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California Court of Appeals Strikes Nonrelative Resident Exclusion Provision in Car Accident Case

A California Court of Appeals addressed the issue of whether a nonrelative resident exclusion provision in an insurance policy should be upheld or struck as contrary to public policy. In the case, the driver and his college roommate, a passenger in the vehicle, were involved in a motor vehicle collision. The roommate brought a personal injury claim against the driver and the other motorist as a result of the injuries he sustained in the accident. The driver’s insurance company filed a complaint for declaratory relief, alleging that the roommate was defined as an “insured” under the policy and did not have a duty to indemnify the driver for the amount awarded to the roommate. The superior court found in favor of the insurer, and the parties appealed.

After reviewing the entirety of the record, the Court of Appeal reversed, concluding that the insurance policy provision excluding the roommate from coverage was an overbroad expansion of a statutorily permitted exclusion for relative residents, and it was also contrary to public policy.

California law allows insurers to exclude claims for bodily injuries brought by an insured, with one of its goals to prevent fraud against insurance companies. In the case, the driver’s insurance policy defined insured to include residents who inhabit the same dwelling as the named insured. The policy thus excluded the driver’s roommate from coverage. In analyzing the law with respect to the insurance policy at issue, the Court of Appeal interpreted the relevant California statutory provisions together, holding that while they do provide authority for an insurer to exclude an insured, that person must have an insurable interest to be excluded.

The court further explained that while permissive users, who have no ownership or control of the vehicle, may obtain an insurable interest by act, the driver’s roommate was a non-relative and a non-permissive user of the vehicle, who had no insurable interest in the car or its owner. The court noted that since cohabitation can be temporary and involve complete strangers, particularly in the college setting, there is no legal basis to assume that insurers would be subject to the same risk of fraudulent lawsuits as relatives in the same household. The court observed that if an insurer could exclude a large portion of the public without regard to insurable interest, it would defeat the public policy behind requiring mandatory automobile insurance liability.

The court therefore concluded that no public policy consideration or legal authority could justify denying the roommate’s claim against the named insured of the policy, since there is no significance in the mere status of cohabitation. Finding in favor of the roommate, the judgment was reversed.

The San Mateo attorneys at the Law Offices of Galine, Frye, Fitting & Frangos provide aggressive and dedicated legal representation to clients pursuing compensation from those responsible for their injuries. If you have been the victim of a car accident, motorcycle crash, or other accident, our personal injury attorneys can advise you as to your rights and options under the law. To set up a free consultation with one of our experienced attorneys, contact us at 650-345-8484 or through our website.

More Blog Posts:

California Appeals Court Allows Survivors of Pedestrian Victim to Sue Passenger for Encouraging Driver to Speed, San Mateo Injury Lawyers Blog, published December 15, 2015

California Appeals Court Affirms $15 Million Verdict Against Semi-Truck Operator in Wrongful Death Action, San Mateo Injury Lawyers Blog, published May 12, 2015

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