8.3 Vehicles and Persons Insured

• Library: Insurance Law in Virginia (Virginia CLE) (2020 Ed.)

8.3 VEHICLES AND PERSONS INSURED

8.301 In General. The Virginia Code requires all insurers to offer insurance on pro forma insurance contracts filed and adopted by the State Corporation Commission (SCC) as "forms." ⁷⁰ Insurers must use the precise language of the SCC's forms unless the SCC specifically approves a deviation. ⁷¹ Although the practitioner must always begin the coverage analysis with the specific insurance contract in question, the Virginia Code provides for remarkable consistency among insurance contracts offered for sale concerning the risk actually insured by the Virginia Personal Auto Policy (PAP), which supersedes the former Virginia Family Auto Policy (FAP). ⁷² If a form policy conflicts with a statute, the statute controls unless the form provides greater coverage than required by law. ⁷³ Many of the FAP provisions are continued

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in the PAP but are phrased differently, so prior case law remains instructive.

8.302 Motor Vehicles.

A. In General. The superseded FAP policy provided for two classes of motor vehicles subject to the insurance contract: the "owned" versus the "nonowned" automobile. The current PAP distinguishes between a "covered auto" (a defined term in the PAP) and automobiles that are not covered. Loss to a "nonowned auto" is also insured under the PAP. ⁷⁴ These definitions can usually be found at the beginning of the policy. There may be slight differences in the nomenclature among contracts offered by competing insurers, but the basic principle is the same.

B. Covered Automobile.

1. In General. Under the PAP, liability coverage extends to any person using a "covered auto," subject to the policy exclusions. The PAP also insures against direct or accidental loss to a "covered auto."

2. Definition. A "covered auto" is defined as:

a.	Any private vehicle shown in the Declarations;
b.	A "newly acquired auto";
c.	Any "trailer" owned by the insured; 75
d.	Any auto or "trailer" not owned by the insured while used as a temporary substitute for any other declared vehicle which is out of normal use because of a breakdown, repair, servicing, loss or destruction.

For purposes of the standard policy, a leased vehicle is deemed to be "owned" by the insured if it is leased under a written agreement in that person's name for a continuous period of at least six months. ⁷⁶

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3. Temporary Substitute Vehicle. The PAP defines a "temporary substitute vehicle" as "[a]ny auto or trailer you do not own while used as a temporary substitute for any other vehicle described in this definition which is out of normal use because of its breakdown, repair, servicing, loss, or destruction." ⁷⁷

In addressing this issue under Virginia's prior Family Auto Policy (FAP), the Virginia Supreme Court has stated that the substitution must be "temporary" and not "of an unlimited or indefinite duration." ⁷⁸ In Armstrong v. Nationwide Mutual Insurance Co., ⁷⁹ the court held that the vehicle in issue was not a temporary substitute. It had been in use for three months as a substitute for a vehicle that broke down one week after purchase and was towed to a garage where it remained and was never returned to normal service.

In Lumbermens Mutual Casualty Co. v. Harleysville Mutual Casualty Co., ⁸⁰ the insured participated in a carpool with his coworkers. When the insured's vehicle became disabled, a family member was involved in an accident while driving the insured and his coworkers to work. The court held that the family member's vehicle was a temporary substitute vehicle being used to the same extent as the original vehicle and was, therefore, entitled to the same coverage as the original vehicle, but no greater coverage.

The vehicle being substituted does not necessarily have to be of the same type as the one owned by the insured. In Brown v. Security Fire & Indemnity Co., ⁸¹ the court found the insured to be in a temporary substitute vehicle when he borrowed a logging rig to take a flat tire to a service station and was involved in an accident along the way.

In Farmers Insurance Exchange v. Enterprise Leasing Co., ⁸² the court held that the insured's rental car was covered as a "temporary vehicle" under the terms of his policy, and his insurer was required to reimburse the self-insured rental car company for damages due to their insured's negligence.

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4. Newly Acquired Vehicle. The Amendment of Policy Provisions—Virginia for "Newly Acquired Auto" provides coverage for a private passenger auto or pickup or van for which no other insurance policy provides coverage. The insured must give notice to the insurer within a specified period when an additional vehicle is acquired under the PAP, and the additional vehicle will have the broadest coverage provided for any of the insured's vehicles as shown on the declarations page. Notice is not necessary, however, if the newly acquired vehicle is a replacement for an already declared vehicle. ⁸³ The standard PAP policy defines a "newly acquired auto" as any of the following types of vehicles of which the insured becomes the owner during the policy period:

a.	A private passenger auto, or
b.	A pickup or van for which no other insurance policy provides coverage that is not used for business or commercial purposes other than farming or ranching. 84

When the newly acquired vehicle is kept in addition to the listed vehicle, it may not be insured. If the insured asks for coverage on a newly acquired auto after a time period specified in the policy ⁸⁵ has elapsed, any coverage will not begin until the time such a request is made. In Virginia Farm Bureau Mutual Insurance Co. v. Nationwide Mutual Insurance Co., ⁸⁶ the issue was whether the FAP covered a newly acquired vehicle under the replacement proviso. The named insured had purchased the second automobile after ignition problems developed with the original vehicle and its tags expired. When the second vehicle became inoperable and junked, the named insured purchased a third car. The insured held onto the original vehicle because it was rare and he "regarded it as a very special vehicle." ⁸⁷ The court held that neither the second automobile nor the third automobile was covered because the insured never intended to replace the original vehicle. In Iowa National Mutual Insurance Co. v. McGhee, ⁸⁸ the insured transferred the

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registration and license plates from an insured 1957 Ford to a newly purchased 1963 Corvair, and where the Ford was found to be legally and mechanically inoperable, the court held that the evidence supported a finding that the Corvair was a replacement vehicle, thus falling inside the policy.

These two cases suggest that evidence drives decisions concerning newly acquired vehicles. Two other fact-specific cases are Butler v. Government Employees Insurance Co.⁸⁹ and Zurich General Accident & Liability Insurance Co. v. Baum. ⁹⁰ In Butler, the named insured bought a second car, transferred the tags from the original vehicle to the second, and offered the first vehicle for sale. The court held that the second vehicle was not a replacement for the first under the disputed policy's provisions because both vehicles were operable and the insured retained ownership and control of both vehicles up to the date of the accident that gave rise to the suit. Baum involved a disputed issue of fact as to whether the named insured had indeed called his agent by telephone to substitute a newly acquired vehicle for the originally insured vehicle. The court held that there was insufficient evidence to sustain the insured's verdict since the agent denied the conversation and the insured acted inconsistently following the alleged telephone call. Again, all of the cited cases above were decided under the previous version of Virginia's standard automobile policy.

5. Practice Pointers (Newly Acquired Vehicle). As with any fact-specific litigation, preparation is the key to winning. The practitioner should approach the issue with common sense. What acts did the named insured take that were consistent or inconsistent with his or her contention? Do family or friends provide support?

With the proliferation of 24 hours a day/7 days a week automobile insurance sales, it is important to obtain all of the file notes, no matter where in the country the notes were recorded. Is there a central computer file regarding policy service? When a toll-free telephone number is dialed, depending on the hour of the day, the area of the country where normal business hours are in effect is where the call is received. If a named insured leaves a dealership at 9:30 p.m. with a new car and calls his or her insurer at 10:00 p.m. to advise of the acquisition, then a customer service representative in California is most likely the one taking the call. With the high turnover of insurance sales personnel and the high cost of flying a customer service representative from California to testify in a Virginia court,

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practitioners also need to be wary of the evidentiary and practical issues involved in admitting a computerized file note into evidence at trial.

A newly acquired vehicle for which the named insured purchases a separate policy will not be automatically covered under an existing policy.

C. Nonowned Vehicle. Two exclusions merit attention that are familiar to insurance practitioners from the "nonowned" vehicle concept under the old FAP. Liability coverage is not provided for loss arising from the ownership, maintenance, or use of vehicles, other than the "covered auto," that are (i) owned by the named insured or any "family member" or (ii) not owned by the named insured or any family member but that are "furnished or available for the regular use" of the named insured or any "family member." ⁹¹ This could also apply to a temporary substitute as defined by the policy for an insured's covered vehicle. If a practitioner concludes that a...