State Farm Mut. Auto. Ins. Co. v. Fisher

• Decision Date: 25 August 2000
• Docket Number: No. 1-99-3396.,1-99-3396.
• Citation: 315 Ill. App.3d 1159,735 N.E.2d 747,249 Ill.Dec. 143
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Appellee, v. Jeremy FISHER and Harrah's Casino Illinois, an Illinois Corporation, Defendants-Appellants (Ruby Smith, Defendant).
• Court: United States Appellate Court of Illinois

735 N.E.2d 747

315 Ill. App.3d 1159

249 Ill.Dec. 143

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Appellee, v. Jeremy FISHER and Harrah's Casino Illinois, an Illinois Corporation, Defendants-Appellants (Ruby Smith, Defendant).¹

No. 1-99-3396.

Appellate Court of Illinois, First District, Fifth Division.

August 25, 2000.

Rehearing Denied September 22, 2000.

Fraterrigo, Beranek, Feiereisel & Kasbohm, Chicago (Francis P. Kasbohm, of counsel), for Appellants.

Taylor, Miller, Sprowl, Hoffnagle & Merletti, Chicago (Frank C. Stevens, of counsel), for Appellee.

Justice HARTMAN delivered the opinion of the court:

Ruby Smith (Smith) allegedly sustained injuries while entering Maurice Barnes' (Barnes) vehicle following its return from the valet parking service at Harrah's Casino Illinois (Harrah's). Smith filed suit against Barnes, Jeremy Fisher (Fisher), the valet driver employed by Harrah's, and Harrah's. Fisher and Harrah's tendered their defense to Barnes' automobile insurance carrier, State Farm Mutual Automobile Insurance Company (State Farm).

State Farm later sought a declaratory judgment that it had no duty to defend or indemnify Fisher or Harrah's because there was no coverage under the "automobile business" exclusion clause (sometimes "exclusion clause") in Barnes' insurance policy. The circuit court granted State Farm's motion for summary judgment, finding that the policy exclusion clause applied. Fisher and Harrah's allege State Farm's exclusion clause violates public policy, was ambiguous, and does not apply by its own terms because Fisher was acting as Barnes' agent. They seek reversal of the court's judgment, entry of summary judgment in their favor, and sanctions against State Farm.

On September 21, 1995, Barnes and Smith visited Harrah's in Joliet, Illinois. Upon arrival, Barnes, driving his 1985 Mercury Cougar, gave his vehicle to an employee of Harrah's valet service. When finished with their visit, Fisher retrieved Barnes' vehicle and returned it to the front of the casino. As Smith entered the passenger side, the vehicle rolled backward, causing her to be knocked to the ground. At the time of the accident, Barnes' vehicle was insured through State Farm.

In August 1997, Smith filed suit against Fisher, Harrah's, and Barnes, alleging that defendants negligently managed and operated the vehicle, failed to keep the vehicle under proper control, failed to apply the emergency brake upon returning the vehicle, and negligently left the motor running on an inclined driveway. Subsequently, Fisher and Harrah's tendered their defense to State Farm, which State Farm denied, alleging that it had no duty to defend Fisher and Harrah's under Barnes' insurance policy, based upon the exclusion clause in Barnes' policy that provided, in pertinent part:

"THERE IS NO COVERAGE:

1. WHILE ANY VEHICLE INSURED UNDER THIS SECTION IS:

* * *

b. BEING REPAIRED, SERVICED OR USED BY ANY PERSON EMPLOYED OR ENGAGED IN ANY WAY IN A CAR BUSINESS. This does not apply to:

(1) you or your spouse

* * *

(4) any agent, employee or partner of you, your spouse, any relative or such resident." (Emphasis in original.)

The policy defined a "car business" as "a business or job where the purpose is to sell, lease, repair, service, transport, store or park land motor vehicles or trailers."

In July 1998, State Farm sought a declaratory judgment that it had no duty to defend Fisher and Harrah's because of the excluded coverage. In September 1998, Fisher and Harrah's filed an answer and affirmative defense to State Farm's declaratory judgment complaint, arguing that the exception did not apply because Fisher and Harrah's were acting as Barnes' agent when the injury occurred.

In March 1999, State Farm moved for summary judgment. In April 1999, Fisher and Harrah's responded to State Farm's motion for summary judgment and filed a cross-motion for summary judgment, asserting that they were Barnes' agents and therefore were exempt from the exclusion clause; the clause language was ambiguous; and the exclusion violated public policy.

In May 1999, the circuit court granted State Farm's summary judgment motion and denied Fisher and Harrah's cross-motion, finding that "Fisher, while working as a valet for Harrah's was in the `car business' [because] his job was to `store or park land motor vehicles.'" In addition, Fisher and Harrah's were not exempt from the exclusion clause because Fisher was a bailee, not Barnes' agent, when he parked Barnes' vehicle. Last, the exclusion clause was not ambiguous and State Farm appropriately relied upon the provision when it denied the claim.

In August 1999, Fisher and Harrah's moved to reconsider the grant of summary judgment, arguing that Fisher could be both Barnes' bailee and agent and asked the circuit court to follow a factually similar case from New Jersey, Scott v. Salerno, 688 A.2d 614, 297 N.J.Super. 437 (1997). The circuit court denied the motion, finding that Fisher was acting as a bailee, not Barnes' agent, and the court was not bound to follow rulings of other states' courts. This appeal followed.

I

Fisher and Harrah's initially assert that entry of summary judgment in State Farm's favor was in error because it should not have been permitted to rely on the "car business" exclusion of the policy.

The construction of an insurance policy is a question of law subject to de novo review. State Farm Mutual Automobile Insurance Co. v. Villicana, 181 Ill.2d 436, 441, 230 Ill.Dec. 30, 692 N.E.2d 1196 (1998); Zimmerman v. State Farm Mutual Automobile Insurance Co., 312 Ill. App.3d 1065, 1068, 246 Ill.Dec. 70, 729 N.E.2d 70 (2000), appeal denied, 189 Ill.2d 704, 248 Ill.Dec. 608, 734 N.E.2d 899 (2000).

The primary objective in construing the language of a policy is to ascertain and give effect to the intentions of the parties as expressed in their agreement. McKinney v. Allstate Insurance Co., 188 Ill.2d 493, 497, 243 Ill.Dec. 56, 722 N.E.2d 1125, 1127 (1999). Language in a policy will not be enforced, however, if it contradicts public policy as mandated by the Illinois legislature. See State Farm Mutual Automobile Insurance Co. v. Universal Underwriters Group, 182 Ill.2d 240, 246, 231 Ill.Dec. 75, 695 N.E.2d 848, 850 (1998) (Universal Underwriters); Pekin Insurance Co. v. State Farm Mutual Automobile Insurance Co., 305 Ill.App.3d 417, 420, 238 Ill.Dec. 566, 711 N.E.2d 1227, 1230 (1999) (Pekin)

.

Insurance is based upon the theory of spreading risk among many policy holders. Group Life & Health Insurance v. Royal Drug Co., 440 U.S. 205, 211, 99 S.Ct. 1067, 1073, 59 L.Ed.2d 261, 268 (1979). The purpose of mandatory automobile liability insurance is not only to protect the owner against liability or some other insurance company; rather, its' principal purpose is to protect the public by securing payment of their damages. See Continental Casualty Co. v. Travelers Insurance Co., 84 Ill.App.2d 200, 206, 228 N.E.2d 141, 144 (1967); 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); Marcus v. Hanover Insurance Co., 740 So.2d 603, 605 (1999) (Marcus); 7 Couch on Insurance Law § 109:5 (3rd rev. 1997).

Section 7-601(a) of the Illinois Vehicle Code (Code) requires vehicles to be insured through a "liability insurance policy." 625 ILCS 5/7-601(a) (West 1998). The definition of a "motor vehicle liability policy," contained in section 7-317 of the Code (625 ILCS 5/7-317 (section 7-317)), mandates coverage requirements in such a policy. See Universal Underwriters, 182 Ill.2d at 244, 231 Ill.Dec. 75, 695 N.E.2d at 850.

Section 7-317(b) provides, in pertinent part:

"`Motor vehicle liability policy' defined. * * *

(b) Owner's Policy. Such owner's policy of liability insurance:

* * *

2. Shall insure the person named therein and any other person using or responsible for the use of such motor vehicle or vehicles with the express or implied permission of the insured." (Emphasis added.) 625 ILCS 5/7-317(b)(2) (West 1998).

Fisher and Harrah's argue first that State Farm cannot deny coverage based on the automobile business exclusion clause of the policy because the exception violates public policy as mandated in section 7-317(b)(2), relying on Universal Underwriters and Pekin. State Farm responds that 7-317(b)(2) and Universal Underwriters should not apply in the present situation because the named insured does not control the selection of the driver or the manner in which the car is driven once he relinquishes control to a third party.

In Universal Underwriters, a car dealership allowed Rodney Luckhart to test-drive one of its vehicles. During the test-drive, Luckhart was involved in an automobile accident. The car dealership's policy stated that an insured included any person required by law to be insured while test-driving one of its vehicles. Universal Underwriters, 182 Ill.2d at 241-42, 231 Ill.Dec. 75, 695 N.E.2d at 849. Luckhart's insurance carrier, State Farm, settled all claims against Luckhart and then sued the dealership's insurance carrier, Universal Underwriters, for reimbursement. The circuit court granted State Farm summary judgment and the appellate court affirmed (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)). The supreme court affirmed, finding section 7-317(b) mandated that "a liability insurance policy issued to the owner of a vehicle must cover the named insured and any other person using the vehicle with the named insured's permission," and if an insurance policy fails to include a clause providing coverage to persons who are permitted to use the named insured's vehicle, such a clause will be read into the policy. Universal Underwriters, 182 Ill.2d at 244-46, 231 Ill.Dec. 75, 695 N.E.2d at 850-51.

In Pekin, the appellate court found the language in a car dealership's insurance policy that excluded test-drivers...