A unit of car insurer Progressive Corp. has no duty to defend or indemnify a trucking company in a case filed on behalf of an injured driver because he is considered an employee under federal regulations, and therefore falls under a policy exclusion, even though the trucking firm considers him to be an independent contractor, says an appeals court.

An unidentified truck driver for Garden City, Georgia-based Madd Transportation L.L.C. was seriously injured in May 2012 while at a Pennsylvania facility operated by Ambridge, Pennsylvania-based IPSCO Koppel Tubulars L.L.C., which produces pipes and connections, according to Tuesday’s ruling by the 11th U.S. Circuit Court of Appeals in Atlanta in Progressive Mountain Insurance Co. v. Madd Transportation, IPSCO Koppel Tubulars L.L.C.

About a year later, the driver’s legal guardian filed a lawsuit charging IPSCO with negligence, which added Madd as a third-party defendant in the case, according to the ruling. Madd notified Cleveland-based Progressive of the lawsuit, asserting its commercial auto insurance policy required Progressive to defend it.

Progressive filed a declaratory judgment action in U.S. District Court in Savannah, Georgia, contending it had no duty to defend or indemnify Madd under the policy because of its “employee exclusion.”

Madd and IPSCO contended the employee exclusion was inapplicable because the driver was an independent contractor. The policy does not define “employee,” according to the ruling.

The District Court ruled in Progressive’s favor, and a three-judge appeals court panel unanimously agreed with its ruling.

Progressive’s obligation to defend Madd “depends on whether independent contractors qualify as ‘employee’ under the policy’s employee exclusion,” says the ruling.

“Although the policy itself does not define ‘employee,’ it is subject to federal motor carrier regulations that do define that term,” and these consider independent contractors to be employees, says the opinion, in upholding the lower court ruling.