Know Your Contract!

We sign contracts all the time. As consumers, we are agreeing to terms that we typically don’t even bother to read. Unfortunately, ignorance of the law or of your contract terms doesn’t make for a good defense. There is a beauty in contract law. The contract terms can be of your advantage or not. The beauty is you have the option to agree to those terms or not.  Below is an interesting case involving an insurance company denying coverage based on contract wording.

A family goes out of town on vacation and the family asks a close friend to watch over the house and to take care of the family dogs while they’re away. The friend decided to take the family’s car to run a short errand since his car was inoperable at that time. This short errand ended up in a fatality accident killing 3 people. The friend did survive with serious injuries. The friend gets sued for what we can only imagine is a lot of money. The family’s insurance company, which holds the liability policy on the automobile of the car the friend was driving, wants to deny any coverage to this claim. The liability policy at issue specifically defines a “Covered Person” as “you or any family member for the maintenance or use of any auto,” and “any person using your covered auto with your permission and within the scope of your permission.” The facts given here is that the friend never had permission to drive the family car. The case even gets into whether there was implied permission or even inference of implied permission. The friend has never driven the family car before. In fact, the family let the tag expired showing that there was no intent on any driving that vehicle any time soon.


In construing contracts, the words expressing the parties’ intentions should be given their usual and ordinary meaning. In this case, the litigation came down to a few words in the contract, “with your permission and within the scope of your permission.” The Court held in favor of the insurance company finding that since there was no permission for the friend to drive the car. The insurance company would not held liable for any claim involving the fatality accident. The moral of the story is that words do matter at least in terms of contracts. Do your best to take the time to read the fine print to things you sign or agree to. The plainest of language can make all the difference. For those important documents such as major purchases, long term commitments, and important business dealings; if you don’t understand, don’t sign. The better practice is to consult with attorney to get a clear understanding as to what you’re agreeing to.

Will Cartwright

Cartwright Law LLC

Citation: Tennessee Farmers Mutual Insurance Co. v Dunlap, No. E2015-00413-COA-R3