INSURANCE-RELATED COURT CASES
Digested from case reports published online
Coverage denied for driver who transported marijuana
Starting in about February 2022, Andrew Murphy was employed as a full-time delivery driver for GE United Technologies, LLC, doing business as Grassdoor, which was a licensed cannabis retailer and delivery service. Grassdoor’s drivers used their own personal vehicles to deliver cannabis products to customers who ordered them online.
Murphy would drive his personal vehicle, a 2012 Toyota Corolla, to Grassdoor’s warehouse facility in the City of Commerce where cannabis orders would be loaded into his vehicle. He would then drive the vehicle to deliver the orders. Murphy worked approximately nine hours a day, five days a week doing this job for Grassdoor and typically would deliver about 10 to 20 orders per day. He was paid once per week and he was reimbursed for his mileage.
On July 3, 2022, Murphy was involved in a collision while delivering orders. His vehicle was damaged. At the time of the collision, Murphy was the named insured on an automobile policy issued by the Interinsurance Exchange of the Automobile Club (the Exchange), which was erroneously sued as AAA Auto Insurance of Southern California.
The policy covered physical damage to Murphy’s car unless coverage was otherwise excluded. The policy contained the compensated carrying exclusion, which was an amendatory endorsement that stated in pertinent part: “ … this policy does not apply: (a) to any automobile … 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.”
Murphy submitted a claim to the Exchange for the damage to his vehicle, but the Exchange denied coverage.
On July 12, 2022, Murphy filed a complaint against the Exchange for breach of contract. He alleged that the compensated carrying exclusion was ambiguous and against public policy. After Murphy filed a first amended complaint with non-substantive changes, the Exchange answered on December 21, 2022. A jury trial was set for February 20, 2024.
On September 25, 2023, the Exchange filed a motion for summary judgment, arguing that the undisputed facts established that the Exchange did not breach its contract with Murphy and thus Murphy had no claim against the Exchange. Murphy opposed the motion, arguing that the exclusion was ambiguous and that he was reasonable in believing he was covered. He also argued that public policy did not favor applying the compensated carrying exclusion to people employed as delivery drivers. He acknowledged that he did not have any insurance coverage through Grassdoor.
The trial court ruled in favor of the Exchange, finding that the Exchange had met its burden to show that the compensated carrying exclusion applied and Murphy had not shown that the exclusion was ambiguous or contrary to public policy.
Murphy countered that Grassdoor was now insolvent, and he was unable to find an attorney to represent him in a suit against Grassdoor to recover his damages. Therefore, he argued he should be able to obtain relief through his personal automobile policy.
Again, the court disagreed. The Exchange’s obligation to provide personal vehicle coverage is not triggered by the financial condition of an insured’s employer. Murphy has a remedy against Grassdoor. He cannot seek that remedy from a third party who has explicitly disclaimed liability for it.
The compensated carrying exclusion thus applies and the Exchange was justified in denying Murphy’s claim. The trial court properly granted summary judgment.
Murphy v. AAA Auto Insurance of Southern California—Court of Appeal of the State of California, Fourth Appellate District, Division Three—No. G063742—January 24, 2025.
