The Illinois Supreme Court has once again corrected an error of insurance policy interpretation by the Illinois Appellate Court, Fifth District and held that the mechanical device exclusion in the policy in question was not ambiguous. The case is State Farm Mut. Auto. Ins. Co. v. Elmore, 2020 IL 125441.
At issue in this case was the enforceability of a "mechanical device" exclusion in an automobile policy that was issued by State Farm Mutual Automobile Insurance Company (State Farm). Keith Elmore was injured while unloading grain from a truck owned by his father, Ardith Sheldon Elmore (Sheldon). Kent helped Sheldon with his grain farm operation in 2013, and was filling an empty grain truck with grain when an accident occurred caused by an auger with no protective shield. In the accident Kent lost his right leg below the knee, and surgery was later required to remove the leg just above the knee.
Kent filed a negligence suit against Sheldon which eventually settled. In exchange for releasing all claims against Sheldon, Kent received $1.9 million from State Farm Fire and Casualty and two other insurers. Kent reserved his right to pursue additional coverage under the auto policy that covered the grain truck, a 2002 Ford International 4900. Sheldon was the named insured under that policy. State Farm filed a complaint for declaratory judgment asking the court to determine and adjudicate the parties' rights and liabilities under the policy.
State Farm originally argued that there was no coverage under the policy because the injury was caused by an auger which is considered neither a "car" or a "trailer," as those terms are defined in the policy. Later, State Farm filed an amended complaint arguing that the auger was a mechanical device and, thus, coverage was precluded under the policy's "mechanical device" exclusion.
The Policy
State Farm's insurance policy including this language.
- We will pay:
- Damages an insured becomes legally liable to pay because of:
- Bodily injury to others; and
- Damage to property
Caused by an accident that involves a vehicle for which that insured is provided Liability Coverage by this policy[.]
The policy contains a Commercial Vehicle endorsement containing the "mechanical device" exclusion as follows:
(4) There is no coverage for an insured for damages resulting from:
(c) The movement of property by means of a mechanical device, other than a hand truck, that is not attached to the vehicle described in (a) above.
Lower Court Decisions
The circuit court granted State Farm's motion for summary judgment and denied Kent's motion. Kent appealed, and the Appellate Court, Fifth District reversed with one justice dissenting. The Illinois Supreme Court allowed State Farm's petition for leave to appeal.
Arguments
On appeal, State Farm argued that the mechanical device exclusion was unambiguous and precluded coverage. The insurer further contended that the appellate court's refusal to enforce the exclusion restricted the freedom of contract.
Kent argued that the exclusion was void because it was against public policy because it excludes coverage for damages for bodily injury suffered by a permissive user.
The Court agreed with State Farm that the appellate court erred in finding the mechanical device exclusion ambiguous. When the terms of the policy are assigned the plain, ordinary, and popular meanings, the exclusion is capable of only one reasonable interpretation. The Court also determined that the average insured would be capable of understanding the exclusion as it is. According to the dictionary definitions, not only was the grain auger clearly a machine or tool designed to move grain from one place to another, it was also a device that was operated by a machine, a tractor. It was not a small hand-propelled truck or wheelbarrow, and it was not attached to the insured vehicle, so the exclusion clearly applied and precluded coverage for the injury.
The Court found that the appellate court erred in finding the exclusion ambiguous on the basis that the three out-of-state cases cited by the insurer applied the exclusion to devices that were either self-powered or motorized. The Court did not agree with the injured party that it was reasonable to interpret the mechanical device exclusion as applying only to the loading of property onto the insured vehicle. Lastly, the mechanical device exclusion simply did not discriminate between insureds and permissive users, so the exclusion was not void as against public policy.
Editor's Note: Although the mechanical device exclusion is not widely found, this decision reaffirms Illinois law stating that insurance policies and provisions that are unambiguous and do not violate public policy are to be enforced as written.