When Is A Passenger A User Of A Vehicle For Purposes Of Insurance Coverage?

Here’s one for people living in Weatherford, Mineral Wells, Aledo, Azle, Willow Park Brock, Hudson Oaks, Millsap, Springtown, and other places Texas. When will a passenger be consider a “user” of an automobile?
This is a Dallas Court of Appeals case that was decided in 1997. The style of the case is American Economy Insurance Company v. United Services Automobile Association. Here is some of the background information including the underlying case that this case resulted from.
In the underlying case, Scott Johnson (Driver) was driving a vehicle belonging to his father (Father). Three friends, including Benjamin Ellis, were passengers. The driver and the passengers were intoxicated. The vehicle collided with a second car and the Driver, Scott Johnson, was killed. The three passengers were injured.
The occupants in the second car brought suit against the Father, alleging that the vehicle had crossed the center line while traveling at an excessive rate of speed. The plaintiffs also alleged that the three passengers had encouraged, aided, and abetted the Driver’s negligent acts and reckless driving, and that the passengers’ occupancy of the vehicle constituted a “use” of the vehicle.
The Father was insured by USAA. Ellis (the Passenger), was insured by AEIC. When the Passenger was served with citation, the complaint was delivered to an AEIC agent with a request for defense. AEIC wrote to USAA requesting that USAA assume the defense. USAA refused stating that there was doubt whether the Passenger qualified as a permissive “user” of the Johnstone vehicle. AEIC assumed the Passenger’s defense. The plaintiffs settled their claim against the Passenger and the Passenger executed a general release in favor of USAA in return for $11,000 in payment. Plaintiff’s then dismissed their lawsuit against the Passenger with prejudice. AEIC wrote to USAA requesting reimbursement for defense costs. USAA refused.
AEIC then brought this declaratory judgment action to interpret the USAA policy. The trial court entered judgment against AEIC and in favor of USAA indicating that AEIC had failed to prove that the Passenger was a “user” of an automobile insured by USAA. AEIC appealed.
This appeals court reversed the trial court and remanded the case for further proceedings.
In the ruling the appeals court said that the USAA policy was a standard Texas personal auto policy. The AEIC policy contained an “other insurance” clause which provided that AEIC’s liability would be considered excess of other applicable liability insurance. Therefore, if the USAA policy was applicable to the Passenger, then the USAA policy would be considered the primary policy and the AEIC policy excess.
The Passenger’s conducted constituted a “use” of the Johnstone vehicle within the meaning of the USAA policy. Citing a number of previous cases, the Appellate Court stated that the courts have “reasoned that coverage as a ‘user’ should be extended to the passenger because the accident need not be proximately caused by the act of the passenger, but only that the accident arise out of the use of the automobile.” In this case, the underlying case alleged that the Passenger had actively encouraged, urged, aided and abetted the driver to consume alcoholic beverages and to drive the vehicle in a reckless manner while intoxicated. Therefore, the Passenger and other companions were engaged in a continuing course of reckless and negligent conduct.
The release signed by the Passenger in the underlying case does not bar AEIC’s claim for reimbursement of defense costs. Since USAA was legally obligated to provide a defense for the Passenger and refused to do so, AEIC, as the Passenger’s excess insurer, was entitled to reimbursement for providing that service upon USAA’s refusal to do so.