Temporary Substitute In Insurance Policy

If someone in Grand Prairie, Fort Worth, Saginaw, Roanoke, North Richland Hills, Lake Worth, Colleyville, or anywhere else in Tarrant County uses someone else’s car when their own car is unavailable, does the insurance on that other car protect them?
This issue was discussed in a 2003, Texas Supreme Court case styled, Progressive County Mutual Insurance Company v. Paul Sink. The case concerned coverage for a “temporary substitute” vehicle under the standard Texas Personal Auto Policy.
The issue was whether the policy provided liability coverage when the insured, whose own vehicle was disabled, takes and drives an automobile owned by someone who is not a family member without permission or the reasonable belief that he has permission and is involved in an auto accident with a third party. The trial court ruled as a matter of law that there was no coverage. The appeals court reversed the trial court. This Supreme Court reversed the appeals courts. Here is some background.
Joshua McCauley’s pickup truck became disabled. He was at that time employed by Alamo Rent-A-Car, and while on the job, he took one of its rental cars to drive to a location that was not disclosed in the court’s record to get his tools so that he could attempt to repair his truck. It was uncontested that McCauley did not obtain permission from Alamo to use any of its vehicles and did not believe that he had permission to use the car in question. While returning to work in Alamo’s car, McCauley was involved in an accident with Paul Sink.
Sink sued McCauley and obtained a favorable judgment that was subsequently discharged in bankruptcy. Sink then commenced this action against McCauley’s auto insurance carrier, Progressive County Mutual Insurance Company, under its policy insuring McCauley’s truck. Sink claimed that he was a third-party beneficiary of McCauley’s policy and sought benefits under that policy’s liability coverage.
When the trial began, the Judge determined that the vehicle owned by McCauley’s employer was not covered by the insurance policy issued for McCauley’s truck. That is when this appeal began.
The only issue for the Supreme Court was the proper interpretation of the policy.
The liability coverage section of the policy provided that Progressive “will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of an auto accident.” The policy contained a broad exclusion that precluded coverage for any person who uses a vehicle without a reasonable belief that he or she is entitled to do so, but the policy also stated that the exclusion does not apply to an insured or an insured’s family member who uses “your covered auto”:
EXCLUSIONS A. We do not provide Liability Coverage for any person:
8. Using a vehicle without a reasonable belief that that person is entitled to do so. This exclusion (8) does not apply to you or any family member while using your covered auto.
The policy’s definition of “your covered auto” contains, among other things, the reference to a “temporary substitute” vehicle:
G. “Your covered auto” means:
4. Any auto or trailer you do not own while used as a temporary substitute for any other vehicle described in this definition [e.g., a vehicle identified in the policy Declarations or a vehicle acquired by the insured during the policy period] which is out of normal use because of its:
a. breakdown;
b. repair;
c. servicing;
d. loss; or
e. destruction.
Progressive argued in the court of appeals and maintained before the Supreme Court that although there is no definition of its policy of what constitutes a “temporary substitute” vehicle, courts should look to the definition of “temporary substitute automobile” used in the Texas standard policy form that preceded the current one. Alternatively, Progressive contended that the term “temporary substitute” should be given its commonly understood meaning, which, it argued, is that a substitute vehicle must be used with the permission of its owner or at least a reasonable belief that the owner consented.
In justifying its ruling the court said that because the term “temporary substitute” is not defined in the policy, they considered the ordinary, everyday meaning of the words used. It is common to rent a car, use a loaner car, or borrow a car from a friend or family member while one’s primary vehicle is undergoing service or repair. The generally accepted meaning of “temporary substitute” vehicle does not, include taking a vehicle without at least a reasonable belief of entitlement to its use.
Paragraph 8 says that a person using a vehicle without a reasonable belief that he or she is entitled to do so is not covered. “The general public understands that if a vehicle driven by a teenager and expressly covered by the policy breaks down and the teenager steals a neighbors car, the stolen vehicle would not be regarded as a ‘temporary substitute’ vehicle. Nothing in the use of the term ‘temporary substitute’ vehicle suggests otherwise. The analysis would not change if the teenager ‘borrowed’ the neighbor’s car without the neighbor’s knowledge or permission. The same can be said of an adult insured who ‘borrows’ his or her employer’s car without permission. The ordinary connotation of a ‘temporary substitute’ vehicle is that it is a vehicle used with the owner’s permission, or at least a reasonable belief that the owner consented.”

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