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.

 

 

 

Mass. Appeals Court holds that GL policy effectively excludes coverage for negligent supervision of driver

Kimberly Pereira, an employee of R. Squared, provided support services to Dennis Pinto, who had been diagnosed with dementia.  Pereira drove Pinto to a restaurant in a car owned by Pinto's wife.  At the restaurant Pereira consumed alcohol and became intoxicated.  She subsequently crashed the vehicle, and Pinto was seriously injured.

Pinto's family sued Pereira, R. Squared, and R. Squared's principals.  The claims included liability under respondeat superior against R. Squared and its principals, and negligent hiring, training, supervision or retention. 

FSIC provided general liability coverage to R. Squared.  It disclaimed coverage on the basis of an automobile exclusion.   That exclusion provided, "This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, training or monitoring of others by that insured, if the 'occurrence' which caused the 'bodily injury' or 'property damage' involved the ownership, maintenance, use or entrustment to others of any . . . 'auto"  . . . that is owned or operated by or rented or loaned to any insured." 

The FSIC policy also contained a severability clause, under which the policy applied "separately to each insured against who claim is made or suit is brought." 

Pilgrim provided auto coverage to R. Squared.  It settled the suit.  FSIC filed a declaratory judgment action, seeking a declaration that Pilgrim had no right to contribution or subrogation from it. 

In First Specialty Ins. Co. v. Pilgrim Ins. Co., 83 Mass. App. Ct. 812 (2013), the court distinguished the FSIC policy from  policies interpreted in earlier cases.  The earlier cases had similar facts.  The court found coverage in those cases because of the severability clauses of the policies. 

In First Specialty the court distinguished the policies in those earlier cases, because the FSIC policy stated that the auto exclusion applied even if the claims against any insured allege negligence in the supervision or hiring of others by that insured.  That language was sufficient to make the severability clause ineffective with respect to the exclusion.  The court speculated that the clause was added to address the earlier cases which had found coverage.