CGL Exclusion for ATVs Found Ambiguous
The Appellate Division, Third Department, recently found a Commercial General Liability ("CGL") policy exclusion relating to ownership and use of an all terrain vehicle ambiguous. Essex Insurance Company v. Grande Stone Quarry, LLC, et al., Appellate Division, Third Department, March 3, 2011.
William Matter sustained injuries when an ATV he was operating went down a steep embankment on property owned by Grande Stone Quarry. Matter sued Grande for an alleged dangerous condition on its property. Essex Insurance, the insurer for Grande under a CGL policy, disclaimed coverage citing an endorsement, amending its policy which provided:
This insurance does not apply to ‘bodily injury’, ‘property damage’, ‘personal injury’, ‘advertising injury’ or any injury, loss, or damages, including consequential injury, loss or damage, arising out of, caused by or contributed to:
a. by ownership, non-ownership, maintenance, use, or entrustment to others of any ‘auto’, aircraft, watercraft, snowmobile, all terrain vehicle (ATV), or motorcycle. Use includes operation and ‘loading’ and ‘unloading’.
Essex Insurance commenced a declaratory judgment action against Grande and Matter. Plaintiff and Defendants moved for summary judgment. Supreme Court granted Plaintiff’s motion, declaring Plaintiff was not required to defend or indemnify Grande. Grande appealed.
On appeal, the Appellate Division reviewed the amended policy exclusion, as well as the original policy exclusion which excluded:
‘Bodily injury’ or ‘property damage’ arising out of the ownership,
maintenance, use or entrustment to others of any aircraft, ‘auto’ or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and ‘loading or unloading’.
The Court noted that the original exclusion is limited to listed activities “by the insured," and that the recognized purpose of such an exclusion is that the insured
generally obtains “mirror image” coverage under its automobile policy for complete protection. In this situation, the amendment expanded the list of vehicles encompassed by the exclusion to include ATVs and significantly omitted the reference to “any insured” in the re-wording of the exclusion.
The Court rejected Essex Insurance’s position that the amended exclusion included use of the listed vehicles “by anyone, not just by an insured on the policy.” The Court concluded that the amendment relied upon by Essex Insurance “would not simply apply to vehicles for which an insured would be expected to obtain separate insurance, but extended to a whole new category of people, i.e., those coming upon the insured’s premises via any of the listed vehicles, and sustaining an injury due to an allegedly defective condition of the insured’s property. While a reasonable insured reading the pertinent language would certainly understand that this policy did not cover the insured’s use of the various vehicles, it is not clear that the insured would realize that protection had been extinguished for claims resulting from third parties using such vehicles when injured by a condition of the insured’s property.”
The Court cited the general rule that an ambiguity in the policy is construed against the insurer, and the test of ambiguity focuses on the reasonable expectations of the average insured. The insurer must establish that the exclusion is subject to no other reasonable interpretation. The Court found the policy language ambiguous and reversed the lower court, declaring that Essex Insurance had a duty to defend and indemnify Grande in the underlying personal injury action.
The Court noted that a First Department case, DMP Contracting Corp. v. Essex Insurance Company, 76 A.D.3d 844 (2010), appeared to have accepted Essex Insurance’s interpretation of the amended policy exclusion, and rejected that holding.
This case is an example of a strict policy interpretation by the Court in finding an alleged ambiguity, even in the face of another appellate court’s holding that similar policy language was unambiguous.
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