Andrew Murphy v. AAA Auto Insurance Of Southern California

(March 2025) - In Murphy v. AAA Auto Insurance of Southern California, --- Cal.App.5th --- (January 31, 2025), the California Fourth District of Appeal affirmed the trial court’s entry of summary judgment in favor of the Interinsurance Exchange of the Automobile Club, erroneously sued as AAA Auto Insurance of Southern California (the “Exchange”) in connection with a claim for damage sustained by plaintiff, Andrew Murphy’s Toyota Corolla due to an automobile accident. At the time of the accident, Murphy was employed by GE United Technologies, LLC doing business as Grassdoor (“Grassdoor”). Grassdoor was a licensed cannabis retailer and delivery service. The accident occurred while Murphy was delivering a cannabis order for Grassdoor. Murphy worked delivering cannabis orders five days a week and was paid by Grassdoor on a weekly basis. He was not an independent contractor. Grassdoor did not maintain commercial auto insurance for its operations.

Murphy submitted a claim for the damage sustained by his Corolla to the Exchange under a personal automobile policy covering Murphy. In response, the Exchange denied Murphy’s claim based on the following “compensated carrying exclusion”:

. . . 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.”

As a result of the Exchange’s coverage denial, Murphy filed a lawsuit for breach of contract and bad faith against the Exchange. In response, the Exchange filed a motion for summary judgment arguing that the compensated carrying exclusion applied to bar coverage of Murphy’s claim. The trial court agreed and entered summary judgment in favor of the Exchange.

In affirming the trial court’s decision, the Court of Appeal found as follows:

The policy language here is clear and explicit. There is no coverage for collision damage occurring while the car is being operated to transport property in exchange for compensation. We give the word “property” its plain and ordinary meaning, as the word is not specially defined in the policy itself. The word “property” is a broad term referring to things which are or may be owned or possessed. (See Webster's 3d New Internat. Dict. (1993) p. 1818.) It is undisputed Murphy was transporting cannabis, which falls under the category of property. Murphy also does not dispute that he was employed by Grassdoor to transport the cannabis, and that he was compensated for doing so.

Murphy, however, contends that the exclusion applies to independent contractors, and not to drivers employed to transport property. It would make sense, he argues, for the Exchange to exclude coverage for independent contractors' use of the car for their business because they have the ability to obtain commercial car insurance, whereas employees do not. He also points to the exclusion's language, stating that it applies to damage arising from the use of the car to transport property “in each instance for” compensation or a charge. Murphy notes he was paid by the hour, and not per delivery.

We disagree. As the parties and the trial court noted at the summary judgment hearing, Murphy's employer, Grassdoor, was legally responsible for making him whole in this situation. Labor Code section 2802 subdivision (a), provides: “An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.”

Murphy counters that Grassdoor is now insolvent, and he is unable to find an attorney to represent him in a suit against Grassdoor to recover his damages. Therefore, he argues, he should be able to obtain relief through his personal automobile insurance policy. Again, we disagree. 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.

As for the “in each instance” language on which Murphy focuses, we interpret this to refer to each instance in which the vehicle is used and damage arises. It does not refer to each instance of compensation.

The compensated carrying exclusion thus applies and the Exchange was justified by the policy in denying Murphy's insurance claim.