State Farm v. Du Page County
2011 IL App (2d) 100580
Ill. App. Ct.2011Background
- State Farm seeks equitable subrogation and reimbursement after paying $400,000 on Jane Radostits' estate and $45,128.56 in defense costs in Lubinski v. Radostits.
- Jane Radostits, a county employee, was killed driving a county-owned car while intoxicated; Lubinski alleged negligence by Jane and by others in the State’s Attorney’s Office.
- At the time, Du Page County was a self-insured municipality with a retained limit of $2 million; excess liability was provided by private insurers.
- The Lubinski settlement paid by State Farm totaled $400,000 to Jane’s estate and $100,000 by the County to Lubinski; the Lubinski suit was dismissed with prejudice.
- State Farm’s umbrella policy is excess over underlying insurance; however, the County’s three State Farm auto policies did not cover the 2003 Impala involved in the accident.
- The trial court dismissed Counts III (Equitable Subrogation) and IV (Reimbursement); State Farm appealed seeking judgment on pleadings for these counts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is State Farm entitled to equitable subrogation against the County? | State Farm argues County is primarily liable under a policy of insurance. | County is not an insurer or carrier; not primarily liable. | No; County is not an insurer, so equitable subrogation fails. |
| Does horizontal exhaustion apply to this self-insured County? | County should be treated as primary; exhaustion required. | County is not an insurer; horizontal exhaustion does not apply. | Horizontal exhaustion does not apply. |
| Is the State Farm umbrella policy primary or excess when no underlying coverage exists for the loss? | Umbrella is excess over underlying insurance, which exists here. | There was no valid underlying insurance; umbrella is primary. | Umbrella policy is primary because no underlying valid insurance covered the loss. |
| Can State Farm recover defense costs already paid as part of equitable subrogation or reimbursement? | Defense costs should be reimbursed. | No statutory basis; no underlying insurance. | Reimbursement not established; assertion affirmatively rejected. |
Key Cases Cited
- Antiporek v. Village of Hillside, 114 Ill. 2d 246 (1986) (IRMA/self-insurance framework protects government funds)
- Aetna Casualty & Surety Co. of Illinois v. James J. Benes & Associates, Inc., 229 Ill. App. 3d 413 (1992) (IRMA as a non-insurer; public funds protection)
- Yaccino v. State Farm Mutual Automobile Insurance Co., 346 Ill. App. 3d 431 (2004) (IRMA not an insurer; UM primary vs IRMA in city context)
- Chicago Hospital Risk Pooling Program v. Illinois State Medical Inter-Insurance Exchange, 325 Ill. App. 3d 970 (2001) (distinguishes CHRPP as not involving public funds; medical pools)
- Home Insurance Co. v. Cincinnati Insurance Co., 213 Ill. 2d 307 (2004) (equitable subrogation framework; primary vs secondary liability)
- State Automobile Mutual Insurance Co. v. Habitat Construction Co., 377 Ill. App. 3d 281 (2007) (horizontal exhaustion doctrine and excess/primary interplay)