Auto Insurance And Excluded Drivers

A question that may be asked by a resident of Grand Prairie, Arlington, Dallas, Mansfield, Irving, Mesquite, Garland, Fort Worth, Duncanville, or other places in Texas might be; What is an “excluded driver?”
An excluded driver is essentially someone who is driving a car without insurance because that person is excluded from coverage by the insurance policy. This usually happens with teenage drivers who the parents have excluded from coverage on the insurance policy to avoid having to pay the higher premiums the teenage driver would cause by being on the policy.
An excluded driver case was decided by the Court of Appeals of Texas, Houston (14th Dist.), on August 12, 2010. The case is styled, Jose A. Perez and Nancy C. Perez v. Old American County Mutual Fire Insurance Company. The courts’ opinion was issued by Justice, Tracy Christopher.
Here are some relevant facts of the case:
On October 4, 2007, seventeen year old Maria Nambo was involved in a wreck with Jose A. Perez. Although Maria was unlicensed, her mother, Virginia Nambo, permitted her to drive the car. Maria’s father, Mario Nambo, had an insurance policy with Old American. In the application for the policy, Mario warranted that he and Virginia were the only drivers in the household, and he excluded Virginia from coverage. He further denied that there were any residents of his household over the age of fifteen who were not listed in the application. Old American learned that Maria resided with Mario and Virginia and immediately rescinded the policy and refunded Mario’s premiums.
Old American then filed a lawsuit against the Nambos and Perezs seeking a court ruling that the policy was validly rescinded and that Old American had no duty to defend or indemnify the Nambos in connection with the accident.
The trial court ruled in favor of Old American and declared that (a) Mario failed to disclose Maria as a driver or a resident of his household, (b) Old American relied on these nondisclosures in issueing the policy, (c) the policy properly was rescinded, and (d) Old American has no duty to defend Mario and Maria Nambo or to pay damages to them or to Jose Perez in connection with the accident.
Attorneys for the Perezs and Nambos argued that the evidence in trial was legally insufficient because a motor vehicle liability insurance policy may not be canceled for any reason after an accident has occurred. They cited, Texas Transportation Code, Section 601.073(c). Old American countered saying an insurer may avoid liability under a policy if it issued the policy in reliance on a false representation that was material to the risk. This is in Texas Insurance Code, Section 705.004.
It was also pointed out that legally, one who signs a document is presumed to know its contents. This was to counter arguements by Nambo that he did not read or understand what he had signed.
There were other arguements in the case dealing with the number of days notice required before having a trial, the use of interpreters, and appeal issues. What is relevant though is how the court treated the excluded driver provision of the insurance contract. Here, they upheld that provision. An experienced Insurance Law Attorney will have at one time or another run into this situation. Many times this exclusion is beatable. But each case falls on its’ on set of facts.