American Access Casualty Co. v. Reyes
1 N.E.3d 524
Ill.2014Background
- American Access issued an auto liability policy covering a 1999 Chrysler to Ana Reyes, who was listed as the vehicle owner and the sole named insured on the Declarations page.
- The policy also contained an endorsement expressly excluding Reyes as a specified operator; the policy listed a friend, Jose Cazarez, as the primary driver.
- Reyes drove the vehicle in October 2007 and struck two pedestrians; one child died and a civil suit followed alleging negligence and wrongful death.
- American Access sued for a declaratory judgment that the policy provided no coverage for the accident; State Farm intervened, arguing the exclusion violated public policy.
- The trial court granted summary judgment for American Access; the appellate court reversed, holding a blanket exclusion of the sole named insured violates public policy; the Illinois Supreme Court granted review.
Issues
| Issue | Plaintiff's Argument (American Access) | Defendant's Argument (State Farm / Reyes) | Held |
|---|---|---|---|
| Whether an automobile liability policy may exclude the sole named insured/owner | Policy may validly exclude named drivers, including the named insured, consistent with common law and §7-601(a) defenses; §7-602 permits driver-specific warnings | §7-317(b)(2) (omnibus clause) requires coverage of the “person named therein”; excluding the sole named insured conflicts with statute and public policy | The exclusion is invalid; sole named insured/owner cannot be excluded because it conflicts with §7-317(b)(2) and public policy |
| Whether the phrase “person named therein” excludes the named insured from coverage | “Person named therein” is broader and does not necessarily mean “named insured” | Prior Illinois decisions and statutory text treat “person named therein” as synonymous with “named insured” | The court treats the phrases as equivalent; statute mandates coverage of the named insured |
| Whether statutory provisions (e.g., §7-602 or §7-601(a)) permit excluding the named insured | §7-602 allows exclusion of “any driver” and §7-601 preserves common-law policy defenses, so exclusions are permissible | §7-602’s language refers to permissive drivers or owners when operating other vehicles; §7-601 does not preserve contractual exclusions because those are not common-law defenses | Rejected: §7-602 does not authorize excluding the sole named insured of the insured vehicle; §7-601 does not save contractual exclusions from statutory mandates |
| Whether public policy favors permitting such exclusions to lower premiums and expand access to insurance | Allowing exclusions helps high-risk or unlicensed owners obtain affordable coverage for their vehicles by excluding themselves as drivers | Public policy focuses on protecting the driving public and ensuring recoverable compensation; permitting the exclusion undermines that purpose | Rejected: statutory purpose (protecting public and securing payment of damages) outweighs insurer’s pricing/public-policy argument |
Key Cases Cited
- Progressive Universal Ins. Co. v. Liberty Mut. Fire Ins. Co., 215 Ill. 2d 121 (Illinois Supreme Court) (statutory omnibus clause must be read into liability policies; purpose is to protect public)
- State Farm Mut. Auto. Ins. Co. v. Smith, 197 Ill. 2d 369 (Illinois Supreme Court) (§7-317(b)(2) mandates coverage for named insured and permissive users; common-law defenses do not override statutory requirements)
- State Farm Mut. Auto. Ins. Co. v. Universal Underwriters Group, 182 Ill. 2d 240 (Illinois Supreme Court) (owner’s policy must cover named insured and permissive users; courts read omnibus clause into policies)
- Dungey v. Haines & Britton, Ltd., 155 Ill. 2d 329 (Illinois Supreme Court) (upheld named-driver exclusion where excluded person was not the sole named insured)
- Heritage Ins. Co. of Am. v. Phelan, 59 Ill. 2d 389 (Illinois Supreme Court) (upheld certain named-driver exclusions in context-specific settings)