Claim Against Vehicle Owner Key to Umbrella Coverage for Auto Loss Caused by Permissive Driver

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In this insurance coverage action, Allstate  appealed from an order granting summary judgment and determining that a permissive user of a motor vehicle was covered under Allstate’s  umbrella policy.

In August 2007, Alana Proctor, the permissive driver of a vehicle owned by Neil Seiden, collided with Melanie Manzo-Pianelli. Seiden had an insurance policy with State Farm that provided $100,000 in coverage and an umbrella policy with Allstate that provided $1,000,000 in coverage. State Farm tendered its policy limits to Pianelli, and Pianelli sought to recover against Allstate.  Allstate denied coverage.  In October 2009, Pianelli sued her insurer, USAA, for underinsured motorist benefits. USAA filed a third party complaint against Allstate, Pianelli, and Proctor, seeking a determination as to the “priority of coverage.” Seiden was never brought in as a party.

In its summary judgment motion, Allstate argued that as a permissive user, Proctor was not afforded coverage under the policy, which limited coverage to “damages which an insured person becomes legally obligated to pay.”  Because Seiden, the insured person, was not named as a defendant, he could never be “legally obligated” to pay damages since the statute of limitations had run.

The appellate court reversed the trial court’s grant of summary judgment, because there was an issue of fact regarding whether Seiden could be legally obligated to pay Proctor’s claim.  The issues included whether the statute of limitations to sue Seiden had run, the applicability of the relation-back doctrine if Seiden were added as a defendant, whether Allstate misrepresented coverage in its letter to Proctor, and whether tolling applied. During oral argument, the appellees claimed there was the potential that Seiden could still be held liable. Also during oral argument, Allstate admitted that if Seiden had been named as a defendant, Allstate would have had a legal obligation to pay the claim. If no action may be maintained against Seiden, it follows then that there would be no liability or coverage under the umbrella policy for the permissive user.