US District Court For District of Massachusetts holds that auto exclusion in pedicab's general liability policy excludes injuries caused by car hitting insured's customers in a pedicab

Laura Gentry Reagan and her husband Robert Reagan hired a pedicab that was licensed and registered to Boston Rickshaw and operated by its employee Dennis Suozzi.  During the ride, Suozzi allegedly changed lanes without looking or signaling.  That caused a vehicle to hit the rear of the pedicab, injuring the Reagans.  They sued Suozzi and Boston Rickshaw.

Atain Specialty Insurance provided general liability insurance to Boston Rickshaw.  It denied a duty to defend or indemnify on the basis of an exclusion for bodily injury "arising out of . . . any auto . . . whether or not owned, maintained, used, rented, leased, hired, loaned, borrowed or entrusted to others or provided by another to any insured." 

In Atain Specialty Insurance Co. v. Boston Rickshaw LLC, __ F.3d __, 2019 WL 2766980 (D. Mass.), the United States District Court for the District of Massachusetts first dismissed the argument that the declaratory judgment action was not yet ripe because the underlying lawsuit had not yet resolved, as the declaratory judgment action raised the issue of the duty to defend as well as the duty to indemnify.   

The court then addressed the first part of the auto exclusion, excluding coverage for body injury "arising out of . . . any auto."  It cited the usual definitions for "arising out of," a phrase which "must be read expansively, incorporating a greater range of causation than that encompassed by proximate cause," etc.  It held that the exclusion "therefore, appears to apply to the Reagans' alleged injuries, because the injuries arose directly of the operation of the automobile, and would not have occurred but for the collision."

The Reagans argued that taking the exclusion as a whole, it applies only to autos under the control of the insured, and does not include the auto that struck the pedicab. The court held that such an interpretation was contradicted by the plain meaning of the policy interpreted by the rules of grammar.

Finally, the Reagans argued that a reasonable insured that operates pedicabs would not expect the auto exclusion to apply to autos outside of their control or use, or to autos that strike pedicabs.  The court responded to that argument in part by pointing out that it is commonplace for insureds to have separate automobile and general liability policies.  I find that comment troubling.  After all, insureds who don't own or use automobiles generally don't have automobile policies, but that doesn't mean that their customers or visitors can't get hit by cars in a variety of circumstances under which the insured could be found liable. 

That led me to wonder whether a standard homeowner's policy, which I know excludes coverage generally for motor vehicle accidents, would exclude coverage if an unknown person drove a car through the wall of a house (and then drove away).  The standard ISO homeowner's policy form (a form used by many insurers) does not exclude coverage in those circumstances:

·       The property damage coverage (covering damage to the house itself) excludes coverage to motor vehicles themselves, but does not exclude coverage for damage to the house caused by a motor vehicle. 

·       The liability coverage (covering claims against the homeowner brought by an injured person) excludes "motor vehicle liability," which is defined in the policy as liability arising out the ownership or use of the vehicle by an insured. 

It's worthwhile to note that the exclusion interpreted in the case is also not a standard exclusion (or at least is not in the first general liability ISO form that I grabbed).  I’m not going to speculate about the insurance policy negotiations of a company whose business involves being a part of traffic, or whether that company has an auto policy that is providing coverage.