Opinion ID: 172126
Heading Depth: 2
Heading Rank: 3

Heading: Sufficient Nexus Test

Text: In granting summary judgment for HRC, the district court applied a sufficient nexus test derived from an unpublished district court opinion, North River Insurance Co. v. American Home Insurance Co., No. 01-0231 (D.N.M. Nov. 22, 2002). Addressing the same language that exists in the Union Standard policy, North River held that for a non-owned vehicle to be used in connection with [an insured's] business, there must be a sufficient nexus between the insured party and the vehicle. See id. at 11. A sufficient nexus would exist where, for example, the parties had a joint venture or enterprise, or the insured had some legal responsibility for the use of the vehicle. Id. An insufficient nexus would exist where, for example, a private vehicle caused an accident while turning around in an insured's parking lot. Id. at 10. As an initial matter, we note that certain factors from North River bolster our resolution of the coverage issue. For example, the relationship between HRC and Brunson cannot be described as a joint venture or enterpriseindeed, both parties agree no joint venture or enterprise existed. See Appellant's App. at 575-76. Nor did HRC have any legal responsibility for the use of Brunson's truck: HRC hired Brunson as an independent contractor to transport the mud separator on its own, using Brunson's own equipment and its own employees. In deciding the Union Standard policy's coverage, the district court reasoned that Brunson's transportation of HRC equipment to the HRC yard was a task core to HRC's business of leasing oil rig equipment, thereby establishing a sufficient nexus to constitute a use of the Brunson vehicle in connection with [HRC's] business. Appellant's App. at 675 (District Ct. Amended Order). New Mexico courts have never applied such a nebulous distinction between independent contractors involved in core tasks and those who are not. An example illustrates the problem with the sufficient nexus test as applied by the district court. Suppose that instead of renting drilling equipment, HRC's core business was marketing products via the Internet and shipping them from its warehouse. Applying the district court's sufficient nexus approach in this situation would render delivery trucks covered autos under the Union Standard business auto policy. After all, such vehicles would drive to the HRC warehouse daily to receive packages integral to HRC's core business. Should one of these vehicles strike a pedestrian while en route to HRC's office or in its parking lot, it would be a non-owned auto and the Union Standard policy would cover any resulting damages. Construing the business automobile policy provision in such a way would, in our view, impermissibly extend coverage to a vast universe of potential claimants. In essence, the problem with a substantial nexus test is that it would resolve this coverage dispute by focusing on whether, for example, a contractor is supplying vital services to a business. In our view, for the reasons we have given here, New Mexico's reasonable expectations of the insured test is focused instead on the insured's control.