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Progressive Universal Insurance Co. of Illinois v. Liberty Mutual Fire Insurance Co.

March 29, 2004

[5] PROGRESSIVE UNIVERSAL INSURANCE COMPANY OF ILLINOIS, PLAINTIFF-APPELLEE,
v.
LIBERTY MUTUAL FIRE INSURANCE COMPANY, DEFENDANT-APPELLANT (MIKHAIL LAVIT, SUSAN LAVIT, RONALD ABBINANTE, AND CASALE PIZZA, INC., DEFENDANTS).



[6] Appeal from the Circuit Court of Du Page County. No. 01-MR-1022 Honorable Thomas J. Riggs, Judge, Presiding.

[7] The opinion of the court was delivered by: Justice Bowman

[8]  Defendant, Liberty Mutual Fire Insurance Company (Liberty Mutual), appeals from the trial court's order granting the motion for summary judgment by plaintiff, Progressive Universal Insurance Company of Illinois (Progressive), and denying Liberty Mutual's cross-motion for summary judgment. Progressive obtained a declaration that, pursuant to an exclusion in its insurance policy, it had no duty to defend or indemnify Ronald Abbinante, the son of its policyholder, Shirley Abbinante, in an underlying action (Lavit v. Abbinante, No. 01--L--0802 (Cir. Ct. Du Page County)). On appeal, Liberty Mutual argues that the policy exclusion is ambiguous and against the public policy expressed in section 7--317(b)(2) of the Illinois Vehicle Code (625 ILCS 5/7-- 317(b)(2) (West 2000)). We agree with Liberty Mutual's latter argument, and we therefore reverse the trial court's decision.

[9]  On August 25, 2000, Ronald was using Shirley's car to deliver pizzas for Casale Pizza, Inc., when he hit a pedestrian, Mikhail Lavit. Lavit and his wife sued Ronald and Casale Pizza, claiming that Lavit had suffered brain and spinal cord injuries. Progressive began defending Ronald under a reservation of rights and denied that it was required to indemnify him. The Lavits then sought and obtained the $100,000 limit of their uninsured motorist coverage with Liberty Mutual. Liberty Mutual demanded reimbursement from Progressive. In response, Progressive filed a declaratory judgment action seeking a declaration that it had no duty to defend or indemnify Ronald in the Lavits' suit. Liberty Mutual, as the Lavits' subrogee, filed a counterclaim against Progressive for reimbursement of the uninsured motorist coverage. Progressive moved for summary judgment, arguing for the application of a policy provision that stated as follows, under the heading, "PART I - LIABILITY TO OTHERS":

[10]  
"EXCLUSIONS - READ THE FOLLOWING EXCLUSIONS CAREFULLY. IF AN EXCLUSION APPLIES, COVERAGE WILL NOT BE AFFORDED UNDER THIS PART I.

[11]   Coverage under this Part I, including our duty to defend, does not apply to:

[12]  
1. bodily injury or property damage arising out of the ownership, maintenance, or use of a vehicle while being used to carry persons or property for compensation or a fee, including, but not limited to, delivery of magazines, newspapers, food, or any other products. This exclusion does not apply to share-expense car pools." (Emphasis in original.)

[13]   Ronald testified in a deposition that Casale Pizza paid him $1.25 per delivery.

[14]   Liberty Mutual filed a cross-motion for summary judgment, arguing that Progressive's food delivery exclusion was ambiguous and contrary to public policy. The trial court granted Progressive's motion and denied Liberty Mutual's motion. Liberty Mutual timely appealed. Ronald and Casale Pizza are not parties to this appeal.

[15]   Summary judgment is appropriate where the pleadings, depositions, admissions, and affidavits on file, when viewed in the light most favorable to the nonmoving party, show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2--1005(c) (West 2002); General Casualty Insurance Co. v. Lacey, 199 Ill. 2d 281, 284 (2002). The construction of an insurance policy provision is a question of law that can be properly decided on a motion for summary judgment. Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill. 2d 384, 391 (1993). We review a grant of summary judgment de novo. General Casualty Insurance Co., 199 Ill. 2d at 284.

[16]   Liberty Mutual argues that Progressive must defend and indemnify Ronald because the policy exclusion is ambiguous and against public policy. An insurer's duty to defend its insured is much broader than its duty to indemnify. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 125 (1992). If the allegations of the underlying complaint, when liberally construed in favor of the insured, potentially fall within a policy's coverage, the insurer has a duty to defend the insured against the underlying complaint. Outboard Marine Corp., 154 Ill. 2d at 125. The duty to indemnify arises only if the insured's activity and the resulting loss or damage actually fall within a policy's coverage. Outboard Marine Corp., 154 Ill. 2d at 128. The insurer has the burden of establishing that a claim falls within a provision that limits or excludes coverage. Sears Roebuck & Co. v. Acceptance Insurance Co., 342 Ill. App. 3d 167, 172 (2003).

[17]   We first examine whether the food delivery exclusion is ambiguous. If the words in the policy are unambiguous, a court must afford them their plain, ordinary, and popular meaning. Outboard Marine Corp., 154 Ill. 2d at 108. However, insurance policies are to be liberally construed in favor of coverage, and if the words in the policy are susceptible to more than one reasonable interpretation, they are ambiguous and will be construed in favor of the insured and against the insurer who drafted the policy. State Security Insurance Co. v. Burgos, 145 Ill. 2d 423, 438 (1991). This is especially true for ambiguities that appear in exclusionary clauses. Outboard Marine Corp., 154 Ill. 2d at 121. Still, courts should not exercise their inventive powers to create an ambiguity where none exists. American Standard Insurance Co. v. Allstate Insurance Co., 210 Ill. App. 3d 443, 447 (1991). In determining if there is an ambiguity, we must read an insurance policy provision with reference to the facts of the case at hand, rather than in isolation. American Family Mutual Insurance Co. v. Hinde, 302 Ill. App. 3d 227, 232 (1999).

[18]   Liberty Mutual cites Cincinnati Insurance Co. v. West American Insurance Co., 112 F. Supp. 2d 718 (C.D. Ill. 2000). There, a postal carrier was using his own vehicle to deliver mail along a rural route when he was involved in a car accident. Cincinnati Insurance Co., 112 F. Supp. 2d at 719. His insurance policy excluded coverage of injury from the operation of "a vehicle while it is being used to carry persons or property for a fee." Cincinnati Insurance Co., 112 F. Supp. 2d at 721. The postal carrier's compensation for mail delivery was based on the round trip mileage of the postal route and the number of delivery points on that route. The court held that under Illinois law, the clause was ambiguous because the mail was not carried "for a fee" in accordance with the meaning of the provision. Cincinnati Insurance Co., 112 F. Supp. 2d at 722-23. Liberty Mutual contends that Progressive's exclusion should similarly be held to be ambiguous.

[19]   However, as Progressive points out, the Cincinnati Insurance Co. court decided that the clause was ambiguous in reference to the facts of that case. Cincinnati Insurance Co., 112 F. Supp. 2d at 723; see also, Annotation, R. Sutton, What Constitutes Use of Automobile "to Carry Persons or Property for Fee" within Exclusion of Automobile Insurance Policy, 57 A.L.R.5th 591 (1998) (various jurisdictions have found similar exclusionary clauses to be both ambiguous and unambiguous, depending upon the facts of the cases). Here, Progressive's exclusion applies to deliveries made for a fee or compensation and further specifies that it includes, but is not limited to, the "delivery of magazines, newspapers, food, or any other products." Thus, the exclusion is broader and more detailed than the clause at issue in Cincinnati Insurance Co. Additionally, the parties do not dispute that Ronald was delivering pizzas when the accident occurred, nor do they dispute that Casale Pizza paid him $1.25 for each pizza that he delivered. Clearly, Ronald was delivering food when the accident took place, and the $1.25 he received for each delivery was either a fee or compensation. Therefore, we hold that, as applied to the facts in this case, the exclusion is not ambiguous.

[20]   We next examine whether the exclusion is contrary to public policy. Liberty Mutual argues that the exclusion is void because it conflicts with section 7--317(b)(2) of the Illinois Vehicle Code (625 ILCS 5/7-- 317(b)(2) (West 2000)). That section states that a motor vehicle liability policy "[s]hall insure the person named therein and any other person using or responsible for the use of such motor vehicle or vehicles with the express or implied permission of the insured." 625 ILCS 5/7--317(b)(2) (West 2000). This type of coverage is commonly referred to as "omnibus coverage." State Farm Mutual Automobile Insurance Co. v. Hertz Claim Management Corp., 338 Ill. App. 3d 712, 716 (2003). The supreme court has stated that section 7--317(b)(2), coupled with Illinois's mandatory insurance law (625 ILCS 5/7--601(a) (West 2000)), requires 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 ...


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