Moruzzi v. CCC Servs., Inc.

2020 IL App (2d) 190411

171 N.E.3d 61

446 Ill.Dec. 626

Sandra MORUZZI and Kaiser Law, Plaintiffs-Appellants,

v.CCC SERVICES, INC., d/b/a Country Preferred Insurance Company, Defendant-Appellee.

No. 2-19-0411

Appellate Court of Illinois, Second District.

Opinion filed June 10, 2020

Rehearing denied July 9, 2020

Joseph P. Postel, of Lindsay, Pickett & Postel, LLC, of Chicago, for appellants.

Keith G. Carlson and Jeffery A. Bier, of Carlson Law Offices, of Chicago, for appellee.

JUSTICE ZENOFF delivered the judgment of the court, with opinion.

¶ 1 Plaintiffs, Sandra Moruzzi and Kaiser Law (Kaiser), appeal two orders granting summary judgment in favor of defendant, CCC Services, Inc., d/b/a Country Preferred Insurance Company (Country).¹ Plaintiffs filed a declaratory judgment action seeking construction of a Country automobile policy issued to Moruzzi and in effect when Moruzzi was injured by an underinsured driver. The trial court found that Country was entitled to set off the medical payments benefits that it paid to Moruzzi against its policy limits after Moruzzi obtained a settlement from the tortfeasor. The court also found that Kaiser was not entitled to attorney fees from Country under the common-fund doctrine. We affirm in part and reverse in part.

¶ 2 I. BACKGROUND

¶ 3 On October 18, 2013, Moruzzi was injured when she was struck by an underinsured driver (Townsend). As a result of the accident, Moruzzi's total damages were $350,000. Kaiser is the law firm that represented Moruzzi in her claim against Townsend.

¶ 4 Townsend was insured by Illinois Farmers Insurance Company (Farmers). The limit of Farmers' policy was $100,000. Farmers paid its policy limit without litigation. Moruzzi, through Kaiser, then looked to Country, her own insurer, for payment under her underinsured motorists (UIM) coverage. The limit for that coverage was $250,000. The Country policy also provided for medical payments (MP) of $100,000. Again, without litigation, Country paid Moruzzi the full $100,000 MP benefits.

¶ 5 Country then set off the $100,000 paid by Farmers and its MP of $100,000 from its liability limit of $250,000 and tendered Moruzzi a check for $50,000. Moruzzi initially declined Country's tender, claiming that Country had to set off the MP against her total damages rather than the limits of liability. In addition, Kaiser demanded that Country pay it one-third of the $100,000 MP benefits and another one-third of the $100,000 Farmers settlement as attorney fees. Kaiser maintained that its efforts saved Country $200,000 and thus established two "common funds" that benefited Country. When the parties failed to resolve the dispute, Moruzzi and Kaiser sued Country.

¶ 6 A. The Country Policy

¶ 7 The record contains a certified copy of the Country policy and amendatory endorsements in effect when Moruzzi was injured. According to the declarations page, Moruzzi paid premiums for UIM coverage as well as MP coverage. The UIM coverage limit (maximum) is $250,000 per person, and the MP coverage limit (maximum) is $100,000.

¶ 8 The policy defines "underinsured motor vehicle" as "any type of motor vehicle * * * for which the sum of all liability bonds or policies at the time of an accident are less than the limit of this insurance ." (Emphasis added.)

¶ 9 Section 2 of the policy is titled "Uninsured-Underinsured Motorists, Coverage U." In this section, the policy (and the amendatory endorsement attached thereto) states: "We will pay damages which an insured is legally entitled to recover from the owner or operator of an * * * underinsured motor vehicle because of bodily injury sustained by an insured and caused by an accident." (Emphasis added.) Paragraph 2(a) under "Conditions, Section 2" provides that the "limit of liability " for each person (as shown on the declarations page) "is the maximum amount we will pay for all damages arising out of bodily injury to any one person in any one accident." (Emphases added.) Paragraph 2(a) continues: "The figure listed [on the declarations page] is the most we will pay for any one person in any one accident." (Emphasis added.)

¶ 10 Section 3 of the policy is titled "Medical Payments, Coverage C." It provides that "we will pay for reasonable medical expenses incurred by an insured within two years from the date of the accident and as a result of bodily injury caused by the accident."

¶ 11 Next, the policy provides for certain reductions from the UIM coverage limits. Subsection (a) under "Uninsured-Underinsured Motorists, Coverage U" provides that the "limits of liability for [UIM] coverage will be reduced by the total payments of all bodily liability insurance policies applicable to the person or persons legally responsible for such damages." Subsection (e) under "Conditions, Section 2" provides that the "[a]mounts payable for damages under [UIM] coverage will be reduced by all sums paid under [MP]." (Emphasis added.)

¶ 12 Under the amendatory endorsement to "Conditions, Section 2," the policy provides that "the most [Country] will pay " to any one person under its UIM coverage is the lesser of (1) the difference between the each person limit of recovery as shown on the declarations page and the amount paid by or on behalf of the tortfeasor or (2) the difference between the amount of the insured's damages and the amount paid to the insured by or on behalf of the tortfeasor. (Emphasis added.)

¶ 13 B. The Declaratory Judgment Action

¶ 14 Plaintiffs filed a five-count first amended complaint for declaratory judgment. Only counts I through III are at issue in this appeal. The gist of those counts was twofold: (1) Country improperly set off the MP benefits that it paid to Moruzzi against the $250,000 UIM limit rather than Moruzzi's total damages, and (2) Country owed Kaiser reasonable attorney fees as a result of its $100,000 MP setoff and the setoff for the $100,000 Farmers payment. Specifically, count I alleged that Country could not set off against the UIM limit the MP benefits that it paid to Moruzzi, but instead had to set them off against Moruzzi's total damages.² Count II alleged, in the alternative to count I, that Country could set off against the UIM limit the MP benefits that it paid only because Kaiser created a common fund: the Farmers settlement. Therefore, Kaiser alleged, it is entitled to reasonable attorney fees from the MP benefits. Count III alleged that Kaiser is also entitled to reasonable fees from the $100,000 Farmers payment under the common-fund doctrine. The parties filed cross-motions for summary judgment. The court granted Country's motions and denied plaintiffs' motions. Plaintiffs filed a timely appeal.

¶ 15 II. ANALYSIS

¶ 16 A. The Setoff for Country's MP Benefits

¶ 17 Plaintiffs first argue that the policy allows Country to set off the MP benefits that it paid to Moruzzi only against Moruzzi's total damages. This means that the $100,000 MP benefits that Country paid would be set off against $350,000 instead of $250,000. Then, when the Farmers payment of $100,000 is also set off, Moruzzi would be left with UIM coverage of $150,000 instead of the $50,000 that Country tendered. Second, plaintiffs argue in the alternative that the policy language is ambiguous and must be resolved in their favor. Third, plaintiffs argue, again in the alternative, that Country is not entitled to any setoff for the MP benefits that it paid. Plaintiffs contend that such setoffs apply only where necessary to prevent a double recovery. There can be no double recovery here, they say, because Moruzzi's total damages exceed the combined total of her UIM and MP coverage.

¶ 18 As noted, this matter was presented to the trial court on cross-motions for summary judgment. On June 1, 2017, the court granted Country's motion and denied plaintiffs' motion. Summary judgment is appropriate only where the pleadings, depositions, and admissions on file, together with affidavits, if any, demonstrate that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2016); Standard Mutual Insurance Co. v. Lay , 2013 IL 114617, ¶ 15, 371 Ill.Dec. 1, 989 N.E.2d 591. We review de novo a grant of summary judgment. Lay , 2013 IL 114617, ¶ 15, 371 Ill.Dec. 1, 989 N.E.2d 591.

¶ 19 Our analysis is also guided by the well-established principles relating to the interpretation of insurance policies. An insurance policy is a contract governed by the general rules of contract interpretation. Cherry v. Elephant Insurance Co. , 2018 IL App (5th) 170072, ¶ 11, 419 Ill.Dec. 851, 94 N.E.3d 1265. A policyholder is bound by the policy's terms so long as those terms do not violate public policy. Zdeb v. Allstate Insurance Co. , 404 Ill. App. 3d 113, 124, 343 Ill.Dec. 698, 935 N.E.2d 706 (2010). The terms of an insurance policy must be given their plain and ordinary meaning, and courts should not search for ambiguities where none exist. Allstate Insurance Co. v. Smiley , 276 Ill. App. 3d 971, 977, 213 Ill.Dec. 698, 659 N.E.2d 1345 (1995). All provisions of an insurance policy must be read together to aid interpretation and to determine whether an ambiguity exists. Smiley , 276 Ill. App. 3d at 977, 213 Ill.Dec. 698, 659 N.E.2d 1345. If the terms of a policy are clear and unambiguous, there is no need for construction, and the policy provisions will be applied as written. Smiley , 276 Ill. App. 3d at 977, 213 Ill.Dec. 698, 659 N.E.2d 1345. However, if a provision is subject to more than one interpretation, it is ambiguous and should be construed against the insurer and in favor of the insured. Cherry , 2018 IL App (5th) 170072, ¶ 12, 419 Ill.Dec. 851, 94 N.E.3d 1265. Reasonableness is the key, and the touchstone is whether a policy provision is subject to more than one reasonable interpretation, not whether "creative possibilities can be suggested." Cherry , 2018 IL App (5th) 170072, ¶ 13, 419 Ill.Dec. 851, 94 N.E.3d 1265.

¶ 20 The purpose of UIM coverage is to "furnish...