Arizona Supreme Court Voids DUI Exclusion in Rental Car Insurance, Awarding Victims Coverage

In April 1993, Juan Eduardo Quintero-Lopez rented a vehicle from Value Rent-A-Car and purchased supplemental liability insurance underwritten by Philadelphia Indemnity Insurance Company. The next day, he drove while intoxicated and caused a serious collision. Passenger Pedro Huerta, a minor, suffered injuries. Passenger Melvin Sanchez was killed. Judgments against Quintero-Lopez totaled $705,000.

Philadelphia Indemnity refused to pay the supplemental coverage, pointing to a DUI exclusion it said voided the policy. The insurer argued that because Quintero-Lopez was drunk, the policy he bought provided no protection to the crash victims at all. The families of Pedro Huerta and Melvin Sanchez, along with Quintero-Lopez's wife Michelle, appealed that denial.

Goldberg and Osborne attorneys John E. Osborne and Michael E. Medina, Jr. represented the victims and surviving family members. They argued that the exclusion was hidden: the rental contract mentioned prohibited uses on one side of the page, while a separate clause on the other side stated that policy violations voided coverage, and a third document, a promotional brochure, described coverage without any mention of the DUI restriction. A consumer renting a car and buying insurance at the counter had no reasonable way to understand that a single drink before driving could wipe out every dollar of the supplemental policy.

The Arizona Supreme Court agreed. Applying the reasonable-expectations doctrine, the court found that ordinary consumers purchasing liability coverage in a car rental transaction would not expect a DUI exclusion scattered across three separate documents in fine print to eliminate coverage entirely. The exclusion was unenforceable against the minimum statutory limits, and the court held it also could not defeat the supplemental coverage under the circumstances of how the policy was marketed and presented.

The ruling reversed a summary judgment that had been entered in favor of Philadelphia Indemnity and directed that coverage apply. The decision, issued April 16, 2001, has been cited in subsequent Arizona insurance coverage disputes as a key application of the reasonable-expectations doctrine to exclusionary clauses in consumer insurance contracts.