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Who covers what when an employee is involved in an accident while driving a personal vehicle for business purposes? It is a question as old as insurance itself. It should come as no surprise that the Holy Grail for trial lawyers is obtaining coverage for an employee’s personal vehicle through the employer’s commercial auto policy. Not only are policy limits usually significantly higher, but the dynamics of engaging a commercial policy in litigation are often considered more favorable than a claim against the employee’s personal auto policy alone. To arrive at an answer, however, we must first clearly understand the question. This requires a quick overview of the two policies in play.
Employee’s Personal Auto Policy
A personal auto policy covers an individual insured for personal liability, physical damage, medical expenses, and/or uninsured/underinsured motorist protection. Most personal auto policies provide coverage for vehicles owned by the insured even if they are used for business purposes. A common exception is “livery” – carrying goods or people for a fee – although ride-sharing and/or mileage reimbursement do not usually jeopardize coverage. Delivery services, including package delivery services, pizza delivery, flower delivery, and the like, are usually considered “livery” for which coverage is excluded. The insurance purchased on a personal vehicle is always “primary.” The policy covering a vehicle pays first before any other policy. If an accident occurs while an employee is operating their car on an errand for the employer, the employee’s personal insurance is the primary coverage, and should be looked to first to provide protection.
Employer’s Commercial Auto Policy
Most businesses that own vehicles utilize a commercial auto policy. The liability section of this policy provides protection for bodily injury and property damage for which the insured employer is liable. Under common law, employers are responsible for the actions of their employees committed within the course and scope of employment. Employers must be sure that their policies provide coverage for “non-owned” and “hired” vehicles. The company is then protected if an employee causes an accident. If an employer does not own any vehicles, “non-owned and hired” auto liability insurance is recommended in order to provide the coverage outlined above.
The standard commercial auto policy provides no coverage for the employees who are sued, even if the accident took place on company time. The intent of the commercial policy is to protect the company (employer) from liability – not the employee. Most employers will add an “Employees as Additional Insured” endorsement to their policy for a small additional premium. Because the insurance on a particular vehicle is always primary, any accident caused by an employee while driving his or her own car will be paid first by the personal auto policy covering that vehicle. If there is not enough coverage under the employee’s policy, the employer’s business auto policy steps up to pay any excess above the personal policy limits.
Most business auto policies include no coverage for collision damage to an employee’s car, although such coverage can be purchased. Such coverage is generally not worth the extra cost. It also does not change the fact that employee’s coverage is still primary. Even after buying the extra coverage, the business auto policy will only pay if there is no insurance on the employee’s vehicle.
Employees Using Personal Vehicles for Business Purposes
MWL attorneys are frequently asked to assess coverage questions under commercial auto policies. One of the more frequent questions arises in the context of employees who are traveling related to their employment. This raises two interrelated questions:
- Is the employee within the course and scope of his employment such that the employer is vicariously liable for the conduct?
- If not, then the question becomes whether any policy provisions or endorsements would make the employee an “insured” even while outside the scope of employment?
Not every employee is engaged in the employment of its employer at all times. Aasen-Robles v. Lac Courtes Orielles Band of Lake Superior Chippewa Indians, 267 Wis.2d 333, 348, 671 N.W.2d 703 (2003). Only when the employee is acting within the scope of his or her employment does an employer face the potential of vicarious liability for the actions of its employees. Scott v. Min-Aqua Bats Water Ski Club, Inc., 79 Wis.2d 316, 255 N.W.2d 536 (1977); Korntved v. Advanced Healthcare, S.C., 2005 WI App 197 (Ct. App. 2005)(employer could only be held liable if the employee was acting within the scope of her employment when she accessed the medical records in violation of employer protocol).
Wisconsin courts have adopted two tests depending upon whether an employee is considered a “fixed-location” employee or one without a set place of work, like a traveling salesman. Where the employee does not have a fixed place of employment, courts have held that the inquiry focuses solely on whether the employee is “actuated by a purpose to serve his employer.” Fischer v. United States, 996 F. Supp.2d 724, 729 (W.D. Wis. 2014). For example, a forest service employee who was stationed in a remote refuge and was required to commute distances to obtain groceries. Id. Other examples include a volunteer firefighter who traveled to different locations at request of his employer, Brown v. Acuity, 2013 WI 60, ¶ 32, 348 Wis.2d 603, 619, 833 N.W.2d 96, 104, or a physical therapist who traveled to and from homes of her patients to perform her work. Murray v. Travelers Ins. Co., 229 Wis.2d 819, 828, 601 N.W.2d 661, 664–65 (Ct. App. 1999). In all these cases, the inquiry is highly fact specific and largely involves the employee’s intent. Thus, in situations involving non-fixed location employees, the ultimate determination often requires a trial in order to determine whether the employee was actuated by some purpose to service the employer at the time of the accident.
On the other hand, if an employee has a “fixed location” the analysis is a little easier. In Wisconsin, a fixed-location employee is not acting within the scope of her employment when commuting from home to or from her given place of employment or to a work training event, unless the employer exercises control over the “method or route” of the employee’s travel. Geldnich v. Burg, 202 Wis. 209, 210, 231 N.W. 624,624 (1930); DeRuyter by Jacguart v. Wisconsin Electric Power Co., 200 Wis.2d 349, 360-61, 546 NW.2d 534, 539-40 (Wis. Ct. App. 1996), aff’d, 211 Wis.2d 169, 565 N.W.2d 118 (Wis. 1997).
In DeRuyter, the plaintiffs filed suit against the at-fault driver and his employer, Wisconsin Electric, following a fatal car accident. Id. at 356. The plaintiffs alleged that Wisconsin Electric was vicariously liable for the employee’s negligence because the employee was driving to a company-mandated training session when the accident occurred. Id. Wisconsin Electric denied liability, asserting that the employee was not acting within the scope of his employment at the time of the accident because he was merely driving from his house to the training session. Id.
The plaintiffs argued that Wisconsin Electric exercised control over its employee while he was traveling by car to the training session because the training was mandatory, travel time was compensated, Wisconsin Electric provided a map indicating the location where the training session was held, and Wisconsin Electric had a “fitness-for-duty” policy that prevented alcohol consumption a prescribed amount of time prior to an employee’s shift. Id. at 357-59. The circuit court agreed with the plaintiffs and held that all of the foregoing facts, when combined “created ‘sufficient special circumstances’ that placed his actions within the scope of employment at the time of the accident.” Id. at 358.
The court of appeals reversed, holding that Wisconsin Electric did not control the employee at the time of the accident because the map it provided neither identified a precise route that was to be taken nor mandated the method of travel to the training session. Specifically, the court in DeRuyter, found no vicarious liability despite the facts that the employee 1) was required to attend the training; 2) was paid for his travel time; and 3) was provided with a map with directions to the training location. The court explained:
Where an employee works for another at a given place of employment, and lives at home or boards himself, it is the business of the employee to present himself at the place of employment, and the relation of master and servant does not exist while he is going between his home and place of employment. Thus, only when the employer exercises control over the method or route of the employee’s travel to or from work can the employee be said to be acting within his or her employment. This is the rule because without such control, the employee is not actuated by a purpose to serve the employer … but is solely promoting the employee’s “own convenience.”
Id. at 361 (internal citations omitted). DeRuyter also rejected any type of “special errand” or “special mission” exception.
DeRuyter’s control analysis is consistent with the Restatement (Third) of Agency. The Restatement (Third) adopts a general rule that travel to and from work is not within scope unless the employer provides the vehicle and controls how the employee uses it.
In general, travel required to perform work, such as travel from an employer’s office to a job site or from one job site to another, is within the scope of an employee’s employment while traveling to and from work is not. However, an employer may place an employee’s travel to and from work within the scope of employment by providing the employee with a vehicle and asserting control over how the employee uses the vehicle so that the employee may more readily respond to the needs of the employer’s enterprise.
Restatement (Third) of Agency § 7.07, cmt (e).
Is the Employee an “Insured” Under Other Provisions of the Policy?
In many cases, it will be apparent that the employee is outside the scope of their employment at the time of the accident. However, creative attorneys will not necessarily stop there in order to find coverage under a lucrative commercial insurance policy.
One popular argument involves a common endorsement titled “Employees as Insureds”. That typical endorsement provides in part:
The following is added to the Section II- Liability Coverage,
Paragraph A.1. Who Is An Insured Provision:
Any “employee” of yours is an “insured” while using a covered “auto” you don’t own, hire or borrow in your business or your personal affairs.
Plaintiffs will argue that an “Employees as Insureds” endorsement must mean something more than the general scope of employment test. If an insurer intended to mean course and scope, why not utilize that phrase. It could be argued that “business affairs” connotes a broader interpretation, and as we all know courts generally construe insurance policy phrases against the insurer. Superficially this may seem like a sound argument.
Fortunately, for commercial insurers many courts have interpreted the “Employees as Insureds” endorsement. In Wisconsin, the court of appeals has interpreted this endorsement to be functionally equivalent to the scope of employment test. Balz v. Heritage Mut. Ins. Co., 2006 WI. App 131, ¶ 4-5, 7, 12, 294 Wis.2d 700, 720 N.W.2d 704. Similarly, in United Health Care Ins. Co. v. State Auto Ins. Co. of Wisconsin, 2010 WI App 120, at ¶ 9, 329 Wis.2d 269, 789 N.W.2d 753, the court of appeals rejected an argument that the “business or personal affairs” policy language of a policy provided coverage for any employee regardless of the purpose of the vehicle’s use.
Wisconsin is not alone in concluding that the phrase “in your business or your personal affairs” is synonymous with the scope of employment. In O’Shea v. Welch, the Tenth Circuit asked, “what does ‘in your business’ mean?” It concluded:
We believe the Kansas Supreme Court would find “in your business” to be unambiguous and interpret it to mean “scope of employment.” This construction of the policy is clearly what the contracting parties intended. By adding Amendatory Endorsement # 5, Osco contracted to provide coverage for its employees when using their own vehicles. Obviously, however, it did not seek to provide global coverage for all employee negligence, only negligence occurring while the employees furthered Osco’s business, which they can do only while acting within the scope of their employment.
101 F. App’x 800, 804-05 (10th Cir. 2004). Applying Minnesota law, the Eighth Circuit reached the same conclusion, writing:
The most natural reading of employees-as-insureds endorsement makes only some employees insureds—employees using in the scope of their employment their own vehicles, which Life Time has not hired or borrowed.
Auto Club Ins. Ass’n v. States Sentry Ins., 683 F.3d 889, 893 (8th Cir. 2012).
In Illinois, the phrase “in your business or your personal affairs” in the context of an insurance policy has been interpreted “to protect employees who are injured “while acting in the scope of their employment.” Wolfensberger v. Eastwood, 382 Ill. App.3d 924, 928, 889 N.E.2d 635, 638 (2008) “Many courts have found that the phrases, ‘in your business’ or ‘in connection with your business,’ are equivalent to the phrase, ‘scope of employment.’” Allstate Ins. Co. v. J.A.D. Coal Co., 2006 WL 2381880, at *4 (W.D. Va., Aug. 16, 2006), aff’d, 237 F. App’x 797 (4th Cir. 2007); see also, Wausau Underwriters Ins. Co. v. Bail, 281 F.Supp.2d 1307, 1316 (M.D .Fla. 2002) (identical); Lawler v. Fireman’s Fund Ins. Co., 163 F.Supp.2d 841, 852 (N.D. Ohio 2001), aff’d, 322 F.3d 900 (6th Cir.2003) (equivalent); Bamber v. Lumbermens Mut. Cas. Co., 680 A.2d 901, 903(Pa. Super. Ct. 1996) (synonymous); Price v. Colony Ins. Co., 520 So.2d 964, 967 (La. App. 3rd Cir. 1987) (equivalent).
It is not surprising that plaintiffs seek to turn to commercial auto policies, whose policy limits are usually at least $1 million and frequently include multiple layers of excess coverage. The questions pertaining to scope of employment and corresponding coverage under policy provisions and endorsements are often thorny. Even seemingly straightforward cases should be analyzed closely based on the applicable caselaw and the text of the individual endorsements. MWL attorneys specialize in handling coverage questions. Don’t hesitate to contact us with your next coverage question.
If you should have any questions regarding this article, please contact Ryan Woody at [email protected].