PRESIDING JUSTICE PIERCE delivered the judgment of the court, with opinion.
Illinois Official Reports
Appellate Court
Decision Under Review Appeal from the Circuit Court of Cook County, No. 12-CH-34843; the Hon. Franklin U. Valderrama, Judge, presiding. Judgment Reversed and remanded. Counsel on Appeal Karchmar & Lambert, P.C., of Chicago (Matthew B. Karchmar and Thomas A. Reuland, of counsel), for appellant. Mulherin, Rehfeldt & Varchetto, P.C., of Wheaton (Ray H. Rittenhouse, of counsel), for appellee. Panel PRESIDING JUSTICE PIERCE delivered the judgment of the court, with opinion.
Justice Simon concurred in the judgment and opinion.
Justice Neville dissented, with opinion.
OPINION
¶ 1 Plaintiff Safe Auto Insurance Company (Safe Auto) issued an automobile liability insurance policy to Kenneth Reed (Reed). Defendant Marie Fry (Fry) was a passenger in Reed's vehicle when Reed was involved in a hit-and-run accident. Fry was injured and subsequently filed an uninsured motorist claim with Safe Auto seeking arbitration. Safe Auto thereafter filed a declaratory judgment complaint in the circuit court alleging that it did not have a duty to indemnify Fry because she was excluded from coverage by the "reasonable belief exclusion" in its policy. Later, Safe Auto filed a motion for summary judgment that was granted by the circuit court. Fry now appeals and argues that, where a driver reasonable belief exclusion contained in the Safe Auto contract for automobile liability insurance excludes uninsured motorist coverage for a permissive passenger, the exclusion as applied to the permissive passenger is unenforceable because it violates Illinois public policy. We agree. For the following reasons, we reverse the ruling of the circuit court granting summary judgment in favor of Safe Auto and remand for further proceedings.
¶ 2 BACKGROUND
¶ 3 Safe Auto issued an automobile liability insurance policy to Reed insuring his 2004 Pontiac Grand Am SE1 ("the vehicle") for the policy period beginning May 1, 2012 and ending November 1, 2012. Safe Auto's insurance contract contained an uninsured motorist coverage provision, "Part III-Uninsured Motorist Coverage," which obligated Safe Auto to pay for bodily injuries "1. sustained by an insured person; 2. caused by accident; and 3. arising out of the ownership, maintenance, or use of an uninsured motor vehicle." "Insured person" is defined in the policy to include "any person occupying a covered vehicle." ¶ 4 Safe Auto's policy also contained the following exclusion:
"Coverage and our duty to defend under Part I-Liability to Others, Part II-Excess Medical Payments Coverage, Part III-Uninsured Motorist Coverage, and Part IV-Physical Damage Coverage does not apply to a loss:
* * *
16. If the driver used the covered vehicle without a reasonable belief that he was entitled to do so."
General Exclusion number 16 is referred to as the "reasonable belief exclusion." ¶ 5 On April 14, 2012, Reed's driver's license expired. The reason for the expiration of his driver's license is not at issue here. On May 14, 2012, while Reed was driving his vehicle with Fry as a passenger, the vehicle was involved in an accident with a vehicle that left the scene. Fry was injured as a result of the accident. On May 15, 2012, Reed was issued a new driver's license. Fry denied having knowledge that Reed was driving his vehicle without a valid license on the day of the accident. ¶ 6 Fry sought arbitration of her uninsured motorist claim with Safe Auto on August 2, 2012. In response, Safe Auto filed a complaint for declaratory judgment on September 14, 2012, to prevent Fry from recovering under the policy. On March 18, 2013, Safe Auto filed a motion for summary judgment, alleging that the "reasonable belief exclusion" barred coverage for an uninsured motorist claim. On September 16, 2013, after argument and supplemental briefing, the circuit court granted Safe Auto's motion for summary judgment. The circuit court held:
"Reed, who did not have a valid driver's license at the time of the subject collision, could not, as a matter of law, have a reasonable belief that he was entitled to drive. If the driver, Reed, did not have a reasonable belief that he was entitled to use the vehicle, coverage under the plain language of the policy, is
[sic] excluded to any loss, including losses to any insured person. Fry, as a passenger and permissive user, constitutes an insured under the policy. Fry, however, is barred from coverage due to Reed's exclusion."
Fry's subsequent motion to reconsider was denied May 7, 2014. Fry now appeals the September 16, 2013 order granting summary judgment and the May 7, 2014 order denying her motion to reconsider.
¶ 7 ANALYSIS
¶ 8 The Safe Auto automobile insurance policy issued to Reed contained an uninsured motorist (UM) provision with an exclusion for the insurer's coverage and duty to defend a loss "if the driver used the covered vehicle without a reasonable belief that he was entitled to do so." Fry argues that the circuit court erred when it granted summary judgment in favor of Safe Auto, and her subsequent motion to reconsider, based upon the reasonable belief exclusion in Reed's insurance policy because it is void as it violates Illinois public policy. ¶ 9 "The purpose of summary judgment is not to try a question of fact, but rather to determine whether a genuine issue of material fact exists." Williams v. Manchester, 228 Ill. 2d 404, 417 (2008). Summary judgment is only appropriate when "the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Internal quotation marks omitted.) Id. A court must construe the "pleadings, depositions, admissions, and affidavits strictly against the movant and liberally in favor of the opponent" in determining whether a genuine issue as to any material fact exists. Id. ¶ 10 Summary judgment is precluded where "the material facts are disputed or where, the material facts being undisputed, reasonable persons might draw different inferences from the undisputed facts." Id. Summary judgment should be allowed "only where the right of the moving party is clear and free from doubt." Id. (citing Adams v. Northern Illinois Gas Co., 211 Ill. 2d 32, 43 (2004) (and cases cited therein)). Reviewing courts review appeals from orders granting summary judgment de novo. Id. ¶ 11 The public policy of this state is to protect members of the public injured in vehicular accidents. This public policy, as reflected in state statutes and well-established case law, includes mandatory liability insurance to compensate for injuries caused by the negligent operation of a vehicle by the owner or other permitted driver. 625 ILCS 5/7-601(a) (West 2010); Progressive Universal Insurance Co. of Illinois v. Liberty Mutual Fire Insurance Co., 215 Ill. 2d 121, 129 (2005) (the "principal purpose" of the mandatory liability insurance requirement is "to protect the public by securing payment of their damages"). Importantly, and significantly, public policy, as declared by the General Assembly, requires vehicle owner liability policies to provide specific coverage to "insure not only the persons named in the policy, but also 'any other person using or responsible for the use' of the subject vehicle with the express or implied permission of the insured." Schultz v. Illinois Farmers Insurance Co., 237 Ill. 2d 391, 401 (2010) (quoting 625 ILCS 5/7-317(b)(2) (West 2004)). To enhance this public policy, there is an additional requirement that vehicle liability insurers provide coverage drive while suspended. Recently, the American Association of Motor Vehicle Administrators reported that nationally, at any given time, approximately 7% of drivers (approximately 15 million) are driving while suspended. The report focused on the number of drivers suspended for reasons other than poor driving or "suspensions for social non-conformance reasons": bounced checks, fuel theft, truancy, vandalism, failure to pay taxes, minor in possession of alcohol, false public alarm, illegal solid waste burning, vandalism, failure to pay alimony, selling alcohol to a minor, truancy, unlawful possession of firearms, prostitution, and many more. AAMVA, supra at 22. According to the AAMVA, in 2002 drivers suspended for social nonconformance reasons represented 29% of all suspended drivers. Id. at 2. By 2006, this group represented 39% of all suspended drivers, or about 6 million drivers. Id. The AAMVA concluded that research verified that drivers suspended for social nonconformance reasons pose a comparatively lower safety risk compared to those who are suspended for driving related reasons. Id. at 23. Notably, the AAMVA stated that research indicated that "75 percent of all suspended drivers continue to drive. The addition of suspensions for social non-conformance reasons has however, dramatically increased the number of suspended drivers on our roads resulting in a tremendous burden on law enforcement, departments of motor vehicles, the courts, and local communities." Id. at 4. ¶ 29 The frequency of "driving dirty" and its relationship to Illinois's public policy to protect innocent passengers injured by at-fault uninsured or hit-and-run drivers indicates there is a strong likelihood that hundreds of thousands of unlicensed or suspended drivers are on Illinois roads, many of whom are suspended for reasons other than bad driving. Considering the national figures, it is reasonable to conclude that, in Illinois, a staggering number of permissive passengers are riding in vehicles where the driver does not have a reasonable belief he is permitted to drive. ¶ 30 "Driving dirty," while not condoned, is a reality. Yet this reality is not something a passenger would likely consider when getting into a car. As stated in Monroe v. United States Fidelity & Guaranty Co., 237 Ill. App. 3d 261, 268 (1992),
"[t]here are far too many instances we can call to mind in which a passenger may not have his own policy to look to for recovery. Many people in our State, minors, elderly persons, and people who rely on mass transportation, do not own automobiles, and, thus, do not have their own insurance policy. When a passenger enters an automobile, he should realistically believe he is covered by the owner's policy."
This observation is as accurate today as it was 25 years ago. These permissive passengers are at risk of injury and economic loss due to the fault of uninsured or hit-and-run operators and there is a strong likelihood that the operator of the vehicle they occupy, if suspended, was suspended for reasons unrelated to bad driving. It simply does not follow that these and other innocent passengers should be at risk and denied UM coverage "to at least the same extent
compensation is available for injury by a motorist who is insured in compliance with the Financial Responsibility Law" (
Putnam v.
New Amsterdam Casualty Co.,
48 Ill. 2d 71, 89 (1970)) because of the application of a driver reasonable belief exclusion. ¶ 31 In conclusion, we hold the driver reasonable belief exclusion as applied in this case clearly violates public policy and does not further the public interest because this exclusion allows insurers to indirectly deny coverage to a category of otherwise protected insureds, the permissive passenger, for which premiums were charged and received, based on a broad exclusion applicable to only one category of insured (drivers) under the policy. "We cannot ignore that a premium was paid for uninsured motorist protection. If that protection is not there, the policyholder has been denied substantial economic value in return for the premiums which have been paid."
Hoglund v.
State Farm Mutual Automobile Insurance Co.,
148 Ill. 2d 272, 278 (1992). The
Hoglund court pointed out that exculpatory language cannot be read in isolation but must be read in conjunction with the policy holder's reasonable expectations along with the public policy behind the statute and the coverage intended by the insurance policy itself.
Id. at 279. This exclusion is void and unenforceable as applied to permissive passengers under section 7-317(f)(4) of the Vehicle Code (
625 ILCS 5/7-317(f)(4) (West 2010) ("The policy, the written application therefor, if any, and any rider or endorsement which shall not conflict with the provisions of this Act shall constitute the entire contract between the parties.")). ¶ 32 Fry was a permissive user entitled to protection from economic loss related to her personal injury due to an at-fault hit-and-run motorist. To allow Safe Auto, or any other insurer, to directly or indirectly avoid the mandate of the General Assembly, and the decisions of our courts, by denying UM coverage to permissive passengers by extension of a driver reasonable belief exclusion is unenforceable as against public policy.
See Illinois Secretary of State, Losing Your Driving Privileges, http://www.cyberdrive illinois.com/departments/drivers/losepriv.html (last visited Aug. 11, 2015).
Information provided by the Illinois Secretary of State as of August 11, 2015. In a report prepared by Rutgers University, Illinois reported over 222,000 suspended licenses (2.6% of licensed drivers) in 2003. New Jersey reported that approximately 5% of its 6 million drivers were suspended and less than 6% were suspended for purely driving related reasons. Jon A. Carnegie, Driver's License Suspensions, Impacts and Fairness Study (2007), http://vtc.rutgers.edu/wp-content/uploads/2014/04/MVC-DL-Susp-Final-Report-Vol2.pdf.
See AFSCME Information Highway, Not Just a Ferguson Problem-How Traffic Courts Drive Inequality in California, at 6, 20 (2015), http://www.lccr.com/wp-content/uploads/Not-Just-a-Ferguson-Problem-How-Traffic-Courts-Drive-Inequality-in-California-4.20.15.pdf.
See American Association of Motor Vehicle Administrators, Best Practices Guide to Reducing Suspended Drivers, at 2 (2013), http://www.google.com/url?url=http://www.aamva.org/WorkArea/DownloadAsset.aspx%3Fid%3D3723&rct=j&frm=1&q=&esrc=s&sa=U&ved=0CEEQFjAGahUKE wjc4ZqXwJXHAhVBlYAKHbDGAwo&usg=AFQjCNF4pyQAoSCQgIIaKmFR5VzvhnBqsA (AAMVA). --------
¶ 33 CONCLUSION
¶ 34 For the reasons stated herein, we find that the trial court erred in granting summary judgment in favor of Safe Auto and reverse the ruling of the circuit court and remand for proceedings consistent with this order. ¶ 35 Reversed and remanded. ¶ 36 JUSTICE NEVILLE, dissenting. ¶ 37 The majority takes the position that denying Fry, a permissive passenger, coverage through the reasonable belief exclusion of Safe Auto's insurance policy allows Safe Auto, and other insurance companies, to avoid the mandate of the General Assembly to insure not only the persons named in the policy, but also any other person using or responsible for the use of the subject vehicle with the express or implied permission of the insured. The majority also holds that allowing the reasonable belief exclusion to deny uninsured motorist coverage to a permissive passenger is against public policy. The majority's decision is contrary to Illinois Supreme Court case law. See Founders, 237 Ill. 2d at 445; Schultz, 237 Ill. 2d at 404. Therefore, I respectfully dissent. ¶ 38 The majority overlooks the fact that Illinois public policy is clear that in order to drive a vehicle in Illinois, the driver must have a valid license. 625 ILCS 5/6-101(a) (West 2010). Specifically, section 6-101(a) of the Illinois Vehicle Code provides: 11 "No person *** shall drive any motor vehicle upon a highway in this State unless such a person has a valid license or permit, or a restricted driving permit, issued under the provisions of this Act." 625 ILCS 5/6-101(a) (West 2010). ¶ 39 The Illinois Supreme Court interpreted the aforementioned provision in the Vehicle Code and the reasonable belief exclusion in an insurance policy and held that no driver could have a reasonable belief that he was entitled to drive in this state without a valid license. Founders, 237 Ill. 2d at 438. The Founders court also held that the reasonable belief exclusion does not violate the public policy of Illinois and that insurance companies may limit their risks: "The reasonable-belief exclusion at issue here, like the food-delivery exclusion at issue in Progressive, applies equally to the named insured and anyone using the vehicle with the insured's permission. Pursuant to our analysis in Progressive, we hold that the exclusion does not violate Illinois public policy as set forth in section 7-317(b)(2) of the Vehicle Code. Founders and Safeway may limit their risk by excluding insureds and permissive users alike who lack the most basic requirement for driving in this state: a valid license. We recognize that, depending upon the circumstances of a particular case, the reasonable-belief exclusion, like any exclusion, may result in no insurance coverage from which injured third parties may be compensated. Such coverage gaps, however, implicate policy concerns that are properly considered by the legislature, not this court." (Emphases added.) Founders, 237 Ill. 2d at 445. ¶ 40 The Illinois Supreme Court makes it clear that when a driver operates a vehicle without a valid license, the driver has no reasonable belief that he is entitled to drive under the reasonable belief exclusion in a motor vehicle insurance policy. Founders, 237 Ill. 2d at 438. The Illinois Supreme Court also makes it clear that the word "user" in a motor vehicle policy includes "permissive passengers as well as permissive drivers." Schultz, 237 Ill. 2d at 402-03. Therefore, according to Founders and Schultz, Fry, a passenger in a vehicle driven by an insured driver without a valid driver's license, is barred from recovering uninsured motorist coverage by the reasonable belief exclusion in the driver's motor vehicle insurance policy. Founders, 237 Ill. 2d at 445; Schultz, 237 Ill. 2d at 402-04. Accordingly, in my opinion, the trial court did not err when it granted Safe Auto's motion for summary judgment. ¶ 41 In conclusion, I agree with the Founders court that we must wait until the legislature decides that it will remove the coverage gap by crafting legislation which provides that permissive passengers should receive uninsured motorist coverage and should not be treated like unlicensed drivers or unlicensed permissive drivers under the reasonable belief exclusion. Founders, 237 Ill. 2d at 445. But, this court is bound by decisions of the Illinois Supreme Court. People v. Artis, 232 Ill. 2d 156, 164 (2009). Accordingly, I follow Founders and Schultz and respectfully dissent.