Claim Survives Because of W.V. Statute that Limits Exclusions for Borrowed Vehicles

By Jim Sams | November 15, 2019

Workers’ compensation immunity doesn’t shield an insurer from liability for injuries caused by someone who was borrowing the employer’s truck, and neither do exclusions in the policy, the 4th Circuit Court of Appeals ruled.

The appellate court found that workers’ compensation exclusive remedy does not bar a claim by Greg Allen Ball, who was seriously injured when struck by his employer’s truck, because his claim was against a third party, not his employer.

What’s more, the employee indemnification and employer liability exclusions in the insurance carrier’s commercial auto policy are void because they violate a state statute that prohibits insurers from excluding coverage for accidents caused by persons who had permission to use the policyholder’s vehicle, the court found.

The published Oct. 30 decision reversed a ruling by the U.S. District Court in Charleston. The case is United Financial Casualty Co. v. Ball and Milton Hardware.

Ball was doing construction work for Milton Hardware at the home of Rodney Perry in Milton, West Virginia on Oct. 25, 2016. Business owner David Yeager told him and another worker to load debris into a truck, but another truck owned by the business was blocking the vehicle. Yeager gave Perry, the homeowner, permission to move the truck. As Perry backed up, he struck Ball and pinned him against the other truck.

Milton Hardware had failed to pay its workers’ compensation premiums, so no coverage was available under that policy. However, the company had an active commercial auto policy in place. Ball filed suit seeking coverage under the liability portion of his employer’s policy, which has a limit of $1 million. In the alternative, he is asking for uninsured motorist coverage, with a $100,000 policy limit.

U.S. District Judge Robert C. Chambers granted the insurer’s motion for summary judgment against Ball. The judge did not rule on whether the other exclusions in the policy applied.

The 4th Circuit, however, said that workers’ compensation exclusive remedy does not bar employees from seeking recovery of damages from third parties. Employers can subrogate those claims to recovery any workers’ compensation benefits paid, the court said.

Since Perry was not Ball’s employer, his claim did not arise under workers’ compensation law, which means the policy exclusion for injuries covered under workers’ compensation does not apply, the court found.

The commercial auto policy also excluded coverage to any employees of the insured that arose in the performance of the employer’s business. The court agreed with Ball’s argument that the exclusion is inconsistent with West Virginia Code Section 33-6-31(a). That statute requires every auto insurance policy issued to West Virginia drivers must provide coverage for any person using the insured vehicle with the expressed or implied consent of the owner.

That statute exempts workers’ compensation exclusions, but the 4th Circuit said that exemption doesn’t apply because Ball is not pursuing a workers’ comp claim. The policy exclusion for employee liability is also unenforceable because of the statute, the court found.

The 4th Circuit vacated the district judge’s ruling and remanded the case to the district court for further proceedings involving any unresolved issues.1

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