Calif. appeal court reverses ruling for insurer in vicarious liability suit
Both a church and its governing evangelical association were found vicariously liable for injuries caused by a pastor who was acting in the scope of his employment.
The California Court of Appeal reversed a ruling in favor of an insurer who had sued another insurer for contribution to a settlement award stemming from an auto accident involving a priest and a motorcyclist. The case is GuideOne Mutual Ins. Co. v. Utica National Ins. Group, 213 Cal. App. 4th 1494 (Cal. Ct. App. 2013).
A pastor was driving his personal vehicle when he struck and caused serious injuries to a man riding a motorcycle. The injured man and his wife sued the pastor for the man’s bodily injuries, and sued the church and the governing evangelical association for vicarious liability for the pastor.
The pastor was individually covered under an auto liability policy with State Farm. The church and any employees, such as the pastor, were covered by a commercial auto and a commercial umbrella policy by GuideOne. Coverage was available to employees so long as they were acting in the scope of their employment. The evangelical association had a commercial auto and commercial umbrella policy by Utica.
The underlying personal injury suit by the motorcyclist alleged the pastor was ordained by the evangelical association and had been an agent of both the church and the association at the time of injury. That suit ultimately settled for $4.5 million. State Farm paid its $100,000 limit under the pastor’s auto liability policy. GuideOne paid the $1 million limits under both of the commercial policies it had issued to the church. Utica paid the $1 million limit for its commercial auto policy and $1.4 million of the $5 million limit on the commercial umbrella policy issued to the evangelical association. Both commercial insurers paid under a reservation of their right to contribution from one another.
Later, GuideOne claimed it had paid more than its share of the settlement amount and sued, filing for summary judgment against Utica to recover the alleged overpayment. The trial court found in favor of GuideOne and said Utica owed an additional $600,000 plus prejudgment interest. Utica appealed, arguing the GuideOne umbrella policy had to be exhausted before Utica’s policy would trigger because GuideOne’s umbrella policy covered the church and the pastor, and Utica only covered the evangelical association.
The appellate judges determined that, under Cal. Ins. Code §11580.9(d), all of the policies issued by GuideOne and Utica were excess coverage to the coverage afforded by the driver’s personal auto policy. That code section did not, however, offer guidance for determining the priority of coverage among multiple excess policies. The appellate court was tasked with determining which insurer’s policies had to be exhausted before the policies of the other insurer would be triggered.
In an earlier case, United States Fire Ins. Co. v. National Union Fire Ins. Co., 107 Cal. App. 3d 456 (Cal. Ct. App. 1980), a plane crashed while being flown on company business, and a suit was filed against both the pilot who flew the plane and the pilot’s employer. The court concluded that, for coverage purposes, the pilot’s insurance was primary over the employer’s policy. The judges of the Ninth Circuit had reached the same general conclusion, that an employee’s coverage is primary over the employer’s when the employer is sued for the employee’s negligence, in Canadian Indemnity Co. v. United States Fidelity & Guaranty Co., 213 F.2d 658 (9th Cir. 1954). GuideOne only said that neither of those cases referenced Cal. Ins. Code §11580.9(d), and that each had been focused on determining the priority only of primary policies, not excess policies.
The argument was unpersuasive. The court reminded GuideOne that Cal. Ins. Code §11580.9(d) addressed only the priority of coverage, not how it is allocated. GuideOne directly covered the pastor, who had been acting in the scope of his employment at the time of the incident, as well as the church’s vicarious liability. Utica, however, only had to provide coverage for the evangelical association to the extent of its vicarious liability for the pastor’s negligence.
Based on the United States Fire and Canadian Indemnity decisions, the appellate judges reasoned that both policies issued by GuideOne were primary over the policies issued by Utica because GuideOne covered the pastor’s liability for actions in the course of his employment and the church’s vicarious liability for the pastor, and the evangelical association insured by the Utica policies was only vicariously liable for the pastor. Therefore, both of GuideOne’s policies had to be exhausted before coverage from Utica would apply.
The trial court’s verdict was reversed, including the monetary award granted to GuideOne.
Editor’s Note: When multiple insurance policies can apply to the same loss, the priority of coverage can be complicated to determine. In this case, the pastor’s personal auto policy paid out as well as the policies issued to the church and the governing body. Both the church and governing body were held vicariously liable for the actions of the pastor. Most policies have clauses identifying priority when multiple policies are in force, but even with that, which insurer is responsible for what portion of the loss can be confusing.