BUSINESS AUTO POLICY DOES NOT COVER TRANSMISSION OF A COMMUNICABLE DISEASE FROM DRIVER TO PASSENGERS

In a case of first impression “in this state and perhaps the country,” the Texas Supreme Court recently determined that a business auto policy does not cover a claim by passengers on a commercial bus who contracted tuberculosis (TB) after a bus trip with a coughing driver, who was hospitalized for active TB. Lancer Ins. Co. v. Garcia Holiday Tours, et al., S.W.3d , 2011 WL 2586878 (Tex. 2011) (slip opinion).  Lancer denied a claim for defense and indemnity by its insured, Garcia, after several passengers sued Garcia for contracting TB during a bus trip with an infected driver.  Garcia defended itself and proceeded to trial.  A jury found the company and its driver liable and awarded over $5 million in damages, collectively, to the passengers who contracted the disease.  The company and the driver then sued Lancer for breach of contract and extra-contractual damages.  The passengers, as judgment-creditors, intervened in the suit.  This appeal followed the trial court’s ruling on cross motions for summary judgment filed by Lancer and the passengers.  The trial court granted the passengers’ motion and denied Lancer’s.  The San Antonio Court of Appeals reversed and remanded.  But, not satisfied with the result, Lancer appealed and the Court granted review “to consider the novel coverage question.”

The Court began its review with the policy language at issue which provided coverage for claims for bodily injury caused by an accident “resulting from the ownership, maintenance or use of a covered auto.”  Lancer argued that the infection was not “resulting from” the use of the bus, contending that “resulting from” had to be construed more narrowly than “arising out of” as found in an earlier opinion of the court in Mid-Century Ins. Co. of Texas v. Lindsey, 997 S.W.2d 153 (Tex. 1999).  The court rejected that argument, finding “no significant distinction between the two phrases” at issue.  Lancer next argued that there was not a sufficient factual nexus between the use of the bus and the transmission of the disease.  After reviewing cases involving assaults in vehicle, drive-by shootings, and other torts involving vehicles - but not traditional car “accidents” – the court held that the use of the vehicle must be “instrumental in producing the passengers’ injuries” and the bus here “did not produce, and was not a substantial factor in producing, the passengers’ injuries.” The Court reversed and rendered judgment for Lancer, declaring that Lancer had no duty to indemnify the passengers’ claims.