Opinion ID: 1987028
Heading Depth: 1
Heading Rank: 3

Heading: Founders Cases

Text: Part I of the Founders automobile policy details the liability coverage, stating in relevant part that Founders agrees: To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages, because of: A. bodily injury, or B. property damage arising out of the operation, maintenance or use of the owned automobile or any non-owned automobile and the Company shall defend any suit alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy   . Persons insured, for purposes of Part I liability coverage with respect to an owned automobile, include the named insured and any other person using such automobile with the permission of the named insured, provided the actual use thereof is within the scope of such permission. [1] The Founders policy also contains several exclusions to Part I liability coverage. Relevant here is exclusion (p) under which Part I coverage does not apply to bodily injury or property damage arising out of the use by any person of a vehicle without a reasonable belief that the person is entitled to do so. Five of the underlying automobile accidents involved vehicles insured through Founders and driven by either the named insured, or a permissive user of the insured vehicle. At the time of the accidents, none of the five drivers had a valid license, i.e., either the driver never obtained a license or the license was suspended. Each of these five accidents also involved a vehicle insured through Allstate Insurance Company, which made payments to its insureds for bodily injury and/or property damage resulting from the accidents. Thereafter, Allstate, as subrogee of its insureds, filed a complaint against each of the persons driving a vehicle insured through Founders seeking to recoup the monies Allstate paid to its insureds. In response to each of Allstate's subrogation actions, Founders filed a complaint for declaratory judgment in the Cook County circuit court, naming as defendants Founders' own insured, the driver of the vehicle if the driver was not the named insured, and Allstate, as subrogee of its insureds. [2] In each complaint, Founders sought a declaration that it owes no duty to defend or indemnify its named insured or the driver in connection with the Allstate lawsuit, and that Allstate is not entitled to recover any monies under the Founders policy. Founders maintained that under exclusion (p), because the driver did not have a valid license at the time of the accident, he could not have had a reasonable belief that he was entitled to drive the vehicle. In each case, the parties filed cross-motions for summary judgment. Allstate argued that the reasonable-belief exclusion violates public policy as expressed by Illinois' mandatory insurance statute, and is an improper attempt by Founders to penalize its insureds for conduct (driving without a valid license) that the legislature has already penalized. Allstate also argued that the exclusion is ambiguous and must be construed in favor of coverage. In response, Founders argued that the reasonable-belief exclusion unambiguously applies to unlicensed drivers, and that an insurer may limit its risks without violating Illinois' mandatory insurance statute. In each of the five cases, the trial court granted Founders' motion for summary judgment and denied Allstate's motion for summary judgment. The trial court found that because the driver did not possess a valid license, he did not have a reasonable belief that he was entitled to drive the vehicle. Allstate appealed the trial court's ruling in each case.