In Global Hawk Insurance Company v. Le, which was issued on April 14, 2014, the California Court of Appeal (First Appellate District) reversed the trial court’s grant of an insurance company’s motion for summary judgment that the insurer had no duty to defend or indemnify its insured trucking company against a claim filed by an injured truck driver because the insurer’s liability policy excluded coverage for an injury to an employee. In granting the motion for summary judgment, the trial court had relied on federal motor carrier regulations defining “employee.” The Court of Appeal ruled that reliance on those regulations was misplaced.
Global Hawk Insurance Company insured V&H Transport under a commercial auto liability insurance policy. The policy excluded coverage for an injury to an employee.
V&H agreed to pay Jerry Le $1,100 to haul goods from Los Angeles to New York and then return to Los Angeles. V&H advised Le that he would be paid a lump sum and that no taxes, Social Security or other deductions would be taken out of the lump sum. The owner of V&H allegedly told Le that he was not an employee and was not eligible for workers’ compensation.
Le was seriously injured in an accident during his return trip to Los Angeles. V&H refused to pay Le the $1,100 because he had not finished the trip.
Le sued V&H for damages resulting from his injury. V&H demanded that Global Hawk provide defense and indemnity under its liability policy. Global Hawk filed a motion for summary judgment, arguing that the insurer had no duty to provide coverage for Le’s injury because Le was an employee of V&H and thus was excluded from coverage.
In granting Global Hawk’s motion, the trial court pointed to federal regulations which require an MCS-90 Endorsement to be included in every liability policy covering a motor carrier. The endorsement contains an expansive definition of “employee” which includes independent contractors. The trial court also noted that a Ninth Circuit Court of Appeals decision held that the MCS-90 Endorsement excluded insurance coverage for injured employees. The trial court concluded that, under federal regulations and the MCS-90 Endorsement, Le was an employee of V&H and, because he was an employee, Le’s injury was excluded from coverage under Global Hawk’s policy.
The Court of Appeal held that the trial court’s reliance on the federal regulations and the Ninth Circuit’s decision was misplaced. The court referred to California cases which have set forth principles which should be considered in determining whether a person is an employee. The court concluded that there are triable issues of fact as to whether Le was an employee in light of these case law principles, and therefore the granting of Global Hawk’s motion for summary judgment was an error.
Endorsement MCS-90 was a key element of Global Hawk’s argument that Le was an employee; however Global Hawk acknowledged that the endorsement was not included in the V&H insurance policy. Global Hawk contended that its policy was designed to comply with the federal motor carrier regulations and thus the policy must be informed by the definitions in the regulations and the MCS-90 Endorsement, including the definition of “employee.”
The Court of Appeal rejected this contention, observing that “Global Hawk cites nothing in support of this, and we are unaware of any principle of insurance law that something external to an insurance policy can be read to ‘inform’ what the policy provides. To the extent Global Hawk is trying to argue that the mere possibility that a policy could be augmented by an MCS-90 Endorsement, the law is otherwise. For example, an insured cannot be held bound to a definition applicable to an endorsement not included in the policy.”
A copy of the Court of Appeal’s opinion is available at www.courts.ca.gov