In A Contract, An Ambiguous Term is Construed Against the Drafter
Diane Stagg purchased an automobile insurance policy from American Family Mutual Insurance (American Family) which included an arbitration clause in the uninsured motorist provision. Stagg was injured in an automobile accident and collected the maximum $25,000 under the policy’s at-fault driver liability allowance. Subsequently, Stagg invoked her underinsured motorist coverage and demanded arbitration as provided for in the policy. The arbitration process awarded Stagg $36,340.75, however it was set off $25,000 for what had already been paid under the at-fault provision and $5,000 for what American Family has already paid in medical expenses.
Under Illinois law, if an award is for less than $20,000 the party does not have a right to a trial de novo. However, if the amount exceeds $20,000 the party has a right to trial de novo. Because Stagg did not dispute the arbitration decision, American family filed a motion for summary judgment to enforce the arbitration award. Stagg followed with a motion to dismiss on the basis that there was a contractual issue in the case and that she was entitled to a trial de novo. The circuit court granted Stagg’s motion to dismiss. American Family appealed from the circuit court’s order.
American family argued that the arbitration award was in compliance with the law and therefore Stagg was bound by the decision and did not have a right to a trial de novo. The term “arbitration award” was not defined in the insurance policy. Therefore, because it could be construed to have more than one reasonable interpretation, it is ambiguous. An ambiguous term is construed against the drafter and therefore favors Stagg’s interpretation of the meaning of the term which is that the award consists of the amount before setoffs which exceeded the minimum prescribed by Illinois law. Because the amount exceeds the minimum, Stagg is entitled to a trial de novo.
American Family Mut. Ins. Co. v. Stagg. 393 Ill.App.3d 619, 912 N.E.2d 1283 Ill.App. 5 Dist.,2009.
