Can an Illinois court declare void a provision in an insurance policy, as being against public policy, even though the public policy so violated arises from the law of another state? A recent decision by the Illinois Appellate Court held that it could.
The facts of the case, Country Preferred Insurance Company v. Whitehead, 2011 Ill. App. (3d) 110096, are that the insured, Whitehead, was involved in an accident in Wisconsin, and allegedly sustained injuries, that was caused by an uninsured motorist. Her insurance policy provided that claims involving uninsured motorists must be submitted to arbitration, and a demand for arbitration must be brought by the claimant (the insured) within two years from the date of the accident. This is the same limitations period for bringing an action for personal injuries in Illinois. Wisconsin, however, has a three-year personal injury statute of limitations. Under that state’s law, had the motorist at fault been insured, Whitehead would have had three years to make a claim against him. Because he was uninsured, however, under her insurance policy she had only two years from the date of the accident to demand arbitration.
The Appellate Court, with one justice dissenting, reversed the lower court decision denying Whitehead’s motion to compel arbitration for the reason that she did not make her demand within her insurance policy’s two-year limitations period, notwithstanding that the state (Wisconsin) statute of limitations for bringing an action was three years.
In ruling that the insurance policy’s two year limitations provision was void, the Appellate Court relied upon Illinois precedents that held that where an uninsured motorist limitations provision in an insurance policy puts a policy holder in a substantially different (and disadvantageous) position than he would have been had the motorist who caused the accident had insurance, the provision is void as being against public policy. In effect, the policy provision, if allowed to stand, would have shortened the available statutory limitations period for bringing a claim.
Holding that the two year limitation period in the insurance policy put Whitehead in a substantially different position than she would have been had the other motorist been insured (in which case she would have had three years to bring suit), the court held that the policy provision was void for violation of public policy.
In dissent, Justice McDade wrote that there was no violation of Illinois public policy because Illinois has a two year statute of limitations, the same as the arbitration demand limitations period in the insurance policy. He opined that the Appellate Court did not have the authority to declare the provision void as being against the public policy of another state, Wisconsin, which has a different applicable statute of limitations from Illinois.
While Justice McDade’s well-argued opinion seems persuasive, the fact remains that by literally applying prior Illinois precedents to the facts of the case before it, the majority was right; because of her insurance policy’s two year demand for arbitration limitations period, Whitehead was put in a different position than if the other motorist had carried insurance. Were Justice McDade’s opinion to become law, the result would be to limit the application of Illinois precedents to issues involving Illinois public policy framed exclusively by Illinois law and statutes.
It seems that this is a matter of first impression in which the Illinois Supreme Court might well take an interest.
