Blanket Exclusion in Automobile Policy for Insured Vehicle
In American Access Cas. Co. v. Reyes, an automobile insurance policy was issued in September 2007 by American Access Casualty Company (“American Access”) to Anna Reyes (“Reyes”). The policy’s statement of declarations listed Reyes as the “named insured” as well as the titleholder to the insured vehicle, a 1999 Chrysler 300M. However, in the policy’s section identifying the “operators” of the vehicle, the policy listed two persons: (1) Reyes, with the notation “EXCLUDED” instead of a driver’s license number; and (2) Jose M. Cazarez, with an “out of country/international” driver’s license number. Further, Reyes executed an endorsement providing that American Access would not afford any coverage under the policy to any claim or suit that occurred as the result of Reyes operating any vehicle. Finally, the policy contained a provision excluding bodily injury and property damage liability coverage for “any automobile while in control of an excluded operator.”
On October 30, 2007, Reyes drove her car and struck pedestrians Rocio and Sergio Jasso. Rocio was seriously injured. Sergio, a minor, died as a result of the injuries. Rocio and Sergio’s father sued Reyes alleging negligence. In response, American Access filed an action in which they sought a declaration that, because Reyes was driving at the time of the accident, its policy provided no coverage for and no duty to defend any claims and litigation arising therefrom. State Farm, which provided uninsured motorist coverage to the pedestrians, answered American Access’s complaint and filed a counter-complaint for declaratory judgment, asking that American Access be estopped from excluding coverage for Reyes. State Farm argued that American Access’ attempt to exclude Ana Reyes, the titleholder, payer on the insurance policy, and resident at the address of where the vehicle is garaged and located with full access to the vehicle, is contrary to law and public policy and cannot be enforced. Ana Reyes’ exclusion would result in no one insured under the policy.
The court reviewed whether the exclusion of the only named insured and automobile owner from coverage as a driver under a liability insurance policy contravenes public policy. The court reviewed Section 7-601(a) of the Illinois Safety and Family Financial Responsibility Law, which provided that “[n]o 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 designed to be used on a public highway unless the motor vehicle is covered by a liability insurance policy.” 625 ILCS 5/7- 601(a)(West 2006). The insurance mandated by section 7-601(a) must meet certain requirements, pursuant to section 7-317(b)(2) of the Safety and Family Financial Responsibility Law. The statute mandates that a liability insurance policy insure the named insured and permissive users. The principal purpose of these mandatory liability insurance requirements is to protect the public by securing payment of their damages. An insurance policy provision that conflicts with section 7-317(b)(2) violates public policy and will be deemed void.
In the policy at issue, Reyes was a sole named insured. American Access argued that, consistent with section 7-317(b)(2)’s mandate, Reyes was covered under the policy, since it provided Reyes with uninsured-motorist, bodily-injury, property damage, and medical payment coverage in the event that she was injured in an accident in which she was not the driver. However, that did not equate to liability coverage. The policy exclusion operated to deny coverage when Reyes drove the vehicle and was liable for an accident. Therefore, contrary to section 7-317(b)(2)’s mandate, the liability insurance policy did not cover the named insured. However, insurers may, without running afoul of public policy, legitimately contract to limit the scope of their coverage; but here, there was not a mere restriction or limitation on Reyes’ liability coverage: she had none. The provision constituted a full exclusion of the named insured from liability coverage, as opposed to an exclusion of coverage only in limited circumstances specified in the insurance contract. The court found the exclusion invalid because the sole named insured is not covered by liability insurance.
American Access Cas. Co. v. Reyes, 982 N.E.2d 261 (Ill. App. 2nd Dist., 2012).
