Another Reason Not to Drive Without a Valid License
Insurance Law Update
Supreme Court of Illinois
In Founders Ins. Co. v. Munoz, ___ N.E.2d ___, 2010 WL 1999659 (Ill. May 20, 2010), the Supreme Court of Illinois held that automobile insurance policy exclusions precluding coverage when the driver does not have a “reasonable belief” that he or she is “entitled” to drive the vehicle are applicable to drivers who do not have a valid license. Under these exclusions, drivers are not afforded coverage when driving with a suspended license or when they have no license at all.
In Founders, the court considered six consolidated appeals. The trial courts in each of the underlying cases ruled that the similarly worded exclusions applied to bar coverage for drivers without a valid license. The appellate court held that the exclusion was ambiguous, reversing the trial courts’ rulings in five of the six cases and affirming the trial court’s no-coverage ruling in the sixth case on other grounds.
The Supreme Court reversed, holding that the exclusion barred coverage in all six cases, and that the exclusion unambiguously applied to drivers without a valid license. The court found that the “average, ordinary, normal, reasonable person” for whom the policy was written would understand that the exclusion applies to unlicensed drivers. Relying on a similar decision in Century National Ins. Co. v. Tracy, 339 Ill.App.3d 173 (2003), the court found that regardless of whether the driver owns the vehicle or is a permissive user, the driver cannot have a reasonable belief that he or she is entitled to drive without a valid license.
The court further held that the exclusion did not conflict with Illinois law or public policy. Illinois law mandates that an automobile insurance policy cover the named insured and any other permissive user. The “reasonable belief” exclusion did not violate public policy or contradict the law because insurers are not required to cover all possible losses. Rather, insurers may limit their risk by excluding insureds and permissive users who lack the basic requirement to operate a motor vehicle: a valid driver’s license.