Court Opinion

ID: 3148021
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:40:46.521161+00
Date Added: 2024-06-11T11:55:20.962125
License: Public Domain

ILLINOIS OFFICIAL REPORTS
                                         Appellate Court

              American Service Insurance Co. v. Arive, 2012 IL App (1st) 111885

Appellate Court            AMERICAN SERVICE INSURANCE COMPANY, Plaintiff-Appellee,
Caption                    v. DENISE D. ARIVE, Defendant-Appellant.

District & No.             First District, Fourth Division
                           Docket No. 1-11-1885

Filed                      September 20, 2012
Rehearing denied           October 30, 2012

Held                       Where the driver of a vehicle involved in an accident was named on the
(Note: This syllabus       policy issued by plaintiff as a driver excluded from coverage, plaintiff had
constitutes no part of     no duty to defend or indemnify the insured, the driver’s mother, in the
the opinion of the court   suit arising from the accident, regardless of whether the driver’s name
but has been prepared      was listed on the insurance card as a person excluded from coverage.
by the Reporter of
Decisions for the
convenience of the
reader.)

Decision Under             Appeal from the Circuit Court of Cook County, No. 09-CH-49746; the
Review                     Hon. Rita M. Novak, Judge, presiding.

Judgment                   Affirmed.
Counsel on                 Charles A. Cohn, of Cohn & Cohn, of Chicago, for appellant.
Appeal
                           Bonnie S. Singer, of Goldman & Grant, of Chicago, for appellee.

Panel                      JUSTICE EPSTEIN delivered the judgment of the court, with opinion.
                           Justices McBride and Taylor concurred in the judgment and opinion.

                                            OPINION

¶1          This action arises out of an automobile liability insurance policy issued by American
        Service Insurance Company (American Service) to Marenda Schultz. The liability policy
        covered Marenda’s Chevrolet Astro van, but contained a named-driver exclusion for
        Marenda’s daughter, Kayla, which excluded coverage for any losses incurred while the car
        was driven by Kayla.
¶2          In October 2008, the van, driven by Kayla, collided with a bus driven by Denise Arive.
        Arive later filed an action against Kayla and Marenda Schultz for personal injuries sustained
        in the accident. Subsequently, American Service filed a declaratory judgment action against
        Arive, Kayla and Marenda Schultz, the bus company that operated the bus, and various
        passengers on the bus during the incident. American Service argued that it had no duty to
        defend or indemnify the defendants with respect to any claims arising from the accident
        because Kayla was an excluded driver on the liability policy.
¶3          The parties filed cross-motions for summary judgment. American Service asserted that
        Kayla was an excluded driver pursuant to the policy and therefore was afforded no coverage.
        Arive argued that the named-driver exclusion in the American Service policy was
        unenforceable because American Service had not listed Kayla as an excluded driver on the
        insurance card. In reply, American Service attached an insurance card listing Kayla as an
        excluded driver with its brief, along with an affidavit from a claims representative at
        American Service who was presented to establish that the card was a business record. Arive
        responded that the affidavit and attached insurance card were not timely filed and that the
        affiant was incompetent to testify regarding the insurance card.
¶4          The circuit court granted American Service’s motion and denied Arive’s motion. The
        court found that Kayla Schultz was an excluded driver under the American Service policy.
        The court reasoned that “pursuant to the language in the Appellate Court decision in
        Founders Insurance Company v. Muñoz, [389 Ill. App. 3d 744 (2009), aff’d in part & rev’d
        in part, 237 Ill. 2d 424 (2010),] the dispute between the parties with regard to the question
        of whether an insurance card was issued listing Kayla Schultz as an excluded driver *** is
        moot.” This appeal followed.

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¶5                                         ANALYSIS
¶6       The only issue that we need to address on appeal is whether an insurer, in order to
     enforce a named-driver exclusion in an automobile liability policy, must list the names of the
     excluded drivers on the insurance card it provides to the insured. Arive does not challenge
     this court’s decision in St. Paul Fire & Marine Insurance Co. v. Smith, 337 Ill. App. 3d 1054
     (2003), which held that a named-driver exclusion in an automobile liability insurance policy
     does not contravene Illinois public policy. 337 Ill. App. 3d at 1062. Relying on section 7-602
     of the Illinois Vehicle Code (the Code) (625 ILCS 5/7-602 (West 2008)), which provides that
     an insurance card “shall contain a warning” of any named-driver exclusion, Arive argues that
     a named-driver exclusion is void if the excluded driver’s name does not appear on the
     insurance card provided to the insured.1 The circuit court rejected this argument and granted
     summary judgment in favor of American Service.
¶7       We review the trial court’s decision to grant summary judgment de novo. Outboard
     Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102 (1992). Summary
     judgment is appropriate where “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 judgment as a matter of law.” 735 ILCS 5/2-1005(c) (West
     2008). Summary judgment “should only be granted if the movant’s right to judgment is clear
     and free from doubt.” Outboard Marine Corp., 154 Ill. 2d at 102.
¶8       In St. Paul Fire & Marine Insurance Co. v. Smith, this court addressed an issue of first
     impression in Illinois: “whether a named driver exclusion in an automobile liability insurance
     policy violates Illinois public policy.” St. Paul, 337 Ill. App. 3d at 1056. We examined our
     supreme court’s holding 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.’ ” Id. at 1059 (quoting State Farm Mutual Automobile Insurance Co.
     v. Smith, 197 Ill. 2d 369, 372 (2001)). The court in Smith held that an exclusion that
     purported to deny liability coverage while any insured vehicle was given to a person engaged
     in an automobile business was void as against public policy, but the court cautioned that
     “ ‘[t]he permissibility of other possible policy exclusions is not before us today, and we
     express no opinion as to any other exclusion.’ ” Id. at 1061 (quoting Smith, 197 Ill. 2d at
     379).
¶9       When faced with the named-driver exclusion in St. Paul, we looked to section 7-602 of
     the Illinois Vehicle Code, which provides in part:
         “If the insurance policy represented by the insurance card does not cover any driver
         operating the motor vehicle with the owner’s permission, or the owner when operating
         a motor vehicle other than the vehicle for which the policy is issued, the insurance card

             1
              As noted above, the parties dispute whether it was proper for the circuit court to consider
     the insurance card attached to American Service’s reply brief, which, according to American
     Service, establishes that Marenda Schultz’s card did list Kayla as an excluded driver. In light of our
     resolution below, we need not address this issue. We further note that the circuit court did not
     consider the insurance card as a basis for her ruling.

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            shall contain a warning of such limitations in the coverage provided by the policy.” 625
            ILCS 5/7-602 (West 2008).
       St. Paul, 337 Ill. App. 3d at 1059. We reasoned that “[t]he plain language of this statute
       appears to recognize that insurance policies may exclude named drivers from coverage.” St.
       Paul, 337 Ill. App. 3d at 1060. Section 7-602 and its supporting administrative regulations
       thus served as “evidence that the legislature intended to carve out a narrow exception for the
       named driver exclusion.” Id. Citing several decisions from other jurisdictions, we noted the
       public policy rationales for a named-driver exclusion: (1) protecting all potential claimants
       from damages resulting from automobile accidents by enabling drivers with family members
       having poor driving records to obtain affordable insurance; and (2) deterring insured drivers
       from entrusting their vehicles to unsafe excluded drivers. Id. at 1061 (collecting cases). Our
       decision in St. Paul made no mention of any requirement that the insurer must list the
       excluded drivers on its insurance cards in order to enforce the named-driver exclusion.
¶ 10        Following St. Paul, this court considered the same argument that Arive advances here in
       Founders Insurance Co. v. Muñoz, 389 Ill. App. 3d 744 (2009), aff’d in part and rev’d in
       part, 237 Ill. 2d 424 (2010). Founders addressed five consolidated appeals, one of which,
       No. 1-07-0792, included a named-driver exclusion. We rejected the defendants’ claim that
       the exclusion was unenforceable where the excluded driver’s name was not listed on the
       insurance card:
            “Defendants have not enlightened us with any authority, statutory or otherwise, in
            support of this novel interpretation, nor have we located any. Accordingly, we find no
            statutory impediment to enforcement of Founders’ named driver exclusion in 1–07–0792
            excluding Alberto Muñoz from coverage in the accident of March 11, 2005.” Founders,
            389 Ill. App. 3d at 757.
       We affirmed the grant of summary judgment in case No. 1-07-0792, but reversed the grant
       of summary judgment in the four related cases, finding that there were factual issues as to
       whether a reasonable-belief exclusion applied. Id. Our supreme court reversed in part,
       concluding that the reasonable-belief exclusions applied as a matter of law. Founders, 237
       Ill. 2d at 445-46. In case No. 1-07-0792, the supreme court affirmed on the basis of the
       reasonable-belief exclusion, but explicitly stated that it “need not consider” the applicability
       of the named-driver exclusion. Id. at 445-46.
¶ 11        Arive first contends that the circuit court erred in relying on Founders because the
       appellate court’s discussion of the named-driver exclusion in Founders was “pure dicta.” We
       disagree. This court’s discussion of the named-driver exclusion is not dictum, either obiter
       dictum or judicial dictum:
                “The term ‘dictum’ is generally used as an abbreviation of obiter dictum, which
            means a remark or opinion uttered by the way. Such an expression or opinion as a general
            rule is not binding as authority or precedent within the stare decisis rule. [Citations.] On
            the other hand, an expression of opinion upon a point in a case argued by counsel and
            deliberately passed upon by the court, though not essential to the disposition of the cause,
            if dictum, is a judicial dictum. [Citations.] And further, a judicial dictum is entitled to
            much weight, and should be followed unless found to be erroneous. [Citations.]” Cates

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            v. Cates, 156 Ill. 2d 76, 80 (1993).
       Our opinion in Founders finding the named-driver exclusion enforceable was essential to the
       disposition of the case: it was the only reason we affirmed case No. 1-07-0792. See
       Founders, 389 Ill. App. 3d at 756. The supreme court’s review affirmed the appellate court’s
       decision in case No. 1-07-0792 on other grounds, leaving the appellate court’s reasoning as
       to the named-driver exclusion intact. Founders, 237 Ill. 2d at 446. In any event, even if the
       appellate court’s treatment of the named-driver exclusion were dictum, it would be judicial
       dictum, which “is entitled to much weight, and should be followed unless found to be
       erroneous.” Cates, 156 Ill. 2d at 80. The trial court did not err in relying on Founders.
¶ 12        We see no reason to depart from our decision in Founders. Arive’s argument starts from
       a false premise: Arive assumes that section 7-602, by describing the formal requirements of
       an insurance card, reflects a statement of public policy that renders provisions within the
       policy unenforceable. While “[s]tatutes are an expression of public policy,” the inquiry here
       is whether the exclusion written into the insurance policy circumvents “a statute’s underlying
       purpose.” (Emphasis added.) Smith, 197 Ill. 2d at 372. “An agreement will not be invalidated
       on public policy grounds unless it is clearly contrary to what the constitution, the statutes or
       the decisions of the courts have declared to be the public policy or unless it is manifestly
       injurious to the public welfare.” (Emphasis added.) Progressive Universal Insurance Co. of
       Illinois v. Liberty Mutual Fire Insurance Co., 215 Ill. 2d 121, 129-30 (2005). The court in
       St. Paul referenced section 7-602, among other things, as an indication that the legislature
       “recognize[d] that insurance policies may exclude named drivers from coverage” and that
       such exclusions were therefore consistent with the public policy of Illinois. St. Paul, 337 Ill.
       App. 3d at 1060. The St. Paul court did not, however, read section 7-602 as reflecting a
       public policy that any named-driver exclusion is void when the insurer does not list that
       exclusion on the insurance card. In other words, the court’s reference to section 7-602 tells
       us nothing about that statute’s “underlying purpose.”
¶ 13        When we consider the “underlying purpose” of section 7-602, it is clear that the statute’s
       requirements as to the form of an insurance card are wholly unrelated to the validity of
       exclusions that appear in the policy. The insurance card is simply a form of “evidence,” albeit
       a convenient one, that a driver may present as proof of insurance to a “law enforcement
       officer”; an insurance card is not a substitute for the policy language. See 625 ILCS 5/7-602
       (West 2008) (listing insurance card as one form of “evidence of insurance” that “shall be
       displayed on request made by any law enforcement officer,” but noting that the card “does
       not constitute any part of [an] insurance policy”). Requiring an insurer to include the specific
       exclusion on the card allows a police officer to make sure that the driver of the vehicle is not
       an excluded (and therefore uninsured) driver. Without any indication on the card that
       particular drivers are not covered by the policy, an excluded driver could present an
       insurance card, claim status as a permissive user, and thereby avoid the penalties associated
       with driving while uninsured.2 Similarly, an insurance card must display “an effective date

               2
               A driver who “fails to comply with a request by a law enforcement officer for display of
       evidence of insurance, as required under Section 7-602 of this Code, shall be deemed to be operating

                                                   -5-
       and an expiration date” (id.), which assures the officer that the driver’s policy is currently in
       effect. Taken together, the requirements for insurance cards in section 7-602 relieve drivers
       of the obligation of carrying their insurance policies, while ensuring that police officers have
       enough information to assess whether the driver is covered by a policy currently in effect.
¶ 14        We question what public policy goals would be furthered if we hold that the failure to
       name the excluded insured on the insurance card voids the named-driver policy exclusion.
       While Arive offers no coherent answer on appeal, she does suggest that it would be a good
       idea to require insurers to remind the insured of the policy’s terms. In this case, for example,
       Marenda Schultz claimed she did not have knowledge of the exclusion for Kayla, even
       though she does not dispute that the exclusion was part of her policy. As noted above,
       however, these policy goals do not reflect section 7-602’s underlying purpose. The most
       plausible reading of section 7-602 is that it is meant to inform others, namely, “law
       enforcement officers,” that the person behind the wheel has no current insurance–not to give
       further notice to the insured about policy exclusions. In fact, the General Assembly requires
       insurers to warn insureds that the insurance card is not a summary of the policy: “Examine
       policy exclusions carefully. This form does not constitute any part of your insurance policy.”
       (Internal quotation marks omitted.) 625 ILCS 5/7-602 (West 2008). Additionally, an
       insurance card would be a poor vehicle to provide notice of policy provisions, as an insured
       is not even required to carry an insurance card. See id. (insured can carry “the current
       declarations page of a liability insurance policy” rather than insurance card as proof of
       insurance).
¶ 15        We recognize that where section 7-602 does not impose a penalty on an insurance
       company for failing to provide an insurance card listing any excluded drivers, voiding policy
       provisions based on insurance card errors would of course provide an incentive for insurers
       to list any excluded drivers and other required information on the insurance card. The lack
       of a statutory penalty, however, does not permit us to fashion our own. See, e.g., Requena
       v. Cook County Officers Electoral Board, 295 Ill. App. 3d 728, 734 (1998) (refusing to
       impose sanction of disqualification where none was prescribed in statute “without a clear
       indication from the General Assembly that this is the appropriate penalty”); Henrich v.
       Libertyville High School, 186 Ill. 2d 381, 394 (1998) (noting that courts “cannot restrict or
       enlarge the meaning of an unambiguous statute” or “rewrite statutes to make them consistent
       with the court’s idea of orderliness and public policy”).
¶ 16        As to the specific penalty that Arive requests in this case–rendering an otherwise valid
       named-driver exclusion void–the General Assembly has never expressed an intent to impose
       such a drastic result based on noncompliance with the insurance card requirements in section
       7-602. The legislature could easily have done so. Cf. Progressive Michigan Insurance Co.
       v. Smith, 791 N.W.2d 480, 482 (Mich. Ct. App. 2010) (considering a Michigan law that
       voids the named-driver exclusion unless a warning of the exclusion appears “on the face of
       the policy or the declaration page or certificate of the policy and on the certificate of

       an uninsured motor vehicle,” and shall be subject to the penalties in section 3-707 of the Code. 625
       ILCS 5/3-707(b) (West 2008); see also People v. Nash, 409 Ill. App. 3d 342, 349 (2011).

                                                   -6-
       insurance” (internal quotation marks omitted)). Where the legislature has not expressed an
       intent to invalidate a provision of a private agreement for failure to comply with section 7-
       602, however, Arive is left without support from any authority, statutory or otherwise, to
       support her view of “public policy.” Our supreme court has cautioned that “[t]he power to
       declare a private contract void as against public policy is *** exercised sparingly,” and we
       must be careful not to violate “[t]he freedom of parties to make their own agreements.”
       Progressive Universal, 215 Ill. 2d at 129. Without a clear directive from the legislature that
       requirements as to the form of an insurance card dictate the enforceability of policy
       exclusions, we cannot declare the exclusion here void as against public policy.
¶ 17        We conclude that there is no indication that the General Assembly intended to render a
       valid named-driver exclusion unenforceable where the excluded driver’s name does not
       appear on the insurance card. The underlying purpose of section 7-602 is to ensure that law
       enforcement officers have adequate proof of insurance to assess whether a driver is in fact
       a named insured on the policy. Accordingly, the named-driver exclusion in American
       Service’s policy is enforceable, regardless of whether Marenda Schultz’s insurance card
       listed Kayla Schultz as an excluded driver. Where it is undisputed that the American Service
       policy excluded coverage for Kayla Schultz, American Service had no duty to defend or
       indemnify the Schultzes in the Arive suit. The circuit court’s entry of summary judgment in
       favor of American Service was not in error, and we therefore affirm the judgment of the
       circuit court of Cook County.

¶ 18      Affirmed.

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