Sixth Division November 21, 2008

No. 1-07-2589 STATE FA

RM MUTUAL

AUTOMOB IL

E INS URANCE COMPANY, Plaintiff-Appellee,

v. ENTERPRISE LEASI

NG COMPANY OF CHICAGO, d/b/a Enterprise Rent-A-Car, Defendant-Appellant (Lesean Doby

, Constance Taylor

and David Bartholomew, Defendants). ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Appeal from the Circuit Court of Cook Cou

nty

06 CH 1871

Honorable Mary Anne

Mason, Judge Presi ding. JUSTICE McBRI DE delive

red the o pinion of t

he court : Plaintiff, State Farm Mutual Automobile Insurance Company (State Fa

rm), filed a declaratory

judgment action seeking a determination that it had no duty to defend or indemnify defendant Constance Tay lor or defendant Le sean Doby in an unde rlying a ction filed against them by defenda

nt Enterprise Leasing

Company of Chicag o, d/b/a Enterprise Rent-A-Car (Enterprise). The unde rly ing act ion arose out of Tay

lor’s an d Doby ’s alleg ed failu

re to mak e pay ments to Enterprise for collision damage to a vehicle tha t Taylor rente d from Enterprise and Doby was driving at the time of an accident. The trial cour t granted State Farm’s motion for summary judgment and found no duty to defend Tay

lor or Doby in the under

lying ac tion. Enterpr ise appe als, arg

uing tha t the tria l court e rred in f inding that State F arm had n o duty to defend Tay

lor or Doby bec ause provisions in the policy mandate coverage, and State Fa

rm should be barred under the doctrine of estoppel fr om denying liability

and physical dama

ges1-07-2589

2

coverage to Tay

lor and Doby for

breaching its duty

to defend. The record discloses the following facts. On September 8, 2003, Constance Tay lor rented a 2003 Land Rover Discover y from Enterpr

ise. The rental agreement off ered, for an additional fee, an optional collision damage waiver ( CDW). The CDW covered the renter’s “financial responsi bility for dama ge to the rental v ehicle. ” The re

ntal ag reemen t advised the rent er “to caref ully consider whether to sign [the

waiver d eclining CDW] if y

ou have r ental ve hicle collision coverage provided by your cre dit card or collision insurance on y our own vehicle. Befor e decidi ng to pur chase the [CDW], y

ou may wish to det

ermine w hether y our own ve

hicle insuranc e affor

ds you cover

age for damag e to the r

ental ve hicle an d the amou

nt of the d

eductibl e under your ow

n insurance coverage.”

The rental agreement provide d that the CDW may be voided for sever

al reas ons, inclu

ding “[d]a

mage or loss occu rring w hile the r ental ve hicle is operated by

a driver not permitted under the rental ag reement.” The rental agr eement indicated that Taylor opted to add the CDW coverage. The rental ag reement also had a section in which the renter could include an “additional authorized driver.” H owever, Tay lor did not list another driver and the agreement pr ovided that no other drivers were permitted “without owner’ s approva l.” The a greement also s

howed tha

t the ren tal vehic le was no t permitte d to leave Illinois. At the time of the rental, Tay lor held an automobile insurance policy with State Farm. The vehicle covered on the policy was a 1998 Chevrolet Cavalier. No additional insureds or in su re d v eh ic le s w er e l is te d o n t he po li cy. Despite the aforementioned provisions in the rental agr eement, on September 10, 2003, Lesean Doby

was driving the rented Discovery in Michigan when an accident occur red on1-07-2589

3

Inte rstate 94 East. Ac cording

to an acc ident re

port, the driver swerved

to avoid a

deer an d lost control of the car, causing it to roll over and land in a ditch. The estimated damage to the Discovery was $35,434.44, and the vehicle was valued at $27,700. Tay lor’s CDW was voided under the rental agreeme

nt because the accident occurre d when Doby wa s driving the Discovery

. Enterprise made pay

ment demands of Tay

lor and Doby for

$28,430, equal to the value of the vehicle at the time

of the ac cident pl

us towing costs. In October 2003, Enterpr ise contacted State Farm advising it that Tay lor had voided the CDW and was responsible for all damages from the c laim. In January 2004, State Farm sent Taylor a le

tter denying

coverage because

Taylor wa s not driving or occupy ing the rental car at the time of the accident. In October 2004, Enterpr ise filed its complaint in the underlying litigation based on the damage sustained by

the Discovery

in the September 2003 accident. Count I wa s against Tay lor for breach of contract, count I I was ag ainst Doby for neg ligence and property

damage, and count III was ag ainst Doby for conve rsion. Both Taylor a

nd Doby failed to appe ar in the action and default orders w ere ent

ered against them . In O ctober 2 005, Ente rprise w rote to Sta

te Farm to advise it of Taylor’ s default and to demand that it defend her in the action. In January

2006, State Farm appeared in the underly ing action to represent Tay lor and sent a letter advising Enterprise that it reserve d its right to deny cove rage. Shortly

thereafter, State Farm filed its complaint in the instant declaratory judgment action seeking a determination that it owed no coverage to Tay lor or Doby. Enter

prise filed a counterclaim asking for a de cl ar at io n t ha t c ov er ag e e xi st ed un de r t he St at e F ar m p ol ic y.1-07-2589

4

Stat e Farm f

iled a moti on for summ ary judgme nt and argued t hat th ere was no cov erage for the underly

ing action because Tay

lor was not using the vehicle at the time of the accide nt and Doby did not meet the liability coverage section’s definition of an “ insured.” Further, there was

no cover age for damag es to the v ehicle u nder the phy sical da

mages c overag e becau se Doby also does not meet that section’s definition of an “insured.” I n response, Enterprise asserted that the omnibus cl ause app lied bec ause Doby dr ove the ve

hicle wit h Tay lor’s pe rmission. E

nterpris e also cont ended tha t State Fa rm waive d its righ

t to deny covera ge bec ause it fa

iled to time ly defend T ay

lor and D oby

in the unde

rly ing act ion. I n July 2007, the trial cou rt gra nted State Farm’s motion for

summary judgmen t. This appeal followed. “The construction of an insurance policy and a determination of the rights and obligations thereunder are questions of law for the c ourt which are appropriate subjects for disposition by way of summary

judgment.” Crum & Forster Managers Corp. v. Resolution Trust Corp. , 156 I ll. 2d 384, 391 (1993). Summary judg ment is appropriate where the pleadings, de positions, and admissions

on file, to gether

with any affida vits and exhibits, whe

n viewed in the lig ht most favorable to the nonmoving party, indicate that there is no genuine issue of material fa ct and the movin g pa rty is ent itled to jud gment as a

matte r of l aw. 7 35 ILCS 5/2-1 005( c) (W est 20 04). We review c ases invo lving sum mary judgmen t de novo

. Ragan v. Columbia Mutual Insuranc e Co. , 183 Ill. 2d 342, 349 (1998). Our prima

ry objectiv e in const

ruing the policy

langua ge is to a scerta

in and g ive eff

ect to the intentions of the parties as expressed by the words of the contract. Central Illinois Lig ht Co.1-07-2589

5

v. Home Insurance Co. , 213 Ill. 2d 141, 153 (2004). An insurance c ontract is to be construed as a whole, giving effect to every provision bec ause it must be assumed that every provision was intended to serve a purpose. Central Illinois Lig ht Co. , 213 I ll. 2d at 15 3. “I f the wor ds used in the policy are

clear and unambiguous, they must be given their plain, ordinary , and popular meaning.” Central Illinois Lig ht Co. , 213 Ill. 2d at 153. “A contract ter m is ambiguous if it can reasonably

be interpreted in more than one way due to the indefiniteness of the language or due to it having a double or multiple meaning.” William Blair & Co. v. FI L iquidation Corp. , 358 I ll. App. 3d 32 4, 334 (20 05). “A c ontract is not ambig

uous, howe

ver, if a court ca n ascer tain its meaning from the genera l contract language.” William Bla ir , 358 Ill. App. 3d at 334. “[T]he mere fact that the parties disagre e as to the meaning of a term does not make that ter m ambiguous.” William Bla ir , 358 Ill. App. 3d at 334. On appeal, Enterprise argue s that the trial court erred in granting State Farm’s motion for summary judgmen t becaus e State F arm had a duty to provide

covera ge unde r the omnib

us clause of its policy, and State Fa rm should be estopped from deny ing coverage for

failure to defend Taylor and D oby under a r eservation of rights. “A provision in an automobile insurance policy extending liability coverage to persons who use the named insured's vehicle w ith his or her permission is commonly referr ed to as an omnibus clause.” State Fa rm Mutual A

utomobile Insurance Co. v. Universa l Underwriters Group , 182 Ill. 2d 240, 243-44 (1998). Specific ally , Enterpr

ise focu ses its ar

gument on the “omn

ibus” provision in the

State Farm policy a

nd relies on the provisions of the Illinois Safety and Family F inancial Responsibility La

w (Financial Responsibility Law) (625 ILCS 5/7-100 et seq. (West 2002)) as1-07-2589

6

the basis for its argument that State Farm is required to provide coverage for the dama

ge to the Discovery. Section 7- 601(a) o f the Financial Re sponsibilit y Law provi des: “No 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 designe d to be used on a public hig

hway unless the

motor veh

icle is covered by

a liability insurance policy .” 625 IL CS 5/7-601(a) (West 2002). For most vehicles, section 7-203 requires that the policy limits must be at least $20,000 per person or $40 ,000 per accide nt for pe rsonal in jury or death and at le ast $15,00 0 for pro perty damage. 625 ILCS 5/7-601(a), 7-203 (West 2000). Section 7-317(b) lists the requirements of an owner’s policy , including the omnibus clause. “(b) Owner's Policy. --Such ow ner's p olicy

of liabili ty insurance: 1. Shall de signate

by e xplicit desc

ription or by a ppropria te refer ence, a ll motor ve

hicles wi th respe ct to which covera ge is thereby intende d to be granted; 2. Shall insure the person named therein and any other person using or responsible for the use of such motor vehic le or vehicles with the express or implied permission of the insured;1-07-2589

7 3. Shall insure every na

med insured and any

other person using or responsible for the use of any motor vehicle owned by

the named insured and used by such other person with the express or implied permission of the named insured on account of the maintenance, use or operation of any motor vehicle owned by

the named insured, within the continental limits of the United States or the Dominion of Canada against loss from liability imposed by law arising from such maintenance, use or ope ration, to the extent and aggr egate amount, exclusive of

interest and cost, with resp ect to each motor vehicle, of $20,000 for bodily injury to or death of one person as a result of any

one accident and, subject to such limit as to one per

son, the a mount of $4 0,000 for

bodily injury to or dea th of all persons as a result of any one accident and the amount of $15,000 for damage to property of others as a result of any one accide nt.” (Emphasis in or

iginal. ) 625 I

LCS 5/7 -317(b)(West 2002). “Provisions such as this, which extend liability coverag e to persons who use the named insured's vehicle with his or her permission, are commonly referred to as ‘omnibus clauses.’ Where, a s in Il linois, an

omnibus cl ause is r

equired by s tatute to b e include d in motor v ehicle liability policies, our court has held that such a clause must be read into every such policy.” Progressive Universal I

nsurance Co. v. Liberty

Mutual Fire Insuranc e Co. , 215 Ill. 2d 121,1-07-2589

8

128-2 9 (200 5), ci ting Universal Underwriters , 182 Ill. 2d at 243-44. “The principal purpose of this state's mandatory

liability insurance requir ement is to protect the public by sec uring pay ment of their damages.” Progressive , 215 Ill. 2d at 129. In Universal Underwriters , Rodney L uckhart took a test-drive in a vehicle owned by Joyce Pontiac GMC, Jeep-Eagle and Toyota (Joy

ce Pontiac). While on the test-drive, Luckha rt negligently

collided with another vehicle, causing injuries to the occupa nts. State Farm, as Luckhart’s insurer, se

ttled the claims of the injured occupants and then sought rec overy fr om Universal Underwriters Group (Universa l), the insurer for Joyce

Pontiac. Universal denied the claim, asserting that the policy issued to Joyce Pontiac afforde d no coverage to L uckhart. On cross-motions for summary judg ment, the trial court held in favor of State Farm. Universal Underwriters , 182 Ill. 2d at 241-42. On appeal to the supreme court, Universal arg ued that Luckhart was not re quired to be covered by

the dealer’s policy . The supreme court disagreed a nd found that a car dealer’s liability policy

must provide coverage for test-drive rs. The court discussed the mandatory insurance requirements in I llinois and pointed out that the omnibus clause “applies to the mandatory insuranc e requirement set forth in section 7-601(a).” Universal Underwriters , 182 I ll. 2d at 245. Universal contended that Joyc e Pontiac was exempt from the mandatory insurance requirements under section 7-601(a) bec ause it qualified for “a statutory exemption for ‘vehicles complying with laws whic h require them to be insured in amounts meeting or exceeding the minimum amounts required under [section 7-601].’ 625 IL CS 5/7-601(b)(6) (West 1996).” Universal , 182 I ll. 2d at 24 5. Joyce Pontia c was re quired to

carry liability covera ge of a t least1-07-2589

9

$100,000/$300,000/$50,000, exceeding the required minimum amounts under section 7-203. However, the supreme court concluded tha t the “the exemption which Universal cites applies only when the insuranc e required by law provides the type

of coverage require d under the mandatory insuranc e statute. Hence, the insurance must contain an omnibus clause insuring those driving a vehicle with the owner's pe rmission. Thus, regardless of whether the exemption applies, the garage policy must still cover Luckhart's liability .” Universal Underwriters , 182 I ll. 2d at 245-46. Here, Enterprise is asking this court to extend the omnibus clause to include a re ntal vehicle in addition to the named insured’s owned vehicles. Enterprise points to the phrase “using or responsible for the use of” that is used in section 7-317(b) and a rgues that the legislature intended this phrase to encompass rental vehicles. However, Enterprise ignores the rest of the statute. “The cardinal rule of statutory construction is to ascertain and give effe ct to the intent of the legislature.” In re Donald A.G. , 221 Ill. 2d 234, 246 (2006). “The best evidenc e of legislative intent is the language of the statute, and when possible, the court should interpret the language of a statute a

ccording to its plain and ordinary meaning.” In re Donald A.G. , 221 Ill. 2d at 246. Subsection 7-317(b)(1) requires a description of the c overed vehicle, i.e. , the owned vehicle (625 ILCS 5/7-317(b)(1) (West 2002)), and subsection 7-317(b)(2) refe rs to persons “using or responsible for the use of such motor vehicle or vehicles” with the owner’s permission (emphasis added) (625 ILCS 5/7-317(b)(2) (West 2002)). The word “ such” is being used as an1-07-2589

10

adjectiv e to describe the

typ e of motor

vehicle . When rea

d in context with subse ction (b) (1), it is clear that this subsection is not referring to all vehicles; ra ther, it is referencing the vehicle or vehicles intended to be covered, as require d in subsection (b)(1). Subsection (b)(3), which Enterprise also cites, clearly states that it applies to “any motor vehic le owned by the named insured,” and the rental vehicle was not owned by Taylor. (Empha sis added.) 625 IL CS 5/7- 317(b)(3) (West 2002). Sec ti on 7 -31 7(b ) cl ear ly re fer s t o t he n ame d i nsu red ’s v ehi cle or v ehi cle on t he p ol icy. If the legislature had intended this section to apply to nonowned rental vehicles, it would not have used l anguage t hat sp ecifi cally refe rred t o the o wned v ehicl es on t he pol icy. This langua ge indicates a narrow application of the statute. For this cour t to agree with Enterprise’s interpre tation, we would hav e to ignore the pr ecise la nguag e used in t

he statute . We decli

ne to do so. Further, certa

in ty pes of ve hicles a re exempt f

rom the ma

ndatory insuranc e requir

ements of section 7-601(a), and specifically , we find the exception in subsection 7-601(b)(6) to be pertinent to our analy sis. See 625 IL CS 5/7-601(b) (West 2002). Though not cited by either party, we f

ind the Fifth District’s decision in State Farm Mutual Automobile Insurance Co. v. Hertz Claim Management Corp. , 338 Ill. App. 3d 712 (2003), in which the court conc luded that rental v ehicles

fall withi n the exce

ption unde

r section 7-601(b) , to be per

suasive. There, State Farm’s insured, Michael

Kauling , rented

a vehicl e from AD RI/Auffenbe rg For d to drive while his car was being repaired. K auling declined to purchase a liability insurance supplement at the time of the rental. Later, K auling was involved in a motor vehicle accident while driving the1-07-2589

11

rental vehicle insured by

the defendants. A subsequent claim was made ag ainst the driver for injuries a nd prope rty damage sustaine d by

the other involved d

river. T here wa s a discr

epancy in multiple documents as to which insurer was required to provide primary coverage. State Far

m filed a decla rator y judgment actio n seek ing a de termi natio n that the de fendan ts’ l iabil ity cover age was primary a

nd its was secondary . The trial court granted summary judgment in favor of the defendants. Hertz , 338 Ill. App. 3d at 714-15. On appea l, State F arm arg

ued that I llinois law

require d a vehic le owner ’s insura nce to provide primary c overage in all cases, but the defe ndants contended that this requirement was imposed by the Financ ial Responsibility La w which is inapplicable to rental vehicles. The reviewi ng cour t discusse d the mand

ates unde r section 7-601(a ) of the F inancia

l Responsib ility Law and the omnibus provision, but pointed out that “[a]mong the vehicles exempted from the requirements of section 7-601(a) are those in compliance with other statutes that require insuranc e in amoun

ts meeting

or excee ding thos e requir ed by section 7 -601(a) . 625 ILCS 5/7-601(b)(6) (West 2000).” Hertz , 338 Ill. App. 3d at 716. The Hertz court noted that the supreme court has held that this exception applies only if the other statute requires the same ty pe of insurance required by

section 7-601(a). Hertz , 338 Ill . App. 3d at 7 16, ci ting State Farm Mutual Automobile Insurance Co. v. Universal Unde rwriters Group , 182 Ill. 2d 240, 245 (1998). The court then turned to the chapter of the I llinois Vehicle Code dealing with rental vehicles. Section 9-101 requires all owners of for-rent motor ve hicles to provide proof of financial responsibility to the Secretary of State. 625 IL CS 5/9-101 (West 2002). Proof of financial responsibility may

come in one of three forms: (1) a bond, (2) an insura nce policy, or ( 3) a1-07-2589

12

certificate of self-insurance issued by the Director of the I llinois Department of Insurance . 625 IL CS 5/9-102 (West 2002). The bond shall be in the amount of $100,000, and executed by an authorized surety individual or company . 625 IL CS 5/9-103 (West 2002). Section 9-105 sets out the requ irements for an in surance

policy . Under t

hat sect ion, owne rs of for -rent ve hicles must secure a policy

insuring the operator of the rented motor vehicle against liability for bodily injury in the minimum amount of $50,000 per person and $100,000 per occurrence . 625 IL CS 5/9-105 (West 2002). Further, section 9-105 provides that this coverag e is applicable to “the customer or against any

person operating the motor vehicle with the customer' s express or implied consent.” 625 I LCS 5/9 -105 (Wes t 2002). A ny p erson who violate s this cha pter of the Ill inois Vehi cle Code is guilty of a Class A misdemea nor. 625 IL CS 5/9-110 (West 2002). After considering these provisions, the Hertz court concluded that “[b]ecause the rental car insurance law requires re ntal cars to be insured in amounts exceeding those required by sections 7-601(a) and 7-203 and contains an omnibus clause identica l to that found in section 7-317(b)(2), we find that rental cars f all within the exception provided by section 7-601(b) (6).” Hertz , 338 Ill. App. 3d at 716. The reviewing court went on to find that section 9-105 does not require a car rental ag ency to provide pr imary cover

age and that a driver and a car rental agency may contrac

tually ag ree that the driver’s policy provides primary c overage. Hertz , 338 Ill. App. 3d at 716-18. Although this case is not directly on point, it lends support to our conclusion that the legislature did not intend for the Financial Responsibility Law to be applicable to re ntal vehicles. As we pre

viously discusse d, section 7-317(b ) was dra fted with specific langua ge that refer s to1-07-2589

13

owned vehicles of the named insured that are intende d to be covered on the policy . It does not account for nonowned rental vehicles. The le gislature designated a sepa rate chapter in the Illinois Vehicle Code for rental ve hicles and the required level of insurance, w hich exceeds that required for individuals. The legislature’s choic e to treat the owned vehicles separate f rom rental vehicle s shows tha

t it did not in

tend for the Fina ncial Res ponsibility

Law to be appl icable to rental vehicles. For these reasons, Enter prise’s argument on appeal fails. The omnibus provisions in State Farm’s policy do not apply to the situation present in this case. Therefore, the trial court properly

held that the State Farm has no duty to defend or indemnify

Taylor or Doby fo r t he da ma ge to th e D is co ve ry. Final ly, Enter prise conte nds t hat S tate Fa rm sho uld b e esto pped f rom de nying cove rage because it did not defend Doby and did not issue a clear reservation of rig hts as to its defense of Taylor in the under

lying litiga

tion. “The g eneral

rule of e stoppel pr

ovides tha

t an insur er which takes the position tha

t a complain t potentia lly a lleging covera ge is not covere d under a

policy that inclu

des a duty to defend may

not simply refuse to defe nd the insured.” Employers I nsurance of Wausau v. Ehlco Liqui dating T

rust , 186 Ill. 2d 127, 150 (1999). “Rather, the insurer has two options: (1) defend the suit under a reservation of rights or (2) se ek a declaratory judgment that there is no coverage

. If the insurer fa

ils to take either of these steps and is later found to have wrong fully denied coverage, the insurer is estopped f rom raising policy

defenses to coverage.” Ehlco , 186 Ill. 2d at 150-51. Here, State Farm did both. I t provided a defense of its insured under a rese rvation of rights and filed the instant declaratory judgment action.1-07-2589

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However, even if State Farm’s ac tions were untimely, the estoppel doctrine still does not apply. The estoppe l doctrine only applies whe n an insurer has breached its duty to defend. “Applica tion of the

estoppel doctrine is not appr

opriate if the insu

rer had no duty to defen d, or if the insurer's duty

to defend was not properly triggered. These c ircumstances include where the insurer was given no opportunity to defend; where there was no insuranc e policy in existence; and where, when the policy and the complaint are compared, there c learly wa s no coverage or potential for coverage.” Ehlco , 186 Ill. 2d at 151. As we hav e alrea

dy c oncluded

that ther e is no cov erage

under the State Fa rm policy , State Farm did not breach its duty to defend Tay

lor and Doby in the under lying ac tion. The trial court properl y r ejecte d Enterpr

ise’s est oppel ar gument. Based on the foregoing

reasons, we affirm the decision of the circ uit court of Cook Co un ty. Affirmed. O’MALL EY, P.J. and CAHILL , J., concur.