Recalde v. ITT Hartford

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
1
Appeals certified to us. 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.
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.

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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

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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

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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).

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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.

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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.

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Certified question answered in the negative.

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