Am. Serv. Ins. Co. v. Jones

• Decision Date: 06 May 2010
• Docket Number: No. 1-08-0402.,1-08-0402.
• Citation: 401 Ill.App.3d 514,927 N.E.2d 840,340 Ill.Dec. 101
• Parties: AMERICAN SERVICE INSURANCE COMPANY, Plaintiff-Appellant and Cross-Appellee,v.Arthur JONES, Ramos Movers, Inc., Jose G. Torres, Defendants-Appellees (Elite Rental, Inc., and National Casualty Company, Defendants-Appellees and Cross-Appellants; State Farm Mutual Insurance Company, Defendant).
• Court: United States Appellate Court of Illinois

401 Ill.App.3d 514

927 N.E.2d 840

340 Ill.Dec. 101

AMERICAN SERVICE INSURANCE COMPANY, Plaintiff-Appellant and Cross-Appellee,v.Arthur JONES, Ramos Movers, Inc., Jose G. Torres, Defendants-Appellees (Elite Rental, Inc., and National Casualty Company, Defendants-Appellees and Cross-Appellants; State Farm Mutual Insurance Company, Defendant).

No. 1-08-0402.

Appellate Court of Illinois,

First District, Third Division.

March 31, 2010.

Rehearing Denied May 6, 2010.

COPYRIGHT MATERIAL OMITTED

Newman Raiz, L.L.C., James P. Newman, Chicago (of counsel), for Plaintiff-Appellant and Cross-Appellee.

Brenner, Ford, Monroe & Scott, Ltd., Stephen A. Kolodziej, Chicago (of counsel), for Defendants-Appellees and Cross-Appellants.

Acosta & Shawski, P.C., Wheaton; Law Offices of Michael Murphy Tannen, P.C., Chicago, for Jose G. Torres.

Justice STEELE delivered the opinion of the court:

In this declaratory judgment action, plaintiff American Service Insurance Company (ASI) appeals an order of the circuit court of Cook County granting summary judgment to defendants Elite Rental, Inc. (Elite), National Casualty Company (National), Ramos Movers, Inc. (Ramos), and Jose G. Torres (Torres) on count II of ASI's complaint ruling that ASI provided primary coverage and was obligated to defend Ramos in an underlying automobile collision suit, while National's policy provided excess coverage. National and Elite cross-appeal from the circuit court's ruling on their counterclaim, granting summary judgment to ASI and Torres and declaring that National's policy provides $1 million of coverage.¹

BACKGROUND

The record on appeal discloses the following facts. Ramos is a moving company that owned two trucks for personal moving services. On October 5, 2004, defendant Arthur Jones (Jones) rented a truck from Elite on behalf of Ramos to complete a scheduled move that day from Crystal Lake, Illinois, to Crown Point, Indiana. En route, Jones was involved in a collision with Torres, while still in Illinois, resulting in injuries to Torres.

Since 1995, the Illinois Commerce Commission (ILCC) had issued a public carrier certificate and certificate of public convenience and necessity to Ramos, granting Ramos the authority to operate as a common carrier of household goods between points within a 50-mile radius of Chicago, Illinois, and as a common carrier of other goods to and from points in Illinois.

In 2003, Ramos applied to ASI for truck insurance. The application describes Ramos as a local household furnishings mover. The application listed a truck and a van, each located in Chicago, Illinois, with an operating radius of 50 miles.

ASI insured Ramos under a general liability policy, listing Ramos's two trucks as covered vehicles. The ASI policy included a single, combined limit for bodily injury and property damage of $750,000. The policy provides:

“COVERAGE A-BODILY INJURY LIABILITY

* * *

ADDITIONAL CONDITIONS

1. Other Insurance. Temporary Substitute and Newly Acquired Vehicles

With respect to a Temporary Substitute automobile, this insurance shall be excess insurance over any other valid and collectible insurance available to the insured.

* * *

COVERAGE B-PROPERTY DAMAGE LIABILITY

The company will pay on behalf of the insured all sums,

except for punitive or exemplary damages, which the insured shall become legally obligated to pay as damages because of

A. bodily injury or

B. property damage

to which this insurance applies, caused by an accident and arising out of the ownership, maintenance or use of an owned vehicle or any temporary substitute automobile, and the company shall defend any suit alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy.”

The ASI policy defines a “temporary substitute automobile” as:

“[A] vehicle not owned by the named insured or any resident of the same household, while temporarily used with the permission of the owner as a substitute for an owned vehicle when withdrawn from normal use for servicing or repair or because of its breakdown, loss or distruction [ sic ].”

ASI's policy was certified with the ILCC in compliance with Illinois law and as proof of financial responsibility under the rules for carriers of property. ASI's policy further provides:

“When this policy is certified as proof of financial responsibility under the provisions of any motor vehicle financial responsibility law, such insurance as is afforded by this policy * * * shall comply with the provisions of such law to the extent of the coverage and limits of liability required by such law.”

Moreover, ASI's policy provides:

“The insurance afforded by this policy is primary insurance, except when stated to apply in excess of or contingent upon the absence of other insurance. When this insurance is primary and the insured has other insurance which is stated to be applicable to the loss on an excess or contingent basis, the amount of the company's liability under this policy shall not be reduced by the existence of other insurance.”

National insured Elite under a commercial automobile liability policy, listing Elite's rental vehicles as insured vehicles. National's policy defines “insureds” to include anyone using a covered auto Elite owns, or hires or borrows with Elite's permission. A symbol endorsement to the National policy defined symbol “10” automobiles as:

“Any auto used under a written rental agreement, issued by you, stating a rental period of less than one year. Any auto used in your rental business, or used for non business purposes with your permission.”

The National policy provides coverage to symbol “10” automobiles up to $1 million per occurrence.

Another National endorsement-the “Daily Auto Rental Endorsement”-amended the definition of an insured to include:

“The ‘rentee’ and any other person authorized by and designated in the ‘rental agreement’ held by the ‘rentee,’ subject to all conditions set forth in this endorsement.”

A “rentee” is defined as “a holder of a ‘rental agreement’ ” with Elite “of less than one year.” This endorsement limits liability for rentees to $50,000 for bodily injury to any one person in one accident, $100,000 for bodily injury to two or more people in one accident, and $50,000 for property damage in any one accident.

The “Daily Auto Rental Endorsement” further replaces the general “other insurance” condition to provide:

“For any covered ‘auto,’ the insurance provided by this policy is primary, unless stated otherwise in the ‘rental agreement,’ for the ‘rentee’ and any other person authorized by the ‘rental agreement’ held by the ‘rentee.’ ”

The rental agreement between Elite and Jones provides in part:

“Rentor provides liability coverage to persons using the vehicle with the permission of the Rentor * * * in accordance with the provisions of an automobile liability insurance policy with limits equals [ sic ] to the minimum requirements of any applicable state financial responsibility law or other similar law or statue [ sic ]. All coverages under this Agreement are applicable only after all other valid and collectible insurance (whether primary, excess or contingent) has been paid and exhausted to the full limits of all such policies.”

ASI and National filed declaratory judgment actions in the circuit court of Cook County, seeking a determination of their respective rights and obligations. ASI asked the court to find that its policy did not cover Ramos or Jones because the rental vehicle was not an insured automobile under the policy, or that National's policy provided primary coverage and that the ASI policy provided excess coverage. Ramos filed a counterclaim, which he nonsuited prior to this appeal. National and Elite also filed a counterclaim seeking declarations that: (1) National did not owe a duty to defend Ramos; (2) ASI provided primary coverage; (3) Elite was an additional insured under the ASI policy ²; and (4) if National's policy applies, it was limited to $50,000 of excess coverage.

On July 24, 2006, ASI moved for summary judgment on count II of its complaint, arguing that National's coverage was primary and ASI's coverage-if any-was excess. On June 19, 2007, Torres filed a motion for summary judgment arguing that the ASI policy provided primary coverage to Ramos. The same day, Torres filed a motion for partial summary judgment against National and Elite, arguing that (1) the rented truck was a covered auto with $1 million in liability coverage under the National policy; and (2) Ramos was an insured under the National policy. That same day Ramos moved for summary judgment, arguing that: (1) ASI's suit breached the terms of its own policy and the financial responsibility laws of Illinois; and (2) ASI acted in bad faith during the litigation and fraudulently induced Ramos to make statements in an attempt to deny him coverage. On June 29, 2007, National and Elite filed a joint motion for summary judgment arguing that: (1) National's coverage was subjected to the $50,000 limits; (2) National's coverage was excess to the ASI policy; and (3) Elite is an additional insured under the ASI policy. National and Elite also filed a cross-motion for summary judgment against ASI, contending that: (1) the ASI policy must provide coverage in order to comply with the financial responsibility laws of Illinois; and (2) Elite owed neither Torres nor the public a corresponding duty to provide primary coverage in this case.

On December 14, 2007, the circuit court issued a memorandum opinion and order, disposing of the summary judgment motions. The circuit court first ruled that ASI's argument that the Elite truck was not a “temporary substitute vehicle” failed because the financial responsibility laws of Illinois require that a carrier's insurance must cover any vehicle operated under the authority of that carrier, whether or not the vehicle has been reported to the insurer. The circuit court then ruled that the ASI policy provided primary coverage, because allowing ASI...