Westfield Ins. Company v. Carolina Casualty Ins. Company ( 2021 )

United States Court of Appeals
For the Eighth Circuit
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No. 20-2103
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Westfield Insurance Company,
lllllllllllllllllllllPlaintiff - Appellee
v.
Advanced Auto Transport, Inc.; Gregory Lester Hansen; Indian Harbor Insurance Company,
lllllllllllllllllllllDefendants,
Carolina Casualty Insurance Company,
lllllllllllllllllllllDefendant - Appellant.
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Appeal from United States District Court
for the District of Minnesota
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Submitted: March 17, 2021
Filed: August 30, 2021
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Before COLLOTON, GRUENDER, and GRASZ, Circuit Judges.
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COLLOTON, Circuit Judge.
Gregory Hansen, a driver working for Advanced Auto Transport, Inc., was
involved in an accident with Brady Gartner. Hansen was driving a truck owned by
Worldwide Equipment, Inc. Gartner’s parents sued Hansen, Advanced Auto, and
Worldwide for personal injury damages. Advanced Auto and Hansen tendered the
suit to Worldwide’s insurer, Westfield Insurance Co., for defense and indemnity.
Westfield Insurance denied the tender, and sought a declaratory judgment that it owed
no obligations to Advanced Auto, Hansen, or their insurer, Carolina Casualty
Insurance Co. The district court1 granted summary judgment to Westfield Insurance,
and Carolina Casualty appeals. Because we agree that neither Hansen nor Advanced
Auto was an “insured” under the policy that Westfield Insurance issued to
Worldwide, we affirm.
I.
In 2015, Rumpke Consolidated Companies ordered a garbage truck from
Worldwide, a Mack Trucks dealership. Worldwide purchased a power unit (a cab and
chassis) from Mack Trucks. Rumpke separately contracted with McNeilus Truck and
Manufacturing to convert the power unit into a garbage truck. Mack Trucks
manufactured the power unit and transferred ownership of the unit to Worldwide, but
Mack Trucks delivered the power unit directly to a McNeilus facility in Minnesota
for conversion into a garbage truck, a process known as “upfitting.”
McNeilus converted the truck in Minnesota, then contracted for Advanced
Auto to transport the truck to another McNeilus facility in Ohio for inspection.
Pursuant to a “Master Drive-Away Service Agreement,” Advanced Auto provided a
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The Honorable Michael J. Davis, United States District Judge for the District
of Minnesota.
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driver to transport the truck from the McNeilus facility in Minnesota to the McNeilus
facility in Ohio. McNeilus instructed Advanced Auto where to pick up and deliver
the truck. Advanced Auto gave the driver a bill of lading, which Advanced Auto
would then provide to McNeilus in Ohio as proof of delivery. If the truck had
reached the McNeilus facility in Ohio, McNeilus would have inspected the truck and
returned it to Worldwide. Worldwide would have performed a final inspection of the
power unit and then delivered the truck to the end purchaser, Rumpke.
The Master Drive-Away Service Agreement gave McNeilus certain rights to
direct the performances of Hansen and Advanced Auto. Hansen was required to
deliver the truck with a full tank of fuel, and was forbidden to smoke, transport
passengers, or use tire chains on the truck. Advanced Auto was required to accept or
deny McNeilus’s delivery requests within two hours, and to pick up vehicles within
one day of tender. Advanced Auto also was required to identify the truck with its
Department of Transportation number, and to “maintain in effect commercial
insurances,” including “[b]usiness auto liability insurance, covering all . . . non-
owned autos” against bodily injury claims.
The agreement also specified that the “relationship of [McNeilus] and
[Advanced Auto] is that of an independent contractor.” The parties did not “intend
to clothe [McNeilus] with joint control over [Advanced Auto]’s performance of” its
services, and explained that “[u]nder no circumstances shall employees or agents of
[Advanced Auto] be deemed employees or agents of [McNeilus].”
Hansen of Advanced Auto picked up the truck from McNeilus in Minnesota
on February 18, 2016. Later that day, he was involved in an accident with Gartner
in Olmstead County, Minnesota. Gartner’s parents were appointed as his
conservators. They sued Worldwide, Advanced Auto, and Hansen to recover
damages on Gartner’s behalf.
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Advanced Auto tendered the suit to Westfield Insurance, asserting that
Westfield Insurance was responsible for defending and indemnifying Advanced Auto
and Hansen. Because Westfield Insurance covered vehicles owned by Worldwide,
and Advanced Auto and Hansen were permissive users of a vehicle owned by
Worldwide, Advanced Auto maintained that Westfield Insurance should provide
defense and coverage. Westfield Insurance denied the tender and sued for a
declaration that it owed no obligations to Advanced Auto, Hansen, or Carolina
Casualty (the insurer of Advanced Auto) under the Westfield Insurance policy issued
to Worldwide.
Worldwide’s insurance policy with Westfield Insurance provided liability
coverage for “garage operations,” which “includes the ownership, maintenance or
use” of “covered ‘autos.’” Worldwide owned the truck involved in the accident, so
it was a covered auto. The policy provides that anyone using a vehicle owned by
Worldwide with permission is an “insured,” with certain exceptions.
The dispute centers on an exception: the policy excludes from the definition
of “insured” someone “using a covered ‘auto’ while he or she is working in a business
of selling, servicing or repairing ‘autos’ unless that business is [Worldwide’s] ‘garage
operations.’” The district court concluded that McNeilus was “in the business of
‘selling, servicing or repairing autos.’” Because Advanced Auto was delivering the
truck on behalf of McNeilus when the accident occurred, the court ruled that
Advanced Auto was “working in a business of selling, servicing or repairing ‘autos.’”
Therefore, the exception in Worldwide’s policy applied, and Westfield Insurance had
no duty to defend or indemnify Advanced Auto or Hansen. The court granted
Westfield Insurance’s motion for summary judgment, and we review the decision de
novo. Wolfley v. Solectron USA, Inc., 541 F.3d 819, 823 (8th Cir. 2008).
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II.
On appeal, Carolina Casualty (the insurance carrier for Advanced Auto) argues
that Westfield Insurance (the insurance carrier for Worldwide) owes a duty to defend
and indemnify Advanced Auto and Hansen because they were using a covered auto
owned by Worldwide at the time of the accident. Carolina Casualty maintains that
the disputed exception to the definition of “insured” in Worldwide’s policy does not
apply, because Advanced Auto and Hansen were not “working in a business of
selling, servicing or repairing ‘autos.’”
The parties agree that Minnesota law applies. See Babinski v. Am. Fam. Ins.
Grp., 569 F.3d 349, 351-52 (8th Cir. 2009). Although the disputed exception appears
in the “Coverage” section of the policy, the parties appear to agree that it functions
as an “exclusion.” In Minnesota, a party claiming insurance coverage bears the
burden of establishing that coverage applies; the insurer bears the burden of proving
the applicability of exclusions. Travelers Indem. Co. v. Bloomington Steel & Supply
Co., 718 N.W.2d 888, 894 (Minn. 2006). Even so, exclusions in a policy “are as
much a part of the contract as other parts thereof and must be given the same
consideration in determining what is the coverage.” Lobeck v. State Farm Mut. Auto.
Ins. Co., 582 N.W.2d 246, 249 (Minn. 1998) (quoting Bobich v. Oja, 104 N.W.2d 19,
24-25 (Minn. 1960)). Exclusions are “construed narrowly and strictly against the
insurer,” Bloomington Steel, 718 N.W.2d at 894, but at the same time, “the court has
no right to read an ambiguity into the plain language of an insurance policy.” State
Farm Ins. Cos. v. Seefeld, 481 N.W.2d 62, 64 (Minn. 1992).
To recapitulate the key provisions of the policy, Westfield Insurance provides
coverage to Worldwide for “damages because of ‘bodily injury’ . . . caused by an
‘accident’ and resulting from ‘garage operations’ involving the ownership,
maintenance or use of covered ‘autos.’” “Insureds” include “[a]nyone . . . while using
with [Worldwide’s] permission a covered ‘auto’” owned by Worldwide, with certain
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exceptions. One exception is “[s]omeone using a covered ‘auto’ while he or she is
working in a business of selling, servicing or repairing ‘autos’ unless that business
is [Worldwide’s] ‘garage operations.’”
The exception at issue is a form of “business use exclusion.” “Policies often
exclude coverage if the vehicle is being used in the course of a business activity
because injuries involving business related activities involve greater risks to the
insurer.” 24 Appleman on Insurance Law & Practice § 148.4[J] (2d ed. 2011). The
exception here is grounded “in the assumption that when an insured automobile is
turned over to an independent automobile business for servicing . . . , it is likely to be
driven by an agent of that business over whom the insured has no control.” Grisham
v. Allstate Ins. Co., 992 P.2d 891, 893 (N.M. Ct. App. 1999). As the Minnesota
Supreme Court put it: “The owner does not grant permission to these individuals.
Individually they are usually unknown to him. They are in quite a distinct group from
persons to whom an ordinary assured usually gives permission to drive his car.”
Wendt v. Wallace, 240 N.W. 470, 471 (Minn. 1932). In other words, as applied to the
facts of this case, when Worldwide turned over the truck to McNeilus, Worldwide
had no control over who was driving the truck until McNeilus finished its work and
returned the truck to Worldwide.
Carolina Casualty argues, however, that Advanced Auto and Hansen were not
“working in a business of selling [or] servicing” autos, because they were
independent contractors who were in a separate business of transporting autos.
McNeilus was indisputably working in a business of selling or servicing vehicles.
But Carolina Casualty contends that the exception is inapplicable here because
although Hansen and Advanced Auto were enlisted by McNeilus to transport the
truck, they were not employed by or subject to the control of McNeilus. On that
view, Hansen and Advanced Auto are insured under Westfield Insurance’s policy as
permissive users of Worldwide’s vehicle, and not subject to the exception that would
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apply to McNeilus if McNeilus’s own employee had transported the truck from
Minnesota to Ohio.
Several courts that have considered similarly worded provisions have applied
a functional approach that examines whether the party operating the vehicle is acting
in the commercial interest of a business that services or repairs autos. The New
Mexico appellate court in Grisham determined that “‘[w]orking in the business’ for
the purpose of an automobile business exclusion includes activities that are an
integral and necessary part of the automobile business.” 992 P.2d at 895. Therefore,
a “driver need not be an employee of the automobile business to fall within the
exclusion as long as the driver is acting on behalf of the automobile business.” Id.
The Fifth Circuit in Mahaffey v. General Security Insurance Co., 543 F.3d 738(5th Cir. 2008) (per curiam), similarly reasoned that a vehicle was “used in the
business” of a lessee when the vehicle’s stand-by driver was involved in accident on
the way to a motel for the night. The court concluded that the driver was “furthering
[the lessee’s] commercial interests to have a driver on standby,” so the driver was
“acting in the business” of the lessee. Id. at 742-43. Mahaffey cited the “commercial
interest” test from Empire Fire & Marine Insurance Co. v. Brantley Trucking, Inc.,
220 F.3d 679 (5th Cir. 2000), where a vehicle was “used in the business” of a lessee
when the driver took a truck for servicing while waiting for the lessee to load cargo.
The Empire Fire court concluded that the exclusion applied because the truck was
“used to further the commercial interests of the lessee,” and the driver’s actions were
“in furtherance of [the lessee]’s business.” Id. at 682. The Seventh Circuit likewise
concluded that a provision excluding coverage while a truck “is being used in the
business of an . . . organization to whom the automobile is rented” is one that “clearly
refers to occasions when the truck is being used to further the commercial interests
of the lessee.” Hartford Ins. Co. of Se. v. Occidental Fire & Cas. Co. of N.C., 908
F.2d 235, 239 (7th Cir. 1990); see also Forkwar v. Empire Fire & Marine Ins. Co.,
487 F. App’x 775, 780 (4th Cir. 2012) (holding that business use exception for an
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auto “used in the business” of a lessee applied where independent contractor’s
conduct at the time of the accident “furthered the commercial interest” of the lessee).
We think these cases illustrate the better approach to this type of provision, and
that the Minnesota courts likely would adopt it. The phrase “working in a business”
of servicing autos does not necessarily mean that the driver of a vehicle is employed
by the auto servicing business. Where the driver is acting in furtherance of the
commercial interests of the auto servicing business, and performing a function that
is an integral part of the auto servicing business, then the vehicle is used in the
business, and the driver is “working in” that business. Advanced Auto and Hansen
were unknown to the owner of the vehicle, Worldwide. They were performing an
essential function for McNeilus in the auto servicing business by transporting the
truck from one McNeilus facility to another. Under those circumstances, we agree
with the district court that Advanced Auto and Hansen were working in McNeilus’s
business of auto servicing within the meaning of the policy.
Carolina Casualty says this conclusion cannot be right because it would mean
that a courier like FedEx would be “working in a business” of servicing autos if the
courier transported an auto part from one McNeilus facility to another. The insurance
policy, however, is concerned only with persons who use vehicles owned by the party
to whom the policy is issued, and it must be interpreted in that light. Unlike a FedEx
courier, Hansen was not driving a truck owned by his employer, but operating a truck
owned by Worldwide that McNeilus was in the process of “servicing.” The
transportation was conducted in connection with, and in furtherance of, a business
expressly mentioned in the exception. Cf. Md. Cas. Co. v. Integrity Ins. Co., 693 F.2d
506, 509 (5th Cir. 1982) (per curiam). By moving the truck between McNeilus
locations, Hansen and Advanced Auto were using the truck to conduct an integral
part of McNeilus’s servicing operation, and they were thus “working in a business of
. . . servicing . . . ‘autos.’”
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Carolina Casualty argues that if Advanced Auto and Hansen were “working in”
McNeilus’s business, then they also were working in Worldwide’s garage operations,
so there would be an exception to the exception. A driver is not insured if he is
working in a business of servicing autos, “unless that business is [the insured party’s]
‘garage operations.’” “Garage operations” include “the ownership, maintenance or
use of . . . covered ‘autos,’” and “all operations necessary or incidental to a garage
business.” Carolina Casualty contends that delivery of the truck to Ohio was a
“necessary and essential part” of Worldwide’s garage operations, because McNeilus
would have transferred the truck from its Ohio facility to Worldwide for a final
inspection before Worldwide delivered it to Rumpke.
We reject this contention because the “business of . . . servicing” in which
Hansen and Advanced Auto were working was McNeilus’s servicing business, not
Worldwide’s “garage operations.” Worldwide’s business was to deliver a Mack
“power unit”—a cab and chassis—to Rumpke. Rumpke contracted separately with
McNeilus to convert that power unit into a garbage truck; Worldwide played no part
in that contract or in McNeilus’s choice of Advanced Auto to transport the truck
within McNeilus’s operations. Hansen and Advanced Auto were delivering a vehicle
to McNeilus for a final inspection of a garbage packer unit, a matter that was integral
to McNeilus’s business. That inspection, and the rest of McNeilus’s upfitting
operations, were not integral to Worldwide’s business, so Hansen and Advanced Auto
were not working in Worldwide’s “garage operations.”
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The judgment of the district court is affirmed.
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