Business Use Exceptions in Auto Liability Policies Under Maryland Law Reviewed by Federal Appellate Court: Forkwar v. Empire Fire and Marine Ins. Co.

After obtaining a verdict in a car accident lawsuit, the plaintiff sought to enforce the judgment against the defendant’s insurer. The insurance company successfully argued that the “business use” exception barred coverage of the plaintiff’s claim, as the defendant was operating his vehicle in the course of his work at the time of the accident. The court in the original lawsuit had found that the doctrine of respondeat superior, which holds an employer liable for certain acts of an employee, did not apply to the defendant’s employer. The court in the present case, Forkwar v. Empire Fire and Marine Ins. Co., nevertheless found that the business use exception applied. The case highlights an important challenge for Maryland plaintiffs who may obtain a verdict, but might have difficulty enforcing it.

The plaintiff, Augustine Forkwar, was involved in an automobile accident during the early morning of November 26, 2004 with Hameed Mahdi. Mahdi was an independent contractor of J&J Logistics. He owned his vehicle but leased it to J&J. At the time of the accident, he was on his way to a job for J&J when he stopped to get something to eat. Empire Fire & Marine Insurance Company had issued a commercial auto insurance policy to Mahdi, but it asserted that it was not obligated to defend or indemnify Mahdi under the policy’s business use exception.

Forkwar sued Mahdi and J&J in October 2006, alleging negligence against Mahdi and respondeat superior liability against J&J. Forkwar reportedly made no attempt to prove liability against J&J, and she did not oppose its motion for judgment as a matter of law in the middle of trial. The jury entered a judgment against Mahdi, who was a no-show at trial, for over $180,000. Forkwar then filed suit against Empire for indemnification. Empire removed the case to federal court and moved for summary judgment based on the business use exception. The district court granted the motion, and Forward appealed to the Fourth Circuit.

The appellate court considered two arguments from Forkwar. She first argued that Empire was collaterally estopped from arguing the business use exception because of the Maryland court’s ruling on respondeat superior. She also argued that the business use exception should not apply regardless. The Fourth Circuit rejected both arguments and affirmed the summary judgment order.

A party arguing that collateral estoppel bars an issue must prove that the issue in question is identical to one decided in a prior matter. Here, Forkwar asserted that the other court’s decision regarding J&J’s liability under the doctrine of respondeat superior was identical to the question of whether the business use exception in Empire’s policy relieved it of its obligation to defend or indemnify Mahdi. The court held that respondeat superior and “business use” are distinct issues, and that Empire therefore was not collaterally estopped. It also affirmed that the business use exception relieved Empire of defending or indemnifying Mahdi.

The doctrine of respondeat superior, the court noted, applies specifically to employer-employee relationships. It is further limited under Maryland law to situations where an employee is acting pursuant to instructions from the employer or is otherwise subject to the employer’s control. The business use exception, however, applies much more broadly. It covers situations where a person is serving an employer or the person’s own business interests. It was therefore reasonable for the business use exception to apply between Empire, Mahdi, and J&J even when respondeat superior did not.

Lebowitz & Mzhen’s attorneys are skilled at pursuing justice for people in Maryland who have been injured or lost loved ones in automobile accidents. Contact us today online or at (800) 654-1949 for a free and confidential consultation.

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If a Maryland Employee Gets Into A Distracted Driving Accident, When is the Employer Liable? Maryland Accident Law Blog, June 21, 2012

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