COURT HOLDS NO DUTY TO DEFEND EMPLOYER BASED ON DEFINITION OF “EMPLOYEE” FOUND IN FEDERAL MOTOR CARRIER SAFETY ACT OF 1984.

In  Scottsdale Indem. Co. v. Rural Trash Service, Inc., 2015 WL 6736529 (S.D. Tex. November 3, 2015), the district court examined Scottsdale’s motion for summary judgement on a duty to defend and duty to indemnify its insured, Rural Trash Service, Inc. in a tort suit brought by Joseph Rios for injuries he sustained as a garbage truck driver for Rural.  While emptying a dumpster a fire erupted.  Rios left his truck to seek help, although other employees told him to get back in the truck. Rios was severely burned when the fire triggered an explosion.  Rural was covered by a commercial auto insurance policy with Scottsdale.  Scottsdale accepted Rural’s defense under a reservation of rights, and then filed this declaratory judgment action.

The primary issue in Scottsdale’s motion for summary judgment concerned the policy’s bodily injury exclusion for an “employee” arising out of and in the course and scope of his employment.  The Court recognized that an insurer bears a heavy burden of establishing the application of an exclusion.  The Court further noted that the underlying suit’s petition did not indicate if Rios was an “employee” or “independent contractor.” And, the Court reviewed the policy and found there was no definition of “employee.”  However, Form F of the Policy incorporates the Texas state motor carrier regulations into the Policy.  Those regulations, in turn, incorporate the definition of “employee” in the Federal Motor Carrier Safety Act of 1984 (FMCSR.)  Since FMCSR defines “employee” to include both employees and independent contractors, the Court concluded Rios’ claims were excluded from the Policy.  Accordingly, summary judgment was granted in favor of Scottsdale.