Academic journal article Journal of Risk and Insurance

California Supreme Court Refuses to Give Effect to Automobile Policy Language Restricting Coverage for Permissive Users of Vehicle; Coverage-Limiting Language Insufficiently "Conspicuous, Plain, and Clear" to Be Enforced

Academic journal article Journal of Risk and Insurance

California Supreme Court Refuses to Give Effect to Automobile Policy Language Restricting Coverage for Permissive Users of Vehicle; Coverage-Limiting Language Insufficiently "Conspicuous, Plain, and Clear" to Be Enforced

Article excerpt

Haynes v. Farmers Insurance Exchange, 32 Cal. 4th 1198, 89 P. 3d 381 (California Supreme Court--May 17, 2004)

Haynes involved an automobile policy that provided, in two separate portions of the policy, there was no coverage for claims made arising out of permissive use of the vehicle. Policyholder William Gallahair had purchased an "E-Z Reader Car Policy" from Farmers. He permitted Christopher Morrow to drive the car. Joshua Haynes was riding in the car when an accident occurred, prompting Haynes to sue Morrow and Gallahair for damages. Farmers denied coverage. A portion of the body of the policy entitled "Other Insurance" stated that for "an insured person, other than you or a family member," coverage was available "up to the limits of the Financial Responsibility Law only." An endorsement to the policy entitled "Permissive User Limitation" stated that liability insurance for claims arising through permissive use of the car by someone other than the insurer or a family member were limited to $15,000 per person/$30,000 per accident rather than the $250,000 per person/$500,000 per accident provided for the policy generally in the declarations page. See 89 P. 3d at 1202-1204.

The California Supreme Court held that the endorsement, although not textually unclear, was nonetheless unenforceable because the endorsement was not sufficiently "conspicuous, plain, and clear" to be enforced. See 89 P. 3d at 1205. In Haynes, the policy language limiting benefits available for accidents arising from permissive use was hardly trumpeted, but neither was it buried and camouflaged. …

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