9th Circuit Revives Bad Faith Claim Applying a Broad “Permissive Use” Standard

Posted on May 10, 2021 in Car Accidents

In McGee v. Zurich American Insurance Co., the 9th Circuit revived Plaintiff’s bad faith claim, finding there was a question of material fact as to whether an employee’s use of the company vehicle at the time of the accident was a permissive use, or at least a minor deviation, when the employee drove while intoxicated.

Generally, a person using another person’s vehicle is only covered by the owner’s insurance if they are using the vehicle with the owner’s permission (“permissive use”).  In McGee, Elizabeth Foutz, an employee of AAA Landscaping, was operating a company vehicle. The company allowed Foutz to run personal errands with the vehicle after work.  In 2012, as Foutz was running errands after work, she got in an accident with James McGee.  Although McGee was found at fault for the crash, Foutz was cited for driving while intoxicated.  Zurich, AAA Landscaping’s insurance provider, denied coverage for the accident, claiming although Foutz was allowed to drive after work, AAA never gave her permission to drive while intoxicated and, therefore, she exceeded any “permissible use” of the vehicle.  Foutz assigned her rights against her insurer to McGee, and McGee sued Zurich for breach of contract and bad faith.  The court dismissed both claims, finding that AAA Landscaping never gave Foutz express or implied permission to drive while intoxicated; therefore, at the time of the accident, Foutz was not insured.

On appeal, the 9th Circuit took a more pragmatic and realistic approach in its interpretation of “permissive use.”  It found that “permissive use” includes minor deviations from the specific permission granted.  The Court was persuaded that “[i]f a driver’s usage is permissive in accordance with these references, it will not be defeated by reference to the unreasonableness of the driver’s conduct, including consumption of alcoholic beverages, when the accident occurs.”

The Court applied this rule and found that Foutz’s use was either within the scope of her permitted use or a minor deviation, both of which would still be within the scope of the permissive use coverage.

This broad interpretation of permissive use coverage could affect insurance claims going forward. For an accurate answer as to whether an accident would be considered a “permissive use” under a specific insurance policy—or whether your insurance might apply to an auto claim, consult with a Phoenix car accident attorney. Contact Gallagher & Kennedy at 602.530.8400.