                           ILLINOIS OFFICIAL REPORTS
                                        Appellate Court




               American Access Casualty Co. v. Reyes, 2012 IL App (2d) 120296




Appellate Court            AMERICAN ACCESS CASUALTY COMPANY, Plaintiff and
Caption                    Counterdefendant-Appellee, v. ANA REYES, BRIGIDO JASSO,
                           Individually and as Independent Administrator of the Estate of Sergio
                           Jasso, Deceased, and ROCIO JASSO, Defendants (State Farm Insurance
                           Company, Defendant and Counterplaintiff-Appellant).



District & No.             Second District
                           Docket No. 2-12-0296


Filed                      December 28, 2012


Held                       The automobile liability policy issued by plaintiff naming defendant, the
(Note: This syllabus       titleholder of the insured vehicle, as the named insured but excluding her
constitutes no part of     from coverage was invalid due to the violation of the public policy
the opinion of the court   mandating insurance coverage; therefore, the entry of summary judgment
but has been prepared      finding plaintiff had no duty to provide a defense for defendant in an
by the Reporter of         action arising from injuries she caused was reversed and the cause was
Decisions for the          remanded for a determination of whether the policy provided coverage.
convenience of the
reader.)


Decision Under             Appeal from the Circuit Court of Kane County, No. 10-MR-56; the Hon.
Review                     Thomas E. Mueller, Judge, presiding.



Judgment                   Reversed and remanded.
Counsel on                   Dennis A. Brebner and Keith J. Rhine, both of Yudkin & Brebner, LLC,
Appeal                       of Waukegan, for appellant.

                             Keely Hillison, of Parrillo, Weiss & O’Halloran, of Chicago, for appellee.


Panel                        JUSTICE JORGENSEN delivered the judgment of the court, with
                             opinion.
                             Presiding Justice Burke and Justice Schostok concurred in the judgment
                             and opinion.


                                                OPINION

¶1           The facts in this automobile-insurance-coverage case are undisputed. In September 2007,
        plaintiff, American Access Casualty Company, issued an automobile insurance policy to
        defendant Ana Reyes. The policy’s statement of declarations listed Reyes as the “named
        insured,” as well as the titleholder to the insured vehicle, a 1999 Chrysler 300M. However,
        in the policy’s section identifying the “operators” of the vehicle, the policy listed two
        persons: (1) Reyes, with the notation “EXCLUDED” instead of a driver’s license number;
        and (2) Jose M. Cazarez, with an “out of country/international” driver’s license number.1
        Further, Reyes executed an endorsement providing that plaintiff would not afford any
        coverage under the policy to any claim or suit that occurred as the result of Reyes operating
        any vehicle. Finally, the policy contained a provision excluding bodily injury and property-
        damage liability coverage for “any automobile while in control of an excluded operator.”
¶2           On October 30, 2007 (one month after the above policy took effect), Reyes drove her car
        in Elgin and struck pedestrians Rocio and Sergio Jasso. Rocio was seriously injured and
        Sergio (a minor) died as a result of his injuries. Rocio and Sergio’s father, Brigido Jasso,
        sued Reyes, alleging negligence.
¶3           Thereafter, in response to the negligence suit, plaintiff filed the instant action, seeking
        a declaration that, because Reyes was driving at the time of the October 30, 2007, accident,
        its policy provided no coverage for and no duty to defend any claims and litigation arising
        therefrom. State Farm (which apparently provided uninsured motorist coverage to the
        pedestrians) answered plaintiff’s complaint and filed a countercomplaint for declaratory
        judgment, asking that plaintiff be estopped from excluding coverage for Reyes, because
        plaintiff’s attempt to “specifically exclude Ana Reyes the titleholder, payer on the insurance
        policy, [and] resid[ent] at the address of where the vehicle is garaged and located with full


                1
                 In the insurance application, Reyes was asked to list all household residents age 14 and over
        and any other operators of the vehicle. Only she and Cazarez appear on the application. The
        application defines Cazarez as a household resident and “friend” and lists him as the primary driver
        of the vehicle.

                                                     -2-
     access to the vehicle is contrary to law and public policy and cannot be enforced. Ana Reyes’
     exclusion would result in no one insured under the policy.”
¶4        On October 20, 2011, the court granted plaintiff summary judgment on its complaint. On
     February 11, 2012, the court denied State Farm’s motion to reconsider, which raised, for the
     first time, an allegation that Cazarez is an illegal alien and contended that, by allowing him
     to be a member of her household, Reyes was in violation of federal law and, moreover, that
     plaintiff, by providing insurance coverage to Cazarez, was “harboring and shielding from
     detection an illegal alien.”2
¶5        State Farm appeals, arguing that the insurance policy between plaintiff and Reyes violates
     public policy because it excludes Reyes, the only named insured and owner of the insured
     vehicle. Further, State Farm argues that plaintiff could not validly provide coverage for
     Cazarez because he does not have a valid license and is an illegal alien.
¶6        For the following reasons, we conclude that the provision excluding Reyes from liability
     coverage conflicts with relevant statutory requirements and, thus, violates public policy.
     Accordingly, we reverse and remand.

¶7                                         I. ANALYSIS
¶8        As they are purely legal, we review de novo the issues on appeal. 735 ILCS 5/2-1005(c)
     (West 2008) (summary judgment reviewed de novo); Founders Insurance Co. v. Munoz, 237
     Ill. 2d 424, 432 (2010) (de novo review applied to legal issues). The primary issue presented
     is whether the exclusion of the only named insured and automobile owner from coverage as
     a driver under a liability insurance policy contravenes public policy. An insurance policy is
     a contract, and, therefore, the rules applicable to contract interpretation govern interpretation
     of an insurance policy. Founders Insurance, 237 Ill. 2d at 433. As such, unless it contravenes
     public policy, an unambiguous insurance policy provision will be applied as written.
     Id.“Statutes are an expression of public policy.” St. Paul Fire & Marine Insurance Co. v.
     Smith, 337 Ill. App. 3d 1054, 1058 (2003).
¶9        Section 7-601(a) of the Illinois Safety and Family Financial Responsibility Law provides
     that “[n]o person shall operate, register or maintain registration of, and no owner shall permit
     another person to operate, register or maintain registration of, a motor vehicle designed to
     be used on a public highway unless the motor vehicle is covered by a liability insurance
     policy.” 625 ILCS 5/7-601(a) (West 2006). The insurance mandated by section 7-601(a) must
     meet certain requirements, including, pursuant to section 7-317(b)(2) of the Safety and
     Family Financial Responsibility Law, that a motor vehicle owner’s “liability insurance”
     policy “[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.” (Emphasis added.) 625 ILCS 5/7-317(b)(2) (West 2006). In other words, the statute
     mandates that a liability insurance policy insure the named insured and permissive users. The


             2
             We note that State Farm provided no evidence to support its allegations regarding Cazarez’s
     immigration status.

                                                -3-
       principal purpose of these mandatory liability insurance requirements is “to protect the public
       by securing payment of their damages.” Progressive Universal Insurance Co. of Illinois v.
       Liberty Mutual Fire Insurance Co., 215 Ill. 2d 121, 129 (2005). A private limiting agreement
       may not rewrite a statute that exists for the protection of the public; if the insurance provision
       conflicts with the law, it will be deemed void and the statute will continue to control. Id.; see
       also Founders Insurance, 237 Ill. 2d at 442 (an insurance policy provision that conflicts with
       section 7-317(b)(2) violates public policy and will be deemed void).
¶ 10       However, “[j]ust 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.” Progressive, 215 Ill. 2d at 129. Therefore, we exercise “sparingly” the
       power to declare a private contract void as against public policy. Id. We will not invalidate
       an agreement on public policy grounds unless it is “clearly contrary” to what our statutes or
       court decisions have declared to be public policy, or unless it is “manifestly injurious to the
       public welfare. Whether an agreement is contrary to public policy depends on the particular
       facts and circumstances of the case.” Id. at 130. For the following reasons, and mindful that
       our power to declare a private contract void as against public policy should be used only
       sparingly, we conclude that the blanket exclusion here, precluding all liability coverage for
       Reyes, the only named insured, is “clearly contrary” to section 7-317(b)(2) and, thus, public
       policy.
¶ 11       Again, section 7-317(b)(2) mandates that an owner’s “liability insurance” policy “[s]hall
       insure the person named therein.” 625 ILCS 5/7-317(b)(2) (West 2006).3 In the policy at
       issue here, Reyes is the only person “named therein,” i.e., she is the sole named insured.
       Plaintiff argues that, consistent with section 7-317(b)(2)’s mandate, Reyes is covered under
       the policy, for it provides Reyes with uninsured-motorist, bodily-injury, property-damage,
       and medical-payment coverage in the event that she is injured in an accident in which she is
       not the driver. However, simply put, none of that equates to liability coverage. The policy
       exclusion operates to deny coverage when Reyes drives the vehicle, i.e., when she would be
       liable for an accident. Thus, contrary to section 7-317(b)(2)’s mandate, the liability insurance
       policy does not cover the named insured.
¶ 12       We acknowledge two things. First, named-driver exclusions have been upheld by our
       courts. However, in those cases, the excluded drivers were not the sole named insured. See,
       e.g., Dungey v. Haines & Britton, Ltd., 155 Ill. 2d 329, 336 (1993) (enforcing a named-driver
       exclusion wherein a husband was excluded from coverage under his wife’s policy); see also
       American Service Insurance Co. v. Arive, 2012 IL App (1st) 111885, ¶ 17 (enforcing a
       named-driver exclusion wherein a son was excluded from coverage under his parents’
       policy); Smith, 337 Ill. App. 3d at 1056-57 (same and further holding, generally, that a
       named-driver exclusion in an automobile liability policy does not violate public policy);
       Rockford Mutual Insurance Co. v. Economy Fire & Casualty Co., 217 Ill. App. 3d 181, 186-


               3
                The statute separately, in subsection (b)(1), provides that a liability insurance policy shall
       designate the vehicle that is covered, before subsection (b)(2) provides that it shall insure the person
       named therein (i.e., the named insured). See 625 ILCS 5/7-317(b)(1), (b)(2) (West 2006).

                                                     -4-
       87 (1991) (same and further holding, generally, that public policy is not violated when a
       claimant must seek relief from his or her own uninsured motorist coverage because an
       exclusionary provision rendered uninsured the other vehicle).4 Thus, although the
       aforementioned cases establish that named-driver exclusions are permissible, they do not
       hold that a policy may completely exclude the sole named insured and automobile owner
       without running counter to section 7-317(b)(2) and, accordingly, public policy.
¶ 13       Plaintiff notes that, in addition to mandating coverage for the named insured, section 7-
       317(b)(2) also mandates coverage for permissive drivers. Accordingly, plaintiff questions
       why, given that courts have upheld named-driver exclusions as applied to permissive drivers,
       a named-driver exclusion that applies to the named insured should be treated any differently.
       Our answer to that question is found in another section of the statute. Specifically, section
       7-602 of the Safety and Family Financial Responsibility Law provides:
           “If the insurance policy represented by the insurance card does not cover any driver
           operating the motor vehicle with the owner’s permission, or the owner when operating
           a motor vehicle other than the vehicle for which the policy is issued, the insurance card
           shall contain the warning of such limitations in the coverage provided by the policy.” 625
           ILCS 5/7-602 (West 2006).
       The court in Smith held that the aforementioned provision reflects the legislature’s intent to
       create a limited exception to the mandatory insurance laws for named-driver exclusions.
       Smith, 337 Ill. App. 3d at 1059-60. That limited exception reflected in section 7-602,
       however, specifically references exclusions for permissive drivers. It does not contain a
       corollary provision for the named insured. Further, the provision references an exclusion for
       the “owner,” but that exclusion is limited: an owner may be excluded when the owner
       operates a vehicle other than that for which the policy is issued. Accordingly, while section
       7-602 reflects the legislature’s intent to permit, via named driver exclusions for permissive
       drivers, an exception to section 7-317(b)(2)’s requirements, it does not reflect that named
       insureds may, without limitation, be excluded from liability coverage.
¶ 14       This leads to our second acknowledgment: insurers may, without running afoul of public
       policy, legitimately contract to limit the scope of their coverage; in other words, not every
       limitation on liability coverage violates public policy. Founders Insurance, 237 Ill. 2d at 442
       (“Insurers are not required to cover every possible loss and may legitimately limit their
       risks.”); Progressive, 215 Ill. 2d at 136 (“Nowhere, however, does the law expressly forbid
       parties to an insurance contract from excluding certain risks from liability coverage.”).
       Indeed, two supreme court decisions, while factually distinguishable from the present case,
       reflect that in specific circumstances policy exclusions that limit liability coverage for named
       insureds might not run counter to public policy.
¶ 15       First, in Progressive, which did not involve a named-driver exclusion, our supreme court
       effectively held that exclusionary provisions that act to limit coverage even of named


               4
                Our supreme court, too, has held that the effects of policy exclusions rendering some
       motorists uninsured is “substantially offset” by the requirement of uninsured motorist coverage. See
       Progressive, 215 Ill. 2d at 139.

                                                   -5-
       insureds are permissible. In that case, the exclusionary provision precluded coverage for
       bodily injury or property damage resulting from an accident if the covered vehicle was being
       used to carry persons or property for compensation, which included food delivery. After the
       named insured’s son struck and severely injured a pedestrian while driving the named
       insured’s minivan to deliver pizzas for his employer, the insurer argued that it had no duty
       to defend or indemnify the son, because his conduct fell within the terms of the
       aforementioned policy exclusion. In upholding the exclusionary provision, the court held
       that, as it applied equally to both named insureds and permissive drivers, the provision did
       not conflict with section 7-317(b)’s mandate that any liability policy must cover both named
       insureds and permissive drivers.5 Progressive, 215 Ill. 2d at 134. In so doing, the court
       acknowledged the potentiality that, pursuant to the exclusionary provision at issue, even the
       named insured, could, under the circumstances described in the provision, be rendered
       uninsured. “Accordingly, if [the named insured] used the van to deliver pizzas, she would
       have no more right to insist that [the insurer] defend and indemnify her than [her son] has.
       The policy would provide no coverage.” (Emphasis added.) Id. Thus, in Progressive, the
       named insured, acting as the driver, would have been excluded from coverage if she were
       driving to deliver property or persons for compensation. Id. The named insured was not,
       however, the subject of a blanket policy exclusion. Rather, she was covered by liability
       insurance unless she drove the vehicle for a specific purpose.
¶ 16       Similarly, our supreme court recently upheld exclusionary provisions that, under certain
       circumstances, precluded liability coverage over even the named insureds. Founders
       Insurance, 237 Ill. 2d at 427. Like Progressive, the court in Founders Insurance did not
       consider a named-driver exclusion. Rather, the exclusion at issue provided that coverage
       would be excluded where the person using the vehicle did not have a reasonable belief that
       he or she was entitled to do so. In upholding the provision, the court held that, even where
       the driver was the owner of the vehicle, he or she did not have a reasonable belief that,
       without a driver’s license or if on a suspended license, he or she was entitled to drive the car.
       Id. at 438, 445. The court held that insurance companies could, without violating the public
       policy set forth in section 7-317(b)(2), “limit their risk by excluding insureds and permissive
       users alike who lack the most basic requirement for driving in this state: a valid license.” Id.
       at 445. Accordingly, as the exclusions at issue applied only to persons “insured” under the
       policies, which included both named insureds and permissive drivers, the exclusions could
       act to exclude coverage for named insureds as drivers where they met the conditions of the
       exclusions. Id. Again, however, the exclusion operated to exclude liability coverage over
       named insureds only when specific circumstances were met.
¶ 17       The provision at issue here is markedly different from those in Progressive and Founders
       Insurance. There is not a mere restriction or limitation on Reyes’ liability coverage: she has
       none. The provision constitutes a full exclusion of the named insured from liability coverage,

               5
               In so doing, the court distinguished its prior decision in State Farm Mutual Automobile
       Insurance Co. v. Smith, 197 Ill. 2d 369, 374 (2001), wherein it invalidated, as contrary to section 7-
       317(b)’s requirement that the policy cover both the named insured(s) and permissive drivers, an
       exclusion that acted to preclude coverage of only permissive drivers (indeed, an entire class thereof).

                                                    -6-
       as opposed to an exclusion of coverage only in limited circumstances specified in the
       insurance contract (e.g., using the vehicle for a fee (Progressive) or where the user does not
       have a reasonable belief that he or she is entitled to do so (Founders Insurance)). We do not
       know from the record why plaintiff and Reyes contracted to exclude her from liability
       coverage. The reason for the exclusion, however, is irrelevant to our decision here because,
       even if Reyes were excluded for a legitimate reason, section 7-317(b)(2) requires that the
       owner’s liability insurance policy cover the named insured and, here, coverage is not merely
       limited, but completely nonexistent.
¶ 18       We note that there exist sound public policy reasons for requiring coverage over the sole
       named insured. Those reasons were summarized in a Louisiana court decision, where that
       state’s supreme court held that a similar mandatory liability insurance statute, which
       permitted parties to “exclude from coverage any named person which is a resident of the
       same household as the named insured,” did not permit the exclusion of the named insured.
       (Internal quotation marks omitted.) Williams v. U.S. Agencies Casualty Insurance Co., 2000-
       1693, at 4 (La. 2/21/01); 779 So. 2d 729, 731, superseded by La. Rev. Stat. Ann. § 32:900(L)
       (2001). In so holding, the court stated:
                “Our interest in protecting the driving public far outweighs an insured’s desire to
           exclude himself from coverage in order to avail himself of a lower premium. To allow
           an insured to exclude himself from coverage and drive as an uninsured motorist, runs
           afoul of the overall purpose and intent of Louisiana’s compulsory insurance law. In the
           instant case, [the named insured], *** purchased liability insurance coverage, purported
           to exclude himself as a driver of his own vehicle, and then caused an accident resulting
           in injury. This court will not uphold such actions at the expense of the injured person
           whom our statutory insurance law is designed to protect. Clearly, the legislature did not
           intend that citizens such as these plaintiffs would suffer injury, and a tortfeasor would
           escape liability because he waived the mandatory liability coverage which is required by
           statute. We find that an automobile insurance policy may not exclude the named insured
           of a vehicle from coverage for the negligent operation of the insured vehicle.” Id. at 6-7,
           779 So. 2d at 732.
¶ 19       Nevertheless, we can also imagine scenarios where contractual, named-driver exclusions
       over even the named insured could further the statute’s public policy goal of protecting the
       public by securing payment of damages. Specifically, insurance companies make
       underwriting decisions and calculate policy premiums based on the characteristics and risks
       presented by the policyholder. Progressive, 215 Ill. 2d at 135. In situations where those
       factors render obtaining a policy cost-prohibitive, exclusions of named individuals may allow
       the vehicle owner, who must pursuant to section 7-601(a) obtain a liability insurance policy
       if anyone is to operate, register, or maintain registration over the vehicle, to obtain affordable
       insurance. Smith, 337 Ill. App. 3d at 1061-62. Without the ability to exclude certain drivers,
       including the named insured (who might own the vehicle but present risks that render
       obtaining insurance cost prohibitive), insurance might not be obtained. Id. However, we may
       not ignore section 7-317(b)(2)’s plain language that the liability policy must cover the person
       named therein. Instead, it is the role of the legislature to specify, as it did with permissive


                                                  -7-
       drivers in section 7-602, that named-driver exclusions may include the sole named insured.6
¶ 20       Accordingly, we find that the exclusion here is invalid because Reyes, the sole named
       insured, is not covered by liability insurance. We render no opinion as to whether the policy
       otherwise covers the October 30, 2007, accident. Therefore, we reverse the summary
       judgment entered in plaintiff’s favor and remand the cause for a determination of whether,
       setting aside the exclusionary provision, the policy provides coverage for the 2007 accident.
¶ 21       We add two final points. First, State Farm argues that the exclusion of Reyes from
       coverage under the policy is invalid if the purpose behind her purchase of the policy was to
       benefit Cazarez. State Farm asserts that: (1) because Cazarez has only an international
       driver’s license, not an Illinois driver’s license, the policy insures a person who is unable to
       legally operate the vehicle; and (2) Cazarez is an illegal alien and, by providing insurance to
       him, plaintiff is harboring and shielding an illegal alien from detection, in violation of federal
       law. Simply put, these arguments are red herrings and we will not address their merits.
       Setting aside the lack of proof for these allegations, neither Cazarez’s immigration status nor
       the propriety of plaintiff’s coverage over him is relevant to the issue on appeal. Plaintiff’s
       complaint sought a declaration regarding its contractual obligations to defend or indemnify
       Reyes in connection with the October 30, 2007, accident where Reyes was the driver. As
       Cazarez was not the driver involved in the accident, his coverage is irrelevant to the issue
       before us.
¶ 22       Second, in its response brief, plaintiff seeks sanctions pursuant to Illinois Supreme Court
       Rule 375(b) (eff. Feb. 1, 1994) against State Farm for pursuing a frivolous appeal and
       requests that we award plaintiff costs and attorney fees. Rule 375(b) permits the imposition
       of sanctions when an appeal is frivolous, not taken in good faith, or taken for an improper
       purpose, such as to harass or needlessly increase the cost of litigation. If the appeal is not
       warranted by existing law or a good-faith argument for modifying existing law, or is not
       reasonably well grounded in fact, it may be deemed frivolous and sanctionable. We decline
       plaintiff’s request to impose Rule 375(b) sanctions against State Farm. As we agree with
       State’s Farm’s first argument, this appeal is not frivolous.

¶ 23                                   II. CONCLUSION
¶ 24      For the foregoing reasons, the judgment of the circuit court of Kane County is reversed
       and the cause is remanded.

¶ 25       Reversed and remanded.


               6
                Which is, in fact, what happened in Louisiana. Specifically, in an amendment intended to
       supersede the Williams decision, the Louisiana legislature altered the relevant statute to read that “an
       insurer and an insured may by written agreement exclude from coverage the named insured and the
       spouse of the named insured. The insurer and an insured may also exclude from coverage any other
       named person who is a resident of the same household as the named insured at the time that the
       written agreement is entered into ***.” La. Rev. Stat. Ann. § 32:900(L) (2001); Hawkins v. Redmon,
       2009-2418, at 9 (La. 7/6/10); 42 So. 3d 360, 365.

                                                     -8-
