St. Paul Fire and Marine Ins. Co. v. Smith
787 N.E.2d 852, 272 Ill. Dec. 666, 337 Ill. App. 3d 1054 (2003)
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Rule of Law:
A named driver exclusion in an automobile liability insurance policy is not void as against public policy in Illinois, as it represents a limited, statutorily recognized exception to the state's mandatory insurance laws.
Facts:
- Allen and June Smith held an automobile and homeowners insurance policy with St. Paul Fire & Marine Insurance Company (St. Paul).
- On January 2, 1996, their son, William Smith, was added as a covered driver under their policy.
- St. Paul subsequently discovered William Smith's poor driving record, which included two DUI convictions and a revoked license.
- On January 22, 1996, St. Paul required Allen, June, and William Smith to sign a 'named driver exclusion' endorsement, which explicitly stated St. Paul would not be liable for any accidents or losses while William Smith was driving.
- On June 3, 1996, William Smith, while driving his father Allen's insured vehicle, was involved in a collision with a car carrying William and Audrey Hardwidge.
- The collision resulted in the deaths of William Smith, William Hardwidge, and Audrey Hardwidge.
- At the time of the accident, William Smith also had a separate, personal automobile liability policy issued by Valor Insurance Company.
Procedural Posture:
- The administrators of the Hardwidge estates filed a wrongful death and negligent entrustment lawsuit in a trial court against the estate of William Smith and Allen Smith.
- A trial court jury returned a $5 million verdict against William Smith's estate and Allen Smith.
- St. Paul filed a separate complaint for declaratory judgment in a trial court, seeking a declaration that it had no duty to defend or indemnify due to the named driver exclusion.
- Defendants filed a cross-motion for summary judgment in the declaratory action, arguing the exclusion was void as against public policy.
- The trial court granted summary judgment in favor of the defendants, holding that the named driver exclusion was void because it violated Illinois public policy.
- St. Paul, the plaintiff in the declaratory judgment action, appealed the trial court's grant of summary judgment to the intermediate appellate court.
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Issue:
Does a named driver exclusion in an automobile liability insurance policy, which specifically denies coverage for accidents involving a named individual, violate Illinois public policy as embodied in the mandatory insurance provisions of the Illinois Vehicle Code?
Opinions:
Majority - Presiding Justice Theis
No. A named driver exclusion in an automobile liability insurance policy does not violate Illinois public policy. The court reconciled two seemingly conflicting sections of the Illinois Vehicle Code. While Section 7-317(b)(2) generally mandates that an owner's policy must cover any person using the vehicle with permission (the 'omnibus clause'), Section 7-602 contemplates that policies may not cover every permissive driver by requiring insurance cards to carry a warning about such limitations. Reading these sections together, the court concluded the legislature intended to create a limited exception for named driver exclusions to the general mandatory insurance requirement. This interpretation is supported by administrative regulations requiring warnings for excluded drivers and serves public policy goals recognized in other states, such as enabling families with high-risk drivers to obtain affordable insurance.
Analysis:
This case is a matter of first impression in Illinois and establishes the validity of named driver exclusions. The court clarifies a significant point of tension in the state's mandatory insurance law by carving out a specific exception to the broad 'omnibus clause' coverage requirement. By distinguishing this narrow, individual-specific exclusion from the broad, class-based 'automobile business exclusion' struck down in State Farm v. Smith, the court provides a clear precedent for insurers to manage risk associated with known high-risk drivers. This decision allows insurers to offer affordable policies to families that might otherwise be uninsurable, while placing the risk of an excluded driver's actions on that driver's personal insurance or assets.
