Car Insurance To Cover Employees Driving Own Car?

Our San Francisco insurance attorneys follow all the latest California legal developments in insurance law. Recently we noted that the California Supreme Court granted review in American States Insurance Company v. Ramirez. This case revolves around a “stuffer” put into the envelope with the employer’s insurance policy documents, requesting information about employees driving their own cars for company business. The questions at issue in this upcoming case are, first whether that “stuffer” form which stated that the insured was covered for any vehicle driven was part of the insurance policy, and second, if it was part of the policy, did that “stuffer” form create ambiguity in coverage that should be construed against the insurer?

The background of the case involves an employee, Hector LaBastida, of HLCD, Inc. HLCD took out the insurance policy at issue, which explicitly included insurance for two listed cars. It had a liability limit of $750,000. The insurance company, American States, sent Mr. LaBastida a copy of the policy including the “stuffer” form, which listed him as the only driver. Later, Mr. LaBastida caused a traffic accident in his own car, not one of the cars listed on the policy, but while conducting company business. That accident caused the death of one person and severely injured two others. Mr. LaBastida also had private insurance for his personal car from Wawanesa Insurance Company, with a liability limit of $300,000.

In 2005, the persons injured in the car accident and their families sued HLCD and Mr. LaBastida. In that case, American States denied coverage for the accident because it said Mr. LaBastida’s car was not covered by their policy. Two years later, the injured persons offered to settle within the liability limits, but American States refused again on the grounds the car was not covered by them.

Afterwards, American States filed a civil action to determine whether or not Mr. LaBastida’s car was covered by their policy. The trial court found American States potentially liable, with a duty to defend and indemnify in court. The court stated that the “stuffer” form was ambiguous and that at least one interpretation of it was that employees driving their own vehicles were covered.

The Court of Appeals reversed the trial court’s ruling, and held that it would not have been objectively reasonable to believe the “stuffer” form was party of the insurance policy. The Court of Appeals found that the policy was entirely vehicle-based, and not driver-based, so it was clear it only covered the specified vehicles. Furthermore, it held that even if it was part of the policy, it was not objectively reasonable to believe that it enhanced the coverage of the policy.

Now we’ll have to wait for the Supreme Court to finally determine this issue, but employers should be careful in the coming months to clarify their insurance coverage for employee drivers.

San Francisco Insurance Attorneys
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