Omnibus Provisions in Automobile Insurance Policies do not Apply to Rental Vehicles and to Named Insured’s Owned Vehicles

In State Farm v. Enterprise Leasing, a person rented a Land Rover from Enterprise. The renter held an automobile insurance policy with State Farm for her Cavalier, and no additional insureds or insured vehicles were listed on the policy.  The renter allowed another person to drive the rented vehicle and an accident occurred.  State Farm denied coverage because the renter was not driving or occupying the rental car at the time of the accident.

Enterprise filed suit against the renter and the unauthorized driver. State Farm appeared while reserving its right to deny coverage.  Enterprise asserted that the omnibus clause in the State Farm policy applied because the unauthorized driver drove the vehicle with the renter’s permission. Enterprise also asserted that the Illinois Safety and Family Financial Responsibility Law, listing the requirements of an owner’s policy, required State Farm to provide coverage for the damage to the rental car.

The court in State Farm v. Enterprise had to decide whether to extend the omnibus clause to include a rental vehicle, in addition to the named insured’s owned vehicles.

The court held that the Financial Responsibility Law clearly stated that it applied to “any motor vehicle owned by the named insured,” and the rental vehicle was not owned by the renter. Further, the court held that certain types of vehicles are exempt from the mandatory insurance requirements of that law, specifically rental vehicles. Thus, the court held that the omnibus provision did not apply, and State Farm had no duty to defend or indemnify.

State Farm Mutual Auto. Ins. Co. v. Enterprise Leasing Co. of Chicago, 386 Ill.App.3d 945, 899 N.E.2d 408 (Ill.App. 1 Dist., 2008).