## Facts

- St. Paul issued Allen and June Smith an auto liability policy covering a vehicle owned by Allen.
- Their son, William Smith, initially was listed as a driver, but St. Paul later refused to continue coverage with him as a driver after reviewing his driving record, including prior DUI-related suspension/revocation.
- St. Paul required Allen and June to sign a “Named Driver Exclusion” endorsement excluding liability coverage and any duty to defend for losses arising from accidents occurring while William drove any motor vehicle.
- William drove Allen’s vehicle and collided with another car occupied by William and Audrey Hardwidge; William Smith and both Hardwidges died.
- Wrongful-death and survival suits were filed against Allen Smith and William’s estate; a jury returned a $5 million verdict against William’s estate and Allen.
- Allen, William’s estate, and William’s insurer (Valor) sought defense and coverage from St. Paul.
- St. Paul filed a declaratory-judgment action seeking a declaration of no duty to defend or indemnify based on the named-driver exclusion.
- The trial court granted summary judgment to the insureds/claimants, ruling the exclusion void as against Illinois public policy embodied in the Vehicle Code’s mandatory insurance provisions.
- St. Paul appealed.

## Issues

1. Whether a named-driver exclusion in an auto liability policy violates Illinois public policy reflected in the Illinois Vehicle Code’s mandatory insurance provisions.
2. Whether the exclusion was effective and unambiguous as part of the policy to bar coverage for an accident occurring while the excluded driver operated the vehicle.
3. Whether claims against the named insured for negligent entrustment are barred when they arise from an accident occurring while the excluded driver was driving.

## Decision

- The appellate court reversed the trial court’s summary judgment for the insureds/claimants and remanded.
- The court held that named-driver exclusions do not violate Illinois public policy under the mandatory insurance scheme.
- The court held the exclusion was unambiguous, incorporated into the policy, and barred both defense and indemnity for claims arising from the accident because William was driving.
- The court held the negligent-entrustment claim against Allen was within the exclusion because it arose from the same accident while the excluded driver operated the vehicle.

## Legal Principles

- Illinois public policy favoring compulsory liability insurance does not categorically prohibit narrowly drawn named-driver exclusions.
- Statutory provisions requiring insurance identification cards to warn that coverage may not extend to all drivers, and to identify excluded drivers by name, support legislative acceptance of named-driver exclusions as a limited exception to omnibus coverage for permissive users.
- Exclusions that are specific to identified high-risk drivers may be treated differently from broader exclusions that effectively negate the minimum-liability purpose of mandatory insurance laws.
- When an exclusion bars coverage for “losses or claims arising from accidents” while an excluded driver operates a vehicle, the exclusion can also bar derivative theories against the named insured (including negligent entrustment) tied to that same accident.
- Clear, signed endorsements incorporated into the policy are enforced according to their plain terms, including provisions eliminating both indemnity and defense obligations for excluded-driver accidents.

## Conclusion

The appellate court held that Illinois law permits enforceable named-driver exclusions consistent with the state’s compulsory insurance policy, and that St. Paul therefore owed no defense or indemnity for the fatal accident or related negligent-entrustment claims because the excluded driver was operating the vehicle.


St. Paul Fire & Marine Ins. Co. v. Smith, 337 Ill. App. 3d 1054, 787 N.E.2d 852 (Ill. App. Ct. 1st Dist. 2003)