Defining “In Connection With Your Business” in Non-Owned Auto Insurance Coverage

Introduction

This case arises from a fatal collision involving Martin A. Montano Jr., an employee of Casas Custom Floor Care, LLC (“Casas”), and the surviving spouse of the victim, Michael Corey Cravens. At issue were two core questions: first, the scope of coverage under an automobile liability policy issued by Cincinnati Indemnity Company (“Cincinnati”)—specifically, what it means for an employee to operate a “non-owned covered auto” “in connection with” the employer’s business—and second, the enforceability of a contingent Morris agreement executed between Montano and Cravens after Cincinnati reserved its rights. The Supreme Court of Arizona reversed and remanded on coverage and affirmed on the Morris agreement’s enforceability.

Summary of the Judgment

The Arizona Supreme Court held that an employee uses a non-owned auto “in connection with” the employer’s business when the use is directly involved with or furthers a business purpose, but does not include a routine commute. The Court harmonized two policy provisions—one requiring use “in your business” and the other “in connection with your business”—to require more than a mere link yet less than strict course and scope. It further ruled that contingent Morris agreements are not per se unenforceable; they remain valid so long as they meet established safeguards against fraud, collusion, unfairness, or unreasonableness. The case was remanded to apply the clarified coverage standard.

Analysis

Precedents Cited

• United Services Automobile Ass’n v. Morris, 154 Ariz. 113 (1987): Established requirements for enforceable settlements under an insurer’s reservation of rights (no fraud, collusion, unfairness, unreasonableness; insurer notice and opportunity to contest).
• Bartolomucci v. Federal Insurance Co., 770 S.E.2d 451 (Va. 2015): Interpreted identical “non-owned auto” language, distinguishing the general “in connection with your business” from the narrower “in your business,” and applied the narrower test to exclude routine commutes.
• Pham v. Hartford Fire Ins. Co., 419 F.3d 286 (4th Cir. 2005): Construed an “employee use” endorsement to require actual engagement in the employer’s business at the time of the accident.
• Engler v. Gulf Interstate Eng’g, Inc., 230 Ariz. 55 (2012): Defined “course and scope of employment” as tied to employer control, a standard the Court found inappropriate for “in connection with” language.
• California Casualty Ins. Co. v. American Family Mut. Ins. Co., 208 Ariz. 416 (App. 2004): Earlier Arizona decision defining “in connection with” as “associated” or “related,” which the Supreme Court found too broad when read with the companion “in your business” provision.

Legal Reasoning

The Court began by recognizing an ambiguity between two policy clauses:

1. An “Expanded Coverage Plus Endorsement” conditioning employee coverage on use “in your business.”
2. A “Non-Owned Autos” definition requiring use “in connection with your business.”

Because the policy must be read as a whole and ambiguities construed against the drafter, the Court harmonized the terms to require that an employee’s non-owned auto use be both in connection with and in the furtherance of the employer’s business purpose—but not so broadly as to cover a commute nor so narrowly as to demand strict course and scope control. It found neither party’s proposed interpretation (scope of employment vs. mere association) satisfactory and adopted a middle path inspired by Bartolomucci and Pham: coverage applies when the vehicle use is directly involved in or furthers a business task or purpose at the time of the accident.

On the Morris agreement, the Court reaffirmed that contingent agreements are permissible so long as they adhere to Morris safeguards. The contingency here—rescission if the agreement itself precluded a respondeat superior claim—did not prejudice the insurer and provided a narrow, predictable trigger.

Impact on Future Cases

• The clarified definition of “in connection with your business” will guide insurers drafting employee-use endorsements, ensuring they specify whether routine commutes are excluded and under what circumstances personal vehicles qualify for coverage.
• Plaintiffs and insurers will rely on this decision to argue coverage for on-the-job diversions (e.g., impromptu supply runs) while excluding ordinary home-to-work travel.
• Contingent Morris agreements will be tested under a fact-specific fairness standard, not invalidated solely for their contingency; this preserves flexibility for settlement in reservation-of-rights scenarios.

Complex Concepts Simplified

Non-Owned Covered Auto: A vehicle not owned or leased by the employer but used for employer’s business.

In Connection With Your Business: More than a mere link; it means the vehicle is being used to carry out or support a business task at the time of the incident, such as delivering goods or running a work-related errand.

Course and Scope of Employment: A traditional tort concept requiring employer control over the employee’s actions at the accident time—too strict for this insurance standard.

Morris Agreement: A stipulation where an insured admits liability and assigns insurer rights to the plaintiff, in exchange for limiting collection to policy limits, subject to protections against collusion or unfairness.

Conclusion

This decision establishes a definitive, middle-ground test for when an employee’s use of a non-owned vehicle is covered under an employer’s auto policy: it must directly further the employer’s business purpose, excluding routine commutes yet not demanding strict employer control. It also confirms that contingent Morris agreements remain valid so long as they comply with the core anti-fraud and fairness principles of Morris. Together, these rulings refine insurance coverage interpretation and settlement practice in Arizona.