This case involves the interplay between an umbrella insurance policy and a contract for pooled self-insurance. The trial court found enforceable a clause in the umbrella policy that made its coverage apply only after exhaustion of the limits of all applicable "insurance and self insurance."
The appellate court considered a somewhat similar conflict in Illinois Emcasco Insurance Co. v. Continental Casualty Co., 139 Ill. App. 3d 130 (1985), which also involved an automobile accident.
But the Association's contract is not an insurance policy. In Antiporek v. Village of Hillside, 114 Ill. 2d 246 (1986), our supreme court held that a contract like the Association's contract with Lynwood "is pooled self-insurance, through formal agreement, of governmental entities which share the risks and costs of civil liabilities." Antiporek, 114 Ill. 2d at 251.
Lynwood and other participating municipalities form "a risk-management pool in which only Illinois municipalities may participate." Antiporek, 114 Ill. 2d at 247-48. The Antiporek court held that municipalities that participate in such risk-management pools do not waive municipal immunities from liability. Antiporek, 114 Ill. 2d at 250-52.
The Association argues that this court should not apply the reasoning of Emcasco here because (1) the Association's contract with Lynwood does not qualify as "other insurance and self insurance" within the meaning of State Farm's policy, and (2) even if the contract could qualify as self-insurance, the court should, on grounds of public policy, refuse to enforce that clause and instead permit the municipality to recover from State Farm.
We construe the umbrella policy to provide insurance coverage only when the loss exceeded available limits of insurance and self-insurance, including pooled self-insurance.