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Illinois Appellate Court Rules Policy Exclusion Clause Does Not Apply: Insurer Had Duty to Defend and Indemnify

August 30, 2022

This blog post was written by HeplerBroom Summer Associate Jocelyn Andersson. A supervising partner also contributed to the post.

In Illinois Farmers Insurance Co. v. Godwin, the insured was in a car accident while driving his father’s car. Defendant Farmers denied coverage, arguing that the insurance policy’s exclusion clause applied because insured’s father’s car was not listed on the relevant insurance policy and either insured’s father was a member of insured’s household or he provided his car to insured for regular use.  The Illinois Appellate Court for the Third District found that insured’s father was not a resident of insured’s household and the vehicle was not regularly available for insured’s use. (The insured only had access to the vehicle when he was living with his father and his father was not using the vehicle. Furthermore, the insured had to make a reasonable request for permission to use the vehicle.) Therefore, the exclusions did not apply and insurer had a duty to defend and indemnify insured driver.

Case Background

Coalton Godwin and Jarred Pai were driving home from a backpacking trip when they were involved in a single-car accident that took Jarred’s life. Illinois Farmers Insurance Company v. Godwin, 2022 IL App (3d) 210001, ¶ 1. The driver, Coalton, was insured through Illinois Farmers Insurance Company (“Farmers”) but the car he was driving, his father’s Jeep Grand Cherokee, was not on the Farmers insurance policy. Godwin, 2022 IL App (3d) 210001, ¶4. Coalton’s mother, Kellie, and his father, Bruce, were divorced and living separately. Id. at ¶ 8. Coalton resided with each parent on a regular, alternating basis. Id.

Coalton and Kellie purchased an insurance policy with Farmers before the accident in which they, along with Coalton’s grandmother, were listed as “your household drivers.” Id. at ¶ 4. Coalton and his mother were named as insureds. Id. The address on the policy was Coalton and Kellie’s residential address. Id. Coalton owned a Jeep Wrangler that was covered under the insurance policy and used it as his primary vehicle. Id. at ¶ 4, 8. When Coalton lived with Bruce, he was allowed to use the Grand Cherokee, as long as it was available and Coalton received Bruce’s permission. Id. at ¶ 8. Coalton used the Grand Cherokee approximately once per week. Id.

The dispute before the Rock Island County Circuit Court arose out of an exclusion clause in the insurance policy that stated: “This coverage does not apply to . . . [b]odily injury or property damage arising out of the ownership, maintenance or use of any vehicle other than your insured car, which is owned by or furnished or available for regular use by you or a family member.” Id. at ¶ 4. The contract defined “family member” as “a person related to . . . an insured by blood, marriage or adoption who is a resident of . . . [the insured’s] household.” Id.

Farmers argued that Bruce met the definition of “family member” because he was Coalton’s father and a resident of Coalton’s household. Id. at ¶ 9. They also argued that Bruce’s Grand Cherokee was available for regular use by Coalton. Id. As such, the “Grand Cherokee was excluded from liability coverage” and Farmers “had no duty to defend or indemnify Coalton in the underlying case.” Id.

Jarred’s estate argued that Bruce was not a resident of Coalton’s household because the relevant household was only that of Coalton and Kellie. Id. at ¶ 10. Also, they argued that the Grand Cherokee was not available for Coalton’s regular use because it “was subject to extensive limitation in both time and scope of use,” as it “was primarily driven by another resident of Bruce’s household” and at least half of the time, Coalton had no access to it because he was not residing with Bruce. Id.

The circuit court agreed with Jarred’s estate, finding that coverage applied and Farmers had a duty to defend and indemnify Coalton under the policy. Id. at ¶ 13, 14. The circuit court found that because Coalton was in privity of contract with Farmers, the focus should be on Coalton’s household. Id. at ¶ 13. Bruce did not reside at the address on the policy and was not even listed as a household driver. Id. at ¶ 13. Thus, “Bruce was not a resident of Coalton’s household.” Id. Regarding the “regular use” of the Grand Cherokee, the circuit court found significant that “[a] spare key was kept at Bruce’s home for other drivers” and Coalton only “occasionally used the [] Grand Cherokee ‘to run errands and transport his siblings.’” Id. Also, on the date of the accident, Coalton had express permission from Bruce to use the Grand Cherokee because it was better equipped for travel than Coalton’s Wrangler. Id. at ¶ 14. The circuit court held that these “occasional uses of the [] Grand Cherokee were ‘for a specific purpose or task and at the direction or with the explicit permission of Bruce.’” Id. Therefore, the policy exclusion did not apply and Farmers had a duty to defend and indemnify Coalton in the underlying case. Id. at ¶ 15. Farmers appealed.

Appellate Court Ruling

The Third District began their analysis by noting that the insurance policy clearly provided liability coverage “arising out of . . . Coalton’s use of a private passenger car” but that there were two instances relevant to the situation where coverage would be denied. Id. at ¶ 20 (emphasis omitted). Thus, the court divided their analysis of the exclusion clause into two inquiries: (1) whether the damage arose out of Coalton’s use of a vehicle other than his insured car ‘which [was] owned by or furnished . . . by . . . a family member’” and; (2) whether the “Grand Cherokee was ‘available for regular use by’ Coalton.” Id. at ¶¶ 20, 22.

Regarding the first inquiry, the Third District noted that the policy specified that a “family member” must be “a resident of . . . Coalton’s household.” Id. at ¶ 20. The court noted that “resident of household” has no fixed meaning and “requires a case-by-case analysis of the intent, physical presence, and permanency of abode of the person in question.” Id. (citing State Farm Fire & Casualty Co. v. Martinez, 384 Ill. App. 3d 494, 499-500, (2008)). Intent, as manifested by the person’s actions, was ultimately the controlling factor. Id. (citing Martinez, 384 Ill. App. at 500).

The Third District concluded “that Bruce was not a resident of Coalton’s household.” Id. at ¶ 21. Neither Bruce nor his address were listed anywhere on the policy, despite Coalton spending about half of his time there. Id. Only Coalton, Kellie, and Coalton’s grandmother were named in the policy, and only Kellie’s address was listed. Id. The Third District concluded from this that the intention of the parties in privity with Farmers was to provide coverage to the named insureds and those family members residing at the listed address. Id. Bruce did not have a “physical presence” at the listed address—nor did he have any intention of residing there. Id. Therefore, Bruce’s ownership of the Grand Cherokee and his furnishing of it to Coalton did not trigger the exclusion provision. Id.

Regarding the second inquiry, the Third District concluded that the “Grand Cherokee was not ‘available for regular use by Coalton.’” Id. at ¶ 22. The Third District noted that, like the term “resident of household,” “regular use” must be determined on a case-by-case basis. Id. at ¶ 23. They also specified that it was the availability of use, not actual use, that mattered. Id. They reasoned that provisions excluding from liability vehicles that are driven regularly are generally put in place to prevent the situation where an insured could buy an insurance policy for a single vehicle and subsequently obtain coverage on any and all other vehicles regularly driven by the insured. Id. at ¶ 24.

However, in this case, the Grand Cherokee was only available to Coalton when Bruce was not using it. Id. at ¶ 25. Coalton’s use was further restricted because he was only allowed to use the Grand Cherokee when he resided with Bruce, and then only upon Bruce’s approval of a reasonable request by Coalton. Id. The Third District noted that Coalton’s actual use was only about once per week. Id. Therefore, Coalton’s use of the Grand Cherokee “was not so frequent, habitual, or of a principal nature to be deemed ‘regular’ as a matter of law.” Id. at ¶ 26.

Because Bruce was not a resident of Coalton’s household and the Grand Cherokee was not regularly available to Coalton, Coalton’s use of Bruce’s Grand Cherokee on the day of the accident was not excluded from coverage under the Farmers insurance policy. Id. at ¶¶ 21, 22. Therefore, the Third District affirmed the circuit court’s order granting summary judgment to the Estate of Jarred Pai and held that Farmers had a duty to defend and indemnify Coalton. Id.

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