Friday, March 4, 2011

Third Department Declines to Adopt First Department Interpretation of "Use of Auto" Exclusion in CGL Policy

In Essex Ins. Co. v. Grande Stone Quarry, LLC, the underlying plaintiff was injured while using an ATV on property owned by Grande Stone Quarry. Grande Stone notified its insurer, Essex Ins. Co., of the potential claim. Essex disclaimed coverage pursuant to an endorsement amending its policy in pertinent part as follows:

This insurance does not apply to "bodily injury". . . or any injury, loss, or damages. . . arising out of, caused by or contributed to:

a. by ownership, non-ownership, maintenance, use, or entrustment to others of any "auto". . . all terrain vehicle (ATV), or motorcycle. Use includes operation and "loading" and "unloading".

By comparison, the standard language in Essex's CGL policy, which was amended by the above-referenced endorsement, excluded coverage as follows:

"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. Use includes operation and "loading or unloading".

As can be seen, the exclusion was clearly amended to apply to ATV use. As can also be seen, the exclusion was amended to delete the limiting language for application to ownership or use of an ATV by "any insured." Despite the foregoing, the Third Department found that the exclusion did not apply to "any other persons" without adding such explicit language. The Court stated that Essex had "failed to create an exclusion having a definite and precise meaning, unattended by danger of misconception" (citations omitted). (The Third Department did not discuss the fact that the exclusion also applied to "non-ownership" of any ATV).

Most notably, the Third Department specifically observed that it was declining to adopt the holding of the First Department, thereby creating a conflict between the Departments on this issue, in DMP Contr. Corp. v. Essex Ins. Co. (76 AD3d 844, 846-47 [1st Dept. 2010] [holding that: "The plain meaning of this language, which focuses on the connection between a vehicle and the injury, not between a vehicle and the insured, is that bodily injury occurring as described is not covered, whether or not it is the insured who owned, maintained, used or entrusted to others the subject automobile]).

Whether a conflict between the Departments on the interpretation of this exclusion presents enough "leaveworthiness" for the Court of Appeals to take this issue might be dependent upon whether other insurers have similarly amended the standard CGL policy language to exclude coverage to use of "autos" or ATV's by persons other than the insured while operating such vehicles on the insured's property. If the issue is limited to Essex's policy, it may not present sufficient statewide implications or be of such public importance as to warrant leave. Stay tuned to this blog for any further developments.

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