A W.R. Berkley Corp. unit must defend an auto insurance agency owner in an accident involving an employee who was driving an agency car while on a personal trip, says a federal appeals court, in partially affirming a lower court’s ruling.

In November 2016, Tayonna C. Volinski, an employee of Atlanta-based Peachtree Auto Insurance Agency Inc., was allegedly driving a 2001 GMC Jimmy owned by the agency with her boyfriend, Kevin Maull, as a passenger when she lost control of the sport utility vehicle, according to Tuesday’s ruling by the 11th U.S. Circuit Court of Appeals in Atlanta in Nautilus Insurance Co. v.  Christopher Flor, Tayonna C. Volinski, Daisy Davis.

Both occupants were ejected from the car. Mr. Maull, who was left in a vegetative state, later died of his injuries, while Ms. Volinski sustained a traumatic brain injury and has no recollection of the incident, according to the ruling.

At the time of the accident, Ms. Volinski was driving Mr. Maull to his place of employment. The parties agreed Mr. Flor, Peachtree’s president and owner, had given Ms. Volinski permission to use the vehicle, but disagreed over the scope of that permission, with Nautilus alleging Ms. Volinski’s permission to use the vehicle was limited to commuting to and from work and Ms. Volinski claiming there were no limitations on her use of the vehicle. 

Mr. Flor had an umbrella policy with Scottsdale, Arizona-based Nautilus.

Mr. Maull’s next of kin, Ms. Davis, sued Ms. Volinski, Mr. Flor, Peachstate and others in state court on negligence and negligent entrustment claims, and Ms. Volinski filed a cross claim against Mr. Flor for negligent maintenance, according to the ruling.

Nautilus filed suit in U.S. District Court in Atlanta seeking a declaration of its coverage obligations under the policy, and Nautilus and Mr. Flor both moved for summary judgment.

The District Court granted judgment to Mr. Flor on Nautilus’ duty to defend, because it determined he met the definition of insured under the policy and no exclusion precluded this duty.

The court also determined that its resolution on Nautilus’ duty to defend Mr. Flor also resolved that Nautilus had a duty to defend Ms. Volinski, and also granted summary judgment in her favor. The court did not rule on Nautilus’ duty to indemnify in the case.

A three-judge appeals court panel upheld the lower court’s ruling on Nautilus’ duty to defend Mr. Flor. “According to the policy, Nautilus must defend any suit against an insured, regardless of whether the allegations are ‘groundless false or fraudulent,’” said the ruling.

“The policy provides that Flor, as the named-insured policyholder, is covered ‘while using any automobile.’ The policy defines ‘using’ as ‘maintaining, entrustment to others operating, loading, or unloading.’ The underlying suit asserts claims against Mr. Flor for negligent maintenance and negligent entrustment that arguably fall within the policy’s coverage,” said the ruling.

The panel disagreed, however, over the District Court’s grant of summary judgment to Ms. Volinski in the case, holding “there is a genuine issue of material fact for whether Volinski was using the vehicle within the scope of the permission granted by Flor,” said the ruling, in vacating the lower court’s ruling that granted summary judgment on Nautilus’ duty to defend Ms. Volinski. That issue was remanded to the lower court for further proceedings.

Attorneys in the case could not be reached for comment.

Nautilus is not liable to defend or indemnify an ATM company whose employee was involved in a fatal shooting because of the weapons exclusion in its policy, said a federal district court in
December.