Phoenix Insurance v. Rosen
242 Ill. 2d 48
| Ill. | 2011Background
- Martha Rosen was injured in an auto accident; the tortfeasor carried $25,000 bodily injury coverage, Rosen's policy included $500,000 underinsured-motorist coverage.
- The underinsured-motorist arbitration clause allows either party to demand arbitration if the issues are disputed as to entitlement or amount; two arbitrators select a third, with possible submission to the AAA if not selected within 45 days.
- Arbitration award of $382,500 was issued to Rosen, subject to set-offs; Phoenix Insurance challenged the award and demanded a jury trial under the trial de novo provision.
- Rosen asserted the trial de novo provision was invalid and unenforceable as against Illinois public policy; she also sought to enforce the arbitration award in her favor.
- The circuit court granted Phoenix’s 2-615 motion to strike Rosen’s affirmative defense and dismiss her counterclaim; the appellate court reversed; the Supreme Court granted review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial de novo clause in underinsured-motorist policy violates public policy | Rosen argues it violates public policy and is unenforceable | Phoenix argues the clause is enforceable under public-policy framework | Enforceable; not contrary to public policy |
| Whether public policy favors arbitration and supports the clause in this context | Arbitration should be preferred; provision undermines arbitration goals | Statutes authorize and promote such provisions in uninsured context and are consistent with arbitration policy | Public policy supports arbitration including trial de novo in underinsured-motorist context |
| Whether the clause is unconscionable | Provision is adhesive, one-sided, and oppressive against insured | Arbitration structure and mutuality of process mitigate unconscionability | Not unconscionable |
| Whether prior Illinois authority like Bugailiskis/Parker/Samek/Kost should be overruled | Public policy bars such provisions in underinsured context | Those cases misalign with Reed and related statutes; no need to overrule beyond holding here | Overruling of those cases; clause upheld |
Key Cases Cited
- Fireman's Fund Insurance Co. v. Bugailiskis, 278 Ill.App.3d 19 (1996) (trial de novo in underinsured context deemed against public policy)
- Parker v. American Family Insurance Co., 315 Ill.App.3d 431 (2000) (appellate court struck down trial de novo in underinsured context)
- Kost v. Farmers Automobile Insurance Ass'n, 328 Ill.App.3d 649 (2002) (insured may invoke trial de novo; conflicts with public policy but not dispositive)
- Samek v. Liberty Mutual Fire Insurance Co., 341 Ill.App.3d 1045 (2003) (adhesion concerns; unconscionability arguments raised)
- Zappia v. St. Paul Fire & Marine Insurance Co., 364 Ill.App.3d 883 (2006) (upheld trial de novo provision; contrary to Bugailiskis/Samek line)
- Reed v. Farmers Insurance Group, 188 Ill.2d 168 (1999) (uninsured-motorist statute requires arbitration; legislature's public policy controls)
- Schultz v. Illinois Farmers Insurance Co., 237 Ill.2d 391 (2010) (uninsured/underinsured interrelation; public policy alignment)