Court Opinion

ID: 9709521
Source: CourtListenerOpinion
Date Created: 2023-08-26 03:49:42.496528+00
Date Added: 2024-06-11T18:22:49.678850
License: Public Domain

Mr. JUSTICE ROMITI, dissenting: I respectfully dissent. Penalties and attorney’s fees normally cannot be awarded in a suit against an insurance company unless they are provided for either by contract or by statute. (Allstate Insurance Co. v. Alterman Transport Lines, Inc. (5th Cir. 1972), 465 F.2d 710; Olsen v. Preferred Risk Mutual Insurance Co. (1969), 284 Minn. 498,170 N.W.2d 581; Olokele Sugar Co. v. McCabe, Hamilton & Renny Co. (1971), 53 Haw. 69, 487 P.2d 769.) There is no statute which would permit such an award here, nor does the plaintiff contend that there is. The No-Fault Act was declared unconstitutional (Grace v. Howlett (1972), 51 Ill. 2d 478, 283 N.E.2d 474) long before this suit was filed. Thus, the plaintiff cannot recover penalties unless the contract itself provides for the assessment of penalties if the. insurer should refuse to pay. There is, of course, no express provision in the policy to that effect. The majority, however, has ruled that the rider’s reference to the statute incorporated its terms into the contract to such an extent that although the statute was declared null and void in Grace, the provision remained as part of the voluntary contract between the parties. It is hornbook law that the statutes in force when an insurance contract is executed are read into the policy whether or not they are actually incorporated therein. (Goble v. Central Security Mutual Insurance Co. (1970), 125 Ill. App. 2d 298,260 N.E.2d 860; Bertini v. State Farm Mutual Automobile Insurance Co. (1977), 48 Ill. App. 3d 851, 362 N.E.2d 1355, appeal denied (1977), 66 Ill. 2d 628.) For this very reason there was obviously neither any need nor any reason for the parties to incorporate the statute by reference into the contract. And, the language “in accordance with Article XXXV of the Illinois Insurance Code, subject to all of the provisions of the policy, except as modified herein” does not show any intention on the part of the insurer to incorporate the terms of the statute into the insurance contract, except, of course, to the extent Allstate recognized that the statute, during the time it existed, would be read in, by force of law. To the contrary, that provision clearly declares that Allstate provides coverage subject to all the provisions of the policy except as modified herein. In other words, Allstate intended that the terms of the policy were to control. They and not the terms of the statute were to determine the scope of the insurer’s liability.1  Nor is Landis, relied upon by the majority, persuasive here. The Illinois Supreme Court in McCann ex rel. Osterman v. Continental Casualty Co. (1956), 8 Ill. 2d 476, 134 N.E.2d 302, in rejecting the reasoning of the court in Landis ruled that mere reference to the Financial Responsibility Act was insufficient to incorporate its terms into an insurance contract when the statute would otherwise be inapplicable. That is precisely the situation here. The no-fault statute is not applicable since it was declared null and void in Grace. Thus, as in McCann, the liability of the insured depends on the terms set in the insurance contract without reference to the statute. And while the policy expressly required Allstate to pay any claim promptiy, it omitted the statutory provision assessing penalties should Allstate fail to do so. Furthermore, even if the language “in accordance with” could be considered to be language of incorporation, since the rider said “provide the following coverage in accordance with 9 9 9,” only the coverage portions and not the whole of the statute could be considered to be incorporated by reference into the policy. Statutory provisions awarding penalties and attorneys’ fees are not coverage provisions; that is, provisions affording protection and indemnity if certain enumerated risks should occur. Such statutes are penal in nature and are considered as costs to reimburse the insured for enforcing the contract. Salter v. National Indemnity Co. (Fla. App. 1964), 160 So. 2d 147; Commercial Casualty Insurance Co. v. McCulley (1932), 185 Ark. 468,48 S.W.2d 225; Baker v. Federal Crop Insurance Corp. (1965), 241 Ore. 609, 407 P.2d 841, cert. granted (1966), 384 U.S. 938, 16 L. Ed. 2d 538, 86 S. Ct. 1459, cert, dismissed (1966), 385 U.S. 801,17 L. Ed. 2d 48,87 S. Ct. 10; 6A Appleman Insurance Law and Practice §4031 (1972). Finally, the majority holds that Allstate is barred from relying on the fact that the no-fault statute was declared unconstitutional by its continuing to pay benefits for more than one year. But Allstate was required under its contract to pay benefits regardless of the constitutionality of the statute. The policy, including that part affording no-fault protection and setting forth the terms of that protection, constituted a contract between the parties; the nullification of the statute, though temporarily a part of the contract as a matter of law, did not affect the rights of the parties under the contract. (Pawlik v. State Farm Mutual Automobile Insurance Co. (7th Cir. 1962), 302 F.2d 255.) Since the coverage remained in effect as part of the voluntary contract between the insurer and the insured, and since the insured qualified under the terms expressly set forth in the policy, Allstate was obligated by the policy to continue paying benefits. An insurer does not waive its reliance on a valid defense simply because it paid benefits it was required under the policy to pay, regardless of the existence of the defense. Wisconsin National Loan & Building Association v. Webster (1903), 119 Wis. 476, 97 N.W. 171. For these reasons I believe the judgment of the trial court should be affirmed.   Of course, the mere fact Allstate intended the terms of the policy to control did not mean that they would. To the extent the policy was in conflict with the terms of a governing statute, the statute, not the policy would prevail. Bertini v. State Farm Mutual Automobile Insurance Co. (1977), 48 Ill. App. 3d 851, 362 N.E.2d 1355, appeal denied (1977), 66 Ill. 2d 628.