The Insured is Presumed to Know What His Policy Insures

Undisclosed Intent Does Not Change the Wording of a Policy

Jun 27, 2022

FACTUAL HISTORY

Mobile Maintenance is a family cleaning business operated by Julien, Jesse Espinoza (Julien’s daughter) and Javier Espinoza (Jesse Espinoza’s husband). In March 2015, United Services Automobile Association (“USAA”) issued an automobile insurance policy to Jesse Espinoza that covered two vehicles.

Later, in 2016, Jesse Espinoza completed a vendor agreement for Mobile Maintenance to clean apartments owned by AMLI, listing Mobile Maintenance as the vendor. That agreement required Mobile Maintenance to obtain at least $1,000,000 in automobile liability insurance. Jesse Espinoza thus asked USAA to increase the coverage limits on the policy that was issued in 2015. USAA was unable to increase the policy limits and referred Jesse Espinoza to Petitioner, who issued a commercial automobile policy with the necessary coverage.

On October 15, 2018 a Honda Civic-driven by Brandon Donald, an uninsured motorist-struck Julien when she was walking from the grocery store to her daughter’s house. Julien sustained severe injuries in the accident. On October 2, 2020, Julien filed suit against Brandon Donald in the State Court of Gwinnett County and served Petitioner as the purported underinsured motorist carrier.

The Policy named Mobile Maintenance as the insured, and premium payments for the Policy were made via electronic transfers from Mobile Maintenance’s bank account. When applying for the Policy, Jesse Espinoza represented that the vehicle to be insured was used only for business purposes.

ANALYSIS

The insurer argued that it is entitled to summary judgment because Julien is not an “insured” under the terms of the Policy and is thus not eligible for coverage under either the Uninsured Motorist Coverage Endorsement or the Medical Payments Coverage Endorsement. Respondents concede that Mobile Maintenance is the named insured on the Policy. However, they contend that this was an error and that they intended to procure a personal policy in the name of Javier Espinoza (who is not a party to this action) or Jesse Espinoza-in which case Julien, as a relative of the insured, would receive coverage-rather than a commercial automobile policy insuring Mobile Maintenance.

Under Georgia law, “insurance is a matter of contract, and the parties to an insurance policy are bound by its plain and unambiguous terms.” [Richards v. Hanover Ins. Co., 299 S.E.2d 561, 563 (Ga. 1983).]

The parties in this case do not dispute that Mobile Maintenance is the named insured on the Policy, nor do they dispute that only an “insured” party is eligible for uninsured motorist coverage and medical payments coverage. The parties also do not contest the language that appears in the Policy: to qualify as an “insured” for the purposes of the Endorsements when the named insured is a partnership (like Mobile Maintenance), a claimant must have been “occupying an insured auto or temporary substitute auto” at the time of injury.

Julien was indisputably a pedestrian when she was struck by an uninsured motorist and thus falls outside the applicable definition of “insured.” The plain terms of the Policy, then – by which the Court is bound – precludes her from recovering any benefits under the Endorsements. Since the policy language is clear and unambiguous the contract must be enforced according to its plain terms. It is well settled that where no ambiguity in a policy of insurance exists, the courts must adhere to the contract made by the parties even if it is beneficial to the insurer and detrimental to the insured. The Policy’s language clearly and unambiguously dictates that Julien is not an “insured” and is thus ineligible for coverage.

Although Respondents admit that the Policy exists, that it was issued to Mobile Maintenance and that it contains the language above, they nonetheless argue that they intended to procure a personal insurance policy in the name of Jesse Espinoza or Javier Espinoza. Had they done so, Respondents contend, Julien would be covered under the Policy as a “relative” of the “named insured.”

Respondents’ arguments on this point are unavailing. As the facts show, the Policy was issued to Mobile Maintenance, premiums were paid from Mobile Maintenance’s account and Jesse Espinoza represented that the vehicle (a 2007 Dodge Ram) under the Policy would be used only for business purposes. The law weighs against Respondents’ position about their supposed intent. The general rule is that insureds are chargeable with knowledge of the contents of their policies.

Jesse Espinoza was presumed to know the Policy’s terms, including who qualifies as an “insured” under its provisions. The plain language of the Policy dictates that Julien is not eligible for coverage under the Uninsured Motorist Coverage Endorsement or the Medical Payments Coverage Endorsement.

As a result, the insurer does not owe Respondents any coverage obligation with respect to any claim arising from the October 21, 2018 accident because Helene Julien is not an “insured” under the terms of the Policy. Accordingly, Petitioner’s Motion for Summary Judgment was granted.

ZALMA OPINION

Equity allows an insured to reform the wording of a policy if it was issued in error because of a mistake of fact or fraud. In this case the alleged mistake was unilateral on the part of the insured who bought a commercial policy that only insured those operating the described vehicle. Since the person injured was a pedestrian she was not an insured and the belated “intent” was not able to convince the court that the error was not discovered in hinds

ight.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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The Insured is Presumed to Know What His Policy Insures

Undisclosed Intent Does Not Change the Wording of a Policy

FACTUAL HISTORY

ANALYSIS

ZALMA OPINION

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