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03/04/97 UNIVERSAL UNDERWRITERS INSURANCE GROUP v.

March 4, 1997

UNIVERSAL UNDERWRITERS INSURANCE GROUP, PLAINTIFF-APPELLANT,
v.
IRENE GRIFFIN, ALLSTATE INSURANCE COMPANY, DOROTHY LUBOW, AND HOWARD PONTIAC, INC., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County. The Honorable John K. Madden, Judge Presiding.

Rehearing Denied April 3, 1997. Released for Publication April 24, 1997.

Presiding Justice DiVITO delivered the opinion of the court. Rakowski and McNULTY, JJ., concur.

The opinion of the court was delivered by: Divito

PRESIDING JUSTICE DiVITO delivered the opinion of the court:

In July 1991, Howard Pontiac, Inc. (Howard), allowed its customer Irene Griffin to use a "loaner" car while it serviced her car. While she was driving the loaner, Griffin was involved in an accident. At the time, plaintiff Universal Underwriters Insurance Group (Universal) insured Howard under a garage policy, and Allstate Insurance Company (Allstate) insured Griffin under a personal auto policy.

One of the other drivers involved in the accident Dorothy Lubow, sued Griffin for negligence. Allstate initially defended Griffin in that suit but later tendered the defense to Universal, which then filed a complaint for declaratory judgment against defendants Allstate, Griffin, Lubow, and Howard. Allstate filed a counterclaim for declaratory judgment against Universal. Universal and Allstate filed cross-motions for summary judgment.

After a hearing, the circuit court held that Griffin was an insured under the Universal policy and that the limits of Universal's coverage for Griffin were $100,000 per person and $300,000 per accident, and it ordered Allstate and Universal to share liability on a pro rata basis. Universal appeals that decision.

To resolve the issues presented by this appeal, we must decide whether Griffin was an insured under Universal's policy. If we find that she was an insured, we must decide which insurer, Allstate or Universal, is responsible for coverage, and we must determine the amount of that coverage.

In its amended complaint for declaratory judgment, Universal asked for a declaration that it owed Griffin neither coverage nor a defense because (1) she was not an insured under its policy, (2) if she were, an insured, Universal's coverage was excess over Allstate's, and (3) if there were coverage, the limits of that coverage were $20,000 per person and $40,000 per accident.

There is no amended counterclaim in the record, but Allstate's original counterclaim contained three counts. In count I, Allstate asserted that Griffin was an insured under the Universal policy and asked for a declaration that Universal reimburse Allstate for the fees and costs it incurred in defending her. In count II, Allstate asked the circuit court to declare that the limits of Universal's coverage with respect to Griffin were $100,000 per person and $300,000 per accident. In count III, Allstate asked for a declaration that its policy and Universal's policy were co-excess policies and, therefore, that Universal must pay Allstate its proportionate share of Griffin's defense.

Allstate filed a motion for summary judgment on its counterclaim and on Universal's complaint. It asked the circuit court to enter judgment that Griffin was an insured under Universal's policy, that the limits of Universal's coverage were $100,000/$300,000, and that Universal reimburse Allstate on a pro rata basis for its expenses in defending Griffin.

Universal responded with its own motion for summary judgment. It asked the circuit court to find that Griffin was not an insured under its policy and that it owed Griffin no coverage or defense. Alternatively, it asked the court to declare that its coverage was excess or that the limits of its coverage were $20,000/$40,000.

After a hearing, the circuit court entered a written order in which it essentially granted Allstate's motion and denied Universal's. It stated that both Universal and Allstate were excess insurers of Griffin. The "other insurance" clauses in the Universal and Allstate policies were incompatible, and, therefore, Universal and Allstate were to contribute to Griffin's defense on a pro rata basis. The court further found that Universal's liability was equal to its policy limit of $100,000/$300,000, and Allstate's liability was equivalent to its policy limits.

The court concluded:

"From a public policy standpoint, Allstate and Universal are responsible for coverage. Illinois automobile insurance law is mandated to protect the general public in instances where members of the general public may be injured in an automobile accident. The general public should be compensated for any injuries suffered. The insurance companies collect premiums from their customers and enjoy the monetary benefits of these premiums. The companies should adhere to their responsibility to protect the general public by living up to their full obligations under those policies."

On appeal, Universal first disputes the circuit court's conclusion that Griffin was an insured under its policy. The policy provided that Universal would pay "all sums the INSURED legally must pay as damages *** because of INJURY to which this insurance applies caused by an OCCURRENCE arising out of GARAGE OPERATIONS or AUTO HAZARD." The policy defined "auto hazard" as "the ownership, maintenance, or use of any AUTO YOU own *** and: *** (3) furnished for the use of any person or organization."

The parties' dispute concerning Griffin's status as an insured focuses on the policy's definition of an insured:

"WHO IS AN INSURED -- ***

With respect to the AUTO HAZARD:

1. YOU;

2. Any of YOUR partners, paid employees, directors, stockholders, executive officers, a member of their household or a member of YOUR household, while using an AUTO covered by this Coverage Part, or when legally responsible for its use. The actual use of the AUTO must be by YOU or within the scope of YOUR permission;

3. Any other person or organization required by law to be an INSURED while using an AUTO covered by this Coverage Part within the scope of YOUR permission."

The parties agree that Griffin does not fall within the first two parts of this definition, and Universal does not dispute that she was acting within the scope of Howard's permission when she had the accident. Their disagreement centers on whether Griffin was "required by law to be an INSURED."

According to Universal, Griffin was not "required by law to be an INSURED" because Illinois law does not require auto owners to provide insurance coverage to permissive users of their cars. Universal acknowledges that the Illinois Vehicle Code contains the following mandatory insurance provision:

"Required liability insurance policy. (a) From January 1, 1990 through December 31, 1993, *fn1 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.

The insurance policy shall be issued in amounts no less than the minimum amounts set for bodily injury or death and for destruction of property under Section 7-203 of this Code ***." 625 ILCS 5/7-601(a) (West 1992).

Universal contends that, although this provision requires car owners and operators to maintain insurance coverage, it does not require owners to provide ...


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