The appellate court reversed, finding the exclusion to be void and unenforceable under this state's law mandating liability coverage for permissive users of a vehicle. 347 Ill. App. 3d 411. We granted Progressive's petition for leave to appeal. 177 Ill. 2d R. 315. For the reasons that follow, we now reverse the judgment of the appellate court.
Ambiguities in terms limiting or excluding coverage, however, will be construed against the insurer and in favor of the insured. Progressive Universal Insurance Co. of Illinois v. Liberty Mutual Fire Insurance Co., 347 Ill. App. 3d 411, 414, 806 N.E.2d 1224, 1227 (2004). A term is ambiguous when it is subject to more than one reasonable interpretation.
If the court determines that the allegations fall within, or potentially within, coverage under the policy, the insurer has a duty to defend the insured against the underlying complaint. Progressive Universal Insurance Co. of Illinois v. Liberty Mutual Fire Insurance Co., 347 Ill. App. 3d 411, 414, 806 N.E.2d 1224 (2004). Insurance policies are to be liberally construed in favor of coverage, and where an ambiguity exists in the terms of the contract, the ambiguity will be resolved in favor of the insured and against the insurer.
Ambiguities in terms limiting or excluding coverage, however, will be construed against the insurer and in favor of the insured. Progressive Universal Insurance Co. of Illinois v. Liberty Mutual Fire Insurance Co., 347 Ill. App. 3d 411, 414, 806 N.E.2d 1224, 1227 (2004). A term is ambiguous when it is subject to more than one reasonable interpretation.
Although no Illinois court has interpreted the "compensation or for a fee" exclusion under precisely the same factual scenario presented here, the Illinois Court of Appeals examined the "compensation or for a fee" language and found it to be unambiguous in the context of an employee who delivered pizzas and was paid $1.25 per pizza delivered. Progressive Universal Ins. Co. of Illinois v. Liberty Mut. Fire Ins. Co., 806 N.E.2d 1224, 1227 (Ill. Ct. App. 2004), rev'd on other grounds, 828 N.E.2d 1175 (2005), as modified on denial of reh'g (June 9, 2005). The court stated that the "compensation or for a fee" language is broader than the "for a fee" language and noted that the $1.25 earned per delivery was either a fee or compensation.
Id. at 6. This difference does not alter how "arising out of" should be interpreted; it only alters the evidence needed to establish a duty. See Progressive Universal Ins. Co. of Ill. v. Liberty Mut. Fire Ins. Co., 806 N.E.2d 1224, 1226 (Ill.App.Ct. 2004) (stating that an insurer has a duty to defend if "the allegations of the underlying complaint, when liberally construed in favor of the insured, potentially fall within a policy's coverage" and that an insurer has a duty to indemnify "if the insured's activity and the resulting loss or damage actually fall within a policy's coverage") (emphasis in original). We note that one of our fellow Northern District of Illinois judges, Judge Hart, speculated, in AMEC, 2004 WL 816720, at *5, that the absence of an employment relationship could make the use of "but for" causation inappropriate if the plaintiff could not prove proximate causation.
Other jurisdictions have reached similar conclusions. See, e.g., United States v. Milwaukee Guardian Ins. Co., 966 F.2d 1246 (8th Cir.1992); Amerisure Ins. Co. v. Graff Chevrolet, Inc., 257 Mich.App. 585, 669 N.W.2d 304, 309–10 (2003), rev'd on other grounds,469 Mich. 1003, 674 N.W.2d 379 (2004); Strader v. Progressive Ins., 230 S.W.3d 621 (Mo.Ct.App.2007); Progressive Universal Ins. Co. of Ill. v. Liberty Mut. Fire Ins. Co., 347 Ill.App.3d 411, 282 Ill.Dec. 636, 806 N.E.2d 1224 (2004); Almendral v. Security Nat'l Ins. Co., 704 So.2d 728 (Fla.Dist.Ct.App.1998). But see, e.g., Progressive Cas. Ins. Co. v. Metcalf, 501 N.W.2d 690 (Minn.Ct.App.1993); RPM Pizza, Inc. v. Automotive Cas. Ins. Co., 601 So.2d 1366 (La.1992); United States Fidelity & Guaranty Co. v. Lightning Rod Mut. Ins. Co., 80 Ohio St.3d 584, 687 N.E.2d 717 (1997); Prudential Prop. & Cas. Ins. Co. v. Sartno, 588 Pa. 205, 903 A.2d 1170 (2006); United Servs. Auto. Ass'n v. Couch, 643 S.W.2d 668 (Tenn.Ct.App.1982); Pizza Hut of America, Inc. v. West Gen. Ins. Co., 36 Ark.App. 16, 816 S.W.2d 638 (1991); First Georgia Ins. Co. v. Goodrum, 187 Ga.App. 314, 370 S.E.2d 162 (1988); Progressive Gulf Ins. Co. v. We Care Day Care Ctr., Inc., 953 So.2d 250 (Miss.Ct.App.2007).
September 2004. Appeal from 347 Ill. App. 3d 411. Disposition of Petitions for Leave to Appeal Allowed.
We believe this conclusion is sustained by the following authorities. In Progressive Universal Ins. Co. of Ill. v. Liberty Mut. Fire Ins. Co., 347 Ill.App.3d 411, 282 Ill.Dec. 636, 806 N.E.2d 1224 (2004), Ronald Abbinante was employed to deliver pizzas for a restaurant. He was paid $1.25 for each delivery by his employer, Casale Pizza. Abbinante was using his mother's automobile to deliver pizzas when he hit a pedestrian.