John Deere Insurance Co. v. Allstate Insurance Co.

THIRD DIVISION
July 29, 1998
(NUNC PRO TUNC as of June 30, 1998)



No. 1--97--2904

JOHN DEERE INSURANCE COMPANY, ) Appeal from the
) Circuit Court of
Plaintiff-Appellant, ) Cook County.
)
v. )
)
ALLSTATE INSURANCE COMPANY, JOHN G. )
THOMAS and MARK E. GOSSETT, )
)
Defendants-Appellees. )
________________________________________)
)
ALLSTATE INSURANCE COMPANY and JOHN G. )
THOMAS, )
)
Counterplaintiffs-Appellees, )
)
v. )
)
JOHN DEERE INSURANCE COMPANY, )
)
Counterdefendant-Appellant. )
________________________________________)
)
MARK E. GOSSETT, )
)
Counterplaintiff-Appellee, )
)
v. )
)
JOHN DEERE INSURANCE COMPANY, ALLSTATE )
INSURANCE COMPANY and JOHN G. THOMAS, ) Honorable
) Albert Green,
Counterdefendants-Appellants. ) Judge Presiding.

JUSTICE BURKE delivered the opinion of the court:

Plaintiff John Deere Insurance Company (John Deere) appeals
from an order of the circuit court denying its motion for summary
judgment and granting defendants, Allstate Insurance Company's
(Allstate), John Thomas' (Thomas) and Mark Gossett's (Gossett)
cross-motions for summary judgment in John Deere's declaratory
judgment action to determine whether it had an obligation to defend
or indemnify Thomas, Allstate's insured, in an underlying action
filed by Gossett against Thomas, for injuries Gossett allegedly
suffered as a result of being struck by an automobile driven by
Thomas. On appeal, John Deere contends that: (1) Thomas was not an
insured under the terms of a garage insurance policy issued by John
Deere (John Deere policy) to Rock River Ford, Inc. (Rock River
Ford), an automobile dealership; (2) Illinois law does not require
automobile dealers to provide liability insurance coverage to
permissive users of their insured automobiles; and (3) even if
Thomas was an insured under the John Deere policy, the liability
coverage under the policy was limited to the "$20,000/$40,000"
mandatory minimum limits set forth in sections 7--203 and 7--601 of
the Illinois Vehicle Code. 625 ILCS 5/7--203, 5/7--601 (West
1993). For the reasons set forth below, we affirm.
On August 9, 1995, Rock River Ford gave Thomas, its customer,
permission to test drive one of its automobiles, during which time
Thomas allegedly struck and injured Gossett, a pedestrian. On the
day of the accident, Rock River Ford was insured under the John
Deere policy. Rock River Ford had previously referred to this
policy in a certificate of insurance which was attached to its 1994
application to the Secretary of State for a new and used car
dealers' license for the year ending December 31, 1995. In the
certificate, Rock River Ford specifically stated that the policy
included garage liability limits in the amount of $500,000 per
accident. In fact, section IV of the John Deere Policy, entitled
"GARAGE LIABILITY LIMITS/COVERAGES," provided that "each 'accident'
" related to "garage operations" would be covered in the amount of
$500,000. Under the John Deere policy issued to Rock River Ford,
an "insured" was defined as follows:
"WHO IS AN INSURED
a. The following are 'insureds' for covered
'autos':
(1) You for any covered 'auto.'
(2) Anyone else while using with your
permission a covered 'auto' you own ***
except:
***
(d) Your customers, if your
business is shown in the
Declarations as an 'auto'
dealership. However, if a customer
of yours:
(i) Has no other available
insurance (whether primary,
excess, or contingent), they
are an 'insured' but only up to
the compulsory or financial
responsibility law limits where
the covered 'auto' is
principally garaged.
(ii) Has other available
insurance (whether primary,
excess, or contingent) less
than the compulsory or
financial responsibility law
limits where the covered 'auto'
is principally garaged, they
are an 'insured' only for the
amount by which the compulsory
or financial responsibility law
limits exceed the limit of
their other insurance."
Thomas was also personally covered at the time of the alleged
accident by a separate automobile liability insurance policy issued
to him by Allstate (Allstate policy) that had liability limits of
$50,000 per person and $100,000 per occurrence. The Allstate
policy defined an "insured auto" as, inter alia, a "non-owned
private passenger auto used by you or a resident relative with the
owner's permission. This auto must not be available or furnished
for the regular use of an insured person." The Allstate policy
further provided:
"If There Is Other Insurance
If an insured person is using a substitute
private passenger auto or non-owned auto, our
liability insurance will be excess over other
collectible insurance. If more than one
policy applies on a primary basis to an
accident involving your insured auto, we will
bear our proportionate share with other
collectible liability insurance."
After the alleged accident, Gossett filed a complaint against
Thomas in the circuit court of Winnebago County, Illinois (Gossett
lawsuit). Allstate informed John Deere that it expected John Deere
to provide Thomas with liability insurance coverage. John Deere
responded that it was denying coverage to Thomas because Thomas did
not qualify as an insured under the "WHO IS AN INSURED" provision
in the John Deere policy.
On April 30, 1996, John Deere filed a complaint for declaratory
judgment in the circuit court of Cook County, arguing that Thomas
was not insured under the John Deere policy because he had his own
insurance policy from Allstate with sufficient limits to comply with
Illinois law. John Deere also pled in the alternative that if the
trial court should find that Thomas was an insured under its policy,
the maximum liability coverage available to him was at least $20,000
per person for death or bodily injury and $40,000 per accident for
death or bodily injury--the mandatory minimum limits as required by
the Illinois Motor Vehicle Code (625 ILCS 5/7--203, 5/7--601 (West
1993))--and not the greater limit of $500,000 contracted for by Rock
River Ford under the policy issued to it.
On August 20, 1996, Allstate and Thomas filed a joint
counterclaim for declaratory judgment, arguing that: (1) Thomas was
an insured under the John Deere policy and, therefore, the John
Deere policy provided primary coverage to Thomas for any liability
he may have incurred while test driving the vehicle owned by Rock
River Ford; (2) the Allstate policy provided excess coverage to
Thomas under the same factual circumstances; and (3) an escape
clause contained in the John Deere policy, which provided that John
Deere's coverage does not apply when a customer has other insurance
in an amount equal to what is required by Illinois' mandatory
insurance law, was unenforceable. On September 19, 1996, Gossett
filed a counterclaim for declaratory judgment, arguing that the John
Deere policy provided a liability limit in the amount of $500,000,
the Allstate policy provided a liability limit in the amount of
$50,000, and the escape clause in the John Deere policy was
unenforceable.
On April 25, 1997, John Deere, Allstate, Thomas and Gossett
filed cross-motions for summary judgment. On June 19, 1997, the
trial court denied John Deere's cross-motion for summary judgment
and granted Allstate's, Thomas' and Gossett's motions for summary
judgment. The trial court specifically found that Thomas was an
insured under the John Deere policy, the John Deere policy provided
primary coverage to Thomas in the amount of $500,000, the Allstate
policy provided excess coverage to Thomas in the amount of $50,000
and the John Deere policy contained an unenforceable escape clause.
This appeal followed.
On April 22, 1998, Allstate and Thomas filed a motion in this
court for leave to cite additional authority, which we granted. In
the motion, Allstate and Thomas argued that our supreme court's
decision in State Farm Mutual Automobile Insurance Co. v. Universal
Underwriters Group, No. 82837 (April 16, 1998), "directly addresses"
the issue of whether the John Deere policy provided coverage for
permissive users of automobiles owned by car dealerships. The State
Farm court held that the Illinois Vehicle Code mandates that garage
insurance policies contain an omnibus clause that provides primary
coverage "insuring those driving a vehicle with the owner's
permission." State Farm, slip op. at 3.
During oral arguments before this court on April 29, 1998, John
Deere acknowledged that "in light of the State Farm holding," it
owed Thomas a "full and unequivocal defense in the Gossett lawsuit."
Because John Deere's concession has mooted its first two arguments
on appeal--that Thomas is not an insured under the terms of the John
Deere policy and Illinois law does not require automobile dealers
to provide coverage to permissive users of their insured autos--we
need only address John Deere's argument regarding the amount of
coverage pursuant to the policy issued to Rock River Ford.
John Deere contends that even though Thomas is an insured under
the policy, the amount of liability coverage, as "contemplated by
the terms of the John Deere policy" and as set forth in the Illinois
Motor Vehicle Code (625 ILCS 5/7--203, 5/7--601 (West 1993)), should
be "capped" at "$20,000/$40,000" with respect to the Gossett
lawsuit. Allstate, Thomas and Gossett contend that because the John
Deere policy clearly provides liability coverage of $500,000 per
accident for garage operations in excess of the mandatory
$20,000/$40,000 requirement of the Code, John Deere and Rock River
Ford are "bound to these higher limits."
Gossett specifically argues that John Deere s assertion "that
the maximum exposure of John Deere is $20,000 or $100,000" is
contrary to the certificate of insurance John Deere filed with the
Secretary of State by which it intended to convince the Secretary
of State that Rock River had 'all' Rock River automobiles covered
and that the coverage 'exceeded' the minimum requirements" of
$100,000 for bodily injury to, or death of, any person and $300,000
for bodily injury to, or death of, two or more persons in any one
accident, as set forth in section 5--101(b)(6) of the Code (625 ILCS
5/5--101(b)(6) (West 1993)). John Deere counters that its
certificate of insurance is "merely" proof that Rock River procured
a general liability insurance policy and that the "liability limits
covering the location where Rock River was doing business was
$500,000." (Emphasis in original.) According to John Deere, the
certificate of insurance "neither affirmatively nor negatively
modifies the coverages afforded by the John Deere policy," and there
is "absolutely nothing contained in the certificate *** that
addresses what coverage, if any, is afforded permissive users of
Rock River's vehicles." (Emphasis added.)
"The interpretation of an insurance policy is a question of law
properly decided on a motion for summary judgment." Steinberg v.
Universal Underwriters Insurance Co., 272 Ill. App. 3d 79, 81, 650 N.E.2d 14 (1995). If the terms of an insurance policy are
ambiguous, it must be construed in favor of the insured; however,
if the terms are unambiguous, there is no need for construction, and
the policy will be enforced as written unless it contravenes public
policy. Illinois Farmers Insurance Co. v. Cisco ex rel. Estate of
Cisco, 278 Ill. App. 3d 1022, 1025, 664 N.E.2d 235 (1996). Review
of an order granting summary judgment is de novo. State Farm Mutual
Auto Insurance Co. v. Universal Underwriters Group, 285 Ill. App.
3d 115, 120, 674 N.E.2d 52 (1996). "Summary judgment is appropriate
when there are no genuine issues of material fact and the moving
party is entitled to judgment as a matter of law." Outboard Marine
Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102, 607 N.E.2d 1204 (1992).
The Illinois Vehicle Code (Code) requires that owners of motor
vehicles acquire liability insurance covering a vehicle in an amount
"no less than the minimum amounts set forth *** under sections 7-203
of this Code." 625 ILCS 5/7--601(a) (West 1993). Section 7--203
of the Code provides that the mandatory minimum limits of liability
insurance for motor vehicles shall be in the amount of not less than
$20,000 for the death or injury of any one person in any one
accident, and $40,000 for the death or injury of two or more persons
in any one accident. 626 ILCS 5/7--203 (West 1993).
Section 5--101(b)(6) of the Code applicable to new vehicle
dealers (the Illinois New Car Dealers Licensing Act), requires:
"A statement that the applicant has
complied with the appropriate liability
requirement. A Certificate of Insurance ***
shall be included with each application covering
each location at which he proposes to act as a
new vehicle dealer. The policy [of insurance]
must provide liability coverage in the minimum
amounts of $100,000 for bodily injury to, or
death of, any person, $300,000 for bodily injury
to, or death of, two or more persons in any one
accident, ***." 625 ILCS 5/5--101(b)(6) (West
1993).
The Illinois Used Car Dealers Licensing Act contains an identical
provision to that in the Illinois New Car Dealers Licensing Act.
(625 ILCS 5/5--102(b)(4) (West 1993)). Section 7--317 of the Code
states that a vehicle owner's liability insurance policy:
"1. Shall designate by explicit description
or by appropriate reference, all motor vehicles
with respect to which coverage is thereby
intended to be granted;
2. Shall insure the person named therein
and any other person using or responsible for
the use of such motor vehicle or vehicles with
the express or implied permission of the
insured[.]" 625 ILCS 5/7--317(b)(1), (b)(2)
(West 1993).
A plain reading of these Code sections reveal that the
legislature intended that the amount of liability insurance which
must be carried on a particular automobile is not determined by the
operator of the automobile but, rather, the automobile itself.
Therefore, the amount of liability insurance required by the Code
for an automobile should not change according to the identity of the
person who is driving the automobile at the time an accident occurs.
See State Farm, slip op. at 3 (holding that "pursuant to custom in
the insurance industry, primary liability is generally placed on the
insurer of the owner of an automobile rather than on the insurer of
the operator.) (Emphasis added.) To hold otherwise would defeat
the public policy considerations that motivated the enactment of the
New and Used Car Dealers Licensing Acts, which mandate that
automobile dealerships "must provide liability coverage in the
minimum amounts" of $100,000/$300,000 (625 ILCS 5/5--101(b)(6), 5--
102(b)(4) (West 1993)), because such a holding would illogically
mandate a higher limit of liability coverage when an automobile
dealership's employee is driving the insured automobile as an agent
of the dealership, yet would not apply to the customer of the
dealership permissively test driving the same automobile. We
therefore hold that the Act was intended to apply to
customers/permissive users like Thomas who expose the public to a
risk when they test drive vehicles, while at the same time perform
acts that serve to increase the commercial success of the
dealership. See State Farm, 285 Ill. App. 3d at 120-21 (holding
that the purpose of the Act is the protection of the public, and "by
permitting customers to test drive its vehicles, the car dealer
receives a vital benefit to the success of its business, i.e., an
exponential increase in the probability the permitted user will
actually purchase the test-driven vehicle"). See also Hertz Corp.
v. Garrott, 238 Ill. App. 3d 231, 239, 606 N.E.2d 219 (1992), where
a rental car company rented a vehicle to a person who was involved
in an accident with a third party. The rental agreement provided
liability coverage limits of $100,000 per person, and $300,000 per
accident, whereas the mandatory insurance requirements for rental
cars was $50,000 under the Code. The Hertz court rejected the car
rental company's argument that its obligation to indemnify third
parties was limited to the $50,000 amount required by statute and
not the higher limits provided in its rental agreement, and held
that the statute "in no way define[d] the scope of the obligation
that may be assumed by the rental agency by separate agreement," and
that if the rental company "wanted to provide liability protection
at a level that would merely satisfy the minimum requirement under
the statute, it was free to have done so in the contract." Hertz,
238 Ill. App. 3d at 239.
We briefly note that John Deere's reliance on Steinberg, in
support of its assertion that there is "ample authority" for this
court to hold that it is only liable for "$20,000/$40,000" coverage
under its policy, is misplaced. After the Steinberg court held
that the permissive driver who had his own insurance coverage in
compliance with the minimum requirements of the Code was not "an
insured" under the automobile dealership's garage policy, it
commented in dicta that, had it found coverage under the garage
policy, it would have found that the limits of such coverage were
$20,000/40,000 pursuant to section 7--601 of the Code, and not
$100,000/300,000 pursuant to section 5--101(b) of the Code.
Steinberg, 272 Ill. App. 3d at 83-84. We note, however, that any
statement contained in a judicial opinion which is not essential to
the disposition of the case or logically necessary to the rationale
for the disposition, is not authoritative. Geer v. Kadera, 173 Ill. 2d 398, 414, 671 N.E.2d 692 (1996).
In light of the Act's requirement that automobile dealerships
provide liability coverage of at least $100,000/$300,000 for their
automobiles (625 ILCS 5/5--101(b)(6), 5--102(b)(4) (West 1993)), and
our supreme court's holding in State Farm that "a liability
insurance policy issued to the owner of a vehicle must cover the
named insured and any other person using the vehicle with the named
insured's permission" (State Farm, slip op. at 3), we reject the
dicta in Steinberg, and hold that the limit of the John Deere policy
was at least $100,000/$300,000. Moreover, because Rock River
determined that garage coverage would meet or exceed the
$100,000/$300,000 coverage required by section 5--101(b), and
specifically represented in its certificate of insurance that it had
procured $500,000 in garage coverage, we do not accept John Deere's
present attempt to limit its liability coverage amount in the
Gossett lawsuit to either $100,000 as required by section 5--101(b)
or $20,000 as required by section 7--601(a) of the Code for bodily
injury sustained by a person involved in an accident. Because Rock
River obligated itself to a $500,000 limit in its certificate of
insurance, which it was required to file with the Secretary of State
pursuant to section 5--101(b) of the Code, it cannot now be heard
to deny the coverage amount it contracted for to limit the same to
either $20,000 or $100,000.
For the reasons stated, the judgment of the circuit court is
affirmed.
Affirmed.
LEAVITT, P.J., and GORDON, J., concur.