Title: General Casualty Insurance Co. v. Lacey
Citation: N/A
Docket Number: 90993
State: Illinois
Issuer: Illinois Supreme Court
Date: April 18, 2002

Docket No. 90993-Agenda 18-January 2002.
GENERAL CASUALTY INSURANCE COMPANY, Appellee, 
 								v. GEORGE W. LACEY, Appellant.

Opinion filed April 18, 2002.


	JUSTICE THOMAS delivered the opinion of the court:
	The issue presented is whether, under the facts of this case,
the liability-limit exhaustion clause in General Casualty Insurance
Company's underinsured-motorist policy is valid and enforceable.
We hold that it is.
BACKGROUND
	On June 22, 1991, George W. Lacey was operating a car that
was involved in a motor vehicle accident. At the time of the
accident, Lacey was covered by an underinsured-motorist policy
issued by General Casualty. That policy provided coverage limits
of $100,000 per accident and $300,000 per occurrence, and
included the following liability-limit exhaustion clause:
		"We will pay under this coverage only after the limits of
liability under any applicable bodily injury liability bonds
or policies have been exhausted by payment of judgment
or settlements, unless we:
			(1) Have been given written notice in advance of a
settlement between an 'insured' and the owner or operator
of the 'underinsured motor vehicle;' and
			(2) decide to advance payment to the 'insured' in an
amount equal to the tentative settlement."
The other driver involved in the accident was insured by Allstate
Insurance Company under a policy providing bodily injury liability
limits of $50,000 per person and $100,000 per accident.
	In the summer of 1997, Lacey settled with Allstate for
$42,500. Lacey then filed a claim with General Casualty for
underinsured-motorist benefits. General Casualty denied the
underinsured-motorist claim, insisting that underinsured-motorist
coverage was not triggered because the $42,500 settlement did not
exhaust the at-fault driver's bodily injury liability limits. In
addition, General Casualty sought a declaration from the trial court
that Lacey was not entitled to underinsured-motorist benefits. In
response, Lacey conceded that the $42,500 settlement with
Allstate failed to exhaust the at-fault driver's bodily injury liability
limits. Nevertheless, Lacey argued that he was entitled to
underinsured-motorist benefits because General Casualty's
liability-limit exhaustion clause was void as against public policy.
Both parties moved for summary judgment, and the trial court
entered summary judgment in General Casualty's favor. With one
justice dissenting, the appellate court affirmed. No. 3-99-0977
(unpublished order under Supreme Court Rule 23). We granted
Lacey's petition for leave to appeal. 177 Ill. 2d R. 315(a).

ANALYSIS
	Summary judgment is proper where, when viewed in the light
most favorable to the nonmoving party, the pleadings, depositions,
admissions, and affidavits on file reveal that there is no genuine
issue as to any material fact and that the moving party is entitled
to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West
2000); Ragan v. Columbia Mutual Insurance Co., 183 Ill. 2d 342,
349 (1998). The standard of review for the entry of summary
judgment is de novo. Ragan, 183 Ill. 2d  at 349.
	Before this court, Lacey again argues that General Casualty's
liability-limit exhaustion clause is void as against public policy. In
support of this argument, Lacey points to the current enactment of
section 143a-2(7) of the Illinois Insurance Code, which provides:
			"A policy which provides underinsured motor vehicle
coverage may include a clause which denies payment
until the limits of liability or portion thereof under all
bodily injury liability insurance policies applicable to the
underinsured motor vehicle and its operators have been
partially or fully exhausted by payment of judgment or
settlement. A judgment or settlement of the bodily injury
claim in an amount less than the limits of liability of the
bodily injury coverages applicable to the claim shall not
preclude the claimant from making an underinsured
motorist claim against the underinsured motorist
coverage." 215 ILCS 5/143a-2(7) (West 2000).
Conceding that this version of section 143a-2(7) did not become
effective until January 1, 1997, Lacey nevertheless argues-without
any citation to authority-that the validity of General Casualty's
liability-limit exhaustion clause "should be governed by the law in
effect at the time of settlement."
	We must reject Lacey's argument. While we agree with Lacey
that statutes represent an expression of public policy (State Farm
Mutual Automobile Insurance Co. v. Smith, 197 Ill. 2d 369, 372
(2001)), it is equally well settled that "[s]tatutes in force at the
time an insurance policy was issued are controlling." (Emphasis
added.) State Farm, 197 Ill. 2d  at 372; Cummins v. Country
Mutual Insurance Co., 178 Ill. 2d 474, 482 (1997). This principle
is rooted, of course, in both the constitutional prohibition on the
impairment of contracts (U.S. Const., art. I, §10; Ill. Const. 1970,
art. I, §16) and the maxim that all applicable statutes in effect at
the time a policy is issued are deemed a part of the policy. See,
e.g., Kapinus v. State Farm Mutual Automobile Insurance Co.,
317 Ill. App. 3d 185, 187 (2000); Brandt v. Time Insurance Co.,
302 Ill. App. 3d 159, 170 (1998); Weisberg v. Royal Insurance Co.
of America, 124 Ill. App. 3d 864, 868 (1984). Consequently, in
assessing whether General Casualty's liability-limit exhaustion
clause violates public policy, we look not to the law that was in
effect at the time of settlement but at the law that was in effect at
the time the policy was issued.(1)
	Prior to the 1997 amendment, section 143a-2(7) specifically
authorized General Casualty to include a liability-limit exhaustion
clause in its underinsured-motorist policy. Indeed, the statutory
language and the policy language are virtually identical:
			"A policy which provides underinsured motor vehicle
coverage may include a clause which denies payment
until the limits of liability under all bodily injury liability
insurance policies applicable to the underinsured motor
vehicle and its operators have been exhausted by payment
of judgment or settlement." 215 ILCS 5/143a-2(7) (West
1992).
Given that the liability-limit exhaustion clause in General
Casualty's underinsured-motorist policy was expressly authorized
by section 143a-2(7) at the time Lacey's policy was issued, that
clause by definition conforms to public policy and is fully
enforceable.

CONCLUSION
	For the foregoing reasons, the judgment of the appellate court
is affirmed.
Affirmed.
 



1.      1Although the exact date of the policy's issuance is unknown, the
parties agree that the policy was issued prior to the effective date of the
1997 amendment to section 143a-2(7).