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February 02, 2016 Articles

Clarifying the Standard Employee Exclusions in Commercial Automobile Policies

With coverage or exclusion turning on the answer, several federal courts have taken a new approach in recent years to the age-old question of whether a truck driver is an employee or an independent contractor

by Julius F. "Rick" Parker III[1]

Any attorney who has ever faced a claim in which a truck driver is injured while driving a truck for an insured has faced a wall of confusion. The standard Insurance Services Office (ISO) form commercial auto policy excludes coverage for injuries to employees of the insured. Due to the nature of trucking operations, motor carriers generally attempt to create an independent contractor relationship with drivers. Thus, when the carrier attempts to deny coverage under the standard employee exclusions, a messy and complex factual question arises, one that has confounded courts and practitioners for decades. In recent years, however, several federal courts have taken a new approach to this age-old question. In a very recent, but unpublished, opinion, the Eleventh Circuit Court of Appeals adopted that approach.[2]


Motor carriers run the gamut from single owner-operators making purely intrastate hauls to large companies operating hundreds of tractor-trailers making long interstate hauls. Whether large or small, however, all motor carriers have several incentives to treat the drivers of their trucks as independent contractors instead of employees. First, if the driver is an independent contractor, under the common law, the motor carrier could not be held liable for injuries or property damage inflicted by the driver.[3] Second, a motor carrier is relieved of the responsibility of withholding Social Security and federal taxes (as well as matching the employee’s Social Security and Medicare contributions). Third, most states do not impose a responsibility for employers to carry workers’ compensation insurance on independent contractors. Therefore, by characterizing the driver as an independent contractor, rather than an employee, the motor carrier saves a great deal of time and money, while substantially reducing liability exposure.

This effort has had a profound effect on the “standard employee exclusions”[4] in the ISO CA 00 01 coverage form. That form excludes the following:

3. Workers’ Compensation

 Any obligation for which the “insured” or the “insured’s” insurer may be held liable under any workers’ compensation, disability benefits or unemployment compensation law or any similar law.

4. Employee Indemnification And Employer’s Liability

“Bodily injury” to:

a. An “employee” of the “insured” arising out of and in the course of:

(1) Employment by the “insured”; or
(2) Performing the duties related to the conduct of the “insured’s” business; or

b. The spouse, child, parent, brother or sister of that “employee” as a consequence of paragraph a. above.

This exclusion applies:

(1) Whether the “insured” may be liable as an employer or in any other capacity; and

(2) To any obligation to share damages with or repay someone else who must pay damages because of the injury.

5. Fellow Employee

 “Bodily injury” to any fellow “employee” of the “insured” arising out of and in the course of the fellow “employee’s” employment or while performing duties related to the conduct of your business.[5]

Thus, when a truck driver is injured while driving a truck for a company, the company’s insurer is called upon to respond. At that point, the insurer must determine whether the driver is considered an employee or an independent contractor for purposes of the exclusion. That determination has been very fact-intensive and the subject of much litigation over the past several decades.

The Restatement Approach

Many courts resorted to the common-law test for distinguishing between an employee and an independent contractor as stated in the Restatement (Second) of Agency. That test requires the court to analyze the following factors:

(2) In determining whether one acting for another is a servant or an independent contractor, the following matters of fact, among others, are considered:

(a) the extent of control which, by the agreement, the master may exercise over the details of the work;

(b) whether or not the one employed is engaged in a distinct occupation or business;

(c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;

(d) the skill required in the particular occupation;

(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;

(f) the length of time for which the person is employed;

(g) the method of payment, whether by the time or by the job;

(h) whether or not the work is a part of the regular business of the employer;

(i) whether or not the parties believe they are creating the relationship of master and servant; and

(j) whether the principal is or is not in business.[6]

Courts struggled mightily with these factors, particularly in the context of truck drivers. Where the parties attempted to treat the driver as an independent contractor for tax purposes, the actual relationship could be very difficult to determine using the above test.

For example, what if the driver did not own the tractor or trailer? What if the driver owned the tractor but was required to put the company’s logo on it? What if the driver “leased” the tractor for a nominal sum? Clearly, there are bright-line examples on each side, such as where the company actually treats the driver as a W-2 employee or where the company hires true independent owner-operators and makes no attempt to create the appearance that the owner-operator is driving for the company. Between those extremes lie the great many cases with which courts have struggled.

The same problem gave rise to difficulties concerning liability in the interstate context. Could a company be held liable when a member of the public was injured by a driver who owned his own truck but had another company’s logos on the truck? The answer at the federal level was “yes,” under the doctrine of “logo liability.”[7] Based on principles of apparent agency, the doctrine of logo liability “hold[s] federally authorized carriers . . . that are licensed by the United States Department of Transportation (USDOT) and display their USDOT certificate number on their trucks, vicariously liable for the negligence of drivers operating under a lease.”[8] But does that same doctrine answer the question of whether the same driver, who is injured by the negligence of the company for whom he is driving, is an “employee” excluded from coverage under a commercial automobile policy? Arguably, it did not because the doctrine of logo liability was created to afford a remedy to members of the public injured by the negligence of a truck driver and not to aid in the interpretation of insurance policies.

As a result, courts struggled with application of the common-law test. In many cases, courts also applied the test articulated by the state’s workers’ compensation laws, either because of exclusion 4 or because “statutory employees” were held to be “employees” for purposes of the standard employee exclusions.[9] That added an even further layer of complexity to an already complex and confusing analysis. Therefore, in most states, insurers are hard-pressed to deny coverage based on the standard employee exclusions except under the clearest of circumstances.

The Federal Motor Carrier Act Approach

However, in 1997, the Ninth Circuit Court of Appeals took a novel approach to the question. In Perry v. Harco National Insurance Co.,[10] the court held that the definition of “employee” contained in the federal Motor Carrier Act regulations supplied the definition of “employee” in a commercial automobile policy. That definition, at 49 C.F.R. § 390.5, defines an employee as

any individual, other than an employer, who is employed by an employer and who in the course of his or her employment directly affects commercial motor vehicle safety. Such term includes a driver of a commercial motor vehicle (including an independent contractor while in the course of operating a commercial motor vehicle), a mechanic, and a freight handler. . . .

The plaintiff in Perry was the widow and administrator of the estate of a driver killed while driving a tractor-trailer leased to him by Sunset Express, Inc. The carrier’s insurer, Harco National, denied coverage on the ground that the driver was an employee as defined in the federal Motor Carrier Act because the policy contained a statutorily mandated MCS-90 endorsement.[11]

The lower court applied that definition under the rationale that, because the trip involved an interstate-licensed motor carrier, federal law should apply. The Ninth Circuit affirmed, rejecting the estate’s argument that applying the federal definition would leave drivers without a remedy against a motor carrier that negligently supplies defective equipment. The court noted that the estate had a remedy under workers’ compensation, but it expressly reserved ruling on whether the federal Motor Carrier Act created a cause of action by a driver against a negligent motor carrier.[12]

Courts paid little attention to Perry for more than a decade after the opinion was released, though five years later, the Fifth Circuit reached the same conclusion without reference to Perry. In Consumers County Mutual Insurance Co. v. P.W. & Sons Trucking, Inc.,[13] the court was once again faced with a policy insuring interstate trucking and, therefore, containing the mandatory MCS-90 endorsement. Given the applicability of federal law, the Fifth Circuit held that the definition of employee contained in 49 C.F.R. § 390.5 controlled and the policy’s standard employee exclusions barred coverage.[14]

In 2009, however, the Fifth Circuit again considered the issue, affirming its holding in Consumers County.[15] But, like its predecessors, the case involved a policy that included the federally mandated MCS-90 endorsement.[16] Therefore, whether in the Ninth Circuit or the Fifth Circuit, courts interpreting purely intrastate policies continued to apply the cumbersome common-law and workers’ compensation statutes to determine whether a driver was an employee or independent contractor for purposes of the standard employee exclusions.

In 2012, however, a district court in Alabama first considered whether the definition of “employee” contained in 49 C.F.R. § 390.5 would apply based solely on state law. The court, in Lancer Insurance Co. v. Newman Specialized Carriers, Inc.,[17] noted that the Alabama legislature adopted the federal Motor Carrier Act by statute. Therefore, even applying state law, the court was obligated to apply the definition of “employee” contained in 49 C.F.R. § 390.5.[18] The decision is important in that it recognized that, even in a purely intrastate scenario, the incorporation of the Motor Carrier Act and its concomitant regulations into state law would require the application of the federal definition as a matter of state law.[19]

However, in 2015, a district court in Georgia released an opinion applying the same logic as that used in Lancer. In Progressive Mountain Insurance Company v. Madd Transport, LLC,[20] the driver of a truck leased by Madd Transport was injured while loading pipes onto the trailer for transport. He sued Madd Transport for his injuries, and the insurance company denied coverage under employee exclusions virtually identical to those in the ISO CA 00 01 coverage form. The driver argued that the standard employee exclusions did not apply because he was an independent contractor under Georgia common law and therefore not within the exclusions. The court granted summary judgment in favor of the insurer.[21] The critical aspect of its ruling was its complete rejection of Georgia law on the distinction between employees and independent contractors as the basis for interpreting the policy. Rather, the court cited much of the above precedent to conclude that the definition of “employee” in 49 C.F.R. § 390.5 applied to the policy’s standard employee exclusions.[22] The court also found it noteworthy that Georgia, like Alabama, incorporated the federal Motor Carrier Act and its interpretive regulations by statute.[23]

The plaintiff in Madd Transport appealed to the Eleventh Circuit Court of Appeals. In keeping with its rapid disposition rate, the Eleventh Circuit affirmed the district court in an unpublished decision dated December 8, 2015.[24] Therefore, although the decision can be cited only as persuasive authority,[25] it appears clear that the Eleventh Circuit has adopted the majority approach, bringing much-needed clarity to the law.

Policy Concerns

The Eleventh Circuit was undoubtedly subjected to counter-arguments on the propriety of using a federal statute and regulation intended to clarify liability to supply the definition of a private intrastate contract. Those on the federalism side of the fence would no doubt argue that an insurance policy that covers a purely intrastate transaction is a matter of state concern only. Therefore, federal law should play no part in interpreting an insurance policy under state law. That argument may be well-taken in states that have not adopted the federal Motor Carrier Act, unlike Florida, Georgia, and Alabama. After all, there is ample authority to supply that definition under the common law and workers’ compensation statutes.

Where state law specifically incorporates the Motor Carrier Act, however, it would be difficult at best to make a case for ignoring the policy behind section 390.5’s elimination of the distinction between employees and independent contractors. “By eliminating the common law employee/independent contractor distinction, the definition serves to discourage motor carriers from using the independent contractor relationship to avoid liability exposure at the expense of the public.”[26] By the same token, eliminating that distinction for purposes of insurance coverage discourages insureds from using the independent contractor relationship to avoid the standard employee exclusions or to obtain insurance coverage for which they did not pay a premium.

One overriding principle, recognized by the Fifth Circuit in Consumers County, suggests that eliminating that distinction makes sense. By adopting the definition of “employee” contained in section 390.5 for purposes of insurance coverage, the court does not in any way affect the law of liability. A driver who currently meets the definition of an independent contractor for workers’ compensation purposes would still be considered an independent contractor under state law. All that would change is whether the putative employer’s insurance policy provides coverage where the driver is injured by the negligence of the employer.


Insurers writing coverage in Florida, Georgia, and Alabama have finally received significant clarity with regard to the applicability of the standard employee exclusions to injuries to tractor-trailer drivers. In the coming years, other circuit courts will likely be given the opportunity to join this ever-increasing majority. Given the bright-line rule that the majority approach provides, it appears likely that other courts will follow suit.

Julius F. “Rick” Parker III is a partner at Butler Weihmuller Katz Craig, LLP, in Tallahassee, Florida.


[1] Julius F. “Rick” Parker III is a partner in the Tallahassee office of the firm of Butler Weihmuller Katz Craig, LLP, with offices in Tampa, Miami, Tallahassee, Mobile, Chicago, Philadelphia, and Charlotte.
[2] See Progressive Mountain Ins. Co. v. Madd Transp., LLC, 2015 U.S. App. LEXIS 21191 (11th Cir. Dec. 8, 2015).
[3] See Consumers Cty. Mut. Ins. Co. v. P.W. & Sons Trucking, Inc., 307 F.3d 362, 366 (5th Cir. 2002).
[4] See Great Glob. Assurance Co. v. Shoemaker, 599 So. 2d 1036 (Fla. Dist. Ct. App. 1992).
[5] Insurance Services Office Form No. CA 00 01 03 06.
[6] Restatement (Second) of Agency § 220 (Am. Law Inst. 1958).
[7] See Nat’l Am. Co. v. Artisan & Truckers Cas. Co., 796 F.3d 717 (7th Cir. 2015).
[8] See Artisan & Truckers Casualty Co., 796 F.3d at 724 (quoting U.S. Bank v. Lindsey, 920 N.E.2d 515, 525 (Ill. 2009) (internal citations omitted)).
[9] See Am. States Ins. Co. v. Pioneer Elec. Co., 85 F. Supp. 2d 1337, 1343 (S.D. Fla. 2000), abrogation recognized on other grounds by Mid-Continent Cas. Co. v. Basdeo, 742 F. Supp. 2d 1293, 1328 (S.D. Fla. 2010).
[10] 129 F.3d 1072 (9th Cir. 1997).
[11] Perry, 129 F.3d at 1073.
[12] Perry, 129 F.3d at 1074–75.
[13] 307 F.3d 362 (5th Cir. 2002).
[14] Consumers County, 307 F.3d at 367.
[15] See Ooida Risk Retention Grp., Inc. v. Williams, 579 F.3d 469 (5th Cir. 2009).
[16] See Ooida Risk Retention Group,579 F.3d at 474.
[17] 903 F. Supp. 2d 1272 (N.D. Ala. 2012).
[18] Lancer Insurance Co.,903 F. Supp. 2d at 1279.
[19] The decision in Lancer Insurance Co.,903 F. Supp. 2d 1272, was not appealed and therefore remains only persuasive authority on that point in Alabama.
[20] No. 413-CV-254, 2015 U.S. Dist. LEXIS 39558 (S.D. Ga. Mar. 27, 2015).
[21] Madd Transport, 2015 U.S. Dist. LEXIS 39558
[22] Madd Transport, 2015 U.S. Dist. LEXIS 39558, at *4 (citing Ooida Risk Retention Grp., Inc. v. Williams, 579 F.3d 469 (5th Cir. 2009), Consumers Cty. Mut. Ins. Co. v. P.W. & Sons Trucking, Inc., 307 F.3d 362 (5th Cir. 2002), and Perry v. Harco Nat’l Ins. Co., 129 F.3d 1072 (9th Cir. 1997)).
[23] Madd Transport, 2015 U.S. Dist. LEXIS 39558, at *5.
[24] See Progressive Mountain Ins. Co. v. Madd Transp., LLC, 2015 U.S. App. LEXIS 21191 (11th Cir. Dec. 8, 2015).
[25] See 11th Cir. R. 36-2.
[26] Consumers County, 307 F.3d at 366.

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