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Insurer Must Pay for Florida Rental Car Crash by Unauthorized Driver
By Andrew G. Simpson

A Florida rental car customer’s auto insurer must cover crash injuries, even though the driver was someone not authorized under the rental car company’s contact.

In a 5-2 opinion on Nov. 23, the Florida Supreme Court overturned a district court ruling and reaffirmed its own earlier rulings that a rental car contract may not restrict the insured’s auto coverage.

The majority ruled in the Gadsden County case that the rental car was covered by Katusha Shazier’s insurance policy because the rental car was a “temporary substitute auto” and the accident occurred when the car was being driven by someone to whom she had given permission.

The justices rejected Geico Indemnity Co.’s argument that the rented auto no longer fell into the category of “temporary substitute auto” because Shazier had let someone else drive in violation of the contract with the rental car firm, Avis.

The Supreme Court reversed a 1st District Court of Appeal ruling in Geico’s favor. Justice R. Fred Lewis wrote that the appellate decision conflicted with prior Supreme Court rulings.

Kutasha Shazier was a named insured and owner of a Ford Expedition listed on her automobile insurance policy issued by the Geico. In August 2006, because Shazier’s vehicle became disabled due to transmission problems, she rented a Hyundai Sonata from Avis Rent-A-Car, designating Geico as the primary insurer.

Shazier permitted the rental vehicle to be used by Frederick Royal, who in turn allowed the rental vehicle to be operated by Tercina Jordan, who negligently crashed into a tree, resulting in serious injury to minor passengers in the vehicle and the death of another. The injured passengers and the representative for the decedent subsequently filed personal injury actions against Shazier, Jordan and Avis. Avis filed a cross-claim for indemnity against Shazier. Shazier’s insurer, Geico, sought a determination that it had no duty under the policy to defend and indemnify Shazier or Jordan.

The passenger contended that coverage existed because the rental car constituted a “temporary substitute auto” under the Geico policy. Geico countered that because Avis had not given Jordan express permission to drive the rental car, the rental vehicle was not a “temporary substitute auto” as to the named insured, Shazier, under the terms of the Geico policy and thus Geico had no duty to defend or indemnify either Shazier or Jordan.

A trial court agreed with Shazier. However, the district court reversed and ruled that the rental car did not constitute a “temporary substitute auto.” The district court determined that the rental contract between Avis and Shazier — a contract that prohibited anyone not authorized by Avis from driving the car– governed whether Avis had given its permission for the use of the car within the meaning of Geico’s policy.

With regard to an “owned auto,” the Geico insurance contract covers the policyholder and “any other person using the auto with [the policyholder’s] permission.” As to a “non-owned auto,” the insurance contract covers the policyholder and his or her relatives “when driving the non-owned auto” with permission of the owner. The term “non-owned auto” includes “a private passenger, farm or utility auto or trailer not owned by or furnished for the regular use of either [the policy holder] or a relative” but expressly excludes a “temporary substitute auto.”

The Supreme Court noted that Geico’s definition of “temporary substitute auto” required that the vehicle be “temporarily used with permission of the owner.” The 1st District held that because the Avis rental contract between Shazier and Avis did not expressly authorize Jordan to operate the vehicle, the rental car was not being “used with the permission of the owner,” which was Avis. Thus, the rental vehicle was deemed a “non-owned auto” instead of a “temporary substitute auto,” and Geico denied coverage under the policy.

However, the Supreme Court said the district court erred in coming up with a new definition of permission in such cases. Under a long-established doctrine, “liability is imposed on the owner of an automobile who voluntarily entrusts the vehicle to an individual who causes damage to others through the negligent operation of the vehicle,” the state’s high court said.

According to the court’s previous decisions, under Florida’s common law dangerous instrumentality doctrine, an owner’s, bailee’s, lessee’s, or permittee’s consent to the use of a vehicle “cannot be vitiated by invocation of third-party agreements [the Avis contract] that attempts to limit the scope of who may operate a vehicle.”

Geico’s policy defined “temporary substitute auto” as a vehicle not owned by the insured that is “temporarily used with the permission of the owner . . . as a substitute for the owned auto.” Thus, although the insured does not actually own the car, Geico covers a substitute auto as if it were owned by the insured as long the real owner gave permission for its use, the state’s high court said.

Accordingly, under Geico’s policy, Shazier had the permission of the owner of the vehicle, and the car became the insured’s “owned car” under the Geico policy at that moment. Shazier’s “owned car” by definition was being used with her permission at the time of the collision, and Geico cannot escape liability contrary to Florida law.

Chief Justice Charles Canady and Justice Ricky Polston dissented, saying they found no conflict with the earlier decisions.

The cases are SC10-1068 – Rethell Byrd Chandler, Etc., Et Al. v. Geico Indemnity Company, Et Al. and SC10-1070 – Monica Steele, v. Geico Indemnity Company, Et Al.

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