When an Insured Vehicle Becomes an Uninsured Motor Vehicle for Injuries Sustained While Riding in it

A prototypical uninsured motor vehicle insurance claim involves an uninsured third party vehicle injuring someone in a different car that has both liability and uninsured motorist (UM) coverages. What happens when the policyholder is injured while she is a passenger in a UM-covered vehicle she owns or uses, but the insurer denies liability coverage for the driver of the insured vehicle?

In a case of poetic but circuitous justice, a United States District Court in Florida found that, where an automobile insurer denied liability coverage for the non-permissive driver of the insured vehicle, that vehicle itself qualified as an uninsured motor vehicle (UMV), triggering the UM coverage of the same policy to pay for the passenger’s injuries. Not a surprising result, since the insurer’s denial of liability coverage for the driver was what left the vehicle uninsured. The decision is published as Tibbetts v. State Farm Mutual Automobile Insurance Company, 2015 U.S. Dist. LEXIS 156593 (November 19, 2015).

The facts in Tibbetts were not in dispute. State Farm issued an automobile liability insurance policy with UM coverage to Angela Marie Tibbetts’ parents. The policy was in force at the time of an automobile accident on September 16, 2014, and provided coverage for a Honda Civic automobile owned by Tibbetts’ mother, a vehicle involved in the accident. Angela qualified as a “resident relative” insured under the policy, since she was living with her parents at the time of the accident. She was an insured under the policy also, because she was identified in it as a driver of the vehicle.

At the time of the accident one Ray Walker was driving the Honda Civic, and Angela was riding in it as his passenger. Walker was not a member of the Tibbetts family, and he had no permission to drive the vehicle. Angela Tibbetts was injured in the accident.

State Farm denied liability coverage to Walker for the accident, because he lacked permission to drive the Honda Civic. Since State Farm treated the vehicle as uninsured, and no other policy insured the vehicle, Angela made a claim for UM benefits for her injuries under the State Farm policy. State Farm denied that claim, too.

Angela sued State Farm seeking UM benefits for the accident. On cross-motions for summary judgment, the court found that there was UM coverage for the accident, granted Angela’s motion for summary judgment and denied State Farm’s cross-motion.

The State Farm policy UM provision required the insurer to pay Angela, as an insured, all bodily injury compensatory damages she was legally entitled to recover from the driver of an uninsured motor vehicle. The policy defined an uninsured motor vehicle to include a motor vehicle whose ownership and use is not insured for bodily injury at the time of an accident. Not only had State Farm denied liability coverage to driver Ray Walker for the accident, but the parties also agreed that there was no evidence that Walker was insured by any insurance policy at the time of the accident. Additionally, State Farm itself contended that Walker’s use of the Honda Civic was not insured under the liability coverage of the policy, because he was driving the vehicle without permission. On the surface, it is difficult to see how State Farm thought it could claim the vehicle was not an uninsured motor vehicle at the time of the accident.

State Farm contended its position was supported by the second of two exceptions to the policy definition of the term “uninsured motor vehicle,” but this contention was overcome by an exception to the first of those policy exceptions, which the court held directly conflicted with the second exception and affirmatively established UM coverage. The two exceptions read as follows:

Uninsured motor vehicle does not include a land motor vehicle . . .:

1. whose ownership . . . or use is provided Liability Coverage by this policy. However, any such vehicle will be deemed to be an uninsured motor vehicle for bodily injury sustained by . . . a resident relative while the vehicle is being operated by a person other than you [the named insured] or a resident relative; [or]
2. owned by . . . or furnished or available for the regular use of you [the named insured] or a resident relative[.]

The parties disputed the operation of these two exceptions under the facts of the case. State Farm contended that the Honda Civic was not a UMV under the policy because of exception 2, under which a UMV did not include a vehicle owned by or furnished or available for regular use by Angela, a resident relative, or by her parents, named insureds.

Angela, on the other hand, relied on Exception 1 to argue that the Honda Civic was a UMV at the time of the accident. That exception provided that a UMV did not include a vehicle whose ownership or use was afforded liability coverage by the policy, thereby denying UMV status to the Honda Civic. Exception 1, however, had its own exception, which fit the facts of the case to a tee. That provision said that the Honda Civic would be deemed a UMV for bodily injury sustained by Angela, while the vehicle was being operated by someone other than Angela or her parents.

The court noted that the exception to Exception 1 was consistent with the Florida UM coverage statute, which provided that, for the purpose of UM coverage, subject to the terms and conditions of such coverage, the term “uninsured motor vehicle”, was deemed to include an insured motor vehicle when the liability insurer thereof excludes liability coverage to a nonfamily member, whose operation of an insured vehicle results in injuries to the named insured or to a relative of the named insured, who is a member of the named insured’s household. Fla. Stat. §627.727(3)(c)

State Farm argued that as long as the Honda Civic satisfied one of the two policy exceptions – and it did satisfy Exception 2 – it could not be considered a UMV, because the UMV exceptions were placed in the policy as alternatives, using the disjunctive word “or” to differentiate between them. State Farm also pointed out that the Florida statute provided that its definition of a UMV was made subject to the terms and conditions of the UM coverage of the policy, making the policy wording the final word.

The Court rejected State Farm’s position because Exceptions 1 and 2 directly contradicted each other when the vehicle involved in the accident is owned by an insured and covered by the insurance policy, but is being operated at the time of the accident by someone other than the insured or a resident relative and causes bodily injury to the insured or a resident relative. Under Exception 1 the Honda Civic was a UMV; under Exception 2 it was not.

Because the policy exceptions directly conflicted with each other as applied here, the court ruled that they created a policy ambiguity. Exception 1 specifically addressed the circumstances of this case and provided UM coverage for the accident, while exception 2 was a general exception that exempts the vehicle from UM coverage. Since the exceptions created an irreconcilable coverage ambiguity, without any ability to bring them in harmony with one another, the court construed the policy provisions liberally in favor of UM coverage and found that the Honda Civic was a UMV under the policy for the accident at issue.

Comparing the case to California law as a different jurisdiction, the result would have been the same under the direct approach of that state’s uninsured motor vehicles statute. (Ins. Code, §11580.2.) That statute requires an automobile liability insurance policy to include coverage “insuring the insured . . . for all sums . . . that he, she, or they, as the case may be, shall be legally entitled to recover as damages for bodily injury or wrongful death from the owner or operator of an uninsured motor vehicle.” The “insured” would have included Angela, since the term is defined in the statute to mean the named insured, his or her spouse and, while residents of the same household, relatives of either. Crucially, the term “uninsured motor vehicle” is defined simply to include a vehicle with auto liability insurance “applicable” at the time of the accident, but the insurer writing the insurance denies or refuses to admit coverage thereunder, except conditionally or with reservation. Ins. Code, §11580.2(a)(1) and (b). As a consequence, in California anything less than State Farm’s complete acceptance of liability coverage for Walker, the non-permissive driver, without more, would have made the Honda Civic a UMV, triggering Angela’s UM coverage for the accident.