United States: Auto Insurer Properly Denied Liability Coverage Where Insured Operated A "Non-Owned" Auto Furnished For Insured's Regular Use

Medina v. GEICO Indemnity Company, 8 Cal.App.5th 251 (2017)

Leigh Anne Flores worked for Pacific Bell. While driving a Pacific Bell van, she hit another car driven by Javier Medina. Pacific Bell furnished the van to Flores for work, but Flores also used it for personal use without any express objection or restriction by Pacific Bell. At the time she struck Medina, Flores was on a personal errand during work hours.

Medina sued Flores and Pacific Bell. The trial court rejected vicarious liability claims against Pacific Bell, because the accident did not occur in the course and scope of Flores's employment. Flores tendered the Medina action to her personal auto insurer, GEICO. GEICO declined to defend and indemnify Flores. Although the GEICO policy covered use of a "non-owned" vehicle, the coverage did not extend to non-owned vehicles "furnished for [Flores's] regular use."

As between Medina and Flores, the matter proceeded to arbitration with an award in Medina's favor totaling $500,000. Thereafter, Flores assigned any rights she had against GEICO to Medina for a covenant not to execute the award against her personal assets. Medina then filed suit against GEICO for breach of contract, bad faith and declaratory relief. GEICO moved for summary judgment arguing, among other things, that there was no coverage under its policy because Pacific Bell furnished the van to Flores for her regular use. Some of the undisputed facts included the following:

  • Because Flores's job included transporting company equipment and tools, Pacific Bell would not allow Flores to use her personal vehicle for work. Instead, it provided Flores with a set of keys to the van permanently assigned to her for her exclusive, regular use.
  • Pacific Bell did not place any restrictions on Flores's use of the van during the work day. She routinely used the van for personal errands while on out-of-town work assignments. She also used the van to drive home for lunch and to run errands while working on assignments in town.

Relying on these and other facts, the trial court granted GEICO's motion. The trial court reasoned that there was no coverage under the non-owned auto clause because Flores had nearly unlimited use of the van.

The Court of Appeal affirmed. It rejected Medina's argument that "regular use" encompassed only the vehicle's primary use, not some incidental use, and that the van's primary use was for business. As a threshold matter, the Court explained that the elements to consider in determining whether a car was furnished for regular use "include time, place and manner of use, purpose or type of use, and restrictions on use." Medina, 8 Cal.App.5th at 262 (quoting Highlands Ins. Co. v. Universal Underwriters Ins. Co., 92 Cal.App.3d 171, 175-176 (1979)). The Court agreed that the undisputed facts showed that Flores had regular and nearly unlimited use of the van without any restrictions. It explained: "Here, the van was given to Flores for both business and personal use during the 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 . . . . 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." Id. at 264.

The Court of Appeal also relied heavily on the purpose of the non-owned auto provision, the intent and function of which "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." Medina, 8 Cal.App.5th at 264 (quoting Highlands, 92 Cal.App.3d at 176). Here, "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." Id.

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