Essex Ins. Co. v. Long Island Owners Ass'n, Inc., No. 08-179 (S.D. Tex. June 10, 2009)
Beware the "any auto" exclusion. Although the policyholder in this case dodged a bullet, risk managers everywhere should try to avoid this exclusion in their commercial general liability (CGL) policies.
In theory, insureds should be able to obtain insurance covering liability for most accidental physical injuries to others. If the insured causes the injury while driving or otherwise using an auto, the coverage is provided under a commercial auto liability policy. In all other cases, not arising from the insured's use of an auto, the CGL policy should apply. To avoid overlap, the CGL policy excludes claims arising from the use of the insured's auto, and the auto policy covers nothing but such claims. No claim should fall through a crack between the two. However, some CGL policies out there exclude claims arising out of "any auto" (not just one owned or used by an insured).
In Essex, a motorcyclist was struck by a swing bridge traffic arm that suddenly and unexpectedly lowered on the passing traveler. The vehicle operator sued the homeowners' association responsible for the traffic arm. The defendant's CGL carrier denied coverage under the following exclusion:
With respect to any "auto" . . . [t]his insurance does not apply to any claim, suit cost or expense arising out of, caused by or contributed to by the ownership, non-ownership, maintenance, use or entrustment to others of any "auto."
Since the motorcycle is an "auto" under the policy, Essex asserted that the accident arose form the motorist's use of "any auto." N.B., to avoid this challenge to coverage, purchase a CGL policy that excludes any claims arising from the insured's ownership, non-ownership, maintenance, use or entrustment to others of any "auto." A coverage lawsuit followed.
The court noted that the Texas Supreme Court has ruled that, for this type of exclusion to apply, "a causal connection must exist between the accident or injury and the use of the motor vehicle." (Mid-Century Ins. Co. v. Lindsey, 997 S.W.2d 153 (Tex. 1999). With this criterion in mind, the court decided the issue primarily by comparing two precedents. In Collier v. Employers Nat'l Ins. Co., 861 S.W.2d 286 (Tex. App. 1993), the court found that where a driver of a moving vehicle was shot by someone in a passing car, the use of the vehicle was not causally connected to the incident.
By contrast, in Markel Internat'l Ins. Co. v. Urban, LLC, #CA-160-OG (W.D. Tex. 2008), a woman was struck and killed by a passing vehicle when she was going from one bar to another across a busy street. The Markel court held that auto exclusions (in the bars' policies) excluded the claim because being hit by a car is clearly causally connected to the use of an auto.
The Essex court held that being hit by a traffic arm while driving through the gate was closer to the Collier facts than those in Markel. The motorcyle didn't cause the accident. The driver happened to be passing in a vehicle, but the accident could as easily have befallen a passing pedestrian. Accordingly, the court held in favor of the insured.
The insured taverns in the Markel case probably had no idea they would not be covered if patrons were struck by autos when leaving their establishments. That is a foreseeable risk, as is the lawsuit for the owner's negligence. Had they only checked the language in their policies and asked their agents for a broader policy, the claim would have been covered (as long as the patron was not so drunk as to trigger a dramshop exclusion -- but that is for another day).
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