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Marquis v. State Farm Fire and Casualty Co.6/5/1998
f the automobile, which negligence is covered under the policy.
Although Upland was a negligent entrustment case, its rule applies to claims based on negligent hiring, retention, or supervision. In this case, State Farm's contractor's policy excludes coverage for accidents arising from the use or negligent entrustment of an automobile, but does not exclude coverage for the negligent hiring, retention, or supervision of an employee . Under Upland, it makes no difference that the accident was causally related to the use of an automobile because the theory of liability is negligent hiring, retention, or supervision based on the independent negligence of Sharon Auck. Upland is the rule in Kansas.
The negligence alleged in this case is that of negligent supervision, hiring, or retention, which is negligence separate and distinct from negligence of the driver whose action caused the injury. Negligent supervision, hiring, or retention is a recognized cause of action under Kansas law; its focus is upon the actions of someone other than the person whose negligence caused the injury. In Upland, where the insured's liability was premised upon a legal theory separate and distinct from the liability excluded by the policy, the policy provided coverage for that claim. Thus, under Upland, we recognized that the policy provisions excluded coverage for negligent claims against the driver but it did not exclude coverage for the distinct and separate liability theory of negligent entrustment.
State Farm contends that our decision in Upland should be limited and has been limited by the Court of Appeals and federal district court in cases which were decided after Upland. See U.S. Fidelity & Guar. Co. v. Heltsley, 733 F. Supp. 1418 (D. Kan. 1990); State Farm Mut. Auto. Ins. Co. v. Cummings, 13 Kan. App. 2d 630, 778 P.2d 370 (1989).
Upland is a minority rule in its recognition that policy provisions excluding coverage for the use of an automobile owned or operated by any insured do not necessarily exclude coverage for the distinct and separate liability theory of negligent entrustment. Perhaps the case which best expresses the majority rule and reasoning, and one relied upon by State Farm, is Oakley Transport v. Zurich Insurance Co., 271 Ill. App. 3d 716, 648 N.E.2d 1099 (1995). In Oakley, the court interpreted an exclusion similar to the one we now consider in this case. It noted that the employer 's negligent supervision could not be divorced from its employee 's negligent driving of the vehicle and, thus, coverage was excluded:
"In legal terms, the negligent use of the vehicle, which is directly excluded under the policy [as it is in State Farm's contractor's policy] is the nexus between the supervisor and the supervisee. Because the claim for negligent supervision is not independent of, but inextricably intertwined with, the employee 's use of the truck, any breach by the employer to supervise such use is necessarily deemed to have arisen therefrom. The majority of decisions from other jurisdictions which have considered the identical issues in factually analogous situations have likewise held that the 'auto' exclusion precludes coverage. [Citations omitted.] Accordingly, the claims of negligent supervision against Oakley are excluded from coverage under the 'auto' exclusion." 271 Ill. App. 3d at 727.
In arriving at its decision, the court distinguished between the various different policies and purpose:
"Standard commercial liability policies are issued to cover all hazards incident to the operation of a business with the exception of certain excluded risks, including those involved in the ownership, maintenance, use or entrustment of an 'auto.'
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