Excluded Drivers On The Insurance Policy

Benbrook insurance attorneys know to check auto insurance policies for “excluded drivers.” An excluded driver has no coverage when he is operating a vehicle. The Eastland Court of Appeals issued an opinion in August of 2015, that should be read. The opinion is styled, Allied North America Insurance Brokerage of Texas, L.L.C. v. Diamond Pump & Transport, LLC and the Insurance Company of the State of Pennsylvania.
James Garrett died as the result of injuries that he received when Aaron Sanchez, a driver for Diamond Pump & Transport, LLC, ran into the motorcycle that Garrett was riding. The truck that Sanchez was driving at the time belonged to Diamond and was insured by the Insurance Company of the State of Pennsylvania. However, ICSOP had named Sanchez as a driver who was excluded from coverage under the policy. Allied North America Insurance Brokerage of Texas, L.L.C. was Diamond’s insurance agent that placed the policy with ICSOP. This appeal concerns the validity of the named driver exclusion.
This lawsuit began when the representative of Garrett’s estate, joined by Garrett’s heirs, filed a wrongful death suit against Diamond. Because ICSOP had issued Diamond’s vehicle insurance policy, and after it had issued a reservation of rights notice, ICSOP provided Diamond with a defense in connection with the Garrett lawsuit. Later, the Garrett plaintiffs amended their petition and added Sanchez as a defendant. Because it had listed Sanchez as an excluded driver in the policy, ICSOP then withdrew its defense and denied liability.
When ICSOP withdrew its defense and denied coverage, Diamond provided its own defense. Ultimately, Diamond paid $625,000 in damages to settle the wrongful death lawsuit. In addition to the amount of the settlement, in the process of providing its own defense in the Garrett claim, Diamond incurred attorney’s fees of $22,524.63 and $50,824.88 in interest expense that had accrued on money it had to borrow in order to pay the Garrett claim.
After Diamond settled the Garrett lawsuit, the trial court ultimately had before it, by way of various pleadings, claims by Diamond against ICSOP and against Allied, claims by Allied against ICSOP, assorted declaratory judgment claims, as well as sundry defenses that Allied asserted as defenses to the various claims against it.
Trial was to the court. At the conclusion of the trial, the trial court concluded that Diamond could not recover on its claim against ICSOP because ICSOP had specifically and effectively excluded Sanchez as a covered driver under the policy it had issued to Diamond.
Beginning in 2005, Allied began to broker insurance for Diamond Tank Rental, Diamond’s sister corporation. In 2007, Allied personnel obtained various types of insurance for Diamond, including commercial auto insurance. American Home Assurance, a sister company to ICSOP, issued the auto policy; the policy did not exclude any of Diamond’s drivers. The 2007 policy expired on August 1, 2008.
Shortly before the August 1, 2008 expiration date, ICSOP requested information from Allied to be used to renew Diamond’s policy for the upcoming year. ICSOP subsequently sent a quote in which it listed Sanchez as an excluded driver. Allied denied receiving this first quote, but it did receive a revised quote dated July 30, 2008. The cover page of this revised quote also listed Sanchez as an excluded driver.
Allied personnel used the July 30 quote from ICSOP to prepare a proposal that Allied submitted to Diamond. The testimony from Allied personnel shows that they failed to read, but should have read, that part of the quote from ICSOP in which it listed Sanchez as an excluded driver. Because they did not read that part of the quote, the proposal that Allied presented to Diamond did not show that Sanchez would be an excluded driver, and Allied did not inform Diamond that the policy would not cover Sanchez. To the contrary, in its proposal, Allied specifically listed Sanchez among the other Diamond employees that the ICSOP policy would cover. After some revisions not relevant to this appeal, Diamond accepted Allied’s proposal. ICSOP issued a final bound quote that excluded Sanchez from coverage.
Subsequently, ICSOP ultimately issued the policy, and Allied personnel examined it, compared the policy with the final bound quote, found no differences between the two, and delivered the policy to Diamond. Allied personnel did not compare the policy with the proposal that it had prepared and that Diamond had accepted. No one from Diamond read the policy at the time that Allied delivered it, but unlike Allied’s proposal, the policy contained an excluded driver endorsement whereby ICSOP excluded Sanchez from coverage. ICSOP based its decision to withdraw its defense and to deny coverage in relation to the Garrett claim upon this exclusion.
This Court went into a lengthy, multi-page explanation of the facts and the law in this case. What is important is that ultimately this Court found that the excluded driver exclusion was effective and there was no coverage based on that exclusion.
The bottom line is that policies have to be read and understood.