In the
United States Court of Appeals
For the Seventh Circuit
No. 10-2443
C OCA-C OLA E NTERPRISES, INC., and
ACE A MERICAN INSURANCE C OMPANY,
Plaintiffs-Appellants,
v.
ATS E NTERPRISES, INC.,
d/b/a S&S S ERVICE C O .,
D ANIEL Z ACHA, and U NIVERSAL
U NDERWRITERS INSURANCE C OMPANY,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of Illinois.
No. 08-2119—Harold A. Baker, Judge.
A RGUED D ECEMBER 7, 2010—D ECIDED F EBRUARY 22, 2012
Before R IPPLE, K ANNE, and SYKES, Circuit Judges.
S YKES, Circuit Judge. S&S Service Company performed
occasional maintenance and repair service on a fleet
of Coca-Cola delivery trucks regularly kept at the soft-
2 No. 10-2443
drink company’s bottling plant in central Illinois.
S&S would usually provide this service onsite at the
Coca-Cola plant, but sometimes it would take the trucks
to its shop to perform the repairs. In November 2007
Daniel Zacha, an employee of S&S, caused a fatal traffic
accident while driving a Coca-Cola tractor-trailer to
S&S’s repair shop for service. The dispute here concerns
which company’s insurer—Coca-Cola’s or S&S’s—is
ultimately responsible for the amount paid to settle the
claims of the decedent’s estate. The district court con-
cluded that under Illinois law only Coca-Cola’s insurance
policy provided coverage for the accident and entered
summary judgment in favor of S&S and its insurer.
We affirm, although on slightly modified grounds.
Contrary to the district court’s conclusion, both in-
surance policies provide coverage: S&S’s policy applies
by its plain language, while Coca-Cola’s policy applies
by operation of Illinois public policy. Still, we agree
that Coca-Cola and its insurer are ultimately responsible
for the settlement amount. Under Illinois law the vehicle
owner’s policy is primary over the vehicle operator’s
policy unless a statute provides otherwise. Coca-Cola
argues that the Illinois tow-truck insurance statute
supplies the necessary exception. We disagree; the
accident did not involve a tow truck or other vehicle
owned by S&S.
I. Background
Coca-Cola Enterprises, Inc., operates a soft-drink bot-
tling plant in Mattoon, Illinois, a small city located about
No. 10-2443 3
45 miles south of Champaign. S&S, a local towing-and-
repair company, performed maintenance and repair work
on Coca-Cola’s fleet of delivery vehicles on an order-by-
order basis. S&S’s employees usually performed this
service work at Coca-Cola’s plant, but sometimes they
serviced the trucks at S&S’s shop.
On November 9, 2007, Zacha, an S&S employee, was
performing routine maintenance on one of Coca-Cola’s
tractor-trailers at the Mattoon plant. With Coca-Cola’s
permission, Zacha drove the tractor-trailer from the
bottling plant to S&S’s shop to complete the repairs. The
vehicle never reached its destination. On the way to S&S,
Zacha negligently made a left turn across oncoming
traffic, causing a head-on collision with a minivan. The
driver of the minivan suffered serious injuries and
died shortly thereafter.
Coca-Cola’s tractor-trailer was insured under a policy
from ACE American Insurance Company (“ACE”).1 S&S
and Zacha, acting within the scope of his employment,
were insured under a policy from Universal Underwriters
Insurance Company (“Universal”).2 The decedent’s
estate sent an initial settlement demand to Universal.
S&S and Universal tendered the claim to Coca-Cola and
ACE, but they declined the tender. The insurers then
made reciprocal demands to defend and indemnify their
1
The ACE policy has a $5 million deductible, meaning that
Coca-Cola effectively self-insured up to that amount.
2
The Universal policy had a $300,000 per-occurrence policy
limit but also provided $2 million in umbrella liability coverage.
4 No. 10-2443
respective insureds, and Universal eventually agreed to
take the lead in negotiations with the decedent’s estate.
The estate later filed a wrongful-death action in Illinois
state court. Universal settled the estate’s claims for
$1.9 million, which was within Universal’s policy limits.
Meanwhile, Coca-Cola and ACE filed this diversity
action against S&S, Zacha, and Universal, seeking a
declaratory judgment regarding the parties’ obligations
with respect to the estate’s claims. The defendants an-
swered and counterclaimed for reimbursement of the
settlement amount, claiming that Coca-Cola and ACE
were solely responsible for payment. 3 Both sides moved
for summary judgment. The district court entered two
key holdings: (1) under Illinois law Coca-Cola’s policy
with ACE is primary over S&S’s policy with Universal
unless a statutory exception exists; and (2) the Illinois tow-
truck statute does not provide an exception because
the accident did not involve an S&S tow truck. The court
then concluded that the Universal policy did not apply,
and Coca-Cola and ACE were responsible for the entire
settlement amount. Accordingly, the court entered sum-
mary judgment for S&S, and Coca-Cola appealed.
II. Discussion
We review the district court’s grant of summary judg-
ment de novo, construing all facts and reasonable infer-
3
Unless the context requires otherwise, we refer to plaintiffs
Coca-Cola and ACE collectively as “Coca-Cola,” and to defen-
dants S&S, Zacha, and Universal collectively as “S&S.”
No. 10-2443 5
ences in the light most favorable to the nonmoving party.
Righi v. SMC Corp.,
632 F.3d 404, 408 (7th Cir. 2011).
Summary judgment is appropriate when “there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” FED. R. C IV. P.
56(a). Here, the material facts are undisputed, leaving
only a legal issue: Under Illinois insurance law, which
insurer is responsible for paying the settlement amount?
Is it ACE, under the policy insuring Coca-Cola as the
owner of the vehicle involved in the accident; or Universal,
under the policy insuring S&S, whose employee, Zacha,
was operating the vehicle in the course of S&S’s business?
A threshold question is whether either or both policies
provide coverage for this accident. There is no dispute
that the ACE policy does. That policy covers permissive
drivers of Coca-Cola’s vehicles, although it purports to
exclude “[s]omeone using a covered ‘auto’ while he or
she is working in a business of . . . servicing [or]
repairing . . . ‘autos.’ ” Under Illinois law, however, all
vehicle-owner insurance policies must cover any “person
using or responsible for the use of such motor vehicle or
vehicles with the express or implied permission of the
insured.” 625 ILL. C OMP. S TAT. 5/7-317(b)(2). Another
statute requires all motor vehicle owners to carry a mini-
mum level of insurance. See
id. 5/7-601(a). This set of
statutory requirements is generally referred to as “omni-
bus” coverage. See Zurich Am. Ins. Co. v. Key Cartage, Inc.,
923 N.E.2d 710, 711 (Ill. 2009). Where the omnibus re-
quirements apply, the “[permissive user] clause must
be read into every such policy.” State Farm Mut. Auto.
6 No. 10-2443
Ins. Co. v. Universal Underwriters Grp.,
695 N.E.2d 848, 850
(Ill. 1998). Zacha’s use of the Coca-Cola tractor-trailer
was permissive, so Illinois law mandates coverage
under the ACE policy notwithstanding its exclusionary
language.
Whether the Universal policy applies is a slightly more
difficult matter. The Universal policy provides in relevant
part: “WE will pay . . . all sums the INSURED legally
must pay as DAMAGES . . . because of INJURY to which
this insurance applies, caused by an OCCURRENCE
arising out of the . . . use . . . of an OWNED AUTO . . . .”
The question here is whether the Coca-Cola tractor-
trailer, obviously not owned by S&S, is nonetheless con-
sidered an “owned auto” under the policy. As it turns
out, the policy defines the term rather broadly; “owned
auto” specifically includes “an auto not owned by you . . .
when used in your business.” The phrase “when used in
your business” is not further defined, but the particular
circumstances here—in which an S&S employee was
operating a nonowned vehicle in the course of his em-
ployment for the purpose of transporting it to S&S’s
shop for repairs—surely qualifies. See 8A L EE R. R USS &
T HOMAS F. S EGALLA, C OUCH ON INSURANCE § 120:3 (3d ed.
1995) (“The concept of a business use is not given a rigid
construction . . . .”). Zacha’s accident thus triggered
coverage under the Universal policy.
The district court held, however, that the Universal
policy did not apply because Illinois law does not require
the Universal policy to cover an accident not involving
the towing company’s tow truck. This appears to be a
No. 10-2443 7
correct reading of Illinois law (more on this later), but the
point is not dispositive. Illinois follows the norm that the
plain language of an insurance policy will be enforced
unless it violates public policy. See, e.g., Hobbs v. Hartford
Ins. Co.,
823 N.E.2d 561, 564 (Ill. 2005). Here, as we have
noted, the language of the Universal policy itself
provides coverage. In the case of the ACE policy, we
ignored policy language purporting to exclude coverage
because it was inconsistent with Illinois public policy
as expressed in the omnibus insurance statute. Here,
however, the operative language in the Universal policy
is a grant of coverage—not an exclusion—and no one
argues that providing coverage in this situation would
be against Illinois public policy. (That would be a hard
argument to make.) That Illinois law doesn’t affirmatively
require coverage under these circumstances doesn’t
mean that we ignore the express policy language; to the
contrary, on the face of it, the Universal policy applies.
But which policy is primary? The rule in Illinois is
that “primary liability is generally placed on the insurer
of the owner of an automobile rather than on the insurer
of the operator.” State Farm,
695 N.E.2d at 851. In State
Farm a driver negligently caused an accident while
test-driving an automobile dealership’s vehicle.
Id. at
849. The issue was whether the dealership’s policy cov-
ering the car was primary over the driver’s general-
liability insurance.
Id. The Illinois Supreme Court held
that despite language in the dealership’s policy to the
contrary, the mandate in the omnibus statute made the
dealership’s policy primary over the driver’s operator’s
8 No. 10-2443
insurance unless “statutory language qualif[ied] that
mandate.”
Id. at 851.4
Invoking the exception mentioned in State Farm, Coca-
Cola points to an Illinois statute requiring tow-truck
companies like S&S to carry specified levels of insurance:
(d) Every tow-truck operator shall in addition file
an indemnity bond, insurance policy, or other proof
of insurance in a form to be prescribed by the
Secretary for: garagekeepers liability insurance, in
an amount no less than a combined single limit of
$500,000, and truck (auto) liability insurance in an
amount no less than a combined single limit of
$500,000, on hook coverage or garagekeepers cov-
erage in an amount of no less than $25,000 which
shall indemnify or insure the tow-truck operator
for the following:
(1) Bodily injury or damage to the property of others.
(2) Damage to any vehicle towed by the tower.
(3) In case of theft, loss of, or damage to any vehicle
stored, garagekeepers legal liability coverage in
an amount of no less than $25,000.
(4) In case of injury to or occupational illness
of the tow truck driver or helper, workers com-
4
Illinois courts have construed the holding in State Farm to
“necessarily exclude[] a finding that the [operator’s] insurance
might also be coprimary.” Browning v. Plumlee,
737 N.E.2d
320, 323 (Ill. App. Ct. 2000).
No. 10-2443 9
pensation insurance meeting the minimum re-
quirements of the Workers’ Compensation Act.
625 ILL . C OMP. S TAT. 5/12-606(d) (emphasis added). Coca-
Cola argues that under this statute the Universal policy
must cover S&S against injuries arising out of any
vehicle accident occurring in the course of S&S’s towing-
and-repair business. In other words, because the insur-
ance specified in section 12-606(d) is mandatory, it
trumps Coca-Cola’s omnibus owner’s policy, effectively
reversing the priority of the policies. Although the
ACE policy—the owner’s policy—is primary under the
omnibus statute, the tow-truck statute amounts to an
exception under State Farm, making the Universal policy
primary.
This argument is hard to square with the language of
the relevant statutes. Section 12-606(d) requires tow-
truck operators to carry three types of liability insurance
at specified minimum levels: (1) “garagekeepers
liability insurance”; (2) “truck (auto) liability insurance”;
and (3) “on hook coverage or garagekeepers coverage.”
Id.
Coca-Cola relies solely on the statute’s “truck (auto)
liability” provision,5 arguing that this subsection must
5
We note that Coca-Cola did not develop an argument based
on the mandatory garagekeepers liability insurance. “Typically,
garage liability policies provide coverage for property left ‘in
charge’ of the insured.” 9A L EE R. R USS & T HOMAS F. S EGALLA ,
C OUCH ON I NSURANCE § 132:61 (3d ed. 1995). These policies are
generally issued to “service stations, repair shops, . . . and
(continued...)
10 No. 10-2443
be construed to mandate coverage for any auto accident
occurring in the course of the tow-truck operator’s
business regardless of whether the accident involves a
tow truck or other auto owned by the insured.
This is an implausible reading of the statutory scheme.
The coverage required by subsection (d)(1) of the
statute explicitly refers to “truck (auto) liability insur-
ance,” plainly requiring tow-truck operators to insure
their own trucks and other vehicles at the specified
levels. Construing this provision to mandate coverage
for accidents involving vehicles owned by others ex-
pands the statute beyond its terms. See Sylvester v. Indus.
Comm’n,
756 N.E.2d 822, 827 (Ill. 2001) (avoiding an
interpretation that renders a statutory term meaning-
less). Our interpretation of the tow-struck statute is
reinforced by the terms of the omnibus statute, which
exempts a specified subset of vehicles—not drivers—from
its basic requirements. As relevant here, vehicles subject
to the requirements of the tow-truck statute are exempt
from the omnibus statute. See 625 ILL. C OMP. S TAT. 5/7-
601(b)(1) (exempting “vehicles subject to the provisions
(...continued)
businesses involving a combination of these kinds of opera-
tions.” 20 E RIC M ILLS H OLMES , H OLMES ’ A PPLEMAN ON I NSUR -
ANCE 2 D § 131.2 (2002). Accordingly, it might have been
argued that when Zacha took possession of the Coca-Cola
vehicle, the garagekeepers-liability portion of the statute
kicked in. But again, this argument was not developed; at
oral argument Coca-Cola’s counsel explicitly disclaimed
any reliance on that portion of the statute.
No. 10-2443 11
of . . . Section[] 12-606,” which includes the tow-truck
statute). This means only that tow-truck operators are
required to insure their trucks and other vehicles at
the higher minimum levels specified in the tow-truck
statute, not that they must insure their employees
against liability for accidents that occur while driving
nonowned vehicles.
Coca-Cola cites Pekin Insurance Co. v. Fidelity & Guaranty
Insurance Co.,
830 N.E.2d 10 (Ill. App. Ct. 2005), but that
case does not help its argument. In Pekin a tow-truck
operator was towing a van when the van broke free
and injured passengers in an oncoming vehicle.
830 N.E.2d at 12. The Illinois appellate court concluded
that the tow-truck statute displaced the omnibus
statute, making the tow-truck-operator policy primary
and the van owner’s policy secondary.
Id. at 18. Pekin
is distinguishable. There, as the court specifically
noted, the accident occurred during a tow, and it was
undisputed that subsection (d)(2) of the tow-truck statute
applied. See
id. (“[A]llowing [the tow-truck operator
policy] to become secondary coverage for its tow of the
delivery van violates the public policy reflected in [the tow-
truck statute].” (emphasis added)). Here, in contrast, the
accident did not involve a tow truck or any other S&S
vehicle; subsection (d)(1), requiring tow-truck operators
to maintain higher levels of coverage for their own
trucks and other vehicles, does not displace Coca-Cola’s
owner’s policy.
Accordingly, Coca-Cola’s policy with ACE remains
primary pursuant to the Illinois omnibus statute and
12 No. 10-2443
the rule in State Farm.6 The district court properly
entered summary judgment in favor of defendants
S&S, Zacha, and Universal.
A FFIRMED.
6
Because we have affirmed the judgment in favor of S&S
and Universal, we need not address their alternative
argument under the “target tender” doctrine. We note, how-
ever, that this rule is likely inapplicable here. “The target
tender rule provides an insured covered by multiple
concurrent policies with the paramount right to choose
which insurer will defend and indemnify it with respect to a
specific claim.” Chi. Hosp. Risk Pooling Program v. Ill. State Med.
Inter-Ins. Exch.,
925 N.E.2d 1216, 1233 (Ill. App. Ct. 2010). S&S
argues that because it tendered the case to ACE, ACE may not
seek contribution from Universal. See
id. But the target-tender
rule generally does not apply where, as here, an operator is
insured only by virtue of omnibus coverage. See Pekin Ins. Co. v.
Fid. & Guar. Ins. Co.,
830 N.E.2d 10, 19 (Ill. App. Ct. 2005) (“[The]
towing business and its driver were not named as insureds
or additional insureds on the delivery van owner’s Fidelity
policy but were omnibus insured. Their status in relation to
Fidelity was not a specific part of a contract between [the]
towing business and the delivery van’s owner.”).
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