The Supreme Court of Ohio has ruled that when a university’s automobile liability insurance policy extends coverage to any person operating “with [the university’s] permission” a vehicle “owned, hired or borrowed” by the university, the university’s insurer will be liable for injuries from a traffic accident involving a bus contracted by the university and driven by an employee of the bus company. The Court’s 5-2 decision in Fed. Ins. Co. v. Executive Coach Luxury Travel, Inc., Slip Opinion No. 2010-Ohio-6300, authored by Justice Paul Pfeifer, will expand liability coverage to third parties and will open the door to similar claims under comparable scenarios because the policy language at issue is standard in most insurance policies.
Executive Coach arises from a March 2007 accident in which five baseball players from Bluffton University, as well as the bus driver and his wife, were killed and others injured when the chartered bus in which they were traveling to a Florida tournament crashed in Atlanta, Georgia. Bluffton’s baseball coach had contracted with Executive Coach Luxury Travel, Inc. (“Executive”) to transport players and coaches to Florida. The coach requested that a specific driver who was known to him be assigned to drive the bus. At the time of the crash, Bluffton was covered by a primary auto insurance policy issued by Hartford Insurance Company, an umbrella policy issued by American Alternative Insurance Company, and an excess policy issued by the Federal Insurance Company. The terms and conditions of coverage under the umbrella and excess policies were the same as those under the primary policy with Hartford, which included an “omnibus clause” that defined an “insured” as anyone “using with permission” a covered vehicle that the university “owned, hired, or borrowed.”
The umbrella and excess insurers both sought declaratory judgments that their policies did not provide coverage for the bus accident. The trial court and court of appeals both decided in favor of the insurers, holding that neither Executive nor the driver qualified as an “insured” because Bluffton did not own and had not “hired” or “borrowed” the bus, but rather had contracted with Executive to provide transportation services in a vehicle leased by Executive and driven by one of its employees. In reversing the lower courts, the Supreme Court concluded that the bus and its driver were “insureds” under the terms of the policy’s “omnibus clause,” finding that Bluffton had hired the bus when its baseball coach had procured use of the bus in exchange for payment to Executive, and that the Executive’s employee was driving the bus with Bluffton’s permission given that the coach had specifically requested him. Further, the Court found disingenuous the insurers’ contention that the driver was an “unforeseen third party” whom they never intended to cover given the breadth of the omnibus clause, which provides that the policy covers “anyone else” driving a hired auto.
As expressed in the dissent by Justice Evelyn Lundberg Stratton, Executive Coach marks a significant expansion of liability coverage to third parties whom the parties to the policy had not intended to cover. Executive Coach will surely spawn similar third party claims that will try to exploit widely used omnibus clauses. The potential scenarios for such claims are numerous and could conceivably include: the business traveler whose cab, while en route to the airport, loses control and injures many people; the bride and groom whose chauffeured limousine, while en route to the reception, causes a multi-car accident; and the church group whose chartered bus, while transporting the group to a social function, collides into another vehicle. In short, under Executive Coach, taxi, limousine, and chartered bus companies, as well as their drivers, could rely on their customers’ liability coverage to supplement their own coverage, even though the hackney, livery, or contract driver was not intended to be insured under the omnibus clause of the customer’s liability policy.
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