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

• Decision Date: 30 June 2017
• Docket Number: No. 1-16-1334.,1-16-1334.
• Citation: 82 N.E.3d 523,2017 IL App (1st) 161334
• Parties: Phoungeun THOUNSAVATH, Plaintiff and Counterdefendant-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant and Counterplaintiff-Appellant.
• Court: United States Appellate Court of Illinois

2017 IL App (1st) 161334

82 N.E.3d 523

Phoungeun THOUNSAVATH, Plaintiff and Counterdefendant-Appellee,

v.STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant and Counterplaintiff-Appellant.

No. 1-16-1334.

Appellate Court of Illinois, First District, FIFTH DIVISION.

June 30, 2017

Frank C. Stevens, of Taylor Miller LLC, of Chicago, for appellant.

Eric J. Parker, of Stotis & Baird Chtrd., of Chicago, for appellee.

OPINION

JUSTICE HALL delivered the judgment of the court, with opinion.

¶ 1 The plaintiff, Phoungeun Thounsavath, filed a complaint for declaratory judgment against the defendant, State Farm Mutual Automobile Insurance Company (State Farm). The plaintiff sought a declaration that, as applied to her, the driver exclusion endorsement in the automobile liability policies issued to her by State Farm violated section 143a-2 of the Illinois Insurance Code (Insurance Code) ( 215 ILCS 5/143a-2 (West 2012) ) and the public policy of Illinois. State Farm answered the complaint and filed a counterclaim for declaratory judgment, seeking a declaration that the plaintiff was not entitled to underinsured coverage under her automobile liability policies with State Farm. The circuit court denied State Farm's motion for summary judgment and granted the plaintiff's motion for summary judgment. State Farm appeals.

¶ 2 On appeal, State Farm contends that, as to the plaintiff, its driver exclusion endorsement does not violate section 7-317(b)(2) of the Illinois Safety and Family Financial Responsibility Law (Financial Responsibility Law) ( 625 ILCS 5/7-317(b)(2) (West 2012)), section 143a-2 of the Insurance Code, or Illinois public policy.

¶ 3 BACKGROUND

¶ 4 The facts are not in dispute. The plaintiff was injured while a passenger in a vehicle driven by Clinton M. Evans. At the time of the accident, Mr. Evans was insured by American Access Insurance Company (AAIC), and the plaintiff was insured by State Farm under two automobile liability policies. The plaintiff made a claim against Mr. Evans for her personal injuries, which was paid by AAIC in the amount of $20,000.

¶ 5 The plaintiff then filed an underinsured motorist claim with State Farm. State Farm denied coverage under the following provision contained in both of the automobile liability policies it issued to the plaintiff:

" ‘IT IS AGREED WE SHALL NOT BE LIABLE AND NO LIABILITY OR OBLIGATION OF ANY KIND SHALL ATTACH TO US FOR BODILY INJURY, LOSS OR DAMAGE UNDER ANY OF THE COVERAGES OF THIS POLICY WHILE ANY MOTOR VEHICLE IS OPERATED BY: CLINTON M. EVANS' " (Emphasis in original.)

¶ 6 On May 27, 2015, the circuit court denied State Farm's motion for summary judgment. The court found that while named driver exclusions are recognized in Illinois, the issue was whether such exclusions may be used to deny coverage to the named insured. The court determined that such exclusions do not override the plain language of section 7-317(b)(2) of the Financial Responsibility Act and denied State Farm's motion for summary judgment. Thereafter, the plaintiff filed her motion for summary judgment, which was granted by the circuit court on May 4, 2016.

¶ 7 On May 10, 2016, State Farm filed its notice of appeal from the May 27, 2015, and May 4, 2016, orders of the circuit court.

¶ 8 ANALYSIS

¶ 9 I. Standards of Review

¶ 10 We review the granting of summary judgment, the construction of an insurance policy, and the construction of a statute de novo .

Goldstein v. Grinnell Select Insurance Co. , 2016 IL App (1st) 140317, ¶ 10, 405 Ill.Dec. 518, 58 N.E.3d 779.

¶ 11 II. Applicable Principles

¶ 12 "Summary judgment is proper if, and only if, the pleadings, depositions, admissions, affidavits and other relevant matters on file show that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law." Illinois Farmers Insurance Co. v. Hall , 363 Ill. App. 3d 989, 993, 300 Ill.Dec. 530, 844 N.E.2d 973 (2006). "The cardinal rule of statutory construction is to determine and give effect to the legislature's intent." Sulser v. Country Mutual Insurance Co. , 147 Ill. 2d 548, 555, 169 Ill.Dec. 254, 591 N.E.2d 427 (1992).

¶ 13 The rules of construction applicable to contracts apply as well to insurance policies. Goldstein , 2016 IL App (1st) 140317, ¶ 13, 405 Ill.Dec. 518, 58 N.E.3d 779. The primary objective is to ascertain and give effect to the parties' intentions as expressed in the policy's language. Goldstein , 2016 IL App (1st) 140317, ¶ 13, 405 Ill.Dec. 518, 58 N.E.3d 779. The policy is construed as a whole giving effect to every provision; unambiguous words in the policy are to be given their plain, ordinary and popular meaning. Goldstein , 2016 IL App (1st) 140317, ¶ 13, 405 Ill.Dec. 518, 58 N.E.3d 779.

¶ 14 III. Statutes and Public Policy

¶ 15 A. Illinois's Mandatory Insurance Statutory Scheme

¶ 16 Under the Financial Responsibility Law, 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 2012); see 625 ILCS 5/7-605(a), 7-203 (West 2012) (setting forth the mandatory minimum amounts of insurance to be carried). Section 7-317(b) of the Financial Responsibility Law provides that the owner's policy of liability insurance "[s]hall 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." 625 ILCS 5/7-317(b)(2) (West 2012).

¶ 17 "The ‘principle purpose’ of the mandatory liability insurance requirement is ‘to protect the public by securing payment of their damages.’ " Phoenix Insurance Co. v. Rosen , 242 Ill. 2d 48, 57, 350 Ill.Dec. 847, 949 N.E.2d 639 (2011) (quoting Progressive Universal Insurance Co. of Illinois v. Liberty Mutual Fire Insurance Co. , 215 Ill. 2d 121, 129, 293 Ill.Dec. 677, 828 N.E.2d 1175 (2005) ). In furtherance of that purpose, the Insurance Code requires automobile liability insurance policies to include uninsured and underinsured motorist coverage. See 215 ILCS 5/143a, 143a-2 (West 2012). Uninsured-motorist coverage is required so that the policyholder is placed in substantially the same position he would occupy if he were injured or killed in an accident where the party at fault carried the minimum liability coverage specified in section 203 of the Financial Responsibility Law. Phoenix Insurance Co. , 242 Ill. 2d at 57, 350 Ill.Dec. 847, 949 N.E.2d 639 ; see 625 ILCS 5/7-203 (West 2010). From the legislative history, the supreme court concluded that the "legislative purpose of the underinsured-motorist coverage provision is the same as that of uninsured-motorist coverage, ‘i.e. , to place the insured in the same position he would have occupied if the tortfeasor had carried adequate insurance.’ " Phoenix Insurance Co. , 242 Ill. 2d at 57, 350 Ill.Dec. 847, 949 N.E.2d 639 (quoting Sulser , 147 Ill. 2d at 555, 169 Ill.Dec. 254, 591 N.E.2d 427 ).

¶ 18 B. Public Policy

¶ 19 " ‘Parties to a contract may agree to any terms they choose unless their agreement is contrary to public policy.’ " Allstate Property & Casualty Insurance Co. v. Trujillo , 2014 IL App (1st) 123419, ¶ 18, 379 Ill.Dec. 684, 7 N.E.3d 110 (quoting Sulser , 147 Ill. 2d at 559, 169 Ill.Dec. 254, 591 N.E.2d 427 ). "An agreement will not be invalidated unless it is clearly contrary to what the constitution, the statutes, or the decisions of the courts have declared to be the public policy of Illinois or unless the agreement is ‘manifestly injurious to the public welfare.’ " Phoenix Insurance Co. , 242 Ill. 2d at 55, 350 Ill.Dec. 847, 949 N.E.2d 639 (quoting Progressive Universal Insurance Co. of Illinois , 215 Ill. 2d at 129-30, 293 Ill.Dec. 677, 828 N.E.2d 1175 ).

¶ 20 IV. Discussion

¶ 21 State Farm maintains that the named driver exclusion in the automobile liability insurance policies it issued to the plaintiff does not violate either the provisions of the Illinois Insurance Code or Illinois public policy. We disagree.

¶ 22 In general, named driver exclusions in automobile liability insurance policies are permitted in Illinois. American Access Casualty Co. v. Reyes , 2013 IL 115601, ¶ 15, 376 Ill.Dec. 812, 1 N.E.3d 524. Such exclusions have been enforced by both the supreme court and the appellate court. In Heritage Insurance Co. of America v. Phelan , 59 Ill. 2d 389, 321 N.E.2d 257 (1974), the supreme court upheld the denial of uninsured motorist coverage to the son of the named insured where the son was excluded from liability coverage under a restrictive endorsement. In St. Paul Fire & Marine Insurance Co. v. Smith , 337 Ill. App. 3d 1054, 272 Ill.Dec. 666, 787 N.E.2d 852 (2003), the appellate court, as a matter of first impression determined that section 7-602 of the Financial Responsibility Law, requiring an insurance card to provide warnings if the insurance policy contained coverage restrictions, permitted named driver exclusions from the mandatory liability insurance requirement. To the extent section 7-602 conflicted with section 7-317(b)(2) of the Financial Responsibility Law, the court held that in enacting section 7-602, the legislature intended to create a limited exception to the mandatory insurance laws and, therefore, the named driver exclusion did not violate Illinois public policy. Smith , 337 Ill. App. 3d at 1060, 1062, 272 Ill.Dec. 666, 787 N.E.2d 852. See Rockford Mutual Insurance Co. v. Economy & Casualty Co. , 217 Ill. App. 3d 181, 160 Ill.Dec. 187, 576 N.E.2d 1141 (1991) (the named driver exclusion endorsement precluded uninsured motorist coverage where the decedent was a passenger in a vehicle whose driver was the subject of the exclusion endorsement).

¶ 23 Smith and the cases relied on by State Farm are distinguishable. In those cases, the named driver exclusion was enforced as to parties other than the named insured.

¶ 24 The plaintiff relies on a line of cases beginning with Barnes v. Powell , 49 Ill. 2d 449, 275 N.E.2d 377 (1971), in which Illinois courts refused...