CITY-OWNED VEHICLE IS NOT “UNINSURED MOTOR VEHICLE” AS DEFINED BY AUTO LIABILITY POLICY

February 14, 2012

Last Wednesday, in a case of first impression, the Austin court of appeals determined that a city-owned vehicle did not meet the definition of “uninsured motor vehicle” as contained in a personal auto policy issued by GEICO.  Nealey Michelle Malham v. GEICO, --- S.W.3d ----, 2012 WL 413969 (Tex.App.— Austin February 8, 2012), Malham was injured in a motor vehicle accident in which the car in which she was a passenger was struck by a pickup truck owned by the City of Killeen and driven by a city employee while in the course and scope of his employment.  Malham settled her claims against the City and the employee in exchange for payment to her of $87,500. Thereafter, Malham filed a claim under the uninsured motorist coverage provision of her GEICO policy seeking to recover medical expenses related to back surgery she alleges was recommended to treat injuries sustained in the accident.

Malham sought a declaration that the City vehicle that struck the car she was riding in was an “uninsured motor vehicle,” as that term is defined in her contract with GEICO, and that she was entitled to recover $300,000 from GEICO under the terms and conditions of her uninsured-motorist coverage. The parties agreed to a bifurcated trial whereby they would first try the coverage issues, which presented pure questions of law, to the court and then set any remaining liability and damages issues for a subsequent jury trial. After a bench trial, the court rendered a final take-nothing judgment in GEICO's favor.

In reviewing the trial court’s judgment, the court of appeals determined that the City is a party to a Liability/Property Interlocal Agreement (the “Agreement”), which creates the Texas Municipal League Joint Self–Insurance Fund (the “Fund”) for the purpose of “providing coverages against risks which are inherent in operating a political subdivision.”    The court determined that this agreement is a liability policy, meaning that the vehicle was not uninsured.  The court upheld the judgment for GEICO.