State Farm v. Enterprise Leasing
| Decision Date | 21 November 2008 |
| Docket Number | No. 1-07-2589.,1-07-2589. |
| Citation | 386 Ill. App. 3d 945,899 N.E.2d 408 |
| Parties | STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Appellee, v. ENTERPRISE LEASING COMPANY OF CHICAGO, d/b/a Enterprise Rent-A-Car, Defendant-Appellant. (Lesean Doby, Constance Taylor and David Bartholomew, Defendants). |
| Court | United States Appellate Court of Illinois |
Jennifer L. Medenwald, Querrey & Harrow, Ltd., Chicago, IL, for Plaintiff-Appellee.
Samuel A. Shelist, Shelist Law Firm LLC, for Defendant-Appellant.
Plaintiff, State Farm Mutual Automobile Insurance Company (State Farm), filed a declaratory judgment action seeking a determination that it had no duty to defend or indemnify defendant Constance Taylor or defendant Lesean Doby in an underlying action filed against them by defendant Enterprise Leasing Company of Chicago, d/b/a Enterprise Rent-A-Car (Enterprise). The underlying action arose out of Taylor's and Doby's alleged failure to make payments to Enterprise for collision damage to a vehicle that Taylor rented from Enterprise and Doby was driving at the time of an accident. The trial court granted State Farm's motion for summary judgment and found no duty to defend Taylor or Doby in the underlying action.
Enterprise appeals, arguing that the trial court erred in finding that State Farm had no duty to defend Taylor or Doby because provisions in the policy mandate coverage, and State Farm should be barred under the doctrine of estoppel from denying liability and physical damages coverage to Taylor and Doby for breaching its duty to defend.
The record discloses the following facts. On September 8, 2003, Constance Taylor rented a 2003 Land Rover Discovery from Enterprise. The rental agreement offered, for an additional fee, an optional collision damage waiver (CDW). The CDW covered the renter's "financial responsibility for damage to the rental vehicle." The rental agreement advised the renter The rental agreement provided that the CDW may be voided for several reasons, including "[d]amage or loss occurring while the rental vehicle is operated by a driver not permitted under the rental agreement." The rental agreement indicated that Taylor opted to add the CDW coverage. The rental agreement also had a section in which the renter could include an "additional authorized driver." However, Taylor did not list another driver and the agreement provided that no other drivers were permitted "without owner's approval." The agreement also showed that the rental vehicle was not permitted to leave Illinois.
At the time of the rental, Taylor held an automobile insurance policy with State Farm. The vehicle covered on the policy was a 1998 Chevrolet Cavalier. No additional insureds or insured vehicles were listed on the policy.
Despite the aforementioned provisions in the rental agreement, on September 10, 2003, Lesean Doby was driving the rented Discovery in Michigan when an accident occurred on Interstate 94 East. According to an accident report, the driver swerved to avoid a deer and lost control of the car, causing it to roll over and land in a ditch. The estimated damage to the Discovery was $35,434.44, and the vehicle was valued at $27,700. Taylor's CDW was voided under the rental agreement because the accident occurred when Doby was driving the Discovery. Enterprise made payment demands of Taylor and Doby for $28,430, equal to the value of the vehicle at the time of the accident plus towing costs.
In October 2003, Enterprise contacted State Farm advising it that Taylor had voided the CDW and was responsible for all damages from the claim. In January 2004, State Farm sent Taylor a letter denying coverage because Taylor was not driving or occupying the rental car at the time of the accident.
In October 2004, Enterprise filed its complaint in the underlying litigation based on the damage sustained by the Discovery in the September 2003 accident. Count I was against Taylor for breach of contract, count II was against Doby for negligence and property damage, and count III was against Doby for conversion. Both Taylor and Doby failed to appear in the action and default orders were entered against them. In October 2005, Enterprise wrote to State Farm to advise it of Taylor's default and to demand that it defend her in the action.
In January 2006, State Farm appeared in the underlying action to represent Taylor and sent a letter advising Enterprise that it reserved its right to deny coverage. Shortly thereafter, State Farm filed its complaint in the instant declaratory judgment action seeking a determination that it owed no coverage to Taylor or Doby. Enterprise filed a counterclaim asking for a declaration that coverage existed under the State Farm policy.
State Farm filed a motion for summary judgment and argued that there was no coverage for the underlying action because Taylor was not using the vehicle at the time of the accident and Doby did not meet the liability coverage section's definition of an "insured." Further, there was no coverage for damages to the vehicle under the physical damages coverage because Doby also does not meet that section's definition of an "insured." In response, Enterprise asserted that the omnibus clause applied because Doby drove the vehicle with Taylor's permission. Enterprise also contended that State Farm waived its right to deny coverage because it failed to timely defend Taylor and Doby in the underlying action. In July 2007, the trial court granted State Farm's motion for summary judgment.
This appeal followed.
"The construction of an insurance policy and a determination of the rights and obligations thereunder are questions of law for the court which are appropriate subjects for disposition by way of summary judgment." Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill.2d 384, 391, 189 Ill.Dec. 756, 620 N.E.2d 1073 (1993). Summary judgment is appropriate where the pleadings, depositions, and admissions on file, together with any affidavits and exhibits, when viewed in the light most favorable to the nonmoving party, indicate that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2004). We review cases involving summary judgment de novo. Ragan v. Columbia Mutual Insurance Co., 183 Ill.2d 342, 349, 233 Ill. Dec. 643, 701 N.E.2d 493 (1998).
Our primary objective in construing the policy language is to ascertain and give effect to the intentions of the parties as expressed by the words of the contract. Central Illinois Light Co. v. Home Insurance Co., 213 Ill.2d 141, 153, 290 Ill.Dec. 155, 821 N.E.2d 206 (2004). An insurance contract is to be construed as a whole, giving effect to every provision because it must be assumed that every provision was intended to serve a purpose. Central Illinois Light Co., 213 Ill.2d at 153, 290 Ill.Dec. 155, 821 N.E.2d 206. "If the words used in the policy are clear and unambiguous, they must be given their plain, ordinary, and popular meaning." Central Illinois Light Co., 213 Ill.2d at 153, 290 Ill.Dec. 155, 821 N.E.2d 206. "A contract term is ambiguous if it can reasonably be interpreted in more than one way due to the indefiniteness of the language or due to it having a double or multiple meaning." William Blair & Co. v. FI Liquidation Corp., 358 Ill.App.3d 324, 334, 294 Ill.Dec. 348, 830 N.E.2d 760 (2005). "A contract is not ambiguous, however, if a court can ascertain its meaning from the general contract language." William Blair, 358 Ill.App.3d at 334, 294 Ill.Dec. 348, 830 N.E.2d 760. "[T]he mere fact that the parties disagree as to the meaning of a term does not make that term ambiguous." William Blair, 358 Ill App.3d at 334, 294 Ill.Dec. 348, 830 N.E.2d 760.
On appeal, Enterprise argues that the trial court erred in granting State Farm's motion for summary judgment because State Farm had a duty to provide coverage under the omnibus clause of its policy, and State Farm should be estopped from denying coverage for failure to defend Taylor and Doby under a reservation of rights. "A provision in an automobile insurance policy extending liability coverage to persons who use the named insured's vehicle with his or her permission is commonly referred to as an omnibus clause." State Farm Mutual Automobile Insurance Co. v. Universal Underwriters Group, 182 Ill.2d 240, 243-44, 231 Ill.Dec. 75, 695 N.E.2d 848 (1998).
Specifically, Enterprise focuses its argument on the "omnibus" provision in the State Farm policy and relies on the provisions of the Illinois Safety and Family Financial Responsibility Law (Financial Responsibility Law) (625 ILCS 5/7-100 et seq. (West 2002)) as the basis for its argument that State Farm is required to provide coverage for the damage to the Discovery.
Section 7-601(a) of the Financial Responsibility Law provides:
"No person shall operate, register or maintain registration of, and no owner shall permit another person to operate, register or maintain registration of, a motor vehicle designed to be used on a public highway unless the motor vehicle is covered by a liability insurance policy." 625 ILCS 5/7-601(a) (West 2002).
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) lists the requirements of an owner's policy, including the omnibus clause.
"(b) ...
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