                                           2014 IL App (1st) 131036
                                                 No. 1-13-1036
                                         Opinion filed October 9, 2014
                                                                    FOURTH Division
     ______________________________________________________________________________

                                                    IN THE

                                     APPELLATE COURT OF ILLINOIS

                                               FIRST DISTRICT

     ______________________________________________________________________________

               FOREST LEE NELSON,       )                        Appeal from the Circuit Court
                                        )                        of Cook County.
               Plaintiff-Appellant,     )
                                        )
               v.                       )                        No. 07 CH 10133
                                        )
               COUNTRY MUTUAL INSURANCE )
               COMPANY,                 )                        The Honorable
                                        )                        Stuart Palmer,
               Defendant-Appellee.      )                        Judge, presiding.

     ______________________________________________________________________________

                    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

     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
        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



     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.


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     instant 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." (Emphasis 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


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     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 specific language in the policy. He further claims that, because it chose not to, the




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       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,


                                                     5
       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 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


                                                     6
       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.




                                                     7
       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 distinction between those and similar trial de novo

       provisions in uninsured motorist coverage would be "anomalous." (Internal quotation marks


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       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.




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¶ 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." (Emphasis 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 the proper rejection of an arbitration award that is


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       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


                                                     11
             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

             was 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.


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