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St. Paul Fire and Marine Insurance Company v. Smith

March 20, 2003

ST. PAUL FIRE AND MARINE INSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
ALLEN SMITH, MARJORIE OCASEK, AS SPECIAL ADM'R OF THE ESTATE OF WILLIAM SMITH, DECEASED, ELIZABETH ING, AS SPECIAL ADM'R OF THE ESTATE OF AUDREY HARDWIDGE, DECEASED, AND AS INDEPENDENT ADM'R OF THE ESTATE OF WILLIAM HARDWIDGE, DECEASED, DEFENDANTS-APPELLEES. (VALOR INSURANCE COMPANY, DEFENDANT-COUNTERPLAINTIFF).



Appeal from the Circuit Court of Cook County. No. 98 CH 04353 Honorable John K. Madden, Judge Presiding.

The opinion of the court was delivered by: Presiding Justice Theis

Plaintiff St. Paul Fire & Marine Insurance Company (St. Paul) appeals an order of the trial court granting the motion of defendants Allen Smith, Marjorie Ocasek, as special administrator of the estate of William Smith, deceased, Elizabeth Ing, as special administrator of the estate of Audrey Hardwidge, deceased, and independent administrator of the estate of William Hardwidge, deceased (collectively, defendants), for summary judgment declaring that the named driver exclusion contained in St. Paul's automobile liability insurance policy was void as against public policy. On appeal, St. Paul contends that the named driver exclusion does not violate the mandatory insurance laws of the Illinois Vehicle Code (the Code) (625 ILCS 5/1-100 et seq. (West 1996)). St. Paul also argues that the named driver exclusion applies to bar coverage for the underlying wrongful death lawsuit because the exclusion was part of the St. Paul policy and was not ambiguous, and contends that the negligent entrustment claim against Allen Smith falls within the scope of the exclusion.

The main issue before this court is one of first impression in Illinois, whether a named driver exclusion in an automobile liability insurance policy violates Illinois public policy. We find that it does not and reverse and remand for further proceedings.

On June 3, 1996, William Smith (William), while driving a vehicle owned by his father, Allen, collided with an automobile carrying William and Audrey Hardwidge. All three individuals died as a result of their injuries. At the time of the accident, William had an automobile liability insurance policy issued by Valor Insurance Company (Valor). The car was insured by St. Paul, under a personal insurance package policy including homeowners and automobile liability insurance procured by William's parents, Allen and June Smith. The St. Paul policy initially listed Allen and June as insureds and drivers covered under the policy. On January 2, 1996, William was added as a covered driver to Allen and June's policy. St. Paul then received William's driving record, which revealed that his license had previously been suspended and revoked because he had been convicted of driving under the influence of alcohol twice and driving with a revoked license. St. Paul removed William as a covered driver from Allen and June's policy on January 22, 1996, and required Allen and June to sign a named driver exclusion, which excluded liability for any accidents or losses incurred while the car was driven by William.

In July 1997, the administrators of the estates of William and Audrey Hardwidge filed a lawsuit against the estate of William Smith and Allen (the underlying suit). The complaint included several wrongful death counts against William's estate and a negligent entrustment count against Allen, alleging that Allen allowed William to use his car even though he knew that William had been abusing alcohol for a substantial period of time, William had previously been convicted of driving under the influence of alcohol and William was not covered by Allen's automobile insurance policy. Both Allen and William's estate tendered their defenses to Valor, which provided their defenses. Neither Allen nor William's estate tendered their defenses to St. Paul. In January 2000, a verdict of $5 million was entered against Allen and William's estate. Valor then paid its policy limits of $20,000 to each of the Hardwidge estates.

In April 1998, St. Paul filed a complaint for declaratory judgment, seeking a declaration that it did not owe a duty to defend and/or indemnify Allen or William's estate in the underlying suit because the named driver exclusion in Allen's insurance policy barred coverage for any accident involving a vehicle driven by William. Several months after paying its policy limits in the underlying suit, Valor was granted leave to intervene in St. Paul's declaratory judgment action and filed a counterclaim for declaratory judgment. St. Paul filed a motion for summary judgment, arguing that the named driver exclusion operated to bar any coverage obligation to Allen and William's estate. Valor and defendants filed cross-motions for summary judgment, contending that the named driver exclusion violated Illinois public policy as contained in the mandatory insurance requirements of the Code. Defendants also argued that the exclusion was ambiguous, was not attached to the insurance policy and did not apply to bar claims of negligent entrustment.

The trial court granted Valor's and defendants' summary judgment motions and denied St. Paul's motion on July 27, 2001. On December 12, 2001, the trial court clarified that order and held that the sole basis of its ruling was that the named driver exclusion was void because it violated public policy. On January 7, 2001, the trial court made an express written finding pursuant to Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)), that there was no just reason to delay enforcement or appeal of the July 27, 2001 and December 12, 2001 orders. St. Paul then filed this timely appeal. *fn1

Summary judgment is appropriate only where the pleadings, depositions, admissions and affidavits show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Ferguson v. McKenzie, 202 Ill. 2d 304, 308, 780 N.E.2d 660, 662 (2001), citing 735 ILCS 5/2-1005(c) (West 1998). We review an appeal from the grant of summary judgment de novo. Ferguson, 202 Ill. 2d at 308, 780 N.E.2d at 662. This case involves a question of statutory interpretation, which we also review de novo. Land v. Board of Education of the City of Chicago, 202 Ill. 2d 414, 421, 781 N.E.2d 249, 254 (2002). In interpreting a statute, the court must ascertain the legislature's intent, which is found in the plain and ordinary meaning of the language used in the statute. Land, 202 Ill. 2d at 421, 781 N.E.2d at 254.

Courts apply terms in an insurance policy as written unless those terms contravene public policy. State Farm Mutual Automobile Insurance Co. v. Smith, 197 Ill. 2d 369, 372, 757 N.E.2d 881, 883 (2001). Statutes are an expression of public policy. Smith, 197 Ill. 2d at 372, 757 N.E.2d at 883. "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. [Citation.] Accordingly, insurance policy provisions that conflict with a statute are void." Smith, 197 Ill. 2d at 372, 757 N.E.2d at 883.

In this case, the named driver exclusion in Allen's St. Paul automobile liability insurance policy provided:

"Driver ExclusionPolicy Number: PK01200772

Named Insured: Smith, Allen & June

This endorsement changes the policy. Please read it carefully.

We will not be liable for any accidents or losses while any auto or motorhome is driven ...


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