State Farm Mutual Automobile Insurance Company v. Illinois Farmers Insurance Company

State: Illinois

Docket No: 103816 Rel

Case Date: 09/20/2007

Preview:Docket No. 103816.

IN THE SUPREME COURT OF THE STATE OF ILLINOIS

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY et al. (State Farm Mutual Automobile Insurance Company, Appellant) v. ILLINOIS FARMERS INSURANCE COMPANY et al., Appellees. Opinion filed September 20, 2007.

JUSTICE KARMEIER delivered the judgment of the court, with opinion. Chief Justice Thomas and Justices Freeman, Fitzgerald, Kilbride, Garman, and Burke concurred in the judgment and opinion.

OPINION The issue in this case is whether the "step-down" provisions, which reduce the policy limits for permissive users, of several automobile liability policies issued by Illinois Farmers Insurance Company and one of it subsidiaries, Mid-Century Insurance Company (Farmers), to Illinois policyholders are void and unenforceable because they violate Illinois public policy. The trial court found the "step-down" provisions were contrary to public policy and, therefore, void and unenforceable. The appellate court found the "step-down" provisions are not contrary to public policy and reversed the trial court on this issue. 368 Ill. App. 3d 914. We granted the petition for

leave to appeal by State Farm Mutual Automobile Insurance Company. 210 Ill. 2d R. 315. For the reasons that follow, the judgment of the appellate court is affirmed in part and vacated in part, and the matter is remanded to the trial court. BACKGROUND State Farm filed its second amended complaint seeking declaratory, injunctive and monetary relief from Farmers with respect to the step-down provisions contained in Farmers' automobile liability policies issued to Illinois policyholders. The first four counts deal with money State Farm spent covering losses after Farmers invoked its step-down provisions in four separate and distinct situations, each of which is covered in one of the first four counts. Farmers' step-down provisions reduce the policy limits to the minimum liability limits required under sections 7

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