A recent case from the Eleventh Circuit Court of Appeals weighed the application of a statutory presumption to an insurance policy. In Travelers Prop. Cas. Co. of Am. v. Moore, No. 13-14413 (11th Cir. Aug. 14, 2014), 2014 U.S. App. LEXIS 15610, the court ruled that a state statute presuming the permissive use of a vehicle did not apply to a definition of insured within an insurance policy and held that a driver, who used a company van for criminal conduct, did not have permission to use the van and therefore was not insured under the policy. The case offers interesting insight into the interplay between statute, contract and public policy and serves as a reminder to insurers and insureds that statutory considerations may affect policy interpretation.
The case arose after two men came to the defendant’s house with a tow truck to repossess the defendant’s car. As the men began to tow the car away, the defendant pursued them in his work van, owned and insured by his employer. The defendant was carrying a shotgun, which he pointed at the tow truck from his window while in pursuit. Upon entering a cul de sac, the van struck the tow truck and the shotgun accidentally fired into the truck, killing the driver and injuring the passenger. The defendant then fled the scene.
The defendant was found guilty of felony murder in a criminal case. When tort actions were separately filed against the defendant for monetary damage, the insurance company for the defendant’s employer sought a declaratory judgment that it was not obligated to indemnify the defendant under the employer’s commercial insurance policy because the employee had used the van for personal use without the company’s permission.
The trial court found that, as a matter of law, the insurance company had to provide coverage. In finding that the death of the one man and injuries to the other were not “expected” or “intended” so as to exclude insurance coverage, the trial court also relied on a Rhode Island statute to determine that the defendant was using the van at the time of the incident with permission of his company and therefore was an insured under the company’s commercial auto policy. The policy defined “insured” as anyone using the company’s auto with the company’s permission. Section 31-33-7 of the Rhode Island General Laws creates a “presumption of consent in cases in which the registered owner of a vehicle is not the driver,” stating that in civil proceedings, evidence that at the time of an accident a vehicle was “registered in the name of the defendant, shall be prima facie evidence that it was being operated with the consent of the defendant…” The trial court ruled that the limited consent given to the defendant as an employee was enough to make him an insured because, “under Rhode Island law, any permission at all is sufficient to establish the liability of the owner under § 31-33-7. Thus, [the company’s] consent has been established as a matter of law… and [the defendant] was an ‘insured’ at the time of the incident.”
But on appeal, the Eleventh Circuit refused to so easily connect the dots. Although recognizing the broad interpretation of the statute to mean that “granting even limited consent to use a vehicle constitutes consent to use it for all purposes,” the court did not agree that the presumption extended to interpreting the insurance policy.The court noted that the statute speaks in terms of the vehicle being registered to the “defendant” and a presumption that the “defendant” gave consent but, in this case, the company was not a defendant or even a party in this case. The court determined that the statutory presumption applies only to the owner’s liability and does not concern the interpretation of the owner’s insurance policy. Because the company’s liability was not at issue, the court concluded that the statutory presumption did not apply to the circumstances of the case and should not influence the application of the policy.
Instead, the court interpreted “permission,” as used in the policy, according to its “plain, ordinary, and usual meaning,” and found that the defendant was not insured under the policy. Despite the defendant’s arguments that the company was aware of his regular personal use of the van and had impliedly “consented to such use by failing to stop the violation of [the company’s] personal use policy,” the Eleventh Circuit held that there was no evidence that the company had “granted him permission to use the van as a pursuit vehicle in furtherance of a deadly criminal rampage.” The appellate court focused on the outcome of the defendant’s use of the van, rather than the simple fact of his personal use of the van, stressing that the company could not have anticipated that the defendant would use the van for a criminal pursuit and that it would not be reasonable to infer the company’s consent to use the van “to aid in the commission of serious felonies, especially where a homicide results…” The court ruled that the defendant did not have permission to use the van and therefore was not an insured under the policy.
The case provides an interesting insight into how contract, statute, and public policy interact to determine policy interpretation. Whereas the trial court found the statutory presumption of consent applicable to consider the defendant a permissive user under the policy and therefore insured, the appellate court did not agree that coverage should apply and refused to extend the statutory presumption to the insurance policy. While the Eleventh Circuit was not persuaded that the statutory presumption impacted the interpretation of the vehicle owner’s insurance policy, insurers and insureds should nevertheless understand the interplay between statute and contract, and the presumptions that affect coverage.
There are numerous statutory and common law presumptions that may affect policy interpretation and coverage questions, and it is important for insurers to understand how these external considerations may impact their obligations.
Burke Coleman is Legal Counsel and Compliance Manager for Demotech, Inc. Demotech provides actuarial consulting and Financial Stability Ratings® (FSRs) for property and casualty insurance companies and title underwriters. Burke can be contacted at email@example.com. This article is for informational purposes only, is not intended as legal advice, and is not a substitute for independent legal analysis and advice on a particular issue.
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