Ninth Circuit's Latest Coverage Case Finds No Coverage Under Auto Policy

Continuing with its recent torrent of insurance coverage cases, the Ninth Circuit recently addressed whether an officer and director were covered under the corporation’s auto policy.  See Progressive Casualty Ins. C. v. Owen, No. 06-35677 (9^th Cir. March 26, 2008). The case relied on Montana law, which follow principles similar to those adopted in Hawaii for interpreting insurance policies.

Arelene Owen was a vice-president, secretary and director of Owen Trucking, the insured.  Progressive issued a commercial auto policy to Owen Trucking, listing the named insured as Bennett Owen Trucking.  Ten drivers were named in the declarations, but not Arlene.  Arlene was injured when helping a friend move hay bales, a project unrelated to Owen Trucking.  After driving her friend’s truck, she was standing 15 feet from the bed of the truck when a hay bale fell on her, causing serious injury.  After recovering from her friend’s insurer, she filed a claim for under insured motorist and medical benefits payments with Progressive.

Progressive filed an action in the U.S. District Court seeking a declaratory judgment that Arlene was not covered.  The District Court ruled in Arlene’s favor, finding that the policy was ambiguous because a corporation cannot suffer bodily injury and incur medical bills.  Therefore, the District Court rewrote the policy to include Arlene as a named insured.

The 9^th Circuit reversed.  The language of Progressive’s policy afforded coverage to “any person” driving a vehicle as a temporary substitute for a vehicle named in the policy.  There was no evidence that her friend’s truck was used in place of an Owen Trucking vehicle that was withdrawn from use because, under the language of the policy, of breakdown, repair, servicing, loss, or destruction.  Consequently, Progressive was entitled to summary judgment.

Because the Ninth Circuit used legal principles similar to those adopted by Hawaii courts in determining there was no coverage, it is likely the Hawaii courts would reach a similar decision if confronted with this issue.