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                                       Appellate Court                             Date: 2017.10.04
                                                                                   16:09:28 -05'00'




                  Thounsavath v. State Farm Mutual Automobile Insurance Co.,
                                   2017 IL App (1st) 161334



Appellate Court           PHOUNGEUN THOUNSAVATH, Plaintiff and Counterdefendant-
Caption                   Appellee, v. STATE FARM MUTUAL AUTOMOBILE
                          INSURANCE COMPANY, Defendant and Counterplaintiff-
                          Appellant.


District & No.            First District, Fifth Division
                          Docket No. 1-16-1334



Filed                     June 30, 2017



Decision Under            Appeal from the Circuit Court of Cook County, No. 2014-CH-02511;
Review                    the Hon. Kathleen M. Pantle, Judge, presiding.



Judgment                  Affirmed.


Counsel on                Frank C. Stevens, of Taylor Miller LLC, of Chicago, for appellant.
Appeal
                          Eric J. Parker, of Stotis & Baird Chtrd., of Chicago, for appellee.



Panel                     JUSTICE HALL delivered the judgment of the court, with opinion.
                          Presiding Justice Gordon and Justice Lampkin concurred in the
                          judgment and opinion.
                                             OPINION

¶1       The plaintiff, Phoungeun Thounsavath, filed a complaint for declaratory judgment against
     the defendant, State Farm Mutual Automobile Insurance Company (State Farm). The plaintiff
     sought a declaration that, as applied to her, the driver exclusion endorsement in the automobile
     liability policies issued to her by State Farm violated section 143a-2 of the Illinois Insurance
     Code (215 ILCS 5/143a-2 (West 2012)) and the public policy of Illinois. State Farm answered
     the complaint and filed a counterclaim for declaratory judgment, seeking a declaration that the
     plaintiff was not entitled to underinsured coverage under her automobile liability policies with
     State Farm. The circuit court denied State Farm’s motion for summary judgment and granted
     the plaintiff’s motion for summary judgment. State Farm appeals.
¶2       On appeal, State Farm contends that, as to the plaintiff, its driver exclusion endorsement
     does not violate section 7-317(b)(2) of the Illinois Safety and Family Financial Responsibility
     Law (Financial Responsibility Law) (625 ILCS 5/7-317(b)(2) (West 2012)), section 143a-2 of
     the Insurance Code, or Illinois public policy.

¶3                                         BACKGROUND
¶4       The facts are not in dispute. The plaintiff was injured while a passenger in a vehicle driven
     by Clinton M. Evans. At the time of the accident, Mr. Evans was insured by American Access
     Insurance Company (AAIC), and the plaintiff was insured by State Farm under two
     automobile liability policies. The plaintiff made a claim against Mr. Evans for her personal
     injuries, which was paid by AAIC in the amount of $20,000.
¶5       The plaintiff then filed an underinsured motorist claim with State Farm. State Farm denied
     coverage under the following provision contained in both of the automobile liability policies it
     issued to the plaintiff:
                 “ ‘IT IS AGREED WE SHALL NOT BE LIABLE AND NO LIABILITY OR
             OBLIGATION OF ANY KIND SHALL ATTACH TO US FOR BODILY INJURY,
             LOSS OR DAMAGE UNDER ANY OF THE COVERAGES OF THIS POLICY
             WHILE ANY MOTOR VEHICLE IS OPERATED BY: CLINTON M. EVANS’ ”
             (Emphases in original.)
¶6       On May 27, 2015, the circuit court denied State Farm’s motion for summary judgment. The
     court found that while named driver exclusions are recognized in Illinois, the issue was
     whether such exclusions may be used to deny coverage to the named insured. The court
     determined that such exclusions do not override the plain language of section 7-317(b)(2) of
     the Financial Responsibility Act and denied State Farm’s motion for summary judgment.
     Thereafter, the plaintiff filed her motion for summary judgment, which was granted by the
     circuit court on May 4, 2016.
¶7       On May 10, 2016, State Farm filed its notice of appeal from the May 27, 2015, and May 4,
     2016, orders of the circuit court.




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¶8                                              ANAYLSIS
¶9                                        I. Standards of Review
¶ 10       We review the granting of summary judgment, the construction of an insurance policy, and
       the construction of a statute de novo. Goldstein v. Grinnell Select Insurance Co., 2016 IL App
       (1st) 140317, ¶ 10.

¶ 11                                      II. Applicable Principles
¶ 12       “Summary judgment is proper if, and only if, the pleadings, depositions, admissions,
       affidavits and other relevant matters on file show that there is no genuine issue of material fact
       and that the movant is entitled to judgment as a matter of law.” Illinois Farmers Insurance Co.
       v. Hall, 363 Ill. App. 3d 989, 993 (2006). “The cardinal rule of statutory construction is to
       determine and give effect to the legislature’s intent.” Sulser v. Country Mutual Insurance Co.,
       147 Ill. 2d 548, 555 (1992).
¶ 13       The rules of construction applicable to contracts apply as well to insurance policies.
       Goldstein, 2016 IL App (1st) 140317, ¶ 13. The primary objective is to ascertain and give
       effect to the parties’ intentions as expressed in the policy’s language. Goldstein, 2016 IL App
       (1st) 140317, ¶ 13. The policy is construed as a whole giving effect to every provision;
       unambiguous words in the policy are to be given their plain, ordinary and popular meaning.
       Goldstein, 2016 IL App (1st) 140317, ¶ 13.

¶ 14                                    III. Statutes and Public Policy
¶ 15                        A. Illinois’s Mandatory Insurance Statutory Scheme
¶ 16       Under the Financial Responsibility Law, no one may operate a motor vehicle or allow a
       vehicle to be operated without obtaining sufficient insurance. 625 ILCS 5/7-601(a) (West
       2012); see 625 ILCS 5/7-605(a), 7-203 (West 2012) (setting forth the mandatory minimum
       amounts of insurance to be carried). Section 7-317(b) of the Financial Responsibility Law
       provides that the 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 or implied permission of the insured.” 625 ILCS 5/7-317(b)(2) (West 2012).
¶ 17       “The ‘principle purpose’ of the mandatory liability insurance requirement is ‘to protect the
       public by securing payment of their damages.’ ” Phoenix Insurance Co. v. Rosen, 242 Ill. 2d
       48, 57 (2011) (quoting Progressive Universal Insurance Co. of Illinois v. Liberty Mutual Fire
       Insurance Co., 215 Ill. 2d 121, 129 (2005)). In furtherance of that purpose, the Insurance Code
       requires automobile liability insurance policies to include uninsured and underinsured motorist
       coverage. See 215 ILCS 5/143a, 143a-2 (West 2012). Uninsured-motorist coverage is required
       so that the policyholder is placed in substantially the same position he would occupy if he were
       injured or killed in an accident where the party at fault carried the minimum liability coverage
       specified in section 203 of the Financial Responsibility Law. Phoenix Insurance Co., 242 Ill.
       2d at 57; see 625 ILCS 5/7-203 (West 2010). From the legislative history, the supreme court
       concluded that the “legislative purpose of the underinsured-motorist coverage provision is the
       same as that of uninsured-motorist coverage, ‘i.e., to place the insured in the same position he
       would have occupied if the tortfeasor had carried adequate insurance.’ ” Phoenix Insurance
       Co., 242 Ill. 2d at 57 (quoting Sulser, 147 Ill. 2d at 555).



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¶ 18                                           B. Public Policy
¶ 19       “ ‘Parties to a contract may agree to any terms they choose unless their agreement is
       contrary to public policy.’ ” Allstate Property & Casualty Insurance Co. v. Trujillo, 2014 IL
       App (1st) 123419, ¶ 18 (quoting Sulser, 147 Ill. 2d at 559). “An agreement will not be
       invalidated unless it is clearly contrary to what the constitution, the statutes, or the decisions of
       the courts have declared to be the public policy of Illinois or unless the agreement is
       ‘manifestly injurious to the public welfare.’ ” Phoenix Insurance Co., 242 Ill. 2d at 55 (quoting
       Progressive Universal Insurance Co. of Illinois, 215 Ill. 2d at 129-30).

¶ 20                                            IV. Discussion
¶ 21       State Farm maintains that the named driver exclusion in the automobile liability insurance
       policies it issued to the plaintiff does not violate either the provisions of the Illinois Insurance
       Code or Illinois public policy. We disagree.
¶ 22       In general, named driver exclusions in automobile liability insurance policies are permitted
       in Illinois. American Access Casualty Co. v. Reyes, 2013 IL 115601, ¶ 15. Such exclusions
       have been enforced by both the supreme court and the appellate court. In Heritage Insurance
       Co. of America v. Phelan, 59 Ill. 2d 389 (1974), the supreme court upheld the denial of
       uninsured motorist coverage to the son of the named insured where the son was excluded from
       liability coverage under a restrictive endorsement. In St. Paul Fire & Marine Insurance Co. v.
       Smith, 337 Ill. App. 3d 1054 (2003), the appellate court, as a matter of first impression,
       determined that section 7-602 of the Financial Responsibility Law, requiring an insurance card
       to provide warnings if the insurance policy contained coverage restrictions, permitted named
       driver exclusions from the mandatory liability insurance requirement. To the extent section
       7-602 conflicted with section 7-317(b)(2) of the Financial Responsibility Law, the court held
       that in enacting section 7-602, the legislature intended to create a limited exception to the
       mandatory insurance laws and, therefore, the named driver exclusion did not violate Illinois
       public policy. Smith, 337 Ill. App. 3d at 1060, 1062. See Rockford Mutual Insurance Co. v.
       Economy & Casualty Co., 217 Ill. App. 3d 181 (1991) (the named driver exclusion
       endorsement precluded uninsured motorist coverage where the decedent was a passenger in a
       vehicle whose driver was the subject of the exclusion endorsement).
¶ 23       Smith and the cases relied on by State Farm are distinguishable. In those cases, the named
       driver exclusion was enforced as to parties other than the named insured.
¶ 24       The plaintiff relies on a line of cases beginning with Barnes v. Powell, 49 Ill. 2d 449
       (1971), in which Illinois courts refused to enforce named driver exclusion endorsements. See
       Barnes, 49 Ill. 2d 449 (injured insured entitled to uninsured motorist coverage under her own
       policy, where she was a passenger in her vehicle driven by an individual, who was uninsured at
       the time of the accident); Madison County Automobile Insurance Co. v. Goodpasture, 49 Ill.
       2d 555 (1971) (citing and following Barnes); Kerouac v. Kerouac, 99 Ill. App. 3d 254 (1981)
       (policy exclusion for family members rendered the vehicle driven by the defendant-son
       uninsured, and therefore, the uninsured motorist coverage available to the plaintiffs-father and
       brother); Doxtater v. State Farm Mutual Automobile Insurance Co., 8 Ill. App. 3d 547 (1972)
       (finding that section 143a of the Insurance Code directed insurance companies to provide
       uninsured motor vehicle coverage for an insured regardless of whether, at the time of injury,
       the insured occupied or operated vehicles declared in the subject policy, citing Barnes).


                                                     -4-
¶ 25       Moreover, in Rockford Mutual Insurance Co., the appellate court ruled that since the
       named driver exclusion rendered the Economy-insured vehicle uninsured, the decedent’s
       mother was required to seek recovery under the uninsured motorist coverage in her own
       Rockford insurance policy for the death of her son. Rockford Mutual Insurance Co., 217 Ill.
       App. 3d at 187. The court further held that its ruling was consistent with cases such as Barnes
       and Kerouac, where a specific exclusion rendered the insureds’ own vehicles in which they
       were riding uninsured. Rockford Mutual Insurance Co., 217 Ill. App. 3d at 187. The court
       stated further as follows:
               “To deny any insurance policy coverage to these policyholders would indeed violate
               the public policy expressed in section 143a of the Illinois Insurance Code. The instant
               case is distinguishable from those cases, however, in that in the instant case the injured
               party is not seeking to recover under his or her own insurance policy, but under the
               policy of the vehicle which was rendered uninsured at the time of the injury and of
               which the injured party was neither a policy holder nor a named insured.” Rockford
               Mutual Insurance Co., 217 Ill. App. 3d at 187.
¶ 26       Moreover, our courts have applied the analysis in Barnes even in different factual
       situations. In Doxtater, the reviewing court stated as follows:
                   “Although we recognize that the facts of Barnes v. Powell are distinguishable from
               the facts at bar, we nonetheless cannot overlook the Supreme Court’s statements
               therein regarding the legislative intent behind Section 143a. The expansive
               interpretation applied by a majority of that court leads us to conclude that, presented
               with the issue at bar, our Supreme Court would interpret Section 143a of the Insurance
               Code as a direction to insurance companies to provide uninsured motor vehicle
               coverage for ‘insureds,’ regardless of whether, at the time of injury, the insureds
               occupied or operated vehicles declared in the subject policy.” Doxtater, 8 Ill. App. 3d
               at 552.
       See Comet Casualty Co. v. Jackson, 125 Ill. App. 3d 921, 924 (1984) (in light of the supreme
       court’s expansive interpretation of section 143a in Barnes, “the decision was intended to be an
       expression of the legislative objective to provide extensive uninsured motorist coverage for
       those insured under a valid automobile liability policy”).
¶ 27       State Farm points out that the cases relied on by the plaintiff were decided prior to the
       enactment of the mandatory insurance requirements authorizing named driver exclusions. See
       Pub. Act 85-1201, § 1 (eff. July 1, 1989) (adding 625 ILCS 5/7-602). We disagree with State
       Farm’s premise that the enactment of mandatory insurance would have rendered the cases
       relied on by the plaintiff inapplicable because exclusions are now authorized. The supreme
       court in Phelan, decided in 1974 and cited by State Farm, upheld a restrictive endorsement.
       Phelan, 59 Ill. 2d at 399.
¶ 28       The issue in the present case is whether the named driver exclusion violates our mandatory
       insurance requirements and public policy where the exclusion bars coverage for the named
       insured. While none of the cases relied on by either party addresses this precise issue or fact
       pattern, we find the supreme court’s analysis in Reyes instructive.
¶ 29       In Reyes, the defendant was the sole named insured under her automobile policy with
       American Access Casualty Company (American Access). In consideration for the premium
       charged for the policy, an endorsement to the policy barred coverage where the insured vehicle
       was operated by the defendant. While the defendant was the named insured, she was excluded

                                                   -5-
       from coverage if she operated the vehicle. Reyes, 2013 IL 115601, ¶ 4. Subsequently, while
       driving the insured vehicle, the defendant struck two pedestrians, resulting in the death of one
       individual and injury to the other individual.
¶ 30        In response to the wrongful death suit brought against the defendant, American Casualty
       filed a declaratory judgment suit, seeking a declaration that it owed no liability coverage to the
       defendant based on the named driver exclusion. The circuit court granted summary judgment
       to American Casualty, but the appellate court reversed, finding the exclusion violated public
       policy. Reyes, 2013 IL 115601, ¶ 6.
¶ 31        On further review, our supreme court identified the issue as “whether an automobile
       liability policy can exclude the only named insured and owner of the vehicle without violating
       public policy.” (Emphasis in original.) Reyes, 2013 IL 115601, ¶ 9. In its analysis, the court
       first observed that a statute that exists for the protection of the public cannot be overridden by
       private contracts, since members of the public are not parties to the contract. The court further
       observed that the public policy demands adherence to statutory requirements, but it was also in
       the public’s interest not to unduly restrict the freedom to contract. Reyes, 2013 IL 115601, ¶ 9.
       In order to invalidate a contract provision on public policy grounds it must be “clearly contrary
       to what the constitution, the statutes, or the decisions of the courts have declared to be the
       public policy or unless it is manifestly injurious to the public welfare.” Reyes, 2013 IL 115601,
       ¶ 9 (citing Progressive Universal Insurance Co. of Illinois, 215 Ill. 2d at 129-30). Such a
       determination depends on the facts and circumstances of each case. Reyes, 2013 IL 115601,
       ¶ 9.
¶ 32        The court in Reyes held that under the plain and unambiguous language of section
       7-317(b)(2), defendant, as the named insured, could not be excluded from coverage. Reyes,
       2013 IL 115601, ¶ 13. The court rejected American Casualty’s argument that section 7-602 of
       the Financial Responsibility Law allowed the exclusion of “ ‘any driver.’ ” The language of
       section 7-602 permitted the exclusion of an owner or policy holder or insured “for other
       vehicles, not the vehicle that is insured. This clause does not authorize a named driver
       exclusion for the sole insured and owner of the vehicle.” (Emphasis in original.) Reyes, 2013
       IL 115601, ¶ 17.
¶ 33        The court rejected American Casualty’s public policy argument that the exclusion allowed
       individuals with high risk factors to obtain insurance at reasonable rates rather than operate a
       vehicle with no insurance at all. The court found that the public policy was expressed in the
       plain language of section 7-317(b)(2) and found that the interest in protecting the driving
       public outweighed an individual’s desire to obtain a lower insurance premium. Reyes, 2013 IL
       115601, ¶ 19 (citing Williams v. U.S. Agencies Casualty Insurance Co., 2000-1693, p. 6 (La.
       2/21/01); 779 So.2d 729 (superseded by statute)).
¶ 34        In the present case, Mr. Evans’s vehicle was underinsured. The plaintiff sought to recover
       for her injuries under her own automobile liability insurance policy, which provided the
       underinsured motorist coverage mandated by section 143a-2 of the Insurance Code. Barnes
       and its prodigy, together with Reyes, support the conclusion that a named driver exclusion in an
       insured’s policy that bars liability, uninsured, or underinsured coverage for the named insured
       violates Illinois’s mandatory insurance requirements and Illinois public policy. Therefore, the
       named driver exclusion endorsement in the plaintiff’s automobile liability policies with State
       Farm is not enforceable against the plaintiff, as the named insured.


                                                   -6-
¶ 35                                    CONCLUSION
¶ 36      We affirm the orders of the circuit court denying State Farm’s motion for summary
       judgment and granting summary judgment to the plaintiff.

¶ 37      Affirmed.




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