Automobile Insurance Policy does not Unambiguously Exclude Coverage for Unlicensed Drivers
In Founders Ins. v. Munoz, both Founders Insurance (“Founders”) and Safeway Insurance (“Safeway”) issued automobile policies containing an exclusion that the policy did 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 was entitled to do so.
In a string of cases, the drivers involved in the various accidents giving rise to third-party claims did not have valid driver’s licenses. Founders and Safeway commenced the underlying actions seeking declarations that they had no duty to defend or indemnify the named insureds or permissive drivers. Founders and Safeway argued that none of the drivers had a reasonable belief that they were entitled to drive the insured vehicles under the policies, because they did not have valid driver’s licenses at the time of the accident. The policyholders argued that the exclusion was ambiguous.
The issue was whether the only correct interpretation of the exclusion unambiguously encompassed unlicensed drivers.
The court held that had Founders and Safeway intended to exclude coverage for unlicensed drivers, they could easily have done so in clear and explicit terms. The court found that the exclusion was susceptible of two reasonable interpretations and thus ambiguous. Since the insurers created the ambiguity, the court interpreted the policy in the light most favorable to the policyholders.
Accordingly, the court in Founders Ins. v. Munoz held that although coverage was excluded for persons using the insured vehicle without a reasonable belief that he or she was a permissive driver, the exclusion did not necessarily encompass unlicensed drivers.
Founders Ins. Co. v. Munoz, 237 Ill.2d 424, 930 N.E. 2d299 (Ill., 2010).
