FIRST DIVISION

March 17, 2003

JUSTICE McNULTY delivered the opinion of the court:

When an auto dealer allows a customer to drive one of itsvehicles and an accident results, Illinois law clearly providesthat the dealer's insurer must cover damages inflicted on thirdparties, notwithstanding any policy language to the contrary. The parties to the instant appeal ask us to decide whetherapplicable statutory and contractual principles require thedealer's insurer to defend and indemnify the driver for damagesto the dealer's car. The trial court found no such requirement,and we affirm.

Plaintiff Universal Underwriters Group, as subrogee of itsinsured, Benoy Motor Sales, filed an action in the circuit courtof Cook County alleging that on December 22, 1999, Benoy hadallowed defendant Catherine Pierson to use an automobile owned byBenoy and that Pierson had returned the car damaged. Universalsought $3,197.95 in compensation for the damage to the car. Pierson filed an answer admitting that the car was damaged in anaccident, but denying any wrongdoing. At the same time, Piersonand her insurer, American National Property and Casualty Company,filed a counterclaim for declaratory relief against Universal,seeking a determination that Pierson, as a permissive user ofBenoy's vehicle, was insured by the Universal policy coveringBenoy cars "by terms of the policy and by express operation oflaw based upon Illinois public policy."

Universal filed a motion to dismiss the counterclaim "forfailure to plead a cause of action." Universal contended thatthe language of its policy covering damage to the Benoy vehicledid not include Pierson in its definition of an insured and thatIllinois law required its coverage of Benoy to include permissiveusers only for damages suffered by third parties, not for damagesto the Benoy vehicle itself. The trial court found no basis forPierson's claims of coverage for damage to the Benoy vehicle andgranted Universal's motion, and this appeal followed.

Universal's policy covering Benoy consisted of several"Coverage Parts," each of which constituted a separate contractof insurance, according to the language of the document. Piersonclaims coverage under Part 500 of the policy, in which Universalagrees to pay damages arising out of "Garage Operations or AutoHazard." Pierson's focus on this policy section centers onlanguage that includes in the category of covered insureds thosedrivers using one of Benoy's vehicles with the dealer'spermission.

Universal's response to this claim is that Part 500 of thepolicy covers damages to the person or property of third parties,not to Benoy's own cars. We agree. The language of Part 500 ofthe policy is explicit in this respect; an "Exclusions" sectionlists numerous items that "This insurance does not apply to," andamong them is "personal property, including AUTOS, owned by,rented or leased to, used by, in the care, custody or control of,or being transported by the INSURED." Since Benoy is clearly an"insured" for purposes of this policy section, and the vehicle inquestion is an auto owned by the company, we believe that theexception precludes Pierson's claim of coverage for this incidentunder Part 500.

A different policy section, Part 300, "Auto Inventory,"contains terms that are more clearly applicable to the type ofloss incurred as a result of Pierson's accident: "We will pay forLOSS of or to a COVERED AUTO from any cause *** ." Part 300 doesnot contain an exclusion of the sort that removed Pierson'saccident from the coverage of Part 500.

However, Part 300, while covering the type of loss caused byPierson's accident, lacks Part 500's expansive definition of "Whois an insured." This section's protections include only Benoyand its "partners, paid employees, directors, executive officersand stockholders," and does not include others driving a vehiclewith Benoy's permission.

The Universal-Benoy policy's terms thus provide coverage forthe dealer's permitted users for damages sought by injured thirdparties, and compensation for the dealer for loss to its car, butdo not cover the permitted user for damages to the dealer car shedrove.

Pierson contends that Illinois public policy overrides theexplicit language of the insurance contract and requires that shebe protected for the loss to the Benoy vehicle. In support ofthis contention, she cites Illinois' mandatory insurance law (625ILCS 5/7-601 (West 1998)) and various precedents interpreting anddefining the extent to which that statute imposes coverageresponsibility on the insurer of an auto dealer: Browning v.Plumlee, 316 Ill. App. 3d 738 (2000); Country Mutual InsuranceCo. v. Universal Underwriters Insurance Co., 316 Ill. App. 3d 161(2000); State Farm Mutual Automobile Insurance Co. v. UniversalUnderwriters Group, 182 Ill. 2d 240 (1998); UniversalUnderwriters Insurance Group v. Griffin, 287 Ill. App. 3d 61(1997); Madison Mutual Insurance Co. v. Universal UnderwritersGroup, 251 Ill. App. 3d 13 (1993); and Pekin Insurance Co. v.State Farm Mutual Automobile Insurance Co., 305 Ill. App. 3d 417(1999). Pierson argues that the statute and cases stand for theproposition that Illinois public policy "in favor of permissivedrivers" requires that she receive coverage under Benoy'sinsurance policy. This argument ignores a crucial element of themandatory insurance statute: it requires vehicle owners toprovide "liability" insurance. 625 ILCS 5/7-601 (West 1998).

Courts and legal commentators have reached widespreadconsensus on the meaning of the term "liability" insurance:"Since the liability policy is, by definition, one of liabilityto others, and not for personal or property damages sustained bythe named insured, there can be no coverage of loss sustained byhim or her to his or her person or his or her property when he orshe is operating the insured vehicle." 7 L. Russ & T. Segalla, Couch on Insurance,