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Court Finds No Duty to Defend Unlisted Driver, Even Though Complaint Alleges Facts Suggesting Driver is Insured

The United States District Court for the Eastern District of Pennsylvania recently granted an insurer’s motion for summary judgment as to an unlisted driver’s claims for breach of contract and insurance bad faith, after finding that the insurer had no duty to defend, much less indemnify, “someone it has determined is not an insured under the policy even if a subsequent third-party complaint suggests the person is an insured.” Myers v. GEICO Cas. Co., 2019 WL 175126 (E.D. Pa. 2019).

In Myers, an unlisted driver drove the insured vehicle. While the unlisted driver was driving the vehicle, she hit a third-party. The insurer determined that the unlisted driver did not meet the definition of an “insured” because she was not listed on the policy, she was not related to the policy holder, and she was driving the insured vehicle without permission. The insurer denied coverage, including both defense and indemnification, to the unlisted driver. The third-party subsequently obtained a consent judgment against the unlisted driver and an assignment of the unlisted driver’s rights against the insurer. The third-party then sued the insurer for breach of contract and bad faith.

The Eastern District court granted the insurer’s motion for summary judgment. It found the insurer’s conclusion that the unlisted driver did not meet the definition of an “insured” to be correct. The Eastern District court rejected the plaintiff’s argument that the insurer breached its duty to defend and acted in bad faith by “refusing to defend [the unlisted driver] during [the plaintiff’s] personal injury lawsuit because [the plaintiff] alleged facts suggesting [the unlisted driver] was insured, i.e., that she had [the insured’s] actual and implied permission to drive the car at the time of the accident.” The Eastern District court found that the Pennsylvania Supreme Court has not addressed the issue of “whether an insurer is required to defend someone it has determined is not an insured even after a third party… has alleged that the person is an insured in a lawsuit.” In reaching its conclusion, the Eastern District court predicted that “the Pennsylvania Supreme Court would hold that an insurer is not required to defend someone it has determined is not an insured under the policy even if a subsequent third-party complaint suggests the person is an insured.”

In addition to finding that the insurer’s coverage position was made in good faith, the Eastern District court found that the unlisted driver did not have standing to assert a bad faith claim because she was not an insured.