Written by John K. Messersmith, Esq. & Sarah Kathryn Atkinson, Esq.
Edited by Janeen Koch, Esq.
How often have you had a claim where the facts suggested your insured had no liability but years after the accident, the claim re-emerges on your desk as a lawsuit with your insured as a defendant? As a claims professional, a huge concern in any case involving multiple entities and parties is keeping your coverage from being exposed. Transportation cases are particularly problematic as the industry is known for its complicated relationships associated with owner/operators, leased tractors, leased trailers and other contractual arrangements. Plaintiffs’ attorneys mine those relationships for ways to include new parties and importantly, to find additional layers of coverage. One such tactic that seems to be gaining favor with plaintiff attorneys is to allege a “joint venture” between a tractor or trailer owner and the operator.
Traditionally, plaintiffs simply alleged an employer-employee relationship and therefore, the employee’s negligence was vicariously imposed on the employer. Obviously, the existence of such a relationship in the trucking industry can be complicated and requires a fact-based determination of a number of factors, the most important of which is the right to control. Coker v. Gunter, 191 Va. 747 (1951). Today, however, most motor carriers and operators are engaged in a contractual relationship represented by a contract, lease or purchase agreement. This complex and often tangled set of relationships has given rise to some attorneys arguing that this type of relationship constitutes a joint venture. They simply allege that the owner and the operator engaged in a joint venture to transport product for a profit. Factually, they often allege that the two are both engaged in the trucking business, that they share equipment and they share the profits. On the face of it, those allegations seem plausible, however the allegations are far too general and often lack factual support.
In Virginia, in order for the parties to be in a joint venture, they must have “a community of interest in the object and purpose of the undertaking and an equal right to direct and govern the movements and conduct of each other” with respect to their common goal. Alban Tractor Company v. Sheffield and Kitzmiller Construction Co., 220 Va. 861 (1980). When a joint venture exists, the negligence of one participant is imputed to all participants and each participant is an agent of the other. The Supreme Court of Virginia recently elaborated on its definition of a joint venture by describing a situation where “two or more parties enter into a special combination for the purpose of a specific business undertaking, jointly seeking a profit, gain, or other benefit, without any actual partnership or corporate designation.” PGI, Inc. v. Rathe Prods., Inc., 265 Va. 334 (2003). They are not established by law, but rather created by express or implied contracts. Smith v. Grenadier, 203 Va. 740 (1962). When a joint venture exists, therefore, the negligence of the tractor-owner, or one of its employees, could be imputed to the trailer-owner, and both parties could be properly joined in a suit.
It is easy to allege that both a motor carrier and an operator are both sharing equipment, profit, and benefit from a delivery operation. Consequently, as a potential defendant, it is important for the motor carrier and the operator to establish that their respective operations are completely distinct and separate. Procure all of the lease agreements and contracts in order to show not only that there is no corporate relationship, but importantly, that each has the right and responsibility to control their respective operations. Preserve all documents evidencing payments associated with the delivery to show each entity derived a separate financial benefit. Retain all documents evidencing the load, as often the operator is making a delivery totally unrelated to the business of the owner of the tractor or trailer and there is no relationship between the two other than the equipment. Where possible, establish that each party has their own insurance and neither is an additional insured of the other. In some cases where a motor carrier has employee drivers but leases an operator for excess deliveries, document facts showing the differences in how the motor carrier treats its employees as compared to the leased operators.
Transportation relationships are complicated where often equipment and drivers are leased, loaned or contracted and each inquiry depends on the specific facts of a particular relationship. The outcome of each determination will have resounding effects on the parties’ liability and insurance policies in play when an accident occurs.