Court finds intoxicated driver is covered under employer's policy
The court found the driver had permission to use a company vehicle for personal errands at the time of the accident.
Reversing a lower court’s ruling, the U.S. Court of Appeals for the Ninth Circuit determined an insurer was obligated to compensate a motorist injured in an accident by its policyholder’s intoxicated employee, as she had permission to use the vehicle.
Underwood Bros Inc., doing business as AAA Landscape, was insured with a general insurance policy from Zurich American Insurance Company. The policy provided coverage for auto accidents and defined an insured as anyone “using with your permission a covered ‘auto’ you own.”
AAA Landscape assigned a company vehicle to an employee, Elizabeth Foust, in 2012, and three years later, she was involved in a car accident with James McGee. McGee was found at fault for the accident, but Foutz was cited on the scene for driving while intoxicated.
McGee filed a claim against Foutz, and Zurich declined coverage on the basis that she had “failed to qualify as an insured under the policy because she had exceeded any permissible use by driving while intoxicated.” Foutz assigned her rights to McGee, who sued Zurich for bad faith and breach of contract.
The lower court granted summary judgment on both claims to Zurich, finding that because AAA Landscape never gave Foutz permission, express or implied, to drive while intoxicated, her use of the vehicle while under the influence was not permissive, so she was not to be considered an insured.
State law, policy made coverage indisputable
The Appeals court found that under the insurance policy and Arizona law, there was no dispute that Foutz would be covered by the insurance policy if she was a permissive user at the time of the accident. State law dictates that “permissive use encompasses minor deviations from the permission granted.”
The court found that Foutz’s use of the vehicle at the time of her accident was permissive as she was permitted to use the company vehicle for personal errands after work. Evidence showed that the vehicle’s use at the time of the wreck, which occurred while she was driving home from a grocery store, fell within the scope of the permitted use. The ruling noted that when the evidence was viewed in the light most favorable to McGee, the trip to the grocery store was either within the scope of the permitted use or a minor deviation for that permission.
The insurer argued that Foutz’s use was non-permissive because she did not have express or implied permission to drive a company vehicle while intoxicated. Foutz’s negligence in driving while intoxicated “does not negate the fact that her use (running an errand) was permissive.”
The court reversed the lower court’s decision and remanded the case for further proceedings.
The dissenting opinion found that the district court properly granted summary judgment in favor of Zurich on the breach of contract claim because Foutz did not have permission to operate the vehicle while intoxicated.
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