STATE FARM MUT. AUTO. v. HERTZ CLAIM MAN.

• Citation: 273 Ill.Dec. 507,338 Ill. App.3d 712,789 N.E.2d 407
• Decision Date: 29 April 2003
• Docket Number: No. 5-01-0694.,5-01-0694.
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Appellant, v. HERTZ CLAIM MANAGEMENT CORPORATION and National Union Fire Insurance Company of Pittsburgh, Pennsylvania, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

789 N.E.2d 407

338 Ill. App.3d 712

273 Ill.Dec. 507

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Appellant, v. HERTZ CLAIM MANAGEMENT CORPORATION and National Union Fire Insurance Company of Pittsburgh, Pennsylvania, Defendants-Appellees.

No. 5-01-0694.

Appellate Court of Illinois, Fifth District.

April 29, 2003.

John W. Leskera, Dunham, Boman & Leskera, Collinsville; Robert D. Francis, Edwardsville, for Appellant.

Gregory J. Minana, R. Prescott Sifton, Jr., Blackwell, Sanders, Peper, Martin, LLP, Edwardsville, for Appellees.

Justice CHAPMAN delivered the opinion of the court:

The plaintiff's insured was involved in a motor vehicle accident while driving a rental vehicle insured by the defendants, which resulted in a claim against the driver for injuries and property damage sustained by another driver. The plaintiff sought a declaratory judgment that the defendants' coverage for liability stemming from the accident was primary while the plaintiff's was secondary. The trial court awarded a summary judgment in favor of the defendants. The plaintiff appeals, arguing that (1) a provision in the rental contract making the driver's insurance primary was contrary to law and therefore ineffective and (2) the initial-permission rule required the defendants' coverage to be primary. We affirm the trial court.

I. BACKGROUND

On January 11, 1999, Michael Kauling rented a 1998 Ford Contour from ADRI/Auffenberg Ford, doing business as Auffenberg Rent-A-Car (Auffenberg), to drive while his van was being repaired by a Ford Motor Company (Ford) dealership. His rental contract with Auffenberg provided that if he did not purchase a liability insurance supplement from Auffenberg at an additional charge, his car insurance would provide primary coverage. Kauling did not purchase the liability insurance supplement. Later that day, Kauling was involved in a car accident with David Watson, who filed a complaint against Kauling for his injuries and the damage to his vehicle.

The Contour was owned by Ford and insured through defendant National Union Fire Insurance Company of Pittsburgh, Pennsylvania (National Union). The certificate of financial responsibility that Ford had filed with the Illinois Secretary of State pursuant to section 9-101 of the Illinois Vehicle Code (625 ILCS 5/9-101 (West 2000)) stated that the coverage provided by the National Union policy was secondary. However, the policy itself did not contain such a limitation. Kauling's own vehicle was insured by plaintiff State Farm Mutual Automobile Insurance Company (State Farm). His policy provided coverage for liability arising from his use of "temporary substitute vehicles," including rental cars. It provided, however, that such coverage was secondary if the temporary substitute vehicle had other liability insurance.

On January 12, 2000, the plaintiff filed a complaint against defendant Hertz Claim Management Corp., with which Ford also maintains insurance policies covering Auffenberg vehicles. On May 24, 2000, the plaintiff filed an amended complaint, naming National Union as an additional defendant. The complaints sought a declaratory judgment that the defendants were responsible for providing primary coverage for Kauling's potential liability to Watson. The defendants and the plaintiff filed motions for a summary judgment. The trial court entered a summary judgment order in favor of the defendants on July 30, 2001. This appeal followed.

II. ANALYSIS

The plaintiff contends that Illinois law requires a vehicle owner's insurance to provide primary coverage in all cases. The defendants, by contrast, argue that this requirement is imposed by the Illinois Safety and Family Financial Responsibility Law (Financial Responsibility Law) (625 ILCS 5/7-100 through 7-708 (West 2000)), which is inapplicable to rental vehicles because their insurance is governed by a set of statutes specific to the insurance of rental cars (rental car insurance law) (625 ILCS 5/9-101 through 9-110 (West 2000)), which does not contain such a provision. We agree with the defendants.

A summary judgment is appropriate only where there is no genuine issue of material fact and the pleadings, depositions, and affidavits show that the moving party is entitled to a judgment as a matter of law. Farm Bureau Mutual Insurance Co. v. Alamo Rent A Car, Inc., 319 Ill. App.3d 382, 386, 253 Ill.Dec. 18, 744 N.E.2d 300, 302 (2000). Our review of the trial court's ruling on a motion for a summary judgment is de novo. Farm Bureau Mutual Insurance Co., 319 Ill.App.3d at 385, 253 Ill.Dec. 18, 744 N.E.2d at 302.

Section 7-601(a) of the Illinois Vehicle Code provides that no one may operate a motor vehicle or allow a vehicle to be operated without obtaining sufficient insurance. 625 ILCS 5/7-601(a) (West 2000). For most vehicles, section 7-203 requires that the policy limits must be at least $20,000 per person or $40,000 per accident for personal injury or death and at least $15,000 for property damage. 625 ILCS 5/7-601(a), 7-203 (West 2000). Section 7-317(b)(2) requires that the insurance must cover any person driving the insured vehicle with the express or implied permission of the insured. 625 ILCS 5/7-317(b)(2) (West 2000). Such coverage is commonly referred to as "omnibus coverage." If the policy does not expressly provide omnibus coverage, it will be interpreted as providing it. State Farm Mutual Automobile Insurance Co. v. Universal Underwriters Group, 182 Ill.2d 240, 244, 231 Ill.Dec. 75, 695 N.E.2d 848, 850 (1998) (where omnibus clauses are required by statute, such a clause must be read into each insurance policy).

Among the vehicles exempted from the requirements of section 7-601(a) are those in compliance with other statutes that require insurance in amounts meeting or exceeding those required by section 7-601(a). 625 ILCS 5/7-601(b)(6) (West 2000). The Illinois Supreme Court has held that this exception applies only if the other statute requires coverage of the type mandated by section 7-601(a). Universal Underwriters Group, 182 Ill.2d at 245, 231 Ill.Dec. 75, 695 N.E.2d at 851. Section 9-101 of the Illinois Vehicle Code requires the owners of rental vehicles to provide proof of financial responsibility to the Secretary of State. 625 ILCS 5/9-101 (West 2000). Financial responsibility may be in the form of a bond, an insurance policy, or a certificate of self-insurance. 625 ILCS 5/9-102 (West 2000). If the owner of the rental car opts to provide an insurance policy, as Ford has done in the instant case, it must provide coverage with limits of at least $50,000 per person for bodily injury or death or $100,000 per accident for bodily injury or death and property damage. The policy must cover any driver using the car with the insured's express or implied permission. 625 ILCS 5/9-105 (West 2000). Because the rental car insurance law requires rental cars to be insured in amounts exceeding those required by sections 7-601(a) and 7-203 and contains an omnibus clause identical to that found in section 7-317(b)(2), we find that rental cars fall within the exception provided by section 7-601(b)(6).

Section 7-317 and section 9-105 are silent on which insurer is to provide primary coverage where the driver and the vehicle are covered by different policies. 625 ILCS 5/7-317, 9-105 (West 2000). However, the Illinois Supreme Court has stated that, absent statutory language to the contrary, the omnibus clause found in section 7-317(b)(2) "must be construed to require primary coverage." Universal Underwriters Group, 182 Ill.2d at 246, 231 Ill.Dec. 75, 695 N.E.2d at 851. We note that the two omnibus clauses serve the same purpose and contain nearly identical language. For the reasons which follow, however, we conclude, as have the other Illinois appellate courts to consider the issue, that section 9-105 does not require a rental car agency to provide primary insurance as long as such coverage is available from another source.

The purpose of the omnibus provisions is to protect the public by ensuring that adequate resources are available to compensate for injuries sustained as a result of automobile accidents. 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, 261 (1987). Their purpose is the protection of the public, not other insurance agencies. Continental Casualty Co. v. Travelers Insurance Co., 84 Ill.App.2d 200, 204, 228 N.E.2d 141, 144 (1967). In general, where two insurance policies each purport to offer only secondary coverage, the insurance of the vehicle's owner is primary while that of the driver is secondary. Dotson v. Agency Rent-A-Car, Inc., 101 Ill. App.3d 804, 807, 57 Ill.Dec. 322, 428 N.E.2d 1002, 1004 (1981). However, the Illinois courts that have considered this question in the unique context of rental cars have concluded that the general rule does not apply. Farm Bureau Mutual Insurance Co., 319 Ill.App.3d at 389, 253 Ill.Dec. 18, 744 N.E.2d at 305; Insurance Car Rentals, Inc., 152 Ill.App.3d at 234, 105 Ill.Dec. 387, 504 N.E.2d at 262; Dotson, 101 Ill.App.3d at 808, 57 Ill.Dec. 322, 428 N.E.2d at 1005. This is so because the public policy at stake is not frustrated by departing from the general rule. Farm Bureau Mutual Insurance Co., 319 Ill. App.3d at 389, 253 Ill.Dec. 18, 744 N.E.2d at 305; Insurance Car Rentals, Inc., 152 Ill.App.3d at 234, 105 Ill.Dec. 387, 504 N.E.2d at 262.

In Insurance Car Rentals, Inc., as here, a driver rented a car for use while his car was being repaired. Insurance Car Rentals, Inc., 152 Ill.App.3d at 227, 105 Ill.Dec. 387, 504 N.E.2d at 258. As here, the car rental agency offered him a choice between relying on his insurance company to provide primary coverage or paying a higher cost in order to be provided with full coverage through the rental agency's insurer. The driver opted for the former option. Insurance Car Rentals, Inc., 152 Ill.App.3d at 228, 105 Ill.Dec....