The California Court of Appeal has held that a business auto insurer had no duty to defend its insured, a shuttle company, against a personal injury lawsuit arising from an employee’s sexual assault of a passenger. ( R.A. Stuchbery & Others, Etc. v. Redland Insurance Company (2007) WL 2420266)
Facts
M&M Luxury Shuttle, Inc. (M&M) was a shuttle service operator. One of M&M’s drivers picked up a 16-year-old runaway girl who wanted a ride to a teen shelter. M&M’s driver agreed to drive the girl to the shelter, but instead of taking her there, took her to his apartment. M&M’s driver then convinced the girl to go inside his apartment, where he raped her.
The victim later filed a lawsuit against M&M and the M&M driver who perpetrated the attack, alleging claims for common carrier liability, negligent hiring, sexual battery, etc. M&M tendered the lawsuit to its commercial general liability insurer, R.A. Stuchbery & Others Syndicate 1096 as Underwriters at Lloyd’s (Stuchbery), which agreed to defend M&M under reservation of rights. M&M also tendered defense of the lawsuit to its business auto insurer, Redland Insurance Company (Redland), but Redland denied coverage.
Stuchbery paid approximately $525,000 in defending and indemnifying M&M in the victim’s lawsuit. Following resolution of that lawsuit, Stuchbery filed a coverage action against Redland, alleging that Redland was either solely or partially responsible for the costs of defending and indemnifying M&M. The trial court ruled that the claims against M&M in the underlying lawsuit were not potentially covered under the Redland auto policy, and that Redland thus had no duty to pay any portion of the costs of defending and indemnifying M&M. Stuchbery appealed.
Holding
The Court of Appeal affirmed. The Redland auto policy only covered damages M&M owed because of bodily injury “resulting from the … use” of an M&M shuttle. Here, M&M’s driver had used the shuttle to transport the victim to the apartment where the rape took place. However, under California’s “predominating cause/substantial factor” test, the mere use of a vehicle as transportation to the scene of the injury does not establish a sufficient causal connection between the “use” of the vehicle and the injury. Thus, the victim’s claims against M&M in the underlying lawsuit did not trigger any potential for coverage under the Redland auto policy.
Further, M&M’s status as a common carrier did not warrant a different result. The court agreed that but for the fact that M&M was a common carrier, M&M would not have had any relationship at all with the victim and, hence, M&M’s driver would not have been in a position to injure the victim. However, the court noted that M&M’s driver had not attacked the victim inside the shuttle, but rather, had attacked her in his apartment after she had voluntarily exited the shuttle. The court concluded that under such circumstances, the causal connection between the use of the M&M shuttle and the rape inside the apartment was simply “too attenuated” to trigger Redland’s duty to defend or indemnify.
Comment
Under California law, an auto liability policy is not triggered unless the vehicle is a “predominating cause” or “substantial factor” in the victim’s injury. Causation cannot be proved simply by establishing that the vehicle played some role in the chain of events leading to the injury. According to the California courts, a contrary rule would allow auto policies to be converted into general liability policies.