Chavez v. Arizona School Risk Retention Trust, Inc – 5/18/2011

May 23, 2011

Arizona Court of Appeals Division Two Holds That Students Injured by Automobile While Waiting to Board a School Bus Are Entitled to Underinsured Motorist Coverage Under School District’s Automobile Insurance Policy.

Two students were waiting in line to board a school bus when a vehicle struck the bus from behind and injured the students.  Their parents sued the school district’s automobile liability insurer (the “Trust”).  The parents alleged, and the Trust denied, that the students were covered by the underinsured motorist (“UIM”) provision of the policy.  The parties filed cross-motions for summary judgment.  The trial court granted the Trust’s motion.  The parents appealed.

The Arizona Court of Appeals Division Two reversed.

Pursuant to A.R.S. § 28-4009(A)(2), coverage of a motor vehicle policy must extend to any person “using the motor vehicle . . . with the express or implied permission of the named insured” against liability “arising out of the ownership, maintenance or use” of the vehicle.  Accordingly, a policy UIM provision must ensure any person using a vehicle with permission.  See A.R.S. § 20-259.01(B) (UIM coverage must be offered to all persons insured under the policy).

 The Arizona Supreme Court has held that the term “use” in this context includes loading and unloading a vehicle.  For a vehicle that is intended to be used for more than merely transportation, the term “use” depends on the specialized nature and function of the vehicle.  A school bus is equipped with flashing lights and a stop sign, to allow students to board and exit the bus and to cross the street safely.  The bus in this case had its warning signals on when the bus was struck.  Accordingly, the students were using the bus’s safety functions to board the vehicle at the time of the crash. 

The Court of Appeals rejected the Trust’s arguments that “use” of the bus consists only of driving the vehicle or, alternatively, applies only to those “occupying” the bus at the time of the accident.  Because the students waiting to board the bus were using the bus with permission and were therefore insured for liability purposes as defined by § 28-4009(A)(2), Arizona law requires that they be afforded UIM benefits according to § 20-259.01(B).

The Court of Appeals awarded attorneys’ fees to the parents/appellants, reversed the grant of summary judgment for the Trust, and remanded for further proceedings.

Chief Judge Howard authored the opinion; Judges Brammer and Espinosa concurred.