Insurance Law Alert: Lack of Driver’s License Does Not Affect Auto Insurance Coverage

In Landeros v. Torres (No. F060251, filed 5/24/12), the plaintiff sued another driver for injuries sustained in an auto accident. The other driver had been intoxicated, was prosecuted and sentenced to prison. In the ensuing civil lawsuit, liability was stipulated and a trial on damages produced a verdict of $31 million.

The defendant appealed, arguing that the plaintiff should not have been awarded noneconomic damages under California Civil Code sections 3333.3 and 3333.4, more commonly known as “Prop. 213,” because she was not insured at the time of the accident. Prop. 213 precludes recovery of noneconomic damages incurred in a motor vehicle accident when the injured plaintiff: (1) was driving while under the influence; (2) owned the vehicle involved but the vehicle was not insured; or (3) was the operator of a vehicle but cannot establish financial responsibility.

The plaintiff was underage and held no driver’s license. Her father had acquired the car four days before the accident, and had purchased auto insurance. The father admitted giving his daughter permission to drive the car, but the policy did not list her as a driver. The defendant argued that because the plaintiff held no license she could not be an insured, even though her father had purchased insurance.

The court disagreed. The court noted that the plaintiff did not reside with her father and, therefore, was not covered as a resident relative. However, the court found that she qualified for coverage as a permissive user. Insurance Code section 11580.1 mandates coverage of any person using an insured vehicle, with the named insured’s permission, express or implied, and within the scope of that permission, to the same extent that insurance is afforded to the named insured. Citing Metz v. Universal Underwriters Ins. Co. (1973) 10 Cal.3d 45, the Landeros court said that the statutory mandate for permissive user coverage not only forbids policy provisions that expressly exclude coverage for permissive users, but also invalidates any provision which defines a class of noncovered vehicles with the effect of excluding coverage for permissive users.

The Landeros court cited cases dating back to the 1930s for the proposition that the lack of a license does not affect coverage. According to the court, “both statutory and legal precedent strongly suggests the insurance policy issued here . . . not only provided liability coverage for permissive users, but it also provided liability coverage for unlicensed permissive users, so long as he or she was using the insured vehicle with [the named insured’s] permission.”

In response, the Landeros defendant cited Honsickle v. Superior Court (1999) 69 Cal.App.4th 7, a more recent Prop. 213 case in which the court said that the injured plaintiff, who was barred from noneconomic damages, could not obtain liability coverage because she was unlicensed and that “[a]n application for insurance coverage for an unlicensed driver is an absurdity on its face.” But the Landeros court said that the quoted passages were nonbinding and taken out of context. The court pointed out that the plaintiff in Honsickle could not obtain a license because she lacked resident immigration status, and the insurer had expressly excluded her from coverage. The fact of an express designated driver exclusion distinguished the case entirely.

The Landeros court also rejected an argument that coverage would not apply because the plaintiff had not been rated and no premium charged for her, saying that was presumably included in the premium for permissive user coverage. Likewise, the court declined to speculate whether the father had lied about his daughter on the application, stating that there was no evidence and in any case, Barrera v. State Farm (1969) 71 Cal.2d 659, limits the right to rescind auto insurance.

The court ultimately concluded that “[t]he plain meaning of section 3333.4 limits our inquiry to whether Landeros was a permissive user under the insurance policy purchased by her father. The insurance policy, Insurance Code section 11580.1, and the case law leaves no doubt that Landeros was included as a permissive user of the vehicle, even though she did not have a driver’s license. Accordingly, the trial court correctly concluded that section 3333.4 did not apply and that Landeros was eligible to recover her noneconomic damages.”

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May 25, 2012