United States: Medina v. Geico Indemnity Company

In Medina v. Geico Indem. Co., 8 Cal.App.5th 251 (February 8, 2017), the California Fifth District Court of Appeal affirmed the trial court's entry of summary judgment in favor of Geico Indemnity Company ("GEICO") in connection with an excess judgment arising out a declination of coverage of insured, Leigh Anne Flores, based on her use of a non-owned van supplied by her employer Pacific Bell. The parties' dispute arose out of an automobile accident, wherein, Flores was running a personal errand and was involved in an automobile accident with another vehicle operated by plaintiff, Javier Medina. Flores was operating a van supplied by her employer, Pacific Bell, at the time of the accident. As a result of the accident, Medina filed a lawsuit against Pacific Bell and Flores.

In the underlying Medina lawsuit, the trial court found that Pacific Bell was not vicariously liable for Flores' actions as she was not acting in the course and scope of her employment at the time of the accident. In a subsequent arbitration, involving only Medina and Flores, an arbitrator awarded Medina over a half million dollars in damages. GEICO declined to defend and indemnify Flores in the underlying Medina lawsuit and subsequent arbitration.

Flores was insured for her personal automobile under a policy issued by GEICO. The GEICO policy provided coverage to her for use of a "non-owned" vehicle, but not if the non-owned vehicle was "furnished for her regular use." As a result of its investigation, GEICO determined that Pacific Bell supplied the van which was operated by Flores and involved in the Medina accident for both professional and personal use. Pacific Bell did not place any restrictions on Flores's use of the van. Further, Flores was entitled to use the van at any time while traveling out of town for work. In that regard, the accident occurred while Flores was traveling from Bakersfield to provide her daughter with money for a personal matter.

As a result of the judgment entered by the arbitrator, Flores assigned her rights under the GEICO policy to Medina. Subsequently, Medina filed a lawsuit against GEICO to recover the amount of the judgment based on such assignment. Thereafter, GEICO filed a motion for summary judgment arguing that the van did not qualify as a non-owned vehicle as it had been furnished to Flores for her regular use. The trial court agreed and entered judgment in favor of GEICO.

In affirming the trial court's entry of summary judgment, the Court of Appeal reasoned as follows:

Here, Medina contends the van was not furnished to Flores for her regular use because Pacific Bell furnished the van primarily for business purposes. Medina argues that Flores's use of the van when the accident occurred was not a regular use since she was on a personal mission. According to GEICO, however, Flores's use of the van was a regular use because Pacific Bell furnished the van to her for both business and personal uses, and she could use the van for whatever purposes she wanted.

We agree with GEICO. The undisputed facts show Flores had the keys to the van, which was assigned to her exclusively, and she was authorized to use it for both business and personal purposes. While Pacific Bell furnished the van to Flores because she needed it to perform her job, it did not place any restrictions on her use of it. Even if, as Medina contends, she did not have unrestricted access to the van at all times because she was required to return the van to the Fresno office at the end of her workday while working in the local area and when she returned from out-of-town business trips, Flores had unlimited use of the van when it was in her possession and the van was assigned to her for her exclusive use. When she was out of town on business, the van was her only means of transportation since Pacific Bell refused to allow her to use any other vehicle. Since she could use the van while on out-of-town trips for business and personal use, at the time of the accident she was using the van in a manner permitted by Pacific Bell and within the scope of the purposes for which the van was furnished. These facts establish that the van was furnished to Flores for both business and personal reasons, and her use of the van at the time of the accident was a regular one.

We reject Medina's assertion that because Flores was provided the van primarily for business purposes, her use of the van for personal purposes at the time of the accident was not a regular one. As Lewis instructs, whether a vehicle is furnished to an insured for regular use depends on the time, place and purpose for which it is to be used, and whether its use at the time of the accident was "a departure from the customary use for which the car is furnished." (Lewis, supra, 56 Cal.App.2d at pp. 600–601.) Here, the van was given to Flores for both business and personal use during her work days and while on out-of-town business trips, and her personal use of the van at the time of the accident was not a departure from the customary use, namely business and personal use while on out-of-town trips, for which the van was furnished. That business use was the reason she was given the van does not render her use at the time of the accident irregular when she was authorized to use the van for both business and personal purposes.

The purpose of the non-owned auto provision supports our analysis in this case. The intent and function of this provision "is to prevent abuse, by precluding the insured and his family from regularly driving two or more cars for the price of one policy. The purpose of the provision is to cover the occasional use of other cars without payment of an additional premium but to exclude the frequent or habitual use of other cars, which would increase the risk on the insurer without increasing the premium of the insured." (Highlands, supra, 92 Cal.App.3d at p. 176.) Put another way, the provision is "intended to provide coverage for occasional use of other [non-owned] cars without requiring payment of additional premiums. For obvious reasons, coverage was not intended to include the regular use of other cars because insurance companies would necessarily bear an increased risk without receiving a related increase in premiums. Specifically, the exclusion serves to prevent a situation in which the members of one family or household may have two or more automobiles actually or potentially used interchangeably but with only one particular automobile insured." (Smith, supra, 148 Cal.App.3d at p. 1138.)

The non-owned auto provision excludes coverage for the situation before us, where a person has unlimited use of a vehicle which she drives in addition to her own for some time without paying an additional premium to her insurer. Flores's use of the van at the time of the accident was not an occasional use, but rather was a frequent use which increased the risk to GEICO without it receiving a related increase in premiums. Her use of the van in lieu of her own car on out-of-town business trips for both business and personal purposes shows two vehicles were available to her that could be used interchangeably, but with only her own car insured. This is the type of abuse the non-owned auto provision was intended to prevent.

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