Direct Auto Insurance Co. v. Merx, 161 N.E.3d 1140

Background

On June 18, 2015, Merx was injured as a passenger in a 2013 Chevrolet Cruze driven by an uninsured, at-fault driver (Brandon Motley); her own 2012 Chevrolet Sonic was not involved.
Merx held a Direct Auto auto policy (Jan 15–Jul 15, 2015) that included $25,000/$50,000 liability and matching uninsured-motorist (UM) limits.
The UM endorsement defined coverage only for bodily injury "while ‘you’ are an occupant in an ‘insured automobile’ " and defined "insured automobile" as an owned automobile for which a specific UM premium was paid (i.e., Merx’s Sonic).
Direct Auto sought declaratory relief, arguing the policy unambiguously denied UM benefits because Merx was not occupying her insured vehicle at the time of the accident; it moved for summary judgment.
Merx argued the policy term conflicted with Illinois public policy and section 143a of the Insurance Code, so the exclusion was unenforceable; the trial court denied Direct Auto’s summary-judgment motion and later granted Merx’s motion for judgment on the pleadings.
The appellate court affirmed, holding that denying UM benefits under these facts would violate the statutory purpose of section 143a and settled Illinois precedent.

Issues

Issue	Direct Auto's Argument	Merx's Argument	Held
Whether the policy language unambiguously bars UM coverage because Merx was not occupying her insured vehicle	Policy is clear: UM applies only when the named insured occupies an "insured automobile" (the Sonic), so no coverage for the Cruze accident	Policy may be clear but is unenforceable if it conflicts with statute/public policy	The policy language is unambiguous but cannot be applied to deny UM coverage where doing so would conflict with §143a and precedent; Merx is entitled to UM coverage
Whether Illinois public policy and §143a mandate UM coverage for an insured injured as a passenger in an uninsured third‑party vehicle	The 1995 amendment to §143a permits certain owned‑vehicle exclusions and thus allows reasonable contractual limits	§143a and controlling case law require UM protection for insured persons regardless of the vehicle occupied when injured; the amendment does not apply here	§143a’s purpose requires UM coverage for insureds injured by uninsured motorists in third‑party vehicles not owned or made regularly available to the insured; the 1995 amendment does not bar coverage here
Whether the 1995 amendment to §143a authorizes denial of UM coverage whenever the vehicle is not listed in the policy	The amendment permits insurers to limit UM coverage to vehicles specified in the policy (so the exclusion is valid)	The amendment only authorizes an exclusion for vehicles owned by or furnished/available for regular use of the insured or household members; it does not apply to Merx’s facts	The amendment is limited to unnamed owned/furnished/regular‑use vehicles and is not triggered here; it does not allow the broad exclusion Direct Auto advances

Key Cases Cited

Squire v. Economy Fire & Casualty Co., 69 Ill. 2d 167 (Ill. 1977) (§143a requires UM coverage for insured persons regardless of vehicle occupied when injured)
Phoenix Insurance Co. v. Rosen, 242 Ill. 2d 48 (Ill. 2011) (purpose of vehicle liability requirement is to protect the public by securing payment of damages)
Heritage Ins. Co. of Am. v. Phelan, 59 Ill. 2d 389 (Ill. 1974) (legislative intent behind §143a was to provide extensive UM protection for those who are insureds)
Doxtater v. State Farm Mut. Auto. Ins. Co., 8 Ill. App. 3d 547 (Ill. App. Ct. 1972) (owned‑vehicle exclusion that conditions UM coverage on vehicle being declared is unenforceable under §143a)
Roby v. Illinois Founders Ins. Co., 57 Ill. App. 3d 89 (Ill. App. Ct. 1978) (insured‑vehicle exclusions that make coverage depend on being in a listed vehicle violate §143a)
Rockford Mut. Ins. Co. v. Economy Fire & Cas. Co., 217 Ill. App. 3d 181 (Ill. App. Ct. 1991) (policyholder may recover under own UM policy when injured as passenger in an uninsured vehicle)
Schultz v. Illinois Farmers Ins. Co., 237 Ill. 2d 391 (Ill. 2010) (if a person is an insured for liability purposes, she must be treated as an insured for UM/underinsured coverage)
Shefner v. Illinois Farmers Ins. Co., 243 Ill. App. 3d 683 (Ill. App. Ct. 1993) (interpreting scope of UM exclusions and public‑policy limits)