Who Does A Policy Cover

Grand Prairie insurance lawyers need to be able to look at an insurance policy and determined who is insured by the policy. A 1997, Texas Supreme Court case provides some guidance for an answer. The style of the case is, Grain Dealers Mutual Insurance Company v. McKee. Here is some of the relevant information.
In this case the court must determine whether the Business Auto Policy that Grain Dealers issued to Future Investments, Inc. (“Future Investments”), a corporation of which Gerald McKee is the president and sole shareholder, provides coverage for McKee’s daughter. The court concluded that it does not.
McKee’s eleven-year-old daughter, Kelly, was injured in a one-car accident while riding as a passenger in a car driven by her adult step-sister, Delane Aranda. Delane’s husband owned the car. The parties stipulated that neither Delane nor the car involved in the accident was covered under the Grain Dealers policy and that the accident occurred during an outing unrelated to any business purpose of Future Investments. Kelly resided with McKee when the accident occurred; Delane did not.
McKee sued his Texas Personal Auto Policy insurance carrier, Companion Insurance Company, for Uninsured/Underinsured Motorist Protection (“UM/UIM”) coverage; (2) Delane; and (3) Grain Dealers. McKee settled with Companion and Delane for a total of $320,000.00.
By counter-motions for summary judgment, McKee and Grain Dealers sought a declaratory judgment on the coverage issue. The trial court granted summary judgment in favor of McKee, finding that Kelly was entitled to coverage under the policy’s UM/UIM and Personal Injury Protection (“PIP”) provisions.
The UM/UIM endorsement provides three categories of “who is an insured” under the policy:
1. You and any designated person and any family member of either.
2. Any other person occupying a covered auto.
3. Any person or organization for damages that person or organization is entitled to recover because of bodily injury sustained by a person described in 1. or 2. above.
The PIP endorsement provides two categories of “who is an insured”:
1. You or any family member while occupying or when struck by any auto.
2. Anyone else occupying a covered auto with your permission.
The insurance policies and the summary judgment evidence demonstrate that the Grain Dealers policy excludes coverage for Kelly. In order for the policy to cover Kelly, she must fall within one of the categories of “who is an insured.” The Business Auto Coverage Form of the Grain Dealers policy provides: “Throughout this policy the words ‘you’ and ‘your’ refer to the Named Insured in the Declarations page.” The declarations page of the Grain Dealers policy provides that Future Investments is the “named insured.” Future Investments is also the “named insured” in the UM/UIM and PIP endorsements. The UM/UIM endorsement defines “designated person” as “an individual named in the schedule. By such designation, that person has the same coverage as you.” Future Investments did not name a “designated person” in the space provided in the UM/UIM endorsement and did not list additional autos to be covered under either endorsement. The names of Gerald McKee and Kelly McKee do not appear anywhere in the policy or the endorsements. As a result, Kelly does not qualify as “you” or “designated person” under the endorsements.
Additionally, Kelly does not qualify as a “family member” under the endorsements. “Family member” is defined in both endorsements as “a person related to Future Investments by blood, marriage, or adoption who is a resident of Future Investments household, including a ward or foster child.” Kelly is obviously not related to Future Investments by blood, marriage, or adoption. Of course, she also does not reside in Future Investments’ household. A corporation simply cannot have a “family” as that term is defined in the policy.
Because Kelly does not qualify as a “designated person,” a “family member,” or “you,” she does not fall within the first classification of who is an insured under the UM/UIM and PIP endorsements. The parties agree that Kelly was not occupying a covered auto when the accident occurred. As a result, Kelly does not fall within category 2 of either the UM/UIM or PIP endorsements. In order to recover under category 3 of the UM/UIM endorsement, Kelly would have to be a person described in categories 1 or 2. Because she is not, it is clear that Kelly does not fall within any of the endorsement classifications of “who is an insured.”
McKee claims that any policy interpretation that denies family member status to Kelly is illusory and, consequently, “abhorrent to Texas law” because it “would constitute a forfeiture, i.e. the policy would provide coverage to no person in the Class 1 (you … family member) portion of the UM/UIM and PIP coverages.” The court disagreed. While the family member language provides no coverage for Kelly in this instance, the endorsements provide other types of coverage. For example, the PIP and category 2 of the UM/UIM would have covered Kelly if she had been riding in a covered auto. Additionally, Future Investments had the opportunity to activate coverage under category 1 of the UM/UIM simply by designating a person in the endorsement. Designating either McKee or Kelly would have triggered coverage in this instance. Our interpretation of the policy does not cause a forfeiture, it merely restricts coverage to those who are insured.