Employee Exclusion Applies to Independent Contractor Truck Driver

An auto insurer had no duty to defend a trucking company against an injured driver’s claim because the insurance policy excluded claims by “employees,” notwithstanding that the driver was technically an independent contractor. Progressive Mountain Ins. v. Madd Transp. LLC, No. 15-11668  (11th Cir. Dec. 8, 2015). Madd is an interstate trucking company based in Georgia. One of its drivers was injured at IPSCO’s Pennsylvania facility while securing a load. The driver’s guardian filed a negligence lawsuit against IPSCO in Pennsylvania state court. IPSCO joined Madd as a third-party defendant, claiming that Madd negligently trained and supervised its driver. Madd tendered its defense to Progressive.

Progressive filed a declaratory judgment action on the ground that the policy’s “employee exclusion” — which provides that its coverage (including the duty to defend) does not apply to bodily injury to Madd’s “employees” — relieved it from defending or indemnifying Madd. The district court found that Progressive did not have a duty to defend or indemnify Madd, noting, however, that neither Madd nor IPSCO raised the issue of whether the driver was actually “operating” the vehicle within the meaning of 49 C.F.R. § 390.5 since he was not driving it when the accident occurred.

The 11th Circuit, applying Georgia law, affirmed. Although the policy did not define “employee,” it was subject to federal motor carrier regulations that define that term. See 49 C.F.R. § 387.7(a) (2009) (no motor carrier shall operate a vehicle until it has obtained the required level of insurance). The policy included the MCS–90 Endorsement.  The Court of Appeals was obligated to construe the policy’s “terms and conditions . . . as amplified, extended, or modified” by that endorsement. Ga. Code § 33-24-16; see also Aequicap Ins. Co. v. Canal Ins. Co, 693 S.E.2d 863, 866–68 (Ga. Ct. App. 2010) (using federal motor carrier regulations and an MCS–90 endorsement to interpret an insurance policy).

The endorsement provides that the insurance “does not apply to injury to or death of the insured’s employees while engaged in the course of their employment.” Under the governing regulations, “employee” includes “an independent contractor while in the course of operating a commercial motor vehicle.” 49 C.F.R. § 390.5 (2015). The Court of Appeals held that not only does that definition of “employee” modify the policy’s employee exclusion, see Ga. Code § 33-24-16, but there was no indication that the term “employee” was used differently in the endorsement than in the employee exclusion. Section 390.5’s definition of “employee” therefore supplies the definition of that term in the employee exclusion.   Madd also attempted to raise the issue of whether the driver was operating the vehicle. The Court of Appeals declined to address the issue, as it had not been raised in the district court.

IPSCO moved to dismiss the case for lack of subject matter jurisdiction on the ground that the issue of whether Progressive must indemnify Madd was not ripe for adjudication until Madd was held liable (if at all) in the Pennsylvania lawsuit. Alternatively, IPSCO moved to stay the declaratory action, arguing that deciding whether the driver was an “employee” under the employee exclusion creates the risk of inconsistent judgments. The Court of Appeals held that argument lacked merit as its decision had no bearing on whether the driver was an independent contractor under Pennsylvania law.