By William A. Ramsey
A typical provision in Commercial General Liability (CGL) policies provides that a company’s employees are insureds for acts within the scope of their employment. Lawsuits involving traveling employees can raise issues regarding the insurer’s obligation to defend or indemnify individual employees for acts or omissions that took place away from their usual place of employment. Sometimes the coverage questions are simple. For example, an Indiana electrician sent to perform work at a construction site in Florida who commits a negligent act while performing electrical work at the site almost certainly acted within the scope of employment and, therefore, would be entitled to a defense and indemnification (assuming no other policy exclusions apply). A more difficult question arises when that same electrician in Florida leaves the jobsite and then commits an act unrelated to electrical work that causes personal injury or property damage.
The General Test – Is the Employee Furthering the Employer’s Business or Acting with the Employer’s Authorization?
When analyzing the issue whether an employee was within the scope of employment for purposes of a CGL policy, courts generally apply the law of the applicable state regarding agency or vicarious liability. See D.W.J. v. Wausau Bus. Ins. Co., 2016 WL 3580601, at *3-4 (D. Alaska June 28, 2016); Chestnut Associates, Inc. v. Assurance Co. of Am., 17 F. Supp. 3d 1203, 1211-12 (M.D. Fla. 2014); American Family Mut. Ins. Co. v. Lane, 782 F. Supp. 415, 419-20 (S.D. Ind. 1991). However, the language used regarding coverage for employees in CGL policies varies, and if a policy uses language that is broader than “within the course and scope of employment,” the analysis may not be identical. Cf. Interstate Prod. Credit Ass’n v. Fireman’s Fund Ins. Co., 706 F. Supp. 1405, 1407 (D. Or. 1989) (analyzing precise language used in policy to determine whether a company’s director was covered); Sprinkles v. Associated Indem. Corp., 188 Cal. App. 4th 69, 82 (2010) (discussing coverage for conduct “related to the conduct of business,” and noting that “it is theoretically possible that the actions of an employee may be within the course and scope of employment but not related to the conduct of the business”).
In general, employees are within the course and scope of employment when their acts are incidental to conduct authorized by their employer or further the business of their employer. See Barnett v. Clark, 889 N.E.2d 281, 283 (Ind. 2008). Indiana’s test derives from the Restatement of Agency, which is applied in some form by most courts. See generally Restatement (Third) of Agency § 7.07 cmt. b.
Commuting Employees Are Usually Outside the Course and Scope of Employment
An important component of the general test holds that employees are outside the scope of employment while traveling to and from work. See Dodson v. Carlson, 14 N.E.3d 781, 786 (Ind. Ct. App. 2014), trans. denied; Dillman v. Great Dane Trailers, Inc., 649 N.E.2d 665, 667 (Ind. Ct. App. 1995). The general explanation for this rule is that, when on the way home after work, employees have usually “completed all tasks incidental to [their] employment.” Dodson, 14 N.E.3d at 786. Although some variations exist, most states have adopted some form of the going-and-coming rule. See generally 27 A.L.R. 5th 174 (“Employer’s Liability for Negligence of Employee in Driving His or Her Own Automobile”).
If an employee is outside the scope of employment while driving home, it logically follows that, once an employee reaches home (or some other non-work-related destination), an employee is even further removed from the scope of employment. Cf. Horace Mann Ins. Co. v. Richards, 696 N.E.2d 65, 68 (Ind. Ct. App. 1998) (holding teacher was not covered under school’s liability policy for suit alleging teacher’s involvement in after-school fight that took place in the teacher’s garage).
Although some employees leave their workplace and continue to work after arriving home (as many readers of this article are acutely aware), the going-and-coming rule often provides a fairly bright-line test to help determine whether an employee was in the course and scope of employment at the time of a tortious act.
What About an Employee’s Home-Away-From-Home?
The issue can become muddied, though, when the employee is not going home but to a hotel or other form of temporary housing supplied by an employer while the employee is out of town for work-related activities. Although the Indiana appellate courts have yet to directly address this issue in the coverage context, a line of worker’s compensation cases addresses injuries that occur to employees who are working in locales away from their homes. See Indiana & Michigan Elec. Co. v. Morgan, 494 N.E.2d 991, 994-95 (Ind. Ct. App. 1986). Under this rule, “[t]raveling employees are generally regarded as being in continuous employment (i.e., in the course of the employment) as long as they are traveling for their employer.” Olinger Constr. Co. v. Mosbey, 427 N.E.2d 910, 912 (Ind. Ct. App. 1981). Employees that fall within the “traveling employee” rule are considered to be in the course of employment in situations where typical employees are not. See id. at 913 (quoting Thornton v. Hartford Accident & Indem. Co., 32 S.E.2d 816 (Ga. 1945)).
It should be noted that Indiana has not extended the traveling employee doctrine to a respondeat superior or coverage analysis. Other courts have held that the traveling employee doctrine is inapplicable outside the worker’s compensation context. See Fierro v. Crom Corp., 617 So. 2d 379, 379-80 (Fla. Dist. Ct. App. 1993) (“We decline to extend that exception provided in workers’ compensation cases for the ‘traveling employee’ to permit an action against an employer for his traveling employee’s negligence resulting in injuries to third parties.”); Pister v. Matrix Serv. Indus. Contractors, Inc., 998 N.E.2d 123, 133 (Ill. Ct. App. 2013) (noting that the “traveling employee” doctrine had been applied in Illinois only in worker’s compensation cases and declining to extend the doctrine to respondeat superior cases).
Other courts take a more expansive view to vicarious liability involving acts of traveling employees, while still recognizing that employers are not liable for every act of a traveling employee. See Randolph v. Budget Rent-A-Car, 97 F.3d 319, 328 (9th Cir. 1996) (“The rule is not intended to hold an employer liable for all its employees’ torts while on extended overseas assignment.”); Tennessee Farmers Mut. Ins. Co. v. American Mut. Liab. Ins. Co., 840 S.W.2d 933, 938-39 (Tenn. Ct. App. 1992) (“If the employee’s duties created a necessity for travel, then the employee is within the scope of employment while traveling, as long as the employee does not deviate from the employer’s business and engage in conduct the employer had no reason to expect.”). At least one court has concluded that an employee’s traveling status should have no significant effect on the ultimate inquiry. See Engler v. Gulf Interstate Eng’g, Inc., 230 Ariz. 55, 58, 280 P.3d 599, 602 (2012) (“Although this case presents a fact pattern not confronted in our previous cases — negligent driving by an employee on out-of-town travel status — the same analysis applies.”).
The Traveling Employee Doctrine Should Not Apply to Insurance Coverage Issues
In Indiana, there are significant differences between course of employment for worker’s compensation purposes and scope of employment for vicarious liability purposes. See Horace Mann Ins., 696 N.E.2d at 68; see also Winn Dixie Stores, Inc. v. Akin, 533 So. 2d 829, 832 (Fla. 4th Dist. Ct. App. 1988) (“[T]here may be situations where it may be proper to hold an employer liable for compensation benefits to the employee and yet not hold the employer responsible for that employee’s conduct in causing injury to a third person arising out of the same situation.”). Although some overlap exists, see Expressway Dodge, Inc. v. McFarland, 766 N.E.2d 26, 29-30 (Ind. Ct. App. 2002), applying the traveling employee doctrine to insurance coverage or vicarious liability would significantly expand employer and insurer liability and would be inconsistent with the general principle that the location of an employee’s act or omission does not determine whether an employee is within the scope of employment. See, e.g., Prater v. Indiana Briquetting Corp., 253 Ind. 83, 89, 251 N.E.2d 810, 813 (1969) (“The actual situs of the injury, although a consideration, is not controlling.”); Wiles v. Mahan, 405 N.E.2d 591, 597 (Ind. Ct. App. 1980); KCL Corp. v. Pierce, 141 Ind. App. 120, 125, 226 N.E.2d 548, 551 (1967) (“Although being on the premises is a factor which may be considered in determining whether the aggrieved party is in the course of her employment, it is not controlling. To be in the course of employment, the aggrieved party must be performing a duty owed to his employer which is required by or incidental to his employment.”).
That the general test for liability and coverage should apply regardless of an employee’s traveling status finds support in not only general principles of Indiana law but also in out-of-state decisions and the common sense principle that “during his off-duty hours, a traveling employee is generally free to do as he pleases; the employer lacks the power of control that ordinarily justifies respondeat superior liability.” Liberty Mut. Ins. Co. v. Elec. Sys., Inc., 813 F. Supp. 802, 810 (S.D. Fla. 1993); see also Pister, 998 N.E.2d at 133; Sunderland v. Lockheed Martin Aeronautical Sys. Support Co., 130 Cal. App. 4th 1, 11 (2005) (“The commercial traveler rule results from the liberal construction of the workers’ compensation statutes to extend benefits to protect injured employees. It provides no basis for imputing employee tort liability to an employer who is not at fault.”). If asked to decide the question, an Indiana court should apply the general test for traveling employees, without modification; to do otherwise would contravene the fundamental concept that, although liable for employees’ foreseeable conduct, “[a]n employer does not assume the role of insurer against all harm suffered by third parties with whom its employees may interact.” Restatement (Third) of Agency § 7.07 cmt. b.
Strategies for Determining Coverage Obligations
An insurer will usually have an obligation to defend its named insured, the employer, based on allegations that the employer is vicariously liable for traveling employees’ actions. Insurance defense counsel can argue that the employees were outside the scope of employment. This argument, if successful, would absolve the employer from liability while leaving intact the employer’s right to a defense. On the other hand, with respect to the employees, the potential unnamed insureds, the obligation to defend may turn on the question of whether the employees were within the scope of employment. Obtaining an answer to this question will raise conflicts of interest, as the employees would benefit from a finding that they were within the course and scope. Thus, an insurer who wishes to contest coverage could not do so while defending the employer and employees with a single defense counsel. Separate counsel for the employees, provided under a reservation of rights, or an express declination to defend the employees would be required.
Furthermore, although it will sometimes be sufficient to litigate the question of course and scope within an underlying tort suit, in other circumstances, a separate declaratory judgment action may be preferable or required for several reasons.
Obtaining a clear coverage decision. If differences in state law exist, an employee could have acted within the course and scope of employment under the law applicable to the tort but outside the course and scope of employment under the law applicable to the interpretation of the insurance policy.
Potentially avoiding costly litigation. The declaratory judgment action would involve a narrow, single issue involving the facts of the incident, while the underlying lawsuit could involve additional parties and expensive discovery and litigation regarding damages.
Choice of forum. If the difference in state law is important, an insurer may wish to litigate the issue whether the employee is within the course and scope for purposes of Indiana law in an Indiana forum.
Other coverage defenses. CGL policies typically include additional exclusions for incidents such as injuries to co-employees or leased premises that can preclude coverage even if an employee is an “insured.” See, e.g., St. Paul Mercury Ins. Co. v. Duke Univ., 849 F.2d 133, 137 (4th Cir. 1988) (holding policy’s exclusion for injury caused by a fellow employee precluded coverage). A declaratory judgment action could address all potential exclusions.
Indiana law currently leaves unanswered some questions regarding the obligation to defend and indemnify traveling employees. This uncertainty provides all the more reason for coverage counsel to identify and analyze the issue whether employees were acting within the course and scope of their employment as early as possible and to determine whether a separate declaratory judgment action should be pursued. Although multiple lawsuits involving a single incident are not always practicable, in large or complex cases involving traveling employees, a declaratory judgment action can be an effective way to help formulate the defense strategy in the underlying case, determine whether separate counsel for the insured and insurer is required, and provide a strong indicator of the employer’s liability.•
Mr. Ramsey is an associate in the Fort Wayne office of Barrett McNagny and a member of the DTCI Insurance Coverage Section. The opinions expressed in this article are those of the author.