Named Driver Exclusion

Fort Worth insurance attorneys will have run across the type of situation that is presented in this 1996, opinion. This is a Corpus Christi Court of Appeals case styled, Zamora v. Dairyland County Mutual Insurance Company. Here is the relevant information.
Gracie Vela (wife of Jesus Toc) was operating Jesus Toc’s automobile when she was involved in an accident with Pete and Janie Zamora. At the time of the accident, Gracie Vela was named as an excluded driver in Mr. Toc’s automobile insurance policy with Dairyland. The Zamoras filed suit based on negligence, gross negligence, and negligent entrustment. Dairyland denied coverage on the basis of the named driver exclusion in the policy.
Thereafter, the Zamoras entered into an agreed judgment against Jesus Toc and Gracie Vela, and both parties filed suit against Dairyland on the basis that Dairyland wrongfully failed to provide coverage. Dairyland filed motion for a summary judgment asserting it had no duty to provide coverage because Gracie Vela was an excluded driver. The trial court granted the summary judgment in favor of Dairyland and this appeal ensued.
Zamora argued that the named driver exclusion should be void as against the public policy of the State of Texas First, the named driver exclusion furthers public policy by enabling drivers with family members having poor driving records to secure insurance they can afford, rather than being relegated to securing coverage from an assigned risk pool at a much greater cost, or not obtaining insurance at all. Second, it deters insured drivers from entrusting their automobiles to unsafe excluded drivers, thus, keeping those unfit drivers off public roadways.
In Zamoras’ second point, they contend that even if the named driver exclusion is valid, under the terms of the policy Dairyland is required to provide a defense to the insured. Zamora argued that, despite the exclusion, the policy extends coverage to all claims for which the insured has legal responsibility. This includes responsibility under the theory of negligent entrustment. With regards to the defense provided by the terms of the policy, Jesus Toc’s insurance policy states in pertinent part:
Dairyland County Mutual Insurance Company of Texas (A county mutual insurance company, herein called the company)
…….
PART A-LIABILITY COVERAGE INSURING AGREEMENT We will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of an auto accident. Property damage includes loss of use of the damaged property. Damages include prejudgment interest award against the covered person. We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. In addition to our limit of liability, we will pay all defense costs we incur. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted.

An insurer is required only to defend those cases within the policy coverage. Under the “eight corners” rule, the trier of fact must examine only allegations in the complaint and the insurance policy in determining whether the duty to defend exists.
To determine if a claim of negligent entrustment is a covered claim, and thus creates a duty to defend, the court must first examine what elements must be proven. To recover under negligent entrustment a plaintiff must establish: 1) entrustment by the owner or custodian; 2) to a driver the owner knew or should have known was a reckless or incompetent driver; and 3) negligent operation of the vehicle proximately caused damage to a third party. Therefore, essential to recovery is negligent operation or use by the entrustee.
The named driver exclusion which is a part of insured’s policy reads, “You agree that none of the insurance coverage afforded by this policy shall apply while Gracie Toc … [The Excluded Driver] is operating your covered auto or any other motor vehicle.” The exclusion’s purpose is to suspend coverage when a specific person, considered or known to be an unsafe driver, is operating a covered vehicle. At the time of the accident, Gracie Vela was in fact operating the vehicle covered by the insurance policy. From the language in the exclusion this is clearly an activity that both parties agreed would suspend the coverage afforded by the policy. Therefore, Dairyland is under no duty to defend Jesus Toc for liability incurred for acts specifically excluded from coverage.
The Court ruled in favor of Dairyland.