Progressive then asked American Select Insurance Company, which insured Troy, to determine whether Mr. Hernandez and his company were covered under Troy's policy at the time of the collision.

American Select denied coverage.

The Johnsons, Mr. Hernandez, and his company ultimately settled the Johnsons' lawsuit, and Progressive paid the Johnsons the $1,000,000 liability limit of the Progressive policy. The Johnsons, Mr. Hernandez, and his company also stipulated to a final judgment in the amount of $5,000,000 against Mr. Hernandez personally and in favor of the Johnsons. Finally, Mr. Hernandez assigned the Johnsons his rights, title, and interest in his claims against American Select for the collection of the judgment entered against him in the Johnsons' lawsuit.

American Select subsequently commenced an action seeking a declaratory judgment regarding the scope of its policy's coverage, or lack thereof, over Mr. Hernandez, his company, and the 2004 Peterbilt dump truck. The Johnsons counterclaimed against American Select for breach of contract and bad faith breach.

American Select moved for summary judgment, asserting that neither Mr. Hernandez nor his company were covered by the American Select policy at the time of the collision.

For their part, the Johnsons argued that Mr. Hernandez and his company were covered by the American Select policy under the doctrine of respondeat superior. They contended that Mr. Hernandez was Troy's employee and, accordingly, Troy, as the employer, was liable for Mr. Hernandez's conduct. Therefore, they argued, “for liability purposes, [Mr. Hernandez] was effectively Troy at the time of the [a]ccident, [i.e. a [n]amed [i]nsured] and the [dump] truck was a covered auto.”

The American Select Policy

The American Select policy listed the named insured as “Troy Forming Concrete, Inc.,” and used “You” and Your” to refer to Troy. The policy listed the following as “insureds”:

a. You for any covered “auto”.

b. Anyone else while using with your permission a covered “auto” you own, hire or borrow except:

1) The owner, any “employee” or agent of the owner, or anyone else from whom you hire or borrow a covered “auto.” This exception does not apply if the covered “auto” is a “trailer” connected to a covered 'auto' you own.

2) Your “employee” if the covered “auto” is owned by that “employee” or a member of his or her household.

3) Someone using a covered “auto” while he or she is working in a business of selling, servicing, repairing, parking or storing “autos” unless that business is yours.

4) Anyone other than your “employees”, partner (if you are a partnership), members (if you are a limited liability company) or a lessee or borrower or any of their “employees”, while moving property to or from a covered “auto”.

5) A partner (if you are a partnership) or a member (if you are a limited liability company) for a covered “auto” owned by him or her or a member of his or her household.

c. Anyone liable for the conduct of an “insured” described above but only to the extent of that liability.

The court granted American Select's motion for summary judgment.

In its decision, the court first found that neither Mr. Hernandez nor his company fell within any of the categories of “insureds” under the policy.

It then rejected the Johnsons' contention that Mr. Hernandez was Troy's employee, reasoning that Troy's control over Mr. Hernandez and his company was “insufficient to create an employer-employee relationship or to invoke the doctrine of respondeat superior.”

The court first ruled that Mr. Hernandez's “clear and unequivocal deposition testimony” demonstrated that he was not Troy's employee:

Q. Do you understand that, as part of this lawsuit, they are claiming that you were an employee of Troy Forming Concrete, not an independent contractor?

A. I am an independent contractor for Troy. I am not a Troy employee.

Q. And you're insistent that you are an independent contractor, correct?

A. You see, yes, because that's the way I work. The way they pay me, they don't deduct taxes or anything. They pay me the amount that I can – I am collecting from them. That's what makes me an independent contractor.

Q. Okay. That was going to be my next question, How do you know that? Is there anything else about your relationship with Troy that makes you certain that you're an independent contractor, versus an employee, other than the way the fact that Troy does not pay your taxes for you?

A. Yes, because I pay for my own insurance, my workers' compensation, and I work for whomever hires me to do work for them.

Q. Is there anything else that makes you sure that you are an independent contractor, versus an employee?

A. Because he's not my boss. I am the boss of my own company. Let's say he goes and he assigns me to truck, and I don't have any available, that's the end of it.

Moreover, the court found other evidence supported this testimony, including:

• The contract between Mr. Hernandez's company and Troy;

• Tax forms, including, a 2016 Form 1099-MISC, showing that Mr. Hernandez's company was paid $790,091.25 by Troy in “Nonemployee compensation” in 2016 with no taxes withheld;

• Invoices and testimony demonstrating that Mr. Hernandez's company invoiced Troy on a weekly basis based on time spent per job contracted, and that Troy did not pay those invoices on any set schedule;

• Insurance forms and testimony showing that Mr. Hernandez's company carried its own liability insurance for its workers and trucks; and

• Deposition testimony indicating:

o Mr. Hernandez and his company hired, fired, paid, and managed their own workers on all dirt removal jobs. Troy had no control or involvement in those decisions.

o Mr. Hernandez and his company set their own workers' own schedules and chose their own hauling jobs. Troy had no input, except to tell them where the hauling site was located and when the job site opened;

o Troy did not supply, store, or maintain any instrumentalities of the job for Mr. Hernandez or his company. Instead, they owned, used, and maintained their own dump trucks and accessories to haul dirt.

o Troy did not consider Mr. Hernandez or his company to be employees; in his deposition, the Troy representative continuously referred to them as Troy's subcontractors.

The court was not persuaded by the Johnsons' argument that Mr. Hernandez was Troy's employee because they had worked together for many years and were an “integral” part of each other's businesses; Troy paid Mr. Hernandez “based on the number of hours he worked in a day”; Troy “dictated Mr. Hernandez's start and stop times”; Troy communicated with the workers for Mr. Hernandez's company to “ask [them] how work is going”; and each of Mr. Hernandez's workers had to “obtain a signature from a Troy superintendent reflecting that he had completed his work for the day.”

Even assuming these facts were true, the court said, they were “insufficient to demonstrate that Mr. Hernandez was Troy's employee, particularly considering the substantial contrary evidence.” The court found that most of these assertions “simply demonstrate[d] that Troy directed his subcontractors” to their job sites, checked on their work, and maintained contact with them. “Simply checking in or requiring a site opening/closing time” did not indicate sufficient control to support a finding of an employer-employee relationship under Colorado law, the court ruled.

Accordingly, the court concluded that Mr. Hernandez was not Troy's employee, Troy was not liable for Mr. Hernandez's collision, and American Select was entitled to summary judgment in its favor.

The case is American Select Ins. Co. v. Johnson, No. 17-cv-01369-CMA-KLM (Colo. June 18, 2018).