An employee may be covered by an employer’s auto insurance policy as a permissive user even though the employee violates a company policy prohibiting driving while intoxicated. The Eleventh Circuit, in Great American Alliance Insurance Co. v. Anderson, 2017 WL 521560 (11th Cir. Feb. 8, 2017), assessed conflicting cases under Georgia law, but determined that a general permissive use clause covers all uses for which the underlying purpose was authorized without regard for operational aspects, such as a company policy prohibiting drinking and driving.
The insured, Looper Cabinet Co., had given permission to an employee, Brian Hensley, to drive a company vehicle for both work and personal purposes, including driving to and from his father’s lake house. After drinking one evening, Hensley drove the vehicle home from the lake house and was involved in a motor-vehicle accident with Ulysses Anderson. Anderson sued Hensley and Looper, and a jury found Hensley liable for approximately one million dollars, including punitive damages. (Looper had been dropped as a defendant.) Looper’s insurer, Great American Alliance Insurance Company, filed a lawsuit seeking a declaration that it was not liable for those damages because Hensley had exceeded the scope of his permissive use by driving while intoxicated, which was prohibited by a written Looper policy. The district court granted Great American summary judgment, finding that a Georgia Court of Appeals case, Barfield v. Royal Insurance Co. of America, 228 Ga. App. 841 (1997), held that a company policy could narrow the scope of permissive use, resulting in an employee not being considered an insured under the policy when having driven while intoxicated in contravention of the company policy.
The Eleventh Circuit, however, focused on an earlier precedent from the Georgia Supreme Court, Strickland v. Georgia Casualty & Surety Co., 224 Ga. 487 (1968), that it found to be irreconcilable with the Barfield case. In Strickland, the Georgia Supreme Court, considering a different factual context, held that operational aspects were unimportant when the employer had granted permission to use the vehicle for the purpose for which it was used. There, the employer had granted permission for one employee to drive himself and coworkers to and from work and to keep the car overnight, but it had prohibited another employee from driving the car. Despite this, the employee with permission allowed the other employee to drive along their normal route. After an accident, the company’s insurer sued seeking a declaration that it had no duty to defend either employee or to pay any judgment entered against them. The Georgia Supreme Court held that the employees were covered by the policy, even though they had violated express prohibitions, because their use of the car was within the scope of the initial permission.
The Eleventh Circuit held that the Georgia Court of Appeals’ limitation on the Strickland rule could not be reconciled with the reasoning of the Georgia Supreme Court in that case and that it was bound to follow the Georgia Supreme Court on questions of Georgia law. So, even though Barfield was factually very analogous and was decided after Strickland, the Eleventh Circuit reversed the district court and held that Hensley was covered by the Great American policy because the purpose for which he used the vehicle, to drive between his home and his father’s lake house, was within the scope of Looper’s permission.
The Eleventh Circuit did remark in dictum that the violation of the company policy could have made a difference if the policy provisions had not been “general permissive use clauses” and had included language disclaiming coverage for violations of company policies—to the extent permitted under Georgia law, which the Eleventh Circuit did not address. In Strickland, the Georgia Supreme Court had similarly remarked that the insurer could have restricted permissive use under the policy based on the “manner of operation” of the vehicle, but had not done so.
The Eleventh Circuit remanded the case for the district court to determine whether the policies precluded punitive damages, a question the district court did not reach.
Posted by Danny Wells.