The Ohio Court of Appeals affirmed a trial court's ruling that an insurer must provide coverage for an accident involving the named insured's daughter while driving a rental car, even if the rental agreement only permitted the insured to drive. The case is Gov't Emps. Ins. Co. v. Hughes, 921 N.E.2d 269 (Ohio Ct. App. 2009).
Background
The mother, Barbara Hughes, rented a Chevrolet Malibu from Enterprise Rent-A-Car while her car was being repaired. The rental contract stated that no one besides Barbara was permitted to drive the car. However, Barbara allowed her daughter, Louisa, to drive the car. While driving with her sister Lynda in the car, Louisa lost control of the car, struck a tree, overturned the vehicle, and injured Lynda in the process.
Lynda sued her sister Louisa for her personal injuries, alleging negligence. At the time of the accident, Government Employees Insurance Company (GEICO) was Barbara's automobile insurance carrier.
GEICO defended Louisa under a reservation of rights but later sought a declaratory judgment that it had no duty to defend or indemnify Louisa because she was not an insured at the time of the accident and that Lynda was excluded for bodily injury to "any insured".
The Insurance Contract
Barbara and her husband Wayne were named insureds in the policy. Barbara's Ford Expedition, which was being repaired, was an insured vehicle. The policy stated, "we will pay damages which an 'insured' becomes legally obligated to pay because of bodily injury, sustained by a person."
"Insured" is defined as "a person or organization described under 'PERSONS INSURED'." "PERSONS INSURED" includes:
"Who Is Covered
Section I applies to the following as insureds with regard to an owned auto:
1. you and your relatives;
2. any other person using the auto with your permission;
3. any other person or organization for his or its liability because of acts or omissions of an insured under 1 or 2 above.
Section I applies to the following with regard to a non-owned auto:
1. (a) you;
(b) your relatives when using a private passenger, farm or utility auto or trailer.
Such use by you or your relatives must be with the permission, or reasonably believed to be with the permission, of the owner and within the scope of that permission"
From the policy we can see a distinction between who is covered with regard to an owned auto and who is covered with regard to a non-owned auto.
"Non-owned auto" was defined as "an automobile or trailer not owned by or furnished for the regular use of either you or a relative, other than a temporary substitute auto."
"Owned auto" was defined as "(a) a vehicle described in this policy for which a premium charge is shown for these coverages... (d) a temporary substitute auto."
"Temporary substitute auto" was defined as "an automobile or trailer, not owned by you, temporarily used with the permission of the owner. This vehicle must be used as a substitute for the owned auto or trailer when withdrawn from normal use because of its...repair."
Mom's Permission
GEICO argued that because the Enterprise contract forbid anyone except Barbara from using the rental car, that the car did not qualify as a temporary substitute auto when driven by Louisa. Since Louisa did not have the owner's permission (Enterprise), then the car did not qualify as an owned auto under the insurance policy.
The court rejected this argument, finding that since Barbara rented the car with the owner's permission, the vehicle qualified as an owned auto in the policy. Since it was an owned auto under the policy, then the provisions of the policy apply. In the policy, relatives and anyone using an owned auto with Barbara's permission are afforded coverage. Since Barbara gave Louisa permission to drive, Louisa was a covered driver under the policy, regardless of the violation of the Enterprise contract.
Using or Occupying
GEICO also argued that injuries to Lynda are excluded under the policy: "EXCLUSIONS: 1. Bodily injury to any insured or any family member of an insured residing in his household is not covered."
Remember that included as an insured in the policy are "1. you and your relatives; 2. any other person using the auto with your permission." GEICO argued that Lynda was using the vehicle by riding as a passenger, making her an insured and therefore excluded from coverage.
The policy did not define "using." Looking to another section of the policy, the court noted that medical payments coverage was provided to persons who "sustain bodily injury caused by accident while occupying the owned auto while being used by you, a resident of your household, or other persons with your permission."
"Occupying" was further defined in the policy as "in, upon, entering into or alighting from." The court reasoned that 'occupying' and 'using' were not used interchangeably by the policy and thus had different meanings.
While Lynda was in the rental car at the time of the accident, she was found to be 'occupying' it, and not 'using' it. Since she was not using the car, she was not an insured, and the exclusion should not apply to her.
The Court of Appeals granted Lynda's motion for summary judgment and denied GEICO's motion, affirming the trial court's judgment.
Editor's Note: The case shows that a rental company's contract does not override the terms of an insurance contract. Even though the rental contract only permitted the mother to use the vehicle, the court found that the daughter was still an insured since she had her mother's permission to use the vehicle.
In addition, since "using" was not defined in the policy, the court looked at the policy as a whole and determined that "using" was differentiated from "occupying" and determined that the injured daughter was occupying the vehicle and not using it, and therefore an insured.