Business Liability, Umbrella Policies, and Employee Accident Driving Own Car to Work
In Video Warehouse, Inc. v. Southern Trust Ins. Co., 2009 WL 806741 (Ga.App.), Video Warehouse, Inc. appealed a summary judgment awarded to Southern Trust Insurance Company. Video Warehouse argued that a disputed issue of material fact existed as to whether two insurance policies excluded coverage for certain claims asserted against Video Warehouse.
Video Warehouse was sued for personal injuries and wrongful death arising out of an auto accident involving one of its employees. The complaint alleged that the Video Warehouse employee was driving his own vehicle to a Video Warehouse store to perform improvements on the store. The complaint alleged that the employee was acting within the scope of his employment in furtherance of his employer's business when he crossed the center line and struck a truck head-on. The driver of the truck was fatally injured in the accident.
A claim was made for vicarious liability against Video Warehouse, alleging that the employee had a poor driving record when hired and that he exhibited further bad driving behavior during his employment. A claim of negligent hiring and retention was also asserted. Video Warehouse denied the allegations of negligence and further denied that the employee was acting within the scope of his employment or in furtherance of its business.
At the time of the accident, Video Warehouse was the named insured under auto, business liability, and umbrella policies issued by Southern. Arguing that none of the policies covered the liability asserted in the complaint against Video Warehouse, Southern petitioned for a declaratory judgment that it was not liable for any potential judgment against Video Warehouse in the underlying action. Southern then moved for summary judgment, and while Video Warehouse conceded that there was no coverage under the auto policy with Southern, it argued for coverage under the business liability and umbrella policies. The trial court found that none of the policies covered the claims and entered summary judgment in Southern's favor. Video Warehouse appealed.
In its decision, the Court of Appeals of Georgia explained that the business liability policy obligated Southern to pay for those sums that Video Warehouse became legally obligated to pay as damages because of bodily injury caused by an accident. However, the policy expressly excluded from its coverage bodily injury “arising out of the … use … of any … auto … owned or operated by … any insured.” The policy defined “insured” to include Video Warehouse's employees “but only for acts within the scope of their employment by [Video Warehouse] or while performing duties related to the conduct of [Video Warehouse's] business.”
The court stated that the operative language of the policy was plain and unambiguous, particularly as applied to the facts of the case. With regard to the present declaratory judgment action, the court explained that Southern would be liable only for those sums that Video Warehouse became legally obligated to pay as a result of the claims of the underlying lawsuit. The two claims against Video Warehouse in that lawsuit were vicarious liability and negligent hiring and retention. For Video Warehouse to be liable under the theory of vicarious liability, the employee who caused the accident had to be acting within the scope of his employment and while he was engaged in Video Warehouse's business. In addition, for Video Warehouse to be liable under the theory of negligent hiring and retention, the accident could not have occurred while the employee was simply commuting to work but had to occur while the employee was engaged in Video Warehouse's business.
Further, the court explained that for liability to attach to Video Warehouse under this particular complaint, the employee had
to be acting within the scope of his employment or performing duties related to the conduct of Video Warehouse's business.
However, if the employee was so acting or was performing such duties, then by definition he was an “insured” under the policy, and under the exclusionary clause, the policy expressly excluded from coverage bodily injury arising out of the use of an auto owned or operated by such an insured. Thus, it was irrelevant that an issue of fact existed as to whether the employee was acting within the scope of his employment and whether he was engaged in Video Warehouse's business. The appeals court agreed with the trial court's decision that it would not rule whether the employee was acting within the scope of his employment or was otherwise engaged in Video Warehouse's business but instead held that in any case, the policy would not cover the injuries arising from the auto accident.
Video Warehouse argued that the exclusionary clause did not expressly refer to negligent hiring and retention claims, and that such claims were not excluded. According to the court, this argument ignored that the clause expressly excluded from coverage bodily injury “arising out of” the use of any auto owned or operated by any insured, and the Georgia Supreme Court had interpreted this same language as excluding all claims for injuries caused by the excluded acts, regardless of the theory of tort liability.
Therefore, the court stated that the underlying facts and circumstances of the claim, rather than the theory of the claim, determined whether or not the exclusion applied. For these reasons, the court held that Video Warehouse's argument that the business liability policy covered the additional claim of negligent hiring and retention failed, as those claims arose out of the excluded conduct that resulted in the accident.
Finally, the action did not cover the action asserting the insured was vicariously liable for the employee's action. Based on the exclusionary language of the policy, the injuries here were excluded, as this auto accident occurred away from Video Warehouse's premises, and as the underlying policies did not cover the claims.
Finding no issue of disputed material facts, the court affirmed the trial court's ruling that the insurance contracts here plainly excluded the claims asserted against Video Warehouse.