Mercury Insurance is one of California’s largest auto insurance carriers. In a recent decision, Mercury Cas. Co. v. Chu, 229 Cal. App. 4th 1432, 178 Cal. Rptr. 3d 144 (2014) the Fourth District California Court of Appeal has upheld a $333,300 judgment despite protests by the insurance carrier that the claim was not covered.
Facts of The Case:
Mercury Casualty issued an insurance policy to Hung Chu insuring his automobile. Chu was driving with his roommate, Tu Pham, when Chu collided with another vehicle, injuring Pham. Pham filed a personal injury action against both Chu and the driver of the other vehicle. Mercury agreed to provide Chu with a defense to the lawsuit under a “reservation of rights” but, asserted that Pham’s injuries were not covered because Pham qualified as an “insured” under the policy due to the fact that he resided with Chu at the same address. The policy broadly defined an “insured” to include “residents,” defined as, “an individual who inhabited the same dwelling as the insured.” According to Mercury, the permitted exclusion authorizing auto liability insurance to exclude coverage for bodily injury claims brought by an insured applied and they should not have to pay the judgment against Chu by Pham.
Legal Issues to Be Decided:
In California, auto insurance companies are free to draft “exclusions” to coverage for either classes of persons or types of situations. One common exclusion is to exclude from coverage any accidents where a “resident” of the household is driving but, was not specifically included on the policy. In this case, the “exclusion” argued was one of one “insured” trying to sue another “insured”. Mercury argued that Pham, as Chu’s roommate, was a “resident” and an “insured” and should not be able to bring a claim against Chu.
Summary of Decision:
My take on this decision as a California personal injury attorney:
In my representation of auto accident victims in the last 18 plus years in CA, I have found Mercury Casualty Insurance to be one of the more difficult carriers to deal with and obtain a fair and expeditious resolution on auto accident claims. This appears to be yet another example. Although, the case did present a novel legal argument that the appellate court admitted was one of “first impression” (i.e. had not been ruled upon before by another California appellate level court), it seems to be a “stretch” to try to exclude coverage for an accident involving a named insured driving and injuring a passenger in their vehicle simply because the passenger happens to also be the driver’s roommate.