Rented Vehicle as a Temporary Substitute Auto
The auto insurer brought an action seeking a declaration that no coverage existed for an accident involving a vehicle rented by the insured. This case is Chandler v. Geico Indemnity Company, 2011 WL 5864808 ( Fla. ). Note that this opinion has not, as of this writing, been released for publication in the permanent law reports.
Shazier was a named insured and owner of a Ford Expedition listed in the auto policy issued by Geico. In 2006, because Shazier's vehicle became disabled, she rented a Hyundai from Avis Rent-A-Car, designating her Geico insurance as the primary insurer. The rental agreement contained the following provision: no additional operators are authorized or permitted without Avis' prior written approval in accordance with the terms and conditions of the rental agreement. Another paragraph in the rental agreement stated that a violation of the agreement, which includes use of the car by an unauthorized driver, will automatically terminate the rental and void all liability protection the renter has accepted.
Soon after renting the car, Shazier permitted the rental vehicle to be used by Royal who in turn allowed Jordan to drive the car. Jordan negligently operated the car and crashed into a tree, resulting in serious injury to minor passengers and the death of another. The injured passengers and the decedent's representative subsequently filed personal injury actions against Shazier, Jordan and Avis. Geico, Shazier's insurer, filed a declaratory judgment action seeking a determination that it had no duty to defend or indemnify Shazier or Jordan. The trial court granted summary judgment against Geico and the appeals court reversed that decision. The case then went to the Florida Supreme Court.
The court noted that the appeals court determined that the rental contract between Avis and Shazier, which prohibited anyone not authorized by Avis from driving the car, governed whether Avis had given its permission for the use of the car within the meaning of the Geico policy; the wording in that policy defined a temporary substitute auto as one temporarily used with the permission of the owner and used as a substitute for the owned auto when withdrawn from normal use because of breakdown or repair. The appeals court found that, because the Avis rental contract between Shazier and Avis did not expressly authorize Jordan to operate the vehicle, the rental car was not being used with the permission of the owner (Avis). Thus, the rental car was deemed a nonowned auto instead of a temporary substitute auto and Geico accordingly denied coverage. The Supreme Court decided that this interpretation by the appeals court conflicted with prior Supreme Court opinions as to the meaning of an owner's consent for the use of a vehicle under the dangerous instrumentality doctrine.
Under the dangerous instrumentality doctrine, liability is imposed on the owner of an auto who voluntarily entrusts the vehicle to another who causes damage to others through the negligent operation of the vehicle. So, regardless of any restrictions written into this rental agreement between Avis and Shazier, the court said that the fact is that the auto was being used with the owner's permission. Consent for use could not be limited by an unauthorized operator clause. The court said that it has applied a very broad and consistent definition for consent regarding an owner' entrustment of a vehicle to another and such consent is not limited by the identity of the operator.
As for the insurance policy, the court said that the policy treated a temporary substitute auto as the insured's owned auto, and that Geico covered the insured and any other person using the auto with the insured's consent. Thus, although Shazier did not actually own the rented car, Geico covered the substitute car as if it were owned by the insured. And, since the policy covered any person using the auto with the insured's consent, the policy also applied to the permissive driver, Jordan. The restriction in the rental agreement between Shazier and Avis could not be used by the insurer to disregard its obligations under the auto policy. The decision of the appeals court was quashed.
Editor's Note: The Florida Supreme Court used the auto policy wording and the dangerous instrumentality doctrine to find coverage for this claim. The policy treated a temporary substitute auto as the insured's owned auto and the doctrine imposed liability on the owner of an auto who voluntarily entrusts the vehicle to another who causes damage. The rented car, as a temporary substitute auto, was seen by the court as a car owned by the insured (Shazier), and the insured voluntarily entrusted the car to another ( Jordan ). The doctrine imposed liability on Shazier and the policy provided coverage for that liability.