Safeco Insurance Company v. Jelen

No. 3-06-0681
_________________________________________________________________
Filed April 10, 2008
IN THE

APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

A.D., 2008

SAFECO INSURANCE COMPANY ) Appeal from the Circuit Court
as subrogee of IOLA BEDNAR, ) of the Ninth Judicial Circuit
) Warren County, Illinois, and
Plaintiff-Appellant, ) from the Circuit Court of Cook
) County, Illinois, First
) Municipal District
v. )
) No. 05-L-25 (Warren County)
) 05-MI-16476 (Cook County)
)
SUSAN M. JELEN, AVIS RENT A ) Honorable
CAR SYSTEM, INC., STEVEN E. ) Gregory McClintock
GREGORY, JEFF GREGORY, and ) Judge Presiding, Warren County
STANLEY GREGORY, )
) Honorable
) Cassandra Lewis
Defendants-Appellees. ) Judge Presiding, Cook County
_________________________________________________________________

JUSTICE LYTTON delivered the Opinion of the Court:
_________________________________________________________________

Plaintiff, Safeco Insurance Company, brought an action against

defendants, Susan Jelen, Avis Rent A Car System, Inc., Steven

Gregory, Jeff Gregory and Stanley Gregory, for subrogation to

recover medical expenses it paid on behalf of its insured, Iola

Bednar, after Bednar was injured in an automobile accident. The

complaint was initially filed in Cook County and then transferred

to Warren County. Defendants filed motions to dismiss pursuant to

sections 2-615 and 2-619 of the Code of Civil Procedure (Code) (735

ILCS 5/2-615 (West 2004); 735 ILCS 5/2-619 (West 2004)). The

trial court granted the motions. Safeco appeals, arguing that the
trial court erred in (1) granting the 2-615 motions to dismiss, (2)

granting the 2-619 motions to dismiss, and (3) transferring the

case to Warren County. We affirm in part and reverse in part.

On May 12, 2004, Iola Bednar, a Minnesota resident, was

injured in an automobile accident in Warren County, Illinois.

Bednar was a passenger in a minivan that collided with a truck

driven by Steven Gregory and owned by Jeff and Stanley Gregory.

The Gregorys are all residents of Illinois. The minivan was driven

by Susan Jelen, a Minnesota resident, and owned by Avis Rent A Car

System, Inc., a company licensed to do business in Illinois.

Bednar was insured by Safeco Insurance Company, a company

licensed to do business in Illinois and Minnesota. As a result of

the accident, Safeco paid $20,000 for Bednar’s medical expenses.

Safeco brought suit, as subrogee of Bednar, against Jelen, Avis and

all three Gregorys to recover the $20,000 it paid on Bednar’s

behalf. In the complaint, Safeco alleged that Jelen was negligent

in driving the minivan (Count I), that Avis was legally responsible

for Jelen’s negligence based on an agency theory (Count II), that

Steven Gregory was negligent in driving the truck (Count III), and

that Jeff and Stanley Gregory were legally responsible for Steven’s

negligence based on a theory of agency (Counts IV and V).

Safeco initially filed its complaint in Cook County. The

Gregorys filed a motion to transfer venue and then requested the

court to treat the motion as a motion to transfer on the grounds of

forum non conveniens. The trial court granted the motion on that

basis.

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 After the case was transferred to Warren County, defendants

filed numerous motions to dismiss. Jelen and Avis moved to dismiss

Counts I and II of the complaint pursuant to section 2-615 of the

Code (735 ILCS 5/2-615 (West 2004)), alleging that Minnesota’s no-

fault law should be applied to bar Safeco’s subrogation claims.

The Gregorys adopted and joined that motion. Jeff and Stanley

Gregory also filed motions to dismiss Counts IV and V of the

complaint pursuant to section 2-619 of the Code (735 ILCS 5/2-619

(West 2004)), alleging that Steven was not acting as their agent or

employee at the time of the accident. The motions were supported

by affidavits from all three Gregorys, stating that Steven was

using the vehicle for his own personal use when the accident

occurred.

The trial court granted defendants’ 2-615 motions to dismiss,

finding that Safeco’s subrogation claim was a contract claim

governed by Minnesota law, which precluded Safeco from seeking

subrogation. The trial court also granted Jeff and Stanley

Gregory’s 2-619 motion to dismiss, finding that there was no agency

liability.

ANALYSIS

I. 2-615 MOTIONS TO DISMISS

A.

Safeco argues that the trial court erred in granting the 2-615

motions to dismiss Counts I through III of its complaint, asserting

that Illinois law should be applied in this case, and that under

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Illinois law, it can proceed on its subrogation claim. Defendants

respond that the trial court properly granted their motions to

dismiss because Minnesota law should apply to preclude Safeco’s

claim for subrogation.

The pivotal issue in this case is whether Safeco’s subrogation

claim is a tort claim or a contract claim. Resolution of this

issue determines whether Illinois or Minnesota law applies. If

Minnesota law applies, Safeco may not seek subrogation against any

of the defendants because Minnesota law forbids it. See Minn.

Stat. § 65B.53, subd. 3 (2006); Milbrandt v. American Legion Post

of Mora, 372 N.W.2d 702, 705 (Minn. Sup. Ct. 1985). Under Illinois

law, Safeco stands in the shoes of Bednar and can seek subrogation.

See 735 ILCS 5/2-403 (West 2004). Our standard of review for this

issue is de novo. Barbara’s Sales, Inc. v. Intel Corp., 367 Ill.

App. 3d 1013, 1017, 857 N.E.2d 717, 721 (2006).

To resolve this issue, we look to the conflicts law in

Illinois as the forum state. Esser v. McIntyre, 169 Ill. 2d 292,

297, 661 N.E.2d 1138, 1141 (1996). Illinois follows the

Restatement (Second) of Conflicts of Law in making choice-of-law

decisions. See Barbara’s Sales, Inc., 367 Ill. App. 3d at 1018,

857 N.E.2d at 721-22. The Restatement employs different tests to

determine which substantive law will apply based on the nature of

the claim raised.

If the claim raised is a tort, the most significant

relationship test is used. Restatement (Second) of Conflict of

Laws § 145 (1971); Esser, 169 Ill. 2d at 297-98, 661 N.E.2d at

4
1141. Under the most significant relationship, the law of the

state where place of the injury controls unless another state has

a more significant relationship to the occurrence. Esser, 169 Ill.

2d at 298, 661 N.E.2d at 1141. When applying the most significant

relationship test, a court should consider: (1) where the injury

occurred; (2) where the conduct causing the injury occurred; (3)

the domicile, residence, place of incorporation and place of

business of the parties; and (4) where the relationship between the

parties is centered. Esser, 169 Ill. 2d at 298, 661 N.E.2d at

1141.

If the claim raised is a contract, the most significant

contacts test is used. Restatement (Second) of Conflict of Laws §

188 (1971); Westchester Fire Ins. Co. v. Heileman Brewing Co.,

Inc., 321 Ill. App. 3d 622, 628, 747 N.E.2d 955, 961 (2001). In

the most significant contacts test, insurance contracts are

governed by the location of the subject matter, the place of

delivery of the contract, the domicile of the insured or the

insurer, the place of the last act to give rise to a valid

contract, the place of performance, or other place bearing a

rational relationship to the general contract. Westchester Fire

Ins. Co., 321 Ill. App. 3d at 628-29, 747 N.E.2d at 961.

B.

In a Florida case, Lincoln National Health and Casualty

Insurance Co. v. Mitsubishi Motor Sales of America, Inc., 666 So.2d

159 (Fla. App. Ct. 1995), Alan Skowronek, a Connecticut resident,

was injured when a rental car being driven by Kathleen Chew, a

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California resident, struck him in Florida. Lincoln National

Health, 666 So. 2d at 160. Lincoln National Health, Skowronek's

insurer, paid Skowronek for medical and other expenses related to

the accident. Lincoln National Health, 666 So. 2d at 160. Lincoln

National Health then filed an action for equitable subrogation

against Chew and the owner and lessors of the vehicle Chew was

driving. Lincoln National Health, 666 So. 2d at 160.

In determining which state's law governed the subrogation

claim, the Florida appellate court reversed the trial court's

ruling and held that because the underlying action sounded in tort,

the subrogation action was governed by the most significant

relationship test. See Lincoln National Health, 666 So. 2d at 161-

62. The court rejected the defendants’ argument that Florida’s

choice of law principles pertaining to contracts should apply to

the action because Lincoln’s right of subrogation arose form the

contract of insurance. Lincoln National Health, 666 So.2d at 161.

The court explained:

This is not an action between the insurer and the insured

concerning matters governed by the contract. The claim

asserted by Lincoln in Florida is for equitable

subrogation against third-party tortfeasors with whom it

has no contract for medical benefits paid to Skowronek.

Such an action is a creature of equity that does not

depend on contract, but which follows as a legal

consequence of the acts and relationship of the parties.

In such an action, the insurer's rights are dependent on

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 the insured's rights in tort against the third-party

tortfeasor. The insurer, as subrogee, stands in the

shoes of its insured with respect to the insured's tort

claim against the tortfeasor. Lincoln National Health,

666 So. 2d at 161 (citations omitted).

The court concluded that Florida law applied to the subrogation

claim because Florida was the state where the accident occurred and

no other state had a more significant relationship to the

occurrence or parties. Lincoln National Health, 666 So. 2d at 162.

Defendants cite a Wisconsin case, where the court came to a

different conclusion. See American Standard Insurance Co. of

Wisconsin v. Cleveland, 124 Wis. 2d 258, 369 N.W.2d 168 (Wis. App.

Ct. 1985). In that case, the Wisconsin appellate court, without

analysis, concluded that "[the insurer's] subrogation right is a

purely contractual right derived from the insurance policy."

American Standard, 124 Wis. 2d at 267, 369 N.W.2d at 173. The

court then concluded that the subrogee's contractual right limited

the subrogee's ability to act against the third-party tortfeasors.1

Defendants also ask us to consider a case recently decided by

the Illinois Appellate Court for the First District, Progressive

Insurance Co. v. Williams, ___ Ill. App. 3d ___, ___ N.E.2d ___

(2008). In that case, Progressive was the insurer of a Minnesota

1
While the American Standard court used the most significant
contacts test, it held that Wisconsin's subrogation law, allowing
the insurer to recover from defendants, applied because the
insurance policy was negotiated, entered into, issued and
delivered in Wisconsin. 124 Wis. 2d at 267, 369 N.W.2d at 173.

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resident injured in a traffic accident in Illinois. Progressive

paid its insured for his injuries and then filed a subrogation

claim against the other driver involved in the accident. The

appellate court upheld the trial court’s dismissal of the claim,

finding that Progressive was not a bona fide subrogee, and thus had

no standing to bring the action. Progressive Insurance Co., ___

Ill. App. 3d ___, ___ N.E.2d ___ (2008). In reaching its decision,

the first district did not analyze whether the underlying action

was based in contract or tort but simply assumed that Progressive’s

claim was contractual.

We reject the holdings in American Standard and Progressive

and accept the Florida court's reasoning in Lincoln National

Health. This is not a dispute between an insured and its insurer

regarding interpretation of an insurance contract; rather, it is a

claim by an insurer against third parties for tortious conduct.

See Lincoln National Health, 666 So. 2d at 161. As a subrogee,

Safeco stands in the shoes of Bednar, its insured, for purposes of

enforcing Bednar's rights against third parties. See Whitledge v.

Klein, 348 Ill. App. 3d 1059, 1064, 810 N.E.2d 303, 307 (2004);

Signode Corp. v. Normandale Properties, 177 Ill. App. 3d 526, 528,

532 N.E.2d 482, 484 (1988); Continental Casualty Co. V. Polk

Brothers, Inc., 120 Ill. App. 3d 395, 397, 457 N.E.2d 1271, 1273

(1983); London & Lancashire Indemnification Co. of America v.

Tindall, 377 Ill. 308, 313, 36 N.E.2d 334, 337 (1941). There is no

question that Bednar's claim against defendants would be based in

tort. See Yacko v. Curtis, 339 Ill. App. 3d 299, 299, 789 N.E.2d

8
1274, 1274 (2003) ("tort suit" arose out of automobile accident);

Wiker v. Pieprzyca-Berkes, 314 Ill. App.3d 421, 423, 732 N.E.2d 92,

94 (2000) (suit brought by plaintiff seeking compensation for

injuries suffered as a result of automobile collision was a "tort

action"). Thus, Safeco's claim should also be considered a tort

claim. See Lincoln National Health, 666 So. 2d at 161.

Nevertheless, defendants contend that Minnesota law should

apply because Minnesota, by adopting its no-fault law, has shown an

interest in controlling how its residents are compensated from an

accident. We disagree. According to the Minnesota legislature,

the main purpose of Minnesota's no-fault system is "to relieve the

severe economic distress of uncompensated victims of automobile

accidents within this state." Minn. Stat. § 65.42(1) (2006)

(emphasis added). This purpose is not furthered when an accident

occurs outside of Minnesota. See Nodak Mutual Insurance Co. v.

American Family Mutual Insurance Co., 604 N.W. 2d 91, 96 (Minn.

Sup. Ct. 2000) (North Dakota law applied to subrogation claim of a

Minnesota insurance company covering a Minnesota resident who was

injured in auto accident in North Dakota).2 Because this accident

occurred in Illinois, Minnesota has no interest in regulating how

Bednar and Safeco are compensated.

2
The court in Progressive found Nodak inapplicable because
the Minnesota Supreme Court did not address the issue of standing
in Nodak. We disagree. By holding that the insurer could pursue
its subrogation claim under North Dakota law, the Minnesota
Supreme Court in Nodak implicitly found that the insurer had
standing to sue as its insured’s subrogee. If it had not, the
action could not have gone forward.

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 C.

Since we have concluded that Safeco's claim should be

considered a tort claim, we apply the most significant relationship

test to determine whether Illinois or Minnesota law applies. See

Esser v. McIntyre, 169 Ill. 2d 292, 297-98, 661 N.E.2d 1138, 1141

(1996). Here, the injury and the injury-causing conduct occurred

in Illinois. Additionally, several of the defendants (the Gregorys

and Avis Rent A Car) are domiciled or do business in Illinois.

Finally, the relationship between the parties arose in Illinois

because the accident occurred in Illinois and but for the accident,

Bednar would have no relationship with the Gregorys or Avis Rent A

Car. Thus, Illinois appears to have the most significant

relationship to this case.

Because Illinois is the place of the injury, and no other

state has a more significant interest in the occurrence or the

parties, Illinois law applies. See Esser, 169 Ill. 2d at 298, 661

N.E.2d at 1141. The trial court erred in granting defendants'

section 2-615 motions to dismiss Counts I through III.

II. 2-619 MOTIONS TO DISMISS

Safeco next argues that the trial court erred in granting the

Gregorys’ section 2-619 motions to dismiss Counts IV and V of the

complaint.

A section 2-619 motion to dismiss provides a means of

disposing of issues of law or easily proven issues of act at the

outset of a case. In Marriage of Kohl, 334 Ill. App. 3d 867, 877,

778 N.E.2d 1169, 1177-78 (2002). Pursuant to section 2-619(a)(9)

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of the Code, a cause of action should be dismissed when "the claim

asserted against defendant is barred by other affirmative matter

avoiding the legal effect of or defeating the claim." 735 ILCS

5/2-619(a)(9) (West 2004). An "affirmative matter" is something in

the nature of a defense which negates the cause of action

completely. Van Meter v. Darien Park Dist., 207 Ill. 2d at 359,

367, 799 N.E.2d at 273, 278 (2003).

When ruling on a section 2-619 motion to dismiss, the court

may consider pleadings, affidavits and deposition transcripts,

Kohl, 334 Ill. App. 3d at 877, 778 N.E.2d at 1178. If a defendant

presents an adequate affidavit supporting his defense, the burden

then shifts to the plaintiff. See Kedzie and 103rd Currency

Exchange, Inc. v. Hodge, 156 Ill. 2d 112, 116, 619 N.E.2d 732, 735

(1993). If the facts asserted in an affidavit are not refuted by

counteraffidavit, the court will take those facts as true

nothwithstanding any contrary unsupported allegations in the

plaintiff’s pleadings. Kohl, 334 Ill. App. 3d at 877, 778 N.E.2d

at 1178. We review a section 2-619 dismissal de novo. Van Meter,

207 Ill. 2d at 368, 799 N.E.2d at 278.

Here, the pleadings and other documents tendered in this case

establish that Jeff and Stanley Gregory owned the truck Steven

Gregory was driving at the time of the collision. The proof of

ownership created a rebuttable presumption that an agency

relationship existed. See Bell v. Reid, 118 Ill. App. 3d 310, 313,

454 N.E.2d 1117, 1119 (1983). That presumption was rebutted by the

affidavits tendered by the Gregorys. In the affidavits, each of

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the Gregorys attested that Steven was using the vehicle for his own

personal use and was not acting as an employee or agent of Jeff or

Stanley Gregory at the time of the accident.

The affidavits presented by defendants shifted the burden to

Safeco to support its claim of agency liability. See Kedzie, 156

Ill. 2d 112, 116, 619 N.E.2d 732, 735. Safeco failed to tender any

counteraffidavits to refute the facts presented by the Gregorys.

Thus, the facts contained in the Gregorys’ affidavits were properly

deemed admitted. The trial court did not err in granting

defendants’ section 2-619 motions to dismiss.

III. MOTION TO TRANSFER

Finally, Safeco argues that the Cook County Circuit Court

erred in granting the Gregorys’ motion to transfer this case to

Warren County. However, Safeco has not tendered any part of the

record from the Cook County proceedings in this appeal. Thus, we

must presume that the Cook County Circuit Court properly granted

the motion to transfer the case to Warren County. See In re

Stephanie P., 341 Ill. App. 3d 887, 892, 794 N.E.2d 397, 400 (2003)

(appellant has the duty to present a sufficiently complete record

of the trial court proceedings to support a claim of error; in the

absence of such a record, a reviewing court will presume that a

trial court’s order was in conformity with the law).

CONCLUSION

The judgment of the Circuit Court of Warren County is affirmed

in part and reversed in part; the judgment of the Circuit Court of

Cook County is affirmed.

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 Affirmed in part and reversed in part.

HOLDRIDGE, J., concurring.

CARTER, J., concurring in part and dissenting in part:

I agree with the majority’s conclusion that the section 2-619 motions to dismiss (735 ILCS

5/2-619 (West 2006)) and the motion to transfer the case to Warren County were properly granted.

I dissent, however, because I disagree with the majority’s ruling that the section 2-615 motions to

dismiss (735 ILCS 5/2-615 (West 2006)) should have been denied.

Following American Standard Ins. Co. of Wisconsin v. Cleveland, 124 Wis. 2d 258, 267, 369

N.W.2d 168, 173 (Wis. Ct. App. 1985), I would find that the claim raised is one of contract and that

the most significant contacts test must be used to determine whether the substantive law of

Minnesota (forbids subrogation in this context) or Illinois (allows subrogation in this context) should

apply. See Restatement (Second) of Conflict of Laws § 188 (1971); Westchester Fire Ins. Co. v. G.

Heileman Brewing Co., Inc., 321 Ill. App. 3d 622, 628, 747 N.E.2d 955, 961 (2001). In the

American Standard case, two Wisconsin residents, Ilerd Cleveland and Thomas McGree, were

involved in a traffic accident in Minnesota. American Standard Ins. Co. of Wisconsin, 124 Wis. 2d

at 260, 369 N.W.2d at 170. They were traveling in separate automobiles and Cleveland was 100%

negligent in causing the accident. American Standard Ins. Co. of Wisconsin, 124 Wis. 2d at 260,

369 N.W.2d at 170. Both were insured by Wisconsin insurers under policies issued in Wisconsin.

American Standard Ins. Co. of Wisconsin, 124 Wis. 2d at 260, 369 N.W.2d at 170. On appeal, one

of the issues that the Wisconsin Appellate Court had to decide was whether to apply Wisconsin’s

subrogation law, which would allow American Standard to recover subrogation, or Minnesota’s no-

fault law, which prohibited contractual subrogation by insurers. American Standard Ins. Co. of

Wisconsin, 124 Wis. 2d at 266-67, 369 N.W.2d at 173. The appellate court applied the most

13
significant contacts test and determined that Wisconsin’s subrogation law controlled American

Standard’s right to recover subrogation. American Standard Ins. Co. of Wisconsin, 124 Wis. 2d at

267, 369 N.W.2d at 173. In so doing, the appellate court noted that, “American Standard’s

subrogation right (was) a purely contractual right derived from the insurance policy.” American

Standard Ins. Co. of Wisconsin, 124 Wis. 2d at 267, 369 N.W.2d at 173.

I would reach the same conclusion in the present case. Although an underlying tort gave rise

to the injuries for which Safeco made payment, the claim raised in this suit is one of subrogation.

The tort claim has been raised in a separate suit filed in Warren County by Iola Bednar against Susan

Jelen and Steven Gregory. As with the insurer in American Standard, Safeco’s right to subrogation

is purely a contractual right derived from the relationship between the insurance company and the

insured. See American Standard Ins. Co. of Wisconsin, 124 Wis. 2d at 267, 369 N.W.2d at 173.

Safeco’s claim, therefore, is a contract claim and must be analyzed under the most significant

contacts test. See Restatement (Second) of Conflict of Laws § 188 (1971); Westchester Fire Ins. Co.,

321 Ill. App. 3d at 628, 747 N.E.2d at 961. Minnesota, as the state where the contract was entered

into, has the most significant contacts with this case. Minnesota law should be applied and Safeco

should not be allowed to proceed on a claim for subrogation against the 2-615 defendants. I would

find, therefore, that the Circuit Court properly granted the section 2-615 motions to dismiss.

For the reasons stated, I concur in part and respectfully

dissent in part.

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