Motor Carrier Act Does Not Expand Policy Definitions Where Coverage Exceeds Statutory Minimums, Sixth Circuit Says

On August 5, the Sixth Circuit Court of Appeals reversed and remanded a lower court ruling granting an insurer a Rule 12(c) dismissal in a declaratory judgment action based on the district court’s premature determination of what constituted an “employee” under the policy at issue.

The Estate of Donald Underwood sued Expeditor’s Express, a trucking company for whom Underwood was driving, after Underwood’s truck veered off the road, burst into flames, and killed him. Expeditor asked its insurer, Gramercy Insurance Company, to defend the lawsuit and indemnify it against any judgment.  Gramercy filed a declaratory judgment action, arguing Expeditor was not covered under the Gramercy policy because it excluded coverage for all Expeditor “employees.”  The district court dismissed the case on Gramercy’s 12(c) motion.

The Sixth Circuit believed this dismissal was premature.  It noted that the Gramercy policy distinguished between ‘employees’ and ‘leased workers’ – notably, employees were excluded from coverage, while leased/temporary workers were not.  Because there was not enough information on the face of the pleadings to properly classify Underwood (he could have been either), it reversed the dismissal and remanded for further proceedings.

The main argument put forth by Gramercy was that the court should apply the very broad definition of “employee” under the Motor Carrier Act of 1980 (an act which require carriers to carry a minimum level of liability insurance and permits them to exclude employees from insurance coverage), i.e. “an operator of a commercial motor vehicle [who] directly affects commercial motor vehicle safety in the course of employment.”

The court disagreed; it stated while the act set minimum coverage requirements for carriers, and could increase insurance coverage where a policy failed to reach that coverage floor, the Act would not reduce a carrier’s insurance coverage in excess of the statutory minimum by altering a policy’s exclusionary definition of “employee” to conform with the definition of “employee” contained in the act.  Therefore, the court held Gramercy was required to provide evidence that Underwood was an “employee” of Expeditor before the suit could be dismissed.

Gramercy Insurance Co. v. Expeditor’s Express, Inc., 2014 U.S. App. LEXIS 15262 (6th Cir. Aug. 5, 2014).