410_C123

Personal Automobile

Nonowned Autos

Subrogation

Insured Person

Permissive Use

 

AUTO DEALER CUSTOMERS COVERED UNDER THEIR PERSONAL AUTO POLICIES

Universal Underwriters Insurance Company, an automobile dealer insurer, paid collision claims for three automobile collisions involving customers who were test driving or borrowing auto dealer vehicles with permission. The claims totaled approximately $22,000. After paying the claims, Universal sought recovery from the three customers under their individual automobile insurance policies. Farmers Automobile Insurance Association, which insured the individual drivers, filed a complaint against Universal, arguing that Universal was responsible for the coverage because Farmers provided collision coverage on nonowned vehicles only on an excess basis.

The trial court originally entered judgment in favor of Farmers, but Universal filed a motion for rehearing. It argued that the trial court should not have treated permissive users as "insureds" under its policy, and that the court incorrectly interpreted the Mandatory Insurance Act to include a collision coverage requirement. The trial court agreed with Universal's arguments, reversed its earlier order, and granted Universal's motion to dismiss. Farmers appealed.

The appellate court of Illinois first addressed the question of whether the drivers were "insureds" under the Universal policy. It found they were not. The section of the Universal policy covering the type of loss caused by the accidents did not have an expansive definition of "Who is an insured," as did other sections of the policy. Because there was no expansive definition, the policy did not provide coverage for the permitted users for damages to the dealer vehicles.

The court also found that the public policy goals served by the mandatory insurance statute did not require coverage. The statute's principal purpose is to protect the public by securing payment of their damages. This purpose did not extend to requiring coverage for damage to the insured vehicle while in the control of a permissive user. This was the responsibility of the user's insurance carrier.

The court concluded that Universal was not responsible for coverage related to the collisions. The decision of the trial court was affirmed.

Farmers Automobile Insurance Association v. Universal Underwriters Insurance Company-No. 1-02-3551-Appellate Court of Illinois, First District, First Division-May 17, 2004-810 North Eastern Reporter 2d 562