Katz v. STATE FARM MUT. AUTO. INS. CO.
965 N.E.2d 636
Ill. App. Ct.2012Background
- Katz, insured under three State Farm policies, was involved in a February 26, 2008, auto collision with Belt, who had a State Farm primary policy for Belt of $100,000.
- Katz's State Farm UIM limits were $250,000 per person under each policy; Belt's liability was higher than Sentry's primary UIM limit ($100,000 vs. $50,000).
- In underlying action, Belt's insurer settled for $100,000; Katz received $60,000 and his spouse $40,000 for loss of consortium from that settlement.
- Katz also received workers’ compensation benefits totaling $47,654.08, which was available for setoff.
- Sentry paid Katz $2,345.92 under its policy after applying a workers’ compensation setoff; State Farm paid Katz $161,876 in UIM benefits.
- Katz contended Sentry was the primary underinsurer and State Farm the excess, seeking an additional $88,124 from State Farm; State Farm argued it alone provided UIM and that setoffs reduced its liability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is State Farm the excess underinsurer or the sole underinsurer? | Katz: Sentry is primary; State Farm is excess; stacking permitted. | State Farm is the only underinsurer because Belt’s $100k primary exceeds Sentry’s $50k; no excess coverage applies. | State Farm is the only underinsurer; not excess. |
| Are the proper setoffs calculated against State Farm's UIM limits? | Setoffs should apply first to Sentry; State Farm cannot double-count against its policy. | Setoffs apply to State Farm’s policy; the Belt settlement and workers’ compensation reduce State Farm’s liability. | Setoffs of $100,000 (Belt) and $47,654.08 (workers’ comp) apply to State Farm; Katz receives no further benefit. |
| Can the Belt loss‑of‑consortium portion be treated as a separate injury for setoff purposes? | Loss of consortium should not escape setoff, possibly allowing stacking. | Loss of consortium is part of bodily injury to one person under the policy; included in the $100,000 setoff. | Loss of consortium is a derivative, non-separate injury; included in per-person setoff. |
| Is Katz entitled to damages under section 155 for vexatious conduct? | If underinsured benefits were wrongly denied, damages under 155 may be warranted. | No 155 damages where no benefits are owed. | No 155 damages awarded. |
Key Cases Cited
- Berutti v. State Farm Mutual Automobile Insurance Co., 288 Ill.App.3d 997 (1997) (loss of consortium not separate injury; per-person limits apply)
- Jones v. Country Mutual Insurance Co., 371 Ill.App.3d 1096 (2007) (policy construction; unambiguous terms control)
- Phoenix Insurance Co. v. Rosen, 242 Ill.2d 48 (2011) (underinsured coverage purpose; place insured as if tortfeasor insured)
- Mid-Century Insurance Exchange v. State Farm Mutual Automobile Insurance Co., 98 Ill.App.3d 493 (1981) (excess clauses apply only where other primary coverage exists)
- Schweighart v. Standard Mutual Insurance Co., 227 Ill.App.3d 249 (1992) (consortium and bodily injury; policy limits interpretation)
- Martin v. Illinois Farmers Insurance, 318 Ill.App.3d 751 (2000) (loss of consortium as derivative of bodily injury; policy limits apply)