Founders Ins. Co. v. Walker

• Decision Date: 16 July 2015
• Docket Number: No. 1–14–1301.,1–14–1301.
• Parties: FOUNDERS INSURANCE COMPANY, Plaintiff–Appellee, v. Ariadne M. WALKER, Sybil Morrison, and Ean Services, LLC, d/b/a Enterprise Rent–a–Car, Defendants–Appellants.
• Court: United States Appellate Court of Illinois

37 N.E.3d 338

FOUNDERS INSURANCE COMPANY, Plaintiff–Appellee

v.Ariadne M. WALKER, Sybil Morrison, and Ean Services, LLC, d/b/a Enterprise Rent–a–Car, Defendants–Appellants.

No. 1–14–1301.

Appellate Court of Illinois, First District, Fourth Division.

July 16, 2015.

Samuel A. Shelist, of Shelist Law Firm LLC, Chicago, for appellants.

Shari Shelmadine, of Law Office of Shari Shelmadine, Chicago, for appellee.

OPINION

Justice ELLIS

delivered the judgment of the court, with opinion.

¶ 1 In this declaratory judgment action, defendant Enterprise Rent–a–Car (Enterprise) appeals from an order of the circuit court of Cook County granting summary judgment in favor of plaintiff, Founders Insurance Company (Founders). Founders had issued an automobile insurance policy to defendant Sybil Morrison that included liability coverage but not collision coverage. Morrison later rented a vehicle from Enterprise that was involved in a hit-and-run accident, resulting in damage to the rented vehicle. Enterprise sued Morrison for the damage to the rental car in a lawsuit not at issue in this appeal. Founders filed this action for a declaration that it had no duty to defend or indemnify Morrison for the damage. The trial court agreed and entered summary judgment for Founders.

¶ 2 Founders made two arguments in support of summary judgment, each of which it renews on appeal. First, it claimed that its liability coverage was not triggered because collision damage to a rental vehicle fell under collision coverage, which Morrison did not purchase from Founders. Second, Founders claimed that, even if liability coverage included damage to the rental vehicle, an exclusion within that liability coverage applied. Either way, it argued, Founders was not obligated to Morrison for the damage to the rental vehicle. The trial court's reasoning is not in the record. But we agree with Founder's second argument and thus affirm.

¶ 3 I. BACKGROUND

¶ 4 A. The Founders Insurance Policy

¶ 5 The relevant facts are not in dispute. Morrison was the named insured on an automobile insurance policy with Founders (the Policy). She paid a premium of $167, which covered her 2010 Hyundai Elantra for the period of March 1, 2012 through September 1, 2012.

¶ 6 Founders' comprehensive policy, not all of which Morrison purchased, contains the following parts:

“Part I—Liability” (which included two subparts for bodily injury liability coverage and property damage liability coverage);

“Part II—Expenses For Medical Services” (which included medical payments coverage);

“Part III—Physical Damage” (which contained four subparts, including collision coverage);

“Part IV—Uninsured Motorist Coverage” (which included two subparts for uninsured motorist bodily injury coverage and uninsured motorist property damage coverage);

“Part V—Underinsured Motorist,” and

“Part VI—Non–Owner Coverage.”

¶ 7 According to the “Declaration Page,” Morrison only purchased insurance for “Part I—Liability” coverage and for “Part V—Underinsured Motorist” coverage. (Part V is not relevant to this appeal.) The salient point is that Morrison purchased liability coverage under Part I but did not purchase coverage under “Part III—Physical Damage,” which included collision coverage.

¶ 8 B. The Enterprise Automobile Rental

¶ 9 On May 1, 2012, Morrison rented an automobile from Enterprise, with a return date of May 8, 2012. The rental contract contained a “Collision Damage Waiver Notice,” which stated:

“This contract offers, for an additional charge, a Collision Damage Waiver to cover your financial responsibility for damage to the rental vehicle. The purchase of a Collision Damage Waiver is optional and may be declined. You are advised to carefully consider whether to sign this waiver if you have rental vehicle collision coverage provided by your credit card or collision insurance on your own vehicle. Before deciding whether to purchase the Collision Damage Waiver, you may wish to determine whether your own vehicle insurance affords you coverage for damage to the rental vehicle and the amount of deductible under your own insurance coverage.”

¶ 10 Morrison declined all of the optional waivers and protections offered by Enterprise.

¶ 11 On May 6, 2012, Morrison's rental car was involved in a hit-and-run accident, resulting in damage to the rental car. Morrison submitted a claim to Founders for physical damage coverage. Founders denied that claim on the basis that Morrison's insurance policy with Founders did not include collision coverage.

¶ 12 As an aside, we note that, when the rental car was involved in that accident, the car was being driven not by Morrison but by her acquaintance, Ariadne Walker. But the fact that someone else was driving the vehicle at the time of the accident is not otherwise relevant to this case, as Founders did not base its denial of coverage on that ground.

¶ 13 C. The Enterprise Lawsuit

¶ 14 On or about December 27, 2012, Enterprise filed a complaint against Morrison and Walker (No. 12 M1 177007) for damage to the vehicle it had rented to Morrison. The complaint contained five counts: count I was for bailment in contract; count II was for negligence and property damage; count III was for conversion; count IV was for negligent entrustment; and count V was for bailment in tort. Among other things, Enterprise alleged in count I that Morrison failed to make payments for the damages to the vehicle. In count II, Enterprise claimed that Walker's negligent operation of the vehicle caused property damage. In count III, Enterprise alleged that Walker was not an authorized user of the vehicle under the rental agreement. Count IV alleged that Morrison negligently entrusted the vehicle to Walker. In count V, Enterprise claimed that Morrison breached her bailment with Enterprise.

¶ 15 D. The Declaratory Judgment Action filed by Founders

¶ 16 Shortly after the Enterprise lawsuit was filed, Founders filed the instant complaint for declaratory judgment, naming Enterprise, Morrison and Walker as defendants, requesting that the court determine as a matter of law that Founders had no duty to defend or indemnify Morrison or Walker in connection with the underlying lawsuit and that Enterprise was not entitled to recover any monies under the Policy.

¶ 17 First, Founders alleged that its insurance policy with Morrison did not include collision coverage. Second, Founders alleged that, even if this loss were somehow included within the coverage Morrison did purchase—“Part I—Liability” coverage—that liability coverage contained an “exclusion (j)” that disclaimed liability, in pertinent part, for “injury to or destruction of * * * property rented to or in charge of the insured.” Either way, Founders claimed, it had no duty to defend or indemnify Morrison or Walker in connection with the underlying lawsuit or the motor vehicle accident, and Enterprise was not entitled to recover any monies under the Policy.

¶ 18 Initially, Enterprise moved to dismiss Founders' complaint, arguing that the liability coverage applied to the rental car accident and that, for various reasons, “exclusion (j)” in that liability coverage did not alter that conclusion. The trial court denied that motion, and Enterprise has not appealed that ruling.

¶ 19 Enterprise then filed its answer and counterclaim, seeking a declaratory judgment that Founders had a duty to defend and indemnify Morrison and Walker. Founders filed a motion for summary judgment, raising the same two legal arguments it asserted in its complaint. The trial court granted that motion. This appeal followed.

¶ 20 II. ANALYSIS

¶ 21 Founders raised two arguments in support of its motion for summary judgment. The trial court's written order does not explain the court's reasoning other than referencing the “reasons stated in court.” We lack a transcript of that hearing, so we do not know on which of the two bases the trial court granted summary judgment. Regardless, the parties agree that the arguments involve purely legal questions, and we may affirm a grant of summary judgment on any basis apparent in the record, regardless of whether the trial court relied on that basis. Harlin v. Sears Roebuck & Co., 369 Ill.App.3d 27, 31–32, 307 Ill.Dec. 825, 860 N.E.2d 479 (2006)

.

¶ 22 The construction of an insurance policy and the determination of contractual rights involve questions of law that are properly addressed in a summary judgment procedure. Certain Underwriters at Lloyd's, London v. Central Mutual Insurance Co., 2014 IL App (1st) 133145, ¶ 7, 382 Ill.Dec. 483, 12 N.E.3d 762

. That is particularly true where, as here, the parties agree that no factual disputes are present, and thus the only question is who is entitled to judgment as a matter of law. See Schultz v. Illinois Farmers Insurance Co., 237 Ill.2d 391, 399, 341 Ill.Dec. 429, 930 N.E.2d 943 (2010). Both a circuit court's grant of summary judgment and the construction of an insurance policy are reviewed de novo.

Valley Forge Insurance Co. v. Swiderski Electronics, Inc., 223 Ill.2d 352, 360, 307 Ill.Dec. 653, 860 N.E.2d 307 (2006).

¶ 23 “An insurance policy is a contract, and the general rules governing the interpretation of other types of contracts also govern the interpretation of insurance policies.” (Internal quotation marks omitted.) State Farm Mutual Automobile Insurance Co. v. Rodriguez, 2013 IL App (1st) 121388, ¶ 17, 370 Ill.Dec. 130, 987 N.E.2d 896

. This court's primary objective in construing the policy is to ascertain and give effect to the intentions of the parties as expressed by the words of the contract. State Farm Mutual Automobile Insurance Co. v. Enterprise Leasing Co. of Chicago, 386 Ill.App.3d 945, 949, 326 Ill.Dec. 191, 899 N.E.2d 408 (2008)

. We construe the policy as a whole, with due regard to the risk undertaken, the subject matter insured, and the purposes of the entire contract. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90, 108, 180 Ill.Dec. 691, 607 N.E.2d 1204 (1992).

¶ 24 As noted, Founders raises...