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

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 7–203 and 7–317(b) of the Illinois Safety and

Family Financial Responsibility Law (625 ILCS 5/7–203, 7–317(b)

(West 2002)) when the insured’s vehicle is being operated by a

permissive user who is neither a family member residing in the

insured’s household or a listed driver. Section 7–203 and section

7–317(b)(3) require every liability insurance policy issued to provide

coverage not less than $20,000 for the death or bodily injury of any

one person, $40,000 for the death or bodily injury of two or more

persons, and $15,000 for property damage occurring in any one motor

vehicle accident. 625 ILCS 5/7–203, 7–317(b)(3) (West 2002).

Farmers filed a motion to dismiss counts I through IV of State

Farm’s complaint, arguing that the step-down provisions contained in

its policies are clear and unambiguous and that the reimbursement

sought by State Farm is an impermissible direct action. In response,

State Farm filed a motion for partial summary judgment on counts I

through IV, arguing that the step-down provisions in Farmers’ polices

were contrary to Illinois public policy and therefore void and

unenforceable. The trial court denied Farmers’ motion to dismiss,

granted State Farm’s motion for partial summary judgment as to

counts I through IV of the complaint on the public policy issue only,

made a written finding there was no just reason to delay the

enforcement or appeal or both of the order granting State Farm’s

motion for partial summary judgment pursuant to Supreme Court Rule

304(a) (210 Ill. 2d R. 304(a)), and stayed all proceedings pending the

resolution of the public policy issue on appeal.

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On appeal, in addition to briefing the public policy issue, Farmers

briefed the ambiguity and direct action issues raised in the trial court

in its motion to dismiss. State Farm moved to strike the ambiguity and

direct action issues from Farmer’s brief, arguing that the trial court’s

Rule 304(a) finding was specifically limited to the public policy issue.

The appellate court denied State Farm’s motion to strike holding that

the ambiguity and direct action issues were properly before that court.

After the appellate court found Farmers’ step-down provisions are

not contrary to Illinois public policy and are enforceable, it reversed

the trial court’s order granting the motion for partial summary

judgment and remanded the cause for further proceedings. 368 Ill.

App. 3d at 927. Additionally, the appellate court found that State

Farm’s actions against Farmers were not impermissible direct actions

under Illinois law and that Farmers’ step-down provisions were clear

and unambiguous as a matter of law. 368 Ill. App. 3d at 921-22. We

granted State Farm’s petition for leave to appeal (210 Ill. 2d R. 315).

In addition, we allowed the Illinois Trial Lawyers Association to file

an amicus curiae brief in support of State Farm.

ANALYSIS

Standard of Review

Summary judgment is proper where the pleadings, depositions,

admissions, and affidavits on file, viewed in the light most favorable

to the nonmoving party, reveal that there is no genuine issue as to any

material fact and the moving party is entitled to a judgment as a matter

of law. Progressive Universal Insurance Co. of Illinois v. Liberty

Mutual Fire Insurance Co., 215 Ill. 2d 121, 127-28 (2005). Whether

summary judgment was appropriate is a matter we review de novo.

General Casualty Insurance Co. v. Lacey, 199 Ill. 2d 281, 284

(2002). In addition, the construction of provisions contained in an

insurance policy is a question of law reviewed de novo. Travelers

Insurance Co. v. Eljer Manufacturing, Inc., 197 Ill. 2d 278, 292

(2001), citing American States Insurance Co. v. Koloms, 177 Ill. 2d

473, 479-80 (1997).

Public Policy

State Farm argues that the step-down provisions contained in

Farmer’s policies violate Illinois’ public policy and are therefore void

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and unenforceable. The terms contained in an insurance policy will be

applied as written unless those terms are contrary to public policy.

Illinois Farmers Insurance Co. v. Cisco, 178 Ill. 2d 386, 392 (1997);

Menke v. Country Mutual Insurance Co., 78 Ill. 2d 420, 423 (1980).

The public policy of this state is reflected in its constitution, statutes,

and judicial decisions. O’Hara v. Ahlgren, Blumenfeld & Kempster,

127 Ill. 2d 333, 341 (1989); McClure Engineering Associates, Inc. v.

Reuben H. Donnelley Corp., 95 Ill. 2d 68, 72 (1983). Terms of an

insurance policy that conflict with a statute are void. State Farm

Mutual Automobile Insurance Co. v. Smith, 197 Ill. 2d 369, 372

(2001); Cisco, 178 Ill. 2d at 392. Additionally, terms of an insurance

policy cannot circumvent the underlying purpose of a statute in force

at the time of the policy’s issuance. State Farm Mutual Automobile

Insurance Co. v. Smith, 197 Ill. 2d 369, 372 (2001); Cummins v.

Country Mutual Insurance Co., 178 Ill. 2d 474, 483 (1997).

We are guided by established principles of statutory construction

in determining whether the legislative mandates of this state are

violated by Farmers’ step-down provisions. The cardinal rule of

statutory construction, and the one to which all other cannons and

rules must yield, is to ascertain and give effect to the true intent and

meaning of the legislature. Progressive Universal Insurance Co. of

Illinois v. Liberty Mutual Fire Insurance Co., 215 Ill. 2d 121, 134

(2005), citing Country Mutual Insurance Co. v. Teachers Insurance

Co., 195 Ill. 2d 322, 330 (2001). The most reliable indicator of

legislative intent is found in the language of the statute. Midstate

Siding & Window Co. v. Rogers, 204 Ill. 2d 314, 320 (2003), citing

Michigan Avenue National Bank v. County of Cook, 191 Ill. 2d 493,

504 (2000). Statutory language is afforded its plain and ordinary

meaning. Midstate Siding & Window Co., 204 Ill. 2d at 320, citing

Michigan Avenue National Bank, 191 Ill. 2d at 504.

With these principles in mind, we now turn to the statutory

pronouncements of our legislature. Section 7–601(a) of the Illinois

Safety and Family Financial Responsibility Law, in pertinent part,

provides:

“No person shall operate, register or maintain registration

of, and no owner shall permit another person to operate,

register, or maintain registration of, a motor vehicle designed

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to be used on a public highway unless the motor vehicle is

covered by a liability insurance policy.

The insurance policy shall be issued in amounts no less

than the minimum amounts set for bodily injury or death and

for destruction of property under Section 7–203 of this Code,

and shall be issued in accordance with the requirements of

Sections 143a and 143a–2 of the Illinois Insurance Code, as

amended.” 625 ILCS 5/7–601(a) (West 2002).

Section 7–203 requires every liability insurance policy issued to

provide coverage of not less than $20,000 for the death or bodily

injury of any one person, $40,000 for the death or bodily injury of two

or more persons, and $15,000 for property damage occurring in any

one motor vehicle accident. 625 ILCS 5/7–203 (West 2002).

In addition, liability insurance required by section 7–601 must

comply with the requirements of section 7–317(b)(2) of the Illinois

Safety and Family Financial Responsibility Law (625 ILCS

5/7–317(b)(2) (West 2002)). Section 7–317(b)(2) requires an owner’s

policy of liability insurance to insure the person named therein and any

other person using or responsible for the use of such motor vehicle or

vehicles with the express or implied permission of the insured. 625

ILCS 5/7–317(b)(2) (West 2002). Provisions which extend liability

coverage to permissive users are referred to as “omnibus clauses”

(Progressive Universal Insurance Co. of Illinois, 215 Ill. 2d at 128),

and our court has held that such a clause must be read into every

liability insurance policy (State Farm Mutual Automobile Insurance

Co. v. Universal Underwriters Group, 182 Ill. 2d 240, 243-44

(1998)).

Section 7–317(b)(3) of the Illinois Safety and Family Financial

Responsibility Law requires every owner’s policy of liability insurance

to “insure every named insured and any other person using or

responsible for the use of any motor vehicle owned by the named

insured and used by such other person with the express or implied

permission of the named insured *** to the extent and aggregate

amount of $20,000 for bodily injury to or death of one person as a

result of any one accident and, subject to such limit as to one person,

the amount of $40,000 for bodily injury to or death of all persons as

a result of any one accident and the amount of $15,000 for damage to

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property of others as a result of any one accident. 625 ILCS

5/7–317(b)(3) (West 2002).

We find nothing in the foregoing statutory language to support

State Farm’s contention that a liability insurance policy providing the

named insured with coverage in excess of the statutory minimum

required by section 7–203 must provide the same level of coverage to

permissive users. Contrast this with section 143a–2(4) of the Illinois

Insurance Code, incorporated into section 7–601(a) of the Illinois

Safety and Family Financial Responsibility Law by reference, which

prohibits the issuance of a liability insurance policy issued on or after

July 1, 1983, “unless underinsured motorist coverage is included in

such policy in an amount equal to the total amount of uninsured

motorist coverage in that policy where such uninsured motorist

coverage exceeds the limits set forth in Section 7–203 of the Illinois

Vehicle Code.” 215 ILCS 5/143a–2(4) (West 2002). The language

contained in section 143a–2(4) of the Illinois Insurance Code shows

that when the legislature intends different types of coverage in excess

of the minimum statutory requirements mandated by section 7–203 of

the Illinois Safety and Family Financial Responsibility Law to be the

same, it chooses plain, unambiguous language to indicate its intent.

Previously, this court has held that the principal purpose behind

Illinois’ mandatory liability insurance requirement and its omnibus

provision “is to protect the public by securing payment of their

damages.” Progressive Universal Insurance Co. of Illinois v. Liberty

Mutual Fire Insurance Co., 215 Ill. 2d 121, 129 (2005); State Farm

Mutual Automobile Insurance Co. v. Smith, 197 Ill. 2d 369, 376

(2001). Sections 7–203 and 7–317(b)(3) of the Illinois Safety and

Family Financial Responsibility Law mandate that liability insurance

policies provide $20,000/$40,000/$15,000 coverage for the named

insured and permissive users of the named insured’s vehicle. By

setting the minimum coverage limits at $20,000/$40,000/$15,000, we

assume that the legislature has decided that this amount of coverage

is sufficient to protect members of the public and secure payment for

damages they may sustain.

Because we find nothing in the statutory pronouncements of our

legislature prohibiting Farmers’ step-downs and because Farmers’

policies provide coverage to the named insured and permissive users

of the named insured’s vehicle in an amount determined by the

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legislature to be sufficient to accomplish the principal purpose behind

Illinois’ mandatory liability insurance requirements and its omnibus

provisions, we cannot say that the policies issued by Farmers in this

case are contrary to the statutory pronouncements of our legislature

or the underlying purpose of the Illinois Safety and Family Financial

Responsibility Law.

State Farm argues, nevertheless, that the public policy

considerations underlying Illinois’ mandatory insurance laws as

construed in our decisions in State Farm Mutual Insurance Co. v.

Smith, 197 Ill. 2d 369 (2001), Progressive Universal Insurance Co.

of Illinois v. Liberty Mutual Fire Insurance Co., 215 Ill. 2d 121

(2005), and State Farm Mutual Automobile Insurance Co. v.

Universal Underwriters Group, 182 Ill. 2d 240 (1998), along with the

appellate court decisions in John Deere Insurance Co. v. Allstate

Insurance Co., 298 Ill. App. 3d 371 (1998), Fuller v. Snyder, 323 Ill.

App. 3d 303 (2001), and Browning v. Plumlee, 316 Ill. App. 3d 738

(2000), prohibit Farmers’ step-down provisions. We disagree.

In Smith and Progressive this court was called upon to determine

whether complete exclusions from liability insurance policies violated

Illinois public policy. In Smith, Maurice Barnes, accompanied by

Smith, drove to Harrah’s Casino, where he allowed Harrah’s valet

service to park his vehicle. When Barnes and Smith left Harrah’s,

Fisher, a valet driver employed by Harrah’s, retrieved Barnes’ vehicle.

As Smith entered the passenger door, Barnes’ vehicle rolled

backwards, striking Smith, which knocked her to the ground causing

her injury. Smith, 197 Ill. 2d at 371. At the time of the accident,

Barnes’ vehicle was insured under a policy issued by State Farm. State

Farm’s policy contained a “car business exclusion clause.” The

exclusion read: “ ‘THERE IS NO COVERAGE: 1. WHILE ANY

VEHICLE INSURED UNDER THIS SECTION IS: *** b. BEING

REPAIRED, SERVICED OR USED BY ANY PERSON

EMPLOYED OR ENGAGED IN ANY WAY IN A CAR

BUSINESS.’ ” (Emphasis in original.) Smith, 197 Ill. 2d at 372-73.

State Farm defined car business as “ ‘a business or job where the

purpose is to sell, lease, repair, service, transport, store or park land

motor vehicles or trailers.’ ” Smith, 197 Ill. 2d at 373. We held that

when a vehicle’s “owner gives his vehicle to a person engaged in an

automobile business ***, the owner is giving that person express or

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implied permission to use the vehicle.” Smith, 197 Ill. 2d at 374. We

went on to say that State Farm’s car business exclusion violated

Illinois public policy as expressed in section 7–317(b)(2) because “a

provision written into an insurance policy that excludes coverage for

persons engaged in an automobile business necessarily excludes

coverage for persons who are using an insured’s vehicle with the

insured’s express or implied permission.” Smith, 197 Ill. 2d at 374.

In Progressive, Shirley Abbinante owned a vehicle insured under

a policy issued by Progressive. Abbinante allowed her son, Ronald, to

use the insured vehicle to deliver pizzas for his employer. Ronald was

compensated by a flat fee for each pizza he delivered. During one of

his deliveries, Ronald struck a pedestrian, Lavit, who sustained severe

injuries as a result of the accident. Progressive, 215 Ill. 2d at 124.

Progressive’s policy contained a “food delivery exclusion.” The

exclusion stated that coverage under the policy did not apply to bodily

injury or property damage while an insured vehicle was “ ‘being used

to carry persons or property for compensation or a fee, including, but

not limited to, delivery of *** food, or any other

products.’ ”Progressive, 215 Ill. 2d at 125.

We upheld the “food delivery exclusion” against attack that it

violated public policy (Progressive, 215 Ill. 2d at 134) and stated:

“Because the requirement to maintain liability insurance is statutory in

origin, any restrictions on the insurance required to comply with the

law must also emanate from our statutes.” Progressive, 215 Ill. 2d at

136. We said that the legislature could easily have prohibited insurers

from excluding certain risks in liability insurance policies but it chose

not to do so. Progressive, 215 Ill. 2d at 138. Smith was distinguished

because the exclusion at issue in Smith only excluded permissive users

while engaged in a car business but the named insured was free to

engage in a car business without compromising his liability coverage.

Progressive, 215 Ill. 2d at 133. We believe Smith and Progressive are

inapplicable to the facts in this case. Those cases dealt with equal

treatment with regard to coverage for owners and permissive drivers,

not liability limits. Here the disputed issue is whether the limits of

coverage provided to a permissive user must be the same as the limits

of coverage provided to the owner of the vehicle.

The remaining cases cited by State Farm involve interpretations of

the car dealer licensing provisions of the Motor Vehicle Code (625

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ILCS 5/5–100 et seq. (West 2002)). Section 5–101(b)(6) of the Code

provides:

“A Certificate of Insurance *** shall be included with each

application ***. The policy must provide liability coverage in

the minimum amounts of $100,000 for bodily injury to, or

death of, any person, $300,000 for bodily injury to, or death

of, two or more persons in any one accident, and $50,000 for

damage to property.” 625 ILCS 5/5–101(b)(6) (West 2002).

Section 5–102(b)(4) provides an identical licensing requirement for

dealers of used automobiles. 625 ILCS 5/5–102(b)(4) (West 2002).

In State Farm Mutual Automobile Insurance Co. v. Universal

Underwriters Group, 182 Ill. 2d 240 (1998), the question before this

court was “whether a car dealer’s garage policy covers the liability of

a separately insured customer who is involved in an accident while

test-driving one of the dealer’s vehicles.” State Farm, 182 Ill. 2d at

241. Joyce Pontiac, a car dealer, allowed Luckhart to test-drive one

of its vehicles. During this test-drive, Luckhart negligently collided

with another vehicle owned by Carter and operated by Calinee, both

of whom sustained personal injury as a result of the collision. Joyce

Pontiac was insured under a garage policy issued by Universal.

Luckhart was insured under a policy issued by State Farm, which paid

a total of $9,092.15 to Carter and Calinee for personal injuries and

property damage they sustained in the collision. State Farm, 182 Ill.

2d at 241. Thereafter, State Farm sought reimbursement from

Universal, alleging that Universal’s policy afforded primary coverage

to Luckhart while test-driving Joyce Pontiac’s vehicle. Under the

terms of the garage policy issued to Joyce, Universal agreed to

provide coverage to any person “ ‘required by law to be an

INSURED’ ” while using a covered automobile within the scope of

Joyce’s permission. State Farm, 182 Ill. 2d at 242. Universal argued

that a test-driver was only “required by law” to be insured if the test-

driver did not have a liability insurance policy. State Farm, 182 Ill. 2d

at 243.

We held that the omnibus clause contained in section 7–317 of the

Illinois Safety and Family Financial Responsibility Law applies

throughout the Code and thus applies to the mandatory insurance

requirement set forth in section 7–601. State Farm, 182 Ill. 2d at 244-

45. Therefore Luckhart, a permissive user, was required by law to be

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an insured under Universal’s policy. State Farm, 182 Ill. 2d at 245.

Universal also argued that to the extent that its policy covered

Luckhart, the policy only provided excess coverage after other

insurance covering Luckhart was exhausted. We stated that “pursuant

to custom in the insurance industry, primary liability is generally

placed on the insurer of the owner of an automobile rather than on the

insurer of the operator.” State Farm, 182 Ill. 2d at 246.

In State Farm we were not called upon to determine what level of

omnibus coverage was required to be provided to permissive users of

a car dealer’s automobile. The damages in that case totaled $9,092.15.

Therefore, whether the permissive user of a car dealer’s automobile

was required to be insured at $20,000/$40,000/$15,000 under the

Illinois Safety and Family Financial Responsibility Law or

$100,000/$300,000/$50,000 under the car dealer licensing provisions

of the Code, the car dealer’s insurer was primarily liable for the entire

amount of damages. State Farm argues that this question, left

unresolved in State Farm, was answered in the appellate court

decisions of John Deere Insurance Co. v. Allstate Insurance Co., 298

Ill. App. 3d 371 (1998), Browning v. Plumlee, 316 Ill. App. 3d 738

(2000), and Fuller v. Snyder, 323 Ill. App. 3d 303 (2001).

Additionally, State Farm contends that John Deer, Brownlee, and

Fuller all rejected attempts made by insurers to step-down coverage

in car-dealership cases and that Farmers’ attempt to step-down

coverage should therefore be rejected here.

In John Deere, Rock River Ford (Rock River) allowed Thomas to

test-drive one of its vehicles. During the test drive, Thomas struck and

injured a pedestrian named Gossett. John Deere, 298 Ill. App. 3d at

373. Thomas was insured under a liability insurance policy issued by

Allstate, which provided excess coverage in the amount of $50,000

per person and $100,000 per occurrence when a nonowned vehicle

was being operated by one of its insured. John Deere, 298 Ill. App. 3d

at 374. Rock River was insured under a garage policy issued by John

Deere in the amount of $500,000. John Deere, 298 Ill. App. 3d at

373. Under the terms of its policy, John Deere attempted to exclude

liability coverage afforded to Rock River’s customers unless (1) the

customer had no other available insurance (whether primary, excess,

or contingent), in which case the customer would be insured but only

up to the compulsory or financial responsibility law limits where the

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covered “auto” is principally garaged, or (2) the customer had other

available insurance (whether primary, excess, or contingent) in an

amount less than the compulsory or financial responsibility law limits

where the covered “auto” is principally garaged, in which case the

customer would be insured only up to the amount by which the

compulsory or financial responsibility law limits exceeded the limits of

their other insurance. John Deere, 298 Ill. App. 3d at 373-74. John

Deere supplied the Illinois Secretary of State with a certificate of

insurance on behalf of Rock River, which indicated that Rock River’s

policy limits were set at $500,000. John Deere, 298 Ill. App. 3d at

373. On appeal, John Deere conceded that our decision in State Farm

required it to provide primary liability insurance to permissive users,

such as Thomas, under the garage policy issued to Rock River.

Therefore, the appellate court was called upon only to decide what

amount of coverage was required by the Code. John Deere, 298 Ill.

App. 3d at 375.

The appellate court cited section 7–203 of the Illinois Safety and

Family Financial Responsibility Law, which requires minimum limits

of liability insurance for an automobile in the amount of

$20,000/$40,000/$15,000 (625 ILCS 5/7–203 (West 1994)) and

sections 5–101(b)(6) and 5–102(b)(4) (625 ILCS 5/5–101(b)(6),

5–102(b)(4) (West 1994)) from the Code which requires minimum

limits of liability insurance of $100,000/$300,000/$50,000. The court

then stated:

“A plain reading of these Code sections reveals that the

legislature intended that the amount of liability insurance

which must be carried on a particular automobile is not

determined by the operator of the automobile but, rather, the

automobile itself. Therefore, the amount of liability insurance

required by the Code for an automobile should not change

according to the identity of the person who is driving the

automobile at the time an accident occurs. [Citations.] To hold

otherwise would defeat the public policy considerations that

motivated the enactment of the New and Used Car Dealers

Licensing Acts ***, because such a holding would illogically

mandate a higher limit of liability coverage when an

automobile dealership’s employee is driving the insured

automobile as an agent of the dealership, yet would not apply

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to the customer of the dealership permissively test driving the

same automobile.” (Emphases in original.) John Deere, 298

Ill. App. 3d at 377-78.

The appellate court held that John Deere’s liability under the garage

policy issued to Rock River was at least $100,000/$300,000/$50,000.

However, the court determined that John Deere could not limit its

liability to this amount because it had specifically represented in its

certificate of insurance filed with the Secretary of State that it insured

Rock River under a garage policy which provided $500,000 in

coverage and therefore John Deere was bound by its $500,000 policy

limits as certified to the Secretary of State. John Deere, 298 Ill. App.

3d at 379.

In Browning, Weeks Pontiac-Chevrolet (Weeks) allowed a

customer named Plumlee to test-drive one of its vehicles. During the

test-drive Plumlee collided with a vehicle driven by Browning.

Plumlee was insured under a policy issued by State Farm. Weeks was

insured under a garage policy issued by Universal Underwriters

(Universal) in the amount of $500,000. Browning, 316 Ill. App. 3d at

739. Under the terms of the garage policy issued to Weeks, Universal

attempted to reduce the liability limits available to permissive users to

the “limit needed to comply with the minimum limits provision law.”

Additionally, Universal attempted to provide only excess coverage in

the event that a permissive user was insured under another insurance

policy. Browning, 316 Ill. App. 3d at 741.

The appellate court first held that our decision in State Farm and

its decision in Madison Mutual Insurance Co. v. Universal

Underwriters Group, 251 Ill. App. 3d 13 (1993), required Universal

to provide primary coverage to permissive users under the policy

issued to Weeks. Browning, 316 Ill. App. 3d at 743. Next, the court

determined that Universal was required to provide permissive users

under the garage policy issued to Weeks with coverage in the amount

of $500,000 (Browning, 316 Ill. App. 3d at 745) and stated that it was

relying on the reasoning supplied by the court in John Deere, 298 Ill.

App. 3d 371, to resolve the issue of what level of omnibus coverage

is required (Browning, 316 Ill. App. 3d at 744-45).

In Fuller, Hurley Dodge (Hurley) was repairing a vehicle owned

by a customer named Snyder. Snyder was using Hurley’s loaner

vehicle when he collided with a vehicle being driven by Fuller. Snyder

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was insured under a liability policy issued by Allstate with coverage

in the amount of $100,000/$300,000/$50,000. Hurley was insured

under a garage policy issued by Universal Underwriters (Universal) in

the amount of $500,000. Fuller, 323 Ill. App. 3d at 305. Under the

terms of the garage policy issued to Hurley, Universal attempted to

reduce the liability limits available to permissive users to the “ ‘limit

needed to comply with the minimum limits provision law.’ ”

(Emphasis omitted.) Fuller, 323 Ill. App. 3d at 305-06. Additionally,

Universal attempted to provide only excess coverage in the event that

a permissive user was insured under another insurance policy. Fuller,

323 Ill. App. 3d at 306. The appellate court, relying on our decision

in Smith, held that Universal’s attempt to provide only excess liability

insurance to permissive users insured under another insurance policy

was contrary to public policy and therefore unenforceable. Fuller, 323

Ill. App. 3d at 307. Next, the appellate court held that Universal was

required to provide Snyder with omnibus coverage in the amount of

$100,000/$300,000/$50,000 relying on John Deere, 298 Ill. App. 3d

at 309. The court also found that sections 5–101(b)(6) and

5–102(b)(4) of the Code were specifically applicable to car dealerships

and should control the issue of minimum policy limits. Fuller, 323 Ill.

App. 3d at 308-09. The dissent pointed out that the Code did not

contain an omnibus provision and that the omnibus provision

contained in section 7–317, which applies throughout the Code, only

requires coverage to be provided in the amount of

$20,000/$40,000/$15,000. Fuller, 323 Ill. App. 3d at 309 (Cook, J.,

dissenting).

State Farm argues that it was not the car dealer provisions that

persuaded the appellate court in John Deere to hold that the insurer

of the car dealer was obligated to provide the full policy limits to

permissive users. It argues that the primary holding of John Deere is

that liability limits follow the vehicle and cannot be changed based on

the operator and that the car dealer provisions involved in John

Deere, Browning and Fuller are irrelevant. In our discussion of John

Deere earlier in this opinion, we quoted at length from that opinion

and mention here only this quote: “To hold otherwise would defeat

the public policy considerations that motivated the enactment of the

New and Used Car Dealers Licensing Acts ***, because such a

holding would illogically mandate a higher limit of liability coverage

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when an automobile dealership’s employee is driving the insured

automobile as an agent of the dealership, yet would not apply to the

customer of the dealership permissively test driving the same

automobile.” (Emphases in original.) John Deere, 298 Ill. App. 3d at

377-78. The Fuller court stated: “Sections 5–101(b)(6) and

5–102(b)(4) should control the issue of minimum policy limits because

those sections are more specifically applicable to car dealerships than

section 7–601.” Fuller, 323 Ill. App. 3d at 308-09. Contrary to State

Farms’ contention, we believe that John Deere, Browning and Fuller

are all based in large part on the car dealer provisions, which are not

involved in this case.

For the foregoing reason, we hold that neither the statutory

pronouncements of our legislature nor the Illinois decisions relied

upon by State Farm prohibit the step-down provisions in Farmers’

policies. State Farm also argues, however, that Farmers’ step-downs

adversely affect the overwhelming majority of Illinois residents and are

contrary to public policy. The legislature is vested with the power to

enact the laws and if the legislation as enacted “seems to operate in

certain cases unjustly or inappropriately, the appeal must be to the

General Assembly, and not to the court.” People v. Garner, 147 Ill.

2d 467, 476 (1992). We note that the General Assembly recently

passed Senate Bill 1208, which deals with the insurance issue involved

in this case. The Governor signed the bill into law as Public Act

95–395, with an effective date of January 1, 2008. This Act, which

creates new section 143.13a of the Illinois Insurance Code (215 ILCS

5/143.13a), now mandates that “any policy of private passenger

automobile insurance must provide the same limits of *** coverage to

all persons insured under that policy, whether or not an insured person

is a named insured or permissive user under the policy.” As we

observed earlier in this opinion, when the legislature intends different

types of coverage in excess of the minimum statutory requirements

mandated by section 7–203 of the Illinois Safety and Family Financial

Responsibility Law to be the same, it chooses plain, unambiguous

language to indicate its intent. It has now done so, effective January

1, 2008.

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Ambiguity and Direct Action

As noted earlier, Farmers filed a motion to dismiss State Farm’s

complaint, arguing that the step-down provisions contained in its

policies are clear and unambiguous and that the reimbursement sought

by State Farm is an impermissible direct action. The trial court denied

Farmers’ motion to dismiss. On appeal, State Farm moved to strike

the ambiguity and direct action issues from Farmers’ brief. The

appellate court denied State Farm’s motion to strike, holding that the

ambiguity and direct action issues were properly before that court and

it decided these issues.

State Farm argues that the trial court’s Rule 304(a) (210 Ill. 2d R.

304(a)) finding in its order granting Sates Farm’s motion for partial

summary judgment was limited to the public policy issue and therefore

the appellate court lacked jurisdiction to rule on the ambiguity and

direct action issues. Farmers argues that this court should not

disregard these issues, which were briefed and argued “on summary

judgment.” It is well established that the jurisdiction of appellate

courts is limited to reviewing appeals from final judgments, subject to

statutory or supreme court rule exceptions (In re Marriage of

Verdung, 126 Ill. 2d 542, 553 (1989)), none of which are present in

this case. It is also well settled in this state that a trial court’s denial of

a motion to dismiss is an interlocutory order that is not final and

appealable. Chicago Housing Authority v. Abrams, 409 Ill. 226, 229

(1951). Because the appellate court lacked jurisdiction to review the

ambiguity and direct action issues, those potion`s of the appellate

court’s decision are vacated.

CONCLUSION

For the reasons set forth above, the judgment of the appellate

court is affirmed in part and vacated in part, and the matter is

remanded to trial court for proceedings consistent with this opinion.

Affirmed in part and vacated in part;

cause remanded.

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