The Illinois appellate court recently held that the provision of the Illinois Vehicle Code requiring insurance coverage for the named insured as well as any permissive user of a vehicle, applies to all liability insurance policies, including policies issued to commercial truckers. In Zurich American Co. v. Key Cartage, Inc., 896 N.E.2d 400, 2008 Ill. App. LEXIS 957 (2008), the insurance carrier of the lessor of a truck denied coverage to a driver and his employee who were given permission to use the truck by the lessee company, because the insurance policy of the driver and his employee did not provide reciprocal coverage to the lessor or lessee companies. The court found this was not a valid reason to deny coverage and ruled that such a denial violated the Illinois law that generally requires a vehicle owner’s insurance to also cover any driver using the vehicle with the owner’s permission. This law is also known as the “omnibus coverage mandate.” The court declared it was the public policy of Illinois for commercial truckers to be subject to this omnibus coverage mandate.
The dispute arose out of a motor vehicle accident in which decedent was fatally injured in a collision with a tractor trailer driven by Terry Washington. Washington was employed by Key Cartage, Inc. Key was part of a family business that involved several trucking companies and numerous vehicles. The companies included, in addition to Key, Rose Cartage Services, Inc. and Franklin Truck Group, Inc. The opinion goes into detail regarding which company owned what tractor or trailer. Suffice it to say that driver Washington was employed by Key and the truck involved in the accident was owned by Franklin, and Rose leased the truck from Franklin. At the time of the accident, the driver’s employer was hauling garbage for another entity under an oral contract. The driver had been hired two weeks before the accident.
Pursuant to the lease agreement, the truck owner agreed to obtain certain insurance and to hold the company that leased the truck harmless from loss or damage resulting from the negligence, incompetence or dishonesty of its operating personnel supplied to the company that leased the truck. However, neither of the insurance policies at issue in the case was issued to the truck owner. The truck was listed as an insured vehicle on a Zurich policy issued to the company that leased the truck. The driver’s employer was insured by West Bend, but the truck itself was not listed on that policy. The issue in the coverage dispute was which insurer owed coverage, and which insurer had to pay first, before the policy of the other came into play.
The decedent’s estate filed a wrongful death action against the driver, his employer, and the company that leased the truck. The action was later amended to add the truck owner. Zurich defended the truck owner and the company that leased the truck under its policy issued to the company that leased the truck. Zurich filed a declaratory judgment action seeking a ruling that there was no coverage for the driver or his employer because their insurance policies did not also provide insurance for the company that leased the truck. West Bend, which insured the driver’s employer, argued that as long as the driver had permission to drive the truck, the insurance of the company that leased the truck for the driver to drive also covered the driver.
The lower court ruled that Zurich, which insured the company that leased the truck, could refuse to cover even a driver with permission (and that driver’s employer) unless the insurance policies of the driver and his employer also provided coverage to the company that leased the truck. West Bend, the driver’s employer, the driver and the decedent’s estate appealed those rulings.
In the appeal, Zurich argued it wasn’t subject to the omnibus coverage requirement that required an insurance company to extend coverage to any driver using an insured vehicle with permission from the insured. The appellate court examined several decisions in which the Illinois Supreme Court determined whether the omnibus coverage requirement applied to other types of insurance, such as policies covering potential customers taking vehicles for test drives, policies that excluded pizza delivery drivers, and policies that provided coverage to valet parkers. The appellate court concluded that an insurance company violates Illinois pubic policy if it provides coverage to its named insured but denies coverage to an express or implied insured, such as a different driver who had the insured’s permission to use the vehicle. The court found this extended to commercial truckers who were using someone else’s truck with permission.
This case means that all automobile insurance policies, including those issued to commercial truckers, which are subject to the Illinois Vehicle Code, will be read as providing coverage for permissive users of the insured vehicle. An insurer may limit that coverage as long as the policy provides the minimum coverage required by statute. An insurer may also exclude coverage for a permissive user as long as the provision would also exclude coverage for the named insured under the same circumstance. However, an insurer will not be able to preclude coverage for a permissive user of a vehicle where it would provide coverage for the named insured under the policy.
