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06/06/88 Standard Mutual Insurance v. General Casualty Companies

June 6, 1988





525 N.E.2d 965, 171 Ill. App. 3d 758, 121 Ill. Dec. 658 1988.IL.877

Appeal from the Circuit Court of Cook County; the Hon. Roger J. Kiley, Jr., Judge, presiding.


PRESIDING JUSTICE CAMPBELL delivered the opinion of the court. BUCKLEY and O'CONNOR, JJ., concur.


Defendants, General Casualty Companies and Reliance Insurance Co., a division thereof (General Casualty), insurers of automobiles rented by Wells Rent-A-Car (Wells), appeal from summary judgment entered in favor of plaintiff, Standard Mutual Insurance Co. , insurer of Jai Kim, a Wells customer, in a declaratory judgment action which sought an interpretation of two automobile insurance policies. In granting summary judgment in favor of SMI, the trial court found that General Casualty had a duty to defend Jai Kim in a personal injury lawsuit arising out of an automobile accident which occurred while Kim was driving an automobile he had rented from Wells. On appeal, General Casualty contends that the trial court erred in failing to analyze Wells' rental agreement in conjunction with General Casualty's policy, which together indicated that Kim had violated the terms of the rental agreement, which rendered General Casualty's policy null and void as to Kim. For the following reasons, we affirm the judgment of the trial court.

The record indicates that on August 9, 1983, Jai Kim rented a station wagon from Wells at its location in Skokie, Illinois. At the time, the automobiles rented by Wells were insured under a business auto insurance policy issued by General Casualty (the Policy), and Kim was personally insured under an automobile liability insurance policy issued by SMI. When Kim rented the car, he entered into a rental agreement with Wells and paid an additional sum for liability and collision coverage to be provided by Wells pursuant to the Policy.

On August 10, 1983, Kim was involved in a motor vehicle accident with a motorcycle in Niagara Falls, Ontario, Canada. When Kim returned the station wagon to Wells, he reported the accident. Subsequently, General Casualty investigated the accident and settled the property damage claim of the motorcyclist under the liability insurance portion of the Policy. However, when the motorcyclist and his passenger filed a personal injury claim against Kim, Wells and General Casualty denied coverage and refused to defend Kim on the ground that Kim had breached the terms of the rental agreement by taking the automobile outside Illinois without Wells' written permission.

As a result, SMI undertook Kim's defense and also filed a complaint for declaratory judgment to determine the rights and responsibilities of the parties under the provisions of the respective insurance policies. SMI claimed that pursuant to express provisions in its policy issued to Kim, its responsibility was to provide only excess insurance over any other valid and collectible insurance, and General Casualty was the primary insurer. General Casualty, on the other hand, contended that its obligation to provide liability coverage under the Policy became null and void when Kim violated the rental agreement by driving the automobile out of State without having first obtained Wells' written permission. Thus, according to General Casualty, SMI was the sole insurer.

In granting partial summary judgment to SMI as to General Casualty's duty to defend Kim, the trial court made the following findings: (1) Kim's use of the rental car in Canada was a permitted use within the meaning of the Policy, as a matter of law; (2) SMI's policy provided excess insurance; and (3) until the underlying case was decided, the court would not make a Disposition as to duty to indemnify. On appeal, General Casualty concedes that Kim was a permitted user, but claims that once he breached the rental agreement by taking the car out of State without written permission, General Casualty's duty to provide coverage under the Policy ceased.

The relevant SMI policy provision states, in pertinent part:

"Other insurance: . . . the insurance with respect to a temporary substitute automobile or non-owned automobile shall be excess insurance over any other valid and collectible insurance."

The relevant provisions of Wells' rental agreement state, ...

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