Theft or Conversion Exclusion under GKLL Coverage

September 12, 2012

Our Virginia insured has a garage policy form CA 00 05 03 06. A customer's vehicle is in the insured shop for repairs, which were completed. A technician at the insured's shop decided to use the customer's vehicle on his lunch break instead of his own because the customer's vehicle had air conditioning and his did not. The named insured was unaware that the technician had taken the vehicle. The customer came to pick up the vehicle and the insured then discovered that the keys were missing from the sealed envelope. Shortly thereafter, the insured received a call indicating that the vehicle was involved in an accident. The customer arrived at the scene and informed the police that the technician did not have authorization to use her vehicle and the police charged the technician with unauthorized use of a motor vehicle. The policy has symbol 30 for GKLL collision and symbols 27 and 28 for liability. Our question is whether the theft exclusion, which includes conversion under the GKLL coverage would apply given that that the vehicle was allegedly stolen by an employee of the insured. In addition, would there be liability coverage given the symbols and the fact that the technician did not have permission to use the customer's vehicle for personal use?

Virginia Subscriber

Our first thoughts were that this was not actually a theft since the employee probably did not intend to keep the car; sort of like a joy ride where a teenager will take a car for a ride just to do that but have no intention of keeping the car. In any case, whether this was theft or not cannot be answered by us. That is a legal question we cannot answer.

But, the other part of the exclusion speaks about loss due to conversion. A loss is defined in the policy as direct and accidental loss or damage including loss of use. And, conversion is defined in the law dictionary as an unauthorized assumption and exercise of the right of ownership over goods belonging to another, or any unauthorized act that deprives an owner of his property for an indefinite time. So, as with theft, you should probably consult with an attorney as to the legal meaning of the terms in your area, but it seems to us that this was a case of conversion caused by the employee. So, we see the exclusion applying to the claim under the GKLL section of the policy.

As for liability coverage, symbols 27 and 28 would not make this a covered auto. Symbol 27 is for specifically described autos and symbol 28 is for hired autos. A customer's car would not fit into either category. Symbol 28 does include a car borrowed by the named insured. But, an employee using a customer's car without permission is not exactly the named insured borrowing a car.

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