Purchasing optional liability coverage for employees’ foreseeable personal use of company vehicles can prevent your employees from being financially at risk.
Issue By: David L. Blinn
Insurance Coverage – Exclusion for Vehicles “Normally Made Available”
Javier Medina v. Geico Indemnity Company
Court of Appeals, Fifth Appellate District
213 Cal.Rptr.3d 502
(February 8, 2017)
What coverage exists for an employee provided with a company vehicle for both personal and business use? That was the question addressed in this case, to the detriment of the employee.
Leigh Anne Flores (“Flores”) was involved in an accident while driving a van her employer, Pacific Bell, had furnished to her to perform her duties, but which she used for both business and personal purposes. Although she did not take it home on nights or weekends, except when out of town on business, she routinely used it for running all of her personal errands during the day, and was permitted to do so. Flores understood there were no limitations on where she could take the van during her non-working hours while on an overnight trip. At the time of the accident, she was running a personal errand during her work day. As a result of the accident, Javier Medina (“Medina”), the driver of the car she hit, sued Flores and Pacific Bell for damages.
The trial court found that Pacific Bell was not vicariously liable for Flores’ actions as she was not acting in the course and scope of her employment at the time of the accident. Since the parties stipulated that Flores was a permissive user of the van, Pacific Bell was liable only for the $15,000 statutory limit. In a subsequent arbitration between only Medina and Flores, the arbitrator awarded Medina over a half million dollars in damages.
Flores had insurance for her personal car through GEICO Indemnity Company (“Geico”). The Geico policy provided coverage for her use of a “non-owned” vehicle, but not if that vehicle was “furnished for [her] regular use.” Flores tendered the defense of the underlying action to Geico, which refused to defend or indemnify her. Flores then assigned any rights she had against Geico to Medina in exchange for a covenant not to execute against her personal assets. After Geico refused to pay the judgment based on the arbitrator’s award, Medina filed suit against Geico for breach of contract and bad faith.
Geico brought a summary judgment motion based, in part, on the ground that there was no coverage under its policy because the van was furnished to Flores for her regular use. The trial court granted the motion holding that as a matter of law there was no coverage under the non-owned auto clause. Medina appealed.
The Court of Appeal upheld the summary judgment in favor of Geico, holding that Flores’ use of the van for personal business at the time of the accident was not a departure from the customary use of the van.
The Court first noted that the interpretation of the phrase “furnished for regular use” had been established for years. The elements to consider in determining whether a car was furnished for regular use “include time, place and manner of use, purpose or type of use, and restrictions on use. Primarily, the issue presents a question of fact which requires an interpretation of the language of the policy to the facts involved.” (Citing Highlands Ins. Co. v Universal Underwriters Ins. Co. (1979) 92 Cal.App.3d 171).
Here, Medina contended that the van was not furnished to Flores for her regular use because Pacific Bell furnished the van primarily for business purposes. Medina argued that Flores’s use of the van when the accident occurred was not a “regular use” since she was on a personal mission. According to Geico, however, Flores’s use of the van was a regular use because Pacific Bell furnished the van to her for both business and personal uses, and she could use the van for whatever purposes she wanted. The Court of Appeal agreed with Geico. While Pacific Bell furnished the van to Flores because she needed it to perform her job, it did not place any restrictions on her use of it. Flores had unlimited use of the van when it was in her possession and the van was assigned to her for her exclusive use.
The Court noted that its holding was consistent with the purpose of the non-owned provision in the Geico (and other) policies. The intent and function of the provision was (according to the Highlands case) “to prevent abuse, by precluding the insured and his family from regularly driving two or more cars for the price of one policy.” For obvious reasons, coverage was not intended to include the regular use of other cars because insurance companies would necessarily bear an increased risk without receiving a related increase in premiums.
The Court pointed out that Pacific Bell could have purchased liability coverage for Flores’ personal non-employment related uses of the van, but chose not to. Unfortunately, they apparently did not make this known to Flores. If they had, she could have purchased an extended non-owned automobile” endorsement to her personal auto policy.
Judgment in favor of Geico on its summary judgment motion was affirmed.
There are probably thousands if not more of employees who routinely use their company furnished vehicles for personal errands, who are at risk if, like Pacific Bell and Flores, no additional coverage is obtained for personal use of the non-owned vehicle by the employee.
For a copy of the complete decision, see: Medina v. Geico