Florida Court Rules Against GEICO in Rental-Car Insurance Case

The 11th Circuit Court of Appeals has thrown out a lower court’s ruling that GEICO is not liable for damages from a 2006 Florida accident in which a motorist who was insured but not authorized to drive a car rented by his brother crashed into another vehicle, killing its driver.

In an opinion handed down on Monday that focused on the issue of what constitutes an owner’s permission to drive a vehicle, the court reversed the earlier decision and sent the matter back to a U.S. District Court in Florida, citing a recent Florida Supreme Court ruling that permission need not be granted in writing in such cases.

According to court documents, Miguel Baena flew to South Florida for vacation in December 2006 and rented a vehicle from Enterprise Rent-A-Car at the Fort Lauderdale airport. Because Baena—who was not insured and did not add to the rental agreement a policy providing the auto insurance Florida motorists are required to carry—said no one else would be driving the rental, the agreement stated, “no other drivers permitted.”

Miguel later met up with his brother, Edgar Baena, who was not aware of the stipulations of the rental agreement, and the two attended a Miami Heat basketball game. Afterward, Miguel asked his brother, who was insured through GEICO, to drive.

On the way home, Edgar crashed into a car driven by Paola Penafiel, killing her.

Under the terms of Edgar’s GEICO insurance policy, the company admitted liability for damages resulting from his use of a “non-owned auto.” But that liability was dependent on the vehicle being used “with the permission, or reasonably believed to be with the permission, of the owner,” according to the court.

GEICO denied the claim on the grounds that it did not believe Enterprise–the owner–had granted permission for Edgar to drive his brother’s rental.

After two trials in which no verdict was reached, a third jury found that although his brother had expressly permitted him to drive the car, Edgar did not reasonably believe he had the permission of Enterprise.

The Baenas and a representative of Penafiel’s estate appealed, claiming that permission to drive a rented vehicle need not be expressly granted in such cases unless the car had been removed from the owner’s control through “a breach of custody amounting to a species of conversion or theft.”

Because Miguel Baena lawfully possessed the car at the time of the accident, his brother had the legal permission of Enterprise to drive it, the appellants argued.

In its decision handed down Monday, the Court of Appeals agreed, citing a November decision by the state Supreme Court that found an auto insurance company was liable for damages in another fatal crash in Florida involving unauthorized drivers of a rental car.

In that case, Kutasha Shazier had a GEICO insurance policy that covered her vehicle and cars that were used temporarily and “with the permission of the owner,” according to the court. After her car broke down, Shazier rented a vehicle from Avis Rent-A-Car, and her policy stated that allowing use by any unauthorized drivers would terminate the rental agreement.

Shazier allowed the car to be driven by an acquaintance, who in turn lent it to another unauthorized operator, who crashed into a tree, “causing serious injury to minor passengers in the vehicle and the death of another,” court documents state.

GEICO refused to pay in that case also, contending that the unauthorized use terminated the agreement with Avis, thus revoking the owner’s permission. After a trial court found GEICO liable for damages owed by Shazier, a state appeals court overturned that decision, ruling that permission to drive the vehicle had been revoked through its unauthorized use.

The state’s high court quashed that decision, citing earlier rulings on the issue of what constitutes permission to use a vehicle and a state judicial doctrine under which an owner is obligated to pay damages caused as a result of voluntarily allowing a vehicle to be used by someone who operates it negligently.

In its ruling this week, the Court of Appeals found that the same standards apply in the more recent case.

“Therefore, if Enterprise gave its consent to Miguel (Baena) to rent the car, that consent … extended to any person that Miguel allowed to use the car,” the opinion states.

About Matthew Morisset
Matthew Morisset is a proud alumnus of the University of Redlands, where he obtained a degree in English Literature. Utilizing his passion for analysis and writing, Matthew looks for important trends in the auto insurance industry and their implications for consumers and the market as a whole.

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