Federal Court Clarifies Meaning of Use for Terms of Insurance Coverage in California Car Accident Case

The U.S. Court of Appeals for the Ninth Circuit recently rendered an opinion in Encompass Ins. Co. v. Coast Nat’l., et al., No. 12-55784 (9th Cir. 2014), which is instructive on the matter of what constitutes the use of a vehicle for the purposes of California insurance law.

In the case, a woman was a passenger in a vehicle, car A, being driven by a man. The man lost control of his vehicle, the car ran off the road, and it crashed into a light pole. A second car, not involved in the accident, stopped at the scene to help. A woman who was a passenger in that second car saw the first woman inside the crashed car and feared that she might be in danger. She testified that the car was smoking and leaking fluid, which led her to believe the car might catch fire or explode. She physically removed the woman from the wrecked car. Following the car accident, the woman suffered severe spinal injuries and became paraplegic. The woman sued the woman who removed her, claiming that she caused the injuries when she removed her from the wrecked car.

At the time of the accident, the rescuer was covered under a package policy, which included car insurance, homeowners insurance, and personal excess liability coverage, issued by  Encompass Insurance Company. The woman submitted her claim to the insurer, and it assumed responsibility for her defense. The woman also attempted to gain a defense from two additional insurance companies, her separate car insurance policy, and the policy issued to the car that had crashed. Both insurers denied coverage, claiming that the policies did not apply because they were not based on injuries that occurred arising out of the “use” of a private passenger car. Thus, the Encompass policy ultimately settled the claim with the injured woman for $4 million and then brought this lawsuit against the other two insurance companies for subrogation, or reimbursement, for their portion of responsibility relating to the incident.

The district court ruled in favor of the other two insurance companies, finding that the woman did not “use” the passenger vehicle when she removed the injured woman from the crashed car.

The Ninth Circuit began an examination of the meaning of the term “use” in the context of a passenger vehicle under California law. It found that the text of the California Insurance Code makes clear that “unloading” a motor vehicle constitutes “use” of that motor vehicle. The California Insurance Code states “The term `use’ when applied to a motor vehicle shall only mean … unloading a motor vehicle.”[underline added]

The insurance companies attempted to argue that unloading of a vehicle is only “use” if some sort of benefit is being derived due to the unloading act. While not explicitly mentioned, it seems that the sort of unloading for gain the insurance companies were contemplating would be something like unloading goods from a trip to the store when the insured is hit by another car, or otherwise injured. The court did not agree with the requirement of a benefit to constitute unloading for the purposes of use.

Furthermore, it rejected the argued distinction between commercial and non-commercial vehicles, since the California Insurance Code mentions only “motor vehicles.” Additionally, the use requirement under the insurance policy requires that the act was “with permission of the owner,” so illegal criminal activity could not fall within the purview of covered claims, which was one of the hypothetical arguments floated by the defendants.

Therefore, it concluded that the unloading of an injured passenger from an automobile constitutes “use” of that automobile under California law. The judgment was reversed and remanded for proceedings consistent with the opinion.

If you have been injured in a car accident, it is important to understand your rights so that you are not taken advantage of. The lawyers at Sharifi Firm, APC have significant experience in handling car accident cases throughout California.  Contact us today for a free consultation with a leading California car accident attorney. We can be reached through this website, or by calling 1 (866) 422-7222

More Blog Posts:

California Court of Appeals Upholds Jury Decision in Car Accident Case, Southern California Injury Lawyer Blog, published February 17, 2015

California Court of Appeals Sides With Hospital in Fall Case, Southern California Injury Lawyer Blog, published February 10, 2015

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