Case Name: STEPHEN HERRIFORD et al., Plaintiffs-Appellees, v. LOUIS BOYLES et al., Defendants-Appellants (Pekin Insurance Company, Intervenor-Appellant)
Court: Illinois Appellate Court
Jurisdiction: Illinois
Decision Date: 1990-02-06
Citations: 193 Ill. App. 3d 947
Docket Number: Nos. 3—88—0811, 3—88—0833 cons.
Parties: STEPHEN HERRIFORD et al., Plaintiffs-Appellees, v. LOUIS BOYLES et al., Defendants-Appellants (Pekin Insurance Company, Intervenor-Appellant).
Judges: 
Reporter: Illinois Appellate Court Reports, Third Series
Volume: 193
Pages: 947–962

Head Matter:
STEPHEN HERRIFORD et al., Plaintiffs-Appellees, v. LOUIS BOYLES et al., Defendants-Appellants (Pekin Insurance Company, Intervenor-Appellant).
Third District
Nos. 3—88—0811, 3—88—0833 cons.
Opinion filed February 6,1990.
BARRY, J., concurring in part and dissenting in part.
Heyl, Royster, Voelker & Allen, of Peoria (John C. Mulgrew, Jr., and John P. Fleming, of counsel), for appellants Louis Boyles and Peoria Charter Coach Company.
Brian P. Mack and John P. Fleming, both of Quinn, Johnston, Henderson & Pretorius, of Peoria, for appellant Pekin Insurance Company.
William K. Brown, of Peoria, for appellees.

Opinion:
JUSTICE STOUDER
delivered the opinion of the court:
The plaintiffs, Stephen Herriford and Clifford Herriford, filed suit against the defendants, Louis Boyles and the Peoria Charter Coach Company, to recover damages for injuries they sustained in a collision on December 30, 1983. The defendants' insurer, Transit Casualty Insurance Company, became insolvent. As a result, the Illinois Insurance Guaranty Fund (the Fund) (Ill. Rev. Stat. 1987, ch. 73, par. 1065.82 et seq.) assumed Transit's obligation to defend against the plaintiffs' claims.
During the pendency of this action, the plaintiffs pursued damage claims under the uninsured motorist provisions of Stephen Herriford's insurance policy. The policy was issued by the intervenor-appellant, the Pekin Insurance Company (Pekin). In accordance with the terms of that policy, the plaintiffs made a demand to submit their uninsured motorist claims to arbitration. Following a hearing, the arbitration panel awarded damages in the amount of $9,000 to Stephen Herriford and $5,000 to Clifford Herriford. The plaintiffs did not seek review of the arbitration decision.
Subsequently, the defendants filed a motion to dismiss the plaintiffs' personal injury suit, asserting that the arbitration decision barred further litigation under the doctrines of collateral estoppel and/or res judicata. The trial court denied the defendants' motion to dismiss, finding inter alia, that the doctrines of res judicata and collateral estoppel did not apply in the instant case. This court thereafter granted the defendants leave to appeal pursuant to Rule 308 (107 Ill. 2d R. 308) to answer the following questions certified by the trial court:
"A. Does Ill. Rev. Stat. (1981) ch. 73, par. 755a require that an insured submit uninsured motorist claims to arbitration or does the statute merely require that insurance contracts afford the insured the option of arbitration?"
And
"B. Do principles of res judicata and/or collateral estoppel under the circumstances of this case preclude plaintiffs from litigating claims which have heretofore been arbitrated to conclusion under the uninsured motorist coverage of plaintiffs' automobile policy?"
Meanwhile, the Pekin Insurance Company filed a petition to intervene in the plaintiffs' cause of action accompanied by a complaint. The complaint alleged that Pekin had a contractual right to claim a lien on any judgment that the plaintiffs received, in order to recover the $14,000 it had paid to the plaintiffs as a result of the arbitration award. The trial court granted the plaintiffs' motion to dismiss Pekin's complaint and entered a finding that there was no just cause to delay enforcement or appeal from that order. (107 Ill. 2d R. 304(a).) The appeal by Pekin was subsequently consolidated with the plaintiffs' appeal and will be addressed below.
In considering the two questions certified by the trial court, we must first look to the operative statutory provisions. The Illinois Insurance Guaranty Fund was established "to provide a mechanism for the payment of covered claims under certain insurance policies, to avoid excessive delay in payment, to avoid financial loss to claimants or policyholders because of the entry of an Order of Liquidation against an insolvent company, and to provide a Fund to assess the cost of such protection among member companies." (Ill. Rev. Stat. 1987, ch. 73, par. 1065.82.) Under the statute, the Fund is deemed to be the insolvent company to the extent of its obligation for covered claims and the Fund retains all rights, duties and obligations of the insolvent company, subject to the limitations set forth in the statutes governing the Fund. (Ill. Rev. Stat. 1987, ch. 73, par. 1065.87 — 4.) Section 546(a) of the Illinois Insurance Code (Code) (Ill. Rev. Stat. 1987, ch. 73, par. 1065.96(a)) provides: "Any insured or claimant having a covered claim against the Fund shall be required first to exhaust his rights under any provision in any other insurance policy which may be applicable to the claim. Any amount payable on a covered claim under this Article shall be reduced by the amount of such recovery under such insurance policy." (Ill. Rev. Stat. 1987, ch. 73, par. 1065.96(a).) Section 143a(l) of the Code (Ill. Rev. Stat. 1987, ch. 73, par. 755a(l)) sets forth certain requirements for uninsured motor vehicle coverage. The statute states in pertinent part that "[n]o such policy shall be renewed or delivered or issued for delivery in this State after July 1, 1978 unless it is provided therein that any dispute with respect to such coverage shall be submitted for arbitration to the American Arbitration Association or for determination in the following manner: Upon the insured requesting arbitration, each party to the dispute shall select an arbitrator and the two arbitrators so named shall select a third arbitrator. If such arbitrators are not selected within 45 days from such request, either party may request that such arbitration be submitted to the American Arbitration Association." Ill. Rev. Stat. 1987, ch. 73, par. 755a(l).
On appeal, the defendants argue that section 143a(l) does not mandate that all disputed uninsured motorist claims be resolved through arbitration. The defendants contend that the statute requires only that insurance policies contain provisions for the submission of disputes to either the American Arbitration Association or to a three-member panel selected according to the procedures set forth in section 143a(l). The defendants argue that, if the policy contains only the second alternative, then under the statute only the insured can request that a dispute be settled by arbitration. In that case, whether a claim is settled by arbitration is left to the discretion of the insured and is therefore not mandatory. We note that the policy in the instant case allows for the selection of the arbitration panel in a manner similar to the procedures set forth in section 143a(l). Unlike the statutory procedures, however, under the plaintiffs' policy both parties have the right to demand arbitration. The policy does not contain provision for arbitration before the American Arbitration Association.
The plaintiffs appear to agree with the defendants that section 143a(l) is mandatory to the extent that one of the two alternative means for selecting the arbitrator must be contained in the policy. The plaintiffs also concede that the mandatory arbitration of their dispute with their insurance company over their uninsured motorist claims does not abridge their constitutional right to trial by jury because, as parties to a contract, they are free to waive constitutional rights through agreement. (See Irmco Hotels Corp. v. Solomon (1975), 27 Ill. App. 3d 225, 326 N.E.2d 542.) However, the plaintiffs argue that if the doctrines of collateral estoppel and res judicata apply to bar further proceedings against the defendants and the Fund, sections 143a(l) and 546(a) would operate to deny the plaintiffs their constitutional right to have a jury decide the claims in their personal injury suit. The plaintiffs contend that section 546(a) was not meant to be a limitation on recovery. They argue that the statutes must be interpreted to allow them to first bring an action under the uninsured motorist provisions of their own policy and then to proceed in a jury trial against the defendants and the Fund.
In construing a statute, we must ascertain and give effect to the legislative intent best evidenced by the ordinary meaning of the statutory language. (In re Estate of Norton (1986), 149 Ill. App. 3d 404, 500 N.E.2d 1022.) In reviewing the statutory language, we find that Section 143a(l) clearly requires mandatory arbitration of all disputed uninsured motorist claims. The statute states that "any dispute with respect to such coverage shall be submitted for arbitration." (Emphasis added.) (Ill. Rev. Stat. 1987, ch. 73, par. 755a(l).) Notwithstanding the statutory provisions, the policy in the instant case stated that either party could demand arbitration. The plaintiffs do not challenge the mandatory arbitration of their dispute with the Pekin Insurance Company. We therefore find that under both the statute and the insurance policy in this case the arbitration process was compulsory and resulted in valid awards to the plaintiffs.
Based on our reading of section 546(a) and Lucas v. Illinois Insurance Guaranty Fund (1977), 52 Ill. App. 3d 237, 367 N.E.2d 469, we find no merit to the plaintiffs' constitutional argument. We find nothing in the statute which would have prevented the plaintiffs from pursuing an action to judgment against the defendants prior to asserting their claims under their uninsured motorist coverage. Section 546(a) states that "[a]ny insured or claimant having a covered claim against the Fund shall be required first to exhaust his rights under any provision in any other insurance policy which may be applicable to the claim." (Ill. Rev. Stat. 1987, ch. 73, par. 1065.96(a).) The statute only requires that claimants exhaust their rights under any other applicable insurance policy before proceeding against the Fund. Section 546(a) is only relevant in determining the recovery from the Fund.
In Lucas, the plaintiffs brought actions for injuries suffered in separate collisions involving the same taxicab company. They recovered substantial judgments against the cab company despite the fact that the company's insurer was adjudicated insolvent prior to the trials. Thereafter, the plaintiffs both recovered $10,000 under their uninsured motorist coverage. On appeal, the court held that the trial court was correct in holding that the plaintiffs' recovery from the Fund was limited to the Fund's obligation less the amount of the plaintiffs' recovery under their uninsured motorist coverage.
In Lucas, the plaintiffs proceeded to trial and recovered judgments against the defendant before they asserted their uninsured motorist claims. In the instant case, the plaintiffs could have continued their action against the defendants and received a judgment in the trial court, as did the plaintiffs in Lucas, before they asserted their uninsured motorist claims. The statute does not mandate that the plaintiffs had to assert claims against their uninsured motorist coverage before pursuing their action to judgment against the defendants. Therefore, sections 143a(l) and 546(a) do not operate to deny the plaintiffs' their constitutional right to a jury determination of their damages.
In addition, in Spearman v. State Security Insurance Co. (1978), 57 Ill. App. 3d 393, 372 N.E.2d 1008, which cites Lucas, the issue was whether the insured could compel her insurer to arbitrate her uninsured motorist claim prior to her proceeding against the assets of the Fund. We note the Fund was not a party in Spearman nor did it represent a party to the litigation in that case. The case did not address the issue of an action against the individual tortfeasor. The language in Spearman is ambiguous when the court says "claim against the Fund." (57 Ill. App. 3d at 394.) All that claim represents, however, is the ultimate amount the Fund must pay to the extent that it stands in the position of indemnifier. On the other hand, the amount the injured party is entitled to receive for his or her injury is determined as a collateral matter or in other proceedings. The statute does not contemplate a direct action against the Fund to determine the damages sustained.
An insurance company (or the Fund, in the case of an insolvent insurance company) is not liable as the tortious wrongdoer, but simply stands ready, pursuant to the contract, to indemnify the tortfeasor for the loss. Under the provisions of section 546(a), before a claimant can recover from the Fund, the claimant must first recover any amounts available under the claimant's own insurance policy.
Having established that the arbitration awards were properly determined, we now address the question of whether, under the circumstances of this case, the doctrines of collateral estoppel and/or res judicata apply to bar further litigation of the plaintiffs' personal injury claims.
A valid arbitration award has all the force of an adjudication, and precludes the parties from again litigating the same matters. (Monmouth Public Schools, District No. 38 v. Pullen (1985), 141 Ill. App. 3d 60, 489 N.E.2d 1100.) Initially, we note that res judicata would not apply in the instant case because the defendants and the Fund were not parties to the arbitration proceeding. (See Kemling v. Country Mutual Insurance Co. (1982), 107 Ill. App. 3d 516, 437 N.E.2d 1253.) On the other hand, collateral estoppel or estoppel by verdict, a branch of res judicata, is narrower in scope and prohibits the relitigation of an issue essential to and actually decided in an earlier proceeding by the same parties or their privies. (Blair v. Bartelmay (1986), 151 Ill. App. 3d 17, 502 N.E.2d 859.) Identity of party for application of collateral estoppel is satisfied so long as the party against whom its application is sought is identical in both actions and had a full and fair opportunity to contest an issue which was necessarily determined in the prior proceeding. (Kemling v. Country Mutual Insurance Co. (1982), 107 Ill. App. 3d 516, 437 N.E.2d 1253.) The doctrine will not be applied if under the circumstances of the case it would result in an injustice to the party against whom it is asserted. Fred Olson Motor Service v. Container Corp. (1980), 81 Ill. App. 3d 825, 401 N.E.2d 1098.
Though it appears that there are no cases in Illinois directly on point, we find Coronet Insurance Co. v. Booker (1987), 158 Ill. App. 3d 466, 511 N.E.2d 793, instructive. In Coronet, the defendant, Booker, originally brought suit against the uninsured motorist and obtained a default judgment in the amount of $6,000. Booker's uninsured motorist claim was submitted to arbitration, and the arbitrator entered an award of $9,000. The plaintiff, Coronet, filed a complaint requesting a declaratory judgment to vacate the arbitration award. The trial court vacated the arbitrator's award to the extent that it exceeded $6,000. On appeal, the court, in dicta, held that the trial court correctly reduced the arbitrator's award by $3,000, because under the doctrine of collateral estoppel the amount of Booker's damages had previously been adjudicated in the earlier action.
In the instant case, the plaintiffs' damages were determined by the arbitration panel. The plaintiffs did not seek review of that de cisión, and have not alleged that they did not receive a full and fair opportunity to contest the issue of damages in arbitration. They have not explicitly alleged that their damages exceeded the amount of their awards, but by implication assert that a trial in their personal injury action could result in a larger damage determination. We do not find that under the circumstances of this case application of collateral estoppel would result in an injustice to the plaintiffs. Nor do we find the facts of this case to fall within any of the exceptions to the general rule that the prior determination of an issue of fact or law in a valid determination precludes relitigation of that issue in a subsequent proceeding. (See Restatement (Second) of Judgments §28, 29 (1982).) By choosing to proceed to arbitration and in that forum having their damages properly and conclusively determined, they are collaterally estopped from relitigating that issue and any other issue necessarily determined in that proceeding. Therefore, the trial court erred in denying the defendants' motion to dismiss plaintiffs' action.
Lastly, we consider the propriety of the trial court's dismissal of Pekin's intervening complaint. The trial court dismissed Pekin's complaint based on its interpretation of the nonrecovery provisions of section 546(a) of the Code (Ill. Rev. Stat. 1987, ch. 73, par. 1065.96(a)). The court reasoned that, since the plaintiffs' recovery against the Fund would be reduced by the amount paid on the plaintiffs' uninsured motorist claim, there was "no money to which any lien [could] attach." On appeal, Pekin contends that it has the right to a contractual lien against the proceeds of plaintiffs' personal injury action. Pekin asserts that its right to claim a lien against any recovery derives from its contract with Stephen Herriford and is supported by the statutory law and public policy of this State.
Pekin's argument, however, fails to take into account the policies underlying the Fund. In Pierre v. Davis (1987), 165 Ill. App. 3d 759, 520 N.E.2d 743, the plaintiff was injured in the course of his employment while making a delivery to the defendant restaurant. The plaintiff recovered $6,983.56 from his employer's workers' compensation insurer, the U.S. Insurance Group. Thereafter, the plaintiff filed suit against the defendant charging negligence. The plaintiff's employer filed an intervening petition "for the use of U.S. Insurance Group" to recover the $6,983.56 paid to the plaintiff based on the insurer's lien under the Workers' Compensation Act (Ill. Rev. Stat. 1985, ch. 48, par. 138.1 et seq.). Before the trial, the defendant's insurer became insolvent and the defense against the plaintiff's claim was undertaken by the Fund. After a jury verdict, a judgment of $6,141.60 was entered in favor of the plaintiff. The trial court denied the defendant's post-trial motion to have the judgment deemed satisfied pursuant to the "covered claim" and "non-duplication of recovery" provisions of the Fund. The reviewing court reversed based on its construction of the term "covered claim" (Ill. Rev. Stat. 1987, ch. 73, par. 1065.84— 3), finding that "it would counteract the purposes of the Fund to allow a solvent insurer to be reimbursed by the proceeds of the Fund."
In the instant case, Pekin claims that pursuant to its contract with Stephen Herriford, it has a right to claim a lien against the plaintiffs' recovery. We find the reasoning of Pierre dispositive, in that it would undermine the purposes of the Fund to allow Pekin to be reimbursed from the assets of the Fund. We find unavailing Pekin's arguments respecting the statutory law and the general public policy of enforcing insurers' contractual liens and subrogation rights. We conclude that the protections afforded by statute to the assets of the Illinois Insurance Guaranty Fund override the lien provisions contained in the instant policy. Although the Pierre court did not address the issue, we find that the the statutory "non-duplication of recovery" provisions of section 546(a) (Ill. Rev. Stat. 1987, ch. 73, par. 1065.96(a)) provide ample authority for the dismissal of Pekin's intervening complaint.
The judgment of the circuit court of Peoria County as it regards the dismissal of the intervenor-appellant's complaint is affirmed; the order of the circuit court denying defendants' motion to dismiss the complaint is reversed, and this cause is remanded with directions that said motion be granted.
Affirmed in part; reversed in part and remanded with directions.
WOMBACHER, J., concurs.