The Fourth Circuit Court of Appeals in United Financial Casualty Company v. Ball vacated a judgment of the District Court for the Southern District of West Virginia. The Court held that the district court had improperly found that a Worker’s Compensation exclusion in a motor vehicle policy bars coverage to a permissive third-party user of an insured vehicle who causes injury to an employee of the insured.

While performing work at the home of a client, the owner of a construction company gave his client permission to move one of the company’s trucks from blocking the client’s driveway. In doing so, the client accidentally struck an employee of the construction company with the vehicle. The company’s insurer denied payment to the injured employee, arguing that the Worker’s Compensation and the Employee Indemnification and Employer’s Liability exclusions in its policy eliminated coverage to the driver because the company was liable to its employee under the state’s workers’ compensation laws. The district court agreed with this argument, and only analyzed the case under the Worker’s Compensation exclusion argument. The employee appealed.

On appeal, the Fourth Circuit considered both the Worker’s Compensation exclusion argument and the argument that the employee’s claim was barred under the Employee Indemnification and Employer’s Liability exclusion in the policy.

As to the Worker’s Compensation exclusion argument, the Fourth Circuit held that the district court erred in applying the exclusion because West Virginia law allows an employee to file suit arising out of a work-related injury where the injury is caused either entirely or by the negligence of a third-party. Thus, because the homeowner was the entire cause of the employee’s injuries, the insurer was unable to invoke the policy’s exclusion for workers’ compensation related injuries.

The Court then turned to whether the policy’s Employee Indemnification and Employer’s Liability exclusion barred the employee’s ability to recover under the policy. That exclusion states that the policy does not extend to “bodily injury to … an employee of any insured arising out of or within the course of… that employee’s employment by any insured” or to such employee “performing duties related to the conduct of any insured’s business.” The exclusion also provides that it applies “whether the insured may be liable as an employer or in any other capacity.” The employee contended that the language of the policy, though on its face would deny coverage for this claim, should be ignored as it is contrary to W. Va. Code § 33-6-31(a). That Code section states that all insurance policies issued in West Virginia must extend coverage to those drivers operating the insured vehicle with the “consent, express or implied, of the named insured.” The insurer countered that argument by stating that the driver effectively stood in the same shoes as the employer. If that were the case, W. Va. Code § 33-6-31(h), would shield the insurer, as that Code section states that a policy issued to an employer need not “cover the liability of an employer to his or her employees under any workers’ compensation law.” However, the Court ultimately held that the driver of the vehicle and the employer were significantly different parties as to render meritless the insurer’s argument that those parties stood in the same shoes. Thus, the Employee Indemnification and Employer’s Liability exclusion to the policy did not apply.

Accordingly, the Fourth Circuit vacated the district court’s order and remanded the case for further proceedings consistent with its finding that the policy exclusions were inapplicable to this case.