If a reckless driver injures someone in a car accident, the driver may not be the only person liable for damages. If the driver was operating a vehicle owned by his or her employer, the employer may be vicariously liable for the victim’s injuries. If the employer had the vehicle insured, the insurance company may bear the ultimate financial responsibility.
Great American Alliance Insurance Co. v. Anderson
Of course, insurance companies often will not pay out without a fight. With respect to automobile insurance, policies often exclude coverage for employer-owned vehicles that are not used with the employer’s permission. What precisely constitutes “permission” can be difficult to determine.
In a recent case, the U.S. 11th Circuit Court of Appeals had to sort out the application of Georgia law to a dispute between an employer and its insurance company over liability for a car accident. The company permitted one of its employees to use one of its vehicles for “work and personal purposes.” One day, the employee drank four beers and got behind the wheel of the company car. He then got into an accident with a motorcycle, injuring its operator.
The motorcyclist sued the employee in Georgia state court and won a jury verdict of $1 million. The employer’s insurance company then sued the employer, seeking a court declaration that it was not liable for the verdict. The insurer argued the employee’s use of the employer’s vehicle at the time of the accident was not permissive because he was driving drunk, in clear violation of the company’s written substance abuse policies.
A federal judge agreed with the insurance company’s interpretation. But on appeal, the 11th Circuit disagreed. Under Georgia law, a “permissive user” for insurance purposes includes an employee who uses an employer’s vehicle for an “approved purpose.” Even if the employee violates company rules in the course of operating the vehicle, the employer may still be responsible if the employee causes an accident.
This rule is based on a 1968 decision by the Georgia Supreme Court. The problem here, the 11th Circuit observed, was that in 1997, the Georgia Court of Appeals issued a seemingly contradictory ruling that said a “company’s internal rules could govern the scope of permissive use.” The insurance company here and the trial judge relied on this decision.
The Supreme Court’s original 1968 decision was never overruled, and the 11th Circuit, as a federal court applying Georgia law, must follow the state Supreme Court’s decision. Based on that rule, the company’s internal policies are irrelevant. The court noted that the insurance company could have written its policy to limit “permissive use” to include the company’s substance abuse policies. It did not do so, therefore it can be held liable for the employee’s negligence.
The 11th Circuit’s ruling does not end the case, however. The $1 million jury verdict included an award of punitive damages. The appeals court said the trial judge still had to determine whether such damages were covered under the employer’s policy.