In Commerce Ins. Co. v. Ultimate Livery Serv., Inc., 452 Mass. 639 (2008), the Supreme Judicial Court of Massachusetts held that an insurer providing commercial automobile coverage to a limousine service must indemnify the limousine service for its negligence in allowing an intoxicated passenger to drive a car after using the insured's services.
As usual, Mike Tracy, of Rudolph Friedmann LLP, sent me the decision on the day it came down in November, 2008.
William Powers and a group of his friends hired the insured, Ultimate Livery Service, to drive them from a sports bar in South Boston to a strip club in Rhode Island and back again. Powers drank heavily throughout the evening. After the van driver left for the night, Powers drove his girlfriend's car and was involved in a collision which seriously injured passengers of another car, killing one of them.
Commerce insured Ultimate Livery under a commercial automobile policy which provided coverage for bodily injury "caused by an accident and resulting from the ownership, maintenance or use of a covered auto."
The court analyzed whether the accident "arose out of" the use of Ultimate Livery's van, stating that there is no meaningful difference between "resulting from" and "arising out of." (The meaning of the term "arising out of" has been frequently litigated, including by me.)
The court found that there was coverage. It noted that the van was used consistently with Ultimate's business objectives. It stated that it was of no consequence that Ultimate Livery did not provide any alcohol because it and its driver knew that Powers was consuming alcohol in the van and getting drunk. The court concluded, "The risk of harm is not too far removed to lack the required nexus under the broad causation standard [under the terms "arose out of" or "resulting from"] that applies. It is a reasonable incident that was contemplated in the first instance when the parties originally entered a contract for transportation service."