Is Wife Driving Her Husband’s Company Van Covered Under Company Insurance Policy?

Brian Ferguson, a cable installer, lent his wife, Angella, the van provided by his employer, the cable company KTS, and she got into an accident. The other parties in the accident (“Plaintiffs”) sued, and claimed coverage under KTS’ insurance policy with Penn National Insurance (“Defendant”). Brown et al. v. Penn National Security Insurance Company dba Penn National Insurance, No. 1:12CV-1204, U.S. District Court, M.D. North Carolina.

A Magistrate Judge heard the motion by Defendant for summary judgment and made a Recommendation to the U.S. District Judge who was in charge of the case.

The Magistrate Judge’s Recommendation was to grant the motion in part in favor of Penn National, finding no coverage under the insurance policy (“the Policy”). However, the Magistrate Judge also recommended denial of the motion in part, finding there was a genuine issue of fact whether there was coverage under North Carolina’s Motor Vehicle Safety and Responsibility Act of 1953 (the “Act”), N.C. Gen. Stat. sections 20-279.1 et seq., as amended.

The diverging decisions resulted from the different requirements of the Policy and the Act regarding whether coverage is triggered. Here is how that came about.

The van company had required Mr. Ferguson to sign a Vehicle Agreement that limited his use of the van to “business use with certain personal use privileges.” In the body of the Agreement, there was more restrictive language: “[p]ersonal use of the vehicle is not permitted under any circumstance,” and “the carrying of passengers not employed by [KTS] is not allowed.”

Even so, Brian sometimes let Angella drive the van. Angella claimed to be unaware that she was not permitted to drive it.

In June 2012, while driving to pick up her daughter, Angella was involved in the accident with Plaintiffs that led to the lawsuit.

Plaintiffs claimed that Angella qualified as an insured person under the Policy because she was driving the van with the permission of KTS. Plaintiffs also contended that, even if Angella wasn’t covered by the Policy, coverage was required under North Carolina’s Motor Vehicle Safety and Financial Responsibility Act of 1953.

The Magistrate Judge rejected the first theory, finding Angella was not insured under the Policy because Angella did not have permission from KTS to drive the van.

However, the Magistrate Judge found the Agreement signed by Brian was ambiguous on the scope of Brian’s personal use privileges, and a jury could find that both Brian and Angela had a good-faith belief that Angella was in “lawful possession” of the van, which would trigger coverage under the Act. For that reason, the magistrate judge denied summary judgment, leaving the ultimate call up to a jury.

Both Penn National and Plaintiffs objected to the Magistrate Judge’s Recommendation and asked the district judge not to adopt it.

The district judge immediately adopted the first part of the Recommendation, finding that Penn National had not given Angella either implied or express permission to drive her husband’s work van. Therefore, there was no coverage for her under the Policy.

The district judge then turned to the part of the Recommendation that found that summary judgment should be denied on the issue of whether Angella was covered under the Act, since there was a genuine issue of fact whether Brian and Angella had a good-faith belief that she was lawfully in possession of the van at the time of the accident.

The requirement of coverage for any driver “in lawful possession” of an insured vehicle was added to the statute in 1967.

The district judge examined a number of cases where one person had an unquestioned right to drive a vehicle but then lent it to someone else who was in an accident. The judge found that when the ultimate driver of the vehicle had a good-faith belief that the person who lent him or her the vehicle had the right to do so, the driver was “in lawful possession” for purposes of insurance coverage under the Act.

Therefore, the district judge adopted that part of the Magistrate Judge’s Recommendation that denied the motion by Penn National for summary judgment that there was no coverage for Angella under the Act.

The district judge ruled that it was up to the jury to decide whether Angella had a good-faith belief that her husband had the right to let her drive the company van and was therefore in lawful possession of the van and covered under the Act.

If you or someone you know has been injured due to the negligence of another, contact an experienced personal injury attorney from the Tatum Law Firm today for a free consultation.