Federal Court holds that Kentucky business owners’ insurance company not obligated to provide liability insurance coverage

by Mandy Hicks

It is not usual for a company car to be used for purposes that go beyond official work for the employer’s business. But what if the employee doesn’t work for the company any longer, but still has the vehicle? Who is responsible if the former employee gets into an accident in that vehicle? Is the business obligated to provide liability insurance coverage?

In a recent case, a dispute arose as to whether the vehicle owner’s insurance company owed liability coverage for an accident that occurred when the automobile was being used by a former employee for non-business purposes.

Facts of the Case

In a recent unpublished appellate case from the federal court of appeals, the plaintiff was an insurance company that filed a declaratory judgment action in the United States District Court for the Western District of Kentucky, seeking the court’s guidance as to whether the defendant was obligated to provide coverage for a 2011 automobile accident in which a vehicle listed on an insurance policy issued by the defendant was “borrowed” from its corporate owner at the time of the collision. The person who was allegedly injured in the accident joined in the action.

The vehicle involved in the wreck was owned by a corporation controlled by the parents of the woman who was driving the automobile when the crash occurred. The woman had worked for her parents’ company for several years and had been given permission to use the car as part of her job. However, a few months before the accident, the woman had stopped working for the company and been given a severance package, which included permission to keep using the car.

The district court held that the vehicle was not “borrowed,” the driver was not an “insured” under the policy provided by the defendant, and the defendant had no duty to provide coverage for the injuries of the person involved in the accident. The former employee appealed.

Decision of the Court

After noting that the federal courts must follow the decisions of the state’s highest court when ruling on an issue of state law, the United States Court of Appeals for the Sixth Circuit affirmed the district court’s opinion, agreeing that the vehicle in question was not “borrowed” when the crash occurred and that the reasonable expectations doctrine did not require the defendant to provide coverage for the accident.

In Kentucky, ambiguities in an insurance contract are to be resolved in the insured’s favor; however, this does not require that “every doubt” be resolved against the insurer, nor does it interfere with the usual rule that contracts are to be interpreted in a reasonable manner consistent with the plain meaning of the agreement. The contract at issue here provided coverage for anyone who borrowed the automobile covered by the policy, but the term “borrow” was not defined by the policy or by existing Kentucky case law. In reviewing several possible definitions of the term, the court found that, since the driver’s use of the vehicle was neither temporary nor with the intent of returning it at some set point in the future, the car was not “borrowed” within the meaning of the policy. Thus, no liability coverage was owed by the defendant.

For Assistance with a Car Accident Claim

If you or a member of your family has been hurt in a motor vehicle accident, you should talk to a lawyer about your case as soon as possible. There are many types of issues that can arise in these types of cases, including insurance coverage disputes. The sooner you seek legal assistance, the more time your attorney will have to investigate the accident, negotiate with the defendant’s insurance company, and, if necessary, prepare your case for trial. To talk to a knowledgeable Kentucky car accident attorney about your case, call English, Lucas, Priest & Owsley today at 270-781-6500. We provide a free consultation to those who have been injured in automobile accidents in both Kentucky and Tennessee.

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