Universal Underwriters Insurance Company does not have to pay hundreds of thousands of dollars on an under-insured claim, according to a recent appellate court order.

A panel of Fifth District Appellate Court justices has upheld a decision made by Madison County Associate Judge Clarence Harrison who granted summary judgment for the insurer in an auto accident case.

The case arose from a rear-end collision, where plaintiff David Knebel was the passenger in a car owned by Ron Ward.

Carol Spafford was driving Ward's car, and Kayla Hoffman rear-ended them. The order does not provide background information on the accident.

Hoffman was insured by State Farm Mutual Automobile Insurance Company with a liability policy limit of $50,000 per person or $100,000 per accident.

State Farm settled with Knebel for $50,000.

Knebel subsequently filed a complaint against Ward's car insurance carrier, Universal Underwriters Insurance Co., seeking declaratory judgment, arguing that the insurance company must provide Knebel with under-insured benefits.

State Farm also filed a counterclaim against Universal Underwriters asking the court to interpret the Universal Underwriters' policy to provide Knebel with $500,000 in underinsured-motorist coverage.

State Farm's main argument was that Universal Underwriters' "step down" policy provision was ambiguous and violated Illinois law and public policy.

However, Harrison denied the motions filed by Knebel and State Farm. He found that the policy was not ambiguous or violated public policy, and that plaintiff was not an underinsured motorist.

In an appeal, Knebel and State Farm sought to reverse the circuit court's summary judgment in favor of Universal Underwriters.

Justice Bruce Stewart, who delivered the order of the court, agreed with Harrison. Justice James Donovan and Stephen Spomer concurred in the Rule 23 decision.

In making the decision, Stewart looked to language in section 5-101 (b) (6) and 5-102(b) (4) of the Vehicle Code and found that "had the legislature intended to increase the minimum uninsured- and underinsured-motorist coverage in a dealer's garage policy, it would have done so with specific language."

During the time, Ward's car was insured under Universal Underwriters' "Garage Operations and Auto Hazard" policy.

Under the step down provision in Universal Underwriters policy, the limit for "non-designated" individuals was $20,000/$40,000.

Universal Underwriters argued that the designated individuals have a limit of $500,000, but that Knebel and Spafford were non-designated individuals.

State Farm argued that the step down provision violates public policy, which requires a minimum liability limit of $100,000/$300,000 for dealership garage policies.

"There is no public policy that requires a dealer's garage policy to provide permissive occupants more than the statutory minimum coverage for underinsured-motorist coverage," Stewart said in the order.

Stewart added that there was no statutory provision in the Vehicle Code or the Insurance Code that prohibited the step-down provisions in the dealer's garage policy.

"The step down provision provides certain named individuals with $500,000 in uninsured/underinsured motorist coverage," Stewart said, adding that the non-designated individuals are not excluded from the policy but instead provided with the statutory minimum coverage.

It wasn't until nine months after the accident that legislation went into effect requiring that the same level of coverage had to be the same for non-designated users, therefore, Stewart said Universal Underwriters' step down provision did not violate Illinois public policy at the time of the accident.

"In the present case, we agree with the circuit court that Universal Underwriters policy is not ambiguous, vague or conflicting," Stewart said.

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