Case Title: Lee v. John Deere Insurance Co

Citation: 

Docket Number: 95337

State: illinois

Court: Illinois Supreme Court

Date: 2003-12-04T00:00:00Z

Document:
Docket No. 95337-Agenda 27-September 2003.
VUONG Y. LEE, Special Adm'r of the Estate of Tak Kwon Lee,

Deceased, Appellant, v. JOHN DEERE INSURANCE COMPANY,
 n/k/a Sentry Select Insurance Company, et al. (John Deere Insurance 							Company, Appellee).
Filed December 4, 2003
	JUSTICE KILBRIDE delivered the opinion of the court:
	In this case we must decide whether the failure of an insurance
company to comply strictly with the statutory requirement that it
provide a space in its motor vehicle coverage application form for the
applicant to sign or initial indicating a decision to reject uninsured-
motorist coverage operates to impose underinsured-motorist coverage
in an amount equal to the bodily injury liability limits. In a declaratory
judgment action brought by the estate of plaintiff killed in an accident,
the circuit court answered that question in the affirmative and
reformed the issued policy to provide underinsured-motorist insurance
coverage equal to the bodily injury liability limits. The appellate court
reversed and remanded. 334 Ill. App. 3d 807, 815. We granted leave
to appeal. 177 Ill. 2d R. 315. We allowed the National Association of
Independent Insurers leave to file a brief as amicus curiae in support
of defendant John Deere Insurance Company. 155 Ill. 2d R. 345. We
now reverse the judgment of the appellate court.

BACKGROUND
	In September 1994, Andy W.Y. Lin (Lin), president of Asia
Distributors (Asia), a trucking firm, sought motor vehicle liability
insurance coverage for Asia's delivery trucks through Elite Insurance
Agency, Inc. (Elite), an insurance brokerage firm. Lin telephoned
Michael Amwoza, president of Elite, and asked him to secure a
coverage quote. He did not personally go to Elite's office and did not
sign an application form. Elite sought a coverage quote from
International Risk Placement (IRP), an agent for John Deere
Insurance Company (Deere). After receiving the quote, Elite prepared
a form entitled "Non-Fleet Transportation Application" based on
information supplied by Lin. Amwoza submitted the completed form
to IRP. The application form contained no signature line for the
person or entity seeking coverage and contained no space for the
applicant to indicate rejection of additional uninsured-motorist
coverage as required by the Illinois Insurance Code (Insurance Code)
(215 ILCS 5/143a-2 (West 1992)). Amwoza testified in a deposition
that he explained to Lin his right to purchase uninsured and
underinsured insurance coverage in an amount equal to the bodily
injury liability limits and advised him of the changes in the premium.
According to Amwoza, Lin did not wish to pay for the increased
coverage. Lin denied that anyone had explained the coverage option
to him.
	On September 8, 1994, in accordance with Deere's custom, IRP
as Deere's agent, issued a temporary binder of coverage to Asia,
effective September 2, 1994. The temporary binder provided bodily
injury liability coverage in the amount of $1 million and
uninsured/underinsured-motorist coverage with aggregate limits of
$40,000. On that same date, IRP forwarded to Elite another form
entitled "John Deere Insurance Company Selection/Rejection of
Uninsured/Underinsured Motorist coverage-Illinois." This
selection/rejection form was submitted to and filed by the Illinois
Director of Insurance in 1992. It was designed to comply with the
provision in the Insurance Code requiring insurance companies to
describe briefly the uninsured-motorist coverage and to include a
space indicating the applicant's rejection of that coverage in an
amount equal to the bodily injury liability limit.
	 On September 12, 1994, Deere issued its insurance policy
containing coverage identical to that described in the temporary
binder, even though it had not yet received the selection/rejection
form back from Elite. Deere then notified IRP that it had not yet
received the signed selection/rejection form from Asia. IRP notified
Elite that the signed form must be returned by October 28, 1994, or
the policy would be canceled. A signed form was returned to IRP by
Elite and in turn sent to Deere.
	Deere canceled the policy for nonpayment of premium on
November 17, 1994. Asia operated without coverage from that date
until January 20, 1995, when a new policy was issued to reinstate
coverage with Deere. Again, IRP sent a selection/rejection form to
Elite, and again a signed form was returned to IRP by Elite only after
Deere demanded it on threat of cancellation. This form was
purportedly signed by Andy Lin, although Lin denied that the
signature was his. The premium for the uninsured/underinsured
coverage was based on the statutory minimum limits. The policy was
renewed for the year 1996 and was in force on March 1, 1996. On
that date, plaintiff's decedent Tak Kwon Lee, one of Asia's drivers,
was killed in a collision between his delivery truck and a car.
	The driver of the car was at fault, and that insurance carrier paid
its $20,000 policy limit to Vuong Lee, the decedent's widow. Lee
then made an underinsured-motorist claim against Deere. Because the
parties could not agree on the amount of available coverage, Lee filed
a declaratory judgment action in the circuit court of Cook County
against Deere seeking a determination of the amount of coverage. Lee
moved for summary judgment, contending that the application form
lacked the required space for rejection of increased
uninsured/underinsured coverage and thus violated section 143a-2(2)
of the Insurance Code. Lee further argued that the separate
selection/rejection form was ineffective. The trial court granted
summary judgment, finding that the application had no signature or
initials indicating rejection of the additional coverage. The trial court
then reformed the insurance policy to provide $1 million in
underinsured-motorist coverage. The court did not address the validity
or effect of the selection/rejection form.
	Deere appealed, and the appellate court reversed, holding that the
trial court misapplied the statute. 334 Ill. App. 3d at 808. Deere
argued that its selection/rejection form was part of an ongoing
application process and that the form complied with the statutory
requirements. The reviewing court did not reach the question of
compliance. Instead, it determined sua sponte that section 143a-2(2)
applied only to uninsured-motorist coverage and not to underinsured-motorist coverage. Accordingly, the court held that since Lee's claim
against Deere was for underinsured coverage, the application and
signature requirements of the statute were both inapplicable and
irrelevant. 334 Ill. App. 3d at 814.

ANALYSIS
	On appeal to this court, Lee argues that the appellate court
misinterpreted the statute, claiming that uninsured- and underinsured-
motorist coverages are linked together and that application procedures
applicable to the former also apply to the latter. Because the question
of the proper interpretation to be afforded statutory provisions is a
question of law, our standard of review is de novo. Knolls
Condominium Ass'n v. Harms, 202 Ill. 2d 450, 454 (2002). The plain
language of the statute is the best indicator of the legislature's intent.
Allstate Insurance Co. v. Menards, Inc., 202 Ill. 2d 586, 591 (2002).
When the statute's language is clear, it will be given effect without
resort to other aids of statutory construction. Petersen v. Wallach,
198 Ill. 2d 439, 445 (2002).
	Section143a of the Insurance Code (215 ILCS 5/143a (West
1992)) mandates uninsured-motorist coverage in an amount equal to
the $20,000/$40,000 minimum liability limits for bodily injury or death
required by section 7-203 of the Illinois Vehicle Code (625 ILCS
5/7-203 (West 1992)).
	Section 143a-2 of the Insurance Code (215 ILCS 5/143a-2
(West 1992)) sets out conditions and procedures for issuing or
rejecting both uninsured- and underinsured-motorist coverage.
Subsection (1) of section 143a-2 requires the insurance company to
provide uninsured-motorist coverage in an amount equal to the bodily
injury coverage unless specifically rejected by the insured and also
requires the company to provide a brief description of the coverage
and to advise applicants of their right to reject coverage in excess of
the amounts required by section 7-203 of the Illinois Vehicle Code.
215 ILCS 5/143a-2(1) (West 1992).
	Subsection (2) of section 143a-2 prescribes an exclusive means
of effecting a rejection of additional coverage, providing in pertinent
part as follows:
		"After June 30, 1991, every application for motor vehicle
coverage must contain a space for indicating the rejection of
additional uninsured motorist coverage. No rejection of that
coverage may be effective unless the applicant signs or initials
the indication of rejection." 215 ILCS 5/143a-2(2) (West
1992).
	Subsection (4) of section 143a-2 defines underinsured-motorist
coverage and provides that no policy of insurance may be issued
unless underinsured insurance is included in an amount equal to the
uninsured-motorist coverage where the latter exceeds the minimum
limits required by section 7-203 of the Illinois Vehicle Code. 215
ILCS 5/143a-2(4) (West 1992). The section contains no language
allowing a rejection of underinsured-motorist coverage.
	We have previously construed this section to provide that
whatever uninsured-motorist coverage the insured elects,
underinsured-motorist coverage will be set, mandatorily, at the
uninsured-motorist coverage level. DeGrand v. Motors Insurance
Corp., 146 Ill. 2d 521, 533 (1992). Thus, it is apparent that, as Lee
argues, the two coverages are inextricably linked in the statute. If the
rejection of uninsured-motorist coverage is ineffective because of a
failure to comply with statutory requirements, it follows necessarily
that coverage must be imposed in an amount equal to the bodily injury
liability limits. Since underinsured coverage is mandatory where
uninsured coverage in excess of the minimum statutory limits exists,
it also follows that underinsured coverage, too, must be imposed in an
amount equal to the bodily injury liability limits.
	The appellate court analysis focused on the language in section
143a-2(2) that, if taken literally, appears to apply only to the rejection
of uninsured coverage. The appellate court ignored, however, the
result required by the language in section 143a-2(4), and that is to
impose underinsured coverage in an amount equal to the uninsured
coverage. Since the latter coverage would be equal to the bodily injury
limit if the rejection were to be ineffective, so too would the former.
Thus, we hold that the appellate court erred in holding that the
application and signature requirements in section 143a-2(2) were
inapplicable and irrelevant.
	This holding is, however, not dispositive, because we must still
decide whether Deere's selection/rejection form complied with the
statute and determine what coverage existed at the time of the fatal
accident. Although Deere argued before the trial court and the
appellate court that its selection/rejection form was sufficient to
comply with the statutory requirements, that issue was not ruled on by
either tribunal. Deere repeats those arguments before us.
	The selection/rejection form contained the following language:
		"Illinois law requires that We, the Company providing the
insurance, are required to provide to You, the Named
Insured on the policy, higher limits for
Uninsured/Underinsured Motorist Coverage. These limits are
to be equal to the policy limits provided for the Bodily Injury
Liability Coverage. You have the right to select a lower limit
for the Uninsured/Underinsured Motorist Coverage, but no
lower than the Minimum Financial Responsibility
requirement.
* * *
			Uninsured/Underinsured Motorist Coverage provides
insurance for the protection of persons who are legally
entitled to recover damages from owners or operators of
uninsured/underinsured motor vehicles because of bodily
injury, including death resulting therefrom.
			Therefore, please indicate your choice below by checking
the appropriate box and signing this form which is to be
returned to the company.
						UNINSURED/UNDERINSURED
			MOTORIST COVERAGE SELECTION/REJECTION
			[ ] I choose to REJECT higher limits and coverage is
requested for the minimum required to meet the Financial
Responsibility Laws of the state."
	This form also contains a brief description of uninsured-motorist
coverage and advises applicants of their right to reject it. Further, the
form provides a check box to indicate the applicant's choice. A date
line and a signature line appear immediately below the check box.
	That form, together with the "Non-Fleet Transportation
Application Form," was submitted to the Department of Insurance
with the appropriate fee, and accepted for filing. By law, the Director
of Insurance must require the filing of all policy forms and may require
the filing of any "generally used riders, endorsements, application
blanks and other matter incorporated by reference in any such policy
or contract of insurance." 215 ILCS 5/143(2) (West 1992). The same
statute provides that "if the Director shall find from an examination of
any such policy form, rider, endorsement, certificate, application
blank, or other matter incorporated by reference in any such policy so
filed that it violates any provision of this Code, contains inconsistent,
ambiguous, or misleading clauses, or contains exceptions and
conditions that will unreasonably or deceptively affect the risks that
are purported to be assumed by the policy, he shall order the company
or companies issuing such forms to discontinue the use of the same."
215 ILCS 5/143(2) (West 1992).
	Deere argues that because the Department allowed the filing of
the selection/rejection form, it necessarily made a determination that
the form does not violate the Insurance Code, contain inconsistent,
ambiguous or misleading clauses, or contain exceptions and conditions
that will unreasonably and deceptively alter the risks assumed under
the policy. Since the separate application and selection/rejection forms
were both filed, Deere argues, the Director has implicitly authorized
the use of a rejection form that is not physically contained within the
application. Lee counters that, since there is no indication in the
record that the Director of Insurance required the filing of either the
application or the selection/rejection form, and since the Director did
nothing more than affix the Department file stamp to the documents,
no inference of Department approval arises.
	It is true, as Deere argues, that the approval of the Director is
entitled to great weight, although it is not conclusive on the courts.
Kirk v. Financial Security Life Insurance Co., 75 Ill. 2d 367, 376
(1978). However, we cannot decide this issue on the basis of the
Director's approval even if it was given. The application form and the
selection/rejection forms are separate documents. The record
conclusively establishes that the application form was submitted to
Deere's agent without a completed selection/rejection form. The latter
form was not executed by the insured until after issuance of the actual
policy of insurance, replacing the temporary binder. Thus, we must
determine whether this two-step process operates to defeat the
rejection of coverage in this case.
	The selection/rejection form contains the requisite explanation of
uninsured-motorist coverage, a space for rejection of the coverage,
and a signature line. If this content appeared in the application form,
it would be sufficient to accomplish a rejection of the coverage.
Arguably, it could be sufficient if both forms were submitted
simultaneously to the applicant, or if the selection/rejection form were
separately submitted and signed prior to the issuance of the insurance
policy. That, however, did not happen in the case before us.
	Deere argues that the procedure used to complete the application
process was commercially reasonable and consistent with prior Illinois
precedent. Since coverage was initially secured through issuance of a
temporary binder and since execution of the selection/rejection form
was requested when the binder was issued, Deere argues that
submission of that form was part of the application process.
	This court has recognized that an insurance binder is in the nature
of temporary insurance, that such a contract can be oral and that it will
be presumed that the parties contemplate that a policy will be issued
containing such conditions and limitations as are usual in such cases,
or that have been used before between the parties. Zannini v. Reliance
Insurance Co. of Illinois, Inc., 147 Ill. 2d 437, 454-55 (1992),
quoting Devers v. Prudential Property & Casualty Insurance Co., 86
Ill. App. 3d 542, 544 (1980), quoting Cottingham v. National Mutual
Church Insurance Co., 290 Ill. 26, 33 (1919).
	In Anderson v. Vrahnos, 149 Ill. App. 3d 251 (1986), the
appellate court held that the legislature did not intend that binders
should be considered policies for purposes of the offer of
underinsured-motorist coverage required by the version of section
143a-2 of the Insurance Code in effect at that time. Hence, a binder
authorized by the insurance company did not, as a matter of law,
include underinsured-motorist coverage.
	The same rationale, Deere contends, applies to the current
version of the statute and the effect of the binder issued by Deere. The
statute does not require execution of the rejection form prior to
issuance of a binder. Since Elite, on behalf of Asia, requested
minimum limits of uninsured/underinsured-motorist coverage, that
coverage was properly bound and higher limits were not imposed by
operation of law. While the binder was in effect and pending
completion of the application process, the company requested
execution of the selection/rejection form. The company ran the risk of
increased uninsured/underinsured-motorist exposure after issuing the
policy and prior to receiving the executed selection/rejection form.
Because the statute does not expressly require the form to be executed
prior to the binder or before issuance of the actual policy, Deere
contends that rejection of the coverage was effective when the form
was executed by Lin. Deere argues also that since the executed form
was returned before the accident occurred, the additional
underinsured-motorist coverage was not then in effect.
	A similar argument was rejected by the appellate court in Wood
v. National Liability & Fire Insurance Co., 324 Ill. App. 3d 583
(2001). That court affirmed summary judgment directing reformation
of an insurance contract to provide uninsured/underinsured-motorist
coverage equal to the bodily injury limits where a separate form
rejecting the additional coverage was submitted after issuance of the
policy. The initial application form did not contain a provision for the
rejection of the additional coverage. Thus, the additional coverage
was contained in the policy at the time it was issued. Wood, 324 Ill.
App. 3d at 586-87. The court reasoned:
			"[I]t is clear that the legislature intended the application
process to cease once an insurance policy is issued. In 1990,
the legislature modified section 143a-2 so that the word
'applicant' replaced the word 'insured.' [Citation.] Before the
change, the 'insured' had the right to elect or reject
[uninsured-motorist] coverage. In its present form, the
statute 'leaves no room for doubt as to whom [uninsured-motorist] coverage must be explained.' [Citation.] We believe
that the revision makes it clear that the applicant, not the
insured, be provided with a description of the [uninsured-motorist] coverage and that the applicant be given an
opportunity to reject the coverage. The alteration is
significant because it is the applicant who needs to know the
extent and amount of his or her coverage before he or she
agrees to enter into a contract of insurance.
			On the date the election form was signed, Wood was no
longer an applicant because he had been issued a policy.
Therefore, the election form could not serve as a valid
rejection of the [uninsured/underinsured-motorist] coverage."
(Emphasis in original.) Wood, 324 Ill. App. 3d at 587.
	The court further noted that once the policy was issued, the
application process was complete. Thus, the company's argument that
the application process was "ongoing" was unavailing. Wood, 324 Ill.
App. 3d at 587.
	The Wood rationale was examined in Isaacson v. Country Mutual
Insurance Co., 328 Ill. App. 3d 982 (2002), where the court held that
a coverage rejection executed after issuance of the policy was
effective when the policy originally provided uninsured-motorist
coverage equal to the bodily injury limits, but was reduced on the
insured's express request in return for a reduction in premium. The
court held that Wood was inapposite because in that case the policy
was issued with the reduced limits before execution of the rejection
form. Isaacson, 328 Ill. App. 3d at 986.
	 A postissuance endorsement to a valid policy is not necessarily
prohibited by any statute and, indeed, that alternative was recognized
as valid in Wood, where the court observed:
		"Moreover, once the rejection form had been executed,
National could have issued an addendum or a new policy
reflecting the change in [uninsured/underinsured-motorist]
limits." Wood, 324 Ill. App. 3d at 588.
	Here, Deere did not use either alternative. Therefore, the
untimely rejection had no effect. While Deere argues that the
application process was ongoing and that the return of the rejection
form was part of this process, there appears to be no justification for
Deere to issue the policy before receipt of the selection/rejection form.
Under the plain language of the statute, Deere could not have lawfully
issued the policy without uninsured/underinsured-motorist coverage
equal to the bodily injury limits. Accordingly, these limits were in
effect when the insured's employee was killed in a covered accident.
For Lin's rejection of the additional coverage to be effective, Deere's
two-step application process must have been completed before the
issuance of the policy. In the absence of a complying rejection, Deere
was in violation of the statute when it issued the policy, and no
subsequent rejection of the additional coverage could have been valid
unless of course, as in Isaacson, the additional coverage was provided
under the original policy.
	Finally, we address the "practicality" arguments urged by Deere
and its amicus. The application process began with a telephone call
from Lin to Amwoza at Elite. Amwoza obtained the information he
needed to secure a quote and then submitted the application,
unsigned, to Deere on Lin's behalf. Deere and its amicus note that this
practice is common in the insurance industry and argue that it is
commercially reasonable. The trial court found that reformation of the
policy was required because the application submitted by Elite
contained no signature or initials indicating rejection of the additional
coverage. Deere and its amicus contend that if the trial court's ruling
were upheld, applicants could no longer quickly obtain coverage, as
might be necessary in many situations, by means of a temporary binder
of insurance procured by telephone. This is an argument better
addressed to the legislature.
	Given our disposition of this case, however, the concerns of
Deere and its amicus are not well founded. Our holding is not based
on the lack of a signature on the application form submitted on Lin's
behalf by Elite. Rather, the result we reach is compelled because the
rejection of coverage equal to bodily injury limits did not occur during
the application process while the temporary binder was in effect. This
case does not require us to determine whether the binder must initially
include the higher coverages. Not until after the insurance policy was
issued with uninsured/underinsured motorist limits at the statutory
minimum was the selection/rejection form completed by Lin. Since Lin
was no longer an "applicant," this procedure clearly was not
authorized by the statute. The trial court properly granted summary
judgment to Lee.
CONCLUSION
	For the reasons we have discussed, we reverse the judgment of
the appellate court and affirm the judgment of the circuit court.
Appellate court judgment reversed;
circuit court judgment affirmed.