Business Owner’s Policy Does Not Cover Claims Alleging that Plaintiffs Had Been Injured By Employee Driving His Own Truck from a Party

July 31, 2013 | Insurance Coverage

A federal district court in Tennessee has ruled that a business owner’s insurance policy did not cover claims brought by people who alleged they had been injured in an accident with the insured’s employee, who left a holiday party in his own truck after drinking.  

The Case 

J. O. Adams, who owned a taxidermy business, hosted a holiday party for friends, family, and employees at which he served alcohol. One employee at the party allegedly drank heavily, left in his personal truck, and crashed into a minivan. The people in the minivan sued Adams and the employee in a Tennessee state court. 

Auto-Owners Insurance Company, which had issued a business owner’s insurance policy to Adams and his business, asked a court to determine whether the policy required that it defend or indemnify either Adams or the employee in the state lawsuit. The insurer moved for summary judgment. 

The Court’s Decision 

The court granted Auto-Owners’ motion. 

The court first observed that the policy covered Adams “only with respect to the conduct of a business of which [he was] the sole owner.” It then found that there was not a sufficiently close nexus between Adams’ taxidermy business and the cause of the underlying plaintiffs’ injuries. 

The court pointed out that the party was a once-a-year event at Adams’ home and that the guests included people in addition to employees and customers. Moreover, the court continued, although employees were encouraged to attend and perhaps even viewed less favorably if they did not, they were not required to attend and were not paid for their time there. The court added that the employee involved in the accident was driving his personal truck and was not acting within the scope of his employment when he departed from the party. Simply put, the court held, the allegations in the state lawsuit did not indicate that an insurer would have been reasonably able to foresee the party as emanating from Adams’ business. 

The court also said that even if the holiday party was related to the conduct of Adams’ business, the policy’s automobile exclusion excluded coverage. Moreover, the court rejected the underlying plaintiffs’ argument that their injuries stemmed from Adams’ negligence during his holiday party, and that the automobile exclusion did not exclude coverage because of the “concurrent cause” doctrine. The court explained that the concurrent cause doctrine had no application when the alleged non-excluded cause would not – independent of the excluded cause – have caused the injuries. That was the situation here, it concluded, explaining that had it not been for the employee’s driving, the underlying plaintiffs would never have been injured by Adams’ alleged negligence. 

The case is Auto-Owners Ins. Co. v. England, No. 3:10-cv-118 (E.D. Tenn. July 8, 2013).

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