A dealership's insurer is responsible for its legal defense costs, even though the dealership had no connection with a vehicle that was carrying its dealer plate at the time of a crash, the Rhode Island Supreme Court has held.
The policy explicitly required Progressive Casualty Insurance Co. to provide coverage for vehicles bearing any one of 15 dealer plates issued to Narragansett Auto Sales, a used-car dealership formerly in Providence, the court said.
The decision 'could be a problem for the industry because they don't have tight controls over the use of dealer plates,' said Providence attorney James Currier, who represents the victim's insurance company.
The state Supreme Court said Narragansett Auto Sales and an independent auto repair shop shared office space. In October 1994, a repair shop employee took one of the dealership's dealer plates and let a friend place it on an unregistered pickup to show to a prospective buyer. Later that day, the friend drove the pickup - still with the dealer plate - to Boston, crossed the center line and caused an accident that nearly killed James Lawrence IV.
Lawrence collected $250,000 under his uninsured motorist policy. He also sued Narragansett Auto Sales.
Progressive Casualty denied coverage of the dealership's legal defense costs. A lower-court judge ruled in favor of Progressive because the pickup's driver admittedly didn't have Narragansett's permission to use the dealer plate on the day of the crash.
But the state Supreme Court disagreed on the insurance issue, holding that the plain language of Narragansett's policy requires Progressive to defend any personal injury or property damage lawsuit involving a vehicle with the dealership's plates.
Currier said Progressive has reimbursed Lawrence's insurance company for part of the $250,000 in benefits already paid.
The dealership didn't return phone calls seeking comment.
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