We are frequently asked by our business clients to advise as to insurance coverage issues that arise when employees use company vehicles for both business and personal purposes. Recently, the California Court of Appeal drew a line in the sand on this issue by holding that the typical “non-owned” provisions in personal automobile policies do not afford coverage to employees for injuries they may cause while operating a company owned vehicle for their “regular use.”
In Medina v. GEICO Indemnity Company (2017) 8 Cal.App.5th 251, the California Court of Appeal determined that the Non-Owned Auto Provision found in most personal auto policies does not cover employees while operating company vehicles furnished for their “regular use.” In Medina, Pacific Bell employee Leigh Anne Flores was involved in an accident while driving a van provided to her by Pacific Bell to perform her work duties. In practice, Flores used the van for both business and personal purposes. As a result of the accident, Javier Medina, the driver of the car she hit, sued Flores and Pacific Bell for damages. Pacific Bell, the owner of the van, was self-insured but asserted that it 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. Flores maintained insurance for the personal vehicles she owned through GEICO Indemnity Company. The GEICO policy provided coverage for Flores’ use of the Pacific Bell van as a “non-owned” vehicle but not if the non-owned vehicle was “furnished for [her] regular use.” GEICO refused to defend or indemnify Flores and Flores assigned any rights she had against GEICO to Medina in exchange for a covenant not to execute against her personal assets. The parties further stipulated that Flores was a permissive user of the van triggering Pacific Bell to pay only the $15,000 statutory liability limit for permissive use of its vehicle. With respect to Flores, Medina ultimately obtained a half-million dollar arbitration award.
The Court of Appeal was left with the question of whether GEICO, the personal auto insurer for Flores, was responsible for paying the $512,665.12 in damages the arbitrator awarded to Medina, as well as emotional distress damages, attorneys’ fees, and punitive damages. For the Court, the issue ultimately was decided by carefully examining two terms: “non-owned” and “regular use.” The insuring grant within the GEICO personal auto policy issued to Flores afforded coverage for bodily injuries arising out of the ownership, maintenance or use of an owned auto or non-owned auto. The policy defined “non-owned auto” as “an automobile or trailer not owned by or furnished for the regular use of either you or a relative, other than a temporary substitute auto. . .[a]n auto rented or leased for more than 30 days will be considered as furnished for regular use.” In sum, the Court found that the GEICO policy covered a car Flores owned or one she used as a temporary substitute for a car she owned but if the car was not owned by her and was not being used as a temporary substitute vehicle, but instead was furnished to her for her regular use, it was excluded from coverage under the GEICO policy. Thus, the van would be excluded from coverage under the GEICO policy if it was “furnished for [her] regular use.”
Flores’ job with Pacific Bell required her to transport equipment and tools between various offices in the San Joaquin Valley and into the Mojave Desert. She was not allowed to use her personal vehicle to do so and was assigned a 2000 GMC Safari van owned by Pacific Bell for this purpose. Flores had her own set of keys to the van and the van was permanently assigned to her for her exclusive, regular use. Pacific Bell did not place any restrictions on Flores’ use of the van during the work day and no limitations were placed on Flores’ use of the van while she was on out-of-town work assignments. As such, Flores routinely used the van to drive home for lunch and to run errands, such as to the bank and shopping. No area restrictions were placed on how far Flores could drive the van and no restrictions were imposed on her use of the van outside of work hours.
On the day of the accident, Flores received a call from her daughter who needed money to address a problem with a pet. At the time, Flores was in Bakersfield and her daughter lived in Fresno. They agreed to meet somewhere between the two cities so that Flores could give her daughter money. Prior to heading out to meet her daughter, Flores had lunch and consumed a couple glasses of wine. Thereafter, she headed out in the van down State Route 99 while intoxicated and ultimately she was involved in the accident that injured Medina.
The Court focused on what activities constitute “regular use” of a vehicle and found that, in this context, it means “frequent use” or “the principal use, as distinguished from a casual or incidental use.” Citing the longstanding California Supreme Court decision in Kindred v. Pacific Auto. Ins. Co. (1938) 10 Cal.2d 463, the Court noted that when a car is furnished for a particular use (i.e. business purposes) and the car is being used as intended (i.e. not being driven to a distant point on one occasion with the special permission of the one furnishing the car), that particular use is deemed a “regular use” of the car. Citing other California authority, the Court also provided examples wherein courts found a vehicle was furnished for regular use:
- A daughter sold her own car and began driving her mother’s car after her mother had a stroke, and thereafter used her mother’s car, to which she had the keys, whenever she wanted for all purposes and occasions;
- A driver agreed to purchase the car, but deferred payment while he awaited the receipt of specially ordered tires, and had used the car without limitation for nearly six weeks when the accident occurred;
- A daughter was the exclusive user of a truck registered in her father’s name but not insured for her use, and no limitations were placed on her use of the truck, for which she had her own key.
Conclusion
The Medina Court highlighted that the purpose of the non-owned auto provision is to prevent abuse, by precluding the insured and her family from regularly driving two or more cars for the price of one policy. Put another way, the provision is intended to provide coverage for occasional use of other non-owned cars without requiring payment of additional premiums. The “non-owned” vehicle coverage in personal auto policies 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.
The Court ultimately found that Flores’ use of the company 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 premium. The Court concluded that the non-owned auto provision intended to exclude coverage to persons with unlimited use of a vehicle which he or she drives in addition to their own vehicle without paying an additional premium to the insurer. Thus, the Court held that the GEICO policy did not afford coverage for Medina’s injuries incurred in the accident.