Court Opinion

ID: 3135685
Source: CourtListenerOpinion
Date Created: 2015-10-22 17:40:54.755885+00
Date Added: 2024-06-11T12:46:59.565834
License: Public Domain

Docket No. 110679.

                       IN THE
                  SUPREME COURT
                         OF
                THE STATE OF ILLINOIS

PHOENIX INSURANCE COMPANY, Appellant, v. MARTHA
                ROSEN, Appellee.

                   Opinion filed April 21, 2011.

     JUSTICE GARMAN delivered the judgment of the court, with
opinion.
     Justices Freeman, Thomas, Karmeier, Burke, and Theis concurred
in the judgment and opinion.
     Chief Justice Kilbride took no part in the decision.

                             OPINION

    This case presents the question of whether a provision allowing
either party to an insurance contract to demand a trial de novo
following arbitration is unenforceable when it appears in an
underinsured-motorist policy. For the reasons below, we hold that
such provisions are enforceable.

                            BACKGROUND
    The facts are not in dispute. On April 19, 2001, Martha Rosen was
injured in an accident with another driver. The other driver’s vehicle
was insured for a maximum limit of $25,000 for claims of bodily
injury, while Rosen’s automobile insurance includes underinsured-
motorist coverage with a maximum limit of $500,000. Rosen filed a
claim with her insurer, Phoenix Insurance Company, requesting
coverage under the underinsured-motorist provisions of her policy.
The arbitration agreement contained in the underinsured-motorist
coverage provides:
           “A. If we and an ‘insured’ do not agree:
                1. Whether that person is legally entitled to recover
           damages under this endorsement; or
                2. As to the amount of damages;
           either party may make a written demand for arbitration. In
           this event, each party will select an arbitrator. The two
           arbitrators will select a third. If such arbitrators are not
           selected within 45 days, either party may request that the
           arbitration be submitted to the American Arbitration
           Association.
           B. We will bear all the expenses of the arbitration except
       when the ‘insured’s’ recovery exceeds the minimum limit
       specified in the Illinois Safety responsibility law. If this occurs,
       the ‘insured’ will be responsible up to the amount by which
       the ‘insured’s’ recovery exceeds the statutory minimum for:
                1. Payment of his or her expenses; and
                2. An equal share of the third arbitrator’s expenses.
           C. Unless both parties agree otherwise, arbitration will
       take place in the county in which the ‘insured’ lives. Local
       rules of law as to procedure and evidence will apply. A
       decision agreed to by two of the arbitrators will be binding as
       to:
                1. Whether the ‘insured’ is legally entitled to recover
           damages; and
                2. The amount of damages. This applies only if the
           amount does not exceed the minimum limit for bodily
           injury liability specified by the Illinois Safety
           Responsibility Law. If the amount exceeds that limit,
           either party may demand the right to a trial. This demand
           must be made within 60 days of the arbitrators’ decision.
           If the demand is not made, the amount of damages agreed
           to by the arbitrators will be binding.” (Emphasis added.)
   Following arbitration, Rosen was awarded $382,500, “subject to
reduction by all applicable set-offs in favor of Travelers Insurance
Company,[1] including but not limited to medical payments made by

  1
    According to the pleadings, Phoenix Insurance Company is “a Travelers
Insurance Company.” Several documents in the record, including the

                                   -2-
Travelers Insurance Company.” Phoenix filed a complaint in the Cook
County circuit court rejecting the arbitration award and demanding a
jury trial, citing the so-called “trial de novo” provision of paragraph
(C)(2) of the arbitration agreement, quoted above. Rosen filed an
answer in which she asserted as an affirmative defense that the trial de
novo provision was “invalid and unenforceable as against the public
policy of the State of Illinois.” She also filed a counterclaim asking the
court to enforce the arbitration award in her favor.
    Phoenix filed a section 2–615 motion to strike the affirmative
defense and counterclaim for failure to state a claim. 735 ILCS
5/2–615 (West 2006). Phoenix relied on Zappia v. St. Paul Fire &
Marine Insurance Co., 364 Ill. App. 3d 883 (1st Dist. 2006), in which
the appellate court upheld a trial de novo clause in a similar
underinsured-motorist policy. After briefing, the court granted
Phoenix’s motion, striking Rosen’s affirmative defense and dismissing
her counterclaim with prejudice. The court’s order included a finding
that the dismissal of the counterclaim was final and there was no just
reason to delay appeal or enforcement of that dismissal, pursuant to
Supreme Court Rule 304(a) (Ill. S. Ct. R. 304(a) (eff. Feb. 26, 2010)).
    Rosen appealed, and the appellate court reversed. No. 1–08–2776
(unpublished order under Supreme Court Rule 23). The appellate
court noted that prior decisions regarding the enforceability of trial de
novo provisions in underinsured-motorist policies has “varied,” citing
two cases in which such provisions were struck down as violative of
public policy: Fireman’s Fund Insurance Cos. v. Bugailiskis, 278 Ill.
App. 3d 19 (2d Dist. 1996), and Parker v. American Family
Insurance Co., 315 Ill. App. 3d 431 (3d Dist. 2000). The court also
reviewed Kost v. Farmers Automobile Insurance Ass’n, 328 Ill. App.
3d 649 (5th Dist. 2002), in which the court allowed an insured to
invoke the trial de novo clause, and Zappia, in which the court
rejected Bugailiskis and found that the clause was enforceable.
    After considering these cases, the court concluded that Zappia
was “the exception to the rule” and declined to follow it. The court
found that the trial de novo provision “unfairly and unequivocally
favors the insurer over the insured because an insurance company is

arbitration decision and the “Automobile Policy Booklet,” refer to Travelers
rather than Phoenix. The distinction is not relevant to our decision.

                                    -3-
unlikely to appeal a low binding arbitration award while very likely to
appeal a high award.” The court also found that such provisions
violate “the public policy considerations in support of arbitration” by
increasing the time and costs required to settle the dispute. The court
therefore found that “trial de novo provisions in underinsured clauses
are against public policy in Illinois.” We granted Phoenix’s petition for
leave to appeal. Ill. S. Ct. R. 315 (eff. Feb. 26, 2010). We
subsequently granted the Illinois Trial Lawyers Association leave to
submit an amicus curiae brief in support of Rosen. Ill. S. Ct. R. 345
(eff. Sept. 20, 2010).

                              ANALYSIS
     Whether a provision in a contract, insurance policy, or other
agreement is invalid because it violates public policy is a question of
law, which we review de novo. In re Estate of Feinberg, 235 Ill. 2d
256, 263 (2009). The circuit court’s order granting a section 2–615
motion to dismiss is also reviewed de novo. Wakulich v. Mraz, 203 Ill.
2d 223, 228 (2003).
     In deciding whether an agreement violates public policy, we must
“ ‘determine whether the agreement is so capable of producing harm
that its enforcement would be contrary to the public interest.’ ”
Feinberg, 235 Ill. 2d at 265-66 (quoting Kleinwort Benson North
America, Inc. v. Quantum Financial Services, Inc., 181 Ill. 2d 214,
226 (1998)). This court has a long tradition of upholding the right of
parties to freely contract. Mohanty v. St. John Heart Clinic, S.C., 225
Ill. 2d 52, 64 (2006); Vine Street Clinic v. HealthLink, Inc., 222 Ill.
2d 276 (2006). As we have stated, “ ‘it should be remembered that it
is to the interests of the public that persons should not be
unnecessarily restricted in their freedom to make their own contracts.’
” First National Bank of Springfield v. Malpractice Research, Inc.,
179 Ill. 2d 353, 359 (1997) (quoting Schumann-Heink v. Folsom, 328
Ill. 321, 330 (1927)). Thus, the power to declare a private contract
invalid on public policy grounds is exercised sparingly. Progressive
Universal Insurance Co. of Illinois v. Liberty Mutual Fire Insurance
Co., 215 Ill. 2d 121, 129 (2005); First National Bank of Springfield
v. Malpractice Research, Inc., 179 Ill. 2d 353, 359 (1997). An
agreement will not be invalidated unless it is clearly contrary to what
the constitution, the statutes, or the decisions of the courts have

                                  -4-
declared to be the public policy of Illinois or unless it is “manifestly
injurious to the public welfare.” Progressive Universal, 215 Ill. 2d at
129-30; Mohanty, 225 Ill. 2d at 65; Schumann-Heink, 328 Ill. at 330.
Those seeking to have an agreement invalidated carry a “heavy
burden” of demonstrating a violation of public policy. Mohanty, 225
Ill. 2d at 65; see also Feinberg, 235 Ill. 2d at 266 (“ ‘The courts apply
a strict test in determining when an agreement violates public policy.’
” (quoting Kleinwort, 181 Ill. 2d at 226)).
     In relation to the judicial branch, the General Assembly, which
speaks through the passage of legislation, occupies a “superior
position” in determining public policy. Reed v. Farmers Insurance
Group, 188 Ill. 2d 168, 175 (1999) (citing Committee for Educational
Rights v. Edgar, 174 Ill. 2d 1, 29-32 (1996)). We have “strictly
adhered to the position that the public policy of the state is not to be
determined by the varying opinions of laymen, lawyers or judges as to
the demands of the interests of the public.” (Internal quotation marks
omitted.) Mohanty, 225 Ill. 2d at 65 (quoting Groome v. Freyn
Engineering Co., 374 Ill. 113, 124 (1940), quoting Zeigler v. Illinois
Trust & Savings Bank, 245 Ill. 180, 193 (1910)). Thus, “ ‘[w]hen the
legislature has declared, by law, the public policy of the State, the
judicial department must remain silent, and if a modification or change
in such policy is desired the law-making department must be applied
to, and not the judiciary, whose function is to declare the law but not
to make it.’ ” Reed, 188 Ill. 2d at 175 (quoting Collins v.
Metropolitan Life Insurance Co., 232 Ill. 37, 44 (1907)).
     The trial de novo provision at issue in this case implicates several
public policies. As noted above, we must first consider the relevant
public policy expressed by the legislature in our statutes. For that, we
turn to the Illinois Insurance Code (215 ILCS 5/1 et seq. (West
2006)) and the Illinois Safety and Financial Responsibility Law (625
ILCS 5/7–100 et seq. (West 2006)). Rosen and her amici argue that
the trial de novo provision also violates our public policy favoring
arbitration, so we review that policy as well.

     Public Policy Supporting Underinsured-Motorist Insurance
    With several exceptions not relevant here, all motor vehicles
operated or registered in this state must be covered by a liability
insurance policy. 625 ILCS 5/7–601(a) (West 2006). The policy must

                                  -5-
include coverage for bodily injury in at least a minimum amount
specified by the Financial Responsibility Law, currently $20,000. 625
ILCS 5/7–203 (West 2006). In addition, motor vehicle liability
policies must include uninsured-motorist coverage. 215 ILCS 5/143a
(West 2006). Uninsured-motorist coverage must be provided in an
amount equal to the liability coverage, unless the insured specifically
rejects such additional coverage. 215 ILCS 5/143a–2(1) (West 2006).
If the uninsured-motorist coverage limit exceeds the minimum liability
limit required by the Financial Responsibility Law, the policy must
also include underinsured-motorist coverage in an amount equal to the
uninsured-motorist coverage. 215 ILCS 5/143a–2(4) (West 2006).
     The “principal purpose” of the mandatory liability insurance
requirement is “to protect the public by securing payment of their
damages.” Progressive Universal, 215 Ill. 2d at 129. To further that
end, uninsured-motorist coverage is required “ ‘to place the
policyholder in substantially the same position he would occupy, so far
as his being injured or killed is concerned, if the wrongful driver had
had the minimum liability insurance required by the Financial
Responsibility Act [citation].’ ” Squire v. Economy Fire & Casualty
Co., 69 Ill. 2d 167, 176 (1977) (quoting Ullman v. Wolverine
Insurance Co., 48 Ill. 2d 1, 4 (1970)). In Sulser v. Country Mutual
Insurance Co., 147 Ill. 2d 548, 555-58 (1992), this court examined
the legislative history supporting the underinsured-motorist coverage
provision and concluded that the legislative purpose of underinsured-
motorist coverage is the same as that of uninsured-motorist coverage,
“i.e., to place the insured in the same position he would have occupied
if the tortfeasor had carried adequate insurance.” The court noted that
“[u]ninsured and underinsured motorist policies provide virtually the
same coverage to the insured,” and that by providing for
underinsured-motorist coverage in addition to uninsured-motorist
coverage, “the legislature avoided the absurdity of a situation where
a policyholder would receive fewer benefits in the fortuitous event of
being injured by an underinsured rather than by an uninsured
motorist.” Id. at 557. Thus, as we have recently noted, under Illinois
law liability, uninsured-motorist, and underinsured-motorist coverage
provisions are “inextricably linked.” Schultz v. Illinois Farmers
Insurance Co., 237 Ill. 2d 391, 404 (2010). All three serve the same
underlying public policy: ensuring adequate compensation for

                                 -6-
damages and injuries sustained in motor vehicle accidents.
    Despite the interrelatedness of uninsured-motorist and
underinsured-motorist coverages, relevant differences exist between
the statutory mandates. The Illinois Insurance Code requires that “any
dispute with respect to the coverage and the amount of damages”
under an uninsured-motorist policy must be submitted for arbitration.
215 ILCS 5/143a(1) (West 2006). At the time of Rosen’s injury, the
statute also provided, “Any decision made by the arbitrators shall be
binding for the amount of damages not exceeding the limits for bodily
injury or death set forth in Section 7–203 of the Illinois Vehicle
Code.” 215 ILCS 5/143a(1) (West 2000). Thus, at the time of
Rosen’s injury, the arbitration provision in her underinsured-motorist
policy matched the arbitration provision required by law for
uninsured-motorist policies. In 2004, the statute was amended to
create a higher binding threshold for awards where the policyholder
has coverage exceeding the statutory minimum, up to a maximum
threshold of $50,000 for a single injured person. It now provides:
“Any decision made by the arbitrators shall be binding for the amount
of damages not exceeding $50,000 for bodily injury to or death of any
one person, $100,000 for bodily injury to or death of 2 or more
persons in any one motor vehicle accident, or the corresponding
policy limits for bodily injury or death, whichever is less.” 215 ILCS
5/134a(1) (West 2008). However, the statutory provision mandating
underinsured-motorist coverage has never required a similar
arbitration agreement. Indeed, the underinsured-motorist statute has
never required arbitration of any kind.

                 Public Policy Supporting Arbitration
    As noted above, this case also implicates the Illinois public policy
supporting arbitration as a means for resolving disputes. This court
has noted that arbitration promotes the economical and efficient
resolution of disputes. Donaldson, Lufkin & Jenrette Futures, Inc. v.
Barr, 124 Ill. 2d 435, 442 (1988); see also Reed, 188 Ill. 2d at 173. In
general, the legislature has expressed its approval of arbitration
through adoption of the Uniform Arbitration Act (710 ILCS 5/1 et
seq. (West 2006)), which provides, inter alia, that an arbitration
agreement “is valid, enforceable and irrevocable save upon such

                                  -7-
grounds as exist for the revocation of any contract,” with limited
exceptions not relevant here. 710 ILCS 5/1 (West 2006). Thus, public
policy in Illinois favors arbitration.

                            Unconscionability
     In addition to the public policies supporting underinsured-motorist
insurance and arbitration, Rosen argues that the trial de novo
provision in her underinsured-motorist policy violates public policy
because it is unconscionable. Rosen asserts that the provision unfairly
favors the insurer over the insured, an assertion that our appellate
court has also adopted in several cases. See Fireman’s Fund
Insurance Cos. v. Bugailiskis, 278 Ill. App. 3d 19, 23 (1996); Parker
v. American Family Insurance Co., 315 Ill. App. 3d 431, 434 (2000);
Samek v. Liberty Mutual Fire Insurance Co., 341 Ill. App. 3d 1045,
1050 (2003). Before we address the substance of that argument, some
clarification of terms is useful. Although related, a finding that a
contract provision is unenforceable because it is unconscionable is
distinct from a finding that a contract provision is invalid because it
violates public policy. Unconscionability takes two general forms; an
agreement may be unenforceable if it is either procedurally or
substantively unconscionable. Kinkel v. Cingular Wireless, LLC, 223
Ill. 2d 1, 22 (2006). Procedural unconscionability consists of “ ‘some
impropriety during the process of forming the contract depriving a
party of meaningful choice.’ ” Id. at 23 (quoting Frank’s Maintenance
& Engineering, Inc. v. C.A. Roberts Co., 86 Ill. App. 3d 980, 989-90
(1980)). Factors to be considered in determining whether an
agreement is procedurally unconscionable include whether each party
had the opportunity to understand the terms of the contract, whether
important terms were “ ‘hidden in a maze of fine print,’ ” and all of the
circumstances surrounding the formation of the contract. Id.
Substantive unconscionability concerns the actual terms of the
contract and examines “ ‘the relative fairness of the obligations
assumed,’ ” asking whether the terms are “ ‘so one-sided as to
oppress or unfairly surprise an innocent party.’ ” Id. at 28 (quoting
Maxwell v. Fidelity Financial Services, Inc., 907 P.2d 51, 58 (1995)).
     As discussed above, our public policy analysis asks whether the
contract provision at issue threatens harm to the public as a whole,
including by contravening the constitution, statutes, or judicial

                                  -8-
decisions of Illinois. In contrast, an unconscionability analysis asks
whether the agreement, by its formation or by its terms, is so unfair
that the court cannot enforce it consistent with the interests of justice.
In other words, the argument that a contract is invalid because it
violates public policy “touch[es] upon matters of substance related to
the public welfare rather than aspects of the bargaining process
between the parties.” Restatement (Second) of Contracts ch. 8, intro.
note (1981).

                       Decisions of Illinois Courts
     The courts of Illinois have also addressed the trial de novo
provisions. In Fireman’s Fund Insurance Cos. v. Bugailiskis, 278 Ill.
App. 3d 19 (1996), our appellate court considered a trial de novo
provision in an underinsured-motorist policy. In that case, the
insured’s underinsured-motorist policy contained a trial de novo
provision substantially identical to the one in Rosen’s policy. A panel
of arbitrators awarded the insured $139,500.85, and the insurance
company filed a claim demanding trial. Following the insured’s motion
for summary judgment, the trial court certified the question of whether
the trial de novo clause was violative of public policy to the appellate
court. Id. at 20-22.
     The Bugailiskis court first noted that, although Illinois public
policy favors arbitration, an arbitration provision does not violate
public policy simply by requiring nonbinding arbitration. Id. at 21. The
court then acknowledged that trial de novo provisions are common in
insurance policies across the country, and that courts in several states
have struck down the provisions as against public policy. See id. at 22
(collecting cases). Reviewing cases from other states, the court noted
that trial de novo provisions, though “ostensibly neutral,” in fact favor
the insurer “unfairly and unequivocally.” Id. The court further noted
that an insurance contract “possesses some of the earmarks of an
adhesive contract,” and trial de novo provisions “frustrate the public
policy goals of arbitration” by adding cost and delay when an award
is rejected. Id. at 22, 23.
     The Bugailiskis court acknowledged that some states have upheld
trial de novo provisions against public policy challenges. Id. at 23. It
also acknowledged the insurer’s argument that several of the
out-of-state cases that struck down the provisions did so in the

                                   -9-
context of uninsured-motorist policies, not underinsured-motorist
policies. Id. However, the court held,
         “we cannot think of any reason why the provision is less
         violative of public policy because it is applied to an
         underinsured motorist claim instead of an uninsured motorist
         claim.
             The contract allows [the insurer] to demand a jury trial if
         the arbitration award requires [the insurer] to pay any amount.
         This is because any award under the minimum liability amount
         would be covered by another policy in an underinsured
         motorist claim. In an uninsured motorist claim, the contract
         subjects [the insurer] to $20,000 (the minimum liability
         amount) of liability without the right to demand a jury trial.
         Therefore, the unequal application of the ‘escape hatch’
         provision is actually less oppressive to the insured in an
         uninsured motorist case.” (Emphases in original.) Id. at 24.
The court in Bugailiskis therefore held that the trial de novo provision
was unenforceable, and the arbitration award in favor of the insured
was binding. Id.
    Not long after Bugailiskis was decided, this court took up the
public policy question in the context of uninsured-motorist policies.
In Reed v. Farmers Insurance Group, 188 Ill. 2d 168 (1999), the
insured plaintiff challenged the trial de novo provision in her
uninsured-motorist policy, arguing that it was against public policy.
This court acknowledged that courts of other states had invalidated
the provisions as violative of the public policy supporting arbitration
or because they are unfairly structured in favor of the insurer.
However, we noted that none of those states have statutes authorizing
the trial de novo provisions. Reed, 188 Ill. 2d at 174. This court also
acknowledged the appellate court’s decision in Bugailiskis, but it
noted that Bugailiskis involved an underinsured-motorist policy,
which is not required to contain the trial de novo provisions. Id. In
contrast, the Illinois uninsured-motorist statute not only authorizes
such provisions, it requires them. 215 ILCS 5/143a(1) (West 2006).
As we noted in Reed, “this distinction is dispositive of this issue.”
Reed, 188 Ill. 2d at 174. As noted above, where, as in Reed, the
legislature has spoken, the question of public policy is not for the
courts to decide. Thus, Reed held that “the arbitration provision that

                                 -10-
appears in the plaintiff’s insurance contract is already an expression of
public policy and represents the legislature’s consideration of the
question.” Id.
     The appellate court next considered trial de novo provisions in the
underinsured-motorist context in Parker v. American Family
Insurance Co., 315 Ill. App. 3d 431 (2000). The Parker court
acknowledged our holding in Reed, but found that it was expressly
limited to uninsured-motorist policies. The court noted that Reed had
distinguished Bugailiskis on the grounds that the uninsured-motorist
statute does not require trial de novo provisions. Id. at 434-35. The
court then found that, in contrast to the legislature’s determination of
public policy in the uninsured-motorist context, “the legislature has
not given us any guidance concerning underinsured motorist
coverage.” Id at 435. Thus, the court relied on Bugailiskis, finding
that the trial de novo provision was unenforceable and the parties’
already-conducted arbitration was binding. Id. at 435-36.
     In Kost v. Farmers Automobile Insurance Ass’n, 328 Ill. App. 3d
649 (2002), the appellate court considered an insured’s attempt to
enforce the trial de novo provision. The Kost court noted the holdings
in Bugailiskis and Parker that trial de novo policies were void as
against public policy, but it rejected the insurance company’s attempt
to invoke those decisions. Id. at 654. Although the court agreed that
trial de novo provisions generally violated public policy, it found that
allowing an insured to invoke the provision “does not frustrate public
policy.” Id. Indeed, the court noted, “it is of the highest irony that a
provision that our courts have found to be against public policy
because of manipulative drafting by insurers should now be claimed
by defendant to be a shield against an insured’s suit.” Id. at 655.
     The last case relied on by Rosen is Samek v. Liberty Mutual Fire
Insurance Co., 341 Ill. App. 3d 1045 (2003). There, the appellate
court acknowledged that there may be situations where an insured
wants to invoke the trial de novo, as had occurred in Kost. However,
the Samek court held that “trial de novo provisions disturbingly take
on the character of adhesion contracts because they lack a mutuality
of remedy between the insurer and the insured.” Id. at 1051. Thus, the
Samek court followed Bugailiskis and Parker, declaring the trial de
novo provision unenforceable as against public policy. Id.
     Most recently, however, the appellate court in Zappia v. St. Paul

                                  -11-
Fire & Marine Insurance Co., 364 Ill. App. 3d 883 (2006), held that
trial de novo provisions do not violate public policy. Id. at 887-88.
That case, like Kost, involved an attempt by an insured to invoke the
provision. The Zappia court reviewed Bugailiskis, Parker, and
Samek, but noted that Kost and Zappia both countered the assertion
that only an insurance company would want to enforce the trial de
novo provisions. Id. at 887. The Zappia court also quoted the
dissenting justice in Samek, who wrote:
         “I find it somewhat anomalous for the judiciary of this state to
         find a contractual provision relating to the arbitration of
         underinsured-motorist claims to be contrary to public policy
         when, at the same time, an almost identical provision relating
         to the arbitration of uninsured-motorist claims is mandated by
         the legislature. As the supreme court has acknowledged, the
         legislature occupies a superior position in determining public
         policy (Reed, 188 Ill. 2d at 175), and I can conceive of no
         difference in the public and private interest factors which are
         relevant to a determination as to the propriety of permitting
         trial de novo clauses to be included in arbitration provisions
         governing uninsured-motorist coverage as compared to those
         governing underinsured-motorist coverage.” Samek, 341 Ill.
         App. 3d at 1053 (Hoffman, J., dissenting).
The Zappia court noted, as had the courts in Bugailiskis, Parker, and
Samek, that Illinois public policy favors arbitration of all sorts and
does not require that arbitration be binding. Zappia, 364 Ill. App. 3d
at 887. Thus, the court held that trial de novo provisions do not
violate public policy, disagreeing with majority opinions in
Bugailiskis, Parker, and Samek. Id. at 888.

                    Application to the Present Case
     As we have noted, the power to declare a private contract invalid
on public policy grounds is exercised sparingly. Progressive Universal
Insurance Co. of Illinois v. Liberty Mutual Fire Insurance Co., 215
Ill. 2d 121, 129 (2005); First National Bank of Springfield v.
Malpractice Research, Inc., 179 Ill. 2d 353, 359 (1997). Because it
is primarily the function of the legislature, not the courts, to construct
public policy, “ ‘[w]hen the legislature has declared, by law, the public
policy of the State, the judicial department must remain silent, and if

                                  -12-
a modification or change in such policy is desired the law-making
department must be applied to, and not the judiciary, whose function
is to declare law but not to make it.’ ” Reed, 188 Ill. 2d at 175
(quoting Collins v. Metropolitan Life Insurance Co., 232 Ill. 37, 44
(1907)).
    Rosen urges us to find, as the appellate court did in Parker, that
the legislature has not spoken to the public policy of trial de novo
provisions in underinsured-motorist policies. However, such a finding
would require us to overlook the clear statement of public policy
found in the uninsured-motorist statute, a statute we have held is
“inextricably linked” with the underinsured-motorist statute at issue.
Schultz, 237 Ill. 2d at 404. As we acknowledged in Reed, the
legislature has determined that trial de novo provisions are consistent
with the public policy of this state when they appear in uninsured-
motorist policies. Importantly, the legislature did more than simply
condone the use of such provisions in the uninsured-motorist context;
it explicitly required their use. 215 ILCS 5/143a(1) (West 2006).
Correspondingly, the public policy of Illinois does not merely condone
the use of trial de novo provisions in uninsured-motorist policies. It is
the public policy of Illinois that such provisions must be included.
    As we have repeatedly emphasized, the legislative considerations
behind the underinsured-motorist statute are the same as those
underlying the uninsured-motorist statute. Both statutes ensure that
an injured policyholder will be compensated for her damages up to the
limits of coverage she has paid for, regardless of the coverage carried
by the at-fault driver. Sulser, 147 Ill. 2d at 555-58; Schultz, 237 Ill. 2d
at 404. This common purpose is underscored by the underinsured-
motorist statute’s requirement that coverage limits under that
provision must equal the insured’s uninsured-motorist coverage limit.
215 ILCS 5/143a–2(4) (West 2006). We acknowledge, of course, that
the legislature has declined to enact a trial de novo requirement in the
underinsured-motorist context. Thus, Rosen is correct that the
legislature has not clearly defined Illinois’ public policy with respect
to trial de novo provisions in underinsured-motorist policies.
However, the legislature’s requirement of the provisions in uninsured-
motorist policies is certainly evidence of the legislature’s view of trial
de novo agreements. Where the public policy as expressed by the
legislature affirmatively requires a contractual provision in one

                                   -13-
context, it would be inconsistent to say that an identical provision in
a highly related context is so against public policy that we must refuse
to enforce it, unless some distinction between the two contexts
supports such a result.
    Rosen first argues that trial de novo provisions violate our public
policy supporting arbitration because they do not promote the final,
efficient, and economical resolution of disputes. However, as noted
above, Illinois public policy does not require that arbitration be
binding. See, e.g., Mayflower Insurance Co. v. Mahan, 180 Ill. App.
3d 213, 217 (1988). In addition to the decisions of our courts so
holding, this fact is evident in the legislature’s adoption of trial de
novo provisions in the uninsured-motorist context. In fact, trial de
novo provisions like those at issue here actually do more to promote
the purposes of arbitration than “pure” nonbinding arbitration, because
they ensure that at least some policyholders–those with low-value
damages as determined by a neutral panel of arbitrators–receive an
efficient and economical final resolution.
    As we have stated, Illinois public policy favors arbitration. In the
context of uninsured-motorist insurance, of course, this public policy
applies with even more force because the statute requires that disputes
“with respect to the coverage and the amount of damages” be
submitted for arbitration. 215 ILCS 5/143a(1) (West 2006). In the
uninsured-motorist statute, the legislature has required arbitration of
claims since 1978, two years before the underinsured-motorist statute
was even enacted. See Pub. Act 80–1135 (eff. July 1, 1978)
(amending Ill. Rev. Stat. 1977 ch. 73, par. 755a (“Uninsured or hit
and run motor vehicle coverage”)); Pub. Act 81–1426, §1 (eff. Sept.
3, 1980) (adding Ill. Rev. Stat. 1981, ch. 73, par. 755a–2 (“Additional
uninsured motorist coverage–Underinsured motorist coverage”)).
Thirteen years later the legislature amended the uninsured-motorist
statute again, this time to require the trial de novo provisions. Pub.
Act 86–1155 (eff. July 1, 1991) (amending 215 ILCS 5/143a(1)).
Thus, even where the statute already supported the use of arbitration
to resolve disputes in uninsured-motorist claims, the legislature acted
to make arbitration nonbinding in some cases. In contrast, as noted
above, the underinsured-motorist statute has never required
arbitration. Rosen has suggested no reason that the conflict she points
to between the goals of arbitration and trial de novo provisions should

                                 -14-
render the provisions unenforceable in underinsured-motorist policies,
where no type of arbitration is required, but not in uninsured-motorist
policies, where arbitration is mandated.
    Rosen also argues that the uninsured-motorist and underinsured-
motorist statutes should be given different construction, and that we
should not presume that the legislature’s consideration of trial de novo
provisions would carry over from uninsured-motorist to underinsured-
motorist policies. First, she argues that the purposes of the two
statutes differ. According to Rosen, the purpose of the uninsured-
motorist statute “is to insure that compensation for persons injured by
an uninsured motorist will be no less than the amount available for
persons injured by a driver insured for the minimum amount ($20,000)
required by section 7–203 of the Illinois Safety Responsibility Law.”
In contrast, she maintains that the purpose of underinsured-motorist
coverage “is to provide compensation above the minimum statutory
amount and up to the limits of the insured’s liability limits.” (Emphasis
in original.)
    As discussed above, the fundamental purpose of requiring
insurance is “to protect the public by securing payment of their
damages.” Progressive Universal, 215 Ill. 2d at 129. All statutorily
required insurance–liability, uninsured motorist, and underinsured
motorist–seeks to fulfill this basic purpose. While mandatory liability
insurance attempts ensure that all drivers carry at least $20,000 of
bodily injury coverage, mandatory uninsured-motorist coverage
protects a driver who has complied with the liability coverage
requirement when she is injured by a driver who has not. As we have
said, uninsured-motorist coverage therefore “ ‘place[s] the
policyholder in substantially the same position he would occupy, so far
as his being injured or killed is concerned, if the wrongful driver had
had the minimum liability insurance required by the Financial
Responsibility Act [citation].’ ” Squire, 69 Ill. 2d at 176 (quoting
Ullman, 48 Ill. 2d at 4). If the claimant sustains damages less than the
statutory minimum amount, both laws ensure that he will be made
whole. If his damages exceed the statutory minimum, both laws ensure
that he will be compensated for his damages at least up to the
statutory minimum. If the tortfeasor is uninsured, the claimant will be
compensated up to the limits of his own uninsured-motorist policy,
which he has bargained for and paid for with his own insurer. If the

                                  -15-
tortfeasor is insured, but for an amount less than the claimant has
bargained for and paid for with his own insurer, mandatory
underinsured-motorist coverage in an amount equal to his uninsured-
motorist coverage ensures that the claimant will still be compensated
up to the limits of his own uninsured-motorist policy.
     Contrary to Rosen’s assertion, underinsured-motorist coverage
thus serves the same goal as uninsured-motorist coverage, “i.e., to
place the insured in the same position he would have occupied if the
tortfeasor had carried adequate insurance.” Sulser, 147 Ill. 2d at 555-
58. The purpose is not, as Rosen argues, to ensure compensation
above the statutory minimum; it is to ensure compensation of the
insured’s damages to the extent bargained for under his insurance
policy. Therefore, when a neutral panel of arbitrators determines that
a claimant’s damages are less than $20,000, that claimant will be fully
compensated. Our appellate court has also pointed out, correctly, that
if an insured’s damages are less than $20,000, the insurance company
does not have to pay out under the underinsured-motorist policy at all.
See Bugailiskis, 278 Ill. App. 3d at 24. However, if an insured’s
damages are less than the statutory minimum, the insured has no right
to compensation from the underinsured-motorist policy, because her
damages will have been fully covered by the tortfeasor’s liability
insurance. While the insurance company may benefit from the
arbitrator’s decision, the fact that her insurance company does not
have to pay out under her policy does not change the amount of
compensation to which the insured is entitled.
     All of this reinforces our determination that uninsured-motorist
and underinsured-motorist policies serve the same legislative purpose.
See also Sulser, 147 Ill. 2d at 555-58; Schultz, 237 Ill. 2d at 404.
Rosen argues that we should nonetheless apply public policy
differently to them, pointing to the decisions of our appellate court in
Bugailiskis and the cases that have followed. We note, however, that
Bugailiskis, on which Parker, Kost, and Samek rely, was decided
before Reed held that public policy is not violated by trial de novo
provisions in uninsured-motorist policies. The Bugailiskis court
therefore did not need to consider the uninsured-motorist statute, and
it did not do so. In the absence of a clear statement of public policy by
the legislature, the court was left with a blank slate on which to
determine the public policy of Illinois. As we have explained,

                                  -16-
however, our slate is not blank. In light of Reed’s decision upholding
trial de novo provisions in uninsured-motorist policies against a public
policy challenge, any subsequent analysis of the provisions in
underinsured-motorist policies must, in our view, consider the
relationship between uninsured-motorist coverage and underinsured-
motorist coverage. As we recognized in Reed itself, however, this
relationship was not implicated in Bugailiskis. Reed, 188 Ill. 2d at
174.
      Finally, Rosen argues that the legislature’s decision not to make
any reference to trial de novo provisions in the underinsured-motorist
statute indicates an intent “not to link” the underinsured-motorist and
uninsured-motorist statutes in this regard. She argues that where the
uninsured-motorist statute endorses the trial de novo provisions
explicitly, we should not read mere silence as also an endorsement of
the provisions. We agree. However, we will similarly not read mere
silence as a prohibition of the provisions. To do so would be to
require the legislature to enumerate in every statute all actions private
parties may take that would not violate public policy. Here, the
legislature has done more than simply allow the trial de novo
provisions in a highly related statute. The provisions must appear in
uninsured-motorist policies; if an insurance policy does not contain a
trial de novo provision in its uninsured-motorist coverage, it is
contrary to the statute and unenforceable as against public policy.
Schultz, 237 Ill. 2d at 400 (“[t]erms of an insurance policy that
conflict with a statute are void and unenforceable”). To hold, as
Rosen urges, that the same insurance policy also violates public policy
if it does include the provision in its underinsured-motorist coverage
would be anomalous, and Rosen has not provided any difference
between the two statutes that would lead us to such a result.
      We note also that no other state has adopted such a difference.
Courts in several states have invalidated trial de novo provisions on
public policy grounds. See, e.g., Mendes v. Automobile Insurance Co.
of Hartford, 563 A.2d 695 (Conn. 1989); Worldwide Insurance
Group v. Klopp, 603 A.2d 788 (Del. 1992); Schmidt v. Midwest
Family Mutual Insurance Co., 426 N.W.2d 870 (Minn. 1988);
Schaefer v. Allstate Insurance Co., 590 N.E.2d 1242 (Ohio 1992);
Pepin v. American Universal Insurance Co., 540 A.2d 21 (R.I. 1988).
However, as Phoenix urges and Rosen concedes, no state has

                                  -17-
distinguished between the use of trial de novo provisions in uninsured-
motorist policies and their use in underinsured-motorist policies.
Moreover, none of the states in which the provisions have been
invalidated have statutes requiring the provisions; to our knowledge,
section 143a of Illinois’ Insurance Code is the only such statute in the
country. Even in the absence of such a statute, however, courts in
several jurisdictions have upheld the provisions against public policy
challenges. See, e.g., Liberty Mutual Fire Insurance Co. v. Mandile,
963 P.2d 295 (Ariz. Ct. App. 1997); Roe v. Amica Mutual Insurance
Co., 533 So. 2d 279 (Fla. 1988); Cohen v. Allstate Insurance Co.,
555 A.2d 21 (N.J. Super. Ct. App. Div. 1989).
    For all of the above reasons, we conclude that Rosen has not met
her burden of establishing that the trial de novo provision is
unenforceable as against public policy. We therefore turn to her
related argument that the provisions are unenforceable because they
are unconscionable. Citing the appellate court’s decisions in
Bugailiskis, Parker, Kost, and Samek, Rosen argues that the provision
lacks mutuality and unequivocally favors the insurer over the insured.
She argues that insurance contracts bear the earmarks of adhesive
contracts, and the trial de novo policy is so one-sided and oppressive
that no rational insured would voluntarily agree to such a provision.
We disagree.
    First, even if we accept Rosen’s argument that her insurance
agreement is a contract of adhesion, such a finding does not render the
agreement unenforceable. As we have held, adhesive contracts “are a
fact of modern life. Consumers routinely sign such agreements to
obtain credit cards, rental cars, land and cellular telephone service,
home furnishings and appliances, loans, and other products and
services. It cannot reasonably be said that all such contracts are so
procedurally unconscionable as to be unenforceable.” Kinkel, 223 Ill.
2d at 26. In Kinkel, even when this court found that the contract at
issue was a contract of adhesion, our finding that the contract
represented a “degree of procedural unconscionability” was based not
on that fact, but on the “additional fact” that key information was
incorporated only by reference. Id. at 26-27. Moreover, the combined
effect of these facts in Kinkel still created a degree of procedural
unconscionability insufficient to render the contract unenforceable; we
found only that it was a “factor to be considered” in conjunction with

                                 -18-
the claim of substantive unconscionability. Id. In contrast, Rosen has
made no other argument of procedural unconscionability. Thus, even
if the insurance contract is a contract of adhesion, Rosen must still
establish substantive unconscionability that is, when taken with the
adhesive character of the contract, sufficient to meet her burden of
showing that the contract is so unconscionable that should not be
enforced.
     Rosen’s principal argument regarding unconscionability is, in fact,
one of substantive unconscionability. She argues that “the main
purpose and effect of [trial de novo] clauses is to make low awards
binding, which almost always favors the insurance companies, while
making high awards non-binding, which also will usually favor the
company.” Although she acknowledges that the clause may be
invoked by an insured, she asserts that “this does not avoid the
inherent bias of a scheme designed to minimize a company’s exposure
by sticking insureds with low awards and allowing the insurer to
escape from high awards.”
     Initially, we note that the trial de novo provision is not, as Rosen
argues, totally one-sided. As the Zappia court pointed out, the
provision allows an insured who is awarded an amount over $20,000
to seek a new trial if he believes the award is insufficient to cover his
damages. While it is certainly true that an insurer is more likely to
want an award less than $20,000 to be binding, it is not clear that any
award over $20,000 will be rejected by the insurer. Zappia and Kost,
which both arose from claims by an insured under the provisions,
indicate that an insured may indeed wish to enforce a trial de novo
provision. While such anecdotal evidence is not sufficient by itself to
defeat Rosen’s argument that the provisions are oppressive, those
cases show that the insurance contracts at issue possess more than the
mere illusion of mutuality that Rosen ascribes to them.
     We also note that “the issue of unconscionability should be
examined with reference to all of the circumstances surrounding the
transaction” (Kinkel, 223 Ill. 2d at 24), and the structure of the
arbitration provision in Rosen’s insurance policy taken as a whole
helps ensure some measure of fairness between the parties. When a
conflict arises between the insurer and the insured under the
underinsured-motorist provision, as occurred in this case, both parties
are entitled to choose an arbitrator, and those two arbitrators together

                                  -19-
select the third arbitrator. Then the parties may present evidence
regarding the insured’s damages and the insurer’s liability. After
hearing this evidence, the arbitrators reach a decision as to the amount
of damages, if any, to which the insured is entitled under her insurance
contract. Thus, when an insured is bound to an award less than
$20,000, it is not an award crafted by the insurance company for its
own benefit. Rather, the arbitration agreement is designed to result in
an award that is the product of the informed and reasoned judgments
of an impartial panel of arbitrators.
    Of course, the insurance company benefits from the trial de novo
provision. Unquestionably, the provision provides an “escape hatch”
from what Rosen calls the insurer’s “worst case scenario”–an award
that is substantially higher than the company believes the claim is
worth. Rosen argues that it does not provide a similar “escape” for the
insured’s worst case scenario–an award that is substantially lower than
the insured believes his claim is worth–and this is true when the actual
low award is less than $20,000.2 The provision also allows an insurer
to prolong resolution of an expensive claim, thus increasing the
pressure on the insured to settle.
    We have said that substantive unconscionability is concerned with
the “ ‘relative fairness of the obligations’ ” assumed under the
agreement, and that indications of substantive unconscionability are “
‘contract terms so one-sided as to oppress or unfairly surprise an
innocent party, an overall imbalance in the obligations and rights
imposed by the bargain, and significant cost-price disparity.’ ” Kinkel,
223 Ill. 2d at 28 (quoting Maxwell, 907 P.2d at 58). Applying that
definition to the case at bar, we acknowledge that there is an
imbalance in the rights imposed under the trial de novo provision in
Rosen’s insurance agreement. However, we do not find the terms to
be so “inordinately one-sided” in favor of the insurance company that
we must refrain from enforcing them. Rosen has not suggested that
the terms of her insurance agreement were hidden from her or unclear

      2
        We note that the range of awards an insured considers to be
unacceptably low may well encompass awards of more than $20,000. For
example, if an insured believes her claim entitles her to $300,000 under her
policy, and the arbitrator’s award is $25,000, the insured may wish to reject
the award.

                                    -20-
to her. On the contrary, she fully complied with the arbitration
requirements of the provision, which appear in the same paragraph as
the trial de novo clause. She was thus not “unfairly surprise[d]” when
Phoenix rejected the arbitration award and demanded trial de novo.
Although the trial demand does allow Phoenix to put additional time
pressure on Rosen to settle her claim, the knowledge of the
arbitrator’s determination of damages allows both parties to better
evaluate their bargaining positions with respect to settlement.
    On these facts, we cannot say that the insurance contract is
“ ‘improvident, oppressive, or totally one-sided.’ ” Kinkel, 223 Ill. 2d
28 (quoting Streams Sports Club, Ltd. v. Richmond, 99 Ill. 2d 182,
191 (1983)). We therefore reject Rosen’s argument that the contract’s
provisions are unconscionable and cannot be enforced.

                            CONCLUSION
    For the above reasons, we hold that the provision in Rosen’s
underinsured-motorist policy allowing either party to reject an award
over the statutory minimum for liability coverage does not violate
public policy and is not unconscionable. To the extent that
Bugailiskis, Parker, Kost, and Samek hold otherwise they are
overruled.
    Based on our holding, the circuit court’s grant of Phoenix’s 2–615
motion to dismiss Rosen’s counterclaim was appropriate. Therefore,
the judgment of the appellate court is reversed, and the judgment of
the circuit court is affirmed.

   Appellate court judgment reversed;
   circuit court judgment affirmed.

   CHIEF JUSTICE KILBRIDE took no part in the consideration or
decision of this case.

                                 -21-