Lead Opinion
delivered the opinion of the court:
Ronald Abbinante delivered pizzas for Casale Pizza, Inc. While using his mother’s minivan to make a delivery, Abbinante struck and injured a pedestrian. The issue in this case is whether Progressive Universal Insurance Company of Illinois (Progressive), which issued the motor vehicle liability insurance policy on Abbinante’s mother’s van, had a duty to defend and indemnify him in a personal injury action subsequently filed by the injured pedestrian and the pedestrian’s wife. In a declaratory judgment action filed by Progressive, the circuit court of Du Page County held that because of a provision in the policy excluding coverage for bodily injury or property damage arising out of the use of the vehicle to carry persons or property for compensation or a fee, including food delivery, the company owed no such duty. The appellate court reversed, finding the exclusion to be void and unenforceable under this state’s law mandating liability coverage for permissive users of a vehicle.
The facts are undisputed. Shirley Abbinante owned a minivan which she insured through Progressive. On August 25, 2000, Mrs. Abbinante allowed her son Ronald to use the van to deliver pizzas for Casale Pizza, Inc. The company gave Ronald money for gas and paid him $1.25 for each pizza he delivered. While driving his mother’s van in the course of delivering a pizza for the company, Ronald struck a pedestrian named Mikhail Lavit. Lavit and his wife sued Ronald and Casale Pizza to obtain damages for personal injuries, including brain and spinal cord injuries, sustained as a result of the accident.
Progressive began defending Ronald in the personal injury action under a reservation of rights. While that action was underway, the Lavits sought and obtained a payment of $100,000 from their own insurer, Liberty Mutual Fire Insurance Company (Liberty Mutual). That payment represented the limits of the uninsured-motorist coverage provided by their Liberty Mutual motor vehicle policy.
After paying the policy limits to the Lavits, Liberty Mutual demanded reimbursement of that sum from Progressive. Progressive responded by bringing this action in the circuit court of Du Page County to obtain a declaratory judgment that it had no duty to defend or indemnify Ronald in the Lavits’ personal injury action. Liberty Mutual, in turn, asserted a counterclaim against Progressive seeking reimbursement of the sums it had paid to the Lavits under the uninsured-motorist provisions of their poliсy.
“the ownership, maintenance, or use of a vehicle while being used to carry persons or property for compensation or a fee, including, but not limited to, delivery of *** food, or any other products.”
Liberty Mutual countered with a cross-motion for summary judgment, arguing that Progressive could not avoid its contractual obligations based on this exclusion because the exclusion was not only ambiguous, but contrary to public policy.
Following a hearing, the circuit court granted the motion for summary judgment filed by Progressive and denied the cross-motion for summary judgment filed by Liberty Mutual. In the court’s view, the food delivery exclusion in the policy was both unambiguous and valid. Progressive therefore had no duty, as a matter of law, to defend or indemnify Ronald. Absent such a duty, Liberty Mutual had no basis for obtaining reimbursement from Progressive.
The circuit court’s summary judgment order contained an express written finding pursuant to Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)) that there was no just reason for delaying enforcement or appeal or both.
In its appeal, Libеrty Mutual argued, as it had in the circuit court, that the food delivery exclusion in the policy issued to Ronald’s mother was ambiguous and contrary to public policy. The appellate court agreed with the circuit court that the claim of ambiguity was meritless. Viewing the exclusion with reference to the particular facts of this case, the appellate court held that the exclusion was completely unambiguous and that Ronald’s conduct fell squarely within its terms. The policy excluded coverage where the vehicle was being used to deliver food for a fee or compensation, and, the appellate court observed, that was precisely what Ronald was doing at the time he hit Mr. Lavit. He was using the van to deliver food, namely, pizza, and was being paid compensation or a feе, $1.25 per delivery plus gas money, to do so.
While the appellate court found no ambiguity in the policy’s food delivery exclusion as applied to this case, it agreed with Liberty Mutual’s additional claim that the exclusion violated public policy. Relying on this court’s recent decision in State Farm Mutual Automobile Insurance Co. v. Smith,
“[s]hall insure the person namedtherein and any other person using or responsible for the use of such motor vehicle or vehicles with the express or implied permission of the insured[.]”
Because Ronald was using the vehicle with his mother’s express permission at the time he struck and injured Lavit, the court held that section 7 — 317(b)(2) required Progressive to defend and indemnify Ronald in the personal injury action brought against him by the Lavits. In the appellate court’s view, giving effect to the food delivery exclusion in the mother’s policy would conflict with this statutory requirement and contravene the goal of Illinois’ mandatory motor vehicle liability insurance law. Accordingly, the appellate court reversed the circuit court’s entry of summary judgment in favor of Progressive and entered summary judgment in favor of Liberty Mutual.
In the proceedings before our court, no issue is raised as to the clarity of the food delivery exclusion in the mother’s insurance policy. It is conceded to be unambiguous. The sole question presented for our review is whether the appellate court errеd in holding that Liberty Mutual was entitled to summary judgment on the grounds that the policy exclusion was void and unenforceable.
The standards applicable to this inquiry are well established. Summary judgment is proper where, when viewed in the light most favorable to the nonmoving party, the pleadings, depositions, admissions, and affidavits on file reveal that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Whether the entry of summary judgment was appropriate is a matter we review de novo. General Casualty Insurance Co. v. Lacey,
Section 7 — 601(a) of the Illinois Safety and Family Financial Responsibility Law (625 ILCS 5/7 — 601(a) (West 2000)) mandates liability insurance coverage for automobiles and other motor vehicles designed to be used on a public highway. Under the statute, no person is permitted to operate, register or maintain registration of such a motor vehicle unless the vehicle is covered by a liability insurance policy. State Farm Mutual Automobile Insurance Co. v. Smith,
The liability insurance mandated by section 7 — 601(a) must meet certain requirements. One of those requirements is set forth in section 7 — 317(b)(2) of the Illinois Safety and Family Financial Responsibility Law (625 ILCS 5/7 — 317(b)(2) (West 2000)). As indicated earlier in this opinion, section 7 — 317(b)(2) provides that a motor vehicle owner’s policy of liability insurance
“[s]hall insure the person named therein and any other person using or responsible for the use of such motor vehicle or vehicles with the express orimplied permission of the insured[.]” 625 ILCS 5/7 — 317(b)(2) (West 2000).
Provisions such as this, which extend liability coverage to persons who use the named insured’s vehicle with his or her permission, are commonly referred to as “omnibus clauses.” Where, as in Illinois, an omnibus clause is required by statute to be included in motor vehicle liability policies, our court has held that such a clause must be read into every such policy. State Farm Mutual Automobile Insurance Co. v. Universal Underwriters Group,
The principal purpose of this state’s mandatory liability insurance requirement is to protect the public by securing payment of their damages. State Farm Mutual Automobile Insurance Co. v. Smith,
In evaluating whether statutory provisions override contractual terms, courts must remain mindful of principles of freedom of contract. The freedоm of parties to make their own agreements, on the one hand, and their obligation to honor statutory requirements, on the other, may sometimes conflict. These values, however, are not antithetical. Both serve the interests of the public. Just as public policy demands adherence to statutory requirements, it is in the public’s interest that persons not be unnecessarily restricted in their freedom to make their own contracts. The power to declare a private contract void as against public policy is therefore exercised sparingly. First National Bank of Springfield v. Malpractice Research, Inc.,
Liberty Mutual’s public policy challenge to the food delivery exclusion at issue in this case relies primarily on our decision in State Farm Mutual Automobile Insurance Co. v. Smith,
On cross-motions for summary judgment, the circuit court ruled in favor of State Farm and against the valet and casino, holding that the policy exclusion was applicable and that State Farm therefore had no duty to provide a defense or indemnification. The appellate court reversed, concluding that State Farm could not avail itself of the car business exclusion to avoid its obligations under the policy. State Farm Mutual Automobile Insurance Co. v. Fisher,
The appellate court advanced two basic grounds in support of its decision. First, it held that the exclusion was unenforceable because it conflicted with the mandatory language of the omnibus clause provision set forth in section 7 — 317(b)(2) of the Illinois Safety and Family Financial Responsibility Law (625 ILCS 5/7 — 317(b)(2) (West 2000)) and the policy of this state’s mandatory automobile insurance legislation. State Farm Mutual Automobile Insurance Co. v. Fisher,
Our opinion affirming the appellate court’s judgment relied on only the first of these grounds. We noted that when a vehicle owner gives his vehicle to a person engaged in a car business,
“the owner is also giving that person the express or implied permission to use the vehicle. Therefore, a provision written into an insurance policy that excludes coverage for persons engaged in an automobile business necessarily excludes coverage for persons who are using an insured’s vehicle with the insured’s express or implied permission.” State Farm Mutual Automobile Insurance Co. v. Smith,197 Ill. 2d at 374 .
Citing our opinion in State Farm Mutual Automobile Insurance Co. v. Universal Underwriters Group,
State Farm
Although we expressly limited the reach of our decision in State Farm Mutual Automobile Insurance Co. v. Smith,
The appellate court’s reliance on Smith is understandable. That case is similar, in many respects, to the matter before us here. As suggested earlier in this opinion, however, whether a contractual agreement is void as against public policy ultimately depends on the particular facts and circumstances of each case. Our examination of Smith discloses a significant factual distinction between the car business exclusion at issue there and the food delivery exclusion in Ronald’s mother’s policy.
The car business exclusion in Smith applied only to permissive users. Unlike the exclusion in this case, it was inapplicable to thе named insured or his spouse, or any agent, employee or partner of the insured, his spouse and certain others. The named insured, his spouse, and the others were expressly exempted from the exclusion. Admittedly, we did not specifically discuss that fact in our opinion. As we have just indicated, however, we took care to limit our opinion to the particular provision at issue in the case (State Farm Mutual Automobile Insurance Co. v. Smith,
The exemption from the exclusion in Smith meant that conduct which would be covered if undertaken by the insured would not be covered if undertaken by someone who was using the vehicle with the insured’s permission. Barnes, the insured, was free to engage in a “car business” without compromising his liability coverage. It was only others to whom Barnes entrusted the vehicle who were not covered for “car business” activities. This disparity was plainly inconsistent with section 7 — 317(b) (2)’s requirement that liability insurance policies cover not only the insured but also “any other person using or responsible for the use of such motor vehicle or vehicles with the express or implied permission of the insured.” 625 ILCS 5/7 — 317(b)(2) (West 2000).
No similar disparity is present in the policy issued by Progressive to Ronald’s mother in the present case. Under the clear and unambiguous terms of that policy, no one is exempt from the food delivery exclusion. The exclusion applies with equal force to Ronald’s mother, who is the named insured, and to anyone using
Because the exclusion in Progressive’s policy does not differentiate between the insured and those using the vehicle with the insured’s permission, there is no possibility, as there was in Smith, that liability insurance coverage afforded the insured would also not be extended to permissive users of the vehicle. Section 7 — 317(b)(2)’s requirement that liability insurance policies cover not only the insured but also “any other person using or responsible for the use of such motor vehicle or vehicles with the express or implied permission of the insured” (625 ILCS 5/7 — 317(b)(2) (West 2000)) is therefore not imperiled. As a result, the food delivery exclusion does not conflict with the statute and сannot be said to be void as against public policy.
This conclusion is supported by basic rules of statutory interpretation. The cardinal rule of statutory construction, and the one to which all other canons and rules are subordinate, is to ascertain and give effect to the true intent and meaning of the legislature. Country Mutual Insurance Co. v. Teachers Insurance Co.,
If section 7 — 317(b)(2) operated to invalidate the food delivery exclusion with respect to permissive users such as Ronald, as Liberty Mutual argues it does, Progressive would be obliged to defend and indemnify permissive users for conduct that would clearly not be covered if undertaken by the actual named insured. Recognizing that obligation, named insureds could readily evade the policy’s restrictions merely by lending their vehicles to one another. After making the temporary swap, the insureds would be mere permissive users of one another’s vehicles and, as such, would enjoy liability coverage for conduct where no coverage would lie if the insureds drove their own vehicles.
Insurance companies make underwriting decisions and calculate policy premiums based on the characteristics of a policyholder, the risks the policyholder presents, and the contractual terms and limitations by which the policyholder agrees to be bound. If policyholdеrs were allowed to avoid the limitations in their policies and obligate the insurance companies to pay damages by swapping vehicles whenever they wanted to engage in conduct that would otherwise be excluded from coverage, the criteria employed by insurance companies in issuing policies would be fundamentally eroded. Through the simple act of loaning his or her vehicle to others, a policyholder could subject an insurer to risks the insurance company had no way to foresee and which the parties to the insurance contract had expressly agreed to exclude. The insurance company would be denied the benefit of its bargain, and the insured would receive a windfall in the form of coverage for which it did not pay.
Liberty Mutual responds to the problems that would flow from disparate application of the food delivery exclusion by arguing that under the law, the exclusion is not only void and unenforceable as to permissive users, it is also void and unenforceable as to the named insured.
We find this contention untenable. Illinois law prohibits persons from operating, registering or maintaining registration of a motor vehicle designed to be used on a public highway unless the vehicle is covered by a liability insurance policy. 625 ILCS 5/7 — 601(a) (West 2000). By its terms, this prohibition runs to the operators and owners of motor vehiclеs, not their insurance carriers. Merely because persons cannot operate or own vehicles without the required insurance does not mean that insurance carriers are required to cover, without exclusion, every loss operators and owners sustain.
Because the requirement to maintain liability insurance is statutory in origin, any restrictions on the insurance required to comply with the law must also emanate from our statutes. The pertinent statutes here specify minimum coverage amounts (625 ILCS 5/7 — 203, 7 — 601(a), 7 — 317(b)(3) (West 2000)) and impose various other requirements, including a requirement that a policy’s liability coverage apply to losses that occur in Canada as well as the continental limits of the United States. 625 ILCS 5/7 — 317(b)(3) (West 2000). Nowhere, however, does the law expressly forbid parties to an insurance contract from excluding certain risks from liability coverage.
Contrary to Liberty Mutual’s view, section 7 — 317(b)(2) of the Illinois Safety and Family Financial Responsibility Law contains no such prohibition. As discussed earlier in this opinion, it simply requires that a motor vehicle liability policy insure not only the person named therein, but also “any other person using or responsible for the use of such motor vehicle or vehicles with the express or implied permission of the insured.” 625 ILCS 5/7 — 317(b)(2) (West 2000).
That permissive users must be covered along with the named insured in no way compels the conclusion that exclusions are never permissible. Inclusion of permissive users goes to the issue of who must be covered. It says nothing of what risks must be covered. To hold that requiring coverage for permissive users means that insurers are forbidden from excluding certain types of risks from cоverage requires a leap in reasoning that neither the language of the statute nor the rules of statutory construction will support. It is a non sequitur.
A more reasonable interpretation of section 7 — 317(b)(2), and the one we adopt, is that the legislature merely intended to insure that the common and often unavoidable practice of entrusting one’s vehicle to someone else does not foreclose an injured party from obtaining payment for otherwise covered losses resulting from operation of the vehicle. The scope of coverage is unaffected by the law. The statute simply eliminates from coverage determinations the happenstance that a vehicle was operated by a permissive user rather than the actual owner. If a loss is coverеd by the policy, the fact that the vehicle was
Had the General Assembly wished to bar insurers from excluding certain risks from motor vehicle liability policies, it could easily have so provided in the pertinent statutes. It did not do so. To the contrary, the Illinois Safety and Family Financial Responsibility Law clearly contemplates that exclusions may be included in policies and that those exclusions will be upheld. That is why section 7 — 602 of the statute (625 ILCS 5/7 — 602 (West 2000)) requires insurance cards to contain a disclaimer admonishing policyholders to “[ejxamine policy exclusions carefully.”
In urging us to adopt the view that section 7 — 317(b)(2) forbids exclusions such as the food delivery exclusion involved in this case, Liberty Mutual directs our attention to decisions from various foreign jurisdictions, including Salamon v. Progressive Classic Insurance Co.,
The litigation before us today is governed by the law of Illinois, not Maryland. Unlike Maryland courts, our court has never required that insurance exclusions he deemed invalid if those exclusions have not been authorized explicitly by our General Assembly. Rather, our policy is to enforce exclusions not explicitly provided for by law based on principles of contract interpretation. Due to this difference, we are not persuaded by the rationale utilized in Salamon. We are likewise unpersuaded by Stanfel v. Shelton,
In further support of its view that section 7 — 317(b)(2) prohibits insurers from excluding risks from liability coverage, Liberty Mutual contends that allowing such exclusions would be inherently inconsistent with the public policy of protecting the public by securing the payment of its damages. This argument must also fail. Although exclusions, where applicable, will shield the particular company which issued the policy from financial responsibility, that does not mean that no insurer will be liable.
Under the mаndatory insurance law enacted by our General Assembly, the effects of policy exclusions are substantially offset by the requirement of uninsured-motorist coverage. See 625 ILCS 5/7 — 601(a) (West
For the foregoing reasons, the food delivery exclusion in the policy issued by Progressive to Ronald’s mother was not void and unenforceable under this state’s mandatory insurance law. The circuit court’s entry of summary judgment in favor of Progressive and against Liberty Mutual was therefore correct and should not have been disturbed by the appellate court. Accordingly, the judgment of the appellate court is reversed and the judgment of the circuit court is affirmed.
Appellate court judgment reversed; circuit court judgment affirmed.
Notes
The circuit court included that finding because its summary judgment order did not fully resolve all of the claims of all of the parties. A third-party claim by Liberty Mutual against Badger Mutual Insurance Company, Casale Pizza’s insurer, remained pending, as did a claim for declaratory relief filed by Badger against Liberty Mutual and others. All matters regarding Badger were resolved through cross-motions for summary judgment in a separate order entered by the circuit court on the same date summary judgment was entered in favor of Progressive. No appeal was taken from that separate order by any party.
Under Liberty Mutual’s theory, the mandatory liability law has no effect on the viability of policy exclusions with respect to (1) losses in excess of the minimum liability coverage required by statute or (2) any form of coverage other than liability coverage. As to those matters, Liberty Mutual does not dispute that the food delivery exclusion in Progressive’s policy would remain fully operative.
Illinois’ present insurance scheme does not eliminate the possibility that drivers will take to the road without liability insurance, nor does it guarantee that injured parties will have their own policies to draw from, as Mr. Lavits did. As a result, there may be circumstances under which injured parties will be left without coverage of any kind. Whether such “gaps” in coverage should be addressed by the legislature and, if so, how they should he remedied, present important questions of public policy. Such questions, however, are for the General Assembly, not this tribunal, tо consider.
Dissenting Opinion
dissenting:
The majority concludes the food delivery (“pizza”) exclusion in Progressive’s policy was not void and does not violate this state’s mandatory liability insurance law.
Section 7 — 601 of the Vehicle Code provides, in pertinent part: “No person shall operate *** a motor vehicle designed to be used on a public highway unless the motor vehicle is covered by a liability insurance policy.” (Emphasis added.) The statute further provides: “The insurance policy shall be issued in amounts no less than the minimum аmounts set for bodily injury or death and for destruction of property under Section 7 — 203 of this Code ***.” 625 ILCS 5/7 — 601(a) (West 2000).
The majority acknowledges our holding in State Farm Mutual Automobile Insurance Co. v. Smith,
The result reached by the majority increases the likelihood tortiously caused vehicular accidents will go uncompensated because no insurance coverage will be available from the tortfeasor. Although the majority recognizes this possibility, it holds this result is offset by the statutory requirement of uninsured-motorist coverage.
Other jurisdictions considering this issue have concluded mandatory insurance statutes render policy exclusions unenforceable to the extent of required minimum limits as a matter of public policy. In Salamon v. Progressive Classic Insurance Co.,
Thus, the Maryland statutory scheme, while not identical, is substantially similar to our own. As in State Farm, the Maryland court had earlier held Maryland’s statute was intended to “make certain that those who own and operate motor vehicles in this State are financially responsible.” Pennsylvania National Mutual Casualty Insurance Cо. v. Gartelman,
New York’s highest reviewing court reached a similar conclusion in Matter of Liberty Mutual Insurance Co. v. Hogan,
The majority acknowledges other jurisdictions, including the Maryland court in Salamon, have found policy coverage exclusions incompatible with mandatory minimum coverage laws. The majority declines to rely on the reasoning of those cases because “[t]he litigation before us today is governed by the law of Illinois, not Maryland.”
The reasoning of the Maryland and New York courts is persuasive, and our appellate court used a similar rationale. I agree with the appellate court that the “impetus behind mandatory automobile liability insurance is to protect the public by assuring that its damages will be paid [citation], and Progressive’s food delivery exclusion contravenes that goal.”