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Thounsavath v. State Farm Mutual Automobile Insurance Co.

Supreme Court of Illinois

March 22, 2018

PHOUNGEUN THOUNSAVATH, Appellee,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant.

          JUSTICE THOMAS delivered the judgment of the court, with opinion.Chief Justice Karmeier and Justices Freeman, Kilbride, Garman, Burke, and Theis concurred in the judgment and opinion.

          OPINION

          THOMAS JUSTICE

         ¶ 1 Plaintiff Phoungeun Thounsavath sought underinsured motorist coverage from defendant, State Farm Mutual Automobile Insurance Company (State Farm), stemming from an automobile accident that occurred while she was a passenger in a vehicle driven by Clinton Evans. State Farm denied plaintiff's claim for underinsured motorist coverage based upon a driver exclusion endorsement in plaintiff's automobile liability insurance policies with State Farm. The driver exclusion endorsement named Clinton Evans as an excluded driver.

         ¶ 2 Both parties filed complaints for declaratory judgment. On cross-motions for summary judgment, the trial court granted summary judgment in favor of plaintiff. The appellate court affirmed. 2017 IL App (1st) 161334. This court allowed State Farm's petition for leave to appeal. Ill. S.Ct. R. 315 (eff. July 1, 2017).

         ¶ 3 BACKGROUND

         ¶ 4 State Farm issued two policies of motor vehicle insurance to plaintiff. One policy insured a 1998 Pontiac Grand Am, and one policy insured a 2004 Pontiac GTO. Each policy provided liability, uninsured motorist, and underinsured motorist coverage in the amounts of $100, 000 per person and $300, 000 per accident. Both policies contained a "Driver Exclusion Endorsement" that excluded Clinton M. Evans. Driver exclusion endorsements are also referred to as named driver exclusions. Specifically, the driver exclusion endorsement provided:

"IT IS AGREED WE SHALL NOT BE LIABLE AND NO LIABILITY OR OBLIGATION OF ANY KIND SHALL ATTACH TO US FOR BODILY INJURY, LOSS OR DAMAGE UNDER ANY OF THE COVERAGES OF THIS POLICY WHILE ANY MOTOR VEHICLE IS OPERATED BY: CLINTON M. EVANS." (Emphases in original.)

         ¶ 5 On June 17, 2012, plaintiff was a passenger in a 2007 Hyundai automobile that was owned and operated by Clinton Evans when Evans's vehicle was involved in an accident with another automobile. Plaintiff was injured in the accident. Plaintiff made a claim for damages against Clinton Evans for her personal injuries. Evans's insurer, American Access Insurance Company, paid plaintiff's claim in the amount of $20, 000, the policy limit. Plaintiff then filed a claim for underinsured motorist coverage with State Farm for the June 17, 2012, accident. State Farm denied plaintiff's claim based upon the driver exclusion endorsement.

         ¶ 6 Plaintiff subsequently filed a complaint for declaratory judgment in the circuit court of Cook County, seeking a declaration that she was entitled to underinsured motorist coverage under her State Farm policies. Plaintiff alleged that she purchased automobile insurance policies from State Farm that included underinsured motor vehicle coverage for bodily injury. Plaintiff noted that she was involved in a motor vehicle accident while a passenger in a vehicle owned by Clinton Evans and sustained over $30, 000 in medical bills related to the accident. Clinton Evans was at fault for the accident, and his insurer tendered the full policy limits of $20, 000 to plaintiff. Plaintiff then sought to recover pursuant to the underinsured motorist coverage of her State Farm policies, but State Farm denied the claim, citing the named driver exclusion stating that Clinton Evans was an excluded driver. Plaintiff asserted that section 143a-2 of the Illinois Insurance Code (215 ILCS 5/143a-2 (West 2012)) required all policies of insurance to provide underinsured motorist coverage to the named insured, so that State Farm's denial of plaintiff's underinsured motorist coverage violated the statute, as well as Illinois public policy. Plaintiff therefore sought a declaration that State Farm must provide her with underinsured motorist coverage under her State Farm policies.

         ¶ 7 State Farm filed an answer to plaintiff's complaint for declaratory judgment, denying that section 143a-2 of the Insurance Code required all policies of insurance to provide underinsured motorist coverage to the named insured. State Farm also filed a counterclaim for declaratory judgment, noting that it had issued two policies of automobile insurance to plaintiff. Both policies contained a driver exclusion endorsement, signed by plaintiff, which excluded coverage for bodily injury, loss, or damage under the policies while any motor vehicle is operated by Clinton Evans. State Farm denied that either of plaintiff's automobile insurance policies provided underinsured motorist coverage for the June 17, 2012, accident because all coverages were excluded while Clinton Evans operated any motor vehicle. State Farm sought a declaratory judgment in its favor declaring that there was no underinsured motorist coverage available to plaintiff under either policy for the June 17, 2012, accident, that State Farm had no duty to arbitrate any claim for underinsured motorist coverage made by plaintiff under either policy, and that there was no coverage of any kind available to plaintiff under either policy for the accident of June 17, 2012.

         ¶ 8 The circuit court ordered both parties to file cross-motions for summary judgment. State Farm filed a motion for summary judgment, arguing that the driver exclusion endorsement in both automobile policies issued to plaintiff did not violate the Insurance Code or the public policy of the state of Illinois. The circuit court denied State Farm's motion for summary judgment. Plaintiff then filed her motion for summary judgment, which the circuit court granted.

         ¶ 9 State Farm appealed, arguing that its driver exclusion endorsement did not violate section 143a-2 of the Insurance Code or Illinois public policy. The appellate court affirmed the circuit court. 2017 IL App (1st) 161334.

         ¶ 10 The appellate court noted that, under section 7-601(a) of the Illinois Safety and Family Financial Responsibility Law (Financial Responsibility Law) (625 ILCS 5/7-601(a) (West 2012)), a part of the Illinois Vehicle Code (Vehicle Code), no one may operate a motor vehicle or allow a vehicle to be operated without obtaining sufficient insurance. 2017 IL App (1st) 161334, ¶ 16. In addition, sections 143a and 143a-2 of the Insurance Code (215 ILCS 5/143a, 143a-2 (West 2012)) require automobile liability insurance policies to include uninsured and underinsured motorist coverage. 2017 IL App (1st) 161334, ¶ 17. The appellate court acknowledged that, in general, named driver exclusions in automobile liability insurance policies are permitted in Illinois. Id. ¶ 22. However, the cases cited by State Farm in support of its named driver exclusion were distinguishable, as the named driver exclusions in those cases were enforced as to parties other than the named insured. Id. ¶ 23.

         ¶ 11 The appellate court stated that the issue in this case was whether the named driver exclusion violated Illinois's mandatory insurance requirements and public policy where the exclusion barred coverage for the named insured. Although none of the cases cited by either party addressed that precise issue, the appellate court found the analysis in American Access Casualty Co. v. Reyes, 2013 IL 115601, to be instructive.

         ¶ 12 The issue in Reyes was whether an automobile liability policy could exclude the only named insured and owner of the vehicle without violating public policy. Reyes noted that the plain and unambiguous language of section 7-317(b)(2) of the Vehicle Code (625 ILCS 5/7-317(b)(2) (West 2010)) mandated that an automobile liability policy cover the "person named therein." Reyes, 2013 IL 115601, ¶ 11. Because Reyes was the only person "named therein, " Reyes could not be excluded from coverage through a contractual provision. Id.

         ¶ 13 Similar to Reyes, the appellate court held that a named driver exclusion in an insured's automobile liability insurance policy that bars liability, uninsured, or underinsured coverage for the named insured violates Illinois's mandatory insurance requirements and Illinois public policy. 2017 IL App (1st) 161334, ΒΆ 34. Accordingly, the appellate court held that the named driver exclusion endorsements in ...


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