Mercury Casualty v. Chu: Car Accident Liability for Resident’s Injuries

Mercury Casualty v. Chu, a case from the California Court of Appeals, involved a two-vehicle accident that occurred in an intersection. According to court records, two roommates were in a car that collided with another vehicle.

gavel9.jpgThe injured passenger filed a negligence lawsuit against his roommate, who was driving the car, and the other driver involved in the crash. Passenger obtained a $333,300 verdict against his roommate in the lawsuit.

Driver’s insurance company requested a judicial declaration that driver was not responsible for passenger’s injury because of the resident exception to driver’s insurance policy.

Lawyers who regularly represent victims injured in car accidents in Asheville, know insurance companies will typically include a clause in their insurance policy binders that they are not liable for injuries caused to someone who lives in the same residence as the insured driver.

In Mercury Casualty, the insurance company also demanded driver reimburse them for any money spent defending the claim brought by roommate. Driver filed a cross-claim against the insurance company for breach of contract, bad faith dealing, and negligence.

The trial court granted the insurance company’s motion for summary judgment, finding that it was not responsible for the injuries caused to roommate, who resided with driver, under the coverage exception included in the policy. The court also found that driver was not responsible for reimbursing insurance company, because they had not requested such relief in their initial motion for a judicial declaration and were therefore barred from asking for it in a later motion. Both parties appealed the trial court’s ruling to the state court of appeals.

The appeals court reversed and remanded the trial court’s decision granting insurance company’s motion for summary judgment on grounds that the resident exception as applied in this situation was overbroad and contrary to public policy. As a result of this ruling, the court did not have to address the issue of whether insurance company was entitled to reimbursement.

The court reasoned that one should look at how the term “resident” is defined in terms of a car accident lawsuit. The term was not defined in the insurance contract. Under the relevant case law, the term “resident” was meant to include relatives of the named insured or non-relatives who live with the named insured but are also permissive users of the car.

Basically, it comes down to whether the resident has an insurable interest in the car. If he or she does not, and is not a relative, then it would be wrong to exclude them from being able to file a claim, merely because they live in the same dwelling as the named insured. The insurance company in this case alleged that roommate was covered by the policy, making payment of his damages improper. However, being a covered driver did not confer any benefit to roommate. The only reason he was given insured driver status was to preclude him from coverage for any benefits as a result of this accident.

This case deals with the concept of having an insurable interest in a person or piece of property in order to obtain coverage. Historically, this goes back to King’s law, when insurance was merely a form of gambling on whether ships would sink or people would be killed. If someone was able to obtain coverage in something or someone (life insurance) without having an insurable interest, there was a risk that they would destroy the property of another, or even kill the named insured on a life insurance policy to collect benefits. When people starting taking out life insurance policies on the king, he made a law that required an insurable interest.

Contact the Asheville car accident attorneys at the Lee Law Offices by calling 800-887-1965.

Additional Resources:

Mercury Casualty v. Chu, September 28, 2014, California Court of Appeals
More Blog Entries:

Progressive Casualty Insurance Co. v. MMG Insurance Co.: UM/UIM Coverage for Passengers, August 22, 2014, North Carolina Personal Injury Lawyer Blog

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