In Union Standard Ins. Co. v. Hobbs Rental Corp., No. 07-2184 (10th Cir. May 5, 2009)[here], the court determined the insured's business auto policy did not cover vehicles owned and operated by an independent contractor.
The insured company rented oil drilling equipment. It hired an independent contractor to transport a "mud separator" from an oil field to the insured's yard. The independent contractor exercised complete control over the transport job, using its own employees and truck. An employee of the independent contractor was severely electrocuted when the truck touched an overhead power line. The employee sued the insured, who placed its comprehensive liability carrier on notice. When the carrier declared bankruptcy, the insured sought coverage from Union Standard under its business automobile policy. Union Standard defended under a reservation of rights.
The policy provided coverage for certain "non-owned autos," defined as, "Those autos you do not own, lease, hire, rent or borrow that are used in connection with your business. This includes autos owned by your employees or partners or members of their households but only while used in your business or your personal affairs." The district court granted summary judgment to the insured.
The Tenth Circuit reversed. The second sentence of the non-owned auto provision indicated it was intended to cover a narrow and foreseeable set of circumstances involving the insured's employees or members of their households. Considering the "in connection with" language with the entire provision suggested that instead of covering all autos somehow related to the insured's business, the policy was intended to apply only to persons affiliated with the insured and operating privately-owned vehicles while performing company-related work. Given this language, the court declined to expand coverage to independent contractors who did business with the insured.
