No Coverage For Vehicle Driven By Employee But Not Possessed By Employee (PA)
The Eastern District of Pennsylvania recently determined that an insurance company had no duty to contribute to a settlement over a car accident involving its insured’s employee while the employee was driving a noncompany vehicle. In Continental Casualty Company v. Pennsylvania National Mutual Casualty Insurance Company, the court determined that there was no coverage as the employee did not “borrow” the vehicle involved in the accident.
The incident involved a vehicle collision between a motorcycle driver and a GMC Yukon driven by an employee of Shady Maple Smorgasboard, Inc. The GMC Yukon was owned by Sight & Sound Ministries Inc. Occasionally, including at the time of the accident, the Shady Maple employee drove to marketing events in the same vehicle as an employee from Sight & Sound, which often partnered with Shady Maple in various marketing efforts. At the time of the accident, the Shady Maple employee, with permission, was driving the GMC Yukon owned by Sight & Sound.
In the aftermath of the accident, a lawsuit was commenced against the Shady Maple employee, Sight & Sound, and other entities in the Philadelphia County Court of Common Pleas. Later, the action was settled in private mediation for $10 million. Sight & Sound’s insurer, Continental Casualty Co., contributed $8.7 million to the settlement. Thereafter, Continental sought reimbursement from Pennsylvania National Mutual Casualty Insurance Co. which insured Shady Maple through a declaratory judgment action in the Eastern District of Pennsylvania.
Ultimately, the court found that Penn National had no duty to reimburse Continental for the settlement because the Shady Maple employee never acquired “control, dominion or possession” over the GMC Yukon. As such, the court determined that Shady Maple could not have “borrowed” the GMC Yukon for business purposes. In reaching its decision, the court considered a number of factors including the fact that the GMC Yukon was already set to be used to attend a trade show and that the Sight & Sound employee could have told the Shady Maple employee to stop driving the vehicle at any point in time. Additionally, the court determined that the Shady Maple employee’s offer to drive was not based on any effort to exercise control of the vehicle for Shady Maple’s purposes. Furthermore, the court stated that the Shady Maple employee did not have express authority from Shady Maple, itself, to borrow the GMC Yukon. As such, the court concluded that, although a Shady Maple employee was behind the wheel, Sight & Sound remained in possession and control of the GMC Yukon at the time of the accident. As such, Continental’s declaratory judgment action was denied.
Thanks to Zhanna Dubinsky for her contribution to this post. Please email Georgia Coats with any questions.