
28 September 1999

NO. 4-99-0004



IN THE APPELLATE COURT



OF ILLINOIS



FOURTH DISTRICT



CHRISTY HUFF and TIFFANY LUFKIN,		)	Appeal from

Plaintiffs-Appellants,		)	Circuit Court of

v.                			)	Sangamon County

ENTERPRISE RENT-A-CAR COMPANY,		)	No. 97MR0132

MIDWEST,							)	

Defendant-Appellee.			)    Honorable

)	Donald M. Cadagin,

                    		)	Judge Presiding.

_________________________________________________________________



JUSTICE McCULLOUGH delivered the opinion of the court:



Defendant, Enterprise Rent-A-Car Company (Enterprise), is a self-insured rental car company.  On April 14, 1996, Brian Page was involved in an accident while driving an Enterprise rental car.  Two passengers, plaintiffs Christy Huff and Tiffany Lufkin, were injured in the accident.  Huff and Lufkin filed suit against Page, and on March 4, 1997, a $400,000 default judgment was entered in their favor.  Huff and Lufkin now seek to enforce that judgment against Enterprise.  Enterprise argues it is relieved of any liability to Huff and Lufkin because it was not given notice of the suit against Page until after a default judgment was entered against him.  Huff and Lufkin appeal the trial court's November 20, 1997, decision to grant Enterprise summary judgment.  We affirm.

Enterprise is a rental car company that has filed a certif­i­cate of self-insur­ance with the Illinois Secretary of State to comply with its duty under the Illi­nois Vehicle Code (Code) to provide proof of its financial responsibility (625 ILCS 5/9-101, 9-102 (West 1996)).  On April 14, 1996, Page drove a car rented from Enter­prise.  Enterprise offered Page the option of purchasing personal accident insurance and supple­mental liability protec­tion or of pre­sent­ing proof he was covered by his own insurer.  Page provid­ed proof of coverage and did not buy the supplemental protection.  The rental con­tract provided, "[O]wners' financial responsibility is ex­pressly limited to those applicable provi­sions of the Motor Vehicle Financial Responsibil­

ity laws of the state in which the vehicle is operating."

On the above date, Page was in­volved in an acci­dent result­ing in inju­ries to two passengers, plaintiffs Huff and Lufkin.  On December 4, 1996, Huff and Lufkin filed suit against Page, and on March 4, 1997, a default judgment was entered against him, awarding Huff $150,000 and Lufkin $250,000.  On May 27, 1997, Huff and Lufkin filed a com­plaint against Enter­prise, seeking to hold it liable on the default judgment under Code.

On November 20, 1997, Huff and Lufkin filed a motion for summary judgment.  On January 9, 1998, Enter­prise filed a response arguing Page failed to give it notice of the suit, and the rental contract between Enterprise and Page indicated Page opted not to purchase optional supplemental liabil­ity protection.  Finally, Enterprise argued any liabili­ty would be limited to $50,000 per claim and $100,000 per oc­cur­rence, the minimum coverage required by the Code when a rental car provider provides an insurance policy as proof of financial responsibility (625 ILCS 5/9-105 (West 1996)).  Enterprise then filed affidavits indicating it had not received notice of the suit against Page.  

On February 2, 1998, the trial court denied plaintiffs' motion for summary judgment.  On March 3, 1998, plaintiffs moved to reconsider the denial of summary judgment and for judgment on the pleadings.  On April 21, 1998, this motion was denied.

On March 18, 1998, Enterprise filed a counterclaim and third-party complaint against Page seeking declaratory judgment that it was not obligated to satisfy the damage awards to Huff and Lufkin because it had not been given notice of the suit against Page.  On May 6, 1998, Page filed a 
pro
 
se
 answer stating he contacted Gary L. Clark, Frederic Nessler & Associates, attorney for plaintiffs Huff and Lufkin, who told him to send him a signed letter stating Enter­prise was responsible and that Clark would forward the letter to Enterprise.  Page indicated he followed these instruc­tions.  Page also indicated he informed Enter­prise that he had wrecked its car.

On June 16, 1998, Enterprise filed a request for Page to admit that Huff was his girlfriend at the time of the accident and is the mother of his child.  Enterprise requested Page to admit Clark told him to send him a note requesting Enterprise to defend Page in the suit, and Page did so.  Enterprise requested Page to admit he never directly sent Enterprise a copy of the summons and complaint in the suit against him and he never directly informed Enterprise of the suit.  Page did not respond to the request to admit.  

On September 4, 1998, Enterprise filed a motion for summary judgment because it had not been given notice of the suit against Page.  Attached to the motion were the affida­vits indi

cating no notice was received, the rental contract, the third-

party com­plaint against Page, Page's answer, the request for Page to admit facts, and a transcript of a deposition of Huff.

In her deposition, Huff stated she has lived with Page intermittently since March 1994, and he is the father of one of her chil­dren.  Huff stated she and Lufkin were riding in the rental car at the time of the accident.  Huff did not recall having any discussions with anyone after the accident who stated he or she was working for or representing Enter­prise.  Huff and Page were not living together or communicating with each other in December 1996.  Huff knew Page wrote a letter to Enterprise and gave it to Clark.  Huff identified the unsigned letter, which stated:

"Dear Enterprise,

I feel that it is your responsibil­

ity to pay this bill.

Thank you."

Huff did not know of any other effort by Page to tell Enter­prise he had been in an acci­dent or of the suit against him.  She had not spoken with Page about whether he told Enterprise of the suit.

On October 13, 1998, Huff and Lufkin filed a motion for summary judgment, arguing Enterprise was given notice, no notice was re­quired, and Enter­prise was obligated by the certificate of self-insurance to satisfy the default judg­ment.  Attached to the motion was an affidavit from Arlene Raymer, Clark's legal secre

tary, stating Clark sent the summons and complaint and Page's hand-printed note to Enterprise.  The affidavit identi­fied a copy of the letter and the envelope ad­dressed to Enter­prise.  The envelope has a date stamp, from Clark's postage meter, of January 6, 1997.  Also attached to the motion was an affidavit from Clark stating he told Page to send him a short note addressed to Enterprise with the summons and com­plaint, and he would forward it to Enter­prise.  Clark stated he received these materials from Page and forwarded them.

Attached to the motion for summary judgment were notices of attorney liens sent by Clark on behalf of Huff and Lufkin to Enter­prise on April 14, 1996.  Also included was a May 20, 1996, request from a claims repre­senta­tive at Fireman's Risk Management Services (Fireman), an agent of Enterprise, to take a statement of plaintiffs.  Also attached was a July 31, 1996, letter from a Fireman's claim repre­sentative stating no voluntary payment would be made on plaintiffs' claim because Page did not purchase supplemental coverage and was intoxicated at the time of the acci­dent, in violation of the rental contract. 

On October 15, 1998, Enterprise filed a response to the motion for summary judgment, arguing, in pertinent part, an evidentiary hearing was necessary to determine whether notice was given.  On November 20, 1998, the trial court held an eviden­tiary hearing on the issue of notice, and the trial court heard testi

mony from Raymer and employees of Enterprise. 

The trial court granted Enterprise's motion for summary judgment, ruling notice of the suit against Page was required by the policy and it was not given.  Summary judgment is appropri­ate when no genuine issue of material fact exists.  735 ILCS 5/2-1005 (West 1996).  This court reviews an order granting summary judg­ment 
de
 
novo
.  
T.F. v. Ghibellini
, 289 Ill. App. 3d 824, 826, 683 N.E.2d 1250, 1252 (1997).

The trial court conducted an evidentiary hearing before granting Enterprise's motion for summary judgment.  Although section 2-1005 of the Code of Civil Procedure (735 ILCS 5/2-1005 (West 1996)) does not provide for an evidentiary hearing, any error by the trial court in conducting an evidentiary hearing was not raised in plaintiffs' initial brief and is therefore waived on appeal (177 Ill. 2d R. 341(e)(7)).  We also note that no jury demand was filed by either party and neither party suggests additional evidence can be presented as a question of fact for determination by the trial court.   

The Code re­quires all owners of for-rent motor vehi­cles to give proof of financial responsi­bili­ty.  625 ILCS 5/9-101 (West 1996).  An owner can comply with this require­ment by filing with the Secre­tary of State a bond, proof of insur­ance, or a certificate of self-insurance.  625 ILCS 5/9-102 (West 1996).  Enterprise filed a certificate of self-insur­ance.  

To obtain a certificate of self-insurance, an owner must satisfy the Illinois Depart­ment of Insurance that he is able and will continue to be able to pay a judgment ob­tained against him.  Failure to pay a judgment is grounds for revocation of the certificate.  625 ILCS 5/7-502 (West 1996).  Enterprise does not dispute that an injured party may sue a self-insured ­rental car owner for failure to pay a judgment obtained against the driver.  
Cf
. 
Hertz Corp. v. Garrott
, 238 Ill. App. 3d 231, 239, 606 N.E.2d 219, 224 (1992); but see 
Overbaugh v. Strange
, 18 Kan. App. 2d 365, 366-67, 853 P.2d 80, 82 (1993) (company's duty to defend an employee driving a self-insured company vehicle), 
modified
 
on
 
other
 
grounds
, 
254 Kan. 605, 867 P.2d 1016 (1994); 
Kiernan v. Agency Rent A Car, Inc.
, 940 F.2d 917, 919 (4th Cir. 1991).  For purposes of this appeal, we assume, without deciding, that this is true.

The primary issue on appeal is whether Enterprise was required to be given notice of the suit against Page before a default judgment was entered against him.  The parties agree that Page's rental contract re­quired him to give notice to Enterprise of suits against him.  However, plain­tiffs argue the finan­cial respon­si­bil­i­ty provisions of the Code do not allow Enterprise to assert failure to give notice as a defense against someone other than Page.  

A provision in a bond or insurance policy, mandated by a finan­cial responsi­bil­i­ty law, that conflicts with that law is void and the statute con­trols.  
American Country Insurance Co. v. Wilcoxon
, 127 Ill. 2d 230, 241, 537 N.E.2d 284, 289 (1989).  Simi­larly, a provision in a car rental agreement that conflicts with the owner's obligation under a financial responsi­bility law to provide insurance is void.  See 
Hertz
, 238 Ill. App. 3d at 238, 606 N.E.2d at 223.  Here no issue is raised whether Page had insurance that met the minimum financial responsibility law requirements.

An analogous situation occurs when an insurer seeks to avoid liability to an injured third party because the insured has failed to comply with the notice provisions of the insurance policy.  As a general rule, an insurer is not liable under a policy to its insured or to an insured's judgment credi­tor unless the insured complies with the notice-of-suit condition in the automobile insurance policy.  
Mitchell v. Tatum
, 104 Ill. App. 3d 986, 989, 433 N.E.2d 978, 981 (1982).  

Howev­er, when the policy is issued pursu­ant to a finan­

cial respon­sibility law intended to benefit the public, several cases have held the insurer's policy defenses against the insured cannot be raised against an innocent third party.  See 
Johnson v. R&D Enterprises
, 106 Ill. App. 3d 496, 501, 435 N.E.2d 1233, 1236 (1982).  The failure of either the insured or the injured third party to give notice of suit, as re­quired by the policy, does not bar the third party from recov­ering from the insurer, even if a default judg­ment is entered against the insured before the in

surer knows of the suit.  See 
Great American Insurance Co. v. Brad Movers, Inc.
, 65 Ill. App. 3d 357, 360-61, 382 N.E.2d 623, 626 (1978) (the insured's noncompliance with policy conditions cannot be raised as a defense to a third-party claim).  These principles have been applied to rental contracts such as the one at issue here.  See 
Hertz
, 238 Ill. App. 3d at 239, 606 N.E.2d at 224.

It is consistent with the policies behind the financial responsibility laws to bar an insurer from asserting most policy defenses against an innocent third party.  However, the notice requirement is a minimal one.  Here, the injured party knew the identity of the insurer and had been negotiating with the insurer prior to filing suit (plaintiffs' attorney lien notices of May 10, 1996, and June 10, 1996, requesting a response from Enter

prise; Enterprise responses of May 20, 1996, and July 31, 1996, and attorney Clark's affidavit stating he "attempted to negotiate a settlement *** prior to filing suit").  Clark provides no rationale for not giving Enterprise notice of the suit other than that it would not have been in the best interest of his client to do so.

However, upon this record, we need not decide whether third-party plaintiffs generally have a duty to give an insurer notice of suit when they attempt to recover under coverage man

dated by statute.  Most of the cases cited by the plain­tiffs for the rule in 
Johnson
 involve breach of the policy or other miscon­

duct by the insured.  See 
John­son
, 106 Ill. App. 3d at 498, 435 N.E.2d at 1234; 
Great American
, 65 Ill. App. 3d at 359-60, 382 N.E.2d at 625-26; 
Illinois Casualty Co. v. Krol
, 324 Ill. App. 478, 479-80, 58 N.E.2d 473, 474-75 (1944).  The primary issue here is the conduct of the injured third party.

The rule from 
Johnson
 is limited.  
Johnson
 stated that to re­lieve the insurer of liability due to the insured's breach of policy, and "thereby[] deprive an 
innocent
 
third
 
party
 of recov­ery[,] would thwart the purpose behind the requirement of compulsory insur­ance." (Emphasis added.)  
John­son
, 106 Ill. App. 3d at 499, 435 N.E.2d at 1235.  Several other states have recog

nized an exception excusing an insurer from liabil­ity to a third party under a clause requir­ing notice of the suit or cooperation of the in­sured, when the insured and the third party have engaged in fraud or collu­sion.  See 
Nation­al Indemnity Co. v. Simmons
, 230 Md. 234, 243, 186 A.2d 595, 600 (App. 1962) (in 
dicta
); 
Strickland v. Hughes
, 273 N.C. 481, 487, 160 S.E.2d 313, 317 (1968); 
Futch v. Fidelity & Casualty Co.
, 246 La. 688, 700, 166 So. 2d 274, 278 (1964); 
Indemnity Insurance Co. of North America v. Lee
, 232 Ky. 556, ___, 24 S.W.2d 278, 279 (App. 1930); 7A Am. Jur. 2d 
Automo­bile Insurance
 §581, at 419 (1997).  Under that exception, liabil­ity will not be recog­nized, even if the injured third party would normally be protect­ed from the insurer's de

fenses against the insured by a finan­cial respon­si­bility law.  See 
National Indemnity
, 230 Md. at 243, 186 A.2d at 600.  

Plaintiffs cite 
Roberts v. Central Mutual Insurance Co.
, 285 Ill. App. 408, 2 N.E.2d 132 (1936), in which an insurer was not allowed to raise the insured's collusion with the injured third party as a defense to avoid paying on a bond required by a financial responsibility statute.  
Roberts
 focused primarily on the misconduct of the insured, and nothing in that opinion sug

gests the misconduct by the injured third party was an issue.  

In this case the parties agree Clark told Page he would forward the notice of suit to Enterprise.  By doing so, Clark, representing plaintiffs, assumed a duty to ensure it was received by Enterprise.  Policy defenses normally cannot be asserted against injured third parties because the rights of the insurer, vis-à-vis the insured, are governed by the terms of the con­tract, while injured third parties are statutory beneficiaries whose rights cannot be defeated by the terms of a contract to which they are not par­ties.  
Great American
, 65 Ill. App. 3d at 362, 382 N.E.2d at 627.  In this case, Clark voluntarily interjected himself, and the plaintiffs' interests, into the relationship between Page and Enterprise by agreeing to forward notice of the suit to Enterprise.

We hold that when an injured third party agrees to forward the insured's notice of suit to the insurer, he subjects himself to the insured's policy defense of failure to give notice of suit, notwithstanding any financial responsibility law that would normally protect him from this defense.  In this case, Clark, as plaintiffs' representative, agreed with Page, the insured, to give notice of suit to Enterprise, who was acting as a self-insurer.  

We do not decide whether the trial court correctly decided that no genuine issue of material fact existed as to whether Enterprise received notice.  Plaintiffs failed to raise this issue in their initial brief on appeal and have therefore waived it.  177 Ill. 2d R. 341(e)(7).

For all of the above reasons, we affirm.

Affirmed.

STEIGMANN and GARMAN, JJ., concur.

