High Court Enforces Automobile Exclusion for Farm Equipment

By Don R. Sampen, published, Chicago Daily Law Bulletin, January 26, 2021

The Illinois Supreme Court, reversing an appellate court decision, recently held that a mechanical device exclusion in an automobile policy was not ambiguous and not a violation of public policy.

The case is State Farm Mutual Automobile Insurance Co. v. Elmore, 2020 IL 125441 (Dec. 3). The insurer, State Farm, was represented by Heyl Royster of Edwardsville. Taylor Law Offices PC of Effingham represented the insureds, Sheldon Elmore and his son Kent.

Kent was assisting his father, Sheldon, in farming operations in Effingham County in 2013, unloading grain from a grain truck. The grain flowed from a chute under the truck onto a hopper leading to an auger, to be transferred to a transport truck. When attempting to open the grain truck’s gate to allow the grain to flow, Kent accidentally stepped onto the augur, causing injury and ultimately the loss of his leg below the knee.

Kent filed a negligence action against Sheldon, and ultimately settled in return for a payment of $1.9 million from three casualty insurers, including a State Farm casualty policy. Kent, however, reserved his rights against the State Farm auto policy involved in this appeal.

The State Farm auto policy covered the grain truck for, among other things, bodily injury caused by an accident involving the vehicle. The policy, however, contained an exclusion — the so-called “mechanical device exclusion” — applicable to damages resulting from 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.”

The referenced paragraph “(a) above” was another exclusion applicable to the handling of property before being moved “onto a vehicle for which the insured is provided liability coverage by this policy.”

No issue existed concerning the fact that the auger was a mechanical device, was not a hand truck, was not attached to the insured grain truck, and was being used to move grain. It was powered by means of a power take-off shaft connected to a tractor.

State Farm filed this declaratory action seeking a determination of the parties’ rights and obligations, and eventually moved for summary judgment based on the mechanical device exclusion.

Kent filed a counter motion contending that under the Illinois Insurance Code, 625 ILCS 5/7-317(b)(2), automobile coverage is required to extend to not only the named insured but to all persons using or responsible use of the insured vehicle, as a matter of public policy. He further argued that coverage must extend to all acts that occur before a loading-and-unloading process has been completed.

The trial court granted State Farm’s motion, and Kent appealed. The 5th District Appellate Court reversed finding that the exclusion was ambiguous apparently because, in the 5th District’s view, it could be construed as applying only to self-powered machines, and not the auger, which relied upon an outside power source to operate. State Farm took this appeal.

Analysis

In an opinion by Justice Michael J. Burke, the Supreme Court reversed. With respect to ambiguity, Burke found the mechanical device exclusion not ambiguous and applicable, because the auger was not a hand truck and not attached to the insured vehicle. As for the 5th District’s position that the mechanical device had to be self-powered, Burke said that nothing in the exclusion so required.

Kent nonetheless argued that an ambiguity arose from the exclusion’s description of the “vehicle described in (a) above,” apparently suggesting that the mechanical device exclusion would apply only when the exclusion in paragraph (a) also applied.

Burke disagreed, saying that the language in question simply referenced the insured vehicle. He further observed that the policy on the truck was an automobile policy, and nothing in it indicated it was meant to cover injuries from the use of farm implements.

As for Kent’s public policy language based on statutory language, Burke observed that under Progressive Universal Insurance Co. of Illinois v. Liberty Mutual fire Insurance Co., 215 Ill. 2d 121 (2005), the state’s mandatory insurance laws do not preclude parties from excluding certain risks from liability coverage. Typically, moreover, exclusions are permissible so long as they do not differentiate between named insureds and permissive users.

The court therefore reversed the appellate court and held that State Farm was entitled to summary judgment.

Key point

Unambiguous automobile liability policy exclusions that do not differentiate between named insureds and permissive users are permissible and enforceable.