Thounsavath v. State Farm Mutual Automobile Insurance Company
2017 IL App (1st) 161334
| Ill. App. Ct. | 2017Background
- Plaintiff Phoungeun Thounsavath was injured as a passenger in a vehicle driven by Clinton M. Evans; AAIC paid $20,000 as liability for Evans, whose vehicle was underinsured.
- Plaintiff carried two State Farm automobile liability policies that included underinsured motorist (UIM) coverage mandated by the Illinois Insurance Code.
- Both State Farm policies contained a named-driver exclusion endorsement stating the insurer would have no liability "while any motor vehicle is operated by: Clinton M. Evans."
- State Farm denied plaintiff’s UIM claim based on that exclusion; State Farm sued for declaratory relief and moved for summary judgment; the trial court denied State Farm’s motion and granted plaintiff’s summary judgment.
- State Farm appealed, arguing the named-driver exclusion is valid and does not violate 625 ILCS 5/7-317(b)(2), 215 ILCS 5/143a-2, or Illinois public policy.
- The appellate court affirmed, holding the exclusion cannot be enforced against the named insured because it conflicts with the mandatory-insurance statutes and public policy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a named-driver exclusion that bars coverage for the named insured violates the mandatory-insurance statute (625 ILCS 5/7-317(b)(2)) and related UIM statute (215 ILCS 5/143a-2) | Exclusion is unenforceable against the named insured; statutory scheme and precedent (Barnes line) require UIM coverage for insureds regardless of endorsements | Exclusion is permitted; named-driver exclusions are generally valid and authorized by later statutory scheme (including notice provisions) to allow risk-based underwriting | Held for plaintiff: exclusion unenforceable as applied to the named insured because it conflicts with section 7-317(b)(2) and the Insurance Code’s mandated UIM protection |
| Whether enforcing the exclusion is contrary to Illinois public policy | Public policy favors protecting the driving public and ensuring insureds receive statutorily mandated UIM coverage; denying the named insured would undermine that protection | Public policy supports contractual freedom and allowing insurers to exclude high-risk drivers to keep premiums affordable; notice statutes permit limited exclusions | Held for plaintiff: public policy (as expressed in the statutes) outweighs insurer’s freedom to contract; exclusion is manifestly contrary to the mandatory-insurance scheme |
Key Cases Cited
- Barnes v. Powell, 49 Ill.2d 449 (1971) (insured entitled to uninsured motorist coverage despite policy exclusions; expansive reading of UIM statutory purpose)
- Heritage Ins. Co. of Am. v. Phelan, 59 Ill.2d 389 (1974) (upholding a restrictive endorsement in a different factual posture)
- Phoenix Ins. Co. v. Rosen, 242 Ill.2d 48 (2011) (describing purpose of mandatory liability and UIM coverage to protect public)
- Rockford Mut. Ins. Co. v. Economy & Cas. Co., 217 Ill. App.3d 181 (1991) (distinguishing cases where an exclusion renders the vehicle uninsured and clarifying who must seek recovery under which policy)
- St. Paul Fire & Marine Ins. Co. v. Smith, 337 Ill. App.3d 1054 (2003) (upholding named-driver exclusions applied to parties other than the named insured under certain notice provisions)
- Doxtater v. State Farm Mut. Auto. Ins. Co., 8 Ill. App.3d 547 (1972) (applying Barnes and interpreting section 143a to require broad uninsured-motorist protection)