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Grahame v. Mitchell

MARCH 31, 1975.




APPEAL from the Circuit Court of Madison County; the Hon. A.A. MATOESIAN, Judge, presiding.


Mr. JUSTICE KARNS delivered the opinion of the court:

This appeal is from a declaratory judgment entered in the Circuit Court of Madison County construing provisions in a policy of automobile liability insurance issued by Farmers Insurance Exchange (Farmers). The facts are stipulated.

Appellant, Midwest Mutual Insurance Company (Midwest) insured Auto Driveaway Company, Inc., a company engaged in the business of transporting automobiles by use of the highways from place to place throughout the United States. Thomas Mitchell, owner of a 1965 Pontiac automobile, contracted with Auto Driveaway to have his automobile driven from Alamo, California, to Cockeysville, Maryland. Auto Driveaway entered into an agreement, denominated an "independent contractor agreement," with John D. Grahame whereby Grahame, for a consideration, agreed to drive Mitchell's automobile. On December 22, 1969, while enroute to Maryland, Grahame was involved in a multiple-vehicle accident as a result of which several actions for personal injuries and property damage were filed naming Auto Driveaway, Grahame and Mitchell as parties defendant.

Midwest insured Auto Driveaway for bodily-injury and property-damage liability on automobiles in transit. The policy endorsement stated that the automobiles were used in the "handling or transportation of goods for another." The policy contained an "excess insurance" endorsement which provided that the insurance provided was excess insurance over and above other valid and collectible insurance for bodily-injury and property-damage liability on automobiles being transported by Auto Driveaway and its drivers. The status of the driver as an independent contractor employee is not important in the view we take of the case.

At the time of the occurrence, Mitchell was the named insured in a family automobile policy issued by Farmers. This policy insured against liability arising from the operation of the automobile by Mitchell and contained the "omnibus" clause in standard form which provided that the word "insured" included not only Mitchell but "any other person while using such automobile and any other person or organization legally responsible for its use, provided the actual use of such automobile is by the named insured or with his permission." A policy exclusion provided that omnibus coverage was not afforded "while the described automobile is being used in the automobile business." Automobile business was defined as "the business of selling, repairing, servicing, storing, washing, delivering, testing, or parking automobiles, their parts or equipment."

The action for declaratory judgment was brought by Midwest, Grahame and Auto Driveaway against Farmers, Mitchell and individuals who had actions for personal injuries pending.

It is plaintiff's position that the primary defense and insurance coverage of these several actions was with Mitchell's insurer, Farmers, and that the insurance coverage provided by Midwest, Auto Driveaway's insurer, is excess only, that is, excess to the insurance provided by the policy of Mitchell, the owner of the automobile involved in the collision.

An order was entered on February 13, 1974, that the automobile business exclusion in Farmers' policy applied to the facts as stipulated and the policy provided no coverage to the claims and actions arising out of the collision occurring on December 22, 1969; the order further provided that coverage was afforded by the policy of Midwest. This appeal followed.

While the meaning and applicability of the "automobile business exclusion" has been a subject of considerable litigation, the applicability of the exclusion to the business of transporting or delivering automobiles here involved is a novel question as far as we can determine. See Annot., 47 A.L.R.2d 556 (1956).

The exclusion takes several forms and has a long history in the automobile-liability-insurance business. It is referred to as the "automobile business exclusion," or "garage exclusion" in former terminology. The policies generally define the "automobile business" as in the instant case as the business of selling, repairing, servicing, storing or parking automobiles. Farmers' policy adds to this definition the "delivering" of cars, and it argues that this brings Auto Driveaway's business squarely within the policy exclusion.

The argument is that these businesses are attended with higher risks than the operation of a motor vehicle by a named individual for business or pleasure; that they present situations for a different and higher rate structure, allowing for the imposition of lower rates in family liability policies if these higher risks are excluded from coverage; and that the business of transporting or delivering automobiles involves the driving of the owner's car by strangers to whom the named insured has not given direct permission to drive and is therefore a "high risk" business.

There is a type of insurance, commonly referred to as "garage liability insurance," that covers the risks present in the business of selling, repairing and servicing cars, the type of activities commonly thought of as comprising the automobile business. It has been suggested, and we think with force, that the proper interpretation to be given the language of this exclusion in a family automobile policy is to exclude coverage of persons engaged in these businesses and the use of motor vehicles, whether tow-trucks, demonstrator cars or service vehicles, employed as an integral part of these businesses; that the coverage afforded by garage liability insurance and family automobile liability insurance is mutually exclusive. (Christensen v. Farmers Insurance Exchange, 21 Utah 2d 194, 443 P.2d 385 (1968); Allstate Insurance Co. v. Skawinski, 40 Ill. App.2d 136, 189 N.E.2d 365 (1963); Truck Insurance Exchange v. State Farm Mutual Automobile Insurance Co., 182 Neb. 330, 154 N.W.2d 524 (1967).) These cases distinguish the operation of another's car by one engaged in the automobile business and the use of vehicles as an integral part of the business. In the former case, the automobile is the object or subject of the business and is not "being used in the business."

• 1 In any event, the force of the "higher risk" argument is weakened at least so far as the law of this State is concerned by the interpretation of the standard omnibus clause, required for policies satisfying the Illinois Safety Responsibility Law. (Ill. Rev. Stat. 1973, ch. 95 1/2, par. 7-317(b)1; ch. 73, par. 1000.) However, just what is required under the Illinois Safety Responsibility Law (Ill. Rev. Stat. 1973, ch. 95 1/2, par. 7-301 et seq.), is certainly somewhat in doubt if we are to assume the continued viability of McCann v. Continental Casualty Co, 8 Ill.2d 476, 134 N.E.2d 302 (1956). It is now settled that once initial permission to use an automobile is given by the owner, all ...

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