BROWN V. PENN NATIONAL | USE OF COMPANY VEHICLE BY EMPLOYEE'S WIFE | PERMISSIVE USER AND LAWFUL POSSESSION

In Brown v. Penn National (MDNC, January 28, 2014), the federal court addressed whether an operator of a vehicle had liability coverage for injuries arising out of her use of a vehicle owned by her husband's employer. 

The employer allowed the employees to use the vehicles to a limited extent while off the clock. The employee allowed his wife to drive the vehicle occasionally. They thought that this use was allowed by the employer, based in part on a belief that other employees used company-owned vehicles in this manner.

The court ruled that the employer's policy (for use of vehicles) was ambiguous as to whether the employee could us a vehicle for personal purposes, but also ruled that the policy was not ambiguous in that non-employees were not to operate company-owned vehicles. Thus, the operator of the vehicle (spouse of employee to whom vehicle was entrusted) was not covered. Her belief as to her right to operate the vehicle was not material. A person other than the owner could not grant her permissive use of the vehicle. She therefore did not have the full limits of liability coverage ($1,000,000). On the other hand, the court ruled that she was in "lawful possession" of the vehicle, for the purposes of the North Carolina Financial Responsibility act (N.C. Gen. Stat. 20-279.21), and that the policy therefore provided her with the minimum coverage required by law ($30,000).

There is a long line of cases in North Carolina addressing the coverage for "permissive users" and "lawful possessors" in North Carolina. In some instances, a person is initially given permission to operate the vehicle, but he or she exceeds the scope of that use; in this case, the person is a lawful possessor but is no longer a permissive user.

John Kirby has represented handled many insurance cases in North Carolina involving permissive users and lawful possessors.