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Evidence of lack of insurance only admissible in negligent hiring case if proximate cause of harm alleged

Asphalt & Concrete Services, inc. v. Perry
___A.3d___, (2014)

by Gregory S. Emrick, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.mdcourts.gov/opinions/cosa/2014/2059s13.pdf

In April 2012, Morgan Perry was struck by a dump truck being operated by William H. Johnson, II while crossing an intersection, causing significant injuries. At the time of the incident, Johnson was operating a truck owned by Higher Power Trucking, LLC (“Higher Power”), Johnson’s purported employer, and was delivering a load of materials on behalf of Asphalt & Concrete Services, Inc. (“ACS”). Johnson did not have a valid driver’s license and his insurance had been revoked for non-payment. Perry filed suit against Johnson, Higher Power, as his employer, and ACS as the employer of Higher Power, alleging vicarious liability and negligent hiring against both Higher Power and ACS. Neither Johnson nor Higher Power participated in the litigation.

ACS moved to dismiss the claims against it, arguing that the Complaint did not allege that Johnson was its employee, and therefore ACS was not vicariously liable for his conduct. During the course of discovery, however, Perry learned that Higher Power was defunct at the time of the collision. In light of these facts, Perry moved the Court to permit him to amend the Complaint to remove Higher Power as a defendant and reflect that Johnson was an employee of ACS. Since Higher Power was defunct at the time incident and had not been revived, it was not a legal entity and the claims against it were void. The Court permitted the amendment, despite the expiration of the statute of limitations, noting that the amendment did not change the underlying nucleus of fact and related back to the filing of the original complaint. At trial, Perry moved into evidence Johnson’ failure to maintain insurance, over ACS’s objection. The Court admitted the evidence, stating that it was relevant to the claim of negligent hiring. At the close of evidence, ACS again moved for judgment on the basis that the evidence showed that Johnson was employed by Higher Power, not ACS. The jury returned a verdict in the amount of $529,520 against ACS and found that Johnson was both an employee of ACS and that ACS negligently hired Johnson. ACS appealed.

The Court of Special Appeals addressed the propriety of admitting the insurance information and the trial court’s decisions denying the motion to dismiss, permitting the amendment of the Complaint, and denying the Motion for Judgment on ACS’s vicarious liability. The Court first reviewed the general prohibition regarding admitting evidence related to insurance under MD. Rule 5-411, but noted that insurance information may be admissible in claims for negligent hiring. The Court agreed that the lack of insurance was evidence of negligent hiring, since insurance was a necessary predicate for operating a dump truck on the road. The Court, however, noted that admission of this evidence was only proper if it was a proximate cause of the harm. The Court reviewed Maryland’s law on proximate cause.

This Court has explained that “ ‘[p]roximate cause consists of two elements: (1) cause in fact and (2) legally cognizable cause.’” We explained that “causation in fact raises the threshold question of ‘whether the defendant’s conduct actually produced an injury.’” Two tests are used to determine whether cause in fact exists, “the ‘but for’ test and the ‘substantial factor test.’” The “‘but for’ test applies when the injury would not have occurred in the absence of the defendant’s negligent act.” The “substantial factor” test appears when “two independent causes concur to bring about an injury, and either cause, standing alone, would have wrought the identical harm.”

Perry, ___A.3d at 13 (internal citations omitted). The Court held that the lack of insurance for non-payment was not a proximate cause of the collision with Perry. Without this causal connection, admission of Johnson’s lack of insurance was prejudicial to ACS. The Court reversed the judgment for Perry.

The Court, however, found that the trial court had not erred in denying the motion to dismiss the Complaint. The Amended Complaint mooted the allegations of the original complaint and the Court was correct in permitting the amendment since the modifications did not alter the parties’ claims and defenses.

Addressing the motion for judgment, the Court observed that in order to show liability under a theory of respondeat superior the trial court was required to consider five (5) elements:

In determining the existence of an employment relationship, five elements/tests are considered: (1) the power to select and hire the employee; (2) the payment of wages; (3) the power of discharge; (4) the power to control an employee’s conduct; and (5) whether the work is part of the regular business of the employee. And the most important test is whether the ... employer has the right to control or direct the manner of work.

Id., at 8. The Court viewed the record at the time of the motion for judgment and held that the there was sufficient evidence of ACS’s control over Johnson’s actions to submit the issue of ACS’s vicarious liability to the jury. The matter was reversed and remanded to the trial court for a new trial.


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