                                           2016 IL App (1st) 161334

                                                                                FIFTH DIVISION
                                                                                Date Filed

     No. 1-16-1334


     PHOUNGEUN THOUNSAVATH,                              )       Appeal from the Circuit Court
                                                         )       of Cook County.
           Plaintiff and                                 )
           Counterdefendant-Appellee,                    )
                                                         )
           v.                                            )       No. 2014 CH 02511
                                                         )
     STATE FARM MUTUAL AUTOMOBILE                        )
     INSURANCE COMPANY,                                  )       Honorable
                                                         )       Kathleen M. Pantle,
           Defendant and                                 )       Judge Presiding.
           Counterplaintiff-Appellant.                   )
                                                         )
                                                         )


           JUSTICE HALL delivered the judgment of the court, with opinion.
           Justices _______________ 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
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        Illinois Insurance Code (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




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          ANY MOTOR VEHICLE IS OPERATED BY: CLINTON M. EVANS’ ” (Emphasis 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.

¶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).

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¶ 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’ 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


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          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).

¶ 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 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


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          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, (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,


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          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).

¶ 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:




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                “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 76-1586, § 7-602, added by Pub. Act 85-1201, § 1, eff. July 1, 1989. 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.


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¶ 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 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


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          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), as the named insured, the defendant 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., 779 So.2d 729, 732 (La. 2001) (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


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          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.

¶ 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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