Murphy v. AAA Auto Ins. of Southern Cal. CA4/3
G063742
| Cal. Ct. App. | Jan 24, 2025Background
- Andrew Murphy was a delivery driver for Grassdoor, a licensed cannabis retailer, using his personal vehicle to make deliveries and was compensated by his employer.
- Murphy’s car was damaged in a collision while performing delivery work; he was the named insured on a personal auto policy issued by Interinsurance Exchange of the Automobile Club (AAA).
- The policy contained an exclusion ("compensated carrying exclusion") that expressly denied coverage for vehicles used to transport persons or property in exchange for compensation.
- Murphy’s claim for collision coverage was denied due to this exclusion, prompting his lawsuit for breach of contract against the insurer.
- The trial court granted summary judgment for the insurer, finding the exclusion unambiguous and applicable; Murphy appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of compensated carrying exclusion | Applies only to independent contractors, not employees who are paid by the hour | Applies broadly: excludes coverage whenever insured is compensated for transporting property | Exclusion applies to all, not just independent contractors |
| Ambiguity of exclusion | Exclusion is ambiguous and overly broad | Exclusion is clear, explicit, and unambiguous | Exclusion is not ambiguous |
| Public policy consideration | Applying exclusion to employees is contrary to public policy; employees lack alternatives if employer insolvent | Employees are protected by indemnification under Labor Code, and policy expressly excludes coverage | No public policy bar to exclusion |
| Coverage due to employer insolvency | Should be covered if employer cannot compensate | Employer’s financial state is irrelevant to policy application | Employer insolvency does not trigger coverage |
Key Cases Cited
- Palmer v. Truck Ins. Exchange, 21 Cal.4th 1109 (Cal. 1999) (insurance contracts interpreted by the parties’ intent from clear policy language)
- Boghos v. Certain Underwriters at Lloyd's of London, 36 Cal.4th 495 (Cal. 2005) (ambiguity in insurance contracts is construed in favor of insured only if language is unclear)
- Delgado v. Heritage Life Ins. Co., 157 Cal.App.3d 262 (Cal. Ct. App. 1984) (policy language ambiguous only if susceptible of more than one reasonable interpretation)
- American Star Ins. Co. v. Insurance Co. of the West, 232 Cal.App.3d 1320 (Cal. Ct. App. 1991) (clear exclusions override insuring clause)