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Would an “Insured” by Any Other Name Be as Covered?

thinkstockphotos-618210028Automobile liability policies provide coverage both to “named insureds” and “insureds.” Do you understand the coverage consequences of this distinction?

When representing an insured in a car accident case, you need to determine whether your client is the “insured” or a “named insured” under the relevant policy:

Named insured. The person or entity to whom a policy is issued is generally designated as the “named insured” in the declarations portion of the policy. Endorsements or definitions in the policy may expand the persons or entities who are classified as named insureds to include, for example, a spouse who lives with the named insured or various companies affiliated with, or controlled by, the named insured.

Insured. A person, entity, or organization not in a contractual relationship with the insurer, but to whom the policy provides coverage, is called an “insured.” Insureds may include relatives living in the same household with the named insured, persons using an owned automobile with permission, and persons or entities responsible for the actions of named or additional insureds.

What difference does this distinction make? Sometimes a lot. Coverage is broadest for the named insured. To the extent permitted by the Insurance Code and case law, coverage for other insureds may be more limited.

There may also be differences in the applicability of coverage. Most policies specify that the insurance “applies separately to each insured against whom a claim is made or suit is brought.” The limits of liability for an accident are the same, however, regardless of the number of “insureds” who may be responsible for the accident.

In analyzing a claim, you’ll need to assess the potential coverage from the standpoint of each insured seeking coverage, especially if an exclusion is potentially applicable. Arenson v National Auto. & Cas. Ins. Co. (1955) 45 C2d 81, demonstrates this principle: A personal liability policy covered the named insured and members of his household, including his minor son as an additional insured. The policy excluded claims for bodily injury or property damage “caused intentionally by or at the direction of the insured.” The plaintiff’s minor son started a fire that damaged school property. The question was whether the parent’s liability under a provision of the Education Code was covered by the policy. The insurer argued that none of the insureds would be covered if an injury was intentionally caused by an insured. The parent argued that if one insured intentionally injured property, coverage would not necessarily be precluded for all insureds. The court agreed with the parent, holding the parent was covered although the child was excluded.

Some courts have barred coverage for all insureds under a policy in which one insured committed an intentional act and the policy excluded coverage for “intentional acts of an insured” as opposed to “intentional acts of the insured.” See Fire Ins. Exch. v Altieri (1991) 235 CA3d 1352. But if a policy covering multiple insureds contains a severability clause, an exclusion barring coverage for injuries arising out of the intentional acts of “an insured” does not bar coverage for claims that an insured negligently failed to prevent the intentional act of another insured. Minkler v Safeco Ins. Co. (2010) 49 C4th 315, 319.

As with all insurance issues, understand what the terms mean and carefully scrutinize policy language. For everything you need to know about insured, turn to CEB’s California Automobile Insurance Law Guide, chap 3.

Other CEBblog™ posts you may find useful:

© The Regents of the University of California, 2017. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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