American Country Ins. Co. v. Wilcoxon

• Decision Date: 22 March 1989
• Docket Number: No. 65982,65982
• Parties: , 130 Ill.Dec. 217 AMERICAN COUNTRY INSURANCE COMPANY, Appellant, v. Anthony WILCOXON, Appellee.
• Court: Illinois Supreme Court

Page 284

537 N.E.2d 284

127 Ill.2d 230, 130 Ill.Dec. 217

AMERICAN COUNTRY INSURANCE COMPANY, Appellant, v. Anthony WILCOXON, Appellee.

No. 65982.

Supreme Court of Illinois.

March 22, 1989.

Beermann, Swerdlove, Woloshin, Barezky & Berkson, Chicago (Alvin R. Becker and Howard A. London, of counsel), for appellant.

Edward J. Bradley, Jr., of Bradley and Bradley, Chicago, for appellee.

Justice STAMOS delivered the opinion of the court:

Plaintiff, American Country Insurance Company (American), filed a complaint for declaratory judgment on July 26, 1984, against defendant Wilcoxon, among others, seeking a finding that it had no duty to pay under a bond issued to insured defendant Checker Taxi Company (Checker), for injuries suffered by Wilcoxon in an accident involving a cab owned by Checker. The trial court granted plaintiff's motion for summary judgment, finding that plaintiff had no duty, pursuant to the terms of the bond, to pay or indemnify the defendants. Defendant Wilcoxon appealed and the appellate court reversed. (159 Ill.App.3d 884, 111 Ill.Dec. 799, 513 N.E.2d 45.) We allowed plaintiff's petition for leave to appeal (107 Ill.2d R.315).

The primary issue is whether an insurer is permitted to exclude from a surety bond, issued pursuant to the Illinois financial responsibility statute governing taxicab owners (Ill.Rev.Stat.1983, ch. 95 1/2, par. 8-101 et seq.), coverage for members of the public who are injured through the negligence of a cabdriver who did not enter into a lease with the cab company whose cab he was driving.

Plaintiff's suit for declaratory judgment was prompted by a personal injury suit filed in the circuit court of Cook County by Wilcoxon; Wilcoxon sued Checker and David Overstreet after a cab owned by Checker and being driven by Overstreet struck Wilcoxon on December 5, 1983, while Wilcoxon was a pedestrian. Plaintiff advised Checker that pursuant to the terms of the bond it was not liable to pay any judgments against Checker. Plaintiff then filed the present action. Wilcoxon's suit is not involved in this appeal.

Checker and American executed a bond pursuant to the Illinois financial responsibility statute governing taxicab owners under the Illinois Vehicle Code (Ill.Rev.Stat.1983, ch. 95 1/2, par. 8-101 et seq.) which stated that American would satisfy any judgment "resulting from negligence of such Owner/Principal[,] his agent, or any person operating the motor vehicle with his express or implied consent, in the penal sum of Two Hundred Fifty Thousand Dollars." The bond covered the period January 1, 1983, to December 31, 1983. An unsigned rider attached to the bond defined, among other things, the term "express or implied consent." The rider stated:

"(c) Express or implied consent is a motor vehicle described in this instrument which is being used with the express or implied consent of CHECKER when it is being used by

(i) an employee of CHECKER while operating said motor vehicle in the course and scope of his employment;

(ii) a lessee of CHECKER while operating said motor vehicle pursuant to a written lease.

This bond shall not apply to any permitte [sic ], sublessee, or bailee or an employee or lessee of CHECKER. It is the specifice [sic ] agreement and intention of CALUMET and CHECKER that the doctrine known as the Initial Permission Doctrine shall not apply."

We note that the way the rider is worded, particularly the language purporting to define "express or implied consent" by equating "consent" with a "motor vehicle," makes it nearly incomprehensible.

Checker leased one of its cabs to Willie White on December 5, 1983. The written lease was for a 24-hour period, from December 5 to December 6, and stated that Checker would provide insurance covering both "[l]essor and [l]essee, in the limits and of the types prescribed by ordinances of the City of Chicago and laws of the State of Illinois." The lease also stated that the lessee agrees "[t]o be the sole driver of the leased vehicle." According to the complaint for declaratory judgment and Wilcoxon's answer, Willie White gave possession of the leased Checker cab to David Overstreet sometime on December 5, 1983. While Overstreet was driving the cab, he struck and injured Wilcoxon, a pedestrian. Wilcoxon subsequently filed a personal injury suit against Checker and Overstreet.

American filed suit seeking declaratory relief against Wilcoxon, Checker and Overstreet. The complaint for declaratory judgment alleged that the bond issued by American (previously known as the Calumet Insurance Company) was in full force and effect on the day of the accident, but provided for coverage only when a Checker cab was being operated with the express or implied consent of Checker. The complaint stated that Willie White's transfer of possession of the rented cab to David Overstreet, who was not an employee, agent or servant of Checker, was without the knowledge, consent or permission of Checker. In his answer to the complaint, Wilcoxon admitted that Overstreet was in possession of the cab that struck him. Neither Checker nor Overstreet filed an answer. The trial court found that all three defendants had defaulted and entered judgment against them. The trial court subsequently vacated that order as to Wilcoxon.

American then filed a motion for summary judgment, contending that the bond clearly and specifically applied only to an employee of Checker or a lessee of Checker operating pursuant to a written lease. The motion also contended that the bond had served notice that the initial permission doctrine would not apply. Attached to the motion were three affidavits in support of the motion.

The first affidavit was that of the president of American; the bond, the affidavit stated, was filed with, and approved by, the Illinois Secretary of State and the administrator of taxicab ordinances for the City of Chicago. The second and third affidavits, of the lease manager and personnel manager of Checker, asserted that no lease record between David Overstreet and Checker, or record of any kind relating to employment of Overstreet by Checker, could be found. After a hearing, the trial judge granted the motion.

Wilcoxon appealed the trial court's order, and the appellate court reversed. The court found that the initial permission doctrine applied, notwithstanding the lease provision forbidding White to allow anyone else to operate the cab, because the "protection of the public under financial responsibility statutes transcends the private agreement between the parties, where the agreement runs counter to sound public policy." (159 Ill.App.3d at 890, 111 Ill.Dec. 799, 513 N.E.2d 45.) The court held that Checker, therefore, had given its constructive consent to White to permit Overstreet to operate the cab. The court further held that the Illinois legislature had codified the initial permission doctrine in section 8-104 of the Illinois Vehicle Code (Ill.Rev.Stat.1983, ch. 95 1/2, par. 8-104), and that Checker and its surety, American, "cannot, in a private agreement allegedly included in the bond rider, repeal or diminish the effect of the Illinois statute designed to protect the public" (159 Ill.App.3d at 891, 111 Ill.Dec. 799, 513 N.E.2d 45).

Plaintiff contends that the appellate court expanded the plaintiff's liability beyond that imposed by statute and exceeded its authority by rewriting the statute. Plaintiff argues that the initial permission rule is a rule of contract construction that does not apply to the facts of this cause; the rule may be specifically avoided, plaintiff asserts, by parties to an insurance contract. Plaintiff further contends that the appellate court's ruling that Checker constructively consented to the operation of the cab by Overstreet conflicts with a provision in the Chicago Municipal Code.

Defendant argues that the initial permission rule applies here and extends coverage to all successive permittees operating a vehicle used in public transportation. Defendant asserts that this court's earlier decision in Maryland Casualty Co. v. Iowa National Mutual Insurance Co. (1973), 54 Ill.2d 333, 297 N.E.2d 163, rejected the contention that an owner or insurance company may exclude coverage under an insurance bond by expressly disclaiming application of the initial permission rule. Defendant further argues that section 8-104 of the Illinois Vehicle Code mandates omnibus coverage which may not be impaired by restrictive terms in the insurance contract. Defendant finally contends that the appellate court opinion is consistent with the Chicago Municipal Code.

In Maryland Casualty Co. v. Iowa National Mutual Insurance Co. (1973), 54 Ill.2d 333, 297 N.E.2d 163, this court held that once the owner and named insured of an insurance policy containing an omnibus clause extending liability coverage to persons using the covered automobile with the permission of the owner has given permission to another to use the car, any person given permission to drive the car by the first permittee is covered under the policy. In Maryland Casualty, the insurance company issued a policy to Robert Smythe, as the named insured, containing an omnibus clause extending liability coverage to "any other person using such automobile, with the permission of the named insured." (Maryland Casualty, 54 Ill.2d at 335, 297 N.E.2d 163.) Smythe's son, who had permission to drive the insured vehicle, allowed a friend, Horton, to drive it. While driving the Smythe vehicle, Horton was involved in an accident in which others were injured. Smythe's son had previously been instructed by his parents not to permit anyone else to operate the vehicle.

The court held that Horton was covered under the Smythe insurance policy, adopting the initial permission rule that " 'once the initial permission has been given by the named insured, coverage is fixed, barring theft or the like.' " (Maryland Casualty, 54 Ill.2d at 342, 297 N.E.2d 163, quoting Odolecki v. Hartford...