The Office of General Counsel issued the following informal opinion on July 24, 2002, representing the position of the New York State Insurance Department.
Re: Private Passenger Automobile Liability Insurance Coverage for a Non-Owned Automobile
Is an insurer required under the facts set out below to provide automobile liability insurance coverage where a member of the named insureds household is involved in an accident while driving an automobile that is not owned by the named insureds or a member of their household?
In the instant case, the answer to the question depends upon whether or not the vehicle not owned by the named insureds or the member of the household was furnished or made available to the member of the household for regular use. This determination turns upon the facts surrounding the possession and use of the automobile by the member of the household, with the permission of the owner of the automobile. If the automobile was not provided for the member of the households regular use, the mandatory liability coverage for a non-owned automobile applies and there is coverage. If, on the other hand, the automobile was provided for the member of the households regular use, the mandatory coverage for a non-owned automobile does not apply and there is no coverage.
Mr. A was involved in a motor vehicle accident in which his automobile collided with an automobile driven by Ms. B and owned by her mother, Ms. C. Ms. Cs vehicle had no insurance at the time of the accident because the coverage had lapsed. Ms. B is the granddaughter of Mr. & Mrs. D and she resides in their home. Ms. C does not reside in Mr. & Mrs. Ds home.
Mr. & Mrs. D made an insurance claim to their automobile liability insurer (the "Insurer") when they were sued by Mr. A, but their claim under the policy (the "Policy") was denied by the Insurer. The Insurer, in its letter denying the claim, states that the Policy covers damages for bodily injury and property damage to others for which the law holds an insured responsible because of an accident which results from the ownership, maintenance or use of a covered automobile, a non-owned automobile or a trailer while being used with a covered automobile or non-owned automobile. The basis for its denial of the instant claim is that the automobile that Ms. B was operating is neither a "Covered Automobile," nor a "Non-Owned Automobile" as those terms are defined in the Policy and, therefore, its use is not covered under the Policy. The controversy, however, is focused upon the Insurers assertion that the automobile in question is not a non-owned automobile as defined in the Policy.
The Policy defines a non-owned automobile as follows:
"NON-OWNED AUTOMOBILE" means:
an automobile which is not currently owned by, furnished to, or made available for regular use to you or any resident in your household.
The issue is whether the Insurers denial of the claim is proper in view of the fact that the automobile that Ms. B was driving at the time of the accident was not regularly furnished for her use by the Insurers insureds, Mr. & Mrs. D. The Insurers position is characterized as follows: "Essentially, [the Insurer] has indicated that they will not provide coverage due to an exclusion in the section of the policy that defines covered automobile. [The Insurer] indicates that the vehicle that was being driven was regularly furnished to the driver [Ms. B] by her mother [Ms. C]. However, [Ms. C] is not a resident of [Mr. & Mrs. Ds] household nor is she insured under [Mr. & Mrs. Ds] policy."
N.Y. Veh. & Traf. Law Art. 6 (McKinney 1996) was enacted to ensure that victims of motor vehicle accidents in New York State would be compensated for their financial losses and bodily injuries. Under N.Y. Veh. & Traf. Law §§ 310 and 312 (McKinney 1996) every driver is required to maintain proof of financial security. One method of maintaining financial security is through an "owners policy of liability insurance." N.Y. Veh. & Traf. Law § 311 (McKinney 1996) requires that the Superintendent of Insurance prescribe by regulation the minimum provisions for an owners policy of liability insurance. Today, these mandatory minimum provisions for New York automobile liability insurance policies used to satisfy the financial security requirements are contained in Subpart 60-1 of N.Y. Comp. Codes R. & Reg. tit. 11 (1996) ("Regulation 35-A").
Section 60-1.1(d)(1)(iii) of Regulation 35-A is applicable to the issue at hand. It mandates that an owners policy of liability insurance must include a provision, as follows:
(d)(1) A provision that, if the named insured is an individual or husband or wife and the policy affords insurance with respect to a private passenger automobile owned by either, such policy shall afford bodily injury and property damage liability insurance for:
* * *
(iii) the incidental use in other than a business or occupation of such insured or his spouse of automobiles not owned by such named insured or a member of his household, nor furnished or available for their regular use, provided the actual operation or other actual use thereof is with the permission of the owner and is within the scope of such permission.
The foregoing mandatory liability insurance coverage is generally referred to as coverage for "non-owned automobiles." The definition of "Non-Owned Automobile" contained in Mr. & Mrs. Ds Policy provides the coverage required by the Regulation.
Therefore, a New York private passenger automobile liability insurance policy issued to an individual or husband or wife must afford coverage for bodily injury and property damage liability arising from the incidental use (other than business) of an automobile not owned by the named insured(s) or a member of their household, but only if the automobile is not furnished or available for the regular use of the named insured(s) or member of the household to whom the owners permission was given to use the automobile. In other words, a non-owned automobile is not one which is furnished to, or made available for regular use. The mandatory coverage would apply to a resident of the household of the named insured(s) if the automobile is not provided for their regular use. This mandatory coverage provides protection under the named insureds automobile liability policy for the occasional or infrequent use of a vehicle not owned by the insured(s) or a member of their household.
The Policy was issued to Mr. & Mrs. D and the automobile in question was being driven by Ms. B (the granddaughter of the named insureds and a resident of their household). The automobile was owned by Ms. Bs mother, Ms. C, who is not a resident of Mr. & Mrs. Ds household. Mr. & Mrs. Ds automobile liability insurance policy covers, among other things, injuries and/or damages resulting from the use of a non-owned automobile, as required by Section 60-1.1(d)(1)(iii) of Regulation 35-A.
Section 60-1.1(d)(1)(iii) of Regulation 35-A provides for two conditions, both of which must be met, in order for non-owned automobile coverage to attach; the vehicle can not be owned by the named insured(s) or a member of the household and the automobile can not be furnished or available for regular use. However, it is questioned whether or not the "exclusion" claimed by the Insurer is correct since the automobile was not regularly furnished for Ms. Bs use by Mr. & Mrs. D. The mandatory coverage for a non-owned automobile is applicable even if the automobile was not furnished to the resident of the household by the named insureds. There is no requirement for coverage to attach that the named insured(s) provide the non-owned automobile.
The Insurers position that the automobile Ms. B was operating also does not constitute a "non-owned automobile" is not, on its face, an unreasonable position. The basis for its assertion as to a "non-owned automobile" is that the automobile was furnished to or made available for Ms. Bs regular use by her mother, Ms. C. The question is whether the automobile was furnished or made available to Ms. B for her regular use.
New York courts have used certain criteria in order to determine whether a particular automobile is provided for regular use. In Egle v. United Services Automobile Association, 551 N.Y.S.2d 954, 955 (Sup. Ct. 1990) the court observed that, as a general matter, "whether an automobile has been furnished for regular use is determined by the particular facts and circumstances of each case. The factors that courts have considered include the general availability of the vehicle and the frequency of its use by the insured" Liberty Mutual Ins. Co. v Sentry Ins., 130 A.D. 2d 629,630)." As noted by the court in McMahon (supra) at 467, "The availability and number of times a nonowned vehicle is used should be the criterion (Vern v. Merchants Mut. Cas. Co., [21 Misc.2d 948, at 52])..." "In determining whether a car has been furnished for regular use there is no hard and fast rule by which to resolve the question, each case being dependent on its own facts and circumstances. However, it seems clear that the term regular use suggests a principal use as distinguished from a casual or incidental one." Simon v. Lumbermens Mutual Casualty Company, et al., 436 N.Y.S.2d 139, 141 (1981). If the automobile in question had been made available to Ms. B for her regular use, injuries and/or damages resulting from its use would not be covered under Mr. & Mrs. Ds Policy and the claim was properly denied.
Whether or not the Insurer is correct in denying Mr. As claim involves the determination of a question of fact that can only be resolved by a court. Once the factual issue is resolved it will be determinative of whether or not the Insurer must provide liability insurance coverage for a non-owned automobile in the instant circumstances.
The Policy can only cover Mr. As loss through coverage for a non-owned automobile. Insofar as the vehicle in question is not a "covered automobile" under the policy, nor is it a substitute automobile of the named insureds, there appears to be no other way that Mr. & Mrs. Ds Policy could be construed to provide liability coverage for Mr. As loss.
The above opinion is informal and not binding on any court. For further information you may contact Associate Attorney Barbara A. Kluger at the New York City Office.