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Illinois Uninsured and Underinsured Motorist Claims

Published on May 6th, 2010

Illinois car accident attorneys should be aware of two recent opinions which expand the rights of injured parties to recover in uninsured motorist and underinsured motorist claims: (1) Uninsured Motorist claims – Nicholson v. State Farm Ins. Co., 2010 WL 1208887 (Ill. App. Ct. 2nd Dist.) released March 23, 2010.
(2) Undersinsured Motorist claims – Schultz v. Illinois Farmers Ins. Co., 2010 WL 966206 ( Ill. Sup. Ct.) released March 18, 2010.

In Nicholsonthe issue was whether an Illinois insurer has to offer uninsured motorist coverage in an amount equal to liability coverage that an insured has elected to increase or whether an earlier rejection of higher limits exempts the insurer from this statutory requirement. Essentially in Nicholson an insured elected to increase his liability coverage and the insurered failed to get a written rejection of equal limits for uninsured motorist coverage as is required by 215 ILCS 5/143a-2(1). This section establishes the general rule that no automobile liability insurance policy “shall be renewed or delivered or issued in this State” unless UM coverage equivalent to the liability coverage is included, “unless specifically rejected by the insured.”

The Nicholson court stated: “(t)he language, with its statement that the rule applies to policies that are renewed and its references to the insured, clearly expresses a legislative intent to include current policyholders, not just first-time applicants, within the statute’s ambit.” State Farm argued that 215 ILCS5/143a-2(2) sets out an exception to the rule requiring insurers to offer UM coverage equal to liability coverage and that the exception applies here because it states that equal coverage need not be provided in any “renewal, reinstatement, reissuance, substitute, amended, replacement or supplementary policy.” The Appellate Court conceded that the language contained in subparagraphs(1) and (2) “is somewhat ambiguous.”

The Nicholson court conclude that: ” We believe that a change in the level of coverage, with its attendant change in the premium cost, is a material change that results in a new policy rather than a mere continuation of the old policy….in light of these material changes, the defendant was required to once again offer…equal UM coverage and to obtain a rejection of that coverage before the Janotas their new policy.” The bottom line is that auto insurers in Illinois must offer and obtain a rejection of higher UM benefits when increasing an insureds liability coverage. Good news for victims seeking compensation for their injuries.

In Schultz, Justice Karmeier of the Illinois Supreme Court framed the issue: “Does Illinois law permit insurers to issue motor vehicle liability policies in which occupants of a covered vehicle are afforded uninsured motorist (UM) but excluded from underinsured (UIM) coverage?” The Schultz court stated: “As with UM coverage, UIM coverage must also extend to all those who are insured under the policy’s liability provisions. See 215 ILCS 5/143a-2(4)…….Once a person qualifies as an insured for purposes of the policy’s bodily injury liability provisions, he or she must be treated as an insured for UM and UIM purposes as well.”

This decision by the Illinois Supreme Court forecloses insurance companies from writing policies that are overly restrictive and specifically “the portions of the Farmers insurance policies which purported to exclude occupants of covered motor vehicles from UIM coverage violate Illinois law and are unenforceable.”Another strong opinion that precludes insurers from inserting language in their policies that frustrate the policies embodied in Illinois’ satutory scheme regarding UM and UIM coverage.

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