Supreme Court Ruling Instructs Car Insurance Carriers To Pay For Claims Caused By Unauthorized Driver

Saturday’s Post 12/3/11 –  Today’s Post is involves an issue which I experienced personally. The US Supreme Court recently ruled an auto insurance carrier is now required by law to pay for any damage to rental cars even though a driver is not authorized by the rental contract. The majority carried the day during the hearing. The bone of contention is this case was on the interpretations of the term “temporary substitute auto” and the parties covered.  In Shazier V. GEICO; Geico Insurance Company argued that Shazier was in violation since she had allowed another person to drive and this claim was not in the “temporary substitute auto” category. The District court had earlier ruled in favor of the insurer, but this was later overturned by the Supreme Court.

It appears the insured owned a Ford and was insured with Geico. In 2006, the car encountered transmission problems and she rented a car from Avis and she named Geico as primary insurer. On the day of the auto crash,  the insured had allowed another person to use the car, who later lent the rental car who then crashed the vehicle. One passenger lost his life while the others suffered injuries. The injured parties filled petitions against Avis and the drivers. Avis then issued a cross claims. Geico the insurer categorically stated that the policy could not offer coverage for drivers not on their policy. In court, the passenger argued that Geico had to pay for the claims because the rental fell under the provision given by “temporary substitute auto”. Geico contended that the rental had been given to another driver so they had no express permission to use the car. According to Geico, they were not obligated to indemnify the drivers.  The driver won the case during the trail, however, the District court did not agree with the trial ruling, and stated that they could not file under “temporary substitute auto”. According to Geico’s policy they did not recognize third parties since no expression permission was granted by Avis, their obligation is only to their insured. The rental fell under “non-owned auto” exonerating Geico from paying any injury claims.  The Supreme Court reversed the ruling and stated that the district court had attached a different meaning to the word “permission”.   The person whom rented the car had entrusted the driver with the car and this could suffice as express permission. Geico the insurer was required by Florida law to indemnify the injured parties.

In 1990 I traveled to San Antonio, Texas to meet with friend’s of mine from my time in the United States Air Force. When I arrived at the Airport in San Antonio I rented a car. I purchased the Rental Insurance and listed myself as the only driver.  I drove to my friend’s home where two other friend’s were also staying.   During the weekend, a brother of one of my friends borrowed the rental car while I was sleeping and was involved in an accident.  The police called me from the scene.  The car was severely damaged.  When I returned the car, provided them with the police report and filed the claim – they told me the damage would not be covered.  They explained the driver whom was involved in the accident was not listed on the Collision Damage Waiver I signed and I would be personally responsible for the damage. After I arrived home, I turned the matter over to my attorney.  After 7 years of letters between the two attorneys – the Insurer for the Rental Car Company paid the claim.


Michael E. Dortch
President &  Managing Agent
Corporate Home Office
618 South Broad Street
Lansdale, Pennsylvania  19446
(800) 807-0762  ext. 602