St. Paul Fire & Marine Insurance Company v. Smith

While driving his father’s car, William Smith (defendant) collided with William and Audrey Hardwidge, killing himself and the Hardwidges. Smith had an automobile-insurance policy with Valor Insurance Company (Valor). Smith’s parents had an automobile-insurance policy with St. Paul Fire & Marine Insurance Company (St. Paul) (plaintiff). Although Smith’s parents named Smith as an insured under this policy, when St. Paul learned that Smith had been convicted of drunk driving and had his license revoked, St. Paul removed Smith from Smith’s parents’ policy. St. Paul then made Smith’s parents sign a named-driver exclusion excluding liability for any accidents occurring while Smith was driving. The estates of the Hardwidges sued Smith’s father and Smith’s estate (defendants). The defendants tendered their defense to Valor. A $5 million verdict was entered against the defendants. St. Paul filed a declaratory judgment action against the defendants seeking a pronouncement that St. Paul was not required to defend the defendants. Valor was given leave to intervene in this lawsuit. St. Paul moved for summary judgment because, it claimed, the named-driver exclusion barred coverage to the defendants. The defendants and Valor each moved for summary judgment claiming that the named-driver exclusion violated public policy, namely § 7-601(a) of the mandatory-insurance provision of the Illinois Vehicle Code. This provision requires an automobile-liability policy to insure either the named insured or a person driving the named insured’s car with the named insured’s permission. Since statutes are an expression of public policy, an insurance policy provision that conflicts with a statute is void as against public policy. The trial court granted the defendants’ motion for summary judgment. St. Paul appealed.