Safe Auto Insurance Company v. Fry , 41 N.E.3d 595 ( 2015 )

2015 IL App (1st) 141713
SECOND DIVISION
September 22, 2015
No. 1-14-1713
SAFE AUTO INSURANCE COMPANY, ) Appeal from the
) Circuit Court of
Plaintiff-Appellee, ) Cook County
)
v. )
)
MARIE FRY, )
Defendant-Appellant, )
) No. 12 CH 34843
)
) Honorable
(Kenneth Reed, ) Franklin U. Valderrama
) Judge Presiding.
Non-Appealing Defendant). )
PRESIDING JUSTICE PIERCE delivered the judgment of the court, with opinion.
Justice Simon concurred in the judgment and opinion.
Justice Neville dissented, with opinion.
OPINION
¶1 Plaintiff Safe Auto Insurance Company ("Safe Auto") issued an automobile liability
insurance policy to Kenneth Reed ("Reed"). Defendant Marie Fry ("Fry") was a passenger in
Reed's vehicle when Reed was involved in a hit-and-run accident. Fry was injured and
subsequently filed an uninsured motorist claim with Safe Auto seeking arbitration. Safe Auto
thereafter filed a declaratory judgment complaint in the circuit court alleging that it did not have
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a duty to indemnify Fry because she was excluded from coverage by the "reasonable belief
exclusion" in its policy. Later, Safe Auto filed a motion for summary judgment that was granted
by the circuit court. Fry now appeals and argues that, where a driver reasonable belief exclusion
contained in the Safe Auto contract for automobile liability insurance excludes uninsured
motorist coverage for a permissive passenger, the exclusion as applied to the permissive
passenger is unenforceable because it violates Illinois public policy. We agree. For the following
reasons, we reverse the ruling of the circuit court granting summary judgment in favor of Safe
Auto and remand for further proceedings.
¶2 BACKGROUND
¶3 Safe Auto issued an automobile liability insurance policy to Reed insuring his 2004
Pontiac Grand Am SE1 ("the vehicle") for the policy period beginning May 1, 2012 and ending
November 1, 2012. Safe Auto's insurance contract contained an uninsured motorist coverage
provision, "Part III – Uninsured Motorist Coverage," which obligated Safe Auto to pay for
bodily injuries "1. sustained by an insured person; 2. caused by accident; and 3. arising out of
the ownership, maintenance, or use of an uninsured motor vehicle." "Insured person" is defined
in the policy to include "any person occupying a covered vehicle."
¶4 Safe Auto's policy also contained the following exclusion:
"Coverage and our duty to defend under Part I – Liability to Others, Part II –
Excess Medical Payments Coverage, Part III – Uninsured Motorist Coverage,
and Part IV – Physical Damage Coverage does not apply to a loss:
***
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16. If the driver used the covered vehicle without a reasonable belief that he
was entitled to do so."
General Exclusion number 16 is referred to as the "reasonable belief exclusion."
¶5 On April 14, 2012, Reed's driver's license expired. The reason for the expiration of his
driver's license is not at issue here. On May 14, 2012, while Reed was driving his vehicle with
Fry as a passenger, the vehicle was involved in an accident with a vehicle that left the scene. Fry
was injured as a result of the accident. On May 15, 2012, Reed was issued a new driver's
license. Fry denied having knowledge that Reed was driving his vehicle without a valid license
on the day of the accident.
¶6 Fry sought arbitration of her uninsured motorist claim with Safe Auto on August 2, 2012.
In response, Safe Auto filed a complaint for declaratory judgment on September 14, 2012, to
prevent Fry from recovering under the policy. On March 18, 2013, Safe Auto filed a motion for
summary judgment, alleging that the "reasonable belief exclusion" barred coverage for an
uninsured motorist claim. On September 16, 2013, after argument and supplemental briefing,
the circuit court granted Safe Auto's motion for summary judgment. The circuit court held:
"Reed, who did not have a valid driver's license at the time of the subject collision,
could not, as a matter of law, have a reasonable belief that he was entitled to drive. If the
driver, Reed, did not have a reasonable belief that he was entitled to use the vehicle,
coverage under the plain language of the policy, is [sic] excluded to any loss, including
losses to any insured person. Fry, as a passenger and permissive user, constitutes an
insured under the policy. Fry, however, is barred from coverage due to Reed's
exclusion."
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Fry's subsequent motion to reconsider was denied May 7, 2014. Fry now appeals the September
16, 2013 order granting summary judgment and the May 7, 2014 order denying her motion to
reconsider.
¶7 ANALYSIS
¶8 The Safe Auto automobile insurance policy issued to Reed contained an uninsured
motorist (UM) provision with an exclusion for the insurer's coverage and duty to defend a loss
"if the driver used the covered vehicle without a reasonable belief that he was entitled to do so."
Fry argues that the circuit court erred when it granted summary judgment in favor of Safe Auto,
and her subsequent motion to reconsider, based upon the reasonable belief exclusion in Reed's
insurance policy because it is void as it violates Illinois public policy.
¶9 "The purpose of summary judgment is not to try a question of fact, but rather to
determine whether a genuine issue of material fact exists." Williams v. Manchester, 228 Ill. 2d
404, 417 (2008). Summary judgment is only appropriate when “the pleadings, depositions, and
admissions on file, together with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a matter of law.” (Internal
quotations marks omitted.) Id. A court must construe the "pleadings, depositions, admissions,
and affidavits strictly against the movant and liberally in favor of the opponent" in determining
whether a genuine issue as to any material fact exists. Id.
¶ 10 Summary judgment is precluded where "the material facts are disputed or where, the
material facts being undisputed, reasonable persons might draw different inferences from the
undisputed facts." Id. Summary judgment should be allowed "only where the right of the
moving party is clear and free from doubt." Id. (citing Adams v. Northern Illinois Gas Co., 211
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Ill. 2d 32, 43 (2004) (and cases cited therein). Reviewing courts review appeals from orders
granting summary judgment de novo. Id.
¶ 11 The public policy of this state is to protect members of the public injured in vehicular
accidents. This public policy, as reflected in state statutes and well-established case law, includes
mandatory liability insurance to compensate for injuries caused by the negligent operation of a
vehicle by the owner or other permitted driver. 625 ILCS 5/7-601(a) (West 2010); Progressive
Universal Insurance Co. of Illinois v. Liberty Mutual Fire Insurance Co., 215 Ill. 2d 121, 129
(2005) (the "principal purpose" of the mandatory liability insurance requirement is "to protect the
public by securing payment of their damages"). Importantly, and significantly, public policy, as
declared by the General Assembly, requires vehicle owner liability policies to provide specific
coverage to "insure not only the persons named in the policy, but also 'any other person using or
responsible for the use' of the subject vehicle with the express or implied permission of the
insured." Schultz v. Illinois Farmers Insurance Co., 237 Ill. 2d 391, 401 (2010) (quoting 625
ILCS 5/7-317(b)(2) (West 2004)). To enhance this public policy, there is an additional
requirement that vehicle liability insurers provide coverage to protect the public where a personal
injury loss is caused by an uninsured or hit-and-run vehicle and recovery from the tortfeasor is
not possible (UM coverage). 215 ILCS 5/143a (West 2010). An insured under the policy's
liability provision must be an insured under the UM coverage. Schultz, 237 Ill. 2d at 403
("Moreover, the UM coverage must extend to all who are insured under the policy's liability
provisions. If a person constitutes an insured for purposes of liability coverage under a policy,
the insurance company may not, either directly or indirectly, deny uninsured-motorist coverage
to that person."). Without statutorily mandated UM coverage, damages caused by an uninsured
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or hit-and-run driver would result in an unjust burden on the public to suffer a loss without just
compensation due to the negligence of another. Putnam v. New Amsterdam Casualty Co., 48 Ill.
2d 71, 89 (1970) ("the reasonable purpose of the statutory uninsured motorist provisions is to
assure that compensation will be available to policyholders, in the event of injury by an
uninsured motorist, to at least the same extent compensation is available for injury by a motorist
who is insured in compliance with the Financial Responsibility Law"); Squire v. Economy Fire
& Casualty Co., 69 Ill. 2d 167, 176 (1977); Sulser v. Country Mutual Insurance Co., 147 Ill. 2d
548, 555 (1992).
¶ 12 Safe Auto argues that extending its reasonable belief exclusion to deny UM coverage for
a permissive passenger does not violate Illinois public policy and points to our supreme court's
decisions in Founders Insurance Co. v. Munoz, 237 Ill. 2d 424 (2010), and Schultz v. Illinois
Farmers Insurance Co., 237 Ill. 2d 391 (2010) in support. In Founders, our supreme court
considered six consolidated cases against either a named insured driver or permissive driver who
never had a valid driver's license or a driver who had a suspended license at the time of the
accident. Founders, 237 Ill. 2d at 429. The Founders court examined a reasonable belief
exclusion and held that it was not against public policy because no driver could have a
reasonable belief that he was entitled to drive in Illinois without a valid license. Id. at 445.
Founders also held that the reasonable belief exclusion applies equally to both the named insured
and anyone using the vehicle. Id. However, the court was clear that its decision was narrowly
tailored to the specific issues before it. "The issue before us is much narrower. The issue is
whether, as a matter of law, a person without a valid driver's license can have a reasonable belief
that he or she is entitled to drive." (Emphasis added.) Id. at 440. "Irrespective of whether a
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person owns the vehicle, or is a permissive user, without a valid license, a person cannot have a
reasonable belief that he or she is entitled to drive in this state. Without a valid license, a person
has not been given the 'right' to drive; has not been 'qualified' to drive; has not been 'furnished
with proper grounds' for doing so." Id. at 438 (citing Century National Insurance Co. v. Tracy,
339 Ill. App. 3d 173 (2003)).
¶ 13 The foregoing quoted passages makes clear that Founders considered only the issue of
liability coverage in relation to drivers that did not have or never had a valid driver's license
when they incurred liability for causing a vehicular accident. The court left open the question of
whether the exclusion created an ambiguity as to whether coverage applied in other situations.
"That the exclusion could conceivably apply in other factual circumstances does not mean that
the exclusion is ambiguous as to unlicensed drivers." Id. at 440. The recognition by the supreme
court that it was not considering whether the reasonable belief exclusion applied in "other factual
circumstances" is a clear statement that the finding in Founders is not dispositive of Fry's claim
as Safe Auto contends.
¶ 14 Safe Auto finds it significant that shortly before its ruling in Founders, our supreme court
issued its decision in Schultz, 237 Ill. 2d at 394. The issue decided in Schultz was "a single issue:
does Illinois law permit insurers to issue motor vehicle liability policies in which occupants of a
covered vehicle are afforded uninsured motorist (UM) coverage but excluded from underinsured
(UIM) coverage?" Id. The policies in Schultz include "occupants" as a defined "insured" under
the liability and UM coverage provisions, however, "occupants" were not included as a defined
insured under the UIM provision, therefore, it was argued by the insurer, occupants were not
provided UIM coverage under of the policy. Id. The court noted that pursuant to section 7-
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317(b)(2) of the Illinois Vehicle Code (625 ILCS 5/7-317(b)(2) (West 2004)) insurers are
required to "insure not only the persons named in the policy, but also 'any other person using or
responsible for the use' of the subject vehicle with the express or implied permission of the
insured." Schultz, 237 Ill. 2d at 401 (quoting 625 ILCs 5/7-317(b)(2) (West 2004)). The court
took specific aim at the language in section 7-317(b)(2) finding that permissive users are the
same as the named insured for liability coverage purposes stating "it is important to note the
language chosen by the legislature. The law does not refer to permissive drivers. It speaks in
terms of permissive users." Id. The court held, consistent with other jurisdictions, "that for
purposes of motor vehicle insurance policies, 'use' is not limited to operating or driving a motor
vehicle. It also includes riding in one as a passenger" (id. at 402) and construed "Illinois'
mandatory liability coverage requirements to extend to permissive passengers as well as
permissive drivers. Both must be treated as insureds for purposes of liability coverage." Id. at
403.
¶ 15 The Schultz court then considered the requirement of UM insurance under section 7-
601(a) of the Vehicle Code (625 ILCS 5/7-601(a) (West 2004)) and under-insured motorist
coverage under section 143a-2 of the Illinois Insurance Code (UIM coverage) (215 ILCS 5/143a-
2 (West 2004)) and noted "[i]f a person constitutes an insured for purposes of liability coverage
under a policy, the insurance company may not, either directly or indirectly, deny uninsured-
motorist coverage to that person." Schultz, 237 Ill. 2d at 403. The court emphasized "the category
of those insured under a policy's liability provisions must always include permissive users, and
permissive users includes permissive passengers as well as permissive drivers." Id. at 404.
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¶ 16 Safe Auto misses the distinction articulated in Schultz: permissive passengers and drivers
are different categories of users, however, both must be covered as a matter of public policy.
Safe Auto's argument that Schultz, which extends coverage to a permissive passenger, is
precedent for excluding coverage for a permissive passenger based on a driver reasonable belief
exclusion, simply does not follow. Although insurers have some latitude in determining who to
insure, "[o]nce it has been determined who will be insured under the liability section of the
policy, the insurer may not, either directly or indirectly, deny UM or UIM coverage to an
insured." DeSaga v. West Bend Mutual Insurance Co., 391 Ill. App. 3d 1062, 1070 (2009);
Schultz, 237 Ill. 2d at 405. Denial of UM coverage to permissive passengers by application of a
reasonable belief exclusion effectively allows insurers to do what public policy forbids because
"once it has been determined who qualifies as an insured for purposes of liability coverage, that
determination must be applied consistently for purposes of UM and UIM coverage." Id.
¶ 17 As a permissive passenger, Fry clearly is an insured and she cannot be directly or
indirectly denied coverage because of a driver exclusion. "It is only after the parties designate the
'insureds' that the statute and case law become applicable and prohibit an insurance company
from either directly or indirectly denying uninsured-motorist coverage to an 'insured.' " Heritage
Insurance Co. of America v. Phelan, 59 Ill. 2d 389, 395 (1974). Fry is an insured under this
policy and application of the reasonable belief exclusion to deny her UM coverage as a
permissive passenger denies her the protection intended by the General Assembly in violation of
public policy.
¶ 18 In seeking to deny coverage, the insurer in Schultz argued that the term "permissive
users" was limited to "drivers," however, the court rejected this argument because it would
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"necessitate that we read into the governing statutes a distinction which the legislature itself has
not made." Schultz, 237 Ill. 2d at 407-08. Contrary to Safe Auto's contention, the finding in
Schultz, that Illinois public policy requires that permissive passengers have the same coverage as
other insureds under the policy's liability provision, does not furnish the insurer a valid basis to
deny Fry, a permissive passenger (user), coverage under the UM provision because of a
reasonable belief exclusion applicable to the driver.
¶ 19 Safe Auto melds language from Schultz and Founders to argue that shortly after the
Schultz court ruled that section 7-317(b)(2) of the Vehicle Code requires equal coverage of
drivers and permissive users, Founders held that the reasonable belief exclusion applied to
permissive users. This argument ignores the obvious context in which the court used the terms
"driver" and "user" and results in the distorted perspective that would allow insurers to exclude
from coverage permissive users when it excludes unlicensed drivers under a reasonable belief
exclusion. This does not follow. Considering the facts and issues in Schultz and Founders
together, these combined rulings are: insurers may exclude drivers who do not have a reasonable
belief they are permitted to drive, including permissive drivers who are not the named insured
(Founders) and auto liability insurers that provide UM coverage to defined insureds (e.g., owner,
family, permissive occupants, permissive nonowner drivers) must also provide UIM coverage
and cannot exclude any category of insureds (owner, family, permissive occupants, permitted
nonowner drivers) from UIM coverage (Schultz). Schultz dealt with nondriver/permissive user
UIM coverage, not driver liability coverage. Founders dealt with driver liability coverage, not
nondriver permissive user UM coverage. This appeal involves the denial of UM coverage for a
permissive passenger based on a policy exclusion that applies to a driver. The issues in this
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appeal, Schultz and Founders are completely different, involve a completely different analysis
and implicate public policy in completely different ways.
¶ 20 Safe Auto further argues that Schultz stands for the proposition that permissive users are
the same as permissive drivers and named insureds and that Founders held that a reasonable
belief exclusion does not violate section 7-317(b)(2), therefore, the reasonable belief exclusion
applicable to permissive drivers applies equally to permissive nondriver users. Safe Auto then
concludes that Fry, as a permissive passenger, is a permissive user and, as a permissive user, Fry
is bound by the driver exclusion because it applies to permissive users. This simplistic approach
conveniently, and incorrectly, conflates the analysis in Founders, where the court considered the
effect of an exclusion that applied to one category of insured (owners) on a second category of
insured (permissive drivers, a subset of permissive users) while not in any way considering its
effect on a third category of insured (permissive passengers, another subset of permissive users).
The public policy reflected in section 7-317(b)(2) requires coverage of all subsets of permitted
users: named insured, family members (if applicable), permissive drivers and permissive
passengers. Id. at 400-03. To allow an exclusion that applies to "drivers" to also exclude
"passengers" is contrary to the public policy established under section 7-317(b)(2) and the
mandatory liability and UM provisions of this state.
¶ 21 Fry argues that the recent opinion in American Access Casualty Co. v. Reyes, 2013 IL
115601, confirms the legislative intent to protect permissive passengers like her. In Reyes, after
two pedestrians were injured by Reyes, her insurer, American Access, denied liability coverage.
The auto liability policy named Reyes as the vehicle owner/titleholder/named insured. However,
the policy also showed her as "excluded" on the declarations page and on an endorsement that
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excluded liability coverage for bodily injury or property damage caused by an excluded operator.
"Thus, under the policy, Reyes was the sole 'named insured' but she was excluded from
coverage." Id. ¶ 4.
¶ 22 The Reyes court ruled that automobile liability policies must cover both the named
insured and permissive users of the vehicle, relying in part on State Farm Mutual Automobile
Insurance Co. v. Universal Underwriters Group, 182 Ill. 2d 240 (1998), and State Farm Mutual
Automobile Insurance Co. v. Smith, 197 Ill. 2d 369 (2001). In Universal Underwriters Group,
the court concluded that section 7-601(a), together with section 7-317(b)(2), mandate that "a
liability insurance policy issued to the owner of a vehicle must cover the named insured and any
other person using the vehicle with the named insured's permission." Universal Underwriters
Group, 182 Ill. 2d at 244. In Smith, the court stated that "[s]ection 7-317(b)(2) is clear. It
mandates that a motor vehicle liability policy, or a liability insurance policy, cover the named
insured and any other person using the vehicle with the named insured's permission." Smith, 197
Ill. 2d at 374.
¶ 23 Clearly, permissive users are an important category of insured that must be protected. For
example, in Universal Underwriters Group, during a test-drive, a car dealer's customer caused an
accident. Universal Underwriters Group, 182 Ill. 2d at 241. The dealer's insurer tried to avoid
coverage claiming its policy only covered the dealer and its employees, not customers
performing a test-drive. Id. at 241-42. The supreme court referenced section 7-317(b)(2) of the
Vehicle Code (an owner's 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 1996)) and found
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the statutory requirement was within the policy and applied to the customer and the accident.
Universal Underwriters Group, 182 Ill. 2d at 244-46. "Accordingly, a liability insurance policy
issued to the owner of a vehicle must cover the named insured and any other person using the
vehicle with the named insured's permission." Id. at 244. Universal Underwriters Group
enforced the public policy that the liability policy must cover the "named insured" and "any other
person using the vehicle" with permission. Id.
¶ 24 In addition to its misapplication of the Schultz analysis of section 7-317, Safe Auto
argues a named driver exclusion approved in Rockford Mutual Insurance Co. v. Economy Fire &
Casualty Co., 217 Ill. App. 3d 181 (1991) was "favorably" cited in Reyes, and is no different
than this exclusion and its effect to deny UM coverage for a permissive passenger. This
argument is disingenuous at best, especially where the Reyes court stated that "none of these
cases [including Rockford] addressed the question of whether the sole named insured can be
excluded and none of these cases held that a named driver exclusion can override the plain
language of section 7-317(b)(2)." (Emphasis omitted.) Reyes, 2013 IL 115601, ¶ 15.
¶ 25 The conclusion that this reasonable belief exclusion is unenforceable as against public
policy as applied to a permissive passenger is similar to the result in State Farm Mutual
Automobile Insurance Co. v. Wagamon, 541 A.2d 557 (Del. 1988), where an auto liability policy
denied coverage to an insured for a claim brought by a family member based on a "household
exclusion." Wagamon held that the financial responsibility law was meant to protect persons
injured in automobile accidents "regardless of their affiliation with the insured." Id. at 560. Here,
Fry's affiliation to the driver is irrelevant to her being injured by a hit-and-run driver and public
policy mandates that Safe Auto afford her coverage.
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¶ 26 In State Farm Mutual Automobile Insurance Co. v. Washington, 641 A.2d 449, 452 (Del.
1994), the court held that public policy required UIM coverage of an injured son who was
excluded from liability coverage under his father's policy "whether or not he is a passenger in an
automobile, a pedestrian or a driver" because denying the son UIM did not further the same
purpose as excluding him from liability coverage. The same rationale applies here: the
reasonable belief exclusion applicable to Reed does not further the purpose of the public policy
of protecting Fry, his permissive passenger, when she is injured by a hit-and-run motorist.
¶ 27 Were we to agree with Safe Auto on the issue presented here, we would be undoubtedly
ignoring the direct adverse impact such a decision would have on our established public policy
and mandatory UM coverage. When consideration is given to the prevalence of driving on a
suspended or revoked license and the potential harm to innocent passengers injured by an at-fault
uninsured motorist, the insurer's position cannot be accepted. We also consider the relationship
of the risk considered by the insurer and the corresponding premium it demands in return for the
insurance contract. The premium charged for automobile liability coverage is based on the
owner/driver's driving record and the record of others that may be permitted to drive (use) the
vehicle, typically family members. Assuming there is an increase in premium because of the
required statutory UM and UIM coverage, this increase would be based on the data available
from the market regarding (broadly and generally) population, accident rates and other
demographic information the insurance industry deems relevant in evaluating risk. See id. ("An
auto insurer assumes two very different risks in terms of liability and uninsured/underinsured
motorist coverages. In the first instance, the experience, driving record and negligence of the
insured driver defines the risk to the insurer. In the latter, the risk is defined by the negligence of
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the public at large. Uninsured/underinsured motorist coverage protects those injured by
negligent, financially irresponsible drivers."). The owner/driver component of risk in the liability
context is a separate and distinct risk of loss in a UM or UIM context.
¶ 28 In Illinois, license suspensions are authorized for driving related misconduct and for
nondriving related reasons, including unpaid parking tickets, failure to pay child support and
tollway violations. 1 625 ILCS 5/6-306.5, 306.7, 7-702 (West 2010). Currently, in Illinois,
approximately 1.9 million licenses are suspended or revoked (about 21% of all licenses), of
which 31% (577,192) are for nondriving related reasons (about 6% of all licenses), which is
similar to the experience of other states. 2 California, for example, 17%, or 4 million drivers,
drive while suspended. 3 Recently, the American Association of Motor Vehicle Administrators
(AAMVA) reported that nationally, at any given time, approximately 7% of drivers
(approximately 15 million) are driving while suspended. 4 The report focused on the number of
drivers suspended for reasons other than poor driving or "suspensions for social non-
1
See Illinois Secretary of State, Losing Your Driving Privileges, available at
http://www.cyberdriveillinois.com/departments/drivers/losepriv.html (last visited Aug. 11,
2015).
2
Information provided by the Illinois Secretary of State as of August 11, 2015. In a report
prepared by Rutgers University, Illinois reported over 222,000 suspended licenses (2.6% of
licensed drivers) in 2003. New Jersey reported that approximately 5% of its 6 million drivers
were suspended and less than 6% were suspended for purely driving related reasons. Jon A.
Carnegie, Driver’s License Suspensions, Impacts and Fairness Study (2007).
http://vtc.rutgers.edu/wp-content/uploads/2014/04/MVC-DL-Susp-Final-Report-Vol2.pdf.
3
See AFSCME Information Highway, Not Just a Ferguson Problem - How Traffic Courts
Drive Inequality in California, at 6, 20 (2015), http://www.lccr.com/wp-content/uploads/Not-
Just-a-Ferguson-Problem-How-Traffic-Courts-Drive-Inequality-in-California-4.20.15.pdf.
4
See American Association of Motor Vehicle Administrators, Best Practices Guide to
Reducing Suspended Drivers, at 2 (2013),
http://www.google.com/url?url=http://www.aamva.org/WorkArea/DownloadAsset.aspx%3Fid%
3D3723&rct=j&frm=1&q=&esrc=s&sa=U&ved=0CEEQFjAGahUKEwjc4ZqXwJXHAhVBlY
AKHbDGAwo&usg=AFQjCNF4pyQAoSCQgIIaKmFR5VzvhnBqsA(AAMVA).
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conformance reasons": bounced checks, fuel theft, truancy, vandalism, failure to pay taxes,
minor in possession of alcohol, false public alarm, illegal solid waste burning, vandalism, failure
to pay alimony, selling alcohol to a minor, truancy, unlawful possession of firearms, prostitution,
and many more. AAMVA, supra at 22. According to the AAMVA, in 2002 drivers suspended
for social nonconformance reasons represented 29% of all suspended drivers. Id. at 2. By 2006,
this group represented 39% of all suspended drivers, or about 6 million drivers. Id. The AAMVA
concluded that research verified that drivers suspended for social non-conformance reasons pose
a comparatively lower safety risk compared to those who are suspended for driving related
reasons. Id. at 23. Notably, the AAMVA stated that research indicated that "75 percent of all
suspended drivers continue to drive. The addition of suspensions for social non-conformance
reasons has however, dramatically increased the number of suspended drivers on our roads
resulting in a tremendous burden on law enforcement, departments of motor vehicles, the courts,
and local communities." Id. at 4.
¶ 29 The frequency of "driving dirty" and its relationship to Illinois' public policy to protect
innocent passengers injured by at-fault uninsured or hit-and-run drivers indicates there is a strong
likelihood that hundreds of thousands of unlicensed or suspended drivers are on Illinois roads,
many of whom are suspended for reasons other than bad driving. Considering the national
figures, it is reasonable to conclude that, in Illinois, a staggering number of permissive
passengers are riding in vehicles where the driver does not have a reasonable belief he is
permitted to drive.
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¶ 30 "Driving dirty," while not condoned, is a reality. Yet this reality is not something a
passenger would likely consider when getting into a car. As stated in Monroe v. United States
Fidelity & Guaranty Co., 237 Ill. App. 3d 261, 268 (1992),
"[t]here are far too many instances we can call to mind in which a passenger may not
have his own policy to look to for recovery. Many people in our State, minors, elderly
persons, and people who rely on mass transportation, do not own automobiles, and, thus,
do not have their own insurance policy. When a passenger enters an automobile, he
should realistically believe he is covered by the owner's policy."
This observation is as accurate today as it was twenty-five years ago. These permissive
passengers are at risk of injury and economic loss due to the fault of uninsured or hit-and-run
operators and there is a strong likelihood that the operator of the vehicle they occupy, if
suspended, was suspended for reasons unrelated to bad driving. It simply does not follow that
these and other innocent passengers should be at risk and denied UM coverage "to at least the
same extent compensation is available for injury by a motorist who is insured in compliance with
the Financial Responsibility Law" (Putnam v. New Amsterdam Casualty Co., 48 Ill. 2d 71, 89
(1970)) because of the application of a driver reasonable belief exclusion.
¶ 31 In conclusion, we hold the driver reasonable belief exclusion as applied in this case
clearly violates public policy and does not further the public interest because this exclusion
allows insurers to indirectly deny coverage to a category of otherwise protected insureds, the
permissive passenger, for which premiums were charged and received, based on a broad
exclusion applicable to only one category of insured (drivers) under the policy. "We cannot
ignore that a premium was paid for uninsured motorist protection. If that protection is not there,
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the policyholder has been denied substantial economic value in return for the premiums which
have been paid." Hoglund v. State Farm Mutual Automobile Insurance Co., 148 Ill. 2d 272, 278
(1992). The Hoglund court pointed out that exculpatory language cannot be read in isolation but
must be read in conjunction with the policy holder's reasonable expectations along with the
public policy behind the statute and the coverage intended by the insurance policy itself. Id. at
279. This exclusion is void and unenforceable as applied to permissive passengers under section
7-317(f)(4) of the Vehicle Code (625 ILCS 5/7-317(f)(4) (West 2010) ("The policy, the written
application therefor, if any, and any rider or endorsement which shall not conflict with the
provisions of this Act shall constitute the entire contract between the parties.")).
¶ 32 Fry was a permissive user entitled to protection from economic loss related to her
personal injury due to an at fault hit-and-run motorist. To allow Safe Auto, or any other insurer,
to directly or indirectly avoid the mandate of the General Assembly, and the decisions of our
courts, by denying UM coverage to permissive passengers by extension of a driver reasonable
belief exclusion is unenforceable as against public policy.
¶ 33 CONCLUSION
¶ 34 For the reasons stated herein, we find that the trial court erred in granting summary
judgment in favor of Safe Auto and reverse the ruling of the circuit court and remand for
proceedings consistent with this order.
¶ 35 Reversed and remanded.
¶ 36 JUSTICE NEVILLE, dissenting.
¶ 37 The majority takes the position that denying Fry, a permissive passenger, coverage
through the reasonable-belief exclusion of Safe Auto's insurance policy allows Safe Auto, and
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other insurance companies, to avoid the mandate of the General Assembly to insure not only the
persons named in the policy, but also any other person using or responsible for the use of the
subject vehicle with the express or implied permission of the insured. The majority also holds
that allowing the reasonable-belief exclusion to deny uninsured motorist coverage to a
permissive passenger is against public policy. The majority's decision is contrary to Illinois
Supreme Court case law. See Founders, 237 Ill. 2d at 445; Schultz, 237 Ill. 2d at 404. Therefore,
I respectfully dissent.
¶ 38 The majority overlooks the fact that Illinois public policy is clear that in order to drive a
vehicle in Illinois, the driver must have a valid license. 625 ILCS 5/6-101(a) (West 2010).
Specifically, section 6-101(a) of the Illinois Vehicle Code provides:
"No person *** shall drive any motor vehicle upon a highway in this State unless
such a person has a valid license or permit, or a restricted driving permit, issued
under the provisions of this Act." 625 ILCS 5/6-101(a) (West 2010).
¶ 39 The Illinois Supreme Court interpreted the aforementioned provision in the Vehicle Code
and the reasonable-belief exclusion in an insurance policy and held that no driver could have a
reasonable belief that he was entitled to drive in this state without a valid license. Founders, 237
Ill. 2d at 438. The Founders court also held that the reasonable belief exclusion does not violate
the public policy of Illinois and that insurance companies may limit their risks:
"The reasonable-belief exclusion at issue here, like the food-delivery
exclusion at issue in Progressive, applies equally to the named insured and
anyone using the vehicle with the insured's permission. Pursuant to our analysis in
Progressive, we hold that the exclusion does not violate Illinois public policy as
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set forth in section 7–317(b)(2) of the Vehicle Code. Founders and Safeway may
limit their risk by excluding insureds and permissive users alike who lack the
most basic requirement for driving in this state: a valid license. We recognize that,
depending upon the circumstances of a particular case, the reasonable-belief
exclusion, like any exclusion, may result in no insurance coverage from which
injured third parties may be compensated. Such coverage gaps, however,
implicate policy concerns that are properly considered by the legislature, not this
court. " (Emphases added.) Founders, 237 Ill. 2d at 445.
¶ 40 The Illinois Supreme Court makes it clear that when a driver operates a vehicle without a
valid license, the driver has no reasonable belief that he is entitled to drive under the reasonable-
belief exclusion in a motor vehicle insurance policy. Founders, 237 Ill. 2d at 438. The Illinois
Supreme Court also makes it clear that the word "user" in a motor vehicle policy includes
"permissive passengers as well as permissive drivers." Schultz, 237 Ill. 2d at 402-03. Therefore,
according to Founders and Schultz, Fry, a passenger in a vehicle driven by an insured driver
without a valid driver's license, is barred from recovering uninsured motorist coverage by the
reasonable-belief exclusion in the driver's motor vehicle insurance policy. Founders, 237 Ill. 2d
at 445; Schultz, 237 Ill. 2d at 402-04. Accordingly, in my opinion, the trial court did not err when
it granted Safe Auto's motion for summary judgment.
¶ 41 In conclusion, I agree with the Founders court that we must wait until the legislature
decides that it will remove the coverage gap by crafting legislation which provides that
permissive passengers should receive uninsured motorist coverage and should not be treated like
unlicensed drivers or unlicensed permissive drivers under the reasonable-belief exclusion.
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Founders, 237 Ill. 2d at 445. But, this court is bound by decisions of the Illinois Supreme Court.
People v. Artis, 232 Ill. 2d 156, 164 (2009). Accordingly, I follow Founders and Schultz and
respectfully dissent.
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