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A policy definition for “non-owned auto” does not violate public policy simply because it precluded coverage for a driver who was doing a favor for a friend. The case is Landry v. Progressive Sec. Ins. Co., 347 So. 3d 712 (La. 2022).
What Happened
Riyad Shaibi was driving a friend’s car to a tire shop with the friend’s permission when he collided with the Landrys, who both suffered injuries. The Landrys sought coverage from Financial Indemnity Company–Shaibi’s auto carrier–and Progressive Security Insurance, who covered the auto Shaibi was driving.
Though the friend’s auto was being operated by a permissive user, rather than the named insured, at the time of the accident, Progressive paid its full policy limits. Financial, however, denied the Landrys’ claims based on the policy’s non-owned auto exclusion. The insurer argued that, though the policy covered certain “non-owned autos,” the auto Shaibi had been driving at the time of the collision was not considered a covered non-owned auto because it was not being “used as a temporary substitute for ‘your covered auto’ which is out of normal use because of its: 1. Breakdown; 2. Repair; 3. Servicing; 4. ‘Loss’; or 5. Destruction.”
Litigation
When the Landrys sued, Financial sought summary judgment. In opposition, the Landrys argued that Financial has violated both Louisiana insurance law and public policy, and finding otherwise would “lead to absurd conclusions.” The district court disagreed and granted Financial’s motion. The Landrys appealed. The intermediate appellate court was skeptical of the Landrys’ arguments, but the judges claimed it contravened public policy for a person “operating a non-owned vehicle with permission in the fulfillment of a good deed for a friend,” as Shaibi had been, to be excluded from coverage. The trial court ruling was reversed. Financial appealed to the Supreme Court of Louisiana.
A Question of Public Policy
The question before the court was whether an insurer was legally required “to provide coverage for its named insured while operating a non-owned vehicle in the fulfillment of a good deed.” However, the justices pointed out there was no actual dispute over whether Shaibi had been driving a “non-owned auto” within the meaning of the policy at the time of the accident. He was not driving a substitute auto because his own had been stolen, destroyed, or otherwise rendered inoperable. He was taking his friend’s car to a tire shop as an act of kindness, not one of necessity. Therefore, the appropriate question was whether Financial’s policy definition for “non-owned auto” was so antithetical to public policy that it could not be enforced.
State law–specifically La. R.S. §32:900(A)–required Louisiana drivers to carry either an owner’s or an operator’s policy as proof of financial responsibility. Coverage under an owner’s policy described in La. R.S. §32:900(B) extended to the named insured and any permissive driver of the insured auto for coverage “against loss from the liability imposed by law for damages arising out of the ownership, maintenance, or use of such motor vehicle or motor vehicles” (emphasis added). By contrast, an operator’s policy under La. R.S. §32:900(C) protected the named insured “against loss from the liability imposed upon him by law for damages arising out of the use by him of any motor vehicle not owned by him” (bold italics original, plain bold added). Put another way, coverage under an owner’s policy stayed with the vehicle listed in the declarations, while an operator’s policy followed the named insured.
The justices pointed out that a 1985 revision to Louisiana’s compulsory auto coverage laws imposed a requirement for “an automobile liability policy with liability limits as defined by [La.] R.S. 32:900(B)(2)” (emphasis original).” As stated above, La. R.S. §32:900(B) described an owner’s policy focused on coverage for the insured auto rather than who was driving it. The justices said that incorporating this specific subsection of La. R.S. §32:900(B) to the exclusion of the other parts of La. R.S. §32:900 “was intentional.” The legislature, then, chose not to include the operator’s policy described in La. R.S. §32:900(C) in the scope of the 1985 revision. In doing so, the legislature showed that it contemplated the possibility that some policies, whether owners or operators, would not include coverage that followed the named insured when driving a non-owned auto.
The Landrys argued that the statutory requirements for coverage were irrelevant because excluding non-owned auto coverage for Shaibi still violated the public policy of requiring insurance “for the benefit of the injured person and the insured.” They cited State Farm Mut. Auto. Ins. Co. v. Safeway Ins. Co. of La., 205 So. 3d 981 (La. Ct. App. 2016), where the court struck down a policy definition for a “temporary substitute motor vehicle” similar to the definition for “non-owned auto” in the Financial policy.
The court was not moved. For one thing, public policy dictated coverage that followed the vehicle, not the named insured. Furthermore, the definition at issue in the Safeway case had stated that only a vehicle “being serviced or repaired by a person engaged in the business of selling, repairing, or servicing motor vehicles” would be counted as a “temporary substitute motor vehicle.” The definition violated public policy because it placed an unreasonable limit on coverage. The insurer had denied an insured’s unowned auto claim because he repaired his vehicle himself instead of taking it to a mechanic.
The definition of “non-owned auto” in the Financial policy included no such limitation. Also, both of the vehicles listed on Shaibi’s Financial policy were in perfect working order. He was driving the non-owned auto as a favor to his friend, not out of necessity.
Conclusion
Though it was commendable of Shaibi to help his friend, the performance of a good deed in and of itself was an insufficient basis to find coverage. The judgment of the lower court was affirmed.
Editor’s Note: The Landrys claimed that finding no coverage obligation in this case meant there would be no auto coverage period for any driver who drove a non-owned vehicle even if their own wasn’t inoperable. The court’s decision would, hypothetically, preclude coverage for an insured driving their intoxicated friend home in the friend’s car.
The court pointed out that the question of coverage for a non-owned auto in instances of necessity, exigency, or safety concerns was not before the court. Shaibi drove his friend’s car only as a good deed, and not out of necessity. This decision would not have an impact on the public policy considerations surrounding non-owned autos driven under more exigent circumstances.
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