Farm Bureau Mut. Ins. Co. v. Alamo Rent A Car, Inc.

• Decision Date: 22 December 2000
• Docket Number: No. 1-99-3096.,1-99-3096.
• Citation: 319 Ill. App.3d 382,744 N.E.2d 300
• Parties: FARM BUREAU MUTUAL INSURANCE COMPANY, INC., Plaintiff-Appellant, v. ALAMO RENT A CAR, INC., Defendant-Appellee.
• Court: United States Appellate Court of Illinois

744 N.E.2d 300

319 Ill. App.3d 382

FARM BUREAU MUTUAL INSURANCE COMPANY, INC., Plaintiff-Appellant, v. ALAMO RENT A CAR, INC., Defendant-Appellee.

No. 1-99-3096.

Appellate Court of Illinois, First District, Fifth Division.

December 22, 2000.

Rehearing Denied March 8, 2001.

Morse & Bolduc, of Chicago (Peter C. Morse and David J. Roe, of counsel), for appellant.

Mordini & Schwartz, P.C., of Chicago (L. Bradley Schwartz of counsel), for appellee.

Justice QUINN delivered the opinion of the court:

This appeal arises out of an action for declaratory judgment filed by plaintiff, Farm Bureau Mutual Insurance Company, Inc., (Farm Bureau), to determine liability for damages incurred as a result of an automobile accident involving its insured, the renter of a vehicle owned by defendant, Alamo Rent A Car, Inc. (Alamo). Both parties filed cross-motions for summary judgment. The circuit court granted summary judgment in favor of Alamo and Farm Bureau appeals, contending that Alamo, as vehicle owner, is required to provide primary liability insurance coverage. We affirm.

The following facts are undisputed. On September 30, 1996, Donna Fletcher rented a 1996 Corsica from Alamo. The record indicates that Alamo filed a certificate of self-insurance in accordance with sections 9-101 and 9-102 of the Illinois Vehicle Code (the Vehicle Code) (625 ILCS 5/9-101, 9-102 (West 1996)). Although a complete copy of the rental agreement is not a part of the record, it is undisputed that Fletcher was offered the option to purchase liability insurance from Alamo when she rented the car. Fletcher declined and instead chose to rely on her own personal liability policy with Farm Bureau, which was in full force and effect during the rental period.

In its "Terms for Renting an Alamo Car" section, the Alamo rental agreement contained the following provision entitled "Liability Insurance":

"Unless contrary to state law or otherwise provided by this agreement, if there is no other valid and collectible insurance whether primary, excess or contingent, available to the renter (or to any authorized driver while operating the car) sufficient to meet minimum financial responsibility requirements, then, except as to rental occurring in California, Alamo shall provide protection against liability for bodily injury, death or property damage to others up to the minimum financial responsibility limits required by applicable law. Such protection shall be provided through either an insurance policy or a certificate of self insurance (if provided, you have no duty to defend after tendering minimum limits). I agree that any amounts over this minimum will be covered by me or by my liability policy and I will indemnify you for any losses that exceed the minimum limits."

The record indicates that Alamo's insurance coverage also provided an amendatory endorsement and defined an insured as "any rentee/lesee who purchases the Extended Protection (EP) Option, but only while the Alamo vehicle is being driven by the rentee/lesee or an `Alamo Authorized Additional Driver' and all terms and conditions of the Rental Agreement have been met." However, this amendatory endorsement was effective on June 30, 1997. As the accident occurred on October 1996, this provision does not apply to the instant case.

On October 5, 1996, Fletcher, while driving the Alamo rental car, was involved in an accident with Richard and Lucy Smith. At the time of the accident, State Farm Insurance Company (State Farm) insured the Smiths' vehicle. After the accident, State Farm paid benefits to the Smiths in the amount of $9,257.74 and sought recovery of this amount from Farm Bureau and Alamo. As Alamo denied that it provided liability coverage to Fletcher, Farm Bureau reimbursed State Farm for amounts paid to the Smiths.

Farm Bureau's insurance policy contained the following provision entitled "Other Insurance":

"If there is other applicable liability insurance on a loss covered by this Part, we will pay our proportionate share as our limits of liability bear to the total of all applicable liability limits. Any insurance afforded under this Part for a vehicle you do not own or lease, however, is excess over any other liability insurance and shall be limited to the difference between the liability limits on the nonowned vehicle and the liability limits on the described vehicle."

Farm Bureau's policy also contained an amendatory endorsement. Of particular note is the section entitled "Exclusions," which provided as follows:

"2. For damage to property owned by, rented to, in charge of or transported by any insured person but this exclusion does not apply to damages to a rented residence, a rented private garage, or any of the following:

a. a rented auto."

Farm Bureau subsequently filed an amended complaint for declaratory judgment seeking a declaration that Alamo owed primary liability protection to Fletcher and reimbursement by Alamo of all monies that Farm Bureau paid to State Farm. Farm Bureau specifically argued that pursuant to the financial responsibility provisions of the Vehicle Code (625 ILCS 5/9-101 et seq. (West 1996)), Alamo was required to provide primary liability coverage.

After Alamo filed an answer to Farm Bureau's amended complaint for declaratory judgment, Farm Bureau filed a motion for summary judgment (735 ILCS 5/2-1005 (West 1996)) and reiterated its argument that Alamo was required to provide primary liability coverage to those who rent its vehicles. Farm Bureau asserted that it is the public policy of the state that the owner of the vehicle, rather than the vehicle operator, provide primary coverage. Alamo responded with a cross-motion for summary judgment and argued that because Fletcher did not purchase additional insurance coverage from Alamo, it was not required to provide primary coverage.

The trial court granted summary judgment in favor of Alamo. In so doing, the court found that there was no statutory or contractual basis to require Alamo to provide primary liability coverage to Fletcher, citing Insurance Car Rentals, Inc. v. State Farm Mutual Automobile Insurance Co., 152 Ill.App.3d 225, 232, 105 Ill.Dec. 387, 504 N.E.2d 256 (1987). Farm Bureau filed a timely appeal.

Initially, we note that a reviewing court conducts a de novo review of the evidence in summary judgment cases. Espinoza v. Elgin, Joliet & Eastern Ry. Co., 165 Ill.2d 107, 113, 208 Ill.Dec. 662, 649 N.E.2d 1323 (1995). The reviewing court must construe all evidence strictly against the movant and liberally in favor of the nonmoving party. Espinoza, 165 Ill.2d at 113, 208 Ill.Dec. 662, 649 N.E.2d 1323. Where the pleadings, depositions and affidavits show that there is no genuine issue of material fact, the moving party is entitled to judgment as a matter of law. First of America Trust Co. v. First Illini Bancorp, Inc., 289 Ill.App.3d 276, 283, 226 Ill.Dec. 248, 685 N.E.2d 351 (1997). If reasonable persons could draw different inferences from undisputed facts, summary judgment should be denied. Smith v. Armor Plus Co., 248 Ill.App.3d 831, 839, 187 Ill.Dec. 625, 617 N.E.2d 1346 (1993).

We next note that Farm Bureau correctly points out that Alamo was prohibited from allowing Fletcher to drive its rental car unless Alamo maintained insurance in accordance with the financial responsibility provisions of the Vehicle Code. The Vehicle Code has a specific section for "Owners of For Rent Vehicles For Hire" which applies to the instant case. This section has its own financial responsibility law provision delineating the methods of providing proof of financial responsibility. Owners of for-rent vehicles, in order to operate their business in the State of Illinois, must demonstrate financial responsibility by: (1) posting bond; (2) obtaining insurance; or (3) obtaining a certificate of self-insurance. 625 ILCS 5/9-101 et seq. (West 1996). Alamo properly maintained self-insurance in accordance with this section of the Vehicle Code. The question we must address is whether Alamo can assert that it is not required to provide primary coverage pursuant to the terms of the rental agreement without frustrating the public policy of the state.

Farm Bureau contends that the trial court erred in granting summary judgment in favor of Alamo because, in accordance with public policy, as the vehicle owner, Alamo is required to provide primary liability coverage to those who rent its vehicles. In support of its position, Farm Bureau relies on 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 State Farm, one of State Farm's insureds took a test-drive in a vehicle owned by an automobile dealership. During the test-drive, State Farm's insured was involved in an accident. State Farm paid for all damages to the other party due to the accident and subsequently submitted a claim to the dealership's insurance carrier, Universal Underwriters Group (Universal). State Farm argued that the garage policy issued to the dealership by Universal afforded primary coverage for anyone who test-drove their vehicles. Universal denied the claim. Following cross-motions for summary judgment, the trial court granted summary judgment in favor of State Farm. This court affirmed the trial court's ruling. State Farm Mutual Automobile Insurance Co. v. Universal Underwriters Group, 285 Ill.App.3d 115, 220 Ill. Dec. 781, 674 N.E.2d 52 (1996).

On appeal to our supreme court, Universal contended that section 7-601(a) of the Vehicle Code, which governs automobile dealerships, does not specify that a person who test-drives a vehicle must be covered under the dealership's insurance policy. Our supreme court disagreed and held that, "under Illinois law, a car dealer's liability policy must provide coverage for test-drivers." State Farm, 182 Ill.2d at 243, 231 Ill.Dec. 75, 695 N.E.2d 848. The court also noted that, "pursuant to custom in the insurance industry,...