Smith v. American Heartland Insurance Co.

Digitally signed by
Reporter of Decisions
Illinois Official Reports Reason: I attest to the
accuracy and
integrity of this
document
Appellate Court Date: 2017.04.19
12:21:02 -05'00'

Smith v. American Heartland Insurance Co., 2017 IL App (1st) 161144

Appellate Court NANCY SMITH, Plaintiff and Counterdefendant-Appellee, v.
Caption AMERICAN HEARTLAND INSURANCE COMPANY, and
OCTAVIA PEARSON, Defendants and Counterplaintiffs-Appellants.

District & No. First District, First Division
Docket No. 1-16-1144

Filed February 6, 2017

Decision Under Appeal from the Circuit Court of Cook County, No. 11-CH-10715; the
Review Hon. Kathleen M. Pantle, Judge, presiding.

Judgment Affirmed.

Counsel on Shelist Law Firm LLC, of Chicago (Samuel A. Shelist, of counsel), for
Appeal appellants.

Topper & Weiss, Ltd., of Chicago (Barry Weiss, of counsel), for
appellee.

Panel JUSTICE HARRIS delivered the judgment of the court, with opinion.
Presiding Justice Connors and Justice Mikva concurred in the
judgment and opinion.
 OPINION

¶1 This is an appeal regarding insurance coverage and the notice clause of an uninsured
motorist provision contained within the policy. Plaintiff and counterdefendant-appellee,
Nancy Smith, was a passenger in an automobile involved in a hit-and-run accident where the
other vehicle could not be identified because it fled the scene. The owner of the vehicle Smith
rode in had a split insurance policy. One company insured the collision portion, and
defendant/counterplaintiff-appellant, American Heartland Insurance Company (hereinafter
“Heartland”), insured the liability portion. Heartland denied her claim based on the failure to
comply with the notification requirement found in the hit-and-run coverage, and Smith filed
this declaratory judgment action.
¶2 After conducting discovery, both parties moved for summary judgment. Heartland argued
it was undisputed that Smith failed to provide written notification of her claim within 120 days
of the accident as required by the policy. In her motion for summary judgment, Smith argued
her notice was reasonable under the circumstances and, alternatively, the notice provision
violated the public policy of Illinois. The circuit court denied both motions after concluding
there were genuine issues of material fact that needed to be resolved and proceeded to trial.
After trial, the court concluded that it could not enforce the 120-day provision because it
“may” violate the public policy of Illinois. The circuit court concluded that the standard to be
applied was whether notice was reasonable. Based on the testimony and evidence before it, the
court entered judgment for Smith, finding her notice to be reasonable.
¶3 On appeal, Heartland argues that (1) the circuit court erred in denying its motion for
summary judgment, (2) the circuit court erred in finding the 120-day notice provision
ambiguous and applying reasonableness factors to find notice timely, and (3) the notice
provision does not violate the public policy of Illinois. For the reasons set forth below, we
affirm the circuit court in denying summary judgment and proceeding to trial. We find that the
notice provision is not ambiguous; however, despite this, we conclude the reasonableness
factors found in Country Mutual Insurance Co. v. Livorsi Marine, Inc., 222 Ill. 2d 303, 313
(2006), represent suitable guidelines in determining whether a notice provision violates public
policy. We conclude that, when applied to the facts and circumstances of this case, the notice
provision violates the public policy of Illinois regarding uninsured motorist benefits.
Accordingly, we affirm the entry of judgment in favor of Smith.

¶4 JURISDICTION
¶5 On March 25, 2016, the circuit court entered a final judgment in favor of Nancy Smith and
against American Heartland Insurance and Octavia Pearson. On April 22, 2016, defendants
filed their notice of appeal. Accordingly, this court has jurisdiction over this matter pursuant to
article VI, section 6, of the Illinois Constitution and Illinois Supreme Court Rules 301 and 303.
Ill. Const. 1970, art. VI, § 6; Ill. S. Ct. R. 301 (eff. Feb. 1, 1994); R. 303 (eff. May 30, 2008).

¶6 BACKGROUND
¶7 On March 1, 2010, Octavia Pearson (hereinafter “the insured”) was driving her car with
Smith and Derrick Rodgers as passengers when it was struck by a hit-and-run driver in
Chicago, Illinois. The insured obtained her insurance policy through an insurance broker doing

-2-
 business as “Insure On The Spot.” The insurance provided to her was in the form of a split
policy with two insurance companies providing different coverage. American Freedom
Insurance Company provided comprehensive/collision coverage, while Heartland provided
liability coverage and the uninsured motorist coverage at issue in this case. At the time of the
accident, the insured had not received any insurance policy and only had her insurance card
from Insure On The Spot.
¶8 At the scene of the collision, the insured called the police, who arrived shortly thereafter
and prepared a police report of the incident. The police report listed the insured’s insurance
company as Insure On The Spot. Following her interaction with the police, the insured called
Insure On The Spot. The insurance card the insured possessed displayed both insurance
companies but did not state which insurance company issued the comprehensive/collision
coverage or the liability/uninsured motorist coverage.
¶9 On March 2, 2010, Smith went to a hospital emergency room and initiated treatment for
injuries she alleged were caused by the March 1, 2010, accident. Thereafter, Smith retained the
services of attorneys, and based on the information Smith alleged she obtained from the
insured, her attorney sent an attorney’s lien and notice to American Freedom Insurance
Company on March 8, 2010. Receiving no response, on June 29, 2010, a second notice was
sent to American Freedom. On July 9, 2010, Smith’s attorney was notified by American
Freedom that it carried only comprehensive/collision on the insured’s vehicle and that liability
coverage was written by Heartland.
¶ 10 On July 9, 2010, Smith’s counsel, Barry Weiss, reported by telephone to Heartland that
Smith claimed she was injured in the March 1 accident. The insured gave a telephone
statement to Heartland on July 16, 2010, that a hit-and-run accident had occurred. On
September 9, 2010, Smith’s attorney sent a letter to Heartland, informing it of Smith’s
uninsured motorist claim. In a letter dated September 14, 2010, Juliette Driscoll, a claims
adjuster for Heartland, requested that Smith’s counsel provide Heartland with Smith’s medical
damages.
¶ 11 On February 11, 2011, Heartland sent Smith’s attorney a letter, denying her uninsured
motorist claim, because the written notice of her claim was not sent within 120 days of the
incident as stated in the insured’s policy. After receipt of the denial, Smith filed this
declaratory judgment action against Heartland and the insured, seeking an order that Heartland
was obligated to cover her claim. The parties then conducted discovery, and each party
eventually filed motions for summary judgment. On March 24, 2014, the circuit court ruled
that there were genuine issues of material fact that precluded entering summary judgment for
either party.
¶ 12 The circuit court then held a trial on March 25, 2016, where both sides presented testimony
and evidence to the court. However, there is no record of what occurred at this proceeding. The
parties acknowledge that no court reporter was present, no bystander’s report has been filed,
and the record does not contain any of the evidence presented at trial. The court issued its
ruling on the same day and found in favor of Smith. On April 1, 2016, the court read its ruling
and reasoning into the record. The circuit court stated that it found the 120-day notice
provision was unenforceable and instead applied the reasonableness factors found in Country
Mutual, 222 Ill. 2d at 313. It concluded that, based on the evidence before it, Smith’s notice
was reasonable and entered judgment in her favor.

-3-
¶ 13 Heartland timely filed its notice of appeal.

¶ 14 ANALYSIS
¶ 15 Heartland argues the following on appeal: (1) the circuit court erred in denying its motion
for summary judgment; (2) the circuit court erred in finding the 120-day notice provision
ambiguous and applying the reasonableness factors; and (3) the notice provision does not
violate the public policy of Illinois.
¶ 16 Heartland argues for reversal of the circuit court’s order denying its summary judgment
motion because it was undisputed that Smith failed to provide written notice of the accident
within 120 days of its occurrence. Smith responds that this court lacks the jurisdiction to
review the denial of Heartland’s motion for summary judgment because Heartland failed to
appeal the order in its notice of appeal and, additionally, the denial merged with the circuit
court’s order following the trial on March 25, 2016.
¶ 17 “A notice of appeal is a procedural device filed with the trial court that, when timely filed,
vests jurisdiction in the appellate court in order to permit review of the judgment such that it
may be affirmed, reversed or modified.” General Motors Corp. v. Pappas, 242 Ill. 2d 163, 173
(2011). Illinois Supreme Court Rule 303(b)(2) provides that the notice of appeal “shall specify
the judgment or part thereof or other orders appealed from and the relief sought from the
reviewing court.” Ill. S. Ct. R. 303(b)(2) (eff. May 30, 2008). Because the filing of a notice of
appeal is the jurisdictional step that initiates appellate review, the reviewing court has no
jurisdiction unless there is a properly filed notice of appeal. People v. Smith, 228 Ill. 2d 95, 104
(2008). However, a notice of appeal should be liberally construed and considered as a whole.
Id. at 104-05. The notice of appeal informs the prevailing party in the trial court that the other
party seeks review of the judgment and is sufficient to confer jurisdiction on an appellate court
when it fairly and adequately sets out the judgment complained of and the relief sought. Id. An
appellant’s failure to comply with the form of the notice is not fatal when the deficiency is one
of form, rather than substance, and the appellee is not prejudiced. Id.
¶ 18 The notice of appeal, no matter how this court construes it, does not fairly and adequately
set out the March 24, 2014, order denying Heartland’s summary judgment motion as an order
being appealed. The notice of appeal states that the judgment appealed from is the March 25,
2016, order and the relief sought is the “reversal of the judgment in favor of Plaintiff Nancy
Smith.” This notice did not inform Smith that Heartland was appealing the March 24, 2014,
order and therefore failed to confer jurisdiction on this court to consider the summary
judgment order.
¶ 19 Moreover, even if Heartland had included the order in its notice, the merger doctrine would
prevent our review of it. “The denial of a motion for summary judgment is not reviewable on
appeal because the result of such denial merges with the trial that follows.” Paulson v. Suson,
97 Ill. App. 3d 326, 328 (1981) (citing Casson v. Nash, 54 Ill. App. 3d 783 (1977)). In this
case, a trial was held on March 25, 2016, where at least three witnesses testified and both
parties presented evidence to the circuit court. Even if properly appealed, the denial of
Heartland’s summary judgment motion would not be reviewable. Accordingly, we find that
the court’s denial of summary judgment and proceeding to trial was proper.
¶ 20 Next, Heartland argues that the circuit court erred in finding the hit-and-run timing
requirement of the notice provision to be unenforceable and instead applying the
reasonableness factors found in Country Mutual, 222 Ill. 2d at 313. Further, Heartland argues

-4-
 that the timing requirement does not violate the public policy of Illinois regarding uninsured
motorist claims.
¶ 21 Initially, the parties disagree on the standard of review applicable to our review of this
issue. Heartland argues a de novo standard of review should apply because the circuit court
ruled the 120-day notice provision violated public policy and was unenforceable. See Country
Preferred Insurance Co. v. Whitehead, 2012 IL 113365, ¶ 27 (stating whether an insurance
policy is invalid because it violates public policy is reviewed de novo). However, Smith argues
that because the circuit court heard testimony, we should apply the more deferential manifest
weight of the evidence standard. See West American Insurance Co. v. Yorkville National Bank,
238 Ill. 2d 177, 185 (2010) (timeliness of an insured’s notice is a question of fact and should
only be reversed when such a finding is against the manifest weight of the evidence). We agree
with Heartland that a de novo standard applies.
¶ 22 In finding for Smith, the circuit court concluded that the 120-day notice provision
contained within the policy issued by Heartland could not be enforced because “it may be
contrary to public policy.” The court then went on to state that it believed the law only required
notice to be reasonable and that based on the evidence before it, Smith’s notice to Heartland
was reasonable. Despite the use of the term “may” it is apparent the circuit court believed it
could not enforce the 120-day notice provision because it was against public policy.
Accordingly, a de novo standard is proper. Country Preferred Insurance Co., 2012 IL 113365,
¶ 27; Phoenix Insurance Co. v. Rosen, 242 Ill. 2d 48, 54 (2011).
¶ 23 Heartland contends that the circuit court erred in using the factors found in Country Mutual
because the timing provision of the notice requirement is not ambiguous. 222 Ill. 2d at 313.
The primary objective when construing the language of an insurance policy is to ascertain and
give effect to the intentions of the parties as expressed by the words of the policy. Crum &
Forster Managers Corp. v. Resolution Trust Corp., 156 Ill. 2d 384, 391 (1993). An insurance
policy, like any other contract, must be construed as a whole, giving effect to every provision.
Central Illinois Light Co. v. Home Insurance Co., 213 Ill. 2d 141, 153 (2004); Country Mutual,
222 Ill. 2d at 311.
¶ 24 “Whether an ambiguity exists turns on whether the policy language is subject to more than
one reasonable interpretation.” Hobbs v. Hartford Insurance Co. of the Midwest, 214 Ill. 2d 11,
17 (2005). Unambiguous words in the policy are to be given their plain, ordinary, and popular
meaning. Country Mutual, 222 Ill. 2d at 311.
¶ 25 The insurance policy issued by Heartland to the insured contains notice requirements
regarding uninsured motorist claims in two different places. In Part II (Uninsured Motorist
Coverage), the definitions section states:
“ ‘hit-and-run motor vehicle’ means a motor vehicle which hits or causes an object to
hit the insured or an automobile which the insured is occupying at the time of the
accident which causes bodily injury to an insured, provided,
(a) there cannot be ascertained the identity of either the operator or the owner of
such ‘hit-and-run motor vehicle’;
(b) the insured or someone on his behalf shall have reported the accident within 24
hours to a police, peace, or judicial officer, to the Commissioner of Motor Vehicles,
and shall have filed with the company within 120 days thereafter a statement under
oath that the insured or his legal representative has a cause or causes of action arising

-5-
 out of such accident for damages against a person or persons whose identity is
unascertainable, and setting forth the facts in support thereof; and
(c) at the Company’s request, the insured or his legal representative makes
available for inspection the motor vehicle which the insured was occupying at the time
of the accident…”
The Conditions section of the policy states “unless otherwise noted, conditions apply to all
Parts” and contains a “Notice” provision. The “Notice” provision states in relevant part:
“In the event of an accident, occurrence or loss, written notice containing particulars
sufficient to identity the insured and also reasonably obtainable information with
respect to the time, place and circumstances thereof, and the names and address of the
injured and of available witnesses, shall be given by or for the insured to the Company
as soon as practicable. However, in the case of a ‘hit and run’ claim under Part II, notice
must be given to the Company in writing within 120 days of the accident. A suit
seeking recovery against the Company under Part II must be filed within two years of
the accident; this condition does not enlarge the notice provision in Part II Uninsured
Motorist Coverage Definitions—‘Hit & Run Motor Vehicle.’ ”
¶ 26 Heartland is correct that there is nothing ambiguous about this timing requirement. Both
notice provisions clearly and unambiguously require notice within 120 days of the accident.
The cases cited by the parties show that before engaging in an analysis using those factors,
reviewing courts have found the timing requirement in the notice provision at issue to be
ambiguous. The notice provision in each case states an insurer must be given written notice “as
soon as practicable,” an obviously ambiguous timeframe. Country Mutual, 222 Ill. 2d at 311;
West American Insurance Co., 238 Ill. 2d at 185; Barrington Consolidated High School v.
American Insurance Co., 58 Ill. 2d 278, 281 (1974); American Home Assurance Co. v. City of
Granite City, 59 Ill. App. 3d 656, 658-59 (1978); Sowinski v. Ramey, 36 Ill. App. 3d 690, 694
(1976); Kenworthy v. Bituminous Casualty Corp., 28 Ill. App. 3d 546, 548 (1975). Courts had
interpreted this ambiguous phrase to mean “ ‘within a reasonable time.’ ” Country Mutual, 222
Ill. 2d at 311 (quoting Barrington Consolidated High School, 58 Ill. 2d at 282).
Notwithstanding the Country Mutual factors being applicable to ambiguous notice provisions,
we conclude that the Country Mutual factors represent appropriate guidelines to aid courts in
determining whether a notice provision at issue violates public policy, and the circuit court did
not err by utilizing them below.
¶ 27 Smith does not dispute that she failed to give written notice to Heartland within the 120
days required under the notice provision but argues that the timing requirement violates the
public policy of Illinois based on the facts of this case. Smith points out insurance agreements
represent more than just a private agreement between the insured and the insurer. M.F.A.
Mutual Insurance Co. v. Cheek, 66 Ill. 2d 492, 500-01 (1977). Public policy considerations
underlying insurance contracts seek to afford protection to members of the public, generally
innocent third parties. Id. Heartland argues that Illinois courts have long recognized insurance
policy notice provisions impose valid prerequisites to insurance coverage. Country Mutual,
222 Ill. 2d at 311; Barrington Consolidated High School, 58 Ill. 2d at 281.
¶ 28 In deciding whether a provision within an insurance agreement violates 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 Insurance Co. v. Rosen, 242 Ill. 2d 48, 54
(2009). An agreement will not be invalidated unless it is clearly contrary to what the

-6-
 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. Id. at 55. Whether an insurance
provision 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 In Illinois, the general rule is that when an insurer attempts to place limits on the uninsured
motorist provisions of its insurance policy, the limitations must be construed in favor of the
policyholder and strongly against the insurer. Hartford Accident & Indemnity Co. v. LeJeune,
114 Ill. 2d 54, 59 (1986). Section 143a of the Illinois Insurance Code (215 ILCS 5/143a (West
2014)) specifically requires an insurer to provide uninsured motorist coverage which extends
to individuals who may be entitled to recover from persons who own and operate uninsured
motor vehicles. Severs v. Country Mutual Insurance Co., 89 Ill. 2d 515, 518 (1982). The
purpose of this statute is to place the injured party in substantially the same position had the
uninsured driver carried the minimum required liability insurance. 215 ILCS 5/143a (West
2014). Importantly, although the 120-day provision in the insured’s policy limits the time
within which notification of a claim must be made, section 143a does not state a limit as to
when an uninsured motorist claim may be brought. Id.; Severs, 89 Ill. 2d at 518-19. Moreover,
our supreme court has held that the purpose underlying this statute “cannot be circumvented by
the insertion of a contrary or restricting provision in an insurance policy.” Severs, 89 Ill. 2d at
520.
¶ 30 We note that on the day of this incident Heartland’s policy had yet to be delivered to the
insured. The insured had only an insurance card, which set out the names of two insurance
companies without indicating which company was the liability/uninsured carrier. We will not
hold Smith accountable to have greater knowledge than did the insured as to who was the
liability carrier. Based on the facts and circumstances surrounding this case, including the
admissions of Heartland in its answer to Smith’s complaint, a strict enforcement of the 120-day
notice provision contained in Heartland’s policy circumvents the uninsured motorist statutes,
violates public policy, and is therefore void and unenforceable as applied to Smith, an innocent
third party. In arguing for reversal, and upholding the 120-day requirement, Heartland focuses
a great deal of attention on the argument that the 120-day requirement is necessary to prevent
fraudulent claims and its notice provision is in furtherance of that goal. State Farm Mutual
Automobile Insurance Co. v. Benedetto, 2015 IL App (1st) 141521, ¶ 13. That argument does
not help Heartland here. Smith’s claim has never been alleged to be fraudulent; denying her
claim will in no way prevent fraudulent claims from being filed. In answering Smith’s
complaint, Heartland admitted that it knew the accident on March 1, 2010, was a hit-and-run
with an unidentified driver.
¶ 31 Heartland also takes issue with the fact that Smith is not listed on the police report made by
the attending officer, creating suspicion as to Smith’s injuries. However, Heartland also
admitted in its answer that Smith was a passenger in a vehicle owned by its insured when the
accident occurred. Furthermore, the nature and extent of Smith’s injuries is not an issue in this
proceeding.
¶ 32 Heartland also argues such a timing requirement is needed to allow a timely inspection of
the car. However, based on the facts and circumstances of this case, this argument is also
flawed. Smith is not the insured or the owner of the vehicle. She could not turn over the vehicle
even if she wanted to because it belonged to Octavia Pearson. Additionally, Heartland sold a

-7-
 split policy in which it was insuring only the liability part of the policy. A sophisticated
insurance company selling a split policy should recognize that it is entirely possible that an
insured may make a claim with his or her collision carrier and may never contact the insurer
covering the liability portion. That is exactly what happened here—Octavia Pearson made a
claim with American Freedom, her collision carrier, who promptly fixed the car. Octavia
Pearson did not need nor was she required to contact Heartland. Accordingly, we find
Heartland’s contention that timely notice prevented the inspection of the automobile at issue to
be without merit.
¶ 33 Finally, we note that had Smith known the identity of the hit-and-run driver, she would
have had two years pursuant to the Illinois personal injury statute of limitation to seek her
recovery, not 120 days as determined by Heartland and its policy. 735 ILCS 5/13-202 (West
2014).
¶ 34 Heartland’s reliance on Vala v. Pacific Insurance Co., 296 Ill. App. 3d 968 (1998), for the
proposition that Illinois courts have approved of shorter notification periods is unpersuasive.
The insurance policy at issue in Vala was not an automobile policy but a commercial building
policy, so the same policy considerations are not implicated. Id. at 969. Additionally, it was not
argued, and the court did not examine, whether the 60-day notification provision violated
public policy. Id.
¶ 35 Based on the above, the 120-day notice provision Heartland seeks to enforce against Smith
is a dilution or diminution of the uninsured motorist statute and is therefore against public
policy as applied to her. Moses v. Coronet Insurance Co., 192 Ill. App. 3d 921, 925-26 (1989);
Burgo v. Illinois Farmers Insurance Co., 8 Ill. App. 3d 259, 264 (1972); Hartford Accident &
Indemnity Co. v. Holada, 127 Ill. App. 2d 472, 482 (1970). Accordingly, we affirm the entry of
judgment in favor of Smith, and her claim for uninsured motorist benefits should proceed to
arbitration. See Redland Insurance Co. v. Lerner, 356 Ill. App. 3d 94, 98 (2005) (allowing a
reviewing court to affirm for any reason appearing in the record).

¶ 36 CONCLUSION
¶ 37 For the reasons set forth above, we affirm the order of the circuit court entering judgment
in favor of Smith and against Heartland and Pearson.

¶ 38 Affirmed.

-8-