Self-Insurer Auto Exclusion Voided By The Connecticut Supreme Court
August 13, 2018
The Connecticut Supreme Court recently ruled that Connecticut insurance policies can no longer exclude rental car companies from uninsured motorist liability in some cases. The case is Tannone v. Amica Mut. Ins. Co., 329 Conn. 665.
Sandra and Patrick Tannone were crossing a street when they were struck and seriously injured by a rental car owned by EAN Holdings, LLC commonly known as Enterprise Rent-A-Car (Enterprise) Enterprise had leased the car to a woman named Barbara Wasilesky, but at the time Arthur Huffman, a permitted user, was driving the vehicle. Wasilesky was the named insured on an automobile insurance liability policy that provided bodily injury coverage of $20,000 per person and $40,000 per occurrence, the minimum in Connecticut at the time. After the accident the Tannones made a claim against Wasilesky, as she was the lessee, and Huffman, as he was the operator of the vehicle. The parties settled for the full amount of coverage from the policy, $20,000 each. Neither Wasilesky nor Huffman had any other insurance coverage, and the Tannones claimed that their personal injury damages exceeded the $20,000 each that they recovered from the policy. At the time of the accident, Amica Mutual Insurance Company insured the Tannones through two separate policies, each policy carrying $500,000 of coverage for personal injury due to the negligence of an underinsured driver. The policies, though, excluded from the definition of the term "underinsured motor vehicle" any vehicle "owned by a self-insurer under any applicable motor vehicle law." Enterprise was a self-insurer as designated by Connecticut's insurance commissioner, so Enterprise was eligible for the exclusion. The Tannones sued their insurer Amica in order to recover underinsured motorist benefits from their own policies.
Amica argued that its policies did not provide underinsured motorists benefits when the vehicle of the negligent party is owned by a self-insurer. Amica moved for summary judgment, on the basis that the car that struck the Tannones was owned by a self-insurer, and the Tannones failed to demonstrate that they had exhausted their remedy from Enterprise, the self-insurer. Amica cited a case called Orkney v. Hanover Ins. Co. from 1999 where the Connecticut Supreme Court confirmed the validity of the regulation and a similar coverage exclusion. The Tannones replied that Amica's reliance on Orkney was misplaced because it predated the Graves Amendment, enacted by Congress in 2005, that made rental car companies immune from vicarious liability for injuries caused by their underinsured car lessees even if that rental car company has been designated by a state as a self-insurer capable of providing a remedy. The trial court agreed with Amica. The case eventually reached the Connecticut Supreme Court.
The Tannones argued that the self-insured exclusion in their underinsured motorist coverage did not apply to Enterprise in the case. The Connecticut regulation that authorized the exclusion in the policy was invalid when applied to Enterprise because, following the Graves Amendment, Enterprise could not be held liable. The Court reversed the decision of the lower court, holding that the regulation giving rise to the self-insurance exclusion in the Tannones' policy was invalid as applied to Enterprise. The Court explained that Enterprise was a self-insurer but that, after the Graves Amendment was passed in 2005, Enterprise could not be held vicariously liable for injuries caused by their lessees. The court found that Orkney, was no longer controlling.
Editor's Note: The Supreme Court of Connecticut pointed out that Connecticut law requires underinsured motorist coverage, but the regulation permits the exclusion of underinsured motorist coverage as to vehicles owned by self-insurers, now "without a substitute remedy". When a company decides to self-insure they assume the risk for paying for claims out of pocket. States make companies prove that they have funds set aside to pay for any potential claims, and some states require that a self-insured person or company have multiple cars in order to qualify.