ILLINOIS OFFICIAL REPORTS
Supreme Court
Country Preferred Insurance Co. v. Whitehead, 2012 IL 113365
Caption in Supreme COUNTRY PREFERRED INSURANCE COMPANY, Appellant, v.
Court: TERRI J. WHITEHEAD, Appellee.
Docket No. 113365
Filed October 18, 2012
Held Uninsured motorist coverage which required the bringing of a suit, action
(Note: This syllabus or arbitration request within two years did not violate public policy
constitutes no part of merely because it was applied to an insured who had an accident in
the opinion of the court Wisconsin, where the limitation period is three years.
but has been prepared
by the Reporter of
Decisions for the
convenience of the
reader.)
Decision Under Appeal from the Appellate Court for the Third District; heard in that
Review court on appeal from the Circuit Court of Will County, the Hon. Barbara
N. Petrungaro, Judge, presiding.
Judgment Appellate court judgment reversed.
Circuit court judgment affirmed.
Cause remanded.
Counsel on Michael Resis, Victor J. Piekarski and Ellen L. Green, of
Appeal SmithAmundsen LLC, and Keith G. Carlson, all of Chicago, for
appellant.
Pretzel & Stouffer, Chtrd., of Chicago (Robert Marc Chemers and
Heather E. Plunkett, of counsel), for appellee.
Craig L. Unrath, of Heyl, Royster, Voelker & Allen, of Peoria, for
amicus curiae Property Casualty Insurers Association of America.
Justices JUSTICE KARMEIER delivered the judgment of the court, with opinion.
Justices Freeman, Thomas, Garman, Burke, and Theis concurred in the
judgment and opinion.
Chief Justice Kilbride dissented, with opinion.
OPINION
¶1 The issue presented in this appeal is whether a two-year contractual limitation on claim
arbitration in an auto insurance policy violates Illinois public policy where an Illinois insured
was involved in an accident in Wisconsin with an uninsured motorist and that state has a
three-year statute of limitations on the commencement of suit for injuries resulting from the
accident. In the course of a declaratory judgment action filed by plaintiff, Country Preferred
Insurance Company (hereafter Country Preferred), against its insured, defendant, Terri J.
Whitehead, the circuit court of Will County denied Whitehead’s motion to compel
arbitration, and she took an interlocutory appeal from that order. A divided appellate court
reversed and remanded, holding, under the circumstances, that the two-year limitation period
in the parties’ insurance contract violated Illinois public policy. 2011 IL App (3d) 110096.
We granted Country Preferred’s petition for leave to appeal (Ill. S. Ct. R. 315 (eff. Feb. 26,
2010)), and now reverse the judgment of the appellate court.
¶2 BACKGROUND
¶3 The following factual allegations are taken from the parties’ pleadings in the declaratory
judgment action initiated by Country Preferred on October 30, 2009.
¶4 In its complaint for declaratory judgment, Country Preferred stated that Whitehead
claimed, “[o]n July 27, 2007,” “she was in an automobile accident with a vehicle driven by
Mario Lopez-Juarez in the town of Delevan, [sic] State of Wisconsin.” Plaintiff alleged: “On
October 6, 2009, Whitehead first advised Country Preferred that she was making a demand
under the policy as a result of the accident.” In support of the allegation, plaintiff attached
a copy of a letter from Whitehead’s counsel bearing that date. Plaintiff acknowledged that
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defendant’s letter of October 6 “made a demand under the Policy in connection with the
accident”; however, plaintiff concluded “it did not make a demand for arbitration or name
an arbitrator.”
¶5 The next paragraph of the complaint provides the policy language at issue in this
controversy—the “conditions” section governing “uninsured-underinsured motorists”
coverage:
“Legal Action Against Us. No suit, action or arbitration proceedings for recovery of
any claim may be brought against us until the insured has fully complied with all the
terms of this policy. Further, any suit, action or arbitration will be barred unless
commenced within two years from the date of the accident.”
¶6 The complaint alleged that Whitehead had two years from the date of the accident to
make a written demand for uninsured-motorist arbitration—“or until July 27, 2009”—and,
because she did not do so within the applicable two-year period, Country Preferred
contended she is time-barred from ever making an uninsured-motorist claim under the
policy.
¶7 Country Preferred requested findings that: (1) Whitehead had two years from the date
of the accident to make a written demand for uninsured-motorist arbitration under the policy;
(2) Whitehead is time-barred from making or pursuing any uninsured-motorist claim under
the policy; and (3) Whitehead has no rights under the policy in connection with the accident.
¶8 In Whitehead’s answer and counterclaim, filed January 11, 2010, she denied that she first
advised plaintiff, by letter dated October 6, 2009, that she was making a demand under the
policy. She denied that, as a result of the policy provision at issue, she had two years from
the date of the accident to make a written demand for uninsured-motorist arbitration. Finally,
Whitehead denied that, because she did not make a written demand for uninsured-motorist
arbitration on or before July 27, 2009, she is time-barred from ever making an uninsured-
motorist claim under the policy.
¶9 In her counterclaim, Whitehead provided factual allegations regarding the parties’
communications after the accident. She attached to her pleading copies of all correspondence
referenced therein.
¶ 10 According to Whitehead, following the accident, she made a claim with Country
Preferred for uninsured-motorist coverage benefits, and Country Preferred assigned a claim
number, 102-37190, and a claim representative, Andrea Dunmore. Dunmore, by letter dated
October 17, 2007, advised Whitehead: “I need your assistance in settling your claim as
quickly and fairly as possible.” Enclosed with the letter was a form entitled “Notice of Claim
Uninsured Motorist Coverage Underinsured.” Whitehead stated that she signed the form
provided by Country Preferred in the presence of a notary on November 9, 2007.
¶ 11 Whitehead stated that Dunmore did not settle her uninsured-motorist claim “as quickly
and fairly as possible,” as Whitehead received a subsequent letter from Dunmore, dated
November 26, 2008, in which Dunmore asked Whitehead to “contact our office to discuss
your open claim for bodily injury under your uninsured motorist coverage portion of your
policy.” She noted that the letter bore a different claim number than the one originally
assigned to her claim.
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¶ 12 Dunmore next wrote Whitehead on February 13, 2009, requesting that Whitehead contact
Dunmore on her direct telephone line regarding the injury portion of Whitehead’s “open
Uninsured Motorist claim.” In that letter, Dunmore asked Whitehead to submit itemized
medical bills and a list of all medical providers so Country Preferred could “secure their
corresponding medical reports” in order to “process and evaluate your claim.” Dunmore
observed: “Explanation of Benefits from your health insurance company are not medical
bills.” Whitehead alleged that a records authorization form was also enclosed with
Dunmore’s correspondence; however, Whitehead’s pleading does not speak to its
disposition.
¶ 13 Whitehead stated the next correspondence between the parties was a May 5, 2009, letter
her attorney wrote to Dunmore advising the latter of counsel’s representation. By a separate
letter of the same date, counsel advised Dunmore that Whitehead had “placed in [counsel’s]
hands as her attorney, for collection a certain suit, claim, demand or cause of action against
you growing out of the negligence of a certain uninsured motorist *** in an accident on or
about July 21, 2007,”1 and that counsel had been retained on account of “such suit, claim,
demand or cause of action.”
¶ 14 By letter dated May 12, 2009, Dunmore acknowledged counsel’s lien concerning
Whitehead’s “claim” and requested that counsel forward “the specials, supporting material
and your tax identification.” Dunmore stated: “Upon receipt, I will give your client’s claim
prompt attention.” Again, Whitehead’s pleading does not speak to her response to that letter.
¶ 15 From the aforementioned factual allegations, Whitehead concluded that Country
Preferred, through Dunmore, was “aware of” Whitehead’s uninsured-motorist “claim” soon
after the accident occurred—“at least as early as October 2007”—since “Country opened a
claim file and sought the assistance of Whitehead to settle her claim.” Whitehead
acknowledged that Country Preferred apprised her, in correspondence, of its position that
there was a two-year “statute of limitations” applicable to her “bodily injury uninsured
motorist claim.” Whitehead contended it was “vexatious and unreasonable for Country to
advise its insured that she [had] a limited period of time to make a claim, which claim had
been made and acknowledged by the insurer more than one year earlier.”
¶ 16 In paragraph 20 of the first count of her counterclaim, Whitehead set forth what is, in
essence, the position that led to the appeal presently before this court. We quote that
paragraph, including its subparagraphs, in its entirety:
“20. The two year limitation in the policy Country sold to Whitehead has no
application in connection with the July 21, 2007 Wisconsin motor vehicle accident
involving Whitehead and an uninsured motorist for the following reasons:
(a) The statute of limitations for Whitehead to bring an action against Mario
Lopez Juarez for her personal injuries is three years pursuant to Wis. Stats.
1
In its complaint, Country Preferred states that the accident is claimed to have occurred on
July 27, 2007. In her answer, Whitehead confirms that date and continues to recite that date early in
her counterclaim. Midway through her counterclaim, she states that the date of the accident was July
21, 2007. We note the discrepancy, though it is not significant in our analysis or resolution of the
issue before us.
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893.54(1) which provides, as follows:
893.54 Injury to the person. The following actions shall be commenced within
3 years or be barred;
(1) An action to recover damages for injuries to the person.
(b) Country cannot legally reduce the limitation period for arbitration beyond the
applicable period of limitation upon the tort claim itself, hence if the tort claim is not
barred or it can be brought, here, in Wisconsin, the arbitration claim is not and
cannot be barred.
(c) An attempt through contract to time bar a claim not barred in the State where
the accident occurred and where the bodily injury tort arose, is invalid, improper and
unenforceable.
(d) The two year limitation in the Country policy when applied to a claim which
has a three year statute of limitations is a dilution or diminution of the Illinois
Uninsured Motorist statute, 215 ILCS § 5/143a, and is an impermissible attempt to
defeat the intent and the purpose of the statute.
(e) The Uninsured Motorist statute does not mention a time limit in which the
insured may exercise her rights, hence a contractual limitation which precludes the
exercise of those rights before the expiration of the statute of limitations for the tort
claim is arbitrary, capricious, unreasonable and against Illinois public policy.
(f) If the practical effect of the contractual limitation provision is to deprive
Whitehead of the uninsured motorist coverage required by statute, then the provision,
under these circumstances, should be deemed void and of no effect, as the
contractual limitation may not place Whitehead in a substantially different position
than she would have been had the adverse driver, Mario Lopez Juarez, carried
insurance coverage.”
¶ 17 In addition to count I of her counterclaim, the precise nature of which was not specified
by labeling, Whitehead set forth three other counts entitled: “Count II (Breach of Contract)”;
“Count III (Declaratory Judgment Re: Demand for Arbitration)”; “Count IV (Statutory Bad
Faith for Vexatious and Unreasonable Conduct).” Those counts incorporated by reference
the paragraphs comprising the first count of Whitehead’s counterclaim. Those counts
reiterate, to some extent, the position taken by Whitehead in count I of the counterclaim.
Since the narrow issue before us is adequately defined by reference to count I of the
counterclaim, we deem it unnecessary to address those counts further at this juncture.
¶ 18 On February 16, 2010, Country Preferred filed an answer to Whitehead’s counterclaim.
Pertinent to this appeal, Country Preferred admitted “that on October 6, 2009, it received a
claim for UIM benefits under the policy,” though it pointed out it still had “never received
a written demand for arbitration naming an arbitrator as required under the policy.” Country
Preferred denied that Whitehead had attached a completed notice of claim form to her
counterclaim, as she alleged. Country Preferred admitted that “the policy contains a two year
limitation period for making an uninsured-motorist claim requiring a written demand for
arbitration naming an arbitrator within two years of the date of the accident,” and Country
Preferred claimed that Whitehead had been repeatedly advised of that requirement. Country
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Preferred admitted that “it denies Whitehead’s claim to the extent she asserts that the
limitations period in the policy for uninsured motorist coverage is not enforceable.” Country
Preferred also admitted that it had “contacted Whitehead on several occasions to resolve any
claim and to advise of the deadline for making a demand”; however, it averred “she never
made a timely demand for uninsured motorist benefits as required under the policy.”
¶ 19 On July 20, 2010, Whitehead filed a motion to compel arbitration, with a supporting
memorandum attached. In that memorandum, Whitehead alleged that the parties were in
disagreement over the amount owed Whitehead, and she stated:
“Despite the admitted existence of the arbitration agreement, Country contends
it is not required to arbitrate the UM claim because it was not made within two years
of the accident as required by the policy. Whitehead denies that the UM claim was
not made within two years of the accident[;] however, even if it wasn’t, Whitehead
contends that Country can not have a contractual limitation in its policy that places
its insured in a substantially different position than she would have been in had the
tortfeasor carried the insurance required by statute because such a limitation violates
public policy.”
In addition to various appellate court opinions, Whitehead cited this court’s decision in
Severs v. Country Mutual Insurance Co., 89 Ill. 2d 515 (1982), in support of that argument.
¶ 20 On January 26, 2011, the circuit court entered an order denying Whitehead’s motion to
compel arbitration. At the outset, the circuit court made the following finding: “Defendant
[Whitehead] *** first made a claim for uninsured motorist benefits to her insurer, Plaintiff,
on October 6, 2009.” The court then went on to consider, given the circumstances, whether
“the arbitration demand is timely and Plaintiff should be forced to arbitration.” In
considering that question, the court first referenced the two-year limitation provision in the
parties’ insurance contract concerning the initiation of “suit, action, or arbitration
proceedings” against Country Preferred. The circuit court noted that “courts in Illinois have
repeatedly determined that similar language as this policy did not violate public policy.” The
court acknowledged Whitehead’s argument—that the Wisconsin statute of limitations for
suing the tortfeasor should apply in this contractual context—however, the court observed
“no case law has been presented to that effect.” The court rejected, inter alia, Whitehead’s
reliance upon Severs, noting that this court’s holding in that case was driven by the fact that
a minor’s rights were at stake and that this court in Severs concluded “a minor should not
be precluded from enforcing his rights unless clearly debarred from so doing by some statute
or constitutional provision.”
¶ 21 On February 7, 2012, Whitehead filed a notice of interlocutory appeal from the circuit
court’s order. The sole issue on appeal was whether the policy provision in question, given
the circumstances of this case, violates Illinois public policy.
¶ 22 The appellate panel split on that issue, with the majority view resulting in reversal and
remand. In reaching its conclusion that the policy provision violates Illinois public policy,
the majority discussed various appellate decisions, but Severs was the only precedent from
this court to figure substantively in the majority’s analysis. The majority first cited Severs
for the broad proposition that “[a]n insurance policy violates Illinois public policy when it
places an injured party in a substantially different position than if the tortfeasor had carried
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insurance.” 2011 IL App (3d) 110096, ¶ 8 (citing Severs, 89 Ill. 2d at 519-20). Then, in one
paragraph, the appellate majority discussed the holding and circumstances in Severs:
“[I]n Severs, the supreme court held that a two-year contractual limitation against a
minor was unenforceable because it shortened the time within which the minor was
required to file suit. Severs, 89 Ill. 2d at 519-20. The court explained that the
uninsured motorist statute required that the minor ‘be allowed the same period of
time within which to bring suit that she would have had if the driver *** had been
insured.’ Id. at 519. In Illinois, a minor has two years after attaining age 18 to file
suit. See id. at 519-20 (citing Ill. Rev. Stat. 1973, ch. 83, ¶ 22 (now see 735 ILCS
5/13-211 (West 2008))). The two-year policy provision restricted that limitations
period and placed the minor in a substantially different position than she would have
been in if the tortfeasor had carried insurance. See Severs, 89 Ill. 2d at 520. Thus, the
two-year limitation in the policy deprived the minor of the uninsured motorist
coverage required by statute and could not be used against the minor. Id.; see also
Kerouac, 99 Ill. App. 3d at 262.” 2011 IL App (3d) 110096, ¶ 11.
¶ 23 The appellate majority acknowledged that Illinois appellate decisions have approved a
two-year contract limitation; however the appellate court noted that the courts in those cases
“upheld a two-year policy limitation because it was the same length as the statute of
limitations for personal injuries occurring in Illinois. *** As such, the insureds were placed
in the same position they would have been in had the offending motorist been insured.” 2011
IL App (3d) 110096, ¶ 13. The appellate majority concluded: “Here, the two-year period
contained in the policy at issue violates public policy as to defendant because it effectively
shortens the applicable Wisconsin statute of limitations from three years to two years. Thus,
it places defendant in a ‘substantially different’ position than if the other driver had been
insured.” 2011 IL App (3d) 110096, ¶ 12.
¶ 24 Justice McDade, in dissent, first sought to clarify that the sole issue before the court was
whether the two-year time limitation in the parties’ insurance contract is against Illinois
public policy. 2011 IL App (3d) 110096, ¶¶ 19-21 (McDade, J., dissenting). She observed:
“This scope *** would not mean that defendant cannot contest the issue of timeliness in the
underlying declaratory judgment proceedings. The record reveals that defendant’s answer
to plaintiff’s complaint for declaratory judgment expressly denies plaintiff’s allegation that
she ‘did not make a written demand for uninsured-motorist arbitration on or before July 27,
2009.’ ” Id. ¶ 21.
¶ 25 On the merits, the dissent pointed out that Whitehead had “failed to provide any authority
supporting her claim that the laws of another jurisdiction can somehow be used to show a
violation of Illinois public policy.” Id. ¶ 25. Citing Illinois appellate decisions, the dissent
observed—as did the majority—that “Illinois courts, applying Illinois law, have determined
that the language found in section 2 of the policy does not violate Illinois public policy.” Id.
¶ 26. That, the dissenter stated, is because a two-year policy limitation does not place the
insured in a “substantially different position than she would have been had the tortfeasor
carried the required insurance coverage mandated by law” insofar as “Illinois law itself has
a two-year general statute of limitations for personal injury actions.” Id. ¶ 27. The dissenting
justice concluded: “I find it extremely troubling that under the majority’s analysis, an Illinois
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citizen, who is involved in a vehicle accident in Wisconsin with an uninsured driver, is
somehow afforded broader rights than an Illinois citizen, who is involved in a vehicle
accident in Illinois with an uninsured driver.” Id. ¶ 27.
¶ 26 ANALYSIS
¶ 27 Whether a provision in a contract, insurance policy, or other agreement is invalid because
it violates public policy is a question of law, which we review de novo. Phoenix Insurance
Co. v. Rosen, 242 Ill. 2d 48, 54 (2011); In re Estate of Feinberg, 235 Ill. 2d 256, 263 (2009).
¶ 28 In deciding whether an agreement violates Illinois public policy, we must determine
whether the agreement is so capable of producing harm that its enforcement would be
contrary to the public interest. Phoenix, 242 Ill. 2d at 55; Feinberg, 235 Ill. 2d at 265-66. It
is in the interest of the public that persons should not be unnecessarily restricted in their
freedom to make their own contracts. Phoenix, 242 Ill. 2d at 55; First National Bank of
Springfield v. Malpractice Research, Inc., 179 Ill. 2d 353, 359 (1997). Consequently, the
power to declare a private contract invalid on public policy grounds is exercised sparingly.
Phoenix, 242 Ill. 2d at 55; Progressive Universal Insurance Co. of Illinois v. Liberty Mutual
Fire Insurance Co., 215 Ill. 2d 121, 129 (2005). An agreement will not be invalidated unless
it is clearly contrary to what the constitution, the statutes, or the decisions of the courts have
declared to be the public policy of Illinois, or unless it is manifestly injurious to the public
welfare. Phoenix, 242 Ill. 2d at 55; Progressive Universal, 215 Ill. 2d at 129-30. Those who
would invalidate an agreement carry a heavy burden of demonstrating a violation of public
policy. Phoenix, 242 Ill. 2d at 55; Mohanty v. St. John Heart Clinic, S.C., 225 Ill. 2d 52, 65
(2006). Whether an agreement violates public policy depends on the particular facts and
circumstances of the case. Kleinwort Benson North America, Inc. v. Quantum Financial
Services, Inc., 181 Ill. 2d 214, 226 (1998).
¶ 29 We clarify at the outset—though it seems elementary—that the matter before us does not
involve a suit, dispute, or agreement between Whitehead and Lopez-Juarez, the uninsured
motorist who allegedly injured her in Wisconsin; the controversy in this case concerns the
enforceability of a contractual limitation on arbitration between these parties to a contract
for insurance coverage. An agreement to submit to arbitration is a matter of contract. Carr
v. Gateway, Inc., 241 Ill. 2d 15, 20 (2011); Salsitz v. Kreiss, 198 Ill. 2d 1, 13 (2001). The
parties to a contract may agree to a shortened contractual limitation period to replace a
statute of limitations, so long as it is reasonable. Zerjal v. Daech & Bauer Construction, Inc.,
405 Ill. App. 3d 907, 915 (2010); Medrano v. Production Engineering Co., 332 Ill. App. 3d
562, 575 (2002); see also Travelers Casualty & Surety Co. v. Bowman, 229 Ill. 2d 461, 475
(2008) (discussing the holding of Medrano). In the absence of specific and clear provisions
limiting the period within which suits must be filed, the 10-year statute of limitations for
actions on written contracts is applicable to actions by insureds against their insurers based
on insurance policies. Dial Corp. v. Marine Office of America, 318 Ill. App. 3d 1056, 1066
(2001); Murphy v. United States Fidelity & Guaranty Co., 120 Ill. App. 3d 282, 286-87
(1983). As we suggest hereafter, there may be valid reasons for shortening that limitation
period by contract where, as here, a motor vehicle accident is involved.
¶ 30 The principal purpose of the mandatory liability insurance requirement is to protect the
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public by ensuring adequate compensation for damages and injuries sustained in motor
vehicle accidents. Phoenix, 242 Ill. 2d at 57; Progressive Universal, 215 Ill. 2d at 129. To
that end, the legislature has required uninsured-motorist coverage to place the policyholder
in substantially the same position he would occupy, so far as his being injured or killed is
concerned, if the wrongful driver had had the minimum liability insurance required by the
Illinois Safety and Family Financial Responsibility Law. Phoenix, 242 Ill. 2d at 57; Ullman
v. Wolverine Insurance Co., 48 Ill. 2d 1, 4 (1970). It is in the context of “compensation” that
we have said the policyholder must be placed in “substantially the same position.” The
statute requiring an insurance policy to have an uninsured-motorist clause, section 143a of
the Insurance Code (215 ILCS 5/143a (West 2006)), does not mention a time limit in which
the insured may exercise his or her rights under the uninsured-motorist provisions of a
policy. Severs, 89 Ill. 2d at 518-19 (recognizing as much). Section 7-203 of the Financial
Responsibility Law (625 ILCS 5/7-203 (West 2006)), which sets out minimum financial
requirements for uninsured-motorist coverage, does not set forth a required limitations
period either.
¶ 31 As the appellate court recently observed in Rein v. State Farm Mutual Automobile
Insurance Co., 407 Ill. App. 3d 969, 973 (2011), no authority suggests that a similar two-
year limitation period in an insurance policy contravenes Illinois public policy. In fact,
Whitehead admits “the Country Preferred provision at issue has been reviewed by Appellate
Courts throughout the State numerous times” with consistent findings that “the policy
provision did not violate public policy.” However, Whitehead states that those courts so held
“because the time limitation provision in each policy was equal to the statute of limitations
which the insured would have had to file a claim against an uninsured motorist.” Whitehead
contends that the “two-year time limitation provision when applied to a [personal injury]
claim [such as hers] which has a three-year statute of limitations is void as against Illinois
uninsured motorist public policy.” We disagree.
¶ 32 Although Whitehead has articulated no rationale for requiring contractual dispute
resolution procedures, in this context, to correspond precisely with the statutory time period
allotted for filing an action against the tortfeasor, we note, in any event, that the Illinois
legislature, long ago, determined that two years was a sufficient period of time for a legally
competent tort victim, suffering personal injuries, to ascertain the extent of those injuries,
as well as the identity and status of the person or entity causing them, and to file suit for
damages. See 1827 Ill. Laws 285, § 2 (“[A]ll actions of trespass for assault, battery,
wounding and imprisonment, or any of them, shall be commenced within two years next
after the cause of such actions shall have accrued, and not after.”). That policy determination
has been in place for well over 185 years and remains the law in Illinois to this day. See 735
ILCS 5/13-202 (West 2010). Like any statute of limitations, the purpose of the limitation is
“to require the prosecution of a right of action within a reasonable time to prevent the loss
or impairment of available evidence and to discourage delay in the bringing of claims.” Tom
Olesker’s Exciting World of Fashion, Inc. v. Dun & Bradstreet, Inc., 61 Ill. 2d 129, 132
(1975). The same considerations that have resulted in a two-year statute of limitations for
bringing a personal injury action in Illinois militate in favor of the expeditious resolution of
uninsured-motorist claims under an insurance contract.
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¶ 33 Although Wisconsin has made different policy determinations—a three-year statute of
limitations applicable to the underlying claim against the tortfeasor, and a six-year limitation
period for bringing an action against the injured party’s insurer for uninsured-motorist
benefits (see Sahloff v. Western Casualty & Surety Co., 171 N.W.2d 914, 915, 916 (Wis.
1969) (also noting that “no judgment against the uninsured motorist” is required “before
suing the insurance company”))—we see no reason why Wisconsin’s policy determinations
should control the result in this case. We, like the dissenting appellate justice (see 2011 IL
App (3d) 110096, ¶ 25 (McDade, J., dissenting)), discern no rationale or precedent
supporting the proposition that the laws of another jurisdiction can be used to show a
violation of Illinois public policy nor, for that matter, why the period for seeking dispute
resolution under the contract must mirror whatever statute of limitations is applicable to a
suit against the tortfeasor. Even Wisconsin does not recognize that linkage. That said, the
contractual limitation period in the parties’ insurance contract does correspond with the
limitation period our legislature has deemed appropriate for a suit against the motorist at
fault.
¶ 34 In the end, the critical consideration, as we see it, is whether the two-year time limitation
to which the insured and insurer agreed for dispute resolution procedures between
them—which happens to correspond precisely with Illinois’ two-year statute of limitations
for filing a personal injury action—allows the insured sufficient time to ascertain the basis
for, and dimensions of, her uninsured-motorist claim, and, if necessary, to take the steps, in
accordance with the terms of the policy, to initiate dispute resolution procedures. Whitehead
persists in arguing for application of the three-year Wisconsin limitation period for filing a
personal injury action, but even at this juncture she has failed to explain why she could not
have properly initiated dispute resolution procedures within the contractual limitation period
of two years. Nothing of record indicates that Whitehead lacked information necessary to
pursue her claim against Country Preferred in a timely manner or that she was legally
incompetent to do so. The fact that she was, apparently, competent to oversee her own claim
is the principal factor distinguishing this case from Severs, upon which Whitehead relies.
¶ 35 In Severs, a minor, Mary Severs, was injured in an automobile accident. Her father, Perry
Severs, was insured by Country Mutual Insurance Company. Mary’s parents filed a
declaratory judgment action seeking a declaration of rights under the insurance policy.
Pertinent to our purposes, the circuit court found that coverage under the uninsured-motorist
provisions of the policy extended to the injured minor, but the court ruled that plaintiffs had
failed to comply with the policy requirement that any action under the uninsured-motorist
provisions be commenced within two years of the accident. The result was dismissal of
plaintiffs’ complaint with prejudice. Severs, 89 Ill. 2d at 517-18. The appellate court
reversed, holding that the provision requiring suit for recovery under the uninsured-motorist
proviso of the policy to be brought within two years was against public policy when applied
in the case of a minor. Severs, 89 Ill. 2d at 518.
¶ 36 This court granted leave to appeal, identifying the sole issue as whether the contract
provision requiring that an action be commenced within two years after occurrence of the
loss or casualty “is valid as applied to a minor.” Severs, 89 Ill. 2d at 518. The Severs court
first noted the purpose of section 143a of the Insurance Code, i.e., “to insure that persons
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injured by an uninsured motorist are protected at least to the extent that compensation is
made available for persons injured by a motorist insured for the minimum limits under
section 7-203 of the Illinois Safety Responsibility Law.” Severs, 89 Ill. 2d at 519. The court
found it logical to presume the legislature intended that “both classes of injured persons ***
must be allowed the same period of time within which to bring suit.” Severs, 89 Ill. 2d at
519. The court then noted, had the driver of the vehicle been insured as required by law,
“Mary [Severs’] action would not have been barred until two years after she had reached the
age of majority.” See Severs, 89 Ill. 2d at 519-20 (citing, inter alia, Ill. Rev. Stat. 1973, ch.
83, ¶ 22 (now 735 ILCS 5/13-211 (West 2010) (“If the person entitled to bring an action, ***
at the time the cause of action accrued, is under the age of 18 years, or is under a legal
disability, then he or she may bring the action within 2 years after the person attains the age
of 18 years, or the disability is removed.”))). Stating that the purpose underlying the statute
could not be circumvented by the insertion of a contrary or restricting provision in the
insurance policy, this court observed that “[t]he practical effect of the policy provision ***
would deprive an insured minor, who could not in her own behalf file an action, of the
uninsured motorist coverage required by statute.” Severs, 89 Ill. 2d at 520. The court
concluded that “the provision may not be asserted as a bar to recovery by a minor.” Severs,
89 Ill. 2d at 520.
¶ 37 The court went on to support its holding by addressing the pertinent “legal disabilities”
imposed on minors in general, and applicable to Severs in particular, noting that a minor
could not enter into a contract which could be enforced against him, and that a minor could
not bring suit in his own name. Severs, 89 Ill. 2d at 520. The court cited case law confirming
the proposition that minor litigants are “entitled to special protection by the courts,
particularly to see that their rights are protected even from the neglect of their representative
in order to do substantial justice.” Severs, 89 Ill. 2d at 520-21 (citing Brandon v. DeBusk,
85 Ill. App. 3d 645, 648 (1980), and Country Mutual Insurance Co. v. Kuzmickas, 2 Ill. App.
3d 313 (1971)). There is no citation in Severs to Illinois’ statute of limitations governing
personal injury actions.
¶ 38 Whitehead insists “[t]here is no difference between what this Court did in Severs and
what the Appellate Court has done here by reversing the trial court’s ruling.” We disagree.
There is a difference—in fact there are two features distinguishing this scenario from Severs.
Whitehead would have us stretch the holding of Severs well beyond its facts and intended
purview (1) by applying the holding in such a way as to incorporate a foreign statute of
limitation longer than either Illinois’ two-year statute of limitation applicable to personal
injury actions or the corresponding two-year limitation period in the parties’ insurance
contract that were applicable in that case, and (2) by applying a holding intended to protect
a legal incompetent (Severs) to a person (Whitehead) who, not only was legally
competent—as far as we can tell from the record—but who also appears to have encountered
no unusual obstacles to timely filing. This we cannot do.
¶ 39 As we observed at the outset, whether an agreement violates “public policy depends on
the particular facts and circumstances of the case.” (Emphasis added.) Kleinwort Benson,
181 Ill. 2d at 226. Statements made in Severs must be placed in the context of the facts and
circumstances there at issue: an injured two-year-old whose rights were determined solely
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by reference to Illinois statutory authority. We agree with those appellate panels that have
found this two-year contractual limitation does not violate Illinois public policy when
applied to a legally competent plaintiff. We do not believe a different result is warranted
where, as here, the accident takes place in a jurisdiction with a longer statute of limitations
for filing personal injury actions. Whitehead could have pursued a personal injury action in
Wisconsin against Lopez-Juarez. She chose to file a claim for uninsured-motorist benefits
under her insurance policy. We find that the two-year time limitation to which Whitehead
and Country Preferred agreed for dispute resolution procedures between them is reasonable
and consistent with Illinois public policy, given the facts alleged in this case, insofar as it
allowed Whitehead what our legislature has deemed a sufficient amount of time to ascertain
the basis for, and dimensions of, her uninsured-motorist claim, and, if necessary, to take
steps to initiate dispute resolution procedures. Whitehead has failed to sustain her burden of
demonstrating a violation of public policy given the particular facts and circumstances of this
case.
¶ 40 Although the parties’ arguments before this court have focused exclusively on the public
policy issue that prompted us to take this case, comments of the dissenting appellate justice
regarding her perception of what was and was not decided in the circuit court point up the
need to address that issue as well. We note that the circuit court, in its dispositive order of
January 26, 2011, found that Whitehead “first made a claim for uninsured motorist benefits
to her insurer, Plaintiff, on October 6, 2009.” (Emphasis added.) It seems clear, from this
prefatory reference, that the court believed some type of “action,” as defined by the policy,
was initiated by Whitehead on that date, but the action, in any event, was untimely. The use
of the term “claim” in this context is not, in our view, synonymous with taking “legal action”
against the insurer, defined in this policy as “suit, action or arbitration proceedings.” In any
event, our review of the facts alleged in the parties’ pleadings indicates that Whitehead never
initiated any type of legal action to settle her claim within the applicable time frame, and the
circuit court so found.
¶ 41 For the reasons stated, we reverse the judgment of the appellate court and affirm the
judgment of the circuit court. We remand this matter to the circuit court for any further
action, consistent with this opinion, on the remaining counts of Whitehead’s counterclaim.
¶ 42 Appellate court judgment reversed.
¶ 43 Circuit court judgment affirmed.
¶ 44 Cause remanded.
¶ 45 CHIEF JUSTICE KILBRIDE, dissenting:
¶ 46 The majority holds that a two-year limitation on claim arbitration in an insurance policy
does not violate Illinois public policy when the state where the accident occurred has a
longer statute of limitations. “[T]he public policy behind the uninsured motorist statute is to
place the injured party in substantially the same position he would be in if the uninsured
driver had been insured.” Hogland v. State Farm Mutual Automobile Insurance Co., 148 Ill.
2d 272, 279 (1992). I believe the majority’s holding contravenes the public policy
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underlying Illinois’s uninsured-motorist statute, and I respectfully dissent.
¶ 47 I agree with the appellate court that the two-year limitation on claim arbitration in the
automobile insurance policy violates Illinois public policy in this case by effectively
shortening the applicable Wisconsin statute of limitations from three years to two years.
Relying on this court’s decision in Severs v. Country Mutual Insurance Co., 89 Ill. 2d 515
(1982), the appellate court concluded that the policy provision violated Illinois public policy.
¶ 48 In Severs, this court held that a two-year contractual limitation against a minor was
unenforceable because it shortened the time when the minor was required to file suit. Severs,
89 Ill. 2d at 519-20. We recognized that the legislative intent in enacting the uninsured-
motorist provision “was in part to insure that persons injured by an uninsured motorist are
protected at least to the extent that compensation is made available for persons injured by
a motorist insured for the minimum limits under *** the Illinois Safety Responsibility Law
[citation].” Severs, 89 Ill. 2d at 519. Thus, we determined that the uninsured-motorist statute
required that an injured minor “be allowed the same period of time within which to bring suit
that she would have had if the driver *** had been insured.” (Emphasis added.) Severs, 89
Ill. 2d at 519. Since, under Illinois law, a minor had two years after attaining age 18 to file
suit, the two-year policy provision restricted that limitations period and deprived the minor
of uninsured-motorist coverage required by statute. Accordingly, we held that the limitations
provision of the policy could not be used to bar recovery by a minor. Severs, 89 Ill. 2d at
520.
¶ 49 Severs is equally applicable in this case. Here, the accident occurred in Wisconsin, where
there is a three-year statute of limitations. If the wrongful driver had been insured, the
injured defendant’s action would not have been barred until three years after the date of the
accident. The two-year limitation contained in the uninsured-motorist policy provision here
shortens the applicable Wisconsin statute of limitations from three years to two years. Thus,
the provision violates public policy as to the injured defendant because it effectively
deprives the injured defendant of the uninsured-motorist coverage required by Illinois’
statute.
¶ 50 The Insurance Code requires insurers to offer uninsured-motorist coverage in all
automobile policies. 215 ILCS 5/143a (West 2006). Uninsured-motorist coverage is “for the
protection of persons insured thereunder who are legally entitled to recover damages from
owners or operators of uninsured motor vehicles.” 215 ILCS 5/143a(1) (West 2006).
¶ 51 Insured claimants who are legally entitled to recover damages from owners or operators
of uninsured motor vehicles “are statutorily entitled to coverage, and policy language which
attempts to further restrict the right to coverage violates the language and intent of the
statute.” Illinois Farmers Insurance Co. v. Cisco, 178 Ill. 2d 386, 393-94 (1997). “[T]erms
of an insurance policy cannot circumvent the underlying purpose of a statute.” State Farm
Mutual Automobile Insurance Co. v. Illinois Farmers Insurance Co., 226 Ill. 2d 395, 401
(2007) (citing State Farm Mutual Automobile Insurance Co. v. Smith, 197 Ill. 2d 369, 372
(2001), and Cummins v. Country Mutual Insurance Co., 178 Ill. 2d 474, 483 (1997)). Here,
the insured is “legally entitled” to recover damages from the operator of the uninsured motor
vehicle for injuries she sustained in the accident that occurred in Wisconsin, subject to
Wisconsin’s three-year statute of limitations.
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¶ 52 I note that the Wisconsin Supreme Court has not hesitated to strike similar provisions in
uninsured-motorist insurance policies that violate Wisconsin’s statutory mandate. In Nixon
v. Farmers Insurance Exchange, 201 N.W.2d 543, 545 (Wis. 1972), a policy requiring
commencement of suit or arbitration proceedings within one year from the date of the
accident was deemed to violate Wisconsin’s uninsured-motorist coverage statute.
Wisconsin’s statute contained language identical to Illinois’s uninsured-motorist statute,
providing that uninsured-motorist coverage is “for the protection of persons insured
thereunder who are legally entitled to recover damages from owners or operators of
uninsured motor vehicles.” Wis. Stat. § 204.30(5)(a) (1967). The Wisconsin Supreme Court
struck down the policy provision because it reduced the normal period of the three-year
statute of limitations, thus failing to provide the statutorily required protection of persons
“who are legally entitled to recover damages from owners or operators of uninsured motor
vehicles.” (Internal quotation marks omitted.) Nixon, 201 N.W.2d at 545.
¶ 53 There is no question that the policy limitation at issue in this case fails to provide the
statutorily required protection of persons “who are legally entitled to recover damages from
owners or operators of uninsured motor vehicles” when an Illinois resident has the
misfortune of being injured in an accident that occurs in Wisconsin with an uninsured
motorist. The insurance company is well aware of the risk that its insured may become
involved in an accident while traveling in a state that has a three-year statute of limitations,
including Wisconsin. The insured pays a premium for uninsured-motorist coverage, and it
is reasonable for the insured to expect that the uninsured-motorist policy she purchased will
provide coverage as long as she is legally entitled to recover damages under Wisconsin law.
I believe it is fundamentally unfair that the insurance company accepts insurance premiums
and then attempts to limit its liability by use of a limitation provision shorter than the
statutory period of states where its insured may travel. Additionally, the insurance company
here had full and complete notice of the accident, assigned a claim number to defendant’s
uninsured-motorist claim soon after the accident occurred, and the parties engaged in
settlement negotiations within the two-year period.
¶ 54 The policy provision at issue shortens the statute of limitations to bring the injury suit
in Wisconsin from three years to two years. I would hold that the contract provision limiting
the arbitration demand to two years after the accident violates Illinois public policy as to
defendant because it fails to allow defendant “the same period of time within which to bring
suit that she would have had if the [uninsured] driver *** had been insured.” (Emphasis
added.) Severs, 89 Ill. 2d at 519. I therefore respectfully dissent.
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