State arm Mutual Automobile Insurance Co. v. Universal Underwriters Group

Annotate this Case
No. 2--95--1360




STATE FARM MUTUAL AUTOMOBILE ) Appeal from the Circuit Court
INSURANCE COMPANY, as Subrogee ) of Du Page County.
of Rodney Luckhart, )
Plaintiff-Appellee, ) No. 95--AR--0161
v. )
Defendant-Appellant )
(Joyce Pontiac GMC, Jeep-Eagle )
and Toyota, Inc., assumed name ) Honorable
of Northern Illinois Auto ) Joseph S. Bongiorno,
Center, Defendant). ) Judge, Presiding.

JUSTICE HUTCHINSON delivered the opinion of the court:

Plaintiff, State Farm Mutual Automobile Insurance Company
(State Farm), as subrogee of Rodney Luckhart, commenced this action
by filing a complaint for breach of contract against defendants,
Joyce Pontiac GMC, Jeep-Eagle, and Toyota, Inc. (Joyce Pontiac GMC)
and Universal Underwriters Group (Universal). Plaintiff seeks
recovery of $9,092.15 it paid out for claims made against its
insured, Rodney Luckhart.
At issue in this insurance coverage dispute is whether
Steinberg v. Universal Underwriters Insurance Co., 272 Ill. App. 3d
79 (4th Dist. 1995) (holding that a permissive user with personal
insurance coverage in compliance with the minimum limits of the
Illinois Vehicle Code (Code) (625 ILCS 5/1--100 et seq. (West
1994)) is not "an INSURED" under a car dealer's garage policy) or
Madison Mutual Insurance Co. v. Universal Underwriters Group, 251
Ill. App. 3d 13 (5th Dist. 1993) (holding that a permissive user
with or without personal insurance coverage in compliance with the
minimum limits of the Code is "an INSURED" under a car dealer's
garage policy) is the better approach in dealing with the issue of
whether a test driver/permitted user is "an INSURED" under a car
dealer's garage policy.
Plaintiff's complaint alleges the following in a single count.
On March 29, 1994, Rodney Luckhart was the test driver of a 1994
Jeep Cherokee owned by defendant, Joyce Pontiac GMC. While
proceeding eastbound on 75th Street in Naperville, Luckhart rear
ended an automobile owned by Vivian Carter and operated by Raun
Calinee. Both parties suffered injuries, and the automobile was
damaged. At the time of the accident, Mr. Luckhart was insured by
State Farm under a personal auto policy. Joyce Pontiac GMC was
insured by Universal. Vivian Carter and Raun Calinee made demands
upon State Farm for their claims. State Farm settled the Carter
and Calinee claims for $9,092.15.
State Farm, as subrogee of Rodney Luckhart, then brought this
breach of contract action alleging Universal had failed and refused
to pay, according to its contracted-for policy obligations, the
claims arising out of the March 29, 1994, automobile accident.
State Farm's complaint alleged Luckhart, its subrogee, was entitled
to coverage under the Universal policy. As the operator of a
vehicle in Illinois with the permission of its owner, Luckhart was
a person "required by law to be an INSURED" while driving that
vehicle. Therefore, Luckhart fit the definition of "an INSURED"
within the meaning of that insuring agreement. Relying upon the
decision in Madison Mutual, the complaint further asserted that the
Universal policy afforded primary coverage for the accident.
Relying on Steinberg, Universal contended (1) that Rodney
Luckhart was not a person "required by law to be an INSURED" under
its policy; and (2) that, if Luckhart were "an INSURED,"
Universal's coverage would be only the amount necessary to provide
Luckhart with $20,000 per person/$40,000 per accident limits which
Luckhart already possessed from State Farm, and, therefore,
Universal owed no coverage to Luckhart.
The trial court granted plaintiff's motion for summary
judgment and denied Universal's motion for summary judgment,
finding Madison Mutual to be older and more persuasive than
Steinberg. The trial court also determined that the Universal
policy is primary, whereas the State Farm policy is excess.
Judgment was entered in plaintiff's favor in the amount of
$9,092.15. Defendant's motion for reconsideration was denied.
This timely appeal follows.
On appeal, defendant argues that the trial court erred in
finding for plaintiff and holding that Rodney Luckhart is "an
INSURED" under Universal's garage policy definition No. 3 of "WHO
IS AN INSURED" and pursuant to the relevant provisions of the Code.
We disagree and we affirm.
The relevant portion of Universal's garage policy states:
"INSURING AGREEMENT - WE will pay all sums the INSURED legally
must pay as damages (including punitive damages where
insurable by law) because of INJURY to which this insurance
applies caused by an OCCURRENCE arising out of GARAGE
* * *
'AUTO HAZARD' means the ownership, maintenance, or use of any
AUTO YOU own or which is in YOUR care, custody or control and:
(1) used for the purpose of GARAGE OPERATIONS or
(2) used principally in GARAGE OPERATIONS with occasional use
for other business or non-business purposes or
(3) furnished for the use of any person or organization.
* * *
With respect to the AUTO HAZARD:
(1) YOU;
(2) Any of YOUR partners, paid employees, directors,
stockholders, executive officers, a member of their household
or a member of YOUR household, while using an AUTO covered by
this Coverage Part, or when legally responsible for its use.
The actual use of the AUTO must be by YOU or within the scope
of YOUR permission;
(3) Any other person or organization required by law to be an
INSURED while using an AUTO covered by this Coverage Part
within the scope of YOUR permission."
We will begin with a discussion of the relevant statutes and
statutory construction.
The mandatory insurance provision of the Code states:
"Required liability insurance policy. (a) No person
shall operate, register or maintain registration of, and no
owner shall permit another person to operate, register or
maintain registration of, a motor vehicle designed to be used
on a public highway unless the motor vehicle is covered by a
liability insurance policy." 625 ILCS 5/7--601(a) (West
The vehicle dealers provision of the Code states:
"A Certificate of Insurance in a solvent company *** shall be
included ***. The policy 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, and $50,000 for
damage to property." 625 ILCS 5/5--101(b)(6)(West 1994).
Section 7--317 of the Code declares a vehicle owner's policy
of liability insurance:
"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 1994).
With regard to statutory construction,
"the cardinal rule *** is to ascertain and give effect to the
true intent and meaning of the legislature. [Citation.] In
this endeavor, the courts should look first to the statutory
language [citation], for the language of the statute is the
best indication of the legislature's intent [citation]. Where
the meaning of an enactment is unclear from the statutory
language itself, the court may look beyond the language
employed and consider the purpose behind the law and the evils
the law was designed to remedy. [Citation.] Where, however,
the language of a statutory provision is clear, the court must
give it effect [citation] without resorting to other aids for
construction [citation]." Solich v. George & Anna Portes
Cancer Prevention Center of Chicago, Inc., 158 Ill. 2d 76, 81
After a careful review of the relevant statutes, we determine
that they are silent with regard to the issue in the present case.
We agree with the Madison court that it is not clear from the plain
language of the mandatory insurance provision whether the operator
or the owner of the vehicle must provide the mandatory insurance.
Nevertheless, it is certain that when Mr. Luckhart was operating
the vehicle he was required to be covered by a liability insurance
policy. As a result, the issue in terms of our review is limited
to the question of whether Mr. Luckhart was an insured under
Universal's garage policy at the time of the accident. In other
words, we must determine whether Mr. Luckhart was "required by law
to be an INSURED" under Universal's garage policy.
With respect to insurance policies,
"[t]he construction of an insurance policy's provisions
is a question of law. [Citations.] In construing an
insurance policy, the court must ascertain the intent of the
parties to the contract. [Citations.] To ascertain the
meaning of the policy's words and the intent of the parties,
the court must construe the policy as a whole [citations],
with due regard to the risk undertaken, the subject matter
that is insured and the purposes of the entire contract
[citation]. If the words in the policy are unambiguous, a
court must afford them their plain, ordinary, and popular
meaning. [Citations.] However, if the words in the policy
are susceptible to more than one reasonable interpretation,
they are ambiguous [citation] and will be construed in favor
of the insured and against the insurer who drafted the policy
[citations]." (Emphasis in original.) Outboard Marine Corp.
v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 108-09
Before beginning our analysis, it is important to understand
(1) the applicable standard of review and (2) the public policy
considerations relating to auto insurance and insurance generally.
With regard to the applicable standard of review, appellate review
of a summary judgment ruling is de novo. Outboard Marine Corp.,
154 Ill. 2d at 102. "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.,
154 Ill. 2d at 102. An appellate court may affirm a summary
judgment on any basis found in the record. Monticello Insurance
Co. v. Wil-Freds Construction, Inc., 277 Ill. App. 3d 697, 701
With regard to the public policy considerations, the most
important concept to remember is that " 'the purpose of the
insurance requirement under the Illinois Motor Vehicle Act is the
protection of the public and not some other insurance company.' "
Insurance Car Rentals, Inc. v. State Farm Mutual Automobile
Insurance Co., 152 Ill. App. 3d 225, 232 (1987), quoting
Continental Casualty Co. v. Travelers Insurance Co., 84 Ill. App.
2d 200, 206 (1967). In addition, "[w]here provisions of an
insurance contract are clear and unambiguous and neither illegal
nor against public policy, they are to be enforced by the courts."
Equity General Insurance Co. v. Patis, 119 Ill. App. 3d 232, 236
(1983). Finally, an insurance policy "should not be given a
strained, forced, unnatural, or unreasonable construction, or a
construction which would *** lead to an absurd conclusion." 45
C.J.S. Insurance 366, at 89 (1993).
We agree with the court in Madison Mutual which stated that
"[t]he basic difficulty with Universal's interpretation of its
definition of insured is that it equates 'required by law' with
someone who is otherwise uninsured, thus requiring or needing
insurance." (Emphasis in original.) Madison Mutual, 251 Ill. App.
3d at 16. However, the definition of insured under defendant's
policy makes no distinction between whether the person "required by
law" to be an insured has insurance coverage under a separate
policy. "Whether or not a person is insured under a separate
policy when he or she borrows a car from [the car dealer] is of no
consequence in determining whether he or she is 'required by law'
to have insurance under Universal's definition of insured."
Madison Mutual, 251 Ill. App. 3d at 16. Had Universal wished to
make this distinction, it could have easily included or
specifically excluded covered parties. However, Universal did not
choose to do this.
Defendant argues that the public policy of Illinois, as
expressed in the mandatory insurance provision, does not require
that car dealers furnish insurance coverage to customers using
their autos. Nevertheless, defendant concedes that, if an
uninsured person were to test drive one of their vehicles, the
uninsured permitted user would be covered under defendant's garage
policy. We see no reason to distinguish between this situation and
the present one in which a permitted user has a personal liability
auto insurance policy prior to test driving a vehicle. To do so
could lead to unreasonable and possibly absurd results.
We recognize defendant's argument that it is unfair to hold
Universal liable when State Farm receives premiums from the test
driver. However, by permitting customers to test drive their
vehicles, the car dealer receives a vital benefit to the success of
his business; i.e., an exponential increase in the probability the
permitted user will actually purchase the test-driven vehicle.
Considering the statutory authority and the public policy
considerations, it is not unreasonable or manifest error to hold
Universal primarily liable for insurance coverage during the time
a permitted user test drives a vehicle. Therefore, we hold that a
permissive user with or without personal insurance coverage in
compliance with the Code is "an INSURED" under Universal's policy.
Based on the aforementioned analysis, we reject the reasoning
in Steinberg which holds that, in the absence of a statute
specifically stating that vehicle owners must provide insurance
coverage for permissive vehicle users (i.e., the car rental
provision of the Code (625 ILCS 5/9--105 (West 1994)); taxicab
owners provisions of the Code (625 ILCS 5/8--108, 8--109 (West
1994))), there is no requirement car dealers provide insurance
coverage for customers or permitted users. Steinberg, 272 Ill.
App. 3d at 82. In other words, the Steinberg majority held that a
permissive user with personal insurance coverage in compliance with
the Code is not "required by law to be an INSURED" under
Universal's policy and, therefore, is not "an INSURED" under
Universal's policy. Once again, to draw such a fine, artificial
line could lead to unreasonable and possibly absurd results that
would weaken the purpose of the insurance requirement under the
Code. Furthermore, in light of the public policy considerations
identified, we do not find defendant's references to the Kentucky,
Missouri, and Montana statutes and case law applicable or relevant
to the present case.
Each party has also argued that the language of its policy
concerning the amount to be paid defines its obligation as excess
coverage. Defendant presents this argument as an alternative to
its statutory construction and policy intention arguments. In
other words, if this court determines that Luckhart is "an
INSURED," defendant argues that he still would not be entitled to
coverage from Universal because Universal is only required to
provide excess coverage. Plaintiff responds that its policy also
only requires excess coverage, and, because the language of
Universal's policy is illusory and without meaning, this court
should disregard defendant's claim.
We acknowledge that when interpreting an insurance policy our
responsibility is to "ascertain and enforce the intention of the
parties as expressed in the agreement." Springfield Fire &
Casualty Co. v. Garner, 255 Ill. App. 3d 685, 695 (1993).
Furthermore, we are not to be guided by the private or self-serving
intent of the parties; instead we must look to the intent of the
parties as expressed in the agreement. Guaranty National Insurance
Co. v. Koch, 242 Ill. App. 3d 692, 696-97 (1993). However, when
that express intention is inconsistent with or in violation of
public policy considerations, a court may not be able to enforce
strictly the expressed intention of the parties. Guaranty National
Insurance Co., 242 Ill. App. 3d at 695.
Here, we have already resolved the statutory construction
argument against defendant, and that portion of this order is
dispositive of this issue. In coming to the conclusion that
defendant's policy shall be used to reimburse plaintiff, we have
also applied public policy considerations and determined that to
accept defendant's statutory construction argument would be to
weaken the purpose of the mandatory insurance requirements. While
we do not necessarily agree with plaintiff that defendant's policy
coverage language is illusory and without meaning, we do determine
that to accept the expressed intention of the parties to this
insurance agreement would be inconsistent with the public policy of
the state of Illinois and could ultimately lead to an unreasonable
and absurd result.
The facts of this case do not mandate that we address the
ultimate excess coverage issue. Here, the amount sought is
$9,092.15. This amount is considerably below the $20,000/$40,000
coverage requirement of the mandatory insurance provision (625 ILCS
5/7--601(a)(West 1994)) and significantly below the
$100,000/$300,000 coverage requirement of the vehicle dealers
provision (625 ILCS 5/5--101(b)(6)(West 1994)). Furthermore, to
address this issue here, without allowing an adequate opportunity
for briefing and argument, would be unfair.
For the foregoing reasons the judgment of the circuit court of
Du Page County is affirmed.
GEIGER and RATHJE, JJ., concur.

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