N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT

JAM ES M c GEE,

Pla i ntiff-Appe lla

nt,
v. ZUR IC H AM E R IC AN INSUR ANC E C OM PANY, a Ne w York insura nc e c om pa ny , De fe nda

n t-Appe l le e . No. 19-15859 D.C . No. 2:17 c v-4024-DGC
M EM O R ANDUM *

Appe a l from

the Unite d

Stat e s Distric t C ourt for the Distric t of Ariz o na Dav id G. C a m

pbe ll, Distric t Judge , Pre siding Subm itte d M ay

5, 2020 ** Se a ttle , W a s hington B e fore : TASHIM A, W
. FLETC HER , a nd R A W LINSON, C irc u it Judge s. Disse n t by

Judge R A W LINSON Jam e s M c Ge e a

ppe a ls from

the sum m ary judgm e nt e nte re d in fa

v or of Zuric h Am e ric an Insura

nc e C om pa ny (“ Z uric h” ) on his c l a im s of bre a c h of 

# FIL ED
MAR 16 2021 M OLLY C. DW Y E R, CLERK U. S. CO URT O F APPEALS

* This disposition is not a ppropria te for public a t ion a

nd is not pre c e de nt e xc e pt a s provide d

by Ninth C irc uit R

ule 36-3.

* * The pa

ne l una nim ously c onc lude s this c a se is suita ble for de c ision without ora l a

rgum e nt. Se e Fe d. R . App. P. 34(a )(2).c ontra c t a

nd insura nc e ba d fa ith. W e have jurisdic tion unde r 28 U.S.C
. § 1291,
and we re vie w de novo. W h i tman v . Mine t

a , 541 F.3d 929, 931 (9th C ir. 2008). W e re ve rse an d re m an d. Zuric h issue d a

ge ne ra l insura

nc e polic y

to Unde rwood B ros, Inc ., doing busine ss a s AAA La

ndsc a pe (“ AAA La

ndsc a p e ” ). The polic y

provide s busine ss
a uto lia bility c ove ra ge for bodily

injury or prope rty

dam a ge s c a

use d by an a c c ide nt

“ re sulting from

the owne rship, m a inte na

nc e or use of a

c ove re d ‘ a

uto.’ ” The polic y de fine s “ insure d” a s “ [a ] ny one . . . using with y our pe rm ission a

c ove re d

‘ a uto’ y ou own.” In 2012, AAA La

n d sc a pe a ssigne d a

c o m pa ny ve hic le to Eliz a

be t h Foutz , a n
e m ploy e e . Thre e y e ars late r, Foutz wa s involve d in a

c ar a c c ide nt with M c Ge e . Although M c Ge e wa s found a t fa ult for the a c c ide n t, Foutz wa s c ite d for driving while intoxic a te d. Afte r M c Ge e a s se rte d a c la im a ga inst Foutz , Zuric h de c line d
c ove ra ge , c onc luding tha

t Foutz fa ile d to qua lify

a s an insure d unde r the polic y , be c a use she ha d e xc e e de d a

ny pe rm issible use by

driving while

intoxic a te d. Foutz
a ssigne d he r rights to M c Ge e , a nd M c Ge e sue d Zuric h for bre a c h of c ontra c t a nd ba d fa ith. The distric t c ourt gra

nte d sum m ary judgm e nt on both c l a im s to Zuric h. The
c ourt c onc lude d tha

t, be c a use AAA La

ndsc a pe ne ve r gave Foutze xpre ss or
2im

plie d pe rm ission to drive

while intoxic a te d, he r use a t the tim e of the a c c ide nt
wa s not pe rm issive , a

nd she the re fore wa s not a n insure d. The c ourt a lso note d that Foutzha d signe d a

Drive r Polic y

and Agre e m e nt (“ DPA” ) re quiring he r to

“ a b ide by a ll la ws, inc luding spe e d lim its,” in he r ope ra tion of thec om pa n y
ve hic le
. W e re a c h a diffe re nt c o nc lusion. The re is no dispute tha t Foutz wa s c ove re d by the polic y

if she wa s a

pe rm i ssive use r a t the tim e of the a c c ide nt: both the
e xpre s s te rm s of the polic y and Ariz ona ’ s om

n ibus c la use , Ariz . R e v. Stat. § 28- 4009(A)(2), e xte nd c o v e ra ge to pe rm issive use rs. Unde r the om nibus c la use , m ore ove r, pe rm issive use e n c om pa sse s m inor de viations from the pe rm ission gran te d. “ [I] f the ba ile e ’ s use is not a gross, substa ntia l or m a

jor viola tion, e ve n though it may

have am ounte d to a

de viation, prote c tion is still a fforde d to the ba ile e unde r the om

nibus c la use .” J ame s v . Ae tna Life

& C as. , 546 P.2d 1146, 1148 (Ariz . C t. App. 1976). A “ de viation is ‘ m a te ria l’ or ‘ m a jor’ whe n the de viation from

the purpose for whic h the pe rm i ssion wa s origina lly grante d wa s substa ntia l in te rm s of dura

t ion, dista nc e , tim e , or purpose . ” Id. He re , vie we d in the light m ost fa vora ble to M c Ge e , Gonzale

s v . C arMax Auto Supe rstore

s, LLC , 840 F.3d 644, 648 (9th C ir. 2016), the re c ord shows tha t Foutz ’ s use of the ve h ic le a t the tim e of the a c c i de nt wa s pe rm issive . First, the
3e vide nc e shows tha t Foutz wa s pe rm itte d to use the c om p any ve hic le for pe rsona l
e rra nds a fte r work. Foutz te stifie d tha t the c o m pa ny ve hic le wa s he r “ only

sourc e of tra nsporta tion,” tha t “ AAA [La

ndsc a pe ] kne w tha

t” to be the c a se ; tha

t “ if [Foutz ] ne e de d the ve hic le to run e rra nds, go to the groc e ry , som e thing quic k a fte r work, it wa s oka

y ” with AAA La

ndsc a pe , a nd tha t Foutz ’ s supe rvisor wa s a ware of he r use of the c om

pa ny ve hic le to run e rra n ds. Foutz furthe r te stifie d

tha t AAA Landsc a pe e m ploy e e s routine ly

use d c om

pa ny ve hic le s “ for pe rsona l e rra n ds a fte r work,” and tha

t AAA La ndsc a pe ’ s e xe c utive s we re “ w e ll a ware of tha

t.” Se c ond, the e vide n c e e sta blishe s at le a st a

tria ble issue tha

t Foutz ’ s use of the v e hic l e a t the tim e of the a c c ide nt fe ll within the sc ope of tha t pe rm itte d

use . The a c c ide n t oc c urre d a t

around 8:45 p.m . following work, while Foutzwa s driving hom e from

a pe rsona l e rra nd to a

groc e ry store . Vie wing the e vide nc e in the l ight m ost fa

vora ble to M c Ge e , this usewa s e ithe r within thesc o pe of he r pe rm itte d use or, at m inim um , a m inor de viation from

tha t pe rm ission. Zuric h a rgue s tha t Foutz ’ s use wa s non-pe rm issive be c a use she did not ha

ve
e xpre s s or im

plie d pe rm ission to ope

ra te a c om pa ny ve hic l e while intoxic a te d. W e
a ssum e for purpose s of our a na ly sis tha

t AAA La n dsc a p e ne ve r gave Foutz pe rm ission to ope

ra te the v e hic le while intoxic at e d. W e are not pe rsua de d, howe v e r, tha

t this re nde re d he r use of the ve h ic le non-pe rm issive . Vie wing the
4e vide nc e in the light m o st fa vora ble to M c Ge e , Foutzha d pe rm i ssion to use the
ve hic le for the purpose of running pe rsona l e rra nds a fte r work, a nd tha t is pre c ise ly what she wa s doing. He r use , the re fore , wa s pe rm issive
. Foutz ’ s ne glige nc e (driving while intoxic a t e d) doe s not ne g a te the fa c t tha t he r use (running a

n e rran d ) wa s pe rm issive . In this re spe c t, the Ariz ona C ourt of Appe a ls de c ision in N

ational Indemnity

C o. v . N orth Ame ric an Inde mnity , No. 1 C A-C V 90-201, 1991 W

L 263707 (Ariz . C t. App. De c . 17, 1991), a lthough unpublishe d, is pe rsua s ive :

On the one ha

nd, it is t e m

pting to c onc lude that pe rm issive usa ge should ne ve r e nta il pe rm ission to drive while drunk. On the othe r h and, pe rm issive u s a ge m igh t s i m i la rly be argue d t o e x c l u d e pe rm i ssion to d rive d istra c te dly , to e xc e e d the spe e d lim it, or to run re d light s. If suc h situa tiona l d e pa

rture s from re a sona

ble c are we re tre a te d a s be y o n d t h e sc ope o f pe rm issive usa ge , it would thwa rt the ove rriding purpose of the Sa fe ty R e sponsibility Ac t , whic h is “ to provide s e c urity a ga i nst unc om p en s a te d dam a ge s arising from

ope ration of m o tor ve hic le s on the highwa y .” C hase v . S tate Farm Mut. Auto Ins. C o. , 131 Ariz
. 461, 641 P. 2 d 1 305 (App. 1982). Inde e d, to vie w e gre gious de pa rture s from re a sona

ble c are a s viola

ting the im

p lic it te rm s of perm issive usa ge would de fe at c ove ra g e in prec ise ly the c irc um sta

nc e s whe re the ne e d for c ove ra ge would m ost like ly

arise
. W e are pe rsua de d by the l a tte r c onside ra tion to re je c t the a rgum e nt that [ the pe rm issive use r’ s] e xc e ssive drinking a l one took him be y ond the sc o pe of his pe rm i ssion to use the bus. W e c onc lude that p er m issive usa ge is
5d e te rm ine d by re fe re nc e to tim e , d ista nc e , duration, an d purpose . If a drive r’ s usa g e is p e rm issive i n acc orda nc e with the se re fe re nts, it will not be de fe a te d by re fe re nc e to th e unre a s ona

ble ne ss of the drive r’ s c onduc t, inc luding c onsum p tion o f a lc oholic b e ve ra ge s, whe n the a c c ide nt oc c urs. Id. a t *4. Zuric h points out tha

t the DPA re quire d Foutzto “ a bide by a ll la w s, inc l uding spe e d

lim its,” and tha

t, by driving while

intoxic a te d , Foutzfa ile d to
c om ply with the a gre e m e nt. W e are not pe rsua de d , howe ve r, tha t this re nde re d Foutz ’ s use non-pe rm issive . First, a l though Zuric h c o nte nds tha t this a gre e m e nt de fine d the sc ope of Foutz ’ s pe rm ission, the re c ord sugge sts othe rwise . The DPA inc l ude s a num be r of provisions, inc luding onesta ting tha t “ C om pa ny ve h i c le s a

re not to be use d for pe rsona l e rra nds/use .” As disc usse d, the re c ord e vide n c e , vie w e d in M c Ge e ’ s favor, shows tha t this wa s not the c a se . Ac c ordingly , the re is,
a t m inim um , a ge nuine dispute of fa c t a s to whe the r the DPA in fa c t de fine d the
sc ope o f Foutz ’ s pe rm issive use . Se c ond, e ve n a ssum ing tha t the DPA de fine d the sc ope of pe rm ission, the
a gre e m e nt sa

y s nothing a

bout driving while

intoxic a te d or the c onse q ue nc e s for doing so. C

f. J ame s , 546 P.2d a

t 1148–49 (Ha

tha way , J., spe c ia lly

c onc urring) (c onc l uding tha

t a n e m ploy e e ’ s use wa s non-pe rm issive whe re c o m pa ny rule s

6spe c ific a lly

provide d tha

t “ [n] o one m ay

drive a c om pa ny ve h ic le a fte r c onsum ing
a lc oholic be ve ra ge s” ). Nor doe s the a gre e m e n t disc uss insura nc e c ove ra ge . 1 On the c ontra ry , the only

sa nc tion sta te d in the DPA for any

bre a c h is tha

t “ fa ilure to [a bide by the a g re e m e nt] m ay

re sult in e m

ploy e e disc iplina

ry a c tion.” W he n a pe rm issive use r de viate s in a substa ntia l wa y from an e m ploy e r’ s spe c ific instruc tions re g arding the m anne r in whic h a ve hic le should beope ra t e d, it m ay be that c ove ra ge is de fe a te d. Tha t ha s not oc c urre d he re , howe ve r, e ve n a ssum ing tha t the D PA de fine d the sc ope of pe rm itte d use . And, to repe a t, nothing in the DPA,
or e lse whe re in the re c ord, supports the notion tha

t a viola tion of the DPA re sults in the re t roa c tive withdra

wa l of c onse nt pre viously give n. In sum , we c onc l u de that the re is a t le a st a tria ble issue of m a te ria l fa c t a s to whe the r Foutz ’ s use of the ve hic le a t the tim e of the a c c ide nt wa s e ithe r pe rm issive
or a m inor de viation from

the pe rm ission she

wa s gra nte d. W e the re fore re ve rse the e ntry of sum

m ary judgm e n t in Zuric h’ s favor on M c Ge e ’ s bre a c h of c ontra c t
and ba d fa ith c la im s a

nd re m and for furthe r proc e e dings c onsiste nt with this disposition. RE V E RSE D and RE M ANDE D.

1 M ore ove r, the re is no indic a tion tha t the a gre e m e n t is inte nde d to be ne fit third pa

rtie s, suc h a s Zuric h. 7M

c G e e v . Zuric h A m e r

ic an Insuranc e

C o. , Case No. 19-15859 Raw linson, Cir c uit Judge , disse nting: In this insura

nc e c ove ra g e dispute , Appe lla nt Ja m e s M c Ge e (M c Ge e )
a ppe a ls the distric t c ourt’ s gra nt of sum m ary judgm e nt in fa

vor of Appe l le e Zuric h Am e ric an Insura

nc e C om pa ny (Zuric h ). M c G e e a lle ge d tha t he wa s se ve re l y injure d in a n a c c ide n t involving Eliz a be th Foutz

(Foutz ), an e m

ploy e e of AAA Landsc a pe , who wa s driving a

c om pa ny ve hic le while e xtre m e ly

intoxic ate d. M c G e e c o nte nds tha

t Zuric h bre a c he d the insura nc e polic y

issue d to AAA Landsc a pe and de n ie d c o v e ra ge for Foutzin ba d fa ith. M c Ge e m a inta ins tha t, pursua nt to the“ om

nibus c la use ,” A.R .S. § 28-4009(A)(2), 1 Zuric h wa s obliga te d to provide c ove ra ge be c a

use Foutz re c e ive d AAA La ndsc a pe ’ s pe rm i ssion to use the c om pa ny ve hic le
. The distric t c ourt prope rly grante d sum

m a ry judgm e nt in fa

vor of Zuric h on M c G e e ’ s bre a c h of c ontra c t c la im be c a use Foutzla c ke d pe rm ission to use the
c om pa ny ve hic le while intoxic a te d. Unde r Ariz ona la w, “ an im p lie d pe rm ission 

# FIL ED
MAR 16 2021 M OLLY C. DW Y ER, CLERK U. S. CO URT O F APPEALS

1 A.R .S. § 28-4009(A)(2) provide s tha t an insura nc e polic y : sha ll insure the pe rson na m e d in the polic y a s the insure d a nd a ny othe r pe rson, a s insure d, using the m otor ve hic l e or m otor ve hic le s with the e xpre ss or im

plie d pe rm ission of the

nam e d insure d

a ga inst loss from the lia

bility im pose d by la w for da m a ge s arising out of the owne rship, m a inte na

nc e or use of the m otor ve hic le or m otor ve h ic l e s within theUnite d State s . . . 1ge ne ra lly

arise s from

a c ourse of c o nduc t involving a m utua l a c quie sc e nc e in, or a la c k of obje c tion to, a

c ontinue d use of the c ar, signify i ng a sse nt. It is usually shown by the pra c tic e of the pa

rtie s ove r a

pe riod of tim e pre c e ding the da y upon whic h the insure d

ve hic l e wa s be ing use d .” Gome z v . Gre at Am. Ins. C

o. , 548 P.2d 1206, 1208-09 (Ariz . C t. App. 1976) (c ita tion, a l te ra tion, a

nd inte rna l quota

tion
m arks om itte d). AAA La ndsc a pe lim i te d the sc ope of Foutz ’ s pe rm issive use of the c om pa ny
ve hic le through its Drive

r Polic y and Agre e m e nt, whic h

re quire d Foutzto “ a

bide by a l l sta te la ws, inc luding spe e d lim its.” S e e , e .g. , S tonington Ins. C

o. v . Mc W illiams , No. 1 C A–C V 09–0235, 2010 W L 2677119, a

t *4 (Ariz
. C t. App. 2010) (obse rving tha

t “ [i] f the c om

pa ny did give notic e to [the e m ploy e e ] of its
ve hic le use polic y . . . the n [the e m ploy e e ’ s] pe rm itte d use wa s for busine ss purpose s only

and his use [of the ve hic le ] on the night of the a c c ide nt wa s c le arly
m ore tha n a m inor de viation from

tha t pe rm i tte d use ” ) (c iting J ame s v . Ae t na Life & C as. , 546 P.2d 1146, 1148 (Ariz . C t . App. 1976). Foutz fully a c k nowle dge d in he r de position tha

t she did not re c e ive pe rm ission from an y one a t

AAA La n dsc a pe to ope ra te the c om

pa ny ve hic le while intoxic at e d, she wa s “ not ope rating the AAA
ve hic le le ga lly

a t the tim e of the a c c ide nt,” and she viola te d the Drive r and Polic y Agre e m e nt.
2M c Ge e fa ile d to ra ise a m a te ria l fa c tua l disputepre c luding sum m ary judgm e nt ba se d on Foutz ’ s de position te stim ony tha t she obse rve d othe r
e m ploy e e s ope ra te c om

pa ny ve hic le s while intoxic at e d. Foutz c o nc e de d that she
ne ve r inform e d

AAA La ndsc a pe tha t othe r e m

ploy e e s drove c om

pa ny ve hic le s while intoxic a te d, a

n d no othe r e vide nc e wa s a dduc e d tha t AAA La ndsc a pe
a pprove d or ra t ifie d this c o nduc t. As a re sult, M c Ge e wa s una

ble to thwa

rt e ntry of sum m a ry judgm e nt be c a

u se Foutz ’ s te stim ony

did not “re ve a l a single insta nc e in whic h [AAA La

ndsc a pe ] a c q uie sc e d in” the use of c om pa ny ve hic le s by
e m ploy e e s who we re intoxic a te d. G ome z , 548 P.2d a

t 1209 (c i tation om itte d). The distric t c ourt a l so c orre c tly he ld tha t Zuric h did not c ontra

ve ne A.R .S. § 28-4009(A)(2) in de ny ing c ove ra ge . In light of Foutz ’ s a dm i ssions tha t she ope ra t e d the c om

pa ny ve hic le while e xtre m e ly

intoxic a te d in viola

t ion of the Drive r Polic y

and Agre e m e nt a

nd did not re c e ive pe rm ission from AAA Landsc a pe to use the ve hic le a fte r c onsum ing a lc ohol, Foutz ’ s c onduc t wa s a

“ m a te ria l or m a

jor . . . de viation from

the purpose for whic h the pe rm i ssion wa s origina lly grante d.” J

ame s , 546 P.2d a

t 1148 (c ita

t ions a nd inte rna l quota

tion
m arks om itte d). Fina lly , sum

m ary judgm e nt wa s wa

rra nte d on M c Ge e ’ s ba d fa ith c la im be c a use Zuric h prope rly

de nie d c ove ra ge ba se d on its de te rm ination tha t Foutz did
3not qua lify

a s an insure d unde r the polic y . Se e Mante rola v . Farme rs Ins. Ex c h. , 30 P.3d 639, 646 (Ariz . C t. App. 2001) (e xpla ining tha t “ a ba d fa ith c la i m

ba se d sole ly on a c arrie r’ s de nia l of c ove ra ge will fa il on the m e rits if a fina l de te rm i na tion of nonc ove ra g e ultim a te l y is m a de ” ) (c ita

tions omitte d ). Although M c G e e m a i nta ins tha

t Zuric h fa ile d to c onduc t a n a de quate inve s tiga

tion, Foutz ’ s
a dm issions re ve a l tha

t the re we re no a dditiona l fa c ts c a lling into que stion Zuric h’ s de nia l of c ove ra ge . I re spe c tfully

disse nt from

the m a jority ’ s c ontra

ry c onc lusion, whic h is not supporte d by the fa c ts or the la w .

4