Title: Recalde v. ITT Hartford

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  Carrico, C.J., Compton, Lacy, Hassell, Keenan, and 
Kinser, JJ., and Gordon, Retired Justice 
 
ALFONSO C. RECALDE, t/a A & R SWEEPING 
& CLEANING 
 
v.  Record No. 970437 
OPINION BY JUSTICE CYNTHIA D. KINSER 
                                   October 31, 1997 
ITT HARTFORD 
 
 
UPON A QUESTION OF LAW CERTIFIED BY THE DISTRICT 
 
OF COLUMBIA COURT OF APPEALS 
 
 
On April 18, 1997, we accepted for consideration a 
question of Virginia law that the District of Columbia Court of 
Appeals certified to us.
1  That court stated in its 
certification order that the certified question is 
determinative of the appeal pending before it.  The certified 
question is: 
 
[W]hether under Virginia law, for the purpose of 
deciding the scope of coverage of a commercial 
insurance policy for injury or property damage 
arising from the use of a motor vehicle, a sole 
proprietorship named as the insured is a legal entity 
separate and distinct from the individual owner doing 
business in that name.  
 
 
I. 
 
 
The underlying lawsuits arose out of an automobile 
accident that occurred in Virginia on September 22, 1989.  An 
employee of A & R Sweeping and Cleaning (A & R), while in the 
course of his employment, left a Ford pickup truck, owned by 
Alfonso C. Recalde and his wife, Anita G. Mora, unattended 
without removing the keys.  Another individual stole the truck, 
                                                 
     
1 This Court’s jurisdiction to accept the certified 
question is pursuant to Va. Const. art. VI, § 1.  See also Rule 
5:42. 
 
 
 
 
2 
                                                
drove it away at a high rate of speed, and collided with an 
automobile driven by Donald E. Reynard.  Alleging that he 
sustained injuries in the accident, Reynard filed a personal 
injury action in the Superior Court of the District of Columbia 
against Alfonso C. Recalde and A & R Sweeping and Cleaning.  
Judith A. Reynard, Donald E. Reynard’s wife, sought recovery in 
a separate count of the same action for loss of consortium.  
 
During the pendency of the Reynard action, a dispute 
ensued concerning available insurance coverage.  Consequently, 
Recalde filed a complaint for declaratory judgment styled on 
behalf of "Alfonso C. Recalde, t/a A & R Sweeping and 
Cleaning"
2 in the Superior Court of the District of Columbia 
against ITT Hartford (Hartford), A & R’s insurance carrier.  
Recalde sought a declaration that, pursuant to the “Business 
Auto Coverage Part” of an insurance policy issued by Hartford 
to A & R, Hartford has a duty to defend A & R and to provide 
insurance coverage in the Reynard action.
3  After staying the 
Reynard action pending resolution of the declaratory judgment 
proceeding, the superior court granted summary judgment for 
Hartford.  Recalde appealed that ruling to the District of 
 
     
2 No party to this appeal disputes that A & R Sweeping and 
Cleaning, sometimes rendered as A & R Industrial Sweeping and 
Cleaning, is a sole proprietorship owned by Recalde. 
     
3 A & R’s claim against Hartford in effect sought a 
declaration respecting excess coverage because Allstate 
Insurance Company insured the Recalde pickup truck under a 
separate policy.  
 
 
 
 
3 
Columbia Court of Appeals, which in turn certified the question 
of law to us. 
 
The disputed insurance policy is a “Special Multi-Flex 
Policy” consisting of two “Coverage Parts,” the “Business Auto 
Coverage Part” and the “Commercial General Liability Coverage 
Part.”  The crucial provisions are the designation of the 
“named insured” in both “Coverage Parts” and the two classes of 
motor vehicles identified as “covered autos” in the “Business 
Auto Coverage Part.”   
 
The named insured under the policy is “A & R Industrial 
Sweeping & Cleaning,” and its mailing address is “5108 Ninian 
Ave., Alexandria, VA 22310.”  The parties agree that this 
address is Recalde’s home and business address.  The definition 
of “covered autos” in this policy includes only the following 
two categories of vehicles: 
 
HIRED AUTOS ONLY.  Only those autos you lease, hire, 
rent or borrow.  This does not include any auto you 
lease, hire, rent or borrow from any of your 
employees or members of their households.  
 
 
NONOWNED AUTOS ONLY.  Only those autos you do not 
own, lease, hire or borrow which are used in 
connection with your business.  This includes autos 
owned by your employees or members of their 
households but only while used in your business or 
your personal affairs.  
 
 
The superior court interpreted the designation of the 
"named insured" and the categories of "covered autos" to deny 
coverage in the Reynard action.  In reaching this conclusion, 
the court rejected the argument that A & R Sweeping and 
 
 
 
 
4 
Cleaning is a legal entity separate and distinct from Alfonso 
C. Recalde.  Instead, the court found that Recalde and A & R 
are one and the same and that “to name one as the ‘named 
insured’ is to name the other.”  Thus, the court found no 
coverage under the "Business Auto Coverage Part" on the basis 
of the definitions of "Hired Autos Only" and "Nonowned Autos 
Only."   The court also held that the Reynard claims fall 
within the coverage exclusion in the “Commercial General 
Liability Coverage Part” for “‘Bodily injury’ or ‘property 
damage’ arising out of the ownership, maintenance, use or 
entrustment to others of any . . . ‘auto’ . . . owned or 
operated by or rented or loaned to any insured.” 
 
The effect of the superior court’s decision is that the 
Hartford policy, which covered only nonowned autos, provided no 
coverage for the Reynard claims because the named insured and 
the owner of the pickup truck were the same entity. 
 
II. 
 
We are of opinion that the certified question should be 
answered in the negative because of the definition and nature 
of a sole proprietorship.  Furthermore, the weight of authority 
from other jurisdictions that have dealt directly with the 
issue is in accord. 
 
A sole proprietorship is “[a] form of business in which 
one person owns all the assets of the business in contrast to a 
partnership, trust or corporation.  The sole proprietor is 
 
 
 
 
5 
solely liable for all the debts of the business.”  Black’s Law 
Dictionary 1392 (6th ed. 1990).
4  Even when an individual does 
business as a sole proprietorship under a different name, the 
individual remains personally liable for all obligations of the 
business.  Carlson v. Doekson Gross, Inc., 372 N.W.2d 902, 905 
(N.D. 1985).  "`Doing business under another name does not 
create an entity distinct from the person operating the 
business.  The individual who does business as a sole 
proprietor under one or several names remains one person, 
personally liable for all his obligations.'"  Id. (quoting 
Duval v. Midwest Auto City, Inc., 425 F. Supp. 1381, 1387 (D. 
Neb. 1977)); see also Toulousaine de Distribution et de Serv. 
v. Tri-State Seed and Grain, 520 N.W.2d 210, 215 (Neb. App. Ct. 
1994); Patterson v. V & M Auto Body, 589 N.E.2d 1306, 1308 
(Ohio 1992).  
 
The weight of authority in other jurisdictions has applied 
the concept that the individual owner and the proprietorship 
are a single entity in insurance contexts.  In Allstate Ins. 
Co. v. Willison, 885 P.2d 342 (Colo. Ct. App. 1994), the owner 
of a sole proprietorship titled a vehicle in the name of the 
business, Bill's Service and RV Center.  In addition to a 
business insurance policy which was not the subject of the 
                                                 
     
4 In contrast to a sole proprietorship, “a corporation is 
a legal entity that is completely separate and distinct from 
its shareholders . . . .”  Bogese, Inc. v. State Highway 
Comm’r, 250 Va. 226, 230, 462 S.E.2d 345, 348 (1995). 
 
 
 
 
6 
litigation, the owner, Willison, had a personal automobile 
policy issued by Allstate.  Willison had an accident while 
driving the business vehicle, and Allstate denied coverage on 
the basis that its policy covered only nonowned autos used in 
the business.  Finding in favor of Allstate, the court held 
that, even though the vehicle was titled in the proprietorship 
name, Willison was nevertheless the owner.  Thus, the vehicle 
was an “owned” vehicle under the Allstate policy. Id. at 344.  
Accord Providence Washington Ins. Co. v. Valley Forge Ins. Co., 
50 Cal. Rptr. 2d 192, 194 (Cal. Ct. App. 1996) (a van 
registered to sole proprietorship was owned by the individual 
proprietor since the sole proprietorship "has no existence 
apart from [the individual owner]"); Samples v. Georgia Mutual 
Ins. Co., 138 S.E.2d 463, 465 (Ga. Ct. App. 1964) ("The fact 
that the plaintiff's husband purchased this automobile in the 
name that he used in doing business does not contradict the 
fact that he owned the automobile as an individual."). 
 
Recalde contends that the decision in Consolidated 
American Ins. Co. v. Landry, 525 So. 2d 567 (La. Ct. App. 
l988), is applicable.
5  There, however, the sole proprietor 
operated two different businesses: an apartment rental business 
                                                 
     
5 Recalde also argued extensively on brief and orally that 
the Hartford insurance policy unambiguously identified only A & 
R as the named insured.  However, questions concerning 
ambiguity, contract interpretation, or coverage are not before 
this Court on the certified question of law. 
 
 
 
 
7 
and a carpentry business.  The insurance policy in question 
insured the individual doing business as Landry’s Apartments.  
Thus, the court found no coverage for a claim arising out of 
his separate carpentry business.  That outcome does not address 
the issue presently before this Court and, in a more recent 
case, Trombley v. Allstate Ins. Co., 640 So. 2d 8l5 (La. Ct. 
App. l994), the Louisiana court specifically held that a sole 
proprietor doing business under a trade name was not “a 
juridical person separate and apart from the natural person 
. . . .” Id. at 817. 
 
Nor is Hertz Corp. v. Ashbaugh, 607 P.2d ll73 (N.M. l980), 
also relied upon by Recalde, persuasive.  There the court found 
no coverage for a temporary substitute vehicle owned by the 
proprietor under an insurance policy issued to him “d/b/a 
Corky’s Wrecker Service.”  That court relied upon an inapposite 
case involving insurance issued to a partnership.  See id. at 
1176 (citing Farley v. American Auto Ins. Co., 72 S.E.2d 520 
(W. Va. 1952)).  Therefore, we do not find the Hertz decision 
persuasive, especially in light of the authorities discussed 
above. 
 
III. 
 
We conclude, therefore, that a sole proprietorship is not 
a legal entity separate and distinct from the individual owner 
doing business in that name, and hence the certified question 
will be answered in the negative. 
 
 
 
 
8 
 
Certified question answered in the negative.