The Arizona Supreme Court holds that (1) the term, “in connection with your business,” as defined in Cincinnati Indemnity Company’s automobile insurance policy, requires a covered vehicle to be used by an employee in furtherance of an employer’s business purpose, which does not include a routine commute to or from the employer’s office, and (2) a contingent Morris agreement is enforceable if it meets the substantive requirements of Morris agreements to ensure against fraud, collusion, unfairness, or unreasonableness.

An employee, driving a vehicle his employer neither owned nor leased, headed to the employer’s place of business at the end of the workday to correct his timesheet. During the drive, the employee collided with another vehicle, killing its occupant. The decedent’s surviving spouse sued the employee and his employer. The employer had extended automobile insurance coverage (the “Policy”) with Cincinnati Indemnity Co. (the “Insurer”). The Insurer defended the employer in the lawsuit but argued it was not required to provide the extended coverage for the employee under the Policy, because at the time of the collision, the employee had not been driving “in connection with” the employer’s business.  

The surviving spouse and the employee entered into a Morris agreement, stipulating to the employee’s liability, agreeing to a monetary judgment—only to be collected against the insurance policy proceeds—and assigning the employee’s rights under the policy to the surviving spouse. The insurance company then intervened in the case to contest the Morris agreement. The surviving spouse counterclaimed, alleging that the Insurer had breached its duty to indemnify the employee.

The surviving spouse moved for summary judgment on the coverage issue. The superior court granted the motion, ruling that the employee was using the vehicle “in connection with” the employer’s business at the time of the collision and that the Insurer was correspondingly obligated to indemnify the employee under the Policy. The Insurer also moved for summary judgment, arguing the Morris agreement was unenforceable. The superior court denied the Insurer’s motion, finding the agreement enforceable, entering the judgment, and ordering the Insurer to pay the surviving spouse. The court of appeals affirmed, and the Arizona Supreme Court granted review.

Turning first to the coverage issue, the Supreme Court interpreted the Policy by looking to its language. Noting the Policy’s inconsistent use of both broad (“in connection with your business”) and narrow(“in your business”) language to describe the covered vehicle-business relationship, and pointing to cases from other jurisdictions, the Court concluded that the phrase “in connection with your business” means less than within the course and scope of employment but more than a mere association, link, or relationship with the employment. In particular, the Court held that an employee’s use of a vehicle must be directly involved with or in furtherance of an employer’s business purpose but does not include a routine commute to or from the employer’s office.

Turning second to the Morris agreement issue, the Supreme Court rejected the Insurer’s argument that a contingent Morris agreement is per se unenforceable. Rather, like all Morris agreements, a contingent Morris agreement must be assessed on a case-by-case basis to ascertain its freeness from free of fraud or collusion and reasonableness in amount. Finding this standard met as to the agreement at issue, the Court held that it was enforceable.

The Supreme Court vacated the coverage ruling of the court of appeals and affirmed its ruling concerning the Morris agreement, reversed the superior court’s judgment, and remanded the matter to the superior court for further proceedings consistent with the Court’s opinion.

Vice Chief Justice Lopez authored the opinion, which Chief Justice Timmer, Justices Bolick, Beene, Montgomery, and King, and Judge Morse joined.

Posted by: BriAnne Illich Meeds