NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

 FOR THE NINTH CIRCUIT

JAMES McGEE, 

Plaintiff-Appellant,

 v.

ZURICH AMERICAN INSURANCE

COMPANY, a New York insurance

company, 

Defendant-Appellee.

No. 19-15859

D.C. No. 2:17 cv-4024-DGC

MEMORANDUM*

Appeal from the United States District Court

for the District of Arizona

David G. Campbell, District Judge, Presiding

Submitted May 5, 2020** 

Seattle, Washington

Before: TASHIMA, W. FLETCHER, and RAWLINSON, Circuit Judges.

Dissent by Judge RAWLINSON

James McGee appeals from the summary judgment entered in favor of

Zurich American Insurance Company (“Zurich”) on his claims of breach of

FILED

MAR 16 2021

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

* This disposition is not appropriate for publication and is not precedent

except as provided by Ninth Circuit Rule 36-3.

** The panel unanimously concludes this case is suitable for decision

without oral argument. See Fed. R. App. P. 34(a)(2).
contract and insurance bad faith. We have jurisdiction under 28 U.S.C. § 1291,

and we review de novo. Whitman v. Mineta, 541 F.3d 929, 931 (9th Cir. 2008). 

We reverse and remand.

Zurich issued a general insurance policy to Underwood Bros, Inc., doing

business as AAA Landscape (“AAA Landscape”). The policy provides business

auto liability coverage for bodily injury or property damages caused by an accident

“resulting from the ownership, maintenance or use of a covered ‘auto.’” The

policy defines “insured” as “[a]nyone . . . using with your permission a covered

‘auto’ you own.”

In 2012, AAA Landscape assigned a company vehicle to Elizabeth Foutz, an

employee. Three years later, Foutz was involved in a car accident with McGee. 

Although McGee was found at fault for the accident, Foutz was cited for driving

while intoxicated. After McGee asserted a claim against Foutz, Zurich declined

coverage, concluding that Foutz failed to qualify as an insured under the policy,

because she had exceeded any permissible use by driving while intoxicated. Foutz

assigned her rights to McGee, and McGee sued Zurich for breach of contract and

bad faith. 

The district court granted summary judgment on both claims to Zurich. The

court concluded that, because AAA Landscape never gave Foutz express or

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implied permission to drive while intoxicated, her use at the time of the accident

was not permissive, and she therefore was not an insured. The court also noted

that Foutz had signed a Driver Policy and Agreement (“DPA”) requiring her to

“abide by all laws, including speed limits,” in her operation of the company

vehicle. 

We reach a different conclusion. There is no dispute that Foutz was covered

by the policy if she was a permissive user at the time of the accident: both the

express terms of the policy and Arizona’s omnibus clause, Ariz. Rev. Stat. § 28-

4009(A)(2), extend coverage to permissive users. Under the omnibus clause,

moreover, permissive use encompasses minor deviations from the permission

granted. “[I]f the bailee’s use is not a gross, substantial or major violation, even

though it may have amounted to a deviation, protection is still afforded to the

bailee under the omnibus clause.” James v. Aetna Life & Cas., 546 P.2d 1146,

1148 (Ariz. Ct. App. 1976). A “deviation is ‘material’ or ‘major’ when the

deviation from the purpose for which the permission was originally granted was

substantial in terms of duration, distance, time, or purpose.” Id.

Here, viewed in the light most favorable to McGee, Gonzales v. CarMax

Auto Superstores, LLC, 840 F.3d 644, 648 (9th Cir. 2016), the record shows that

Foutz’s use of the vehicle at the time of the accident was permissive. First, the

3
evidence shows that Foutz was permitted to use the company vehicle for personal

errands after work. Foutz testified that the company vehicle was her “only source

of transportation,” that “AAA [Landscape] knew that” to be the case; that “if

[Foutz] needed the vehicle to run errands, go to the grocery, something quick after

work, it was okay” with AAA Landscape, and that Foutz’s supervisor was aware of

her use of the company vehicle to run errands. Foutz further testified that AAA

Landscape employees routinely used company vehicles “for personal errands after

work,” and that AAA Landscape’s executives were “well aware of that.”

Second, the evidence establishes at least a triable issue that Foutz’s use of

the vehicle at the time of the accident fell within the scope of that permitted use. 

The accident occurred at around 8:45 p.m. following work, while Foutz was

driving home from a personal errand to a grocery store. Viewing the evidence in

the light most favorable to McGee, this use was either within the scope of her

permitted use or, at minimum, a minor deviation from that permission.

Zurich argues that Foutz’s use was non-permissive because she did not have

express or implied permission to operate a company vehicle while intoxicated. We

assume for purposes of our analysis that AAA Landscape never gave Foutz

permission to operate the vehicle while intoxicated. We are not persuaded,

however, that this rendered her use of the vehicle non-permissive. Viewing the

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evidence in the light most favorable to McGee, Foutz had permission to use the

vehicle for the purpose of running personal errands after work, and that is precisely

what she was doing. Her use, therefore, was permissive.

Foutz’s negligence (driving while intoxicated) does not negate the fact that

her use (running an errand) was permissive. In this respect, the Arizona Court of

Appeals decision in National Indemnity Co. v. North American Indemnity, No. 1

CA-CV 90-201, 1991 WL 263707 (Ariz. Ct. App. Dec. 17, 1991), although

unpublished, is persuasive:

On the one hand, it is tempting to conclude that permissive

usage should never entail permission to drive while drunk. 

On the other hand, permissive usage might similarly be

argued to exclude permission to drive distractedly, to

exceed the speed limit, or to run red lights. If such

situational departures from reasonable care were treated as

beyond the scope of permissive usage, it would thwart the

overriding purpose of the Safety Responsibility Act, which

is “to provide security against uncompensated damages

arising from operation of motor vehicles on the highway.”

Chase v. State Farm Mut. Auto Ins. Co., 131 Ariz. 461, 641

P.2d 1305 (App. 1982). Indeed, to view egregious

departures from reasonable care as violating the implicit

terms of permissive usage would defeat coverage in

precisely the circumstances where the need for coverage

would most likely arise.

We are persuaded by the latter consideration to reject

the argument that [the permissive user’s] excessive

drinking alone took him beyond the scope of his permission

to use the bus. We conclude that permissive usage is

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determined by reference to time, distance, duration, and

purpose. If a driver’s usage is permissive in accordance

with these referents, it will not be defeated by reference to

the unreasonableness of the driver’s conduct, including

consumption of alcoholic beverages, when the accident

occurs.

Id. at *4.

Zurich points out that the DPA required Foutz to “abide by all laws,

including speed limits,” and that, by driving while intoxicated, Foutz failed to

comply with the agreement. We are not persuaded, however, that this rendered

Foutz’s use non-permissive. First, although Zurich contends that this agreement

defined the scope of Foutz’s permission, the record suggests otherwise. The DPA

includes a number of provisions, including one stating that “Company vehicles are

not to be used for personal errands/use.” As discussed, the record evidence,

viewed in McGee’s favor, shows that this was not the case. Accordingly, there is,

at minimum, a genuine dispute of fact as to whether the DPA in fact defined the

scope of Foutz’s permissive use.

Second, even assuming that the DPA defined the scope of permission, the

agreement says nothing about driving while intoxicated or the consequences for

doing so. Cf. James, 546 P.2d at 1148–49 (Hathaway, J., specially concurring)

(concluding that an employee’s use was non-permissive where company rules

6
specifically provided that “[n]o one may drive a company vehicle after consuming

alcoholic beverages”). Nor does the agreement discuss insurance coverage.

1

 On

the contrary, the only sanction stated in the DPA for any breach is that “failure to

[abide by the agreement] may result in employee disciplinary action.” When a

permissive user deviates in a substantial way from an employer’s specific

instructions regarding the manner in which a vehicle should be operated, it may be

that coverage is defeated. That has not occurred here, however, even assuming that

the DPA defined the scope of permitted use. And, to repeat, nothing in the DPA,

or elsewhere in the record, supports the notion that a violation of the DPA results

in the retroactive withdrawal of consent previously given.

In sum, we conclude that there is at least a triable issue of material fact as to

whether Foutz’s use of the vehicle at the time of the accident was either permissive

or a minor deviation from the permission she was granted. We therefore reverse

the entry of summary judgment in Zurich’s favor on McGee’s breach of contract

and bad faith claims and remand for further proceedings consistent with this

disposition.

REVERSED and REMANDED.

1 Moreover, there is no indication that the agreement is intended to

benefit third parties, such as Zurich.

7
McGee v. Zurich American Insurance Co., Case No. 19-15859

Rawlinson, Circuit Judge, dissenting:

In this insurance coverage dispute, Appellant James McGee (McGee)

appeals the district court’s grant of summary judgment in favor of Appellee Zurich

American Insurance Company (Zurich). McGee alleged that he was severely

injured in an accident involving Elizabeth Foutz (Foutz), an employee of AAA

Landscape, who was driving a company vehicle while extremely intoxicated. 

McGee contends that Zurich breached the insurance policy issued to AAA

Landscape and denied coverage for Foutz in bad faith. McGee maintains that,

pursuant to the “omnibus clause,” A.R.S. § 28-4009(A)(2),1 Zurich was obligated

to provide coverage because Foutz received AAA Landscape’s permission to use

the company vehicle.

The district court properly granted summary judgment in favor of Zurich on

McGee’s breach of contract claim because Foutz lacked permission to use the

company vehicle while intoxicated. Under Arizona law, “an implied permission

FILED

MAR 16 2021

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

1

 A.R.S. § 28-4009(A)(2) provides that an insurance policy:

shall insure the person named in the policy as the insured and any

other person, as insured, using the motor vehicle or motor vehicles

with the express or implied permission of the named insured against

loss from the liability imposed by law for damages arising out of the

ownership, maintenance or use of the motor vehicle or motor vehicles

within the United States . . .

1
generally arises from a course of conduct involving a mutual acquiescence in, or a

lack of objection to, a continued use of the car, signifying assent. It is usually

shown by the practice of the parties over a period of time preceding the day upon

which the insured vehicle was being used.” Gomez v. Great Am. Ins. Co., 548 P.2d

1206, 1208-09 (Ariz. Ct. App. 1976) (citation, alteration, and internal quotation

marks omitted). 

AAA Landscape limited the scope of Foutz’s permissive use of the company

vehicle through its Driver Policy and Agreement, which required Foutz to “abide

by all state laws, including speed limits.” See, e.g., Stonington Ins. Co. v.

McWilliams, No. 1 CA–CV 09–0235, 2010 WL 2677119, at *4 (Ariz. Ct. App.

2010) (observing that “[i]f the company did give notice to [the employee] of its

vehicle use policy . . . then [the employee’s] permitted use was for business

purposes only and his use [of the vehicle] on the night of the accident was clearly

more than a minor deviation from that permitted use”) (citing James v. Aetna Life

& Cas., 546 P.2d 1146, 1148 (Ariz. Ct. App. 1976). Foutz fully acknowledged in

her deposition that she did not receive permission from anyone at AAA Landscape

to operate the company vehicle while intoxicated, she was “not operating the AAA

vehicle legally at the time of the accident,” and she violated the Driver and Policy

Agreement.

2
McGee failed to raise a material factual dispute precluding summary

judgment based on Foutz’s deposition testimony that she observed other

employees operate company vehicles while intoxicated. Foutz conceded that she

never informed AAA Landscape that other employees drove company vehicles

while intoxicated, and no other evidence was adduced that AAA Landscape

approved or ratified this conduct. As a result, McGee was unable to thwart entry

of summary judgment because Foutz’s testimony did not “reveal a single instance

in which [AAA Landscape] acquiesced in” the use of company vehicles by

employees who were intoxicated. Gomez, 548 P.2d at 1209 (citation omitted).

The district court also correctly held that Zurich did not contravene A.R.S. §

28-4009(A)(2) in denying coverage. In light of Foutz’s admissions that she

operated the company vehicle while extremely intoxicated in violation of the

Driver Policy and Agreement and did not receive permission from AAA

Landscape to use the vehicle after consuming alcohol, Foutz’s conduct was a

“material or major . . . deviation from the purpose for which the permission was

originally granted.” James, 546 P.2d at 1148 (citations and internal quotation

marks omitted). 

Finally, summary judgment was warranted on McGee’s bad faith claim

because Zurich properly denied coverage based on its determination that Foutz did

3
not qualify as an insured under the policy. See Manterola v. Farmers Ins. Exch.,

30 P.3d 639, 646 (Ariz. Ct. App. 2001) (explaining that “a bad faith claim based

solely on a carrier’s denial of coverage will fail on the merits if a final

determination of noncoverage ultimately is made”) (citations omitted). Although

McGee maintains that Zurich failed to conduct an adequate investigation, Foutz’s

admissions reveal that there were no additional facts calling into question Zurich’s

denial of coverage.

I respectfully dissent from the majority’s contrary conclusion, which is not

supported by the facts or the law. 

4