2016 IL App (1st) 143336
Ill. App. Ct.2016Background
- Roel Valle, a Village of Lynwood employee, had a State Farm Personal Liability Umbrella Policy that states it is "excess over all other insurance and self insurance."
- Lynwood belonged to the Illinois Municipal League Risk Management Association (the Association), a pooled self-insurance entity that agreed to defend and pay Lynwood’s liability up to $8 million. The Association’s contract contains an "Other Coverage Or Insurance" clause making its coverage excess-of or noncontributing with other available coverage.
- Valle, driving a Lynwood vehicle, collided with Manuel Little; the Association settled claims for $5,822,500 and State Farm did not contribute.
- The Association (as subrogee) sued State Farm seeking contribution from the umbrella policy. Both parties moved for summary judgment on contract interpretation.
- The trial court held State Farm’s umbrella was excess to the Association’s pooled self-insurance and entered judgment for State Farm; the Association appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Association's pooled self-insurance counts as "insurance and self insurance" under State Farm's umbrella clause | The Association: pooled public self-insurance should not be treated as "other insurance" that exhausts umbrella coverage; public funding distinction means umbrella should be primary | State Farm: policy language is unambiguous — coverage is excess over all other insurance and self-insurance, including pooled municipal self-insurance | The court: the Association's contract qualifies as self-insurance; the umbrella is excess and applies only after those limits are exhausted |
| Whether public policy prevents enforcement of State Farm’s "other insurance and self insurance" clause | The Association: public-policy concerns favor permitting recovery from umbrella when public funds are involved | State Farm: policy terms control and are enforceable | The court: public policy does not invalidate the clause; enforceable as written |
Key Cases Cited
- Emcasco Ins. Co. v. Continental Cas. Co., 139 Ill. App. 3d 130 (Ill. App. Ct. 1985) (umbrella policies are typically true excess coverage and generally pay only after primary limits are exhausted)
- Antiporek v. Village of Hillside, 114 Ill. 2d 246 (Ill. 1986) (intergovernmental risk-management agreements constitute pooled self-insurance, not traditional insurance companies)
- Aetna Cas. & Sur. Co. v. Benes & Assocs., Inc., 229 Ill. App. 3d 413 (Ill. App. Ct. 1992) (intergovernmental risk pools are not private insurers for certain legal purposes)
- Rich v. Principal Life Ins. Co., 226 Ill. 2d 359 (Ill. 2007) (contract/insurance-policy interpretation requires giving effect to parties' unambiguous terms)