Maine Court Determines “Regular Use” Exclusion Applies to Preclude Coverage

 

August 7, 2017

 

This week, a federal district court in Maine interpreted a “regular use” exclusion clause in an auto policy as precluding coverage for claims that arose from the death of a pedestrian. The case is Progressive Northwestern Ins. Co. v. Lee, No. 2:16-CV-454-DBH (D. Maine Aug. 1, 2017).

 

A Chevrolet Suburban owned by Lee Tree Company hit and killed a pedestrian in the road. The driver of the vehicle at the time of the accident was Carolyn Lee, the daughter of Michael Lee, the owner of Lee Tree Company. Mr. Lee had given his daughter permission to drive the vehicle because the car she regularly drove was not running properly. The car was insured through Lee Tree Company under a commercial insurance policy issued by Hartford Insurance Company (Hartford). The car that Carolyn Lee normally drove was insured under a personal automobile policy that Progressive Northwestern Insurance Company (Progressive) had issued to her father, Michael Lee.

 

Since the accident was caused by a vehicle covered under the Hartford policy, Hartford retained a lawyer to represent the Lee's. The estate of the deceased, Ms. Zarnoch, settled its claim against the Lee's, but Progressive refused to participate in the settlement. There was an outstanding unpaid balance on the consent judgment, and the estate obtained rights to pursue claims under the Progressive policy. Progressive filed a suit against Ms. Lee and the estate seeking a judgment that Progressive had no duty to defend or indemnify under the personal auto policy that it had issued to Mr. Lee. Mr. Lee and the estate counterclaimed asserting unfair claims practices and negligence, and sought a declaration that Progressive had breached its duties to defend and indemnify.

 

The disputed issue is whether the Chevrolet Suburban had been “furnished or available” for Mr. Lee's “regular use,” which would be excluded activity under Exclusion 11 of the policy. If the suburban had been furnished or available for Mr. Lee's regular use and was not listed as a covered auto under the personal auto policy, Progressive would have no duty to defend and indemnify damage caused by that vehicle.

 

The Lee's argued that Mr. Lee did not regularly use the Suburban because he had a separate company vehicle, and that he, distinguishing himself from Lee Tree Company, rarely used the vehicle for himself or his family. Therefore, Exclusion 11 should not apply.

 

Progressive argued that the exclusion applied because the Suburban had actually been “furnished or available” for Mr. Lee's regular use and was not listed in the declarations as a covered auto under the Progressive policy.

 

The policy excluded “bodily injury or property damage arising out of the ownership, maintenance, or use of any vehicle owned by you or furnished or available for your regular use, other than a covered auto for which this coverage has been purchased”.

 

Mr. Lee stated several incriminating things in his testimony including “I used it for whatever I needed the vehicle for,” and indicated that he was in strict control of when the Suburban was used and who was using it, be it an employee or merely a family member.

The district court granted Progressive's motion and explained that with respect to the Suburban, Mr. Lee owned the car, had blanket permission, keys, access, and the ability to use the car for all purposes. The district court determined that he would also have reasonably expected to pay an extra premium to have extra coverage for this vehicle through Progressive, above and beyond the Hartford policy. Although Mr. Lee did not continuously, steadily, or methodically use the vehicle, he certainly had the right to use the vehicle in whatever way he wished or needed.

 

Editor's Note: Under Maine law the court found that there was no coverage under the Progressive policy for the Suburban. This is because the vehicle, as normally used in the insured's business, was available for the insureds regular use. Since the insured had the keys, and the control over who drove the vehicle, the court determined that the insured had regular access to the vehicle as determined in Exclusion 11 of the personal auto policy. The PAP specifically excludes coverage for losses like this because if a car isn't listed in the declarations, the insurance company does not know what the cost would be to insure that vehicle, therefore they cannot determine appropriate premium prices.