and under traditional principles a valid contract is formed.” Duldulao, 115 Ill. 2d at 490, 505 N.E.2d at 318.

The Duldulao court further noted:

“[T]he handbook contains no disclaimers to negate the promises made. In fact, the introduction to the handbook states just the opposite, that the policies in the handbook ‘are designed to clarify your rights and duties as employees.’ (Emphasis added.)” (Duldulao, 115 Ill. 2d at 491, 505 N.E.2d at 319.)

The three factors which establish contract formation as set forth in Duldulao also apply where disclaiming language is at issue. Anders v. Mobil Chemical Co. (1990), 201 Ill. App. 3d 1088, 1095, 559 N.E.2d 1119, 1122.

Prior decisions of this court have held the presence of disclaimers in an employee handbook preclude the formation of a contract. (See Anders, 201 Ill. App. 3d 1088, 559 N.E.2d 1119; Hogge v. Champion Laboratories, Inc. (1989), 190 Ill. App. 3d 620, 546 N.E.2d 1025; Bennett v. Evanston Hospital (1989), 184 Ill. App. 3d 1030, 540 N.E.2d 979; Moore v. Illinois Bell Telephone Co. (1987), 155 Ill. App. 3d 781, 508 N.E.2d 519, appeal denied (1987), 116 Ill. 2d 562, 515 N.E.2d 112.) For example, in Anders, this court held that an employee manual was not a contract where a disclaimer appeared in the front of the manual, even though the manual provided for general disciplinary procedures and listed specific acts of punishable misconduct. See Anders, 201 Ill. App. 3d at 1091, 559 N.E.2d at 1123.

In the instant appeal, the record indicates that plaintiff signed a document containing disclaimers concurrently with her receipt of the employee handbook. That document reads “I understand that the employment relationship between myself and the Hospital is not contractual in nature.” Even if this statement could be considered ambiguous when viewed in isolation, the portion of the statement which states that the Hospital’s “policies are subject to change without my prior notification, as [employees] are subject to policy changes as they are made” makes it reasonably clear that the employee handbook is not intended to promise employees anything, particularly when combined with the earlier statement that the employment is not intended to be contractual in nature. Moreover, as the Hospital’s brief makes clear, the record shows that the Hospital, which was also the defendant in Duldulao, has systematically deleted or altered the language which the Duldulao court held created an enforceable contract.

Plaintiff urges that the disclaimer in this case should be strictly construed against the drafter, likening the disclaimer to an exculpatory clause. (See Berwind Corp. v. Litton Industries, Inc. (7th Cir. 1976), 532 F.2d 1.) Plaintiff’s citation of Berwind, however, begs the question. Berwind is concerned with contractual provisions which seek to limit a party’s tort liability; to reach that issue, the existence of a contract must be proven or stipulated. In contrast, the disclaiming language here attempts to prevent contract formation. Plaintiff cannot use a rule concerning the interpretation of a contract to establish the existence of a contract. See Anders, 201 Ill. App. 3d at 1097, 559 N.E.2d at 1124.

Plaintiff then argues that the manual contains definite procedures for dismissal of the type previously held to constitute a clear promise of continuing employment. (See Tolbert v. St. Francis Extended Care Center (1989), 189 Ill. App. 3d 503, 506-07, 545 N.E.2d 384, 386 (discussing Doe v. First National Bank (7th Cir. 1989), 865 F.2d 864).) However, a manual which merely provides a list of rules, the violation of which may give rise, to discipline, along with the types of separation of employment which may occur, does not rise to the level of a contract. (Harrell v. Montgomery Ward & Co. (1989), 189 Ill. App. 3d 516, 518, 545 N.E.2d 373, 377.) Moreover, where disclaimers are at issue, the fact that a manual may delineate specific disciplinary procedures does not automatically compel this court to hold the manual enforceable as a contract. See Anders, 201 Ill. App. 3d 1088, 559 N.E.2d 1119.

In Perman v. ArcVentures, Inc. (1990), 196 Ill. App. 3d 758, 554 N.E.2d 982, upon which plaintiff heavily relies, this court denied summary judgment on the issue of whether a disclaimer precluded a reasonable person from believing the policy manual to be an offer. The disclaimer in that case was “not set off from the rest of the text, printed in capital letters or titled.” (Perman, 196 Ill. App. 3d at 764, 554 N.E.2d at 987.) The manual in Perman provided that “ ‘discharges must be approved in advance by the director of employee relations or designees, and are subject to employee appeal through established grievance procedures [ ]’ ([ejmphasis added[ ])” and that it was the “ ‘policy of the Medical Center to assure every employee of the right of appeal, through an established grievance procedure from an unfavorable decision affecting his employment.’ (Emphasis added.)” Perman, 196 Ill. App. 3d at 765, 554 N.E.2d at 985.

In Anders, this court affirmed a summary judgment order on the basis that the handbook at issue did not constitute a clear promise of more than “at-will” employment. The Anders handbook listed specific acts of punishable misconduct and:

“ ‘Generally, a five-step procedure will be used in taking corrective action so that individuals will have an opportunity to correct their behavior. However, a number of acts of misconduct are so universally recognized as being serious violations of accepted behavior that the commission of these acts may subject a person to immediate discharge.’ ” (Anders, 201 Ill. App. 3d at 1091, 559 N.E.2d at 1120.)

The manual then went on to detail each step of the disciplinary procedure, including provisions for review and approval of disciplinary action by management, as well as a right of appeal. Anders, 201 Ill. App. 3d at 1091-92, 559 N.E.2d at 1120.

In this case, the record shows that the manual lists rules which may give rise to discipline. The manual provides that one of several methods “will” be employed in the event of a rule violation, though the manual also provides that each method “may” or “can” be used in a given instance. The manual here further provides:

“Normally, three warning notices for any reason within a 12 month period (from the date of your first warning) will result in dismissal. Cases of immediate dismissal do not require prior warnings.”

Finally, the manual provides that the Hospital “will” give written notice of a dismissal and the reasons therefor.

The record therefore indicates that the language in the manual here was at least superficially similar to that used in the Perman and Anders manuals. However, the disclaimer in Perman was not set off from the rest of the text, put in capital letters or titled. In contrast, the disclaimer in this case was contained on a separate page signed by the plaintiff. Based on the record on appeal, this manual more closely resembles the Anders noncontract than the Perman contract.

Finally, in her reply brief, plaintiff discusses Mitchell v. Jewel Food Stores (1989), 189 Ill. App. 3d 450, 545 N.E.2d 337, rev’d (1990), 142 Ill. 2d 152. Mitchell, however, did not involve the use of a disclaimer in an employee manual. Moreover, the manual in Mitchell indicated that the employee could not be fired without just cause (Mitchell, 142 Ill. 2d at 157); plaintiff has not pointed to a similar promise in the manual at issue here.

In sum, plaintiff has failed to show that the trial court erred in ruling that the handbook at issue here was insufficient to overcome the presumption of “at-will” employment. For all of the aforementioned reasons, the judgment of the circuit court of Cook County is affirmed.

Affirmed.

BUCKLEY and O’CONNOR, JJ., concur.


author: PRESIDING JUSTICE SCARIANO

text:
    DAWN HOGLUND, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.
    First District (2nd Division)
    No. 1—89—1572
    Opinion filed March 19, 1991.

      Beermann, Swerdlove, Woloshin & Barezky, of Chicago (Howard A. London and Joel M. Horwich, of counsel), for appellant.
    James J. Hoffnagle, of Taylor, Miller, Sprowl, Hoffnagle & Merlette, of Chicago, for appellee.
   PRESIDING JUSTICE SCARIANO

delivered the opinion of the court:

Plaintiff, Dawn Hoglund, was injured when a motorcycle on which she was a passenger and which was being driven by Tammy Marko was involved in an accident with a vehicle driven by Barbara Ether-ton. Plaintiff was 14 years old at the time of the incident and was insured under an auto policy issued by State Farm Mutual Auto Insuranee Co. (State Farm) to her father. In her complaint, plaintiff alleged that it was Marko’s negligent operation of the motorcycle that caused the collision, resulting in damages to her in excess of $200,000.

Etherton was covered under a policy of automobile insurance with applicable liability limits of $100,000, the full amount of which was paid to plaintiff in settlement of that claim. The motorcycle driven by Marko was uninsured on the date of the accident; accordingly, plaintiff, through her counsel, made a written demand on State Farm and offered to settle her claim for the $100,000 limits of the uninsured motorist provisions of her father’s policy. State Farm, however, denied coverage based on the following set-off and subrogation provisions of the policy:

“Limits of Liability
CoverageU * * *
2. Any amount payable under this coverage shall be reduced by any amount paid or payable to or for the insured:
a. by or for any person or organization who is or may be held legally liable for the bodily injury to the insured;
* * *
Conditions
* * *
3. Our Right to Recover Our Payments

* * *

b. Under uninsured motor vehicle coverage:
(1) we are subrogated to the extent of our payments to the proceeds of any settlement the injured person recovers from any party liable for the bodily injury.” (Emphasis in original.)

State Farm therefore informed plaintiff that because she accepted $100,000 from Etherton, it could, pursuant to the above-quoted set-off provision, reduce its coverage to her by $100,000, and thus, owed her nothing.

Plaintiff then filed a complaint for declaratory judgment, requesting the trial court to declare that, notwithstanding the set-off provision, State Farm was obligated to indemnify her for any damages in excess of the $100,000 she received from Etherton. In response, State Farm filed a motion for judgment on the pleadings, to which plaintiff countered with a cross-motion for the same relief. After the court granted State Farm its motion and denied plaintiff’s, she appealed..

The only question for our review is whether, in the factual context of this case, the set-off and/or subrogation terms of the insurance contract are legally enforceable. Three statutory provisions are pertinent to plaintiffs claim. First, our Insurance Code provides that no automobile insurance policies shall be issued or renewed for cars “registered or principally garaged in this State unless [uninsured motorist] coverage is provided therein or supplemental thereto, in limits for bodily injury or death set forth in Section 7—203 of the Illinois Vehicle Code.” (Ill. Rev. Stat. 1983, ch. 73, par. 755a.) At the time plaintiff was injured, section 7—203 of the Vehicle Code, the financial responsibility law, required that every insurance policy cover the insured in an amount “not less than $15,000 because of bodily injury to or death of any one person in any one motor vehicle accident.” Ill. Rev. Stat. 1983, ch. 95½, par. 7—203.

The Insurance Code further provides:

“No policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be renewed or delivered or issued for delivery in [this] State with respect to any motor vehicle registered or principally garaged in this State unless uninsured motorist coverage as required in Section 143a [Ill. Rev. Stat. 1983, ch. 73, par. 755a] of this Act is offered in an amount up to the insured’s bodily injury liability limits.” (Ill. Rev. Stat. 1983, ch. 73, par. 755a-2(1).)

In accordance with this statute, State Farm offered plaintiff’s father uninsured motorist coverage up to $100,000, the bodily injury liability limits of his policy and, as noted above, he acquired such coverage.

State Farm, however, in support of its contention that it owes plaintiff nothing, cites section 143a(4) (Ill. Rev. Stat. 1983, ch. 73, par. 755a(4)), which provides:

“In the event of payment to any person under the coverage required by this Section and subject to the terms and conditions of such coverage, the insurer making such payment shall, to the extent thereof, be entitled to the proceeds of any settlement or judgment resulting from the exercise of any rights of recovery of such person against any person or organization legally responsible for the bodily injury or death for which such payment is made ***.”

State Farm also cites Ackermann v. Prudential Property & Casualty Insurance Co. (1980), 83 Ill. App. 3d 590, which applies an earlier version of the statute we have just quoted (Ill. Rev. Stat. 1975, ch. 73, par. 755a(3), now par. 755a(4)), but both the statute and the facts implicated in that case are nearly identical to those we encounter in the case at bar. The plaintiff in Ackermann, as in this case, was injured while he was a passenger in the vehicle of an uninsured motorist, and the amount available to him from the insurance company of the other vehicle involved in the accident was inadequate to compensate him for his injuries. The plaintiff sought uninsured motorist benefits from his carrier, but it refused to pay, relying upon the provisions of the uninsured motorist statute referred to above (Ill. Rev. Stat. 1975, ch. 73, par. 755a(3)) and a provision in the policy similar to the one at issue in the instant case. The court held that the setoff was proper. 83 Ill. App. 3d at 594.

However, State Farm overlooks that Ackermann was decided in 1980, before the effective date of section 143a—2(1) of the Insurance Code (Ill. Rev. Stat. 1983, ch. 73, par. 755a—2(1)), set forth above, which, as noted earlier, adds to the requirement that policy holders carry a minimum amount of uninsured motorist coverage, the corollary obligation upon carriers that they offer their insureds additional uninsured motorist coverage up to the liability limits of their policies. Moreover, applying Ackermann in the manner suggested by State Farm would contravene the public policy expressed in our uninsured motorist law and consistently referred to and upheld by our supreme court in cases construing that law. In what appears to be the earliest of these pronouncements, and, incidentally, a case cited by State Farm, the court stated:

“It would appear that the purpose of the provision in our Insurance Code requiring that every automobile liability policy shall contain uninsured motorist vehicle coverage in an amount not less than the limits described in the Financial Responsibility Law [citation] was intended to place the policy holder in substantially the same position he would occupy, so far as his being injured or killed is concerned, if the wrongful driver had had the minimum liability insurance required by the Financial Responsibility Act.” (Ullman v. Wolverine Insurance Co. (1970), 48 Ill. 2d 1, 4 (citing cases from other jurisdictions).)

(See also Severs v. Country Mutual Insurance Co. (1982), 89 Ill. 2d 515, 519.) Furthermore, “[t]he purpose underlying a statute cannot be circumvented by the insertion of a contrary or restricting provision in an insurance policy.” Severs, 89 Ill. 2d at 520.

And in another case relied upon by State Farm, namely, Glidden v. Farmers Automobile Insurance Association (1974), 57 Ill. 2d 330, the court reiterated that policy, as it has in all of its discussions of the issue involved in this case. Although Glidden allowed the insurance company to subrogate “to the rights of the insured to any proceeds recovered from one legally responsible for the injury” (57 Ill. 2d at 338), nowhere does the court hold that such subrogation would be allowed if it decreased the insured’s recovery below the amount he would have received had the tort-feasor been insured. On the contrary, the court stated that “the public policy expressed by our uninsured-motorist statute is that the insured be provided coverage which would compensate him, in event of injury by an uninsured motorist, to at least the same extent as had he been injured by a motorist who was insured in compliance with the Financial Responsibility Law.” 57 Ill. 2d at 335.

The decisions of other States support this holding. In a case which tracks the statutory and contractual provisions of the case at bar, the supreme court of New Hampshire held that the insurer had

“a right of ‘subrogation’ only as to amounts recovered from the uninsured motorist against whose liability it indemnified its insured; and not the right which the defendant asserts, based upon a literal reading of the section, to set off against the required uninsured motorist coverage up to its dollar limit any sums recovered from any source responsible for the injury including an insured motorist. Adoption of the defendant’s contention would effectively nullify the coverage ostensibly provided by the policy, since because of the $15,000 paid by the carrier for the Virginia motorist, the defendant would pay nothing by reason of the required $10,000 uninsured motorist coverage.
* * *
[If the insurance company were to prevail], the carrier obligated to furnish uninsured motorist coverage would be subsidized at the expense of its insured, by appropriation of his recovery from an insured third-party motorist, without regard to the former’s prior and complete indemnification. This interpretation of the statute would result in nullification of the established legislative purpose to; provide a minimum of $10,000 of uninsured motorist coverage and cannot be adopted. [Citations.]” Raitt v. National Grange Mutual Insurance Co. (N.H. 1971), 285 A.2d 799, 802.

Thus, State Farm’s reliance upon section 143a(4) of the Insurance Code (Ill. Rev. Stat. 1983, ch. 73, par. 755a(4)) is not well grounded because such subrogation statutes are “not concerned with other joint tort-feasors.” Harthcock v. State Farm Mutual Automobile Insurance Co. (Miss. 1971), 248 So. 2d 456, 459 (construing a statutory subrogation provision identical in substance to the one in the instant case).

State Farm cites Schutt v. Allstate Insurance Co. (1985), 135 Ill. App. 3d 136, in support of its allegation that its set-off and subrogation provisions are enforceable; but although Schutt allowed the insurance company to set off uninsured motorist coverage against bodily injury liability coverage, the court noted “that the setoff clause only acts to prevent double recovery in accordance with principles of Illinois law on damages and does not prejudice a plaintiff who has sustained injuries as a result of the negligence of an uninsured motorist.” (135 Ill. App. 3d at 140.) Here, in contrast, State Farm by its motion for judgment on the pleadings does not contest the total amount of plaintiff’s damages and, therefore, is not seeking to prevent double recovery.

Thatcher v. Eichelberger (1981), 102 Ill. App. 3d 231, also cited by State Farm, is distinguishable because, as in Ackermann, the insurance policies in that case were issued before the effective date of section 143a—2(1) of the Insurance Code (Ill. Rev. Stat. 1983, ch. 73, par. 755a—2(1)), which gave insureds a statutory right to purchase extra uninsured motorist coverage. Furthermore, Thatcher did not address whether subrogation rights can be used by insurers with respect to payments made to injured parties by insured motorists. More important, in Thatcher, unlike in the case at bar, plaintiff voluntarily signed a release and trust agreement in which she agreed to pay over to State Farm any monies she later collected, and the court held that the agreement was binding. 102 Ill. App. 3d at 237.

As noted earlier, State Farm’s position is that it pay nothing at all, i.e., neither the statutory minimum nor the greater coverage. Accordingly,' we deem State Farm to be fully cognizant that although the rulings in the cases we have cited and discussed above apply laws which require the purchase of uninsured motorist coverage in a specified amount, while the critical statute in the case at bar (Ill. Rev. Stat. 1983, ch. 73, par. 755a—2(1)) provides merely an option for the acquiring of such insurance in a greater than the required amount, the result reached by the court need not be different. In enacting that provision of the Code, the statutory objective of the General Assembly was incontestably to encourage full protection of innocent persons against uninsured and financially irresponsible motorists. It is beyond dispute, then, that the public policy underlying that provision is supremely achieved by making available to the consumer uninsured motorist coverage that matches his bodily injury liability limits. Therefore, while the purchase of coverage over and beyond the required amount is an option that may be declined by the insured, once the option is exercised the carrier should not be permitted to restrict the class of persons which the legislature intended to benefit. Consequently, we find State Farm’s attempted evasion of its contractual liability to be repugnant to the intent of the legislature. Moreover, “insurance companies should not be permitted to collect premiums for a given amount of coverage and thereafter apply limiting clauses to absolve their liability to the insured. [Citation.]” Maid v. Illinois Farmers Insurance Co. (1981), 101 Ill. App. 3d 1065, 1067.

Accordingly, because, if enforced, they would violate the public policy inherent in the statutes referred to above, we conclude that State Farm’s subrogation and set-off provisions are totally unenforceable in the instant case (Wilhelm v. Universal Underwriters Insurance Co. (1978), 60 Ill. App. 3d 894, 901), and that plaintiff is entitled to recover the entire $100,000 benefit from State Farm under the provisions of her policy.

Reversed and remanded for further proceedings not inconsistent with the views expressed herein.

Reversed and remanded.

HARTMAN and DiVITO, JJ., concur.


author: JUSTICE WHITE

text:
    ALFRED S. REGNERY, Plaintiff-Appellee, v. WALTER C. REGNERY et al., Defendants-Appellants (Gretchen Regnery et al., Plaintiffs; David R. Myers et al., Defendants).
    First District (3rd Division)
    1—89—2087
    Opinion filed March 20, 1991.

      Arvey, Hodes, Costello & Burman, of Chicago (Scott Hodes and Irwin I. Zatz, of counsel), for appellants.
    ■Defrees & Fiske, of Chicago (Timothy J. Riordan, of counsel), for appellee.
   JUSTICE WHITE

delivered the opinion of the court:

Appellants Gretchen Regnery, Anne Regnery, Yerla Regnery, Lynn Regnery, Peter Regnery, and other shareholders of Joanna Western Mills Company (the Regnerys) appeal from an order of the circuit court denying their motion for summary judgment and granting summary judgment in favor of Alfred Regnery (Alfred) in Alfred’s declaratory judgment action. The Regnerys argue that the trial court erred in finding that Alfred was authorized to act as the Regnerys’ agent in settling a lawsuit filed by them.

The Regnerys were shareholders in Joanna Western Mills Company (JWM). In August 1981, several JWM shareholders, including Yerla and Lynn Regnery, entered into a voting trust agreement. Pursuant to the agreement 3,745 shares of JWM stock were deposited into a voting trust and Frederick Regnery, Henry Regnery, and David Meyers were named as trustees. The voting trust agreement also provided that any decision regarding a sale of any of the shares of JWM would require the unanimous consent of the trustees.

In September 1983, there were 7,4831/2 shares of JWM stock outstanding. On September 13, the JWM board of directors adopted a resolution calling for the sale of an additional 600 shares of common stock to Frederick and David Meyers (the Meyerses) at a price of $500 per share. At this time, Frederick Meyers was the president of JWM and the owner of five shares of JWM common stock, while David Meyers was the vice-president and the owner of §2xk shares of common stock. A special shareholder meeting was held on September 26, at which two of the trustees under the voting trust agreement, David Meyers and Henry Regnery, voted the 3,745 trust shares in favor of the resolution. The third trustee, Frederick Regnery (Frederick), opposed both the resolution and the vote of the trust shares in favor of the sale. A total of 5,211 shares was voted in favor of the resolution, and the sale to the Meyerses was approved.

In 1986, negotiations began for the sale of all of JWM’s stock. Proposals for the purchase of the stock were submitted by Frederick and by Kenner & Company, Inc. (Kenner). At a special board of directors meeting held August 15, 1986, the board approved the Kenner proposal. Also at that meeting, the board authorized a payment of $150,000 to Frederick in exchange for his covenant not to sue JWM, its officers, or shareholders in connection with the Kenner acquisition or the issuance of JWM’s capital stock. The board also proposed that Alfred be appointed agent for the shareholders in connection with the Kenner acquisition.

On August 21, 1986, an acquisition agreement was executed, providing for the acquisition and merger of JWM into a wholly owned subsidiary of Kenner. Under the terms of the acquisition agreement, JWM shareholders would be paid $7,766 for each share of common stock they owned.

In September 1986, copies of an agreement of merger, escrow agreement, and agency agreement were sent to JWM shareholders along with a consent agreement. The consent agreement authorized the execution of the merger, escrow, and agency agreements and shareholders were instructed to sign the consent if they approved of these agreements. The consent agreement also authorized the payment of $150,000 to Frederick in exchange for his release of “all claims against this corporation, its directors, officers and stockholders.”

The agency agreement appointed Alfred as agent on the shareholders’ behalf and provided that he would have full power and authority to act as agent for the JWM shareholders in matters pertaining to the acquisition, merger, escrow, and agency agreements and the transactions contemplated thereunder. The agreement also provided that Alfred would have.the authority to settle or dispose of any liability arising with respect to those agreements, including Frederick’s claims and the settlement thereof, and claims asserted against the shareholders in connection with the sale of company stock.

On September 12, the shareholders executed the consent agreement, thereby approving the merger and acquisition and appointing Alfred as their agent in accordance with the agency agreement.

The sale to Kenner was closed on October 9, 1986, and the JWM shareholders each received $7,097 in cash per share owned. The remaining $669 per share was paid into an escrow account to cover certain corporate liabilities.

In late October, another special meeting of the JWM board of directors was held. At the meeting, after the board acknowledged that Frederick “may have claims, charges and causes of action arising from the sale of stock to Kenner & Company, Inc. and past issuance or repurchases of stock,” Henry Regnery, chairman of the board of JWM; Alfred, on behalf of the shareholders of JWM; and Frederick, in exchange for the agreed upon payment of $150,000, executed a settlement agreement and covenant not to sue.

The settlement agreement and covenant stated that Frederick “waives and releases any claims, charges or causes of action of any nature whatsoever known to him, which he may have against the Company *** with respect to any matter whatsoever arising out of or in connection with previous issuances or repurchases of the Company’s stock or the Kenner Acquisition or any other acquisition effected before January 1, 1987.”

Eight months later, in July 1987, the Regnerys filed suit against the Meyerses in circuit court. The Regnerys’ “Complaint Against Trustee And For Accounting” alleged that the 1983 sale of 600 shares of stock to the Meyerses constituted a common law breach of trust and a breach of the express terms of the 1981 voting trust agreement. The Regnerys sought recovery of the full amount paid by Kenner to the Meyerses for the 600 shares and punitive damages for the breach of trust.

The Meyerses filed a motion for judgment on the pleadings alleging that the cause of action advanced by the Regnerys belonged to JWM and that, because the Regnerys were no longer shareholders of JWM, their action could not proceed. This motion was denied.

Following the denial of their motion, the Meyerses filed their answer and affirmative defenses. The Meyerses alleged that the Regnerys were estopped from suing by their conduct in authorizing and paying part of the settlement of Frederick’s claims against JWM and in inducing the Meyerses to consent to the settlement of Frederick’s claims. The Meyerses also argued that the Regnerys lacked standing to bring suit because, under the terms of the agency agreement, they transferred to Alfred their right to bring any action arising from the sale of shares of JWM.

The Meyerses also filed a counterclaim against Verla, Gretchen, Anne, and Peter Regnery and a third-party complaint against Frederick. In the counterclaim, the Meyerses alleged that the Regnerys’ suit was in violation of the consent signed by all JWM shareholders, including Verla, Gretchen, Anne, and Peter. In their third-party complaint, the Meyerses alleged that Frederick instigated the suit against them in violation of his settlement agreement and covenant not to sue.

At the same time, the Meyerses contacted Alfred and requested that he release the Regnerys’ claims against them. The Meyerses’ request was based on their belief that, under the agency and consent agreements, the Meyerses had the right to call upon Alfred to defend the claims against them and Alfred had the power to dispose of the claims because they arose in connection with the sale of the company stock. The Meyerses later made a written demand on Alfred: (1) to repay any sums found to be due and owing in connection with the Regnerys’ lawsuit; (2) to assume the defense of the Regnerys’ lawsuit or repay the Meyerses for the cost of their defense; and (3) to execute a release of the claims asserted in the Regnerys’ lawsuit, pursuant to the authority granted to him under the shareholders’ consent.

In response to the Meyerses’ demand, Alfred filed a complaint for declaratory judgment in the circuit court naming as defendants the Meyerses, the Regnerys, and all former JWM shareholders. In his complaint, Alfred stated that he believed that the consent agreement granted him the authority to release the Meyerses from all of the claims being asserted by the Regnerys and requested that the court enter a judgment authorizing him to execute a release of the claims.

The declaratory judgment action was consolidated with the Regnerys’ action and, subsequently, Alfred and the Regnerys filed motions for summary judgment on Alfred’s complaint. At a hearing on the parties’ motions, the trial court found that because the Regnerys were asserting the same claims that were asserted by Frederick, the court was required to grant Alfred’s motion. In the written order denying the Regnerys’ motion and granting Alfred’s, the court stated that Alfred was the agent of the Regnerys for the purposes of settling the claims asserted by the Regnerys in their action against the Meyerses and that Alfred was authorized by the provisions of the agency agreement to execute and deliver a release of the Regnerys’ claims against the Meyers.

In their appeal from the trial court’s order, the Regnerys argue that the court erred when it denied their motion for summary judgment and entered judgment in favor of Alfred. While the denial of a motion for summary judgment ordinarily may not be appealed, such a denial is reviewable where the case is before this court on appeal from a final judgment and there has been no trial or evidentiary hearing. (International Association of Machinists & Aerospace Workers, District Lodge No. 140 v. Chesire/A Xerox Co. (1984), 125 Ill. App. 3d 350, 465 N.E.2d 981.) Thus, we may consider the questiqn of whether the trial court erred in denying the Regnerys’ motion for summary judgment.

Under section 2—1005 of the Code of Civil Procedure (Ill. Rev. Stat. 1989, ch. 110, par. 2—1005), a court may enter a summary judgment for a moving party where the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. The sole function of a court of appeal in reviewing the trial court’s entry of a summary judgment is to determine whether the trial court correctly ruled that no genuine issue of material fact had been raised and, if no such issue was raised, then the reviewing court must determine whether judgment was correctly entered for the moving party as a matter of law. (Newell v. Field Enterprises, Inc. (1980), 91 Ill. App. 3d 735, 415 N.E.2d 434; Coomer v. Chicago & North Western Transportation Co. (1980), 91 Ill. App. 3d 17, 414 N.E.2d 865.) We find that the question of whether Alfred is authorized to release the Regnerys’ claims against the Meyerses is a proper one for summary judgment.

The nature and extent of an agency is generally a question of fact to be decided by the trier of fact. (Wargel v. First National Bank (1984), 121 Ill. App. 3d 730, 460 N.E.2d 331; St. Ann’s Home for the Aged v. Daniels (1981), 95 Ill. App. 3d 576, 420 N.E.2d 478.) However, where the agency authority has been conferred in writing and there is no dispute concerning the parties’ relationship, the question becomes one of law. Wargel, 121 Ill. App. 3d at 736; 3 Am. Jur. 2d Agency §373 (1986).

In the present case, there is no dispute concerning Alfred’s appointment as agent on behalf of the JWM shareholders. The only question raised concerns the extent of Alfred’s authority under that appointment, i.e., whether Alfred was authorized by the agency agreement to release the claims asserted by the Regnerys against the Meyerses. The Meyerses argued and the trial court found that Alfred was authorized to release the Regnerys’ claims because they were the same as the claims asserted by Frederick. We find nothing in the record that supports the trial court’s conclusion.

The only references in the record to Frederick’s claims, apart from those made in the agency agreement itself, are contained in the covenant not to sue; the consent agreement approved by the shareholders; the minutes of the October 24, 1986, board of directors meeting; and a summary sent to the shareholders prior to the acquisition and merger. These references state only that Frederick may have certain claims against JWM in connection with past sales of stock and in connection with the Kenner acquisition. Nothing in these references provides any indication of what precisely Frederick’s claims were, and we find that, in the absence of any such indications, the trial court erred in concluding that Frederick’s claims and those of the Regnerys were the same.

Our decision does not rest solely on our finding that the trial court lacked support for its conclusion that the claims were the same. We also find that the agency agreement does not authorize Alfred’s release of the Regnerys’ claims against the Meyerses.

The agency agreement provides that Alfred has the authority to act on behalf of the shareholders in

“all matters pertaining to the Acquisition Agreement, the Agreement of Merger, the Escrow Agreement, [the agency] agreement and the consummation of the transactions contemplated under each of said Agreements including, without limit, the authority: (a) to pay, defend, compromise, settle or otherwise dispose of any liability, cost or expense arising with respect to the Acquisition Agreement, Agreement of Merger, Escrow Agreement, [the agency] agreement and the consummation of the transactions contemplated under each of said Agreements, including without limitation *** any claim asserted against the Stockholders in connection with the sale of company stock, including, without limitation, the claims of Frederick Regnery.”

Alfred contends that the agency agreement authorizes him to release the Regnerys’ claims against the Meyerses because they are “claims asserted against the stockholders in connection with the sale of company stock.” We cannot agree.

Where an agent is granted the authority to compromise or settle claims, in exercising that authority, he must pursue strictly the terms and conditions of his mandate. (2A C.J.S. Agency §234 (1972).) A strict reading of the terms and conditions of the agency agreement provides no authority for Alfred’s release of the Regnerys’ claims.

The agency agreement clearly restricts Alfred’s authority to the disposal or settlement of only those claims “pertaining to the Acquisition agreement, the Agreement of Merger, the Escrow Agreement, the [agency] agreement and the consummation of the transactions contemplated under each” of the agreements. The Regnerys’ claims against the Meyerses do not fall within this class of claims.

The Regnerys’ complaint, entitled “Complaint Against Trustee and for Accounting,” alleges that trustee David Meyers and his brother, Frederick Meyers, conspired to commit a common law breach of trust and a breach of the express terms of the 1981 voting trust agreement. These allegations bear no relation to the acquisition, merger, escrow, or agency agreements or the transactions contemplated thereunder.

Although it is true that the Meyerses were shareholders of JWM, and the agency agreement states that Alfred may dispose of claims asserted against the shareholders in connection with the sale of stock, we do not believe that the agreement can be read as authorizing Alfred to release the Regnerys’ claims against the Meyerses. Rather, we find that the agreement authorizes Alfred to deal with claims against shareholders only when those claims have arisen in connection with the acquisition, merger, escrow, and agency agreements or the transactions thereunder.

As we stated above, the Regnerys’ claims do not arise under the agreements or transactions covered by the agency agreement, but under the voting trust agreement executed five years earlier in August 1981. Accordingly, we conclude that the trial court erred in finding that the agency agreement authorized Alfred to release the Regnerys’ claims against the Meyerses.

In deciding that the agency agreement did not provide Alfred with the authority to release the Regnerys’ claims against the Meyerses, we are also mindful of the conflict of interest that would arise for Alfred if we were to rule otherwise. The Meyerses have made a demand on Alfred, as their agent, to defend the Regnerys’ claims against them. In response to this demapd, Alfred seeks to act as the Regnerys’ agent and execute a release of their claims against the Meyerses. We believe this would be improper.

It is well settled in agency law that the relationship between a principal and agent is one of trust and confidence and that the agent owes a duty of loyalty to his principal. (Estergard, Eberhardt & Ackerman, Inc. v. Carragher (1982), 105 Ill. App. 3d 816, 434 N.E.2d 1185; Willis v. Ruthrauff & Ryan, Inc. (1957), 14 Ill. App. 2d 259, 144 N.E.2d 636; 3 Am. Jur. 2d Agency §210 (1986); 3 C.J.S. Agency §271 (1973).) Where, as in the present case, a conflict arises among joint principals concerning how an agent should act, a breach of this duty of loyalty may occur.

The conflicting interests of two principles can place a strain upon the integrity of the agent, who might be inclined to favor one over the other or to exercise his discretion in accordance with the wishes of one. (Manchester Fire Assurance Co. v. Insurance Co. (1900), 91 Ill. App. 609.) Accordingly, because a principal is entitled to the unbiased judgment of his agent, an agent should not act for two parties whose interests conflict. Manchester Fire Assurance, 91 Ill. App. at 613; Bunn v. Keach (1905), 214 Ill. 259, 73 N.E. 419; 3 Am. Jur. 2d Agency §§241, 242.

In the present case, Alfred seeks to act as the Regnerys’ agent and release their claims against the Meyerses. Such action would be in accordance with the Meyerses’ demand on him, but contrary to the wishes of the Regnerys. In light of the conflict between the Meyerses and the Regnerys, an attempt by Alfred to act for both the Meyerses and the Regnerys in this matter would breach the duty of loyalty he owes the Regnerys as their agent.

In conclusion, we find that the trial court erred in finding that the claims asserted by the Regnerys were the same as those asserted by Frederick. We also find that because the claims asserted by the Regnerys were not covered by the agency agreement and because Alfred could not act on behalf of both the Meyerses and the Regnerys in this matter, the court erred in denying the Regnerys’ motion for summary judgment and entering summary judgment for Alfred.

For the foregoing reasons, the trial court’s judgment in favor of Alfred is reversed. The cause is remanded for entry of judgment for the Regnerys on Alfred’s declaratory judgment complaint and for further proceedings in the Regnerys’ breach of trust action.

Judgment reversed and remanded.

CERDA, P.J., and RIZZI, J., concur.

      Verla Regnery is the mother of Frederick, Gretchen, and Anne Regnery. Alfred Regnery is the son of Henry Regnery. Frederick and David Meyers; Peter and Lynn Regnery; and Frederick, Gretchen, and Anne Regnery are first cousins.


author: JUSTICE LaPORTA

text:
    STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Appellee, v. MARY GRAY et al., Defendants-Appellants.
    First District (6th Division)
    No. 1—90—1099
    Opinion filed March 15, 1991.
    Daniel F. Murray, of Chicago, for appellants.
    Taylor, Miller, Sprowl, Hoffnagle & Merletti, of Chicago (Roger Leroy, of counsel), for appellee.
   JUSTICE LaPORTA

delivered the opinion of the court:

Plaintiff, State Farm Mutual Automobile Insurance Company, brought an action seeking a declaratory judgment of its rights and obligations under an automobile insurance policy for uninsured motorist coverage issued to defendant, Mary Gray. The trial court granted summary judgment in favor of plaintiff, finding that plaintiff was not precluded from asserting the defendants’ late notice of the claim as a basis for denial of coverage under the policy. On appeal, defendants contend that the trial court erred in finding that plaintiff had not waived its right to assert the late notice as a defense.

The record reveals that defendants Mary Gray, Hattye Hayes, and Evelyn Aguillard were involved in an automobile accident on September 22, 1982. When the accident occurred, Gray was driving a vehicle that she did not own. The policy under which Gray was insured provided that an insured must give notice of an accident or loss as soon as reasonably possible, and when claiming uninsured motorist coverage, the insured must report the accident to the police within 24 hours and to the plaintiff within 30 days. The insured was also obligated to allow plaintiff to view the automobile which was involved in the accident.

Defendant Gray reported the incident to her State Farm agent by telephone on August 9, 1984, nearly 23 months after the accident occurred. On August 14, 1984, plaintiff sent Gray a “request for claim service and non-waiver of rights” form. Plaintiff’s cover letter indicated that this form was required before plaintiff could investigate the claim and decide whether or not Gray had coverage for the August 1982 accident.

On August 22, 1984, defendants, through their attorney, sent a letter to plaintiff making a claim under the terms of the uninsured provisions of the policy issued to defendant Gray. On August 29, 1984, plaintiff sent a letter to defendants’ counsel indicating that it required the executed “non-waiver of rights” form in order to investigate whether or not Gray was covered for the August 1982 accident.

Gray executed the “non-waiver of rights” form which provided that plaintiff may have no obligation to defend or indemnify her for claims arising out of the August 1982 accident based upon the late notice of the incident and because the vehicle involved in the accident may not have been covered trader the policy. This document specifically stated that plaintiff reserved its right to deny coverage under the policy. Sometime after the plaintiff’s letter of August 29, 1984, Gray returned the executed “non-waiver of rights” form to plaintiff.

On October 3, 1984, plaintiff sent a letter to defendants’ counsel which stated, inter alia, “we have finished our investigation regarding the question as to whether or not we would be able to afford Ms. Gray coverage under [the] policy [issued to her]. We will be able to afford coverage to Ms. Gray under her uninsured motorist provision.”

In a subsequent letter dated July 24, 1985, plaintiff advised defendants’ counsel that the claim under Gray’s policy was “still under investigation,” and a claim service representative would contact him when the investigation was completed.

In December 1985, defendants’ counsel made a demand for arbitration of the uninsured motorist coverage claims. Plaintiff responded to this demand in February 1986, by advising defendants’ attorney that sworn statements of the defendants were sought in an effort to resolve the coverage issues arising from the late notice and the question of whether or not there was any contact with the alleged “hit- and-run” vehicle. Plaintiff’s counsel advised that if the sworn statements indicated that there was coverage, then the statements would be used in the uninsured motorist arbitration. If it was determined that there was no coverage, then the statements would be used as discovery depositions in any declaratory judgment action that plaintiff might bring.

The statements of defendants Gray and Aguillard were taken on June 30, 1986, and defendant Hayes’ statement was taken on December 1, 1986. When each statement was taken, plaintiff’s counsel stated on the record that the statements would serve as depositions in the event a declaratory action was filed and, in the alternative, as sworn statements if the plaintiff determined that coverage was available. Counsel for defendants acknowledged that the sworn statements were being taken for these purposes.

In a letter dated March 12, 1987, plaintiff advised defendants’ attorney that coverage under the uninsured motorist provision of Gray’s policy was denied because there was no evidence of physical contact with the alleged “hit-and-run” vehicle.

On September 14, 1987, defendants’ counsel made a second demand of plaintiff for arbitration of the uninsured motorist coverage claims. Plaintiff again denied coverage on October 8, 1987, and advised that defendants’ request for arbitration was refused.

On February 16, 1989, the American Arbitration Association informed plaintiff that defendants had demanded arbitration of their claims under its auspices. Plaintiff advised the American Arbitration Association that it refused to arbitrate defendants’ claims because no uninsured motorist coverage was available under the policy issued to Gray. Plaintiff indicated further that it intended to file a declaratory judgment action to resolve the coverage issues and would participate in arbitration proceedings only after a court had determined that there was coverage under the subject policy.

Plaintiff filed its complaint for declaratory judgment on March 28, 1989, alleging in count I that no uninsured motorist coverage was available because the accident of September 22, 1982, did not involve an uninsured motor vehicle or a “hit-and-run” vehicle which struck the vehicle occupied by defendants, and in count II that defendants failed to give plaintiff timely notice of the accident in accordance with the terms of the subject policy.

Defendants filed an answer and affirmative defense, asserting that plaintiff had waived the coverage issues by its letter of October 3, 1984, which stated that coverage would be afforded defendants under the uninsured motorist provision of the policy issued to Gray.

Plaintiff subsequently filed a motion for summary judgment supported by affidavits and copies of the correspondence between the parties. Defendants filed a memorandum in response, and plaintiff filed a reply. At the hearing on its motion for summary judgment, counsel for plaintiff stated to the court that he could not explain why the letter of October 3,1984, was sent.

At the conclusion of the hearing, the trial court found that plaintiff had not waived its right to deny coverage under the policy and granted summary judgment in favor of plaintiff based upon defendants’ failure to comply with the notice requirement in the subject policy. The court’s order indicated, however, that summary judgment was granted solely upon the claim alleged in count II of the complaint and, pursuant to that judgment, the cause was dismissed in its entirety. The court did not address or enter any findings on the issues raised in count I of the complaint.

Defendants have appealed, contending that the letter of October 3,1984, effected a waiver of the defense of late notice.

Generally, compliance with the notice requirements of an insurance policy is necessary to establish coverage. (Rooney v. State Farm Mutual Automobile Insurance Co. (1983), 119 Ill. App. 3d 112, 116, 456 N.E.2d 160, 163.) The primary purpose of such a notice requirement is to enable the insurer to make a timely and thorough investigation of a claim and to protect itself against unjustifiable claims. Rooney, 119 Ill. App. 3d at 116, 456 N.E.2d at 163.

Yet, an insurer may waive a policy defense by continuing under a policy when it knows or in the exercise of ordinary diligence could have known the facts in question giving rise to the defense. (Kenilworth Insurance Co. v. McDougal (1974), 20 Ill. App. 3d 615, 620, 313 N.E.2d 673, 677.) A waiver consists of a voluntary, intentional relinquishment by the insurer of a known right and may be express or implied, arising from the acts, words, conduct, or knowledge of the insurer. Western Casualty & Surety Co. v. Brochu (1985), 105 Ill. 2d 486, 499, 475 N.E.2d 872, 878; National Discount Shoes, Inc. v. Royal Globe Insurance Co. (1981), 99 Ill. App. 3d 54, 59, 424 N.E.2d 1166, 1170; Tibbs v. Great Central Insurance Co. (1978), 57 Ill. App. 3d 866, 868, 373 N.E.2d 492, 493; Mollihan v. Stephany (1977), 52 Ill. App. 3d 1034, 1041, 368 N.E.2d 465, 470; Tarzian v. West Bend Mutual Fire Insurance Co. (1966), 74 Ill. App. 2d 314, 326-27, 221 N.E.2d 293, 299.

Strong proof is not required to establish a waiver of a policy defense, but only such facts as would make it unjust, inequitable or unconscionable to allow the defense to be asserted. Mollihan, 52 Ill. App. 3d at 1041, 368 N.E.2d at 471; Kenilworth Insurance Co., 20 Ill. App. 3d at 620, 313 N.E.2d at 677; O’Brien v. Country Mutual Insurance Co. (1969), 105 Ill. App. 2d 21, 24, 245 N.E.2d 30, 31-32.

An implied waiver has been found where, after expiration of the notice period, the insurer requested the insured to engage in a course of conduct inconsistent with the assertion of a policy defense and, because of the request, it may be clearly inferred that the insurer intended to waive the failure to comply with the notice provision. See Kenilworth Insurance Co., 20 Ill. App. 3d 615, 313 N.E.2d 673; McMahon v. Coronet Insurance Co. (1972), 6 Ill. App. 3d 704, 286 N.E.2d 631.

It has also been held that where an insurer’s denial of liability for a loss claimed by an insured is based upon grounds other than the insured’s failure to file a proof of loss, the insurer has waived or rendered unnecessary compliance with the proof of loss requirement in the policy. McMahon, 6 Ill. App. 3d at 709, 286 N.E.2d at 634; Stoltz v. National Indemnity Co. (1952), 345 Ill. App. 495,104 N.E.2d 320.

In the instant case, although defendant Gray failed to notify the plaintiff of the accident until nearly 23 months after the loss occurred and the “non-waiver of rights” form indicated there was a question as to coverage based upon the late notice, the October 3, 1984, letter expressly stated that the plaintiff’s investigation was complete and that plaintiff would be able to afford Gray coverage under the uninsured motorist provision in her policy. We believe that because this letter specifically informed defendants that coverage would be afforded under the policy, it constituted a waiver of plaintiff’s policy defense of late notice. This letter would have led defendants to believe that the insurer intended to arbitrate those matters called for by the insurance contract, namely, damages and liability, and that coverage was not challenged. (See Vasilakis v. Safeway Insurance Co. (1977), 46 Ill. App. 3d 369, 374, 361 N.E.2d 1, 4.) Contrary to plaintiffs argument before this court, an insurer’s letter setting forth its nonwaiver of the issue of coverage is not, under all circumstances and conditions and at all times, a shield against responsibility to an insured. See Vasilakis, 46 Ill. App. 3d at 375, 361 N.E.2d at 4.

We note that the letter of July 24, 1985, sent to Gray nine months after the letter of October 3, 1984, stated only that plaintiff was continuing its investigation of the claim. That letter did not deny coverage or make any reference to a coverage defense based upon late notice. Not until February 1986 did plaintiff attempt to reverse its position by advising defendants of its intention to deny coverage. Even at that time, the basis for the denial was a lack of evidence establishing contact with a “hit-and-run” vehicle and not late notice of the claim.

Once an insurer waives compliance with a notice provision, the notice requirement cannot be revived, and the insured’s claim will be barred only by the regular statutes of limitations. See O’Brien, 105 Ill. App. 2d at 24, 245 N.E.2d at 31-32.

Plaintiff relies upon several Illinois cases which have held that certain actions by the insurer could not be construed as a waiver of a policy defense.

In Western Casualty & Surety Co. v. Brochu (1985), 105 Ill. 2d 486, 475 N.E.2d 872, the insurer accepted the insured’s defense in an action brought by a third party. The insurer sent the insured a letter in which it stated that “there doesn’t seem to be any further question concerning coverage at this time.” Fifteen days later, the insurer advised that it had undertaken the insured’s defense without any admission as to its liability under the terms of the policy and that it reserved its rights to deny coverage under certain exclusions in the policy. There, the Illinois Supreme Court held that the insurer’s conduct could not be construed as an intentional relinquishment of its right to deny coverage based upon the exclusions in the policy. Brochu, 105 Ill. 2d at 499, 475 N.E.2d at 878.

In Mollihan v. Stephany (1977), 52 Ill. App. 3d 1034, 368 N.E.2d 465, the insurer rescinded the insured’s policy based upon a material misrepresentation in the application for insurance. Shortly after the policy had been rescinded, agents of the insurer paid the insured for damage to his vehicle and accepted from the insured a summons and complaint which had been served on him by another party involved in the accident. The court found that these actions by the agents of the insurer resulted, from a delay in communication of information between different departments within the insurer’s organization. The court held that these actions were insufficient to establish a waiver of the insurer’s right to deny coverage under the policy. Mollihan, 52 Ill. App. 3d at 1041, 368 N.E.2d at 471.

In Allstate Insurance Co. v. Horn (1974), 24 Ill. App. 3d 583, 321 N.E.2d 285, the insurer sent the insured a letter which stated that when the insurer received the insured’s medical reports and final medical bills, his claim would be “processed for payment.” The court found that a fair and objective reading of the letter did not suggest that the insurer made an unqualified representation to pay any claim that the insured may have asserted. The court held that the representations made in the letter were not of such a nature as to preclude the insurer from asserting a coverage defense. Horn, 24 Ill. App. 3d at 589, 321 N.E.2d at 290.

We find that the cases cited by plaintiff are factually distinguishable from the case at bar and, therefore, are not controlling here.

Here, the October 3, 1984, letter is pivotal to our consideration of the propriety of the trial court’s grant of summary judgment. At the time the October 3 letter was sent to defendants, the insurance company was aware that the accident had occurred on September 22, 1982, and that defendants had for the first time reported the accident 23 months later. On October 3, 1984, the insurance company also was aware that its policy required that the hit-and-run accident be reported to the police within 24 hours and .to the insurance carrier within 30 days. It was obvious that this had not been done. Yet, the language of the October 3 letter contains no reservation of the timely notice requirement for future determination, and the subsequent actions of the insurer over a 41/2-year time span, until the filing of the declaratory judgment suit in March 1989, gave no indication to defendants that coverage might be denied based on failure to give timely notice.

For the foregoing reasons, the judgment of the circuit court of Cook County is reversed, and the cause is remanded for further proceedings consistent with the view expressed herein.

Reversed and remanded.

McNAMARA and EGAN, JJ., concur.


author: JUSTICE EGAN

text:
    REGINALD THOMAS, Plaintiff-Appellee, v. SALLY A. WARD, Director of the Department of Employment Security, et al., Defendants-Appellants (Unichema Chemicals, Inc., Defendant).
    First District (6th Division)
    No. 1—90—0955
    Opinion filed March 15, 1991.
    Roland Burris, Attorney General, of Springfield (Rosalyn B. Kaplan and Susan Frederick Rhodes, Assistant Attorneys General, of Chicago, of counsel), for appellants.

      Legal Assistance Foundation of Chicago, of Chicago (James 0. Lat-turner and Carl Flaningam, of counsel), for appellee.
   JUSTICE EGAN

delivered the opinion of the court:

The Board of Review of the Department of Employment Security (Board) entered an administrative order denying the plaintiff unemployment compensation because the plaintiff had been discharged from his job based on his misconduct. On administrative review the circuit court reversed that decision as against the manifest weight of the evidence. The Board and the Director of the Illinois Department of Employment Security contend that plaintiff’s actions constituted misconduct (Ill. Rev. Stat. 1987, ch. 48, par. 432(A)), and the Board’s factual evaluation should have been sustained.

The plaintiff worked as a production employee in a continuous process operation for Unichema Chemicals, Inc., in Chicago from 1981 until his discharge in December 1987. His work records showed that he had a history of failure to follow instructions and had received warnings for tardiness and absences; in August 1987 he had been suspended for three days as a result of work problems. He was also a heroin addict who had previously undergone unsuccessful rehabilitation.

On November 25, 1987, the day preceding Thanksgiving, the plaintiff was scheduled to work from 4 p.m. to midnight. He had used heroin that day before work, and by 7 p.m. when it came time for his lunch break, he was feeling quite ill; he left work and went to a hospital where for three hours he sought admission for drug treatment. He was refused admission because his physician had not approved that procedure.

He did not tell anyone that evening that he was leaving work or would not return. He testified that his supervisor, Rick Williams, gave him permission to take his lunch break away from the plant. He also claimed that while he was at the hospital that evening seeking admission, he tried to contact Williams by telephone, but there was no answer in the plant office. He testified that Unichema used an answering machine for its telephone, and the system occasionally would not work sometimes during evening hours. He maintained that he finally contacted Williams the next day, and Williams told him to speak to Mike Newton, the manager, when Newton returned from the Thanksgiving holidays.

The plaintiff was admitted to in-patient hospital treatment on November 27, 1987. According to him, while he was undergoing detoxification for the first several days, his use of a telephone was limited, but he claimed that he did manage to call Newton at the beginning of the week following Thanksgiving. However, he could not reach Newton and he left a message for Newton.

He also explained that he had previously participated in a drug treatment program and attended meetings held during the evening. However, Unichema then transferred him to the evening work shift. This transfer prevented his further attendance in the program which did not have daytime meetings.

Lance Chambers, Unichema’s personnel manager since December 1987, testified that the plaintiff was terminated because he left his job without telling anyone or subsequently contacting Unichema. Chambers said that Unichema maintained a telephone answering machine so employees could leave recorded messages. He said that Unichema did not receive a recorded message from the plaintiff between November 25-27, 1987.

In reversing the Board’s decision, the circuit court commented that there was no evidence that the plaintiff’s failure to contact his employer was intentional, willful or deliberate. On appeal the defendants argue that the court should have deferred to the Board’s determination. The plaintiff argues that the evidence establishes, as a matter of law, that he tried to contact his employer while attempting to gain hospital admission. He claims that his uncontradicted testimony established that he tried to contact his supervisor on November 25, 1987, while he was seeking hospital admission, that he eventually talked to his supervisor on Thanksgiving day and that he then unsuccessfully attempted to contact the plant manager the week following Thanksgiving. Further, he contends that, as a matter of law, his actions were not misconduct.

Recently, in Kennedy v. Edgar (1990), 199 Ill. App. 3d 138, 143-46, 556 N.E.2d 830, this court set forth the general principles of law regarding the evidentiary basis upon which a court can review an administrative decision.

“On review, the findings and conclusions of the administrative agency on questions of fact shall be held to be prima facie true and correct. [Citation.] Only when the court finds the agency’s discretionary authority was exercised in an arbitrary or capricious manner or the decision is against the manifest weight of the evidence is the decision overturned. [Citation.] A reviewing court may not reweigh the evidence or make factual findings and an agency’s decision is not contrary to the manifest weight of the evidence merely because the court would have decided the case differently. [Citation.]
* * *
In order for the circuit court to find the [administrative] decision to be against the manifest weight of the evidence, the court must determine, after reviewing the evidence in the light most favorable to the [agency], that no rational trier of fact could have agreed with the [agency’s] decision.”

A further principle establishes that “where evidence is not contradicted by opposing evidence or circumstances or inherently improbable and the offering witness has not been impeached, the trier of fact is not free to disregard it.” Coupon Redemption, Inc. v. Ramadan (1987), 164 Ill. App. 3d 749, 754, 518 N.E.2d 285; see also Bucktown Partners v. Johnson (1983), 119 Ill. App. 3d 346, 456 N.E.2d 703.

We do not believe that the evidence supports the circuit court’s action. Employers must have some notice of an employee’s absence so that appropriate schedules can be adjusted or other employees reassigned to do the work. For example, in Wilson v. Department of Employment Security (1990), 196 Ill. App. 3d 711, 714, 554 N.E.2d 1006, this court held that an employee was guilty of misconduct and disqualified from unemployment compensation under section 602(A) of the Unemployment Insurance Act (Ill. Rev. Stat. 1987, ch. 48, par. 432(A)) when he did not telephone his employer to report his absence.

Further, whether the plaintiff tried to contact his employer was one of fact based on witness credibility. He claimed that he unsuccessfully tried to leave a message on his employer’s answering machine, but Unichema’s representative said that no messages from the plaintiff were recorded. The plaintiff sought to cast doubt on the witness’ statement by claiming that Unichema’s telephone equipment at times did not function. In our opinion this merely created a factual question to be determined by the Board, and there is nothing in the record to allow a contrary conclusion by the circuit court.

We therefore reverse the judgment of the circuit court.

Reversed.

McNAMARA and LaPORTA, JJ., concur.