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Buckle Up: Court Concludes UM and UIM Insureds Must Include Passengers
Insurance Law Update
Supreme Court of Illinois
In the consolidated case Schultz v. Illinois Farmers Ins. Co., ___ N.E.2d ____, 2010 WL 966206 (Ill. March 18, 2010), the Supreme Court of Illinois determined that an automobile liability insurance policy was unenforceable where the definition of "insured" for uninsured motorist (UM) coverage was broader than the definition of "insured" for underinsured motorist (UIM) coverage. While both the UM and UIM coverage parts of Farmers' policies classified policyholders and household family members as insureds, the UM coverage also insured the vehicle's occupants.
The underlying Schultz and Weglarz cases involved automobile accidents in which some of the injured parties were neither policyholders nor the policyholder's household family members. Farmers denied coverage for these parties' claims for UIM coverage. In the Schultz case, the Illinois Circuit Court entered summary judgment for Farmers, while in the Weglarz case the circuit court entered summary judgment against Farmers. The cases were consolidated on appeal. The appellate court reversed the Schultz decision and affirmed the Weglarz decision.
In affirming the appellate court's decision, the Supreme Court of Illinois considered whether the narrower UIM definition of insured violated an Illinois law that requires automobile liability policies to insure the policyholder and any other person using the insured vehicle with the policyholder's permission. The court paid close attention to the statute's reference to persons using the vehicle as opposed to persons operating the vehicle. Construing the words "use" and "user" in accordance with their plain and ordinary meaning (since no definition was included in the statute), the court determined that "use" of a vehicle includes riding in one as a passenger. Accordingly, the Supreme Court construed Illinois' mandatory liability coverage requirement to extend to all permissive users, including both permissive passengers and drivers. The court concluded that it was a violation of law to provide coverage to permissive passengers under liability and UM coverage but to exclude coverage for those individuals under the UIM coverage part.
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