In Perry v. Asphalt & Concrete Services, Inc., the Court of Appeals of Maryland concluded that the admission of testimony regarding a defendant’s lack of liability insurance at the time of an accident was a legal error. 

           Petitioner Morgan Perry (“Perry”) sued Asphalt Concrete Services, Inc. (“ACS”), Higher Power Trucking, LLC (“Higher Power”), and William Johnson, II (“Johnson”) for injuries he sustained after he was struck by a dump truck driven by Johnson and owed by Higher Power.  ACS had hired Higher Power to transfer asphalt and stone to St. John’s Regional Catholic Church, where ACS was paving a children’s playground.  Perry was crossing a street in Frederick, Maryland, when the truck struck him.  He suffered rib fractures and head trauma as a result of the accident.

            Perry filed suit in the Circuit Court for Prince George’s County, alleging negligence as to all Defendants and Negligent Hiring and Supervision as to ACS.  In a dialogue that occurred outside of the presence of the jury, Defense Counsel asked the Court to exclude evidence of Johnson’s lack of insurance because the first issue was the determination of whether Johnson an employee of ACS or independent contractor.  The Court replied by stating that the prohibition against the admission of insurance information was based on the theory that that knowledge would prejudice a defendant by encouraging the jury to come to a finding of liability.  But here, the Court noted that Perry sought to introduce the contrary:  evidence of the lack of insurance.  The Court overruled Defense Counsel’s objection and proceeded to allow Perry to call ACS employees to testify, in order to establish a foundation for an employment relationship, before it would rule on whether evidence of the lack of insurance was admissible.  The president of ACS testified that at the time of the accident, ACS had 15 employees, who received salaries, health care benefits, and 401(k) participation.  Johnson, the president testified, was not an employee and did not receive benefits.  Perry proceeded to call numerous witnesses on the issue of insurance, including those who testified that Johnson had insurance, but it was invalid at the relevant time due to a lapse in payment, and Progressive did not respond to requests by ACS to submit coverage or lapse information. 

            After Perry concluded his case, the Court overruled ACS’s motion to strike Perry’s requested jury instruction regarding the State’s requirement of liability insurance.  The jury returned a verdict for Perry finding that: 1) Johnson was en employee of ACS; 2) ACS was negligent in its hiring of Johnson; 3) Johnson’s negligence in properly operating his vehicle proximately caused Perry’s injuries; and 4) Perry was not contributorily negligent. 

            ACS appealed to the Court of Special Appeals of Maryland, which reversed the decision of the trial court on the bases that there was no causal link between Johnson’s lack of insurance and the accident, and Johnson’s lack of insurance was not relevant to Perry’s claim of negligent hiring.

            The Court of Appeals granted writ of certiorari and considered whether the trial court abused its discretion by admitting the evidence of the lack of insurance.   The Court commenced its analysis by reviewing Maryland Rule 5-411, which prohibits the admission of evidence of insurance for the purpose of proving fault or liability and is irrelevant to a negligent hiring claim.  Evidence of liability insurance may be admitted for other purposes, including proof of agency, ownership, or control or bias of a witness.  Next, the Court distilled the importance of determining whether Johnson was an agent, servant, and/or employee of ACS or an independent contractor.  Under the doctrine of respondeat-superior, an employer is vicariously liable for the acts of its employee conducted in the scope of employment.   The general rule is that an employer who hires an independent contractor is not liable for the negligence of the independent contractor.  An exception is created, though, when there is some quality in the independent contractor, which made it negligent for the employer to entrust the work to him. 

Specifically, the Court discussed the plaintiff’s burden in proving a negligent hiring claim; first, the plaintiff must show that the employer failed to undertake a reasonable investigation, which resulted in the contractor’s hiring; 2) second, even if the plaintiff proves negligent hiring, he must prove, still, that the hiring proximately caused the plaintiff’s injuries.  The Court noted that ACS contacted Higher Power twice to corroborate insurance coverage, and the fact that ACS hired Higher Power without receiving proof of liability insurance certainly was relevant to the issue of whether it breached its duty.  Next, the Court discussed proximate cause, emphasizing that an employer is liable under a negligent hiring claim only if the employee’s “incompetence” caused the harm.  Critical to this determination is whether it was foreseeable that the negligent act would cause the injury alleged in the Complaint.  The Court concluded that while ACS failed to comply with its legal responsibility to hire drivers with liability insurance, that failure was not the cause and effect of Perry’s injuries.  To highlight its determination, the Court analogized “…one cannot conclude…that an individual is a poor driver because insurance coverage had lapsed due to missed payments.”  For this reason, the Court deemed that the trial court’s admission of Johnson’s lack of liability insurance was legal error.  Further, the Court also concluded that the admission of the irrelevant insurance information was “highly prejudicial” to ACS because it likely caused the jury to draw impermissible conclusions as to liability.