United States: Nationwide Mutual INS. Co. V. Shimon

(Insured Cannot Rely on Non-owned Vehicle Provision for Coverage to Save on Policy Premiums)

In Nationwide Mutual Insurance Company v. Shimon, 243 Cal. App. 4th 29 (2015), the Court of Appeal affirmed the grant of summary judgment for the insurer, determining the automobile insurance policy did not provide coverage for the insured's daughter under the non-owned vehicle provision.

This matter arose out of a vehicle collision involving the teenaged daughter of the named insured, her mother. The daughter's father, the registered owner of the vehicle, had excluded her from his insurance policy to save money, even though the daughter was the only one to ever drive the vehicle. The mother's policy extended coverage for a household family member's use of a "non-owned" vehicle, but only where the vehicle was not "furnished" or "available" for her "regular use."

The trial court entered summary judgment for the insurer, finding the vehicle was available for the daughter's regular use and, as such, was excluded. The appellants (those involved in the collision with the daughter) appealed, arguing that the vehicle was not available for the daughter's use at the time and place of the accident.

The father had purchased the vehicle for the daughter shortly before her 16th birthday. The father excluded the vehicle from his policy to save money. The mother — divorced from the father and remarried — had her own vehicles and automobile insurance. Both the mother and father placed rules on the daughter's use of the vehicle, rules which became less restrictive the longer the daughter had been driving. With inconsequential exceptions, the daughter was the only one to drive the vehicle. On the day of the accident, the daughter should not have been driving the vehicle — her parents had taken it away for poor grades. Nevertheless, the daughter took the keys and drove the vehicle.

The appellants filed a personal injury lawsuit against various parties, including the daughter, the father, and the mother. That lawsuit settled, with the agreement that the court would determine coverage under the mother's policy. The insurer accordingly initiated this declamatory relief action.

The policy listed the mother and her husband as the named insureds. The parties did not dispute that the daughter is a "family member" pursuant to the policy's terms. The trial court determined there was no coverage under the policy, as the vehicle "was furnished or available for [the daughter's] regular use." The trial court also found a provision regarding vehicles hired or borrowed by the insureds with their permission to be inapplicable.

The Court of Appeal agreed with the trial court, finding the regular use exclusion applied.

The Court noted that "[t]he purpose of preventing abuse is a crucial factor in determining whether the exclusion from coverage applies." The Court determined:

The situation in this appeal falls squarely within this purpose of preventing abuse. The GMC was basically [daughter's] vehicle, but no one insured the truck for her use. Even though it was registered to her father and he had a key, [daughter] had her own key and was the only one who drove it for a year and a half, with the possible de minimis exception that her mother may have driven it once or twice. That [daughter's] friend drove it once as [daughter's] agent was still [daughter's] use. That [daughter's] friend once drove it around the block as a prank is inconsequential. When [daughter] was not driving the GMC, it sat parked. The vehicle was for her exclusive use.

The Court distinguished this matter from that in Interinsurance Exchange v. Smith, 148 Cal. App. 3d 1128 (1983), where the vehicle was primarily used by the father; the vehicle was not available to the daughter whenever she "wanted, needed or desired it;" the daughter did not possess a set of keys; she could only use the vehicle with her parents' consent; and the vehicle was not used interchangeably with any other family car. In this matter, the Court found that daughter had "the exclusive use of" the vehicle. The Court rejected the appellant's argument that "the truck was not furnished or available for [daughter's] regular use because her parents placed some parental restrictions on her such that she should not have been driving the truck at that particular time and place." After citing case law wherein the courts found that the use did not constitute "regular use," the Court found: "Here, in contrast, [daughter] was the exclusive user of the car owned by her father, who deliberately excluded it from his insurance policy to save money. This is exactly the abuse the 'regular use' exclusion is designed to prevent." The Court declined to accept the viewpoint that "regular use" must be determined on a trip by trip basis where the driver has the exclusive use of the vehicle — the necessary result if the Court were to adopt the appellant's argument that the use at the time of the accident was not regular use because that specific instance was outside of the parents' consent. The Court concluded the insurance policy excluded coverage, affirming the judgment.

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