                                  Illinois Official Reports

                                          Appellate Court



               Nelson v. Country Mutual Insurance Co., 2014 IL App (1st) 131036



Appellate Court              FOREST LEE NELSON, Plaintiff-Appellant, v. COUNTRY
Caption                      MUTUAL INSURANCE COMPANY, Defendant-Appellee.



District & No.               First District, Fourth Division
                             Docket No. 1-13-1036


Filed                        October 9, 2014


Held                         In an action arising from a vehicular collision where plaintiff settled
(Note: This syllabus         with the insurer of the other party and then proceeded with an
constitutes no part of the   underinsured motorist claim under the policy issued by the insurer of
opinion of the court but     the company van he was driving and obtained an arbitration award for
has been prepared by the     $850,000, the trial court’s vacation of the arbitration award and entry
Reporter of Decisions        of summary judgment to his employer’s insurer setting the matter for a
for the convenience of       trial de novo was affirmed by the appellate court, despite the absence
the reader.)                 of explicit language in the policy allowing a trial de novo as a remedy
                             following the rejection of an arbitration award, since the Illinois
                             Supreme Court has held that such a remedy is inherent and is proper
                             following the rejection of an arbitration award in excess of the limits
                             dictated by the policy and by statute.




Decision Under               Appeal from the Circuit Court of Cook County, No. 07-CH-10133; the
Review                       Hon. Stuart Palmer, Judge, presiding.




Judgment                     Affirmed.
     Counsel on                  Michael S. Cetina, of Walsh Knippen Pollock & Cetina, Chtrd., of
     Appeal                      Wheaton, for appellant.

                                 Keith G. Carlson, of Carlson Law Offices, of Chicago, for appellee.




     Panel                       PRESIDING JUSTICE FITZGERALD SMITH delivered the
                                 judgment of the court, with opinion.
                                 Justices Howse and Taylor concurred in the judgment and opinion.




                                                    OPINION

¶1         Following a bench trial, judgment was entered in favor of defendant-appellee Country
       Mutual Insurance Company (Country Mutual) and against plaintiff-appellant Forest Lee
       Nelson (Nelson).1 Nelson appeals, attacking not this final judgment but, rather, a prior order
       entered by the trial court vacating an arbitration award, granting summary judgment in favor of
       Country Mutual and allowing trial in the first place. He contends that the underinsured
       endorsement provision to the insurance policy at issue did not provide the option for a trial to
       take place and that the provision, which was the basis for the arbitration award’s rejection, was
       ambiguous. He asks that we reverse the judgment of the trial court, that we reinstate the
       arbitration award, and that we remand the cause for determination of the proper setoffs to the
       award. For the following reasons, we affirm.

¶2                                           BACKGROUND
¶3         On August 31, 1999, Nelson, while driving a company van in the employ of Turbo Tubs of
       Chicago, was in a car accident. The other driver involved was insured by Nationwide Mutual
       Insurance Company and, pursuant to the $100,000 underinsured motorist liability limit within
       that policy, Nelson collected $90,000.
¶4         Nelson’s employer, meanwhile, was insured by Country Mutual with an underinsured
       motorist liability limit of $1 million. Nelson proceeded with an underinsured motorist claim
       against Country Mutual, and Country Mutual filed an action for setoffs. Relevant to the instant


             1
            We note for the record that the party designations in this cause are somewhat confused, perhaps
       due to the fact that the cause began in the chancery division of the trial court and later was transferred to
       the law division for final disposition. As Nelson notes, he was originally named as the “defendant,”
       since Country Mutual filed the initial chancery action; however, once the cause was transferred, the
       caption was changed and Nelson was named as the “plaintiff” and Country Mutual was named as the
       “defendant.” Whatever the propriety of these technical designations, we have labeled them according to
       the notice of appeal filed in our court and, to minimize any further confusion, we choose to refer to them
       in our decision by their proper names rather than by any titular designations.

                                                        -2-
     appeal, the arbitration clause of the policy between Nelson’s employer and Country Mutual
     stated:
                 “b. Unless both parties agree otherwise, arbitration will take place in the county in
             which the insured lives. Local rules of law as to arbitration procedure and evidence
             will apply. A decision agreed to by two of the arbitrators will be binding on the insured
             and us for amounts not exceeding the limits for bodily injury required by Illinois
             Law.” (Emphases in original.)
     After some seven years of discovery, Nelson and Country Mutual agreed to arbitration. In
     December 2010, following an arbitration hearing, two arbitrators, with one dissenting,
     returned an award in favor of Nelson in the amount of $850,000, and reserved any issue
     regarding setoffs and worker’s compensation. Nelson filed an application to approve the
     arbitration award, while Country Mutual filed an amended complaint rejecting the award and
     asking for a trial de novo. In response, Nelson filed a motion to dismiss Country Mutual’s
     amended complaint.
¶5       In August 2011, a hearing was held on Nelson’s motion to dismiss. Nelson argued that the
     insurance provision at issue did not allow for a trial de novo as Country Mutual requested
     because it did not explicitly state that this was a remedy upon the rejection of an arbitration
     award; he further argued that the insurance provision at issue was entirely ambiguous with
     respect to the limit of award necessary for rejection. The trial court disagreed. First, it relied on
     Zappia v. St. Paul Fire & Marine Insurance Co., 364 Ill. App. 3d 883 (2006), to find that trial
     de novo was the proper remedy here despite the provision’s language. Second, the court noted
     that while there could be a minor ambiguity regarding the pertinent statutory amount
     contemplated by the phrase “the limits for bodily injury required by Illinois Law” as used in
     the provision, because the amount was only either $20,000 or $50,000 and because both of
     these amounts were clearly less than the $850,000 Nelson was awarded, Country Mutual
     undeniably had the right to reject the arbitration award. Thus, the trial court denied Nelson’s
     motion to dismiss. Country Mutual, upon the trial court’s recommendation, then filed a motion
     for summary judgment, asking that the arbitration award be vacated and that a trial de novo be
     ordered. The trial court granted Country Mutual’s motion for summary judgment and
     transferred the cause to the law division.
¶6       At the conclusion of trial, a verdict was entered in favor of Country Mutual and against
     Nelson. Nelson filed a motion for a new trial, arguing that the arbitration award should never
     have been vacated and that the finding in favor of Country Mutual was against the manifest
     weight of the evidence. The trial court denied Nelson’s motion.

¶7                                            ANALYSIS
¶8       As noted earlier, Nelson does not challenge the ultimate judgment in this cause which
     followed the trial. Rather, he challenges only the decision granting summary judgment in favor
     of Country Mutual, vacating the arbitration award and allowing trial in the first place.
¶9       Nelson’s first contention on appeal is that the trial court erred in vacating the award and
     setting the matter for trial because the underinsured endorsement provision of the insurance
     policy at issue does not explicitly provide for a trial de novo remedy upon the rejection of an
     arbitration award. Citing several cases where insurance provisions included such language, he
     asserts that there is more than one interpretation of the outcome of a cause following a rejection
     and that, if Country Mutual wanted trial de novo as a remedy, it was required to put such

                                                   -3-
       specific language in the policy. He further claims that, because it chose not to, the policy is
       ambiguous and Country Mutual forfeited trial de novo as a remedy following rejection of the
       award. We disagree.
¶ 10        The instant situation, where a car accident results in an arbitration award which is rejected
       by an unsatisfied party who then demands trial pursuant to the insurance policy at issue, is a
       classic one. Despite some debate, our courts have come to affirm that such trial de novo
       provisions are valid, enforceable and not against public policy. And, this has been found to be
       true even when the insurance policy at issue did not contain the specific words “trial de novo”
       as a remedy for rejection.
¶ 11        In considering this evolution, we turn first to Reed v. Farmers Insurance Group, 188 Ill. 2d
       168 (1999). There, the insured was injured in a car accident by an uninsured motorist who fled
       the scene. As required by statute, the insured’s policy with her insurer contained a clause
       calling for arbitration if they could not agree on the amount of coverage to which she was
       entitled under the policy’s uninsured motorist coverage. See Reed, 188 Ill. 2d at 170-71 (citing
       215 ILCS 5/143a (West 1996)). The policy further provided, also as required by statute, that
       the arbitration award would be binding on the parties if it fell below a specified amount,
       namely, the minimum required limits for bodily injury as set forth in the Illinois Financial
       Responsibility Law which, at that time, was $20,000 per person. See Reed, 188 Ill. 2d at 170
       (citing 625 ILCS 5/7-100 et seq. (West 1996)). Thus, if the arbitration award was more than
       that amount, then either party could reject the award. See Reed, 188 Ill. 2d at 170. With this
       policy in place, and before the matter was even submitted to arbitration, the insured filed an
       action seeking a declaratory judgment that the policy’s arbitration provision was
       unconstitutional, challenging both the clause permitting either party to reject awards greater
       than $20,000 and the requirement that the matter be submitted to arbitration at all. See Reed,
       188 Ill. 2d at 171. The insurer moved to dismiss and, while the trial court granted its motion,
       the appellate court agreed with the insured and reversed. See Reed, 188 Ill. 2d at 171.
¶ 12        The cause then proceeded to our state supreme court, which held that the trial de novo
       provision of the uninsured motorist provision in the insurance policy at issue did not, contrary
       to the insured’s insistence, violate public policy. See Reed, 188 Ill. 2d at 174. The Reed court
       explained that because such provisions were explicitly required by statute to be included in all
       uninsured motorist coverage policies, it was only logical that they could not, at the same time,
       be violative of public policy. See Reed, 188 Ill. 2d at 174 (“the legislature has determined that
       uninsured-motorist coverage must contain this provision, and [our statute] accordingly
       requires its presence in automobile policies”; thus, the insured’s “appeal to public policy as
       grounds for invalidating the arbitration provision is unavailing here, for the arbitration
       provision that appears in [her] insurance contract is already an expression of public policy and
       represents the legislature’s consideration of the question”).
¶ 13        While Reed focused primarily on the aspect of trial de novo provisions and their validity
       pursuant to public policy concerns, it also spoke critically to the situation present in the instant
       cause. That is, like the instant cause, the policy at issue in Reed did not contain any specific
       language explicitly calling for a trial upon the rejection of an arbitration award. Instead, and
       again like the instant cause, the policy simply tracked the language of the statute, which, as
       noted, called for arbitration if the parties could not agree on a coverage amount and prescribed
       that the arbitration would be binding only if the award reached fell below a specified amount,
       i.e., the minimum required limits for bodily injury as set forth in the Illinois Financial

                                                    -4-
       Responsibility Law, which, at that time, was $20,000. See Reed, 188 Ill. 2d at 170. In
       reviewing these policy provisions, and the mandates of section 143a of the Illinois Insurance
       Code, which statutorily required them in all uninsured motorist coverage policies, the Reed
       court explained:
                     “The arbitrators’ determination is binding only with respect to awards below
                $20,000, however, for the statute permits either party to reject an award that exceeds
                that amount and to resolve the claim instead through the judicial process.” Reed, 188
                Ill. 2d at 172.
       Thus, in this situation where there was no policy provision with explicit language calling for
       trial de novo as a remedy for the rejection of an arbitration award, our state supreme court made
       clear that such a remedy was, nonetheless, inherent in the dictates of the policy and was the
       proper method to resolve the rejection of arbitration awards exceeding the limits dictated by
       the policy and by statute. See Reed, 188 Ill. 2d at 172.
¶ 14        Following Reed was Zappia v. St. Paul Fire & Marine Insurance Co., 364 Ill. App. 3d 883
       (2006), which left this area of law with two significant points. In Zappia, identical to the case at
       bar, the insured was injured in a car accident, settled with the negligent party’s insurance
       carrier, and then claimed benefits under the underinsured motorist provision of a policy he held
       with his own insurer. The cause proceeded to arbitration, which resulted in an award to the
       insured of $31,415.27 (after setoffs). See Zappia, 364 Ill. App. 3d at 884. The insured, unhappy
       with this award, filed a complaint for trial de novo, citing the following provision of his
       underinsured motorist policy:
                     “ ‘A decision agreed to by two of the arbitrators will be binding for amounts of
                damages that are up to the minimum financial responsibility limits as prescribed by
                Illinois law.’ ” Zappia, 364 Ill. App. 3d at 884.
       Just as in Reed, the statutory limit at that time was $20,000. See Zappia, 364 Ill. App. 3d at 884
       (citing 625 ILCS 5/7-203 (West 2002)). Thus, the insured argued, he had the right to reject the
       arbitration award since it was more than the statutory limit and, once he did so, he was entitled
       to a trial de novo. See Zappia, 364 Ill. App. 3d at 884.
¶ 15        The Zappia court’s main focus, as in Reed, was whether the trial de novo provision violated
       public policy. See Zappia, 364 Ill. App. 3d at 884-85. This was because, since Reed, attempts
       were being made to distinguish between uninsured motorist coverage and underinsured
       motorist coverage and the validity of trial de novo provisions, with some courts finding such
       provisions to be valid as in line with public policy for uninsured motorist coverage because
       they were statutorily required (as discussed in Reed), but invalid as against public policy for
       underinsured motorist coverage because there was no similar statute requiring their use in that
       context. See Zappia, 364 Ill. App. 3d at 884-85 (discussing several cases in this respect). From
       this debate came the first significant point of Zappia. After reviewing all the cases at odds with
       each other, the Zappia court found that, just as trial de novo provisions included in arbitration
       clauses governing uninsured motorist coverage do not violate public policy, trial de novo
       provisions included in arbitration clauses governing underinsured motorist coverage similarly
       do not violate public policy. See Zappia, 364 Ill. App. 3d at 887-88. Disagreeing with those
       cases holding otherwise, the Zappia court noted that it did not matter that the former may be
       statutorily required while the latter was a contractual element of the insurance policy. See
       Zappia, 364 Ill. App. 3d at 887. Instead, the Zappia court concluded that trial de novo
       provisions in underinsured motorist coverage were also valid and enforceable, and any

                                                    -5-
       distinction between those and similar trial de novo provisions in uninsured motorist coverage
       would be “anomalous.” (Internal quotation marks omitted.) Zappia, 364 Ill. App. 3d at 887-88;
       see also Phoenix Insurance Co. v. Rosen, 242 Ill. 2d 48, 66 (2011) (reaffirming Zappia and
       finally settling any dispute between uninsured and underinsured trial de novo provisions,
       holding that neither violates public policy because uninsured motorist coverage and
       underinsured motorist coverage have the same legislative consideration behind them, which is
       to “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”).
¶ 16        The second point of importance gleaned from Zappia is, perhaps, even more critical to the
       case at bar. The facts of that cause make clear that, contrary to Nelson’s contention here,
       explicit language calling for a trial de novo as the remedy upon rejection of an arbitration
       award pursuant to underinsured motorist coverage is not necessary for trial to be the remedy.
       Again, in Zappia, the insured was unhappy with the result of the arbitration, which was above
       the binding limit as prescribed in the policy. Citing that provision, which, identical to the one
       in the instant cause, stated only that arbitration would be binding for an amount “ ‘up to the
       minimum financial responsibility limits’ ” of Illinois law (i.e., at that time, $20,000), the
       insured demanded trial de novo. Zappia, 364 Ill. App. 3d at 884. The Zappia court concluded
       that, as the arbitration award was over the prescribed limit, this was, undeniably, his right. See
       Zappia, 364 Ill. App. 3d at 888. Significantly, it was of no relevance that the insurance policy
       did not specifically state that trial de novo was the remedy for the rejection of an arbitration
       award. Instead, it was clearly inherent that, once the arbitration award was properly rejected,
       the cause would proceed to the only remedy available to settle the dispute, namely, trial.
¶ 17        Accordingly, in both Reed, which involved uninsured motorist coverage, and Zappia,
       which involved underinsured motorist coverage, the arbitration clauses of the insurance
       policies at issue did not contain explicit language ordering a trial de novo upon the rejection of
       an arbitration award. However, in both cases, our courts consistently referred to the arbitration
       clauses, which allowed for the rejection of any arbitration award in an amount over the
       minimum financial responsibility limits as prescribed by Illinois law because they are
       nonbinding, as trial de novo provisions. And, most significantly, in both cases, our courts
       concluded that, despite the absence of any formal language ordering it, trial de novo was the
       proper remedy to be had following the proper rejection of an arbitration award.
¶ 18        Applying Reed and, more particularly, Zappia to the instant cause, we find that Nelson’s
       argument that specific language ordering trial de novo as the remedy following rejection of an
       arbitration award was required for Country Mutual to proceed to trial here lacks merit. Again,
       the arbitration clause at issue in this cause is virtually identical to those in Reed and Zappia. It
       stated that “a decision agreed to by two of the arbitrators will be binding on the insured and us
       for amounts not exceeding the limits for bodily injury required by Illinois Law.” (Emphases
       in original.) The arbitrators in the instant cause awarded Nelson $850,000–clearly (as we
       discuss below) in excess of the limits for bodily injury under Illinois law. Thus, pursuant to the
       policy, Country Mutual had every right to reject the arbitration award. And, pursuant to Reed
       and Zappia, it had every right to then proceed to the only remedy available pursuant to that
       rejection in order to resolve the matter between the parties: trial de novo. As those cases found,
       it is irrelevant that there is no specific language in the policy ordering a trial de novo as a
       remedy upon rejection. Instead, this remedy is inherent in the arbitration provision allowing for



                                                    -6-
       the proper rejection of an arbitration award that is nonbinding because it exceeds the amount of
       damages that are up to the minimum limits prescribed by Illinois law.
¶ 19        Nelson makes a second, and final, contention on appeal. Again highlighting the same trial
       de novo provision at issue in his insurance policy with Country Mutual, he briefly claims that
       the words “not exceeding the limits for bodily injury required by Illinois Law” are
       ambiguous. He claims that, because Country Mutual did not use the words “minimum limits of
       the Illinois Safety Responsibility Law,” it is unclear what the limits are to justify the rejection
       of an arbitration award under the policy and that the phrase used could either mean the limits of
       the Illinois Safety and Family Financial Responsibility Law or the limits of the policy. Again,
       we disagree.
¶ 20        First, it is clear that Nelson’s assertion that the phrase used in the policy could mean the
       limits of the policy is not logical. If “not exceeding the limits for bodily injury required by
       Illinois Law” meant not exceeding the policy limits, then this provision would never apply.
       This is because, as Country Mutual points out, there could never be an award greater than the
       policy limits. Therefore, it would render the provision completely meaningless. See Atwood v.
       St. Paul Fire & Marine Insurance Co., 363 Ill. App. 3d 861, 863 (2006) (policy language is not
       ambiguous simply because parties disagree on meaning; only reasonable interpretations may
       be considered and all provisions should be read together and with intended effect).
¶ 21        Moreover, if the phrase used cannot mean the limits of the policy, the only other logical,
       reasonable and unstrained meaning is that the phrase means the limits of the Illinois Safety and
       Family Financial Responsibility Law. Interestingly, in Zappia, the phrase used there was
       almost identical to the one in the instant case. It stated that a decision agreed to by the
       arbitrators would be binding for amounts of damages that are “ ‘up to the minimum financial
       responsibility limits as prescribed by Illinois law.’ ” Zappia, 364 Ill. App. 3d at 884. No
       ambiguity was found there, as the phrase was clearly, and without question, referencing “the
       $20,000 minimum required limits for bodily injury as set forth in the Illinois Safety and Family
       Financial Responsibility Law (625 ILCS 5/7-203 (West 2002)).” Zappia, 364 Ill. App. 3d at
       884. We find the same to be true here.
¶ 22        In any event, Nelson was awarded $850,000 by the arbitrators. This was a nonbinding
       award under the policy, since it clearly exceeded “the limits for bodily injury required by
       Illinois Law.” 2 Country Mutual, therefore, had the right to reject it and, accordingly, to
       proceed with the only viable remedy here that would resolve the dispute between the parties
       pursuant to the insurance policy, namely, a trial de novo. Accordingly, we find that the trial
       court’s vacation of the arbitration award and its setting of the instant matter for trial de novo
       were wholly proper in light of the circumstances presented in the instant cause.

¶ 23                                         CONCLUSION
¶ 24       For all the foregoing reasons, we affirm the judgment of the trial court.

¶ 25       Affirmed.

           2
            As the trial court here found, the only possible ambiguity in the use of the phrase at issue is not
       whether it refers to the limits of the law cited or the limits of the policy but, rather, the minor one of the
       applicable amount of the limits for bodily injury under the law cited, since that law has been amended
       various times.

                                                         -7-
