Country Preferred Ins. Co. v. Whitehead (Ill. App. Ct. 3d Dist., Aug. 30, 2011)
The policyholder, an Illinois resident, was involved in a motor vehicle accident with an underinsured driver in Wisconsin. The subject Illinois policy provided that uninsured motorist coverage claims were to be decided by arbitration and that the arbitration must be demanded within two years from the date of the accident.
The policyholder retained counsel, who communicated his representation of the policyholder on her underinsured claim before the two-year limitations period lapsed but failed to demand arbitration within that timeframe. After the limitations period expired, the insurer commenced a declaratory judgment action, arguing that the policyholder was barred from making her UM claim because she failed to make a written demand for arbitration within two years of the accident date. The majority observed that the public policy behind the Illinois UM statute was to place the injured party in substantially the same position he would have been in if the uninsured driver had been insured. Thus, an insurance policy violates Illinois public policy when it places an injured party in a substantially different position than if the tortfeasor had carried insurance. Because the two-year limitations period effectively shortened the applicable three-year Wisconsin statute of limitations from three years to two years, placing the policyholder in a “substantially different” position than if the other driver had been insured (i.e., if the driver of the other vehicle had been insured, the Country Preferred insured could have brought her personal injury action against him in Wisconsin, and a three-year statute of limitations would apply), it violated public policy