NC Auto Insurer Need Not Defend Wrongful Death Action
Defendant Driver Was “Borrowed” Co-Employee and Immune From Suit.
In a declaratory judgment action to determine if an automobile liability insurance company was required to defend its insured against an anticipated wrongful death action, a North Carolina appellate court held that a worker who normally worked for a separate company, but who had been temporarily assigned to work for the insured company on the date of the fatal accident, and who was driving the insured vehicle at the time of the fatal crash, was a borrowed employee of the insured company. It followed, said the court, that the borrowed worker/driver was, therefore, the co-employee of the worker killed in the accident. Accordingly, the exclusive remedy of the estate of the deceased worker was within North Carolina’s workers’ compensation framework—not a negligence action—held the court in an unpublished opinion [State Farm Mut. Auto. Ins. Co. v. Don’s Trash Co., 2019 N.C. App. LEXIS 788 (Sept. 17, 2019)]. The trial court erred, therefore, in requiring the defendant insurer to defend the case.
Background
Louis Horton and his son, Don Horton, each owned and operated garbage collection businesses that worked collaboratively from the same address. Louis owned and operated Don’s Trash, while Don owned and operated DJ’s Trash Company, Inc. (“DJ’s Trash”). The companies routinely shared employees, but each employee was exclusively paid by their usual employer regardless of which company the employee worked for at the time. Additionally, the companies routinely shared vehicles, and all of the vehicles were insured by State Farm under one policy (the “Insurance Policy”), which listed Don’s Trash as the named insured.
On the date of the accident, Don and two employees of DJ’s Trash, Bull and Likens, were scheduled to collect trash on DJ’s Trash’s regular route. Don was sick that day, so Louis assigned Donaldson, an employee of Don’t Trash, to serve as Don’s substitute driver. While Donaldson was driving along their route, Donaldson accidentally drove off the right shoulder of the road, overcorrected, and lost control of the garbage truck. Bull was killed as a result of the accident, and Donaldson and Likens were seriously injured.
State Farm filed a declaratory judgment action, seeking a declaration of whether it was liable under the Insurance Policy for the death, personal injuries, and property damage that resulted from the accident. Bull’s estate filed a separate wrongful death action against Don’s Trash and Donaldson. Bull’s estate moved for summary judgment in the declaratory judgment action and the trial court granted summary judgment against State Farm, finding that it was required to defend.
Appellate Court Reasoning
The court noted that the Insurance Policy had two exclusionary provisions typical of auto liability policies. Essentially, claims that were compensable under a workers’ compensation law were excluded from liability coverage. Bull’s estate argued that Bull and Donaldson were not fellow employees and that accordingly, the provisions did not apply to exclude liability coverage.
Control is the Important Issue
Citing earlier decisions, the court indicated that whether a servant furnished by one person to another becomes the employee of the person to whom he or she is loaned depends on whether the person passes under the latter’s right of control with regard not only to the work to be done but also to the manner of performing it. A servant is the employee of the person who has the right of controlling the manner of his performance of the work, irrespective of whether he actually exercises that control or not.
The court summarized that on the day of the accident, Donaldson had been assigned by Louis to replace Don because Don was sick and could not work. In replacing Don, Donaldson became the employee of DJ’s Trash, the entity to whom he had been loaned. DJ’s Trash controlled both Donaldson’s work and the manner in which it was to be performed. Donaldson, at the time of the accident, was the employee of DJ’s Trash and, therefore, a fellow employee of Bull. Thus, the second employee exclusion provision at issue excluded coverage.