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.
2
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
3
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
4
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).
5
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.
6
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.
7
Certified question answered in the negative.
8