A California Court of Appeals decision brought one auto policyholder decidedly down from “cloud nine” in Murphy v. AAA Auto Insurance of Southern California, which found no coverage over a cannabis delivery service employee’s collision in a personal vehicle while on the job. The court ruled the “compensated carrying exclusion” barred coverage, holding it was neither ambiguous nor contrary to public policy in this instance.
The insured, Andrew Murphy, was a full-time delivery driver employed by a cannabis retailer and delivery service, Grassdoor. Murphy was involved in an auto collision while delivering orders and sought coverage from his personal auto insurer. Upon the insurer’s denial, Murphy filed suit against it for breach of contract.
The Exclusion Applied
The exclusion at issue was contained in an endorsement. It excluded coverage for automobiles “while used to carry persons or property … in each instance for: (1) a charge; (2) any form of compensation, voluntary payment or benefit; or (3) the promise or agreement for any form of compensation, voluntary payment or benefit, whether or not such compensation, voluntary payment or benefit is actually paid or provided.”
The court agreed with the insurer that this exclusion barred coverage under these facts, rejecting Murphy’s argument to limit its applicability to independent contractors, rather than drivers employed by those paying them. Murphy reasoned it would make sense for the exclusion to apply only to independent contractors who can obtain commercial car insurance that is otherwise unavailable to employees. The court disagreed, noting California labor law — California Labor Code section 2802(a) — mandated Murphy’s employer’s indemnity obligation in these circumstances. While Murphy invoked Grassdoor’s current insolvency to argue pursuing them would be futile, the court opined that an insurer’s “obligation to provide personal vehicle coverage is not triggered by the financial condition of an insured’s employer.” In a similar vein, the court also rejected a public policy argument from Murphy that employee delivery drivers should not go unprotected, again referencing the protection afforded by section 2802.
Murphy additionally argued the exclusion’s use of the phrase “in each instance” required that each instance of property transportation be compensated, which he asserted did not apply to his hourly, not per-delivery, pay structure. The court again disagreed, instead concluding that “in each instance” referred to each instance of vehicle use wherein damage arises.
The Language Was Understandable and Unambiguous
The court determined the exclusion satisfied the California requirement that an exclusion be “conspicuous, plain, and clear.” It noted the capitalized endorsement header alerted an insured to policy changes and that the block, capitalized warning — “WHAT IS NOT COVERED – EXCLUSIONS” — made clear the exclusionary nature of the policy text below.
Notably, the court declined to engage in a hypothetical posed by Murphy intended to demonstrate the exclusion was ambiguous due to overbreadth. Murphy posited that an insured who drove a friend’s child to school, where the friend treated the insured to dinner as a “thank you,” would not have been covered for any accident that may have occurred during the trip. The court characterized this as an “interesting hypothetical” but irrelevant to the facts at bar, where “[i]t was clear that Murphy was driving his vehicle in the course and scope of his employment.”
