GEICO Casualty Company, which insured Mr. Bond's car under a policy issued to Mr. Bond's girlfriend, was notified of the accident. A GEICO claim representative investigated and determined that Ms. Chapman did not have permission to drive the car at the time of the accident and the claim representative recommended to his supervisor that GEICO deny coverage for Ms. Chapman.

The claim representative subsequently wrote to Ms. Chapman, stating that GEICO was denying coverage because she had used the car without “the permission of the owner.”

Mr. Myers sued Ms. Chapman and Mr. Bond, claiming that Ms. Chapman had been negligent in causing the car collision and that Mr. Bond had negligently entrusted Ms. Chapman with the car. Mr. Myers alleged that Ms. Chapman had actual and implied consent from Mr. Bond to drive the car at the time of the accident.

GEICO agreed to defend Mr. Bond but refused to defend Ms. Chapman on the ground that she did not have permission to drive the car.

GEICO later decided to tender the policy limits of $15,000 to Mr. Myers in exchange for a release of his claims against Mr. Bond.

Ms. Chapman gave Mr. Myers a consent judgment for $1,500,000 and assigned to Mr. Myers any rights she had against GEICO for its refusal to indemnify and defend her.

He sued GEICO, alleging that the insurer had breached the implied covenant of good faith and fair dealing in the policy and had violated the Pennsylvania insurance bad faith law.

GEICO contended that it had no duty to indemnify or defend Ms. Chapman because the undisputed facts showed that she was not an insured under the policy.

GEICO moved for summary judgment.

The GEICO Policy

The GEICO policy required the insurer to:

pay damages which an insured becomes legally obligated to pay 

because of bodily injury or property damage. The policy stated that the following were insureds with respect to “an owned auto”:

1. you and your relatives;

2. any other person using the auto with your permission. The actual use must be within the scope of that permission. 

The district court granted GEICO's motion.

In its decision, the district court pointed out that Mr. Bond, who was named an “Additional Driver” on the declarations page, could be deemed a “Policyholder” for his “owned auto,” which was listed as a covered vehicle.

Therefore, the district court continued, to fit within the definition of “insured” with respect to Mr. Bond's vehicle, Ms. Chapman needed be a relative of Mr. Bond or of his girlfriend or Ms. Chapman had to have had the permission of one of them to drive the car on the date of the accident.

The district court pointed out that there was no dispute that Ms. Chapman was not Mr. Bond's girlfriend's relative and that she did not have Mr. Bond's girlfriend's permission to use the car on the date of the accident. Moreover, the district court added, there was no dispute that Ms. Chapman was not Mr. Bond's relative and that Ms. Chapman did not have Mr. Bond's express permission to use the car on the date of the accident.

The district court then examined whether Ms. Chapman had Mr. Bond's implied permission to use the car, and decided that she had not had implied permission.

The district court pointed out that Ms. Chapman admitted that she had never asked Mr. Bond “for permission to use the car” but that she “did not think that [she] was not allowed to move the car closer to Lemon Hill Park” and she “did not think that [she] was doing anything wrong in moving the car closer to Lemon Hill Park.” The district court rejected Mr. Myers' argument that Ms. Chapman's “subjective beliefs” showed she had Mr. Bond's implied permission to drive the car, reasoning that the “critical question” was whether Mr. Bond had said or done something that warranted Ms. Chapman – an unlicensed driver – to have those beliefs.

In the district court's opinion, a reasonable juror “could not conclude” that Mr. Bond had said or done something to warrant Ms. Chapman to believe she had Mr. Bond's implied permission to drive the car.

Importantly, the district court observed that the Pennsylvania Supreme Court had not addressed whether an insurer was required to defend someone it had determined was not an insured even after a third party such as Mr. Myers had alleged in a lawsuit that the person was an insured. The district court predicted that the Pennsylvania Supreme Court would hold that an insurer was not required to defend someone it had determined was not an insured under the policy even if a subsequent third-party complaint suggested the person was an insured. Accordingly, the district court concluded, GEICO could not be held liable for refusing to defend Ms. Chapman.

The case is Myers v. GEICO Casualty Co., No. 17-3933 (E.D. Pa. Jan. 10, 2019). Attorneys involved include: For LOUIS K. MYERS, Plaintiff: HOWARD A. TAYLOR, LEAD ATTORNEY, PHILA, PA; JAMES C. HAGGERTY, LEAD ATTORNEY, JEFFREY STANTON, HAGGERTY GOLDBERG SCHLEIFER & KUPERSMITH PC, PHILADELPHIA, PA. For GEICO CASUALTY COMPANY, Defendant: JOSEPH A. HUDOCK, JR., LEAD ATTORNEY, SUMMERS MCDONNELLHUDOCK GUTHRIE & SKEEL PC, PITTSBURGH, PA.

FC&S Legal Comment

Courts in other jurisdictions that have held, like Pennsylvania, that the duty to defend was dependent on the allegations in the complaint also have ruled that an insurer need not provide a defense in circumstances similar to Myers. See, e.g., Pro Con, Inc. v. Interstate Fire & Cas. Co., 794 F. Supp. 2d 242, 250 (D. Me. 2011) (defendant must establish that it qualifies as an insured before duty of defend can be imposed based on allegations in complaint); Hartford Fire Ins. Co. v. Leahy, 774 F. Supp. 2d 1104, 1114 (W.D. Wash. 2011) (court could consider information outside of the complaint to determine if party was an insured entitled to defense under the policy); General Ins. Co. of America v. Clark Mall, Corp., 631 F. Supp. 2d 968, 974 (N.D. Ill. 2009) (although duty to defend is determined by allegations in third-party complaint, a mistaken designation of defendant in that complaint cannot require an insured to defend “a corporation with which it had no policy of insurance”).