A recent Indiana appeals court ruling draws a sharp line on insurer obligations for additional insureds in catastrophic trucking accidents – coverage stops at vicarious liability.
On Oct. 16, the Court of Appeals of Indiana issued its decision in Transport Leasing/Contract, Inc. v. Northland Insurance Company. The case revolved around a fatal 2019 accident involving a semi truck driver, Bruce Pollard, who was assigned by Transport Leasing/Contract, Inc. (TLC) to Weston Transportation. The crash resulted in the deaths of Alanna Koons and her twin daughters, as well as injuries to other motorists.
TLC had an Exclusive Services Agreement with Weston, under which TLC provided drivers and was responsible for their hiring and background checks. TLC was named as an additional insured on Weston’s $1 million liability policy with Northland Insurance Company. The policy endorsement specified that TLC was covered “only for damages to which this insurance applies and only to the extent of that person’s or organization’s liability for the conduct of another ‘insured’.”
After the accident, the Koons Estate and other parties alleged that TLC was directly negligent in its hiring and screening of Pollard. Northland paid its $1 million policy limit to settle claims against Weston and attempted to secure a release for TLC, but the settlement agreement reserved the right for the Koons Estate to pursue claims against TLC for its own alleged negligence.
TLC subsequently settled with the Koons Estate for $2.45 million and with other injured parties for $250,000. TLC then filed suit against Northland, claiming the insurer breached its contractual obligations by not settling the direct negligence claims against TLC and by not providing separate legal representation or claims handling for TLC.
The trial court granted summary judgment to Northland, finding that the insurance policy only covered TLC for vicarious liability for Weston’s conduct, not for TLC’s own direct negligence. The appellate court affirmed, citing the policy’s language limiting TLC’s coverage as an additional insured to liability “for the conduct of another ‘insured.’” The court also referenced the ESA, which excluded indemnification for damages resulting from TLC’s own negligent referral of employees.
The court concluded that Northland met its obligations by paying the policy limits to settle the claims it was required to cover and had no duty to defend or indemnify TLC against claims of direct negligence. The court further found no evidence of bad faith by Northland.
For insurance professionals, this case underscores the importance of policy language in determining the scope of coverage for additional insureds. The decision confirms that, unless otherwise specified, coverage for additional insureds may not extend to claims of direct negligence.
