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Commercial Automobile |
Communicable Disease |
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Use Of Covered Vehicle |
Duty To Defend |
Garcia Holiday Tours
(Garcia) operated a commercial bus company in South Texas. It contracted with
the Alice Independent School District to provide a bus and driver for a field
trip to Six Flags Fiesta Texas in San Antonio for members of the Alice High
School band. Several band members observed the driver coughing during the trip,
after which the driver was hospitalized due to being diagnosed with an active
case of tuberculosis (TB).
The bus passengers were
tested for the disease after learning of the driver's diagnosis. Several of
them tested for latent TB and subsequently sued the driver and the bus company.
They asserted that they were negligently exposed to the disease as a result of
being confined on the bus with an infected driver during the band trip. Garcia
notified its auto insurance carrier, Lancer Insurance Company (Lancer) but it
refused to defend the claim. It maintained that the policy did not cover such
claims. Garcia had to defend itself in the trial where a jury found it and the
driver liable and awarded collectively over $5 million to the passengers who
contracted the disease.
After the passengers' tort
suit was adjudicated, the driver and Garcia sued Lancer. They asserted
contractual and extra-contractual claims and sought a declaration of rights
under the business auto policy. The passengers (now judgment creditors of
Garcia) intervened and also sought a declaration of Lancer's obligations under
the policy. The trial court granted the passengers' motion and denied Lancer's.
It then severed the passengers' claims from the remainder of the case. This
allowed Lancer to appeal the passengers' favorable summary judgment, which it
did.
The court of appeals
reversed the summary judgment. It agreed that the policy might provide coverage
for communicable diseases transmitted during the bus trip but still reversed
because there was no conclusive proof that the passengers' infections occurred
during the bus trip. It remanded the case to the trial court to resolve where
the infected passengers contracted the disease. Doing so would then resolve the
issue of whether Lancer had an obligation to indemnify them. Lancer disagreed
with the appeals court decision and the Supreme Court of Texas granted Lancer's
petition to consider this novel coverage question.
Lancer's business auto
policy stated that it afforded coverage for damages the insured is legally
obligated to pay "because of 'bodily injury'…caused by an 'accident'
and resulting from the ownership, maintenance or use of a covered auto." The
policy defined the terms accident, auto, and bodily injury. Lancer conceded
that the bus was a covered auto, that the passengers claims involved an
accident, and that TB is a bodily injury as defined. However, it maintained
that the accident and injuries did not result from use of the bus (as the
policy requires) but, rather, from other causes (use of a contagious bus
driver). Lancer argued that the risk of being exposed to an infectious person
and contracting a disease is a general liability risk, not an auto liability
risk, even if the infectious person happens to be the vehicle's driver. It
contended that the nexus (means of connection, link, or tie) between the
passengers' injuries and the use of the bus was insufficient to invoke the
policy's coverage.
Garcia and the passengers
responded and stated that the policy generally provided coverage for passenger
injuries as long as the bus was being used as a bus. They stated that case law
broadly defined the term "use" to extend coverage well beyond
vehicular accidents or collisions. "Use" is a "general
catchall" that includes "all proper uses of the vehicle not falling
within other terms of definition, such as ownership or maintenance." They
maintained that there was sufficient nexus between that use and their injuries
because the bus was being used to transport passengers at the time of their
injuries.
After referring to a number
of previous related (but not identical) cases, the Supreme Court of Texas
concluded that a communicable disease transmitted from the bus driver to his
passengers was not a risk that Lancer assumed under its insurance policy. This
was because the passengers' injuries did not result from the vehicle's use but
rather from Garcia's use of an unhealthy driver. The bus itself, in its
capacity as a mode of transportation, did not produce (and was not a
substantial factor in producing) the passengers' injuries. The court reversed
the judgment of the court of appeals. It also rendered the judgment that the
passengers, Garcia, and the driver could not take anything on their indemnity
claim against Lancer.
Supreme Court of Texas.
Lancer insurance Company, Petitioner, v. Garcia Holiday Tours, et al.,
Respondents. No. 10-0096. Argued Jan. 4, 2011. Delivered July 1, 2011. 345
S.W.3d 50