US District Court for District of Massachusetts holds that broad auto exclusion broadly excludes coverage for auto accident

Lynnway Auto Auctions conducted a wholesale auto auction at a facility owned by it and BLR.  A Lynnway employee lost control of a vehicle, resulting in serious injury and the death of five people. The claimants alleged that the driver had a suspended drivers license, that Lynnway and BLR negligently established practices that permitted employees to drive vehicles through crowds, and that they failed to properly implement safety precautions including barriers and crosswalks. 

Lynnway and BLR were named insureds on a general liability policy issued by Indian Harbor Insurance Company.  Indian Harbor filed a declaratory judgment action seeking a declaration that it had no duty to defend or indemnify, because the policy contains an auto exclusion. 

The auto exclusion excludes bodily injury 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 exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the accident that caused bodily injury involved the ownership,  maintenance, use or entrustment to others of any auto that is owned, operated by or rented or loaned to any insured. 

In Indian Harbor Ins. Co. v. Lynnway Auto Auctions, Inc., 2021 WL 4295776 (D. Mass. 2021), the United States District Court for the District of Massachusetts looked at a1986 SJC decision, Worcester Mut. Ins. Co. v. Marnell.  In that case the SJC held that a homeowner’s policy with an auto exclusion provided coverage in a social host case that alleged a drunk driving accident.  Although the policy in that case had superficial similarities to the general liability policy at issue in Lynnway, they were far from identical.  The auto exclusion in Lynnway applied by its own terms even if the claims alleged negligence with respect to the employment of others, as long as the accident involved a vehicle.  The court noted that the broader language was in fact a response to Marnell. 

The situation was also different.  As the court pointed out, homeowners are not expected to have auto coverage for accidents involving cars they don’t own such as the car involved in the drunk driving accident.  But the defendants in Lynnway would clearly have, and did have, an auto policy covering vehicles at the wholesale auto auction facility it owned, including the vehicle involved in the accident. 

As I noted to Massachusetts Lawyers Weekly, although technically courts should not consider the availability of other coverage in determining whether a policy applies, of course they do.  Judges are fully aware that in a case like this it is often one insurer suing another over reimbursement for payments already made to the claimants. That is significantly less compelling than a situation where a finding of no coverage may leave a claimant with no realistic chance of a fair recovery.  

The decision is under appeal.