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Auto Insurance Complications When Vehicle Use is Both Professional and Personal

Many people drive as part of their daily work routine. Some do so specifically to further the business of their employer. In cases where an at-fault driver was acting in the course and scope of employment, the employer may be found vicariously liable for its employee’s negligence – even if the employer wasn’t in any way directly negligent (i.e., negligent hiring, negligent supervision, failure to properly maintain vehicle, etc.). van

However, when someone has permission to use a company-owned vehicle both for work and personal reasons, questions of liability can get complicated.

This was the matter at hand in a recent case weighed by a California appellate court, where the question was whether the at-fault driver’s personal insurer should be liable to pay a $500,000 arbitration award for a crash that happened while the driver was operating a company vehicle, but not in the course and scope of employment. 

According to court records, defendant worked for a telephone service company, where she’d been employed for 18 years. She worked out of a number of offices throughout Southern California, where she was responsible for tallying equipment inventory. She sometimes had to transport company equipment and tools as part of her job, and she wasn’t allowed to do this with her personal vehicle. Therefore, the company assigned her a work van, which was permanently assigned to her for exclusive regular use. However, the vehicle was kept at the office and she never took the van home overnight or over the weekend if she wasn’t out-of-town on assignment.

When defendant worked at the office in Fresno, she would drive her personal vehicle to and from the office, pick up the van and use it throughout the work day. When she traveled out-of-town for work, she drove her personal car to the main office, swapped vehicles, loaded up the equipment and carried out her duties. She would check into a motel when getting into town, carry out her work duties, and then pick up her personal vehicle before returning home.

The company never placed any formal restrictions on defendant’s van use during the day. Therefore, she used the van if she wanted to go to lunch, to the bank or to do personal shopping. Her employer was aware of this and did not halt the practice, and had never previously told her such use was forbidden. When overnight assignments kept her out-of-town, the company put no restrictions on where she could take the van during non-working hours.

One day in August 2009, defendant was out-of-town, she got a call from her daughter explaining her pet had an emergency and she needed some money to help defray the sudden cost. Her mother agreed to meet her halfway to give her money. While defendant was on the highway headed toward her daughter, she was involved in a traffic accident on the highway. Defendant had reportedly drank two glasses of wine with her lunch that day and was intoxicated at the time of the crash, which resulted in injuries to plaintiff.

Defendant ultimately lost her job, and believed she would have kept it if she hadn’t been drinking that day, as she had the explicit permission of her employer to use the van for her personal use.

Plaintiff filed a personal injury lawsuit against defendant and defendant’s employer in 2011. The company self-insured company vehicles, including this van, but refused to defend its former employee. The company conceded defendant was operating the van with its permission, but argued she wasn’t acting in the course or scope of employment and therefore wasn’t liable under the doctrine of respondeat superior. The company did offer plaintiff $15,000, which was the statutory liability for permissive use of its vehicle.

Defendant had her own personal auto insurance policy, but she hadn’t initially notified her personal insurer because she believed the employer would cover the damages. However, defendant’s personal auto insurance policy didn’t identify the van she was driving as a covered auto. The policy specifically excluded coverage from accidents involving the use of a non-owned vehicle used for employment of the insured if the crash arises out of that business or job. The personal auto insurer concluded there was no coverage because defendant couldn’t have reasonably believed she had permission to use the van at the time the crash occurred.

Defendant assigned whatever rights she had against her personal auto insurer for bad faith action to plaintiff in exchange for a promise not to seize her personal assets. The pair entered a binding arbitration process, which resulted in a judgment for $500,000 in favor of plaintiff. However, defendant’s auto insurer hadn’t been a party to that process, and refused to pay the judgment. Plaintiff sued for breach of contract, breach of implied covenant of good faith and fair dealing and recovery of the policy limit. The insurer sought summary judgment, arguing the policy didn’t afford coverage for this particular claim against defendant driver.

Trial court issued summary judgment to defendant. The California Court of Appeals for the Fifth Appellate District affirmed, ruling that because defendant used the vehicle for both business and personal purposes and her personal use of the van at the time of the crash didn’t depart from customer use, there was no coverage under defendant’s personal policy.

If you are injured in an accident in Massachusetts, call the Law Offices of Jeffrey S. Glassman for a free and confidential appointment — 1-888-367-2900.

Additional Resources:

Medina v. GEICO Indemnity, Feb. 8, 2017, California Court of Appeal, Fifth Appellate District

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Report: One Dead in Andover Car Crash, Feb. 6, 2017, Boston Car Accident Lawyer Blog