Uninsured / Underinsured Insurance Coverage

Grand Prairie, Dallas, Fort Worth, Arlington, Mansfield, Grapevine, Crowley, Weatherford, and all other places in Texas will find someone driving a rental car. So, what happens if the person driving the rental car causes a wreck with someone else and they do not have enough insurance to cover the damages they cause? That was the issue in the case discussed below.
On October 7, 2010, the United States Court of Appeals for the Fifth Circuit, issued an opinion in the case styled, Kenneth McQuinnie v. American Home Assurance Company.
Here are the underlying facts:
In August 2007, McQuinnie sustained damages in an accident between his vehicle and a rental car driven by Anand Sapkota. Enterprise Leasing (Enterprise) owned the car Sapkota drove. At the time of the accident, McQuinnie was covered by a policy with American Home Assurance Company (American). McQuinnie and Sapkota’s insurance company reached a settlement of $50,000, the limit of Sapkota’s personal insurance policy.
Alleging that his damages exceeded $50,000, McQuinnie filed a claim with Ameican, seeking benefits under the “uninsured/underinsured” provisions of the American policy. In relevant part, American’s policy provides they “will pay damages which an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by an insured, …” The policy also provides definitions specific to uninsured/underinsured coverge:
F. ADDITIONAL DEFINITIONS The following are added to the DEFINITIONS section and have special meaning for UNINSURED/UNDERINSURED MOTORISTS INSURANCE …
6. “Uninsured motor vehicle” means a land motor vehicle or trailer of any type: …
d. Which is an underinsured motor vehicle. An underinsured motor vehicle is one to which a liability bond or policy applies at the time of the accident but its limit of liability either:
(1) is not enough to pay the full amount the covered is legally entitled to recover; or (2) has been reduced by payment of claims to an amount which is not enough to pay the full amount the covered insured is legally entitled to recover as damages.
Finally, the policy provides a list of exceptions, including the following: “uninsured motor vehicle’ does not include any vehicle …owned or operated by a self-insurer under any applicable motor vehicle law.”
American denied the claim because Enterprise is a self-insurer under the Texas Motor Vehicle Safety Responsibility Act and therefore falls within the policy exception for self-insured owners and operators.
A federal law, 49 U.S.C., Section 30106, provides that:
(a) In general. — An owner of a motor vehicle that rents or leases the vehicle to a person (or an affiliate of the owner) shall not be liable under the law of any State or political subdivision thereof, by reason of being the owner of the vehicle (or an affiliate of the owner), for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease, if —
(1) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and
(2) there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner).
Lawyers for McQuinnie used Section 30106 to bolster his arguement that the self-insurer exception only applies when the insured is legally entitled to recover from the self-insurer, and because federal law prevented any recovery from Enterprise, he should be permitted to recover from American, dispite the self-insurer exception.
After a complete review the court ruled in favor of American, stating that the application of American’s self-insurer exception does not violate Texas law, and it therefore bars McQuinnie from recovery under the policy.