Safe Auto Ins. Co. v. Fry

41 N.E.3d 595

SAFE AUTO INSURANCE COMPANY, Plaintiff–Appellee

v.Marie FRY, Defendant–Appellant (Kenneth Reed, Non–Appealing Defendant).

No. 1–14–1713.

Appellate Court of Illinois, First District, Second Division.

Sept. 22, 2015.

Karchmar & Lambert, P.C., Chicago (Matthew B. Karchmar and Thomas A. Reuland, of counsel), for appellant.

Mulherin, Rehfeldt & Varchetto, P.C., Wheaton (Ray H. Rittenhouse, of counsel), for appellee.

OPINION

Presiding Justice PIERCE delivered the judgment of the court, with 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, 320 Ill.Dec. 784, 888 N.E.2d 1 (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 quotations 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, 284 Ill.Dec. 302, 809 N.E.2d 1248 (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, 293 Ill.Dec. 677, 828 N.E.2d 1175 (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, 341 Ill.Dec. 429, 930 N.E.2d 943 (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 to protect the public where a personal injury loss is caused by an uninsured or hit-and-run vehicle and recovery from the tortfeasor is not possible (UM coverage). 215 ILCS 5/143a (West 2010). An insured under the policy's liability provision must be an insured under the UM coverage. Schultz, 237 Ill.2d at 403, 341 Ill.Dec. 429, 930 N.E.2d 943 (“Moreover, the UM coverage must extend to all who are insured under the policy's liability provisions. If a person constitutes an insured for purposes of liability coverage under a policy, the insurance company may not, either directly or indirectly, deny uninsured-motorist coverage to that person.”). Without statutorily mandated UM coverage, damages caused by an uninsured or hit-and-run driver would result in an unjust burden on the public to suffer a loss without just compensation due to the negligence of another. Putnam v. New Amsterdam Casualty Co., 48 Ill.2d 71, 89, 269 N.E.2d 97 (1970) (“the reasonable purpose of the statutory uninsured motorist provisions is to assure that compensation will be available to policyholders, in the event of injury by an uninsured motorist, to at least the same extent compensation is available for injury by a motorist who is insured in compliance with the Financial Responsibility Law”); Squire v. Economy Fire & Casualty Co., 69 Ill.2d 167, 176, 13 Ill.Dec. 17, 370 N.E.2d 1044 (1977) ; Sulser v. Country Mutual Insurance Co., 147 Ill.2d 548, 555, 169 Ill.Dec. 254, 591 N.E.2d 427 (1992).

¶ 12 Safe Auto argues that extending its reasonable belief exclusion to deny UM coverage for a permissive passenger does not violate Illinois public policy and points to our supreme court's decisions in Founders Insurance Co. v. Munoz, 237 Ill.2d 424, 341 Ill.Dec. 485, 930 N.E.2d 999 (2010), and Schultz v. Illinois Farmers Insurance Co., 237 Ill.2d 391, 341 Ill.Dec. 429, 930 N.E.2d 943 (2010) in support. In Founders, our supreme court considered six consolidated cases against either a named insured driver or permissive driver who never had a valid driver's license or a driver who had a suspended license at the time of the accident. Founders, 237 Ill.2d at 429, 341 Ill.Dec. 485, 930 N.E.2d 999. The Founders court examined a reasonable belief exclusion and held that it was not against public policy because no driver could have a reasonable belief that he was...