APPEAL from the Circuit Court of Grundy County; the Hon.
ROBERT G. WREN, Judge, presiding.
MR. JUSTICE STOUDER DELIVERED THE OPINION OF THE COURT:
This is an appeal by the plaintiff, State Farm Fire and Casualty Company (State Farm), following a bench trial in the Circuit Court of Grundy County. In 1978, the defendant, Charles G. Kohen, purchased a used 1977 Corvette, registered and obtained a certificate of title and license for it in Illinois, and insured it with State Farm. Kohen's coverage included liability and collision insurance. After having driven the car for approximately 5 months, Kohen totally demolished it in a collision. State Farm paid more than $8,000 to Kohen pursuant to the collision coverage, whereupon Kohen assigned his certificate of title to the insurer. Upon examining the car, State Farm discovered that the car's hidden identification number did not correspond to the serial number visible through the windshield. Kohen had used the latter number to obtain the Illinois title and license and the insurance. It was then learned that the car was owned by the defendant, Deborah Kent. The car had been stolen in Houston, Texas, in March 1978. In 1979, Kent filed a two-count suit against Kohen and charged him with conversion of her car and its negligent operation. Upon demand by Kohen to defend the suit, State Farm denied coverage, but agreed to defend under a reservation of rights. State Farm then filed the instant declaratory judgment action to determine whether it had the duty to defend and indemnify Kohen in accordance with his liability insurance. Kent's suit came to trial in May 1980, and she received judgment against Kohen on both counts. This judgment remains unsatisfied.
The declaratory judgment action came to trial without jury in July 1980. Kohen failed to appear, and State Farm obtained a default judgment against him. The court decided that State Farm had the duty neither to defend nor indemnify Kohen with respect to the conversion count in Kent's suit. The court found, however, that State Farm was obligated to defend and indemnify Kohen under the negligence count and ruled specifically that a clause excluding coverage for damage to property "in charge of" the insured was inapplicable to instant facts.
State Farm appeals from this ruling and argues the exclusionary clause in Kohen's liability coverage does not require the insurer to defend and indemnify Kohen for damage to Kent's car. We agree and reverse that portion of the judgment.
The relevant provisions of Kohen's liability coverage are:
"Section 1 - Liability - Coverage A
1. pay damages which an insured becomes legally liable to pay because of:
b. damage to or destruction of property including loss of use, caused by accident resulting from ownership, maintenance or use of your car;
When Coverage A does not apply:
b. To property owned by, rented to, in charge of, or transported by an Insured. But coverage applies to a rented residence or private garage damaged by a car we insure."
This exclusion to Kohen's coverage is commonly found in most, if not all, automobile liability insurance policies. The parties agree that the classification specifically in issue here is whether Kohen was in charge of Kent's stolen car. Typically, liability coverage includes damage to property owned by someone other than the insured. The purpose of the clause in issue is to exclude from liability coverage damage to property of the insured. The justification for the exclusion of this kind of exposure from automobile liability insurance was given in Parry v. Maryland Casualty Co. (1930), 228 App. Div. 393, 395, 240 N.Y.S. 105, 107: "The limitations relate to property in which the assured has either a general or a special interest. As to such property, both the frequency of accident and the opportunities for fraud create a high ...