The Illinois Supreme Court has determined the “named driver exclusion” contained in uninsured/ underinsured motorist (UM/UIM) auto insurance policies is invalid for violation of the state’s mandatory insurance requirements and public policy where the exclusion bars coverage for the named insured. Unfortunately, the exclusion still stands for motorists in Florida.
The named driver exclusion (also sometimes referred to as the “designated persons coverage exclusion”) can make it very difficult for certain plaintiffs to obtain insurance coverage for their injuries. In general, it is an endorsement added to an insurance policy stating that a specifically named individual with access to your insured vehicle will NOT be covered by the insurance provider to drive the insured vehicle. That means the vehicle’s liability insurance or UM/UIM coverage will not cover a crash if that driver is operating the insured car. Instead, what usually happens is the driver and the owner of the vehicle who allowed that excluded individual form the policy CAN be held liable for damages the at-fault driver caused.
You can see where this would create major problems, not just for the excluded driver, but the insured who allowed that driver behind the wheel and anyone else involved in a crash with them. Pursuing a claim for damages directly against those involved – without insurance coverage – is a tall task because even if you win, there may be slim chances you’ll actually collect those damages. It can leave innocent motorists without remedy for their injuries.
In the case before the Illinois Supreme Court, a big-name auto insurer issued two policies of motor vehicle insurance to plaintiff, one for a 1998 model vehicle and another for a 2004 model vehicle. Each policy provided liability, uninsured/ underinsured motorist coverage for $100,000/ person and $300,000/ crash. Both policies also contained a “Driver Exclusion Endorsement” excluding a certain individual.
In June 2012, plaintiff was a passenger in a 2007 model vehicle owned and operated by that named excluded driver, who was-at fault in a crash with another vehicle. Plaintiff was injured (incurring more than $30,000 in damages) and sought damages against that driver’s own insurer for her injuries. His insurer paid the $20,000 policy limit. Plaintiff then sought underinsured motorist coverage from her own UM/UIM carrier. However, that carrier denied the claim based on that driver exclusion endorsement.
Plaintiff sought a declaration from circuit court that she was entitled to UIM coverage under her own auto insurer’s policy. Although the at-fault driver was excluded under her policy, she asserted that state insurance law requiring all policies to provide UIM coverage to named insurers, as well as state public policy, meant that her insurer was mandated to provide her with the coverage for which she had paid. Her auto insurer sought its own declaratory judgment, and filed a counterclaim, citing its policy language that coverage was excluded for damages incurred while any motor vehicle was operated by this particular driver. The court ordered both parties to file for summary judgment, which they did. The insurer’s was denied, while plaintiff’s was granted.
Insurer appealed, arguing the driver exclusion endorsement violated neither state law or public policy. The appellate court affirmed, as did eventually the state high court.
In its ruling, the Illinois Supreme Court agreed with the appellate court: That the named driver exclusion violated the state’s mandatory insurance requirements and public policy where this particular exclusion prohibited coverage for the named insured. None of the cases cited by either party had addressed this exact issue before, but a 2013 case was instructive. In that case, the state high court had ruled that an insured could not be excluded from coverage via a contractual provision of his auto insurance policy because it violated the state’s mandatory insurance requirements. The same principle was applied here.
The court noted that while in general, named driver exclusions are permitted in the state and that, in this case, the insurer was entitled to identify this particular person as one for whom it would not provide coverage. However, that individual was not the one seeking coverage from either of the policies. Rather, it was its own insured who was trying to collect from policies she purchased for herself. She had no control over the amount of liability coverage the at-fault driver in this matter purchased for his own vehicle or the fact that his coverage for her injuries was inadequate. The insurer argued it was plaintiff’s choice to ride as a passenger in the excluded driver’s vehicle with him as the motorist. But the courts held that while insurers have a right to stipulate who they will allow to be “insureds,” once a person qualifies as an insured, they must be treated as such for all purposes – including UM/UIM coverage, and they cannot offer below the statutory minimum. All parties agreed plaintiff was an insured, which meant the insurer was prohibited from directly or indirectly denying her UIM benefits.
As our car accident attorneys in West Palm Beach know, this ruling has no direct bearing on Florida cases, but state supreme courts will often look to the legal reasoning of sister courts when confronting the same or similar issues, so it’s worth noting the change in policy.
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Thounsavath v. State Farm Mutual Automobile Insurance Co., March 22, 2018, Illinois Supreme Court
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