When an employee driving a company vehicle is injured in a car accident caused by an uninsured/underinsured motorist (collectively “UM”), a conflict can arise regarding the priority of UM coverage between applicable commercial and personal auto insurance policies. Consider this scenario. Plaintiff is rear-ended by an uninsured motorist while driving on company business in a vehicle titled to her employer, a limited liability company. Insurer A issued a commercial auto insurance policy to plaintiff’s employer which covers the vehicle plaintiff was driving. Insurer B issued a personal auto policy to plaintiff’s husband which does not name the company as an insured or cover the company vehicle. UM coverage is available for plaintiff under both policies. Georgia law permits those policies to be stacked, but which insurer’s UM coverage is first in line? The Georgia Court of Appeals recently addressed this question, and the answer may surprise you.
When an employee driving a company vehicle is injured in a car accident caused by an uninsured/underinsured motorist (collectively “UM”), a conflict can arise regarding the priority of UM coverage between applicable commercial and personal auto insurance policies. Consider this scenario. Plaintiff is rear-ended by an uninsured motorist while driving on company business in a vehicle titled to her employer, a limited liability company. Insurer A issued a commercial auto insurance policy to plaintiff’s employer which covers the vehicle plaintiff was driving. Insurer B issued a personal auto policy to plaintiff’s husband which does not name the company as an insured or cover the company vehicle. UM coverage is available for plaintiff under both policies. Georgia law permits those policies to be stacked, but which insurer’s UM coverage is first in line? The Georgia Court of Appeals recently addressed this question, and the answer may surprise you.
In Sentinel Ins. Co. v. USAA Ins. Co., 335 Ga. App. 664 (2016), the plaintiff co-owned JK Lakeside, LLC, the company under which she operated a liquor store. The plaintiff was rear-ended while driving a vehicle titled in both her name and the name of JK Lakeside, and which she used as a work vehicle. Plaintiff sued the at-fault driver and made UM claims under two policies: (1) a commercial policy issued by Sentinel Insurance Company to named insured JK Lakeside which covered the vehicle she was driving; and (2) a personal auto policy issued by USAA to the plaintiff’s spouse which did not cover JK Lakeside or the vehicle she was driving at the time of the collision. USAA filed a motion to determine the priority of UM coverage.
Traditionally, Georgia courts have employed three tests in making this determination:
Under the “receipt of premium” test, the insurer that receives a premium from the injured insured is deemed to be primarily responsible for providing coverage. Under the “more closely identified with” test, the policy with which the injured party is most closely identified must provide primary coverage. If neither of those tests is helpful in a particular case, the courts look to the circumstances of the injury to see which policy provides primary coverage.
Donovan v. State Farm Mut. Auto. Ins. Co., 329 Ga. App. 609, 611 (2014). The “receipt of premium” test was inapplicable in Sentinel because the plaintiff did not pay a premium on either policy. Thus, the issue was which policy was more closely identified with the plaintiff. The trial court found that she was more closely identified with Sentinel’s commercial policy because she owned and operated the liquor store, co-owned JK Lakeside, and was a title holder in the vehicle.
The Court of Appeals reversed. Although the Court addressed for the first time the priority of UM coverage in the context of a limited liability company, two prior holdings were of particular relevance. In Travelers Indem. Co. v. Maryland Cas. Co., 190 Ga. App. 455 (1989), the plaintiff was injured while driving a vehicle owned by her employer, a corporation, in the course of performing her job duties. She was insured under both her employer’s business policy and her mother’s family policy. The Court held that plaintiff was more closely identified with her mother’s policy. The controlling factor was “the relationship of the injured plaintiff to the policy rather than the circumstances of the injury to the policy,” i.e. the plaintiff’s “status rather than incident context controls.” To that end, the Court found it determinative that plaintiff was insured under her mother’s policy while operating any vehicle, whereas she was insured under her employer’s policy only when occupying a vehicle covered by that policy. The “periodic” coverage under the employer’s policy was more distant from the plaintiff than the “constant, time comprehensive coverage” under her mother’s policy.
However, in Southern Guarantee Ins. Co. v. Premier Ins. Co., 219 Ga. App. 413 (1995), the Court held that the plaintiff was more closely identified with a business policy. There, the plaintiff owned and operated a sole proprietorship, she was injured while driving a personal vehicle owned by her husband, she was insured under her husband’s personal policy, and the vehicle was covered only under a business policy issued to the sole proprietorship. The Court held that the plaintiff was more closely identified with the policy issued to her business because it was a sole proprietorship. That business, unlike the corporation in the Travelers case, was merely a trade name and not a separate legal entity capable of being the true named insured on a contract. Thus, the plaintiff was effectively the named insured on the business policy.
Drawing on these two decisions, the Court in Sentinel concluded that the plaintiff in that case was more closely identified with her husband’s policy than with the business policy. The Court reasoned that, unlike a sole proprietorship, a limited liability company is a separate legal entity from its owners and members and capable of being the true named insured on an insurance policy.
A principal of Georgia UM law the Court did not specifically address in its opinion, but which helps explain its reasoning, is the definition of an “insured” under the UM statute. The statute creates two categories of insured persons: (1) “the named insured and, while resident of the same household, the spouse of any such named insured and relatives of either, while in a motor vehicle or otherwise;” and (2) “any person who uses, with the expressed or implied consent of the named insured, the motor vehicle to which the policy applies.” O.C.G.A. § 33-7-11(b)(1)(B) (emphasis added); see Dunn-Craft v. State Farm Mut. Auto. Ins. Co., 314 Ga. App. 620 (2012). Coverage for the first category of persons applies regardless of location or whether they are operating a vehicle covered by the policy, i.e. it “follows the insured.” Coverage for the second category of persons applies to permissive users of a covered vehicle, but only while operating such vehicle.
As the resident spouse of a named insured on the USAA policy, the plaintiff in Sentinel was insured under that policy regardless of whether she was operating a covered vehicle. On the other hand, she was only insured under the Sentinel policy issued to named insured JK Lakeside while operating the vehicle to which the policy applied. As in the Travelers case, the Court thus concluded that the periodic coverage afforded by the Sentinel policy was more distant from the plaintiff than the coverage under the USAA policy which followed her in any vehicle.
It is also notable that the Court did not consider the various facts surrounding the accident, ownership of the vehicle, or whether the plaintiff was operating the vehicle in the course of her employment. Instead, the determination boiled down to plaintiff’s status under the competing policies: she was more closely identified with her husband’s policy providing constant coverage to her than with the policy issued to her business which covered her only when operating a covered vehicle. Removing the circumstances of the accident from the equation in applying the “more closely identified with” test follows the mandate in the Travelers decision of utilizing a “single and uniformly occurring fact w hich addresses itself to the relationship of the injured plaintiff to the policy rather than the circumstances of the injury to the policy.” It also leads to the seemingly contradictory results of a business policy having priority for an accident involving a personal vehicle in the Southern Guarantee case, and personal policies having priority for accidents involving company vehicles in the Travelers and Sentinel cases.