No. 2--03--0419

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT

JUSTICE BOWMAN delivered the opinion of the court:

Defendant, Liberty Mutual Fire Insurance Company (Liberty Mutual), appeals from the trialcourt's order granting the motion for summary judgment by plaintiff, Progressive Universal InsuranceCompany of Illinois (Progressive), and denying Liberty Mutual's cross-motion for summary judgment. Progressive obtained a declaration that, pursuant to an exclusion in its insurance policy, it had no dutyto defend or indemnify Ronald Abbinante, the son of its policyholder, Shirley Abbinante, in anunderlying action (Lavit v. Abbinante, No. 01--L--0802 (Cir. Ct. Du Page County)). On appeal,Liberty Mutual argues that the policy exclusion is ambiguous and against the public policy expressedin section 7--317(b)(2) of the Illinois Vehicle Code (625 ILCS 5/7--317(b)(2) (West 2000)). Weagree with Liberty Mutual's latter argument, and we therefore reverse the trial court's decision.

On August 25, 2000, Ronald was using Shirley's car to deliver pizzas for Casale Pizza, Inc.,when he hit a pedestrian, Mikhail Lavit. Lavit and his wife sued Ronald and Casale Pizza, claimingthat Lavit had suffered brain and spinal cord injuries. Progressive began defending Ronald under areservation of rights and denied that it was required to indemnify him. The Lavits then sought andobtained the $100,000 limit of their uninsured motorist coverage with Liberty Mutual. LibertyMutual demanded reimbursement from Progressive. In response, Progressive filed a declaratoryjudgment action seeking a declaration that it had no duty to defend or indemnify Ronald in the Lavits'suit. Liberty Mutual, as the Lavits' subrogee, filed a counterclaim against Progressive forreimbursement of the uninsured motorist coverage. Progressive moved for summary judgment,arguing for the application of a policy provision that stated as follows, under the heading, "PART I -LIABILITY TO OTHERS":

"EXCLUSIONS - READ THE FOLLOWING EXCLUSIONS CAREFULLY. IFAN EXCLUSION APPLIES, COVERAGE WILL NOT BE AFFORDED UNDER THISPART I.

Coverage under this Part I, including our duty to defend, does not apply to:

1. bodily injury or property damage arising out of the ownership, maintenance, or use of a vehicle while being used to carry persons or property forcompensation or a fee, including, but not limited to, delivery of magazines,newspapers, food, or any other products. This exclusion does not apply to share-expense car pools." (Emphasis in original.)

Ronald testified in a deposition that Casale Pizza paid him $1.25 per delivery.

Liberty Mutual filed a cross-motion for summary judgment, arguing that Progressive's fooddelivery exclusion was ambiguous and contrary to public policy. The trial court granted Progressive'smotion and denied Liberty Mutual's motion. Liberty Mutual timely appealed. Ronald and CasalePizza are not parties to this appeal.

Summary judgment is appropriate where the pleadings, depositions, admissions, and affidavitson file, when viewed in the light most favorable to the nonmoving party, show that there is no genuineissue of material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2--1005(c) (West 2002); General Casualty Insurance Co. v. Lacey, 199 Ill. 2d 281, 284 (2002). Theconstruction of an insurance policy provision is a question of law that can be properly decided on amotion for summary judgment. Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill.2d 384, 391 (1993). We review a grant of summary judgment de novo. General Casualty InsuranceCo., 199 Ill. 2d at 284.

Liberty Mutual argues that Progressive must defend and indemnify Ronald because the policyexclusion is ambiguous and against public policy. An insurer's duty to defend its insured is muchbroader than its duty to indemnify. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90, 125 (1992). If the allegations of the underlying complaint, when liberally construed in favorof the insured, potentially fall within a policy's coverage, the insurer has a duty to defend the insuredagainst the underlying complaint. Outboard Marine Corp., 154 Ill. 2d at 125. The duty to indemnifyarises only if the insured's activity and the resulting loss or damage actually fall within a policy'scoverage. Outboard Marine Corp., 154 Ill. 2d at 128. The insurer has the burden of establishing thata claim falls within a provision that limits or excludes coverage. Sears Roebuck & Co. v. AcceptanceInsurance Co., 342 Ill. App. 3d 167, 172 (2003).

We first examine whether the food delivery exclusion is ambiguous. If the words in the policyare unambiguous, a court must afford them their plain, ordinary, and popular meaning. OutboardMarine Corp., 154 Ill. 2d at 108. However, insurance policies are to be liberally construed in favorof coverage, and if the words in the policy are susceptible to more than one reasonable interpretation, they are ambiguous and will be construed in favor of the insured and against the insurer who draftedthe policy. State Security Insurance Co. v. Burgos, 145 Ill. 2d 423, 438 (1991). This is especiallytrue for ambiguities that appear in exclusionary clauses. Outboard Marine Corp., 154 Ill. 2d at 121.Still, courts should not exercise their inventive powers to create an ambiguity where none exists. American Standard Insurance Co. v. Allstate Insurance Co., 210 Ill. App. 3d 443, 447 (1991). In determining if there is an ambiguity, we must read an insurance policy provision with reference to thefacts of the case at hand, rather than in isolation. American Family Mutual Insurance Co. v. Hinde,302 Ill. App. 3d 227, 232 (1999).

Liberty Mutual cites Cincinnati Insurance Co. v. West American Insurance Co., 112 F. Supp.2d 718 (C.D. Ill. 2000). There, a postal carrier was using his own vehicle to deliver mail along a ruralroute when he was involved in a car accident. Cincinnati Insurance Co., 112 F. Supp. 2d at 719. Hisinsurance policy excluded coverage of injury from the operation of "a vehicle while it is being usedto carry persons or property for a fee." Cincinnati Insurance Co., 112 F. Supp. 2d at 721. The postalcarrier's compensation for mail delivery was based on the round trip mileage of the postal route andthe number of delivery points on that route. The court held that under Illinois law, the clause wasambiguous because the mail was not carried "for a fee" in accordance with the meaning of theprovision. Cincinnati Insurance Co., 112 F. Supp. 2d at 722-23. Liberty Mutual contends thatProgressive's exclusion should similarly be held to be ambiguous.

However, as Progressive points out, the Cincinnati Insurance Co. court decided that theclause was ambiguous in reference to the facts of that case. Cincinnati Insurance Co., 112 F. Supp.2d at 723; see also, Annotation, R. Sutton, What Constitutes Use of Automobile "to Carry Personsor Property for Fee" within Exclusion of Automobile Insurance Policy, 57 A.L.R.5th 591 (1998)(various jurisdictions have found similar exclusionary clauses to be both ambiguous and unambiguous,depending upon the facts of the cases). Here, Progressive's exclusion applies to deliveries made fora fee or compensation and further specifies that it includes, but is not limited to, the "delivery ofmagazines, newspapers, food, or any other products." Thus, the exclusion is broader and moredetailed than the clause at issue in Cincinnati Insurance Co. Additionally, the parties do not disputethat Ronald was delivering pizzas when the accident occurred, nor do they dispute that Casale Pizzapaid him $1.25 for each pizza that he delivered. Clearly, Ronald was delivering food when theaccident took place, and the $1.25 he received for each delivery was either a fee or compensation. Therefore, we hold that, as applied to the facts in this case, the exclusion is not ambiguous.

We next examine whether the exclusion is contrary to public policy. Liberty Mutual arguesthat the exclusion is void because it conflicts with section 7--317(b)(2) of the Illinois Vehicle Code(625 ILCS 5/7--317(b)(2) (West 2000)). That section states that a motor vehicle liability policy"[s]hall insure the person named therein and any other person using or responsible for the use of suchmotor vehicle or vehicles with the express or implied permission of the insured." 625 ILCS 5/7--317(b)(2) (West 2000). This type of coverage is commonly referred to as "omnibus coverage." StateFarm Mutual Automobile Insurance Co. v. Hertz Claim Management Corp., 338 Ill. App. 3d 712,716 (2003). The supreme court has stated that section 7--317(b)(2), coupled with Illinois'smandatory insurance law (625 ILCS 5/7--601(a) (West 2000)), requires that "a liability insurancepolicy issued to the owner of a vehicle must cover the named insured and any other person using thevehicle with the named insured's permission." State Farm Mutual Automobile Insurance Co. v.Universal Underwriters Group, 182 Ill. 2d 240, 244 (1998). Liberty Mutual maintains that sinceRonald was a permissive driver, Progressive's liability insurance policy was required to cover him forthe accident.

Liberty Mutual cites State Farm Mutual Automobile Insurance Co. v. Smith, 197 Ill. 2d 369(2001). There, the supreme court held that an automobile business exclusion in an insurance policyviolated public policy because it conflicted with section 7--317(b)(2). Smith, 197 Ill. 2d at 374. Theexclusion denied coverage when the vehicle was being repaired, serviced, or used by anyoneemployed or engaged in an automobile business. The supreme court stated:

"When a vehicle owner gives his vehicle to a person engaged in an automobile business, theowner is also giving that person the express or implied permission to use the vehicle. Therefore, a provision written into an insurance policy that excludes coverage for personsengaged in an automobile business necessarily excludes coverage for persons who are usingan insured's vehicle with the insured's express or implied permission. The exclusion thusviolates section 7--317(b)(2) of the Illinois Vehicle Code. As stated, an insurance policyprovision which conflicts with a statute is void." Smith, 197 Ill. 2d at 374.

The supreme court stated that the principal purpose of mandatory automobile liability insurance isto protect the public by securing payment of its damages. Smith, 197 Ill. 2d at 376. It further statedthat it was expressing no opinion as to whether any other exclusions would be valid. Smith, 197 Ill.2d at 379.

Since Smith was decided, the appellate court has validated at least one exclusion. In St. PaulFire & Marine Insurance Co. v. Smith, 337 Ill. App. 3d 1054, 1060 (2003), the appellate court heldthat the legislature intended to created a limited exception for named driver exclusions. In arrivingat its conclusion, the court noted that section 7--602 of the Illinois Vehicle Code (625 ILCS 5/7--602(West 2002)), which pertains to insurance cards, recognizes that insurance policies may excludenamed drivers from coverage. St. Paul Fire & Marine Insurance Co., 337 Ill. App. 3d at 1059-60.

We agree with Liberty Mutual that the exclusion at issue violates public policy. Shirley gaveRonald her express permission to use the vehicle. Under the omnibus coverage mandated by section7--317(b)(2), Shirley's liability policy was required to cover him. The impetus behind mandatoryautomobile liability insurance is to protect the public by assuring that its damages will be paid (Smith,197 Ill. 2d at 376), and Progressive's food delivery exclusion contravenes that goal. Unlike in St.Paul Fire & Marine Insurance Co., there is no evidence that the legislature intended to allow such anexclusion. Therefore, the exclusion conflicts with the coverage required by the statute. Statutes arean expression of public policy, and an insurance policy provision that conflicts with a statute is void. Smith, 197 Ill. 2d at 372. Accordingly, Progressive may not rely on the exclusion to deny Ronaldliability coverage but instead must defend and indemnify him. We note that our holding is limited torequiring liability coverage and does not extend to coverage for damages to the insured vehicle. SeeUniversal Underwriters Group v. Pierson, 337 Ill. App. 3d 893, 897 (2003) (public policy requiresthat injured third party be covered by car owner's insurance policy, but coverage not required fordamages to the insured vehicle while driven by permissive user).

We also note that our holding is consistent with holdings in other jurisdictions that haveexamined this issue. In Stanfel v. Shelton, 563 So. 2d 410, 413 (La. App. 1990), the insured's policycontained an exclusion denying coverage if the vehicle was used to carry persons or property for afee, or used in the course of employment. Stanfel, 563 So. 2d at 413. The insured's son was usingthe car to deliver pizzas when an accident occurred. Stanfel, 563 So. 2d at 411. The court held thatthe exclusion was invalid because it conflicted with a statute requiring insurance coverage for allpermissive drivers. Stanfel, 563 So. 2d at 413; see also St. Paul Fire & Marine Insurance Co. v. Mid-Century Insurance Corp., 18 P.3d 854, 856 (Colo. App. 2001) (business delivery exclusion invalidbecause it conflicted with statute requiring coverage for permissive users).

Progressive argues that Smith is distinguishable from this case because the automobilebusiness exclusion barred coverage for a certain class of people, whereas Progressive's policyexcludes coverage for only certain activities. Progressive maintains that a permissive user is governedby the same policy exclusions that apply to the named insured. However, Progressive has not citedany authority for this argument, nor has our research revealed any. Furthermore, Progressive'sexclusion could be interpreted as barring coverage for all drivers engaged in a delivery business, justas Smith involved an exclusion denying coverage for all drivers engaged in an automobile business. We hold that Progressive's exclusion is void as to permissive users because it conflicts with section7--317(b)(2). As previously stated, the public policy behind the statute is to allow the public torecover its damages, and such an exclusion contravenes this goal.

Progressive also maintains that if all exclusions for permissive users are prohibited, it couldbe liable for intentional criminal acts by such drivers. This contention is of limited merit because, asa general rule, it is against public policy to indemnify for intentional misconduct. Lincoln LoganMutual Insurance Co. v. Fornshell, 309 Ill. App. 3d 479, 483 (1999). Furthermore, our decisionrelates only to the exclusion at issue here. We do not address whether other exclusions for permissiveusers would be valid.

For the foregoing reasons, we reverse the judgment of the circuit court of Du Page County. Our decision results in a grant of summary judgment in favor of Liberty Mutual.

Reversed.

HUTCHINSON and GILLERAN JOHNSON, JJ., concur.