IN CASE OF FIRST IMPRESSION, UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA HOLDS THAT INSURER IS ENTITLED TO LOOK TO EXTRINSIC EVIDENCE IN DETERMINING WHO IS AN INSURED
Henry Bond owned a vehicle which he insured with GEICO. Tatiana Chapman, the mother of one of Mr. Bond’s children, was with Mr. Bond at a family function in Philadelphia when she asked Mr. Bond for the keys so she could retrieve a diaper bag from the vehicle. She had never had a driver’s license, and Mr. Bond never gave her permission to drive the vehicle. For some reason, she drove the car out of the parking lot and into the street, where she collided with Louis Myers’s vehicle, causing it to flip onto its side. Myers sustained various injuries in the accident, including partial amputation of his right thumb. Within days, GEICO received notice of the accident and took recorded statements from Bond and Chapman in which they both indicated that Chapman did not have permission to drive the vehicle. Unfortunately, the statements could not be transcribed, but the claim representative summarized the content of the statements in his claim activity log.
Myers file suit against Chapman and Bond in the Court of Common Pleas of Philadelphia County. GEICO defended Bond but refused to provide a defense to Chapman since she was not a permissive user. Bond only had a $15,000 policy which GEICO tendered and plaintiff accepted. Plaintiff later entered into a 1.5 million dollar consent judgment with Chapman and gave her a covenant not to execute in exchange for an assignment of any bad faith claim she had against GEICO.
Myers then sued GEICO for bad faith in Philadelphia County, and GEICO removed the case to the Eastern District based on diversity. At the conclusion of discovery, GEICO filed a Motion for Summary Judgment arguing that it had no duty to defend or indemnify Chapman since she was clearly not a permissive user of Bond’s vehicle. Myers argued that GEICO was obligated to defend Chapman under the “four corners rule” because Myers alleged in the Complaint against Chapman that she was operating the vehicle with Bond’s permission and that GEICO’s failure to defend her was in bad faith. The appellate courts in Pennsylvania had never addressed this precise issue, so GEICO relied upon a learned treatise which in turn cited cases from 13 other jurisdictions holding that an insurer can rely on extrinsic evidence in determining whether someone is an insured under the policy.
After considering the Motion for Summary Judgment and response, the District Court agreed with GEICO and predicted that the Supreme Court would hold an insurer is not obligated to defend a stranger to the policy who does not qualify as an insured, regardless of what the Complaint says. Our firm handled this case for GEICO, and it is currently on appeal to the Third Circuit.