Auto Insurer May Have to Pay for Transmission That Allegedly Occurred in Back Seat

geckoGEICO's spokesgecko (off duty)

This week the Missouri Court of Appeals held that GEICO may be required to pay $5.2 million to a woman who claims she caught an STD from her former boyfriend. Does GEICO offer that kind of insurance, you may be asking? Well, it looks like at least one arbitrator has decided that GEICO’s automobile-insurance policy covers this, which tells you where the plaintiff allegedly was when the injury was inflicted.

Also where her former boyfriend was.

According to the Kansas City Star, the woman notified GEICO last year that she intended to seek damages from her former boyfriend, which she said was also GEICO’s problem because the incident took place in his vehicle. She demanded $1 million (the policy limits), but GEICO rejected this, denied coverage, and filed a declaratory judgment action asking a court to hold that it had no obligation to pay.

In the meantime—and without telling GEICO—the woman and her former boyfriend agreed to arbitrate their dispute, which means they agreed to have a third party other than a judge resolve it. (Private arbitration can be cheaper and faster than litigation, or at least that’s the idea.) In May of last year, according to the court’s opinion, the arbitrator determined that (1) there had indeed been “sexual activity in [the defendant’s] automobile,” (2) said activity had “directly caused, or directly contributed to” the plaintiff’s injury, (3) the defendant had been diagnosed with HPV, and (4) he negligently failed to disclose this to the plaintiff or take other actions that might have prevented the injury. The arbitrator decided that the plaintiff was entitled to $5.2 million.

Three days after the arbitrator announced the award, the plaintiff sent GEICO a letter telling it about the arbitration agreement, and she filed a petition in state court the next day. As I understand it, this petition was to confirm the private award and “reduce it to judgment” (enforcing a court judgment is how you get someone to pay). After GEICO learned about the award, it decided it had 5.2 million objections to what happened, and it filed a motion to intervene in the state proceeding. The state court granted that motion, but proceeded to enter the judgment the same day. This meant GEICO had to file a motion to vacate the judgment, which it did, arguing in several different ways that the outcome was unfair to it because it hadn’t been involved in the arbitration (about which it had not even been told). The trial court said nope, and denied the motion. GEICO appealed. On Tuesday, it lost.

Most reports about the Court of Appeals’ decision—and there have been many—say this means GEICO has to pay the $5.2 million. But this decision was only about whether GEICO had the right to be involved in the earlier proceedings, including the arbitration, about which the parties never told it. It alleged, in fact, that the parties deliberately kept it out of the loop. Basically, the Court of Appeals said that GEICO could have gotten involved by providing a defense to its insured, instead of going to federal court. No due process violation, therefore.

One reason for this, the court noted, is that GEICO can still assert its rights in the federal action, which is still pending. It can’t challenge the amount, I don’t think, but it can argue that it doesn’t have to pay at all because its policy doesn’t cover this particular activity. If it wins there, then its insured will have to pay (that probably won’t amount to $5.2 million, but I’m just guessing—they didn’t say what kind of car it was), but GEICO won’t.

This means we don’t yet have an answer to the much more interesting question of whether an auto policy covers … what I guess you might call negligent intercourse, just because it happens to have taken place in an insured vehicle. Sadly, but understandably, the court’s opinion does not even speculate on that, nor does it tell us what policy language allegedly covers this.

But, as it happens, GEICO is also my insurance company, and I am looking at my policy right now, solely for the potential entertainment value, needless to say. And I am not going to do much speculating on a Friday afternoon, especially not until after I check to see whether we represent any auto insurers. But I will note the following.

The policy says GEICO will pay damages that an insured becomes legally obligated to pay because of “bodily injury, sustained by a person, and … arising out of the ownership, maintenance or use of the owned auto….” “Bodily injury” includes sickness. I don’t see ownership as being an issue, and there’s no suggestion any “maintenance” was going on, although I guess that argument could be made. So I’d guess the major issue will be whether this particular injury “arose out of … use of the owned auto.” I do not see a definition of “arising out of,” and as I recall, there have been approximately one gajillion cases involving whether one thing “arises out of” another thing under an insurance policy, so that’s probably where things are headed.

Could GEICO benefit from the policy’s exclusions? Well, according to this, the policy does not cover vehicles used to carry “passengers for hire,” “arising from the operation of farm machinery,” or caused by a vehicle during “any racing, speed or demolition contest,” but I doubt anything that interesting was going on here. The exclusion for “stunting activity of any nature” looks promising—no, wait, that’s apparently referring to car racing too. Injury caused by “bio-chemical attack” is out, but only if it results from an act of terrorism, so probably not. Well, the “arising out of” language is probably GEICO’s best bet, at least based on my very brief review.

I am also sad to know that my auto policy will not cover injuries “resulting from a nuclear explosion,” but then I think insurance coverage would be the least of my concerns at that point.