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State Farm Mutual Automobile Insurance Company v. Smith

September 20, 2001

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, APPELLANT
v.
RUBY SMITH ET AL. (JEREMY FISHER ET AL., APPELLEES)



The opinion of the court was delivered by: Justice McMORROW

UNPUBLISHED

Docket No. 90388-Agenda 25-May 2001.

The primary issue in this appeal is whether, in an automobile liability insurance policy, an "automobile business exclusion" violates the public policy of Illinois.

BACKGROUND

On September 21, 1995, Maurice Barnes, accompanied by Ruby Smith, drove his vehicle to Harrah's Casino Cruises-Joliet (Harrah's). Barnes gave his vehicle to the valet service at Harrah's for parking. When Barnes and Smith left Harrah's, Jeremy Fisher, a valet driver employed by Harrah's, retrieved Barnes' automobile. Smith has alleged that, as she entered the passenger door, the vehicle rolled backwards, striking her and knocking her to the ground. Smith *fn1 brought an action against Barnes, Fisher, and Harrah's alleging various acts of negligence.

At the time of the accident, Barnes' vehicle was insured by State Farm Mutual Automobile Insurance Company (State Farm). On August 26, 1997, Fisher and Harrah's tendered their defense to State Farm. State Farm refused the tender on October 15, 1997. Subsequently, State Farm filed an action for declaratory judgment in the circuit court of Cook County, arguing that it had no duty to defend or indemnify Fisher or Harrah's based upon an automobile business exclusion clause in the State Farm insurance policy. State Farm moved for summary judgment on its action for declaratory judgment. Fisher and Harrah's responded to State Farm's motion for summary judgment and filed a cross-motion for summary judgment, arguing that State Farm could not rely on the automobile business exclusion. The circuit court held that the automobile business exclusion applied, and State Farm had no duty to defend or indemnify Fisher and Harrah's. Accordingly, the circuit court granted State Farm's motion for summary judgment.

Fisher and Harrah's appealed, arguing primarily that the automobile business exclusion in State Farm's insurance policy violates the public policy of Illinois, as stated in section 7-317(b)(2) of the Illinois Vehicle Code (See 625 ILCS 5/7-317(b)(2) (West 1998)), and as determined by this court in State Farm Mutual Automobile Insurance Co. v. Universal Underwriters Group, 182 Ill. 2d 240 (1998). The appellate court concluded that Universal Underwriters' holding that " `a liability insurance policy issued to the owner of a vehicle must cover the named insured and any other person using the vehicle with the named insured's permission' " was controlling. 315 Ill. App. 3d 1159, 1165, quoting Universal Underwriters, 182 Ill. 2d at 244. Thus, the appellate court held that the automobile business exclusion violates the public policy of Illinois and, therefore, was unenforceable. 315 Ill. App. 3d at 1165.

We granted State Farm's petition for leave to appeal. 177 Ill. 2d R. 315(a). For the reasons that follow, we affirm the judgment of the appellate court.

ANALYSIS

Courts will apply terms in an insurance policy as written unless those terms contravene public policy. Illinois Farmers Insurance Co. v. Cisco, 178 Ill. 2d 386, 392 (1997). Statutes are an expression of public policy. Cates v. Cates, 156 Ill. 2d 76, 110 (1993). Statutes in force at the time an insurance policy was issued are controlling, and a statute's underlying purpose cannot be circumvented by a restriction or exclusion written into an insurance policy. Cummins v. Country Mutual Insurance Co., 178 Ill. 2d 474, 483 (1997). Accordingly, insurance policy provisions that conflict with a statute are void. Illinois Farmers Insurance, 178 Ill. 2d at 392.

I. Validity of Automobile Business Exclusion

The automobile business exclusion in the State Farm insurance policy at issue in the case at bar states:

"THERE IS NO COVERAGE:

1. WHILE ANY VEHICLE INSURED UNDER THIS ...


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