NO. 4-05-0594
IN THE APPELLATE COURT
OF ILLINOIS
FOURTH DISTRICT
PEKIN INSURANCE COMPANY, ) Appeal from
Plaintiff-Appellant, ) Circuit Court of
v. ) Livingston County
ANTHONY J. HIERA, ) No. 04MR165
Defendant-Appellee. )
) Honorable
) Harold J. Frobish,
) Judge Presiding.
_________________________________________________________________
JUSTICE COOK delivered the opinion of the court:
Plaintiff, Pekin Insurance Company, sought a declaratory judgment of its rights and obligations as to defendant,Anthony J. Hiera, who is seeking uninsured-motorist (UM) coverageunder a policy issued by plaintiff for injuries he allegedlyreceived in an automobile accident. Defendant moved to compelimmediate arbitration and plaintiff objected. The trial courtgranted defendant's motion and plaintiff appeals. We affirm.
I. BACKGROUND
On October 4, 2002, defendant was injured in a motorvehicle collision caused by a UM. The collision occurred whiledefendant was operating his vehicle in the course and scope ofhis employment. At the time of the accident, defendant and hisvehicle were insured by plaintiff, which provided UM coverage inthe amount of $1 million. Defendant filed a claim with plaintiffunder the UM coverage of its policy. Defendant also filed aclaim for workers' compensation benefits, which was still pendingat the time of the trial court's decision in this case.
After defendant made a demand upon plaintiff forarbitration of his UM claims, plaintiff sought a declaratoryjudgment from the trial court stating that it was not liableunder its policy of insurance for any elements of defendant'sloss for which he has been or will be compensated in workers'compensation benefits. Plaintiff also sought a stay of UMarbitration until defendant's proceedings before the IllinoisWorkers' Compensation Commission have been resolved. Defendantmoved to compel immediate arbitration of his UM claim. The courtfound that plaintiff is entitled to a setoff for any element ofdefendant's loss that has been paid for and which is payable byworkers' compensation benefits. The court then granted defendant's motion to proceed with arbitration within a reasonableperiod of time. Plaintiff appeals the order denying its motionto stay the UM arbitration.
II. ANALYSIS
A. Standard of Review
Initially, the parties disagree as to the properstandard of review. An order granting a motion to compel arbitration is considered an order granting injunctive relief and,when appealed, is treated as an interlocutory appeal governed bySupreme Court Rule 307(a)(1) (134 Ill. 2d R. 307(a)(1)). MenardCounty Housing Authority v. Johnco Construction, Inc., 341 Ill.App. 3d 460, 463, 793 N.E.2d 221, 224 (2003).
Defendant argues that an abuse-of-discretion standardis appropriate in reviewing a motion to compel arbitration,citing Schroeder Murchie Laya Associates, Ltd. v. 1000 WestLofts, LLC, 319 Ill. App. 3d 1089, 1094, 746 N.E.2d 294, 298-99(2001), and Bishop v. We Care Hair Development Corp., 316 Ill.App. 3d 1182, 1189, 738 N.E.2d 610, 616 (2000). Generally, thestandard of review for an interlocutory appeal is whether thetrial court abused its discretion. See Schroeder, 319 Ill. App.3d at 1094, 746 N.E.2d at 298-99; Menard County Housing Authority, 341 Ill. App. 3d at 463, 793 N.E.2d at 224. Plaintiff,citing Cohen v. Blockbuster Entertainment, Inc., 351 Ill. App. 3d772, 776-77, 814 N.E.2d 933, 936-37 (2004), argues that a de novostandard of review is more appropriate in this case as the trialconducted no evidentiary hearing and the facts relevant toarbitrability are undisputed.
In both Schroeder and Bishop, the trial courts lookedat the actions of the parties to determine whether the partieswaived their contractual rights to arbitration. Schroeder, 319Ill. App. 3d at 1095-99, 746 N.E.2d at 299-302; Bishop, 316 Ill.App. 3d at 1191-94, 738 N.E.2d at 617-19. In Cohen, the trialcourt denied defendant's motion to compel arbitration, findingthe arbitration clause was invalid because it provided an illusory remedy. Cohen, 351 Ill. App. 3d at 776, 814 N.E.2d at 936. On appeal, the Cohen court held that the defendant failed to showthat the plaintiffs alleged any claims that would implicate thedefendant's arbitration agreement; thus the court affirmed thedenial of the motion to compel arbitration. Cohen, 351 Ill. App.3d at 777, 814 N.E.2d at 937.
In this case, both plaintiff and defendant agree thatarbitration is appropriate. The issue is whether arbitrationshould start immediately or whether arbitration should startafter the workers' compensation hearing. The trial court did nothave to hold any evidentiary hearings or review any disputedfacts regarding arbitrability. This case is, therefore, analogous to Cohen. A de novo standard of review is appropriate. (Even if we were to review this case under an abuse-of-discretionstandard of review, the result would be the same.)
B. Timing of Arbitration
Plaintiff argues that arbitration with defendant wouldbe premature until the workers' compensation claim is resolved asthe amount of the workers' compensation award will determine theamount of the setoff to which plaintiff is entitled. Temporarilydelaying the arbitration, plaintiff contends, will promote theorderly administration of justice and judicial economy because(1) the amount of plaintiff's potential liability is unknown and(2) the resolution of the workers' compensation claim may resultin plaintiff not being liable at all if the workers' compensationclaim exceeds the UM policy limits. Finally, plaintiff arguesforcing arbitration before determining the amount of the setoffwill result in prejudice to plaintiff as it may later be unableto recover the setoff amount if it does not assert the right tothat amount during the arbitration.
Defendant argues the terms of the insurance contract donot provide for a stay of UM arbitration until the workers'compensation claims are resolved. Further, the contract providesthat if plaintiff makes any payment and defendant recovers fromanother party, defendant must "hold the proceeds in trust" forplaintiff and pay plaintiff back the amount it paid. Finally,defendant argues arbitration is designed to speed the resolutionof disputed issues, and forcing the parties to wait to arbitrateuntil the workers' compensation claim is determined will frustrate the "speedy" purpose of arbitration.
A primary purpose of an arbitration agreement is to"enable the parties to secure a speedy determination of thedifferences between them without conforming to the strict formalities necessary in a court of law." Wilhelm v. Universal Underwriters Insurance Co., 60 Ill. App. 3d 894, 899, 377 N.E.2d 62,66 (1978). Staying arbitration will thwart this purpose anddelay the payment of defendant's claim, but plaintiff requeststhat this court ignore the speedy-determination purpose ofarbitration for the sake of the orderly administration of justiceand judicial economy.
Plaintiff acknowledges that arbitration is appropriateas long as the workers' compensation award does not exceed thepolicy's $1 million UM limit. Arbitration will be necessary,therefore, unless defendant's workers' compensation award meetsor exceeds the UM limit. While the orderly administration ofjustice and judicial economy may in some circumstances call forstay of certain judicial proceedings, a stay is not appropriateunder the facts of this case. Defendant's right to a speedydetermination of his UM claim is more compelling than the possibility of saving the parties from an unnecessary arbitration.
Additionally, plaintiff argues that compelling arbitration immediately may prevent plaintiff from later recovering asetoff in the amount of the workers' compensation award. Plaintiff argues insurers are not permitted to question arbitrationawards after the arbitration on the issue of a setoff. See Colev. Inland National Insurance Co., 133 Ill. App. 2d 745, 748, 273N.E.2d 65, 68 (1971) (insurer was not entitled to a setoff forthe medical payment it made to the insured prior to arbitrationas insurer failed to make a claim in arbitration for a setoff);Zimmerman v. Illinois Farmers Insurance Co., 317 Ill. App. 3d360, 368, 739 N.E.2d 990, 996 (2000) (insurer was not entitled toreduce an arbitration award by the amount an underinsured motorist paid to the insured because the arbitrator's award was clearon its face and did not mention a setoff).
In Cole and Zimmerman, the arbitration award did notmention a setoff amount even though the specific setoff amountswere known prior to arbitration. The courts concluded thateither the arbitration award already accounted for the setoffamount or the insurer failed to claim the setoff amount inarbitration and waived its right to the setoff. Cole, 133 Ill.App. 2d at 748, 273 N.E.2d at 68; Zimmerman, 317 Ill. App. 3d at368, 739 N.E.2d at 996. This case is different from Cole andZimmerman because a setoff amount is not known prior to arbitration, so the arbitrators' award will clearly not account for aspecific setoff amount. Further, plaintiff cannot waive itsright to the specific setoff amount as that amount will beunknown at the time of arbitration. Finally, plaintiff canpresent evidence at the arbitration that it is entitled to asetoff and the arbitration award could later be reduced by theamount of the workers' compensation award. In Laatz v. Intergovernmental Risk Management Agency, 336 Ill. App. 3d 863, 866, 784N.E.2d 877, 879 (2003), the court addressed whether a UM arbitration award could be reduced after it was issued by the amount theinsured recovered in a workers' compensation claim. The Laatzcourt agreed that "any arbitration award to plaintiff would bereduced by the total amount of worker's compensation paymentsplaintiff had received, including any received after the hearingwas conducted." Laatz, 336 Ill. App. 3d at 866, 784 N.E.2d at879.
Defendant agrees that the UM policy provides that if herecovers from his workers' compensation case after the UM arbitration, he must hold in trust the amount he receives for theworkers' compensation case and then pay plaintiff that amount. This allows defendant to use the arbitration award immediatelyand ensures that plaintiff will receive the setoff amount shoulddefendant recover anything in workers' compensation. The ordercompelling arbitration was, therefore, appropriate.
III. CONCLUSION
For the reasons stated, we affirm the trial court'sjudgment.
Affirmed.
STEIGMANN and APPLETON, JJ., concur.