The Letter of The Law: November 2013

On Behalf of | Nov 1, 2013 | Newsletter

Employer Drives Away From Liability for Employee’s Use of Employer’s Car


EMPLOYMENT: Employer Drives Away From Liability for Employee’s Use of Employer’s Car

INSURANCE: Another Important SIR Decision

Employer Drives Away From Liability for Employee’s Use of Employer’s Car

A California Appellate Court recently ruled in Baker v. Halliburton Energy Services, Inc. that an employer could not be found vicariously liable for injuries its employee sustained while driving a company car on personal business. While this was a fact specific case, it nonetheless is a helpful case for employers.

Halliburton Energy Services, Inc. provided its employee, Troy Martinez, with a company car for the use of execution of his job duties. After completing his work for the day, Martinez decided to drive to Bakersfield, which was 140 miles away from his normal commute, to buy his wife a car. It should be noted that occasionally in the past Martinez did travel to Bakersfield for work. On his way back from the car dealership, Martinez struck a vehicle, injuring six passengers. The passengers sued Halliburton under a theory of vicarious liability for their injuries.

The Court found that even though Martinez was driving a company owned vehicle and travelled to a place where he had occasionally performed work, the trip itself was purely personal and was not “undertaken for the benefit of Halliburton.” The Court reasoned that because the trip to Bakersfield had not been approved by Martinez’s supervisor and no tasks were undertaken in Bakersfield for the benefit of Halliburton, that it was not foreseeable that Halliburton would have assumed the risk of a traffic accident, or that such a risk was incidental to Halliburton’s enterprise.

The Court did distinguish that “minimal deviations,” such as stopping at a yogurt shop on the way home from work, would not extinguish employer liability. The take away from this case for employers is Halliburton keeps intact the “coming and going” rule, which is an exception to the doctrine of vicarious liability.

The “coming and going” rule proscribes that an employer is not liable for providing workers’ compensation benefits for injuries sustained by employees going to and coming from work. There are some notable exceptions to this rule that all employers, whether insured or self-insured, should know.

If the injury was sustained while traveling for some incidental benefit to the employer, “not common to commute trips by ordinary members of the work force,” then the employer may be responsible. For many types of jobs, such as construction or sales, employment is not fixed at any particular location or time. Typically in those cases, the “coming and going” rule will not apply and the employer would be liable for the employee’s injury.

Exceptions include:

  • The “commercial traveler” exception. The employer is liable for injuries sustained during business trips, including any mode of transportation such as a driving to a client meeting or flying to business meetings.
  • The “special mission” exception. The employer is liable for injuries sustained while the employee is engaged in an extraordinary task within the course of employment, and undertaken at the request or invitation of the employer. For example, a secretary gets a call at 5 a.m. from his boss, asking him to drive out of town to drop off a document to a client.

Another Important SIR Decision

By: Brendan J. Coughlin

The recent California case of American Safety Indemnity Co. v. Admiral Insurance Co. (2013) 220 Cal. App. 4th 1, confirms that policy language must be unambiguous when an insurer seeks to limit its obligations under an insurance policy. In this matter, the Court of Appeal found that while the language at issue clearly imposed a $250,000 Self-Insured Retention (“SIR”) on damages paid to third parties, this SIR was inapplicable to the insurer’s duty to defend claims made.

The case began with a landslide or two. It ended with an insurer or two, disputing who should pay for the years of intervening litigation. The facts reach back over a decade, when a grader contracted with developer D. R. Horton, Inc. [Los Angeles Holding Company] (“Holding”) for housing construction in Santa Clarita.

Grading began in 2002. However, back cut slope failures resulted in landslides and tension cracks that visibly extended to within 50 feet of existing upslope homes. The slides caused physical damage to the property of several of these adjacent homeowners, who sued Holding, developer related entities D. R. Horton, Inc. and D. R. Horton, Inc. – Los Angeles (“Horton,”) the grader and others in 2003.

The underlying subsidence lawsuit settled in 2007 for a total of nearly $5 million. The grader had been insured by American Safety Indemnity Co. (“ASIC.”) Holding and Horton had been insured by Admiral Insurance Co. (“Admiral.”) Holding was also an additional insured under the grader’s ASIC policy.

During the underlying litigation, Holding tendered its defense to ASIC. This was declined. A bad faith lawsuit followed. In settlement of the bad faith action, ASIC agreed to defend Holding. ASIC also paid the defense fees of Horton, unaware of Horton’s Admiral coverage.

The instant case arises from ASIC’s declaratory relief action for indemnity and subrogation against Admiral. ASIC sought to recover its payment of Horton’s defense costs. Admiral’s principal defense was that because Horton had not paid the SIR on the Admiral policy, Admiral’s duty to defend was not triggered.

The trial court granted ASIC’s motion for summary adjudication, and eventually awarded ASIC $1.9 million plus interest. In reviewing the trial court’s ruling, the Court of Appeal confirmed, and found that the SIR clause in the Admiral policy failed to expressly and unambiguously make payment of the SIR a condition precedent to Admiral’s duty to defend. Instead, the language of the policy gave the Horton a reasonable expectation of defense upon tender. In subrogation, ASIC steps into the shoes of Horton’s rights against Admiral. Principles of equitable subrogation required Admiral to reimburse ASIC for Horton’s defense fees.

Contract provisions between parties, and insurance policy language, evolve and are often updated year-to-year. Contractual interpretation also evolves, is redefined, and may be reconfirmed or modified. This particular case illustrates that these can be complicated, precise issues. An insurance policy written years ago may simply not mean today what the insured or insurer think that it does.

Lance A. Adair Selected as 2013 ‘Top Rated Lawyer’
Congratulations to Lance A. Adair of our Irvine office, who has been selected as a ‘2013 Top Rated Lawyer’ in the practice areas of Land Use and Zoning, as well as Real Estate on behalf of American Lawyer Media, and Martindale-Hubbell. Mr. Adair can be contacted at (949)-261-7700 or ladairat-sign kringandchung DOT com .

New Associate Joins Kring & Chung’s Irvine, CA Office
Kring & Chung is pleased to announce that David T. Kim has joined its Irvine, CA office as an Of Counsel attorney. Kim’s practice focuses on business transactions and real estate. Kim is proficient in the drafting, review, and negotiations of many different types of contracts, including, among others: commercial leases, distribution agreements, manufacturer agreements, trademark license agreements, and sales representative agreements. Mr. Kim can be contacted at (949)-261-7700 or david.kimat-sign kringandchung DOT com.

The 36th Annual Kring & Chung Newport Beach Triathlon
Thank you to all who participated and volunteered at the Kring & Chung Newport Beach Triathlon which took place October 20, 2013. Congratulations to Karl Schultz and Jocelyn Bonney who came in first place in the men and women divisions. Please see the News & Events section of our website to view photos from the event.

Kring & Chung 5th Annual Thanksgiving Food Drive in Collaboration with Families Forward
November 1st – November 14th
In collaborative efforts with Families Forward, Kring & Chung will be preparing 20 food baskets for families to celebrate Thanksgiving. Families Forward greatly relies on the generous support from our local community to fill the needs of the families that they serve during this busy time of year. Last year they provided 700 families with food needed to celebrate Thanksgiving.

If you are interested in participating and donating to the food drive, please contact Valerie Farrell at (949)-261-7700.


Serving California’s Businesses and Individuals