Insurance Car Rentals, Inc. v. State Farm Mut. Auto. Ins. Co.
| Decision Date | 13 February 1987 |
| Docket Number | No. 3-86-0150,3-86-0150 |
| Citation | 105 Ill.Dec. 387,504 N.E.2d 256,152 Ill.App.3d 225 |
| Parties | , 105 Ill.Dec. 387 INSURANCE CAR RENTALS, INC., Plaintiff-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant and Counterplaintiff-Appellant (Planet Insurance Company, Thomas Burke, and Marjorie Burke, Defendants-Appellees; Planet Insurance Company, Insurance Car Rentals, Inc., Thomas Burke, and Marjorie Burke, Counterdefendants-Appellees). |
| Court | United States Appellate Court of Illinois |
Robert D. Jackson, argued, John A. Kendrick, Westervelt, Johnson, Nicoll & Keller, Peoria, for State Farm Mut. Ins. Co.
Laurie M. Judd, Kavanagh, Scully, Sudow, White & Frederick, Peoria, for Insurance Car Rentals, Inc.
W. Thomas Johnston, Dianne M. Wolfe, McConnell, Kennedy, Quinn & Johnston, Peoria, for Planet Ins. Co.
This appeal arises out of an action and a counterclaim for declaratory judgment, filed by Insurance Car Rentals, Inc., and State Farm Mutual Automobile Insurance Company, respectively, to determine liability for damages incurred as a result of an automobile accident involving the renters of a vehicle owned by Insurance Car Rentals, Inc. The circuit court rendered a declaratory judgment in favor of Insurance Car Rentals, Inc., and Planet Insurance Company, the insurance carrier of the rental agency.
On October 24, 1983, Robert Wille (Wille) rented a 1982 Chevrolet Chevette from Insurance Car Rentals, Inc. (Car Rentals) after being referred to Car Rentals by an adjuster for State Farm, for the use of himself and his wife during a period of time in which his personal auto was being repaired.
Car Rentals rents cars and trucks on a temporary basis to replace disabled vehicles and had, at the time of Wille's rental, filed a motor vehicle liability policy in compliance with the Illinois Vehicle Code (Ill.Rev.Stat.1985, ch. 95 1/2, par. 9-101), which requires car rental agencies to file proof of financial responsibility with the Illinois Secretary of State. The business automobile policy was issued by Planet Insurance Company (Planet) which insures against bodily injury in the amount of $100,000 per person (or $300,000 per accident) and against property damage in the amount of $50,000. Car Rentals paid insurance premiums to Planet for rental vehicles on a per use basis.
Car Rentals offers its customers two options with respect to insurance coverage. First, a rental program can be obtained whereby the customer pays $18 per day for a rental car with complete insurance coverage provided through Car Rentals' Planet policy. Second, a customer may, as in Mr. Wille's instance, rent a car for $13.50 per day and rely on his insurance company to provide insurance coverage. Mr. Wille signed a form entitled "Temporary Substitute Automobile Rental Agreement for Insurance Car Replacement Only," which, in pertinent part, states,
As usual course of business for Car Rentals, where a customer chooses to rely on his own insurance coverage, Car Rentals checks the customer's drivers license for pertinent information and also checks with the customer's insurance company in order to confirm the policy number, expiration date, and several items of coverage. Before renting to Willes, Car Rentals contacted State Farm agent Norm Geier in order to verify Mr. Wille's insurance coverage. There is no discrepancy as to whether Mr. Geier confirmed the policy; the Willes were insured by State Farm. There is, however, a question as to whether Mr. Geier confirmed that the Willes' policy would cover the automobile from Car Rentals. The Willes' policy, in pertinent part, reads:
"3. Temporary Substitute Car, Non-Owned Car, Trailer.
If a temporary Substitute Car * * * has other vehicle liability coverage on it, then this coverage is excess. THIS COVERAGE SHALL NOT APPLY:
A. IF THE VEHICLE IS OWNED BY ANY PERSON OR ORGANIZATION IN A CAR BUSINESS; AND
B. IF THE INSURED OR THE OWNER HAS OTHER LIABILITY COVERAGE WHICH APPLIES IN WHOLE OR IN PART AS PRIMARY, EXCESS OR CONTINGENT COVERAGE."
Temporary substitute car, as defined by State Farm, is:
Since Mr. Wille opted for the rental agreement which did not include a cost for insurance coverage, Car Rentals did not include the 1982 Chevrolet Chevette rented by Wille in its premium payment to Planet.
On November 15, 1983, Mrs. Wille, while driving the rented Chevette was involved in an auto accident with Marjorie and Thomas Burke (The Burkes). The Burkes filed suit against Mrs. Wille for personal injury and property damage. The Burkes demanded State Farm to compensate for injuries and damages, and State Farm in turn demanded Planet to defend and indemnify the Willes. Planet rejected State Farm's demand. Subsequently, State Farm, Planet and Car Rentals entered into an agreement to resolve the Burkes' claims but which would not prejudice any party's legal or contractual rights. State Farm, in accordance with that agreement, paid the Burkes $3,000 in settlement of their suit, and it paid Car Rentals $2,096.98 for damage to the rental vehicle as a result of the accident.
Car Rentals filed a complaint for declaratory judgment solely against State Farm to establish State Farm's liability for all damages arising from the accident. State Farm filed a declaratory judgment counterclaim against Car Rentals, Planet and the Burkes, asserting that the financial responsibility provisions of the Motor Vehicle Code and the public policy of Illinois make the "waiver" term of the rental agreement between Car Rentals and the Burkes unenforceable. The trial court granted declaratory judgment to Car Rentals and Planet and against State Farm. The court found that the "waiver" provision was not barred by the Motor Vehicle Code or the public policy of Illinois and that State Farm is primarily liable to pay the damages for which the Willes are responsible. State Farm filed for this appeal.
Appellants raise five issues on appeal: (1) whether Illinois law or public policy requires Car Rentals to provide liability coverage to its renter, Mr. Wille, if it elects to submit an insurance policy to the Secretary of State as proof of financial responsibility; (2) whether Illinois law or public policy permit Car Rentals to waive insurance coverage by its insurance carrier, Planet, through language in a rental agreement wherein, for a lower rental cost, the customer can voluntarily choose to rely solely on his personal auto insurance carrier during the rental period; (3) whether Car Rentals' separate agreement with customers concerning insurance coverage constitutes a unilateral change in the contract for insurance between Planet and Car Rentals; (4) whether the escape clause contained in the State Farm insurance policy with the Willes is applicable; and (5) if the escape clause is not applicable, which insurance company is the primary carrier providing liability coverage.
Issues (1) and (2) can be resolved together. Illinois Revised Statutes 1985, chapter 95 1/2, paragraph 9-101, requires that car rental agencies file proof of financial responsibility with the Illinois Secretary of State. A rental agency may file either a motor vehicle liability bond, an insurance policy or a certificate of self-insurance. (Ill.Rev.Stat.1985, ch. 95 1/2, par. 9-102.) Car Rentals met the requirement of paragraph 9-105 by filing a rental car policy issued by Planet Insurance Company. Basically, a policy certified to the Secretary of State must contain an "omnibus coverage" clause. Each customer and individual operating the automobile with the permission of the insured must be furnished $50,000 of liability coverage by a certified insurance policy. Accordingly, under paragraph 9-101 of the Motor Vehicle Code, the policy must be in "full force and effect" before a business can rent cars to customers.
State Farm asserts that filing the proof of financial responsibility with the Secretary of State invariably means that the business filing such proof must insure the customer renting the vehicle. Part of the rationale of State Farm is the language of paragraph 9-101 that the policy must be in "full force and effect." Moreover, that under paragraph 9-109 of the Motor Vehicle Code, "(i)f any insurance policy * * * filed * * * shall for any reason become inoperative, the Secretary of State shall * * * cancel the certificate of compliance with the owner and it shall be unlawful for the owner to rent out the motor vehicle * * *." Hence State Farm asserts that the agreement entered into by Car Rentals and the Willes is prohibited by statute and unenforceable. As further authority for its position, State Farm cites cases from other jurisdictions where appeals courts have declined to allow a car rental agency or automobile dealership to avoid the effects of applicable financial responsibility laws through the inclusion of limiting language in the policies. (Metz v. Universal Underwriters Insurance Co. (1973) (en banc), 10 Cal.3d 45, 109 Cal.Rptr. 698, 513 P.2d 922; Allstate Insurance Co. v. Sullivan (Mo.App.1982), 643 S.W.2d 21; Keystone Insurance Co. v. Atlantic Chrysler Plymouth, Inc. (1979), 167 N.J.Super. 353, 400 A.2d 872.) In each of these cases the insurance carrier attempted to avoid liability by limiting language in the policy itself and in each case the court rejected such attempt. We do not disagree with the rationale or the decision of the respective courts in each case, however, those cases are not...
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