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An appellate court in California, affirming a trial court's decision, has ruled that an auto insurer had no duty to determine if an applicant for an insurance policy was a licensed driver before issuing the applicant an insurance policy.

The Case

Lucia Gomez alleged that she was injured and her mother killed when the car Ms. Gomez was driving was hit by a car being driven by Manuel Ramos.

Thereafter, Ms. Gomez sued Alliance United Insurance Company for common law negligence and wrongful death. She asserted that Alliance wrote automobile insurance policies for the “substandard insurance market” and that it had issued an insurance policy to Mr. Ramos five days before the accident so that he could purchase his car from a dealership.

Ms. Gomez contended that Alliance had breached a duty of care to her and the motoring public by issuing an insurance policy to Mr. Ramos even though Alliance knew he was unlicensed, would be the only driver of the vehicle, did not have any U.S. driving experience, had never driven before, was not a “rated” driver, could not buy the vehicle without insurance, and could not drive the car without first obtaining insurance.

The trial court concluded that Alliance did not have a common law duty of care to police or control the driving qualifications of California motorists or to determine whether Mr. Ramos was licensed before issuing him a policy.

Ms. Gomez appealed. She argued that it was “highly foreseeable” that insuring a knowingly unlicensed driver would substantially increase the risk of harm to the motoring public because it was widely recognized that unlicensed drivers were dangerous and frequently caused fatal traffic accidents.

The Appellate Court's Decision

The appellate court affirmed.

In its decision, the appellate court ruled that insurers did “not assume a broad duty of care to the public by issuing insurance to applicants.” It reasoned that the common law traditionally imposed liability to control the conduct of another person to avoid foreseeable harm only when a defendant had “some special relationship to the dangerous person or to the potential victim,” adding that there was no authority that suggested that an insurer stood “in a special relationship with the applicant or his potential victims” or owed “any affirmative duty of inquiry or disclosure regarding the applicant.”

According to the appellate court, an insurer could not be held “liable in tort to a third party” if it insured a driver who was unlicensed.

The appellate court concluded that Alliance did not owe a duty of care to determine whether Mr. Ramos was a licensed driver and, therefore, that the trial court had properly ruled in favor of Alliance.

The case is Gomez v. Alliance United Ins. Co., No. A152242 (Cal. Ct.App. Oct 25, 2018).

Steven A. Meyerowitz, Esq., is the Director of FC&S Legal, the Editor-in-Chief of the Insurance Coverage Law Report, and the Founder and President of Meyerowitz Communications Inc. As FC&S Legal Director, Mr. Meyerowitz, a member of the team that conceptualized FC&S Legal, provides daily analysis and commentary on the most significant insurance coverage law decisions from courts across the country and news regarding legislative and regulatory developments. A graduate of Harvard Law School, Mr. Meyerowitz was an attorney at a prominent Wall Street law firm before founding Meyerowitz Communications Inc., a law firm marketing communications consulting company.