Czapski v. Maher

• Decision Date: 10 June 2011
• Docket Number: No. 1–10–0948.,1–10–0948.
• Citation: 352 Ill.Dec. 377,2011 IL App (1st) 100948,954 N.E.2d 237
• Parties: Mark CZAPSKI and Anna Czapski–Florek, Co–Special Administrators of the Estate of Roger Czapski, Deceased, Plaintiffs–Appellees,v.Christopher MAHER, Motor Werks of Barrington, Inc., National Casualty Company, a Corporation, Federal Insurance Company, a Corporation, Defendants–Appellants (National Casualty Company, Defendant and Counterplaintiff–Appellant; Christopher Maher, Individually; Mark Czapski and Anna Czapski–Florek, Co–Special Administrators of the Estate of Roger Czapski, Deceased, Counterdefendants–Appellees).
• Court: United States Appellate Court of Illinois

2011 IL App (1st) 100948

954 N.E.2d 237

352 Ill.Dec. 377

Mark CZAPSKI and Anna Czapski–Florek, Co–Special Administrators of the Estate of Roger Czapski, Deceased, Plaintiffs–Appellees,

v.Christopher MAHER, Motor Werks of Barrington, Inc., National Casualty Company, a Corporation, Federal Insurance Company, a Corporation, Defendants–Appellants (National Casualty Company, Defendant and Counterplaintiff–Appellant; Christopher Maher, Individually; Mark Czapski and Anna Czapski–Florek, Co–Special Administrators of the Estate of Roger Czapski, Deceased, Counterdefendants–Appellees).

No. 1–10–0948.

Appellate Court of Illinois, First District, Sixth Division.

June 10, 2011.

Thomas H. Crouch, Kurt M. Zitzer, Meagher & Geer, PLLP, Scottsdale, Roderick T. Dunne, Carrie Von Hoff, Karbal, Cohen, Economou, Silk & Dunne, LLC, Chicago, for National Casualty Co.Todd S. Schenk, Amber C. Coisman, Tressler LLP, Chicago, for Federal Insurance Co.Kevin M. Forde, Joanne R. Driscoll, Kevin M. Forde, LTD., Thomas R. Rakowski, Thomas R. Rakowski, P.C., Timothy J. Cavanagh, Matthew M. Rundio, Cavanagh Law Group, Chicago, for Appellees.

OPINION

Justice R. GORDON delivered the judgment of the court, with opinion.

¶ 1 The key issue in this appeal is whether a person who test-drives a motor vehicle is a “customer” within the meaning of an auto dealership's umbrella and excess insurance policies.

¶ 2 BACKGROUND

¶ 3 This is a declaratory judgment action regarding coverage under an auto dealership's umbrella and excess insurance policies. The key issue in this appeal is whether a person who test-drives a motor vehicle is a “customer” within the meaning of two insurance polices which are the subject of the coverage question before us. For the reasons discussed below, we find that a test-driver is a “customer” in the context of the insurance policies that are the subject matter of this appeal.

¶ 4 I. Parties

¶ 5 Defendant Christopher Maher was test-driving a BMW automobile owned by defendant Motor Werks of Barrington, Inc. (Motor Werks), accompanied by Motor Werks' salesperson Roger Czapski, who was seated in the BMW's front passenger seat. Czapski was killed when the BMW collided with another vehicle.¹ The collision resulted in wrongful death and personal injury claims against Maher. The underlying wrongful death claim went to trial, resulting in a $13.72 million judgment against defendant Maher.

¶ 6 Prior to trial, plaintiffs, as well as the other passengers, filed a declaratory judgment action seeking declarations of coverage available to Maher under both: (1) certain insurance policies issued to Motor Werks, and (2) certain insurance policies issued to Kevin Maher, Christopher Maher's father. The dealership, Motor Werks, had purchased a $5 million umbrella policy from defendant National Casualty Company (National) and a $10 million excess policy from defendant Federal Insurance Company (Federal). These policies were purchased to protect defendant Motor Werks from liability in excess of its $1 million primary policy. Defendant Motor Werks was a party in the declaratory judgment action, but not in the underlying wrongful death litigation.

¶ 7 II. Policies

¶ 8 The policies state that the term “insured” does not include the dealership's “customers.” In particular, National's policy states under the heading “Auto Dealership Limitation Endorsement”: “Your customers are not ‘named insureds' or ‘insureds' as defined in this policy.” ² Thus, the umbrella and excess policies insure the risk that the dealership itself would be liable for sums in excess of the primary policy, but do not insure the risk of a customer's liability.

¶ 9 The term “customer” also appears in an endorsement in National's policy entitled “Auto Dealership Limitation Endorsement.” In relevant part, it states:

“THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.

* * *

4. Your customers are not ‘named insureds' or ‘insureds' as defined in this policy.”

¶ 10 III. Procedural History

¶ 11 In the first declaratory action, National and Federal asserted that, as a test-driver, Maher was Motor Werks' “customer” and, therefore, not covered under Motor Werks' umbrella and excess policies. The trial court agreed, finding that Maher was not an insured and not covered under the policies. The trial court found that the term “customer” was unambiguous and included a test-driver.

¶ 12 On appeal, we found that the issue regarding whether Maher was covered by the umbrella and excess policies was not ripe for adjudication because Maher's liability in the underlying tort action had not yet been determined and that the first declaratory judgment action was premature. Czapski v. Maher, 385 Ill.App.3d 861, 324 Ill.Dec. 608, 896 N.E.2d 394 (2008).

¶ 13 After judgment was entered in the underlying wrongful death action, plaintiff instituted this second declaratory judgment action. In this second action, a different trial judge granted plaintiff's motion for summary judgment and denied cross-motions for summary judgment filed by National and Federal. The second trial judge reached the opposite conclusion from the trial judge in the first action and found that the term “customer” was ambiguous. The second trial judge found that the term can be read to include only a person who has already made a purchase, and since Maher had not yet made a purchase, he was not a customer. The trial court reviewed various dictionary definitions and concluded that, even if the term “customer” could be interpreted to include a test-driver, this meant that the term was subject to multiple meanings and, therefore, was ambiguous. The trial court issued a declaratory judgment, finding that National and Federal had a duty to indemnify Maher. National and Federal then filed this timely appeal.³

¶ 14 ANALYSIS

¶ 15 The interpretation of the word “customer” in the insurance policies here is solely a legal issue, which this court reviews de novo. Founders Insurance Co. v. American Country Insurance Co., 366 Ill.App.3d 64, 69, 303 Ill.Dec. 222, 851 N.E.2d 120 (2006) (the de novo standard applies to the interpretation of a contract and the review of a summary judgment).

¶ 16 Defendant argues that the trial court erred as a matter of law in its interpretation of the term “customer” by finding an ambiguity where none exists. Defendant claims that the court failed to give effect to the plain and ordinary meaning of the term “customer” as used in an automobile dealership policy and that the term “customer” includes one who is test-driving a dealership vehicle.

¶ 17 The burden is on the insurer to establish that a policy exclusion applies, and its applicability must be definite and free from doubt. Insurance Corp. of Hanover v. Shelborne Associates, 389 Ill.App.3d 795, 799, 329 Ill.Dec. 138, 905 N.E.2d 976 (2009). Exclusion provisions that limit or exclude coverage must be construed liberally in favor of the insured and strictly against the insurer. State Security Insurance Co. v. Burgos, 145 Ill.2d 423, 438, 164 Ill.Dec. 631, 583 N.E.2d 547 (1991); Pekin Insurance Co. v. Miller, 367 Ill.App.3d 263, 267, 305 Ill.Dec. 101, 854 N.E.2d 693 (2006).

¶ 18 In the case at bar, the term “customer” is not defined in National's policy. Under Illinois law, “[i]f the words in the policy are * * * unambiguous, [a] court [must] afford them their plain, ordinary meaning and will apply them as written.” Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill.2d 384, 391, 189 Ill.Dec. 756, 620 N.E.2d 1073 (1993). If the words are susceptible to more than one reasonable meaning, then they are ambiguous and must be construed in favor of coverage and against the insurer that drafted the policy. Valley Forge Insurance Co. v. Swiderski Electronics, Inc., 223 Ill.2d 352, 363, 307 Ill.Dec. 653, 860 N.E.2d 307 (2006); Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90, 108–09, 119, 180 Ill.Dec. 691, 607 N.E.2d 1204 (1992).

¶ 19 This rule favoring coverage for an ambiguous term is especially true with respect to exclusionary clauses. Outboard Marine, 154 Ill.2d at 119, 180 Ill.Dec. 691, 607 N.E.2d 1204. When an exclusionary clause is relied upon to deny or limit coverage, it will be read narrowly and will be applied only where its terms are clear, definite, specific and free from doubt. Gillen v. State Farm Mutual Automobile Insurance Co., 215 Ill.2d 381, 393, 294 Ill.Dec. 163, 830 N.E.2d 575 (2005). An ambiguity exists only if a term is subject to more than one reasonable interpretation. Hobbs v. Hartford Insurance Co. of the Midwest, 214 Ill.2d 11, 17, 291 Ill.Dec. 269, 823 N.E.2d 561 (2005).

¶ 20 In the case at bar, defendant argues that the plain and ordinary meaning of the term “customer,” as used in a policy issued to an auto dealership, includes one who test-drives an auto that the dealership holds out for sale. Defendant claims that several Illinois courts have specifically referred to a “test-driver” as a dealership's “customer.” For example, defendant cites to the Illinois Supreme Court's opinion in State Farm Mutual Automobile Insurance Co. v. Universal Underwriters Group, 182 Ill.2d 240, 231 Ill.Dec. 75, 695 N.E.2d 848 (1998). In that case, State Farm filed a subrogation claim against Universal, the dealer's garage liability insurer. State Farm, 182 Ill.2d at 241, 231 Ill.Dec. 75, 695 N.E.2d 848. A test-driver was involved in a collision while test-driving a dealer's vehicle. State Farm, 182 Ill.2d at 241, 231 Ill.Dec. 75, 695 N.E.2d 848. Our supreme court found that the motorist was covered under the dealer's insurance policy as primary coverage. Our supreme court observed that a state statute requires the inclusion of an omnibus clause in all automobile liability policies, and this clause requires liability coverage for all persons who use the named insured's vehicle with permission. State Farm, 182 Ill.2d at 244, 231 Ill.Dec. 75, 695 N.E.2d 848. Although the supreme court referred to the...