Maryland Appellate Court Upholds Exclusion to Business Auto Insurance Policy

By Cynthia Dipasquale

A business-auto insurance policy's exclusion for vehicles owned by the insured's employees was not ambiguous or prohibited by law, the Court of Special Appeals has held.

The decision is a win for Continental Casualty Co., which had been ordered to pay $140,000 under its policy insuring Jani-King International Inc., for any vehicles it owned, hired or had borrowed.

Despite that broad insuring clause, the appellate court held that the policy clearly excluded employees driving their own cars, even while on company business. It was a matter of first impression in Maryland.

"Not one case in the country has gone the other way," said Continental's attorney, Jeffrey Schmieler. "This puts Maryland in line with every jurisdiction that has decided the issue."

In 1996, a Jani-King employee, Robert Piazza, was driving his car through Prince George's County after visiting with a client when he collided with Thelma Green's vehicle.

Green sued Piazza and her own insurer, Kemper Insurance Co., for damages and, as part of a 2003 settlement, was awarded $240,000. Piazza's personal insurance carrier paid out $100,000, and Kemper made up the $140,000 difference under Green's underinsured motorist coverage.

Soon after paying the settlement, Kemper filed a complaint for declaratory judgment against Jani-King's insurer, Continental. The Texas-based commercial cleaning franchise had not been named as a defendant in the underlying case, but Kemper claimed the company's insurer should have covered Piazza.

Jani-King's policy provided that Continental would cover the "insured" for any auto, or would cover anyone else using an auto the "insured" owned, hired or borrowed. The "insured" was defined as Jani-King. An exception to the policy stated Continental would not cover an employee if the covered auto was owned by that employee.

Continental pointed to this policy exception in defending itself, but Kemper insisted that the provision was ambiguous.

The Prince Georges County Circuit Court agreed, and ordered Continental to pay Kemper $140,000 plus attorneys' fees.

The Court of Special Appeals reversed on Monday.

"The Continental policy clearly requires that, for coverage to exist, there must be a covered auto and an insured as defined by the policy," Judge J. Frederick Sharer wrote for the court. "We can conceive of no other interpretation that gives logic and meaning to the policy language. The policy is not ambiguous."

An attorney for Kemper did not respond to a request for comment.

WHAT THE COURT HELD

Case:

Continental Casualty Co. v. Kemper Ins. Co., CSA No. 2771, Sept. Term 2005. Reported. Opinion by Sharer, J. Filed April 2, 2007.

Issue:

Is language in a business auto policy excluding employees driving their own vehicles from coverage ambiguous?

Holding:

No; reversed. The policy provision clearly means to exclude employees operating their own vehicles even if they are on company business.

Counsel:

Jeffrey Schmieler for appellant; Elizabeth Fisher for appellee. (12 pages)

(c) 2007 The Daily Record (Baltimore). Provided by ProQuest Information and Learning. All rights Reserved.