Babcock Business Advisor
June 23, 2005 - Vol. 2 No. 005

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GOOD FAITH DRIVER INSURED

An innocent driver in good faith who had no knowledge the vehicle she was driving was actually stolen, was entitled to liability insurance coverage, an appeal court recently ruled last week. Miller v. Tassin, 2004-2115 (La. App. 4 Cir. 5/25/05). The decision extends liability insurance protection for innocent parties, recognized more than 26 years ago for those who in good faith purchase a stolen vehicle and have it insured.

While driver Tassin did not have permission of the vehicle’s true owner to drive the insured vehicle, she did have permission of a friend to drive it, the only owner she knew or could have known, to contact about the vehicle. Until the defendant telephoned her friend to inform him about the accident, she believed the car was his and that she had permission to drive it. Approximately two weeks before the accident, Tassin and her friend traveled to Florida together at which time the friend had the vehicle. At no point until after the accident did the defendant have any reason to question her friend’s ownership of the vehicle.

PGAC, the insurer, contended its non-permission exclusion precluded coverage. The exclusion portion of its policy provided no coverage for any person “using a motor vehicle without the express or implied permission of the owner, or outside the scope of the permission given.” Since Tassin did not have permission of the vehicle’s true owner, PGAC contended the exclusion applied.

The court rejected this argument, ruling that liability insurance should cover, as a matter of public policy and law, an innocent driver in good faith who had no way of knowing the vehicle she was driving was actually stolen. This ruling, the court said, was a logical extension of the Louisiana Supreme Court’s Perkins v. Mcdow, 615 So.2d 312 (La. 1993) decision which found a second permittee – a friend of their child who was given permission but told not to loan the car to anyone – covered under the parent’s policy.

Further illustrative, the court said, was the Louisiana Third Circuit Court of Appeal ruling in State Farm Mutual Automobile Insurance Coverage v. Price, 378 So.2d 599 (La. App. 3 Cir. 1979) which held that a good-faith purchaser may obtain an insurable interest in a motor vehicle, even though he purchased a stolen motor vehicle. The court found that although State Farm’s insured was not the owner of the car (it was previously stolen), he had acted in good faith and had evidenced enough interest in preserving the vehicle that he had essentially earned an insurable interest in the vehicle. While distinguishable from the facts of this case, the court found illustrative the fact that Louisiana courts have found coverage in favor of an innocent insured acting in good faith. Price.

[w]e believe the decisions recognizing the existence of an insurable interest under such circumstances are more logical and reasonable and provide a more equitable result. There is substantial support for such rule in Louisiana law.

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