Reasonable Belief under the Personal Auto Policy
December 3, 2013
Matthew Bumbalough held a Tennessee personal automobile insurance policy with Southern Trust Insurance Company. The policy covered certain damages for which an “insured” or any person using insured's covered auto becomes legally liable to another for an auto accident. However, it contained an exclusion for damages where at the time of the accident, the insured was using vehicle without a reasonable belief that he was entitled to do so. This case is Southern Trust Ins. Co. v. Dustin McNally, et al, 2013 WL 3093958, No. 3:12cv034 (E.D. Tenn. 2013).
On June 12, 2011, Bumbalough delivered his pickup truck, which was insured this policy, to the home of Dustin McNally to be detailed. Bumbalough left the keys in the truck and told McNally to return it to Bumbalough's residence a quarter mile away when the truck was ready, which Bumbalough had allowed McNally to do on past occasions. Instead, McNally used the truck to drive 40–50 miles from his home to his place of employment a county over, where, on returning, he rear-ended a car driven by Anna Northern. Northern filed suit against McNally and Bumbalough in the Circuit Court for Jefferson County, Tennessee, which was opposed by State Farm Mutual Automobile Insurance Company, Northern's uninsured motorist carrier. Southern Trust then moved for declaratory judgment to determine the parties' rights and obligations under the automobile insurance policy.
The court laid out five factors for determining the applicability of an automobile policy exclusion for persons operating a covered auto without a reasonable belief that they are, in fact, allowed to do so: (1) whether the driver had express permission to use; (2) whether the use exceeded the permission; (3) whether any law entitled the driver to use; (4) whether the driver had any right of title or possession; and (5) whether there was some form of relationship between the driver and owner that would have caused the driver to believe that he was entitled to use the vehicle. Phillips v. Harding, App. No. 89–307–II, 1990 WL 14020 (Tenn.Ct.App. Feb.16, 1990). In addition, the court utilized a bifurcated analysis to interpret the policy's reasonable belief language: the first inquiry, being subjective, looked to whether or not the driver in fact believed he had the named insured's permission to use the vehicle. On the other hand, being objective, the second inquiry looked at whether or not that belief was reasonable. Permanent Gen. Assurance Corp. v. Waters, No. 01–A–01–9712–CV00720, 1998 WL 846696 (Tenn.Ct.App. Dec.8, 1998).
Applying the facts of the case to these criterions the court found: (1) McNally was never given explicit, blanket permission to use the vehicle at any time or in any manner he desired; (2) McNally was not given permission by the named insured to use the truck to drive work 40-50 miles away from insured's residence— permission to drive the vehicle to insured's home a quarter of a mile away does not equate to permission to use the vehicle to travel into neighboring counties; (3,4,5) Any past permissions for McNally to use the vehicle to return it to insured's residence after being detailed did not create a right in McNally to use the vehicle beyond those extremely limited parameters; and finally, the court found that McNally did not even have a belief that his use of the vehicle was permissible, as he indicated in deposition that he should have asked permission to take the vehicle outside of the general radius of insured's home. Lastly, even if McNally did have this belief, it has no reasonable basis from the facts—in fact, as it were McNally's license was suspended during the time.
Accordingly, the court found that no reasonable jury could find, based on the facts, that McNally could have reasonably believed he was allowed to use the insured's pickup truck in the manner he did on the date of the accident with Northern. Therefore, the court held that the exclusion operated to preclude coverage for the claims in the underlying tort action.
Editor's Note: This case identifies factors for determining permissive use under personal auto policies. Furthermore, it illustrates the factual distinction between “broad, unfettered dominion” which extends coverage to the other driver, as opposed to “restricted” use which precludes coverage as it did here.