Court Opinion

ID: 9713147
Source: CourtListenerOpinion
Date Created: 2023-08-26 05:09:23.441314+00
Date Added: 2024-06-11T18:23:16.953947
License: Public Domain

JUSTICE BARRY concurring in part and dissenting in part: While I agree that the arbitration process was statutorily required in this case, I cannot subscribe to the majority’s determination that, under the circumstances of this case, plaintiffs are precluded by the doctrine of collateral estoppel from litigating their claims in court. I agree with the majority’s disposition of the appeal of Pekin Insurance Company. The stated purpose of article 34 of the Illinois Insurance Code is 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.) In other words, the primary legislative “purpose is to place [injured] claimants in the same position that they would have been in if the liability insurer had not become insolvent.” (Lucas v. Illinois Insurance Guaranty Fund (1977), 52 Ill. App. 3d 237, 239, 367 N.E.2d 469.) And, so as to protect the Fund’s resources and to avoid windfall judgments, a “non-duplication of recovery” provision is included in the statutory scheme: “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. Most disturbing to me about my colleagues’ opinion is how they deftly sidestep plaintiffs’ constitutional question in order to reach their result. In this regard, the parties agree that plaintiffs were first required to claim their damages under the uninsured motorist provisions of the Pekin Insurance policy before proceeding in this suit against the Fund. The majority, however, rejects this single point of agreement and rules that plaintiffs must first obtain a judgment against the insolvent defendants (represented by the Fund); and, in derogation of the principle of stare decisis, the majority sub silencio overrules binding legal precedent holding that section 546(a) of the Illinois Insurance Code means “that an insured must first proceed under any rights conferred by his insurance policy” before proceeding against the Fund. (Emphasis added.) Spearman v. State Security Insurance Co. (1978), 57 Ill. App. 3d 393, 395, 372 N.E.2d 1008, 1009, citing Lucas v. Illinois Insurance Guaranty Fund (1977), 52 Ill. App. 3d 237, 367 N.E.2d 469. The precise question before the Spearman court was “whether an insured must first file a claim under the uninsured motorist provisions of his insurance policy, or proceed against the Fund.” (Spearman, 57 Ill. App. 3d at 395, 372 N.E.2d at 1009.) The Spearman court unambiguously ruled in favor of first filing against the insurer; and the parties before us today do not dispute that point, but the majority does. Since the majority sua sponte takes issue with Spearman, I am constrained simply to note my dissent, and I quote briefly from Spear-man’s rationale, with which I agree: “Requiring plaintiff to proceed first against the Fund would be contrary to the intent of the legislature. Plaintiff is paying a premium, a portion of which buys the uninsured motorist coverage. [The insurer] cannot accept this money and then attempt to limit its liability by arguing that plaintiff should make a claim under the Fund rather than her insurance policy.” Spearman, 57 Ill. App. 3d at 395, 372 N.E.2d at 1009. Hereafter, in this district at least, in order not to “waive” their right to a jury trial of their damages in these cases, plaintiffs will have to first initiate litigation, contra to section 546(a), against the Fund, thereby incurring the full panoply of litigation fees and expenses. After obtaining a judgment, plaintiffs would then pursue their rights under uninsured motorist insurance. Presumably, by virtue of the doctrine of collateral estoppel, the amount of plaintiffs’ uninsured motorist recovery would not be subject to arbitration, but would be subject to limitations based on the coverage of their own uninsured motorist insurance and the judgment entered as a result of their lawsuit against the liable parties. Then, allowing for the statutory offset, plaintiffs would inform the Fund whether or not a balance is owed on the State court judgment. Plaintiffs in the rest of this State, on the other hand, will have to ponder whether the law as respects them is that stated in Spearman or by the majority here. The majority relies on Lucas, a case decided before Spearman and which addressed only the issue of whether the injured plaintiffs, who were awarded a judgment in excess of the liability limit of the tortfeasor’s insurance, could recover the full policy limit from the Fund or whether plaintiffs’ recovery was limited to the difference between their recovery from their own uninsured motorist coverage and the insolvent insurer’s policy. It is unclear from the facts recited in Lucas whether plaintiffs pursued their rights under their own insurance before or after they were awarded judgments at trial. The court held only that the Fund was responsible for the “difference between the amount of the insolvent insurer’s policy limits and the amount paid to claimants] by [their] own insurer.” (Lucas, 52 Ill. App. 3d at 239, 367 N.E.2d at 471.) The timing of plaintiffs’ claims was not at issue in Lucas-, therefore, I find the opinion less relevant for purposes of the inquiry before us than Spearman. With respect to the Fund’s collateral estoppel argument, I find both of the Fund’s primary authorities — Monmouth Public Schools v. Pullen, District No. 38 (1985), 141 Ill. App. 3d 60, 489 N.E.2d 1100, and Coronet Insurance Co. v. Booker (1987), 158 Ill. App. 3d 466, 511 N.E.2d 793 — readily distinguishable. It should first be noted that Monmouth is not a Fund or insurance case, but rather a labor relations dispute. Defendant teacher was on maternity leave during the first semester of the 1981-82 school year. In December of the following year, having been denied salary credit for the full 1981-82 school year, she brought a grievance. The matter proceeded to arbitration, and the plaintiff school board successfully defended its position on the ground that the employee’s grievance was not brought timely pursuant to the parties’ collective bargaining agreement. The arbitrator determined that the grievant’s complaint was not arbitrable. The teacher then attempted to obtain redress by filing another grievance at the beginning of the 1983-84 school year, complaining of the board’s failure to grant the one-year salary credit to bring her salary up to the anticipated level based on the partial year of service in 1981-82. The board sought a judicial stay of the latter grievance arbitration on the ground that the employee’s grievance was barred by prior arbitration of salary credit based on the same period of maternity leave. The circuit court agreed with the school board that the doctrine of res judicata barred relitigation of the salary schedule question, and that decision was affirmed on appeal. The court stated: “[T]he doctrine of res judicata, or estoppel by judgment, was applicable despite the fact that the grievances were phrased alternatively in terms of placement on the salary schedule for the school years 1982-83, and 1983-84; this does not change the actual issue [citation], which was found as not timely pursued initially under the specific terms of the bargaining agreement.” Pullen, 141 Ill. App. 3d at 69, 489 N.E.2d at 1106. In Coronet, the insured, Booker, obtained a $6,000 default judgment in the circuit court against an uninsured motorist in Booker’s lawsuit seeking damages for injuries sustained in a car accident. Booker also filed a claim with Coronet, his insurer, under the uninsured motorist provisions. The insurance claim proceeded to arbitration, and the arbitrator awarded Booker $9,000. Coronet then sought declaratory judgment in the circuit court on grounds that the arbitrator had exceeded his authority by awarding an amount in excess of $6,000. The circuit court agreed and entered judgment vacating the arbitrator’s award to the extent it exceeded $6,000. On appeal, the court affirmed, holding that the doctrine of collateral estoppel barred relitigation of the question of damages. The court reasoned: “The doctrine of collateral estoppel prevents relitigation of an issue previously decided in an earlier proceeding by the same parties or their privies. The doctrine may be applied as long as the party against whom application of the doctrine is sought, Booker in this case, is identical in both actions and had a full and fair opportunity to litigate the issue which was necessarily determined in the prior proceeding. [Citation.] At arbitration in the instant case, the only issue was liability; whether the uninsured motorist caused Booker’s injuries. No dispute existed as to damages because they were previously adjudicated in Booker’s prove-up against the uninsured motorist. Consequently, the trial court correctly reduced the arbitrator’s award by $3000.” Booker, 158 Ill. App. 3d at 471, 511 N.E.2d at 797. Obviously, neither Monmouth nor Coronet answers the question before us today — whether an arbitration award of damages within the limits of an insured’s uninsured motorist coverage has res judicata or collateral estoppel effect on the insured’s previously filed lawsuit against the uninsured motorist. The party against whom issue preclusion was asserted in both Monmouth and Coronet had had an opportunity to fully present his case in the forum initially selected. In Monmouth a second arbitration proceeding was sought to resolve an issue previously resolved in arbitration between the same parties. In Coronet an injured insured obtained judgment by default in the lawsuit against the uninsured driver before the question of liability was submitted to arbitration under the uninsured motorist provisions of the injured party’s policy. At first blush the facts here appear to be the mere converse of those the court considered in Coronet, but in fact they compel the same result. Unlike the present case, the issue submitted for arbitration in Coronet did not require the arbitrator to redetermine damages. My independent research reveals a case decided by the court of appeals of Michigan which is factually closer to the case before us than either Monmouth or Coronet. In Detroit Automobile Inter-Insurance Exchange v. Kurak (1978), 81 Mich. App. 217, 265 N.W.2d 86, the Michigan court determined that neither collateral estoppel nor res judicata precluded an insured who was insured under both her own and her father’s insurance policy from pursuing her rights to arbitrate damages under the second policy after having recovered an arbitration award within the limits of the first policy. The court cautioned only that, to avoid duplication of recoveries, the amount of the first arbitration award was to be considered in any subsequent arbitration. In my opinion the circumstances before us present a far more compelling case for rejecting res judicata and collateral estoppel defenses. It would seem that if an arbitrator’s award does not preclude subsequent arbitration of a plaintiff’s damages under a second policy of in: surance, there should be no reason why such award should preclude plaintiffs’ pursuit of full and just compensation from the liable parties’ insurer in a court action. Further support for rejecting these doctrines appears in relevant sections of the American Law Institute’s Restatement (Second) of Judgments. Whereas an arbitration award may generally be said to have preclusive effect on subsequent litigation of issues therein determined (Restatement (Second) of Judgments §84 (1988)), the rule is far from inflexible. It is, in truth, fraught with exceptions. I find several of those exceptional circumstances that support the circuit court’s decision to deny issue preclusive effect to the arbitrators’ awards of damages in this case. They are as follows: First, “[tjreating the issue as conclusively determined would be incompatible with an applicable scheme of administering the remedies in the actions involved.” (Restatement (Second) of Judgments §29(1) (1982).) By statute, plaintiffs here were required to first “exhaust” their rights under the Pekin policy. (Spearman, 57 Ill. App. 3d 393, 372 N.E.2d 1008.) But, the statute also anticipates■ that the injured parties will be in no worse position by virtue of the defendants’ insurer’s insolvency than they would have been had the insurer been solvent. Ergo, if plaintiffs injured by liable parties whose insurers are solvent are entitled to present their case to a jury for a determination of damages, then it would be an injustice incompatible with the statutory scheme to find that the plaintiffs here should be denied an opportunity to litigate their damages in a court action. Second, “[t]he forum in the second action affords the party against whom preclusion is asserted procedural opportunities in the presentation and determination of the issue that were not available in the first action and could likely result in the issue being differently determined.” (Restatement (Second) of Judgments §29(2) (1982).) As aforesaid, prior to the Fund’s participation, plaintiffs here demanded a jury trial — a valuable procedural and substantive opportunity not available in arbitration (See Ryherd v. General Cable Co. (1988), 124 Ill. 2d 418, 530 N.E.2d 431 (discussing in an employment context, wherein a retaliatory firing was charged, the danger of preempting State court action and thereby delegating the ultimate determination of Illinois public policy to privately appointed arbitrators)), and a right declared by Thomas Jefferson to be more precious to the maintenance of a democracy than the right to vote. Third, “[tjreating the issue as conclusively determined may complicate determination of issues in the subsequent action or prejudice the interests of another party thereto.” (Restatement (Second) of Judgments §29(6) (1982).) To the extent that issues of liability, including plaintiffs’ contributory negligence if any, are not submitted for the arbitrators’ consideration, defendants would be potentially prejudiced by treating the issue of damages as conclusively determined by an arbitration award. Moreover, in other circumstances, for example if the arbitrators’ award had greatly exceeded the uninsured motorist coverage limits, the Fund would likely resist application of issue preclusion doctrines on grounds that defendants’ position was inadequately represented by plaintiffs’ insurer, that they were unfairly prejudiced by the arbitration proceedings, or that the arbitrators had exceeded the scope of their authority. Fourth, “[a] new determination of the issue is warranted by differences in the quality or extensiveness of the procedures followed in the two [fora] or by factors relating to the allocation of jurisdiction between them.” (Restatement (Second) of Judgments §28(3) (1982).) In this case, the “Decision of Arbitrators” as it appears in the record gives very little insight into the scope of the issues or formality of the proceedings before the arbitrators. It recites merely, “This cause having come on for hearing before the undersigned arbitrators, petitioners [Stephen and Clifford Herriford] present personally and by Morton S. Goldfine, their attorney, and respondent [Pekin Insurance Company] present by John P. Fleming, the arbitrators having heard the testimony and stipulated documentary evidence and being fully advised in the premises hereby renders the [aforementioned] award[s].” The use of stipulated evidence would indicate a less adversarial posturing of the parties to the arbitration than would be expected in the action between the injured plaintiffs and the defendants in this suit. See also State Farm Mutual Automobile Insurance Co. v. Amirpanahi (1988), 50 Wash. App. 869, 751 P.2d 329 (wherein injured insureds arbitrated with liable party’s insurer and obtained an award $14,763.42 in excess of the coverage ceiling of the liable party’s insurance. Injured insureds then pursued their claim under their own uninsured motorist policy with State Farm. State Farm resisted arbitration of the damages question on grounds of issue preclusion, and sought a declaratory judgment ordering them to pay only the difference between what the injured insureds had already recovered and the first arbitration award. On appeal, the court rejected the insurer’s position on the ground that the arbitrator had exceeded his limited authority in determining damages in excess of the policy limit. The court observed that its decision was in accord with Restatement (Second) of Judgments §28(3) (1982)). And fifth, “other compelling circumstances make it appropriate that the party be permitted to relitigate the issue.” (Restatement (Second) of Judgments §29(8) (1982).) In this case, the injured plaintiffs sought first to litigate the question of damages in the circuit court, but for reasons beyond their control, the court has become the forum for the “subsequent” action. There is no suggestion that it was foreseeable to plaintiffs at the time of their initial filing that the Fund would be undertaking the defense, thereby forcing them to exhaust their rights under the uninsured motorist provisions of Stephen’s policy before they could litigate the question of damages to a jury. (See Spearman, 157 Ill. App. 3d 393, 395, 372 N.E.2d 1008.) These circumstances — the fact that the Fund was an unforeseen participant in the suit, that plaintiffs made their request for a jury determination of damages in the first place and that they were placed in the position they now find themselves by force of Illinois statute and precedential case law — are compelling justifications for permitting them to pursue their litigation in State court. The Fund suggests that if plaintiffs are not satisfied by the arbitrators’ award of damages in an amount less than policy limits, then to avoid issue preclusion they were required to vacate their awards in court pursuant to the Uniform Arbitration Act (Ill. Rev. Stat. 1987, ch. 10, par. 112) and file yet another suit against Pekin Insurance in order to “exhaust” their rights under the uninsured motorist provisions. Apparently the Fund would have the plaintiffs risk losing the limited damages won in arbitration, for which an uninsured motorist premium was paid, in order to pit their legal and monetary resources against a battery of lawyers representing not only defendants and the Fund, but their own insurer as well, if they are to become entitled to litigate their damages in court. In my opinion, the procedure suggested by the majority is likewise cumbersome and costly. I see sore little in the facts of this case to commend rigid application of the doctrines of res judicata or collateral estoppel. Simply stated, I reject the Fund’s position as inimical to the legislative purpose of every statute applicable to this action. In sum, and notwithstanding plaintiffs’ legitimate concerns of the trampling of their constitutional rights that the majority’s determination represents, I find that general policies of fairness as expressed in the afore-cited authorities support the decision of Circuit Judge Eagleton to deny defendants’ motion to dismiss this suit on grounds of issue preclusion. I would affirm the judgment of the circuit court and remand this cause for further proceedings.