In Sprinkles v. Associated Indemnity Corporation, 188 Cal.App.4th 69 (2010), the California Court of Appeal held that an insurer did not have a duty to defend an automobile accident case, where Employer’s commercial general liability (“CGL”) policy excluded bodily injury arising out of the use of an automobile by an insured, “insured” included employees “but only for acts within the scope of their employment while performing duties related to the conduct of [the employer’s] business,” and Employee who caused the fatal accident while driving to work was required to use the vehicle to visit job sites for Employer during the workday.
Employee used his own car to make service calls for a property management company. On the day of the accident, Employee was driving to work under the influence of drugs, when he struck and killed Michael Sprinkles. At the time, Employee was an uninsured, undocumented alien with a lengthy criminal record.
The heirs of Michael Sprinkles (“Plaintiffs”) sued Employee and Employer. Plaintiffs settled in part for the $1 million limits of an auto liability policy and an excess policy issued to Employer by Fireman’s Fund. However, Fireman’s Fund refused to defend under the CGL policy it had issued to Employer. As part of the settlement, Plaintiffs took an assignment of Employer’s claim under the CGL policy against Fireman’s Fund and arbitrated the claim.
The arbitration resulted in an award to Plaintiffs of more than $27 million. The arbitrator found that Employee was acting within the course and scope of his employment and that Employer was negligent in hiring and supervising him. Plaintiffs sued Fireman’s Fund for coverage and bad faith. The trial court granted Fireman’s Fund’s demurrer to the complaint.
The Court of Appeal affirmed. Plaintiffs argued that there was a potential for coverage when the lawsuit was initially filed, because Fireman’s Fund learned that Employee was on his way to work at the time of the accident. Under the “going and coming” rule, an employee is generally considered to be acting outside the scope of employment while commuting to and from work. The rule does not apply, however, when the employer receives a sufficient benefit from the employee’s use of the vehicle or the use of the vehicle is a requirement of employment (the “required vehicle” exception).
The Court noted that Plaintiffs alleged in their complaint that Employee was acting within the course and scope of his employment and that the arbitrator found Employee was acting within the course and scope of his employment under the “required vehicle” exception to the “going and coming rule.”
Plaintiffs also argued that the definition of “insured,” and thus the applicability of the automobile liability exclusion, also required that the employee had to be “performing duties related to the conduct of [Employer’s] business.” The Court rejected the argument, citing California Supreme Court’s decisions that when an employee is required to use his own vehicle to go to work sites, the use of the vehicle is a requirement of employment. The reasoning is that the employer benefits from the employee bringing his vehicle to work. The Sprinkles Court added that “[o]nly when the activities are purely personal should they not be considered related to the conduct of the business.”
Although the Court noted that an insurer’s defense under one policy does not necessarily insulate it from liability for breach under another policy, the Court’s ruling might have been influenced in part by the existence of the separate automobile insurance policy. The Court observed that it would “not seem that [Employer] had a reasonable expectation that its CGL policy would provide coverage for automobile liability,” in light of the separate automobile liability policy.