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American Access Casualty Co. v. Reyes

Supreme Court of Illinois

December 19, 2013

ANA REYES et al., Appellees.

Chief Justice Garman and Justices Freeman, Thomas, Karmeier, and Theis concurred in the judgment and opinion.


¶ 1 In this case, the appellate court concluded that an automobile liability insurance policy which excludes from coverage the only named insured and owner of the insured vehicle is against public policy, reversing the judgment of the circuit court which found that the policy provided no coverage. 2012 IL App (2d) 120296. For the reasons set forth below, we affirm the appellate court.


¶ 3 In September 2007, plaintiff, American Access Casualty Company (American Access), issued an automobile liability insurance policy to defendant, Ana Reyes, which insured a 1999 Chrysler 300M. On the application, Reyes was identified as the titleholder of the vehicle. Under the "Operator Information" section of the policy, Reyes was identified as driver number one but where the driver's license number was to be included, it stated "TITLE HOLDER EXCLUDE." Jose M. Cazarez, Reye's "friend, " was listed as driver number two and was identified as the "Pri[mary]" driver. Next to his name was an out of country/international driver's license number. On the "Declarations" sheet, Reyes was identified as the "named insured." Reyes and Cazarez were both again listed as "operators." However, the notation "EXCLUDED" appeared next to Reyes' name.

¶ 4 Reyes also executed an "ENDORSEMENT EXCLUDING SPECIFIED OPERATORS." This endorsement provided: "In consideration of the premium at which this policy is written, notwithstanding any other provision of the policy, it is agreed that no coverage is afforded undes [sic] policy and to any claim or suit which occurs as the result of the vehicle being operated by the following person(s)" after which Reyes was identified. The actual policy itself defined "named insured" as "the individual named in the Declarations and also includes his/her spouse, if a resident of the same household." The policy further contained a clause excluding liability coverage for any bodily injury or property damage caused by "any automobile while in control of an excluded operator." Thus, under the policy, Reyes was the sole "named insured" but she was excluded from coverage.

¶ 5 On October 30, 2007, Reyes was driving her vehicle when she was involved in a traffic accident with two pedestrians, Rocio Jasso and her four-year-old son, Sergio. Rocio was seriously injured and Sergio died as a result of his injuries. Rocio and her husband, Brigido Jasso, filed a lawsuit against Reyes, alleging negligence and wrongful death. In response to this lawsuit, American Access filed the instant action, seeking a declaration that the policy it issued to Reyes provided no coverage for, and no duty to defend or indemnify, any claims and litigation arising from the accident. State Farm Insurance Company, which provided uninsured-motorist coverage to Rocio, answered the declaratory action and filed a counter complaint for declaratory judgment. State Farm alleged that American Access' attempt to exclude Reyes under the insurance policy violated public policy and therefore was unlawful.

¶ 6 The circuit court of Kane County granted summary judgment in favor of American Access, finding that the insurance policy provided no coverage for the accident. The appellate court reversed and remanded, holding that a blanket exclusion in an insurance policy, which precludes all liability coverage for the only named insured, violated public policy. 2012 IL App (2d) 120296. We granted American Access' petition for leave to appeal (Ill. S.Ct. R. (eff. Feb. 26, 2010)).

¶ 7 Analysis

¶ 8 Section 7-601(a) of the Illinois Safety and Family Financial Responsibility Law (625 ILCS 5/7-601(a) (West 2010)), a part of the Illinois Vehicle Code (Code), requires liability insurance coverage for all motor vehicles designed to be used on a public highway. Progressive Universal Insurance Co. of Illinois v. Liberty Mutual Fire Insurance Co., 215 Ill.2d 121, 128 (2005); State Farm Mutual Automobile Insurance Co. v. Smith, 197 Ill.2d 369, 373 (2001). Section 7-317(b)(2) of the Code mandates that a 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 2010); Progressive, 215 Ill.2d at 128; Smith, 197 Ill.2d at 373. This latter provision is commonly referred to as an "omnibus clause" and because it is required by statute, we have held that the clause must be read into every liability policy. Progressive, 215 Ill.2d at 128; State Farm Mutual Automobile Insurance Co. v. Universal Underwriters Group, 182 Ill.2d 240, 243-44 (1998). The principal purpose of this state's mandatory liability insurance requirement is to protect the public by securing payment of their damages. Progressive, 215 Ill.2d at 129; Smith, 197 Ill.2d at 376.

¶ 9 The issue in this case is whether an automobile liability policy can exclude the only named insured and owner of the vehicle without violating public policy. When a statute exists for the protection of the public, it cannot be overridden through private contractual terms. Progressive, 215 Ill.2d at 129. One reason for this rule is that "the members of the public to be protected are not and, of course, could not be made parties to any such contract." American Country Insurance Co. v. Wilcoxon, 127 Ill.2d 230, 241 (1989). Where liability coverage is mandated by statute, a contractual provision in an insurance policy which conflicts with the statute will be deemed void. Progressive, 215 Ill.2d at 129. When we assess whether a statutory provision prevails over a contractual provision, however, we must keep in mind that parties have freedom to contract as they desire. Id. We have reasoned:

"The freedom of parties to make their own agreements, on the one hand, and their obligation to honor statutory requirements, on the other, may sometimes conflict. These values, however, are not antithetical. Both serve the interests of the public. Just as public policy demands adherence to statutory requirements, it is in the public's interest that persons not be unnecessarily restricted in their freedom to make their own contracts." Id.

Accordingly, we use our power to declare a contractual provision void as against public policy sparingly. Id. A contractual provision will not be invalidated on public policy grounds unless it is clearly contrary to what the constitution, the statutes, or the decisions of the courts have declared to be the public policy or unless it is manifestly injurious to the public welfare. Id. at 129-30. Such a determination depends upon the particular facts and circumstances of each case. Id. at 130.

¶ 10 State Farm contends that, under the plain language of the Code, coverage is required for Reyes. We agree. The primary objective of statutory construction is to ascertain and give effect to the legislature's intent. Citizens Opposing Pollution v. ExxonMobil Coal U.S.A., 2012 IL 111286, 23. The best indicator of the legislature's intent is the language of the statute itself, given its plain and ordinary meaning. Id.

¶ 11 The plain and unambiguous language of section 7-317(b)(2) mandates that an automobile liability policy cover the "person named therein." In this case, Reyes is the "person named therein." In fact, Reyes is the only person named therein as the applicant, owner of the vehicle, and, according to the Declarations, the "named insured." Excluding the "person named therein, " who is required to be covered by the Code, through a contractual provision, violates section 7-317(b)(2) and, therefore, public policy.

¶ 12 Despite the clear import of section 7-317(b)(2), American Access argues that requiring the "named insured" to be covered distorts the legislature's intent by substituting words not found in the statute. According to American Access, that section 7-317(b)(2) uses the phrase "person named therein" rather than "named insured" is significant. We disagree.

¶ 13 This court has previously concluded that the phrase "person named therein" is synonymous with "named insured." Universal, 182 Ill.2d at 244 (concluding that section 7-601(a), together with section 7-317(b)(2), mandates 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"); Smith, 197 Ill.2d at 374 ("Section 7-317(b)(2) is clear. It mandates that a motor vehicle liability policy, or a liability insurance policy, cover the named insured and any other person using the vehicle with the named insured's permission."). Moreover, the legislature itself equates "person named therein" with "insured" in section 7-317(b)(2) since it utilizes both terms. The legislature uses "person named therein" in the first clause and then "insured" in the second clause when addressing permissive users. Clearly, the legislature intended both terms to have the same meaning. As such, American Access' argument to the contrary is unpersuasive. Here, according to American Access' own Declarations page, Reyes is the named insured. And, in the policy itself, the "named insured" is identified as the person named in the Declarations, which is Reyes, and his/her spouse. Accordingly, under the above authority and pursuant to the plain and clear language of section 7-317(b)(2), Reyes cannot be excluded from coverage under the policy.

¶ 14 Nonetheless, American Access contends that requiring the named insured to be covered conflicts with Illinois law because this court and various appellate court decisions have upheld named driver exclusions. See, e.g., Dungey v. Haines & Britton, Ltd., 155 Ill.2d 329 (1993); Heritage Insurance Co. of America v. Phelan, 59 Ill.2d 389 (1974); Rockford Mutual Insurance Co. v. Economy Fire & Casualty Co., 217 Ill.App.3d 181 (1991); St. Paul Fire & Marine Insurance Co. v. Smith, 337 Ill.App.3d 1054 (2003); American Service Insurance Co. v. Arive, 2012 IL App (1st) 111885. American Access points out that Reyes executed an endorsement which excluded her from coverage as a named driver. According to American Access, this was proper under Illinois law. Again, we disagree.

¶ 15 There is no question that, as a general matter, named driver exclusions are permitted in Illinois. Dungey, 155 Ill.2d at 336; Phelan, 59 Ill.2d at 396; Arive, 2012 IL App (1st) 111885, ¶ 17; Smith, 337 Ill.App.3d at 1060; Rockford, 217 Ill.App.3d at 187. However, as State Farm points out, none of the authorities relied upon by American Access address the question at issue here—whether the sole named insured and owner can be excluded from coverage. In Dungey, we upheld a named driver exclusion for the husband of the named insured wife. In Phelan, the issue was whether the excluded driver, who was the insured's teenage son, was an "operator" under the language of the exclusion provision since at the time of the accident, he was outside of the insured vehicle. In Rockford, the named insureds' son was excluded, and the issue was whether that named driver exclusion violated public policy to the extent it voided uninsured-motorist coverage. In Smith, once again, the named insureds' son was excluded, and the issue was whether this exclusion violated public policy. Lastly, in Arive, the issue was whether the fact that the excluded driver was not ...

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