Monday, December 2, 2013

Understanding “Use”

State Farm Mutual Automobile Insurance Co. v. Colby, 2013 VT 80

Today’s case is brought to you by the letters A, B, and C because using anything other than these basic letters (that is the proper insurance terminology) to describe this case’s issue would render the whole deal confusing and awkward (kind of like my high school years). 

At any rate, the question before the SCOV is whether an omnibus clause in an insurance policy provides coverage for a person in the middle of a car-loaning triangle.  Put another way: A loans car to B; B, in turn, loans car to C; C, in turn, gets in an accident.  Is B covered under the policy for a negligent-entrustment claim against B for loaning the car to C?

The underlying story, using the A-B-C designations, is as follows.  On the day of the accident, defendant (B) picked up decedent (C) who was hitchhiking.  Eventually, they met policyholder (A) at a McDonald’s, where C asked A to use her car.  In response, A asked B whether B was sober and licensed.  B said he was.  A gave B the keys to A’s car with no restrictions.  But there seemed to be an unarticulated understanding that C, who had been drinking and had had a number of alcohol-related driving charges, would not be driving the vehicle.  A said something about needing to get some boxes out of the trunk.  B gave C the keys so C presumably could go sit in the car and listen to the radio (and maybe help with the boxes—this isn’t clear).  C just got in A’s car and drove off.    
B saw C a couple times later in the day; at one point B told C he shouldn’t be driving and to return the car to A immediately.  Eventually, C drove into a telephone pole at a high rate of speed and died instantly. 

C’s estate sued A and B for wrongful death under a negligent-entrustment theory.  B sought defense coverage under A’s policy.  Insurer objected, and as often happens, the issue boiled down to a legal question of duty to defend and indemnify on which both parties sought summary judgment. 

The policy at issue here provided coverage for people a car is loaned to “while using such a car if its use is within the scope of [policyholder’s] consent.”  Thus, there are two questions: (1) was B’s giving the keys to C “use” under the policy; and (2) if so, was that “use” within the scope of A’s consent? 

The trial court concluded that B’s action was not “use” under the policy and granted summary judgment for insurer.  B appealed. 

Because the SCOV is reviewing a grant of summary judgment, we’re in same-standard-as-the-trial-court territory: if there’s no genuine dispute of material fact, and the movant is entitled to judgment as a matter of law, then summary judgment is proper—in other words, not a lot of deference to the trial court.  Additionally, the SCOV has a long history of reviewing insurance policies and interpretating however the **** they feel like it. 

The SCOV notes at the outset that an insurance company’s “duty to defend” is the broadest duty an insurance company has.  Accordingly, the relevant question is not whether there’s explicit coverage under the policy, but whether there might be coverage.  

The SCOV’s first question is whether the transfer of keys from B to C was “use” under the policy.  What does “use” mean?  To answer this question, the SCOV first looks to the policy’s plain language.  If a disputed term is ambiguous, the language is construed against the insurance company and in the individual’s favor.  Here, the policy does not define “while using.”  Black’s Law Dictionary is no help.  Accordingly, the SCOV finds the term ambiguous. 

There is a lengthy review of the varying interpretations of “use” in insurance policies amongst other jurisdictions that is quite educational, but nonetheless unnecessary to delve into in great detail here.  There is also an educational discussion of the public-policy reasons for favoring coverage.  And the SCOV’s ultimate determination is that “use” is an ambiguous term—broader than, for example, “driving”—and with the principle that construction should be in favor of coverage, the trial court’s interpretation of “use” was far too narrow.  As the SCOV puts it, “[W]e find that entrustment of another with a vehicle that one owns or controls constitutes ‘use’ for the purpose of the omnibus clause of an automobile liability insurance policy.”  Write that down, kids.  Potential coverage just got a nice winter coat.    

This brings the SCOV to the second question: whether the transfer of the keys from B to C was within the scope of A’s consent.  The SCOV notes that everyone seems to have understood that C wasn’t supposed to be driving.  Accordingly, if B gave the keys to C when he knew or should have known C was going to take off with the vehicle, B doesn’t get coverage under the policy. 

But B’s account was that he only gave C the keys to go listen to the radio and maybe help load some boxes.  B even told C that he was not to drive.  Accordingly, there is a factual dispute—indeed, if B’s testimony is believed and a jury finds that B’s belief that C would not drive is reasonable, then there was no negligent entrustment.  The SCOV concludes that a genuine dispute of material fact exists and summary judgment was not proper. 

And so this one gets sent back to the trial court for another day in court—and maybe a couple more after that when we get to the underlying claim . . . .  The immediate result, however, as Louis Jordan might say, is that B done hooked the insurance company, at least for another few rounds.  So beware, brother, beware.   

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