CHAPTER EIGHT - SECTION II – LIABILITY EXCLUSIONS

MOTOR VEHICLE EXCLUSIONS

 

 

ISO. 1.  Coverage E-Personal Liability and Coverage F-Medical Payments to Others do not apply to bodily injury or property damage: ...

e.     arising out of:

(1)   the ownership, maintenance, use, loading or unloading of motor vehicles or other motorized land conveyances, including trailers, owned or operated by or rented or loaned to an insured;

(2)   the entrustment by an insured of a motor vehicle or any other motorized land conveyance to any person; or

(3)  statutorily imposed vicarious parental liability for the actions of a child or minor using a conveyance excluded in paragraph (1) or (2) above. This exclusion does not apply to:

(1)   a trailer not towed by or carried on a motorized land conveyance.

(2)  a motorized land conveyance designed for recreational use off public roads, not subject to motor vehicle registration and:

(a)  not owned by an insured; or

(b)  owned by an insured and on an insured location.

(3)   a motorized golf cart when used to play golf on a golf course.

(4)   a vehicle or conveyance not subject to motor vehicle registration which is:

(a) used to service an insured's residence;

(b) designed for assisting the handicapped; or

(c) in dead storage on an insured location.

 

Other Company.    1.         Coverage L and Coverage M do not apply to: ...

e.   bodily injury or property damage arising out of the ownership, maintenance, use, loading or unloading of: ...

(2)   a motor vehicle owned or operated by or rented or loaned to any insured; or ...

f.   bodily injury or property damage arising out of:

(1)   the entrustment by any insured to any person; ...

with regard to the ownership, maintenance or use of any aircraft, watercraft, or motor vehicle (or any other motorized land conveyance) which is not covered under Section II of this policy;

 

                                    MOTOR VEHICLE DEFINED; EXCEPTIONS

 

CONSUMER APPLICATION

Where Homeowners policy excluded liability for personal injury arising out of the ownership, maintenance, operation, use, loading, or unloading of motor vehicle but exclusion did not apply to motor vehicle in dead storage on the residence premises, vehicle which was being maintained was not considered to be in dead storage.  Both insured and wife had driven the vehicle in question several times and at the time of accident it would not start, had been parked for about a month, and the insured was attempting to start it when fire erupted, injuring plaintiff. 92

 

Tow truck:  In considering issue of coverage under liability policy, where the policy excluded from coverage injuries arising out of the use of any "automobile," court held that such exclusion did not apply to a claim arising out of use of a "tow truck."

 

Operating an ATC on property away from residence:  In considering issue of coverage under Homeowners policy, the court held that, where the insured injured the plaintiff while the insured was operating a Honda ATC on an empty lot across from the insured's home, such accident fell within the motor vehicle exclusion of the policy, in that the Honda ATC was a motor vehicle under the policy and the empty lot did not constitute "resident premises" as defined by the policy.

 

Moped considered as a bicycle:  In considering issue of coverage under Homeowners policy, the court held that, where the insured's son negligently operated his moped and struck claimant, such accident was not within the motor vehicle exclusion because a moped was classified as a bicycle by state statute and was not within the definition of motor vehicle in the policy.  In another case, the court held that the moped was not a "motorized land vehicle" within the motor vehicle exclusion of the policy.

.

Three-wheeler:  In considering issue of coverage under Homeowners policy, where claimant was injured when the insured allowed claimant to operate three-wheel motorized vehicle and claimant lost control of vehicle while operating it in the insured's yard, the court held that the three-wheel vehicle was a motor vehicle as defined by policy; that the evidence did not show that it was designed for use principally off public roads; that it was designed for and had been operated upon public roads; and that the claim for negligent entrustment did not avoid operation of the motor vehicle exclusion of the policy.

 

Stock car racer:  In considering issue of coverage under Homeowners policy, where accident arose out of repair of modified stock car racer, which was never operated upon public highways and was not registered with the state, the court held that such vehicle was not a motor vehicle within the motor vehicle exclusion of the policy.

 

Throwing a bottle from vehicle at another vehicle:  In considering issue of coverage under Homeowners policy, where the policy contained an exclusion stating that the policy "does not apply to the use of automobiles" and where the insured injured the claimant by throwing a bottle from his vehicle at another vehicle in which claimant was riding, the court held that the insured's conduct was not within the policy exclusion; that the accident must at least "arise out of" the use of a vehicle to be within the exclusion; that "arising out of " is broader than "caused by"; that more than mere situs of the insured in a vehicle was required; that the insured's negligent throwing of the bottle onto the roadway was not altered or affected by his presence in the vehicle; and that therefore the claim against the insured was covered by the Homeowners policy.

 

Golf carts:  Golf carts are motor vehicles not subject to licensure and not typically used on roads and highways but are, nonetheless, "dangerous instrumentalities" (so are poorly hit golf balls…)  A homeowner's policy does not provide liability coverage for an accident occurring when the victim, while standing on her property, is struck by a golf cart owned and operated by the insured, when the insured's policy ex­cludes liability coverage for "motor vehicle" owned or operated by the insured.  One court found that the policy's motor vehicle exclusion was applicable even though the golf cart was being used as a utility garden cart and found that the vehicle would then qualify as other motorized land vehicle and would still fall within the definition of a motor vehicle and would consequently be excluded from liability coverage.

 

Trail bike:  A trail bike is a motor vehicle required to be registered and thus falls within the vehicle exclusion.

 

Dual-purpose mini-van: A dual-purpose minivan designed for on- and off-road use is not a vehicle "designed for use principally off public roads."

 

Race car chassis:  Motor vehicle chassis adapted for use as race car, not driven on highway or registered as motor vehicle, was not a "motor vehicle" within Homeowners policy exclusion as to bodily injury arising out of ownership, maintenance, operation, use, loading, or unloading of motor vehicle owned or operated by the insured.

 

Riding lawn mower:  Riding lawn mower is a vehicle and Homeowners policy was technically a policy of "vehicle insurance" as defined in certain state statutes.

 

Farm truck:  Under farm tenants policy, truck that was registered and licensed as automobile, insured under automobile policy but generally used for farming purposes, was a motor vehicle and not a farm implement and therefore fell under the vehicle exclusion.

 

Truck mounted auger:  Court found no coverage for highway accident involving the insured's truck pursuant to motor vehicle exclusion.  Policy definition of "motor vehicle" was not ambiguous.  Auger apparatus attached to truck which came loose and hit oncoming motorcyclist was part of the vehicle, and the truck was a motor vehicle not a farm implement.

 

Three-wheeler not a farm implement:  An accident caused by the insured's Honda three-wheeler was not covered under a Homeowners insurance policy, which excluded from coverage motor vehicles and recreational vehicles. The Honda was either a motor vehicle or a recreational vehicle and was thereby excluded from coverage. It was not covered by a farm implement because an implement was a tool and a self-propelled motor vehicle could not be classified as a tool.

 

Rolling truck:  Insurer owes no duty to defend or indemnify the insured for liability arising from injuries caused when unregistered truck rolled from yard into path of oncoming car.  Another court ruled that an unregistered truck, which had been "retired" from active use, that rolled into road, causing accident, was still within definition of vehi­cle such that automobile exclusion applied.

 

Dead storage:  Vehicle was in "dead storage" within the meaning of the policy where the insured kept the car as a collectible and not as a means of transportation, even though the vehicle was fully operational and was moved periodically for the purpose of showing it or performing repairs and maintenance. Thus Homeowners insurer was required to provide coverage for fire damage to property of another that occurred when gas being drained from the vehicle overflowed and was ignited by a kerosene heater.

 

Motor vehicle being tuned:  A motor vehicle which is unlicensed but being tuned up is not in "dead storage" and is therefore not ex­cepted from an exclusion in a Homeowners personal liability coverage; hence, the liability coverage does not respond to a claimant who was struck and injured by such a vehicle.

 

Transmission being carried from truck bed:  Where policy excluded coverage for bodily injury "arising out of the ownership, entrustment, maintenance, operation, use, or loading of ... any type of motor vehicle," exclusion was applicable and policy did not cover bodily injury sustained when automobile transmission being carried from the bed of insured's pickup truck fell, causing personal injury to claimant. Under rule adopted by court, where alleged negligent act is the natural and reasonable incident or consequence of the use of the vehicle, then act arises out of use or loading of the vehicle.

 

Dune buggy:  Trial court's determina­tion that insured's dune buggy was designed for use principally off roads, and thus not covered by vehicle exclusion clause of Homeowners policy, was supported by substantial evidence.

 

Bodily injury sustained after consuming –insured-providing alcohol:  Insurer was obligated to provide a defense to action brought by a minor to recover for bodily injury sustained in the course of operating an all-terrain vehicle after having been served alcohol by the insured.  Relying on general principles of policy interpretation and the reasonable expectations of the insured, the court found that, because the policy insured against social-host claims, the insurer was obligated to defend the covered risk and could not avoid that obligation merely because operation of an ATV constituted an additional cause of injury.  The dissent would not treat this as a concurrent-cause situation but would find that, because the injuries arose out of operation of an ATV, the exclusion applied.

 

Operation of vehicle by juvenile:  Injured party brought suit against insured parents for negligent entrustment of a motorcycle to their 8-year-old son. The court held that the insurer failed to meet its burden of proving that the exception for motorized land conveyances designed for recreational use off public roads, not subject to motor vehicle registration and owned by any insured and on an insured location, was inapplicable, where the underlying complaint alleged that the minor insured improvidently operated the motorcycle on a county road but further alleged that the point of impact was well off the road on property owned by the insureds.

 

CONSUMER APPLICATION

The owners of a cabin brought a declaratory judgment action requesting the court to declare that the owners' guest did not qualify as an "insured" for an accident.  The accident occurred when the owners' guest took control of the owners' all-terrain vehicle (ATV), which was in the possession of the guest's 12-year-old daughter.  The owners had given the child/daughter but not the guest/mother permission to drive the ATV.  The court held that the initial permission rule does not apply to ATVs, at least where the homeowners policy rather than the automobile policy is involved.  The child's "use" of the owners' ATV did not continue after her mother took control and wrecked the ATV thereby kill­ing one of her two daughters. 140

 

 

Minor child operating a motorcycle:  Declaratory relief action by an insured upon a Texas standard farm and ranchowner's insurance policy.  Insured's minor son struck a pedestrian while operating a Honda motorcycle on a public street.  The policy excluded in­juries arising out of the use of an automobile.  Although recognizing that the term "automobile" does not, standing alone, include a motorcycle, the court held that the insurer had no duty to de­fend the insured in a suit filed against him by the pedestrian.

 

OWNERSHIP

 

Rented tractor:  Under a Homeowners policy granting personal liability coverage to the insured who was driving a rented tractor at the time of an automobile accident with a van, which policy excluded tractors from the definition of motor vehicles and which excluded coverage to any motor vehicle owned or operated by, or rented or loaned to any insured, the  insured was afforded coverage for his personal liability arising out of the accident.

 

Grandfather’s three-wheeler:  Where Homeowners policy excluded liability arising out of the ownership, maintenance, or use of a motor vehicle "operated by, rented or loaned to you," exclusion was held inapplicable to the insured's liability for negligence in allowing his grandson to drive three-wheel all-terrain vehicle. Policy definition of motor vehicle included all-terrain vehicles. Coverage applied because vehicle was not operated by, rented to, or loaned to the insured at the time of the accident.

 

Passenger of minor son:  Insurer not obligated to defend the insured's minor son in an action arising out of injuries received by passenger on motorbike operated by the insured's son.  The policy excluded coverage for the operation and use of any motor vehicle owned or operated by any insured.

 

CONSUMER APPLICATION

Court held that coverage was afforded under a Homeowners policy to the insured who was a passenger in a motor vehicle that struck a pedestrian who sued the insured for damages, claiming that the insured failed to keep an equal duty of lookout in the operation of the vehicle.  Court wrote that coverage was afforded to the insured notwithstanding the insurer's claim that language in policy excluded coverage for bodily injury arising out of "ownership, maintenance, use, loading or unloading of motor vehicles ... including any trailers owned or operated by or rented or loaned to any insured."  Court construed clause "owned or operated by or rented or loaned to any insured" as a modifying phrase applying also to "motor vehicles" and not only to trailers.  Court explained that the insured did not own vehicle in which she was riding as a passenger at time of subject accident; therefore she fell outside exclusionary language. 93

 

MAINTENANCE, USE, LOADING

 

Injury during maintenance:  The insured was working on his car when gasoline ignited and injured a bystander who sued the insured and sought payment under the insured's Homeowners policy.  The court concluded maintenance was being performed on the car at the time the injuries occurred, notwithstanding the engine was being rebuilt during a three-month period, and the car was not in "dead storage" and thus the motor vehicle exclusion precluded coverage.

 

Shooting companion while in insured’s pickup:  The policy did not apply to the use, loading, or unloading of automobiles away from the owner's premises.  No coverage was provided for injuries sustained when the insured's hunting companion was shot in the leg when a gun discharged when the insured reached to get it from behind the seat of his pickup, notwithstanding the contention that the insured's negligence was in keeping a loaded gun, not on safety, in his truck and that the negligence was complete prior to the unloading, and thus that the unloading was not the cause of the accident.

 

CONSUMER APPLICATION

Where child entered the insured's open van while parked in driveway for loading and released transmission, and van rolled backwards and killed another child, the insurer had no duty to defend or indemnify the insured in wrongful death action based on "use of vehicle" exclusion.  Insured's alleged negligence in leaving the van open and failing to supervise children was not independent of use of van, and the insured was in process of loading van-another aspect of same exclusion-at time of accident. 95

 

 

Negligent loading of truck causing fatal injury:  Where the insured's pickup truck was negligently loaded with rebar so that on impact with a car the rebar slid off and caused fatal injury to other driver, "use of vehicle" exclusion in general liability policy applied because the insured's negligent loading was auto-related-i.e., depended upon the use of a vehicle.

 

Accidental discharge of rifle in auto:  Where passenger was injured when a rifle propped up in the insured's car accidentally discharged several minutes after car had stopped, "use of vehicle" exclusion did not apply because there was no causal connection between use of car and injury.

 

Negligent supervision:  Where the insured's minor son had been drinking in the insured's presence and then went for motorcycle ride that resulted in his death and suit against the insured by injured claimant alleging negligent supervision, the insurer had no duty to defend or indemnify based on "use of vehicle" exclusion because events giving rise to the insured's potential liability were "exclusively related" to use of vehicle.

 

Parking rage:  In considering issue of coverage under Homeowners and business policies, where the insured and the claimant had a dispute over a parking space, and the insured got out of his vehicle and shot claimant, the court held that the motor vehicle exclusions of the insured's Homeowners and business policies did not apply; that there was an insufficient nexus between the insured's motor vehicle and the resulting injury; and that something more than the vehicle being the situs of the injury is required.

 

Dog bite:  In considering coverage dispute between Homeowners and auto liability carriers, where the claimant was injured when, after riding in truck with the insured, claimant was bitten by the insured's dog, which was in the back of the pickup, the court held that the dog bite did not arise out of the use of the vehicle and therefore was not covered under the auto policy.

 

Grabbing the driver’s arm:  In considering issue of coverage under Homeowners policy, where the insured passenger in a vehicle grabbed the driver's arm, causing accident, the court held that claim against the insured was not within motor vehicle exclusion because the act of grabbing the driver's arm did not arise out of the use of an automobile.

 

Smoking around gasoline:  Coverage was not precluded for injuries to an automobile repairman that resulted when the insured's cigarette ignited gasoline fumes from a bucket that the repairman had placed next to the steps of the house while repairing the insured's vehicle in the driveway. The accident "arose out of" the in­sured's allegedly negligent use of flammable material, not out of the ownership, maintenance, or use of a motor vehicle.

 

Releasing parking brake:  Child's release of emergency brake on automobile of guest on insured premises of child's father was not "use" of automobile under exclusionary clause of Homeowners liability policy.

 

Tank falling off of truck:  Exclusion for medical payments to others that "arise out of: the ownership, maintenance, use, loading or unloading of motor vehicles or all other motorized land conveyances . . ." was not ambiguous and served to shield the insurer from any liability to the insured for loss caused by water tank, which fell off of truck while in transit.

 

CONSUMER APPLICATION

Injured plaintiff was standing beside his disabled vehicle on shoulder of interstate when defendant passed by in his pickup truck.  Boards in bed of defendant's truck were inadequately secured and struck plaintiff.  Defendant driver's Homeowners policy excluded coverage for injury or damage arising from "ownership, maintenance, use, loading or unloading" of a motor vehicle.  Defendant driver's actions did not constitute an independent tort of negligence, and exclusion based on ownership, etc., of a motor vehicle applied and prevented coverage.  Negligence asserted against defendant was not independent of the vehicle's operation, and the use or loading of the defendant's pickup truck was an essential element of every theory of recovery plaintiffs asserted. 95

 

Falling from a tree:  (This court ruling is presented as an example of difficulty in making judgements at time, because they are frequently based upon convoluted circumstances.  Just for fun, how would you decide?)   The Homeowners insurer might be liable under a policy where an insured's friend was injured when he fell from a tree on the insured's property while attempting to remove a dead branch from a tree. Plaintiff balanced himself with a "safety rope," one end of which was tied to the tree and the other to the bumper of the insured's pickup truck, which was moving gradually to keep the rope taut. The rope broke two feet from where it was tied to the moving vehicle and a genuine issue of fact existed as to whether the acts of alleged negligence were independent from the use of the truck since incidents arising out of the use of a motor vehicle were excluded from coverage.

 

Accidental discharge of firearm:  (There are several court decisions involving accidental discharge of firearms coverage under a Homeowners policy).   Where the insured was loading a rifle into open back of pickup truck and rifle fired, wounding bystander, Homeowners policy did not cover the insured's liability to bystander.  The insurer was not entitled to expenses incurred in initial defense of claim.

 

Coverage for siphoning gasoline:  Where the insured's son siphoned gasoline out of third party's truck into the insured's car, causing a fire that damaged surrounding property, the Homeowners policy covered liability, not the auto policy.  The son did not intend the result and loss did not arise out of "use of vehicle."

 

Question of coverage for death and injury as result of towing boat trailer:  Dispute was between motor vehicle liability insurer and Homeowners liability insurer as to which policy should respond to claims for injury and death resulting when shackle attached to rear bumper of third person's car broke loose and fragments struck and fatally injured decedent as a boat and trailer were being towed. Court held that the insured was not "making use" of motor vehicle and that there was no causal relationship between use of motor vehicle and trailer and the injury and death; therefore Homeowners liability policy must solely respond to claim.

 

“Hot potato” with firecracker in vehicle:  Vehicle exclusion did not apply to preclude liability coverage where car passengers were injured when the insured lit firecracker and unsuccessfully attempted to throw it out of the moving vehicle.  In order to come within policy exclusion there must be a causal connection between use of the vehicle and the accident.  Since the use of the vehicle was not itself a cause of the accident, the exclusion did not apply.

 

Children making vehicle roll backwards with injury to others:  Allegation that the insureds negligently allowed their children to operate a motor vehicle and caused the vehicle to roll backward and strike two children came within the exclusionary clause of the policy that precluded coverage for injury or property damage arising out of the ownership, use, and loading or unloading of the insureds' vehicle.

 

Proximate cause of fire:  While the insured was working on his car in a garage heated by a wood stove, six gallons of gasoline in the car's fuel tank escaped and flowed down the insured's arm and onto the floor.  Fire started on the insured's arm when he stood between the car and the stove.  Because a jury could find that the proximate cause of fire loss was the negligent placement of a wood stove near a volatile substance or the act of the insured in throwing a gasoline-soaked jacket on the floor of the garage, the exclusion did not, as a matter of law, preclude coverage.

 

CONSUMER APPLICATION

Where the insured was cutting down a tree that struck the injured claimant, the insurer was obligated to defend and indemnify the insured pursuant to Homeowners policy.  Court applied a two-pronged "business pursuits" exclusion test, stating that neither cutting the trees nor using the wood for his own purposes or occasionally selling the wood constituted a "business pursuit."  Motor vehicle exclusion was not applicable even though tree was attached to the insured's truck by a chain for purposes of pulling the tree to the ground.  The cause of the claimant's injury was not the truck movement but the insured's cutting.  Lawyer's fees were not available to the insured in his declaratory judgment motion as the insurer's refusal to defend was not in bad faith. 96

 

 

CONSUMER APPLICATION

Exclusion in Homeowners policy for injuries arising out of the maintenance of a motor vehicle was not applicable under the concurrent-cause doctrine, where plaintiff claimed that there were two causes of his injuries: (1) plaintiff's using a torch on his vehicle, which plaintiff was helping to repair, an excludable risk under the policy; and (2) the negligence of the insured in failing to warn and in ultimately kicking a pan of flam­mable liquid, which caught fire and caused injury to plaintiff, a non-vehicle-related risk that would not fall within the exclusionary language of the policy. 97

 

Accidental discharge of shotgun on rack in truck:  Decedent died from unexplained discharge of a shotgun located on shotgun rack attached to interior of the insured's pickup truck.  Decedent's personal representative filed suit seeking recovery for a wrongful death, and auto liability insurer and Homeowners insurer brought declaratory judgment actions.  Auto liability policy provided coverage for damages for bodily injury, including death arising out of the ownership, maintenance, or use of insured vehicle. Use included loading and unloading of vehicle.  Homeowners insurer had issued policy to father of the insured covered by auto liability policy. Excluded from coverage on that policy was bodily injury arising out of the ownership, maintenance, operation, use, loading, or unloading of any motor vehicle owned by any insured.  Loss was not covered by auto liability policy but was covered under personal liability portion of Homeowners policy. Discharge of loaded firearm stored in gun rack permanently affixed to vehicle did not mandate finding that the incident arose out of the use of the motor vehicle.  Truck at time of injury was merely a place of social gathering, and decedent was not a passenger of the vehicle nor did he intend to become an occupant at time of discharge of weapon.

ENTRUSTMENT; VICARIOUS LIABILITY

 

Negligent entrustment:  When underlying state court suit involved an allegation that the insured negligently entrusted her daughter's child to a dangerous and unsafe drunken person, which resulted in the child's being killed in a collision of an automobile being driven by the allegedly drunken person, the insurer did not have any duty to defend claim for bodily injuries arising out of use of the insured's motor vehicle.

 

Negligent Entrustment – minibike:  Where accident arose out of child's use of a minibike, coverage was likewise excluded on claim against the insured parents for negligent entrustment under exclusion for use of recreational vehicle.

 

Entrustment occurring off premises:  The insurer was not obligated to provide a defense or pay a judgment for injuries resulting from the entrustment of the insureds' motorized off-road recreation vehicle by the insureds' daughter where the entrustment occurred on premises but the injury occurred one block away from the insured location.

 

Minor child:  (Note:  Most of the court decisions regarding negligent entrustment, involve minor children)  Homeowners policy, which declared in unambiguous language that it did not apply to bodily injury arising from the operation of a motor vehicle by an insured, did not provide coverage for liability resulting from the negligent driving of the insureds' minor child.

 

CONSUMER APPLICATION

The insured's son injured the underlying plaintiff in a car accident.  The plaintiff sued the insured for negligent entrustment and negligent supervision.  On appeal from the insurer's motion for summary judgment to determine coverage in a declaratory relief action, the court held that the policy unambiguously excluded claims arising from the entrustment of a motor vehicle.  The court also held the claim for negligent supervision could not be covered because the underlying plaintiff's injuries were the direct and unforeseeable result of the conduct of a third person, the son.  98

 

Rental truck:   Automobile exclusion of the Homeowners policy excludes coverage where the insured is vicariously liable for property damage caused by the acts of his minor son, absent a claim for negligence against the insured not depen­dent on the theory of vicarious liability.

 

Failure to take care of child:  Homeowners insurer was liable for the alleged negligence of the insureds for failing to protect a child in their care who was injured when run over by a vehicle driven by the insureds' daughter.  The clause exclud­ing coverage for injury arising out of the ownership, operation or use of a motor vehicle did not exclude coverage.

 

F  Vicarious liability is a liability incurred by a business for acts other than those of its employees.  This may arise when an independent contractor is hired.  The business can be held liable for negligent acts of the contractor to the extent that its representatives give directions or exercise control over the contractor’s liability.   Also defined as the liability that a supervisory party (such as an employer or parent) bears for the actionable conduct of a subordinate or associate (such as an employee or child) because of the relationship between the two parties.  (Black’s Law Dictionary, 7th Edition).

 

Vicarious liability not present:  Insurer was not liable under Homeowners policy for claim arising out of son's negligent operation of the insured's automobile. Theory of vicarious liability was not sufficient to extend coverage where the sole generating source of liability was an automobile-related accident that was excluded from coverage.

 

Vehicle owned and operated by son of insured:  The Supreme Judicial Court of Massachusetts read the Homeowners liability coverage for damages because of bodily injury together with the motor vehicle exclusion and the severability clause of such policy to grant coverage to parents for a claim of negligent supervision of their son who fatally injured the claimant's decedent in a motor vehicle accident after becoming inebriated in a party at his house. The fact that the vehicle was owned and operated by the son proved to be the crucial reason for the court to conclude that the motor vehicle exclusion did not apply to the parents in this case.

 

Child with a stolen car:  A Homeowners policy extending coverage for liability for bodily injury or property damage and excluding coverage for liability arising out of the use of automobiles afforded coverage for statutory liability imposed on parents for malicious or willful destruction of property by minor child, notwithstanding that wanton and malicious act of the child was performed through the use of an automobile stolen by the minor.

 

Negligent Entrustment as defense:  There was no obligation to defend or indemnify insureds with respect to the insureds' alleged negligent entrustment of automobile, given coverage exclusion for damages arising out of ownership and use of motor vehicle. "Negligent entrustment" is part of tort of negligent use and operation of the entrusted automobile.  Clear language of exclusion bars coverage because accident occurred off Homeowner's premises and resulted from use of motor vehicle.  There was no independent non-auto-related act.  Injuries arising from negligent entrustment arise out of use of automobile; hence, there was no coverage.

 

NOTE:  There are many cases that uphold the negligent entrustment exclusion that involve motor vehicles and children.  Once in a while, though, a court will take a little different approach, such as in the following case:

 

Negligent “failure to control”;  Insured's son killed another while driving an auto.  The insured was sued for "negligent failure to control."  Court held that the Homeowners insurer must defend the suit and pay the judgment, since this is not liability arising out of the use, ownership, or maintenance of an automobile.  (There are obviously some considerations taken by the court that are not apparent.)

 

Wild child on County road:  Injured party brought suit against insured parents for negligent entrustment of a motorcycle to their 8-year-old son. The court held that the insurer failed to meet its burden of proving that the exception for mo­torized land conveyances designed for recreational use off public roads, not subject to motor vehi­cle registration and owned by any insured and on an insured location, was inapplicable, where the underlying complaint alleged that the minor insured improvidently operated the motorcycle on a county road but further alleged that the point of impact was well off the road on property owned by the insureds.

 

Nurse driving:  Seventy-one-year old passenger in vehicle owned and operated by passenger's private duty nurse was owed a defense against allegations of negligence by motorcycle operator with whom they collided.

OTHER

 

Drinking in home, then driving:  Insured's act of drinking to intoxication while in his home was not an independent and separate cause of an auto­mobile accident caused by the insured. Therefore the automobile exclusion in the insured's Homeowners policy precluded Homeowners insurer's liability.

 

Dual causation:  The theory of dual causation does not vitiate the insurer's duty to defend if alleged injuries resulted even in part from a risk for which the insurer provided coverage.  Where there is a confluence (a flowing together) of both a covered negligent act (the closing of a garage door) and an excluded negligent act (the operation of a motor vehicle), there is a duty to defend.

 

Failure to take medication:  An epileptic insured's failure to take medication, which resulted in an automobile accident due to a seizure, was covered under his parents' automobile policy but not his parents' Homeowners policy, by operation of the motor vehicle exclusion.  The failure to take the medication was not a divisible act of concurring negligence that would permit coverage under both policies.

 

CONSUMER APPLICATION

The motor vehicle exclusion did not apply to relieve the insurer of its duty to defend the insured in a wrongful death and personal injury action, arising out of a car accident caused when one arm of a crop sprayer bolted to a truck swung loose and struck the windshield of an oncoming car.  The underlying complaint alleged two distinct negligence actions against the insured: one for failure to operate the truck properly, and one for failure to secure the arms of the crop sprayer.  Since this latter act of negligence was not vehicle-related, the motor vehicle exclusion did not apply and there was a duty to defend. 99

 

“Away from premises” not the same as “off premises”:  Exclusion for bodily injury arising out of the use of "recreational motor vehicle owned by any insured, if the bodily injury occurs away from the residence premises," was not applicable where an individual, riding the insured's dirt bike with the insured's permission, lost control and collided with building 10 feet over the insured's property line; use of phrase "away from" residence premises cannot be strictly applied to every situation occurring "off" the residence premises.

 

Throwing fire from a car, burning bystander:  Bodily injuries sustained from splash of fire when the insured threw a flaming gasoline tank from car were specifically excluded from coverage under exclusion for injury arising out of the ownership, use, or maintenance of a motor vehicle.  The fact that injury was also caused by a covered act (negligence) did not implicate efficient proximate cause.  Efficient proximate cause requires that the initial act, which sets into motion a chain of events, be a covered act.  This was not the case because the initial act was use of an automobile.

 

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USE, OWNERSHIP OF AIRCRAFT

 

ISO.  1.    Coverage E-Personal Liability and Coverage F-Medical Payments to Others do not apply to bodily injury or property damage: ...

g.  arising out of:

(1)   the ownership, maintenance, use, loading or unloading of an aircraft;

(2)   the entrustment by an insurer of an aircraft to any person; or

(3)   statutorily imposed vicarious parental liability for the actions of a child or minor using an aircraft.

An aircraft means any contrivance used or designed for flight, except model or hobby aircraft not used or designed to carry people or cargo.

 

Other Company.         1.         Coverage L and Coverage M do not apply to: ...

e.  bodily injury or property damage arising out of the ownership, maintenance, use, loading or unloading of:

(1)   an aircraft;...

f.   bodily injury or property damage arising out of:

(1)   the entrustment by an insured to any person; ...

with regard to the ownership, maintenance or use of any aircraft, watercraft, or motor vehicle (or any other motorized land conveyance) which is not cov­ered under Section II of this policy;

 

 

Negligent pilot:  Where insured pilot was sued for personal injuries arising out of plane crash, insurer had no duty to defend based on "use of aircraft" exclusion despite allegations that the insured was negligent in preflight planning, operated the plane while intoxicated, and made preflight misrepresentations regarding his experience as a pilot, since none of these were independent of the operation and use of the plane.

 

Conflicting decisions on parachuting in aircraft exclusion:  The insured was sued for his role in causing a parachute accident.  The insurer brought a declaratory relief action to determine the applicability of an exclusion for injuries arising out of use of aircraft.  The court held that the exclusion did not encompass injuries relating to parachuting.  The insurer was held to have waived the argument that a plane had taken the parachutists to the jump-off point, thereby triggering the exclusion, by failing to raise the argument until appeal.

- however -

A court in a neighboring state ruled otherwise:  Insurer had no duty to defend or indemnify the insured in a negligence action brought by victim for injuries sustained in a skydiving accident, because parachuting was deemed to arise directly out of the use of an aircraft within the terms of the aircraft exclusion.

 

CONSUMER APPLICATION

The insured was found to have created damage to an airplane that crashed.  He failed to warn the pilot and the passengers that the airplane had been damaged and he further did not provide proper maintenance on the plane and did not so notify the pilot.  The court ruled that the Homeowners policy, by and through "aircraft exclusion," did not provide liability coverage for the insured's negligent damage to airplane that crashed, or failure to warn pilot and passengers of damage, or failure to properly maintain airplane, or failure to properly instruct pilot. 101

 

Vicarious use of a watercraft:  Watercraft exclusion in homeowners insurance policy barred liability coverage for injury even if the liability did not arise from the personal ownership or use of a water craft, but arose vi­cariously. The severability clause did not negate the effect of the exclusion as to any liability of com­munity property for acts of the one insured. The court also held that a dinghy or tender that is not being used to service a covered watercraft is not considered "boat equipment" within the meaning of the watercraft insurance policy.

 

1 


WATERCRAFT LIABILITY

 

ISO. 1.

Coverage E-Personal Liability and Coverage F-Medical Payments to Others do not apply to bodily injury or property damage: ...

f.     arising out of:

(1)   the ownership, maintenance, use, loading or unloading of a watercraft described below;

(2)   the entrustment by an insured of a watercraft described below to any person; or

(3)   statutorily imposed vicarious parental liability for the actions of a child or minor using a watercraft described below.

Watercraft:

(1)   with inboard or inboard-outdrive motor power owned by an insured;

(2)   with inboard or inboard-outdrive motor power of more than 50 horse­power rented to an insured;

(3)   that is a sailing vessel, with or without auxiliary power, 26 feet or more in length owned by or rented to an insured, or

(4)   powered by one or more outboard motors with more than 25 total horse­power if the outboard motor is owned by an insured. But, outboard mo­tors of more than 25 total horsepower are covered for the policy period if:

       (a) you acquire them prior to the policy period and:

(i)    you declare them at policy inception; or

(ii)   your intention to insure is reported to us in writing within 45 days after you acquire the outboard motors.

            (b) you acquire them during the policy period.

This exclusion does not apply while the watercraft is stored.

 

Other Company.    1.         Coverage L and Coverage M do not apply to: ...

e.     bodily injury or property damage arising out of the ownership, maintenance, use, loading or unloading of: ...

(3)   a watercraft:

(a) owned by or rented to any insured if it has inboard or inboard-outdrive motor power of more than 50 horsepower;

(b) owned by or rented to any insured if it is a sailing vessel, with or without auxiliary power, 26 feet or more in overall length;

(c) powered by one or more outboard motors with more than 25 total horsepower owned by any insured; or

(d) designated as an airboat, air cushion, jet ski or similar type of craft.... f.            bodily injury or property damage arising out of: ...

(2)   the negligent supervision by any insured of any person;

(3)   any liability statutorily imposed on any insured; or

(4)   any liability assumed through an unwritten or written agreement by any insured;

with regard to the ownership, maintenance or use of any aircraft, watercraft, or motor vehicle (or any other motorized land conveyance) which is not covered un­der Section II of this policy;

 

 

Looks like a boat, sounds like a boat, floats like a boat…:  The Homeowners policy exclusion for watercraft, which was "designated as an airboat, air cushion, jet ski or similar type of craft," precluded coverage for a personal watercraft that looked like, was powered like, and was driven like a "jet ski."  The court recognized the term "jet ski" is often used as a generic term for all personal watercraft despite the fact that it is a registered trademark of one manufacturer.

 

 

 

 

CONSUMER APPLICATION

Airboat on which decedent was passenger was involved in an accident that resulted in his drowning.  Owner/ operator's Homeowners insurer denied coverage on basis of the watercraft exclusion.  Conflicting testimony was offered on definition of policy's exclusionary phrase "inboard motor power" and whether airboat fit within that definition.  Because the exclusion could yield two reasonable interpretations-one that included airboats within the class of inboard-motor-powered vessels and one that did not - the exclusion was ambiguous.  It was construed against the insurer, and the policy provided coverage for the accident. 101

 

NOTE:  This is a good, but not isolated, example of court decisions where the court rules that if there can be an argument against a policy provision that benefits the insurer, then the provisions must be “ambiguous” and therefore not applicable.  This in effect gives the ruling in favor of the insured, as discussed earlier in this text, and which is not totally unfair as the insurer created the wording of the provision that was agreed to by the insured (a “layman”).  If the insurer did not want airboats covered, they should have so stated (as the Other Company policy form did).

 

1 

 


FAILURE TO RENDER PROFESSIONAL SERVICES

 

ISO.     1.  Coverage E-Personal Liability and Coverage F-Medical Payments to Others do not apply to bodily injury or property damage: ...

c.     arising out of the rendering of our failure to render professional services;

 

Other Company.         1.         Coverage L and Coverage M do not apply to: ...

c.  bodily injury or property damage arising out of the rendering or failing to render professional services;

 

CONSUMER APPLICATION

The insured was a boat mechanic who occasionally delivered boats while on company time and sometimes delivered boats "on the side," earning compensation directly from the boatowner.  During an "on-the-side delivery," the plaintiff in the underlying suit was injured. The insurer brought a declaratory relief action, claiming the business pursuits exclusion applied.  On appeal from the insurer's successful summary judgment motion, the court held that although the policy will cover acts that, by their nature, are casually related to business activities, here the insured was engaged in a business pursuit. 102

 

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LIABILITY & MEDICAL PAYMENTS EXCLUSION OF BUSINESS PURSUITS

 

ISO. 1.  Coverage E-Personal Liability and Coverage F-Medical Payments to Others do not apply to bodily injury or property damage: ...

b.    arising out of business pursuits of an insured; This exclusion does not apply to:

(1)   arising out of or in connection with a business engaged in by an insured. This exclusion applies but is not limited to an act or omission regardless of its nature or circumstance, involving a service or duty rendered, promised, owed, or implied to be provided because of the nature of the business;

(2)   arising out of the rental or holding for rental of any part of any premises by an insured. This exclusion does not apply to the rental or holding for rental of an insured location:

(i)  on an occasional basis if used only as residence;

(ii) in part for use only as a residence, unless a single family unit is in­tended for use by the occupying family to lodge more than two roomers or boarders; or

(iii) in part, as an office, school, studio or private garage;

 

Other Company. 1.

Coverage L and Coverage M do not apply to: ...

b.    bodily injury or property damage arising out of business pursuits of any in­sured or the rental or holding for rental of any part of any premises by an in­sured. This exclusion does not apply:

(1)   to activities which are ordinarily incident to non-business pursuits;

(2)   with respect to Coverage L to the occasional or part-time business pursuits of an insured who is under 19 years of age;

(3)   to the rental or holding for rental of a residence of yours:

(a)   on an occasional basis for the exclusive use as a residence;

(b)   in part, unless intended for use as a residence by more than two roomers or boarders; or

(c)   in part, as an office, school, studio or private garage;

(4)   when the dwelling on the residence premises is a two, three or four-family dwelling and you occupy one part and rent or hold for rental the other part; or

(5)   to farm land (without buildings) not in excess of 500 acres, rented or held for rental to others;

 

F  “Incident” (such as in “incident to non-business pursuits.”)  Dependent upon, subordinate to, arising out of, or otherwise connected with [something else, usually of greater importance].  Example:  The utility easement is incident to the ownership of the tract.

 

Sexual abuse at school:  Alleged negligent failure to prevent sexual abuse of children at school at which the insured was employed fell within business pursuits exclusion of the insured's Homeowners policy.

 

Hit with a bucket:  Insurer owes no coverage where the insured hits a coworker with bucket arm of excavator owned by employer and operated by the insured during his scope of employment.

 

BUSINESS PURSUITS; SCOPE, DEFINED

 

School shooting considered arising out of a business pursuit:  A question of coverage under three policies arose regarding the shooting of a young man by a school building engineer.  The engineer's Homeowners policy did not afford coverage since it excluded from coverage "bodily injury or property damage arising out of a business pursuit of any insured."

 

CONSUMER APPLICATION

Where employee of the insured contractor was injured in a fight occurring during after-hours dice game in the insured's den and the employee sued the insured for negligence.

Homeowners insurer had no duty to defend, based on "business pursuits" exclusion in view of the insured's testimony that he regularly invited his employees to socialize at his house after work "to foster better relations with his employees." 103

 

Little black boxes:  Where the insured was sued by cable TV distributor for injunction and damages for selling devices to intercept cable signal illegally, the insurer had no duty to defend or indemnify the insured based on “business pursuits" exclusion.

 

Wandering horse:  Where the insured owned horse stable but agreed to board friend's horse as a favor, without compensation and without using horse in business operation, injury caused by horse after it wandered away arose out of a nonbusiness pursuit.

 

You are on your own!:  Where the insured was sued for fraud, breach of contract, and intentional infliction of emotional distress in connection with the sale of property, the insurer had no duty to defend or indemnify because the policy excluded coverage for intentional acts. Where the insured was sued for rescission, fraudulent failure to disclose during sale of property, negligent misrepresentation, and negligent infliction of emotional distress, the insurer had no duty to defend or indemnify the insured because the lawsuit did not seek damages constituting "bodily injury" or "property damage."

 

Security guard shooting (Definition of Business Pursuit, also):  In considering issue of coverage under Homeowner policy, where a claim was brought against the insured for shooting incident that arose out of the insured's temporary part-time employment as a security guard, the court held that the "business pursuit" exclusion of the policy did not apply.  Even though the insured's activity may have constituted a "business", it did not constitute a "pursuit" of such business.  A "business pursuit" must be a "continuous and comprehensive activity for financial gain."

 

CONSUMER APPLICATION

In considering the issue of coverage under a Homeowners policy, the court held that, where a claim was brought against the insured for a drowning in a pond that the insured had constructed on 22-acre tract used to keep a herd of cattle, such claim was excluded by the "business pursuit" exclusion of the policy.  The  insured claims that he made his living as a physician and not by raising cattle and that he did not earn a profit from the cattle.  The policy definition of "business" included, but was not limited to, the trade, profession, or occupation of the insured; further, that the absence of a profit did not negate the existence of a "business pursuit."  The tax benefits of the cattle constituted financial gain; and the cattle operation was a continuous and comprehensive activity for financial gain.  The court also held that the "farm" exclusion of the policy also applied. 104

 

Insured vicariously liable for conduct of son-in-law:  In considering issue of coverage under Homeowners policy, where a claim was brought against the insured by the insured's tenant.  The tenant was assaulted by the insured's son-in-law who assisted the insured in the upkeep of insured's apartment building and collected rent.  The son-in-law had an altercation with the tenant regarding the security deposit and return of a key.  The court held that the business pursuit exclusion of the policy applied where the insured was alleged to be vicariously liable for the conduct of her son-in-law, who was allegedly acting in the furtherance of her business interests.

 

Garaging racing cars:  Use of a home garage for repair or resale of used stock racing cars and recapping of tires for compensation, was a business pursuit that removed the garage from fire protection under Homeowners policy.

 

F A business pursuit is a continuous or regular activity done for the purpose of earning a profit.

 

Snow removal in front of business is business pursuit:  Insureds managed a Laundromat . Removal of snow and ice from the front of the Laundromat by insureds was construed to be part of a business pursuit even though the removal of snow was necessary for the insureds to gain access to their apartment.

-however-

Not snow removal on top of the business:  Homeowners insurer was liable in garnishment action arising out of property damage sustained when the insured, who had been shoveling snow off the roof of his business property, struck a power line with the shovel, causing electrical damage to the building and two parked automobiles.  The shoveling of snow was not so causally related to the insured's business activities as to come within the business pursuits exclusion.

 

Storing Scout equipment not business pursuit:  Business pursuits exception to Homeowners policy did not exclude coverage for Boy Scout equipment stored by the insured, even though nominal fee was paid for storage.  An insured engages in a business pursuit only if he engages in a continual or regular activity for the purpose of earning a livelihood.

 

Co-owner not necessarily a business partner:  The business pursuits exclusion did not bar liability coverage to an insured who was a coowner of a pontoon boat that capsized while the boat was being rented from the other coowner. The insured had no partnership agreement with the other coowner, who was renting out the boat as part of his own commercial venture, so coowner's business use could not be imputed to the insured.

 

Assault by policeman on a farmer not business pursuits:  Assault on a farmer by the insured, a state highway patrolman, occurring during argument was not excluded by the business pursuits exclusion because the assault sought to be excluded was not an act peculiar to the business activities of the insured, even though it occurred during the business setting.

- however -

Off-duty policy officer’s actions considered business pursuits:  Actions of an off-duty police officer in investigating the circumstances surrounding the presence of an individual; in approaching the individual while carrying a loaded revolver; in identifying himself as a police officer; in confronting the individual and demanding that he exit his vehicle and explain his presence; and in firing the gun at the individual - were acts done in or closely related to the insured's capacity as an officer of a police department and fell within the business pursuits exclusion of the policy.  The conduct of the insured need not have a profit motive in order for the business pursuits exclusion to be applicable (which is contrary to other rulings on the definition of business pursuits).

Act must be solely for business:  The business pursuits exclusion did not apply where the boating trip during which the accident occurred had the dual purpose of business and pleasure. In order for the subject act to be considered part of a business pursuit-so as to trigger exclusion-the act must be one the insured would not normally perform but for the business and must be solely referable to the conduct of the business.

 

CONSUMER APPLICATION

Provision in Homeowners policy excluding personal liability for bodily injury or property damage arising out of business pursuit of any insured is unambiguous.  An injury that occurred when the insured, a 15-year-old boy, was mowing a neighbor's lawn for $1.25 an hour and struck a child did not arise out of the "business pursuits" of the insured, even though he had earned $175 doing yard work at various homes. 105

 

Politics is not a business pursuit:  Activities by an incumbent mayor seeking reelection were not "business pursuits" excluded from coverage. Political activity by a candidate for public office is a personal right and not a business pursuit.

 

CONSUMER APPLICATION

The insureds, who provided home health care for developmentally disabled persons at their home, sought defense and indemnity in connection with a suit brought against them by a bus driver who fell in their driveway when he was on the premises to provide transportation for two of the disabled persons residing in the home.  The court held that the exclusion was inapplicable because, although the alleged business activity was continuous, the evidence failed to demonstrate that the insureds provided home care with a profit motive.  The disabled persons were neither roomers nor boarders within the ordinary meaning of those terms but were treated as family members. 106

 

Temperamental tennis pro:  Altercation between professional tennis player (McEnroe?) and spectator during tennis match arose out of player's "business pursuits."  Liability coverage for any injury arising out of altercation is excluded.

 

Entertaining employees away from business site:  Homeowners insurer, rather than general liability carrier, was obligated to defend action against the insured restaurant owner for injuries sustained after the insured entertained employees at an independent establishment where wine from the insured's establishment was served.  Although the insured was engaged in a business pursuit, she was engaged in an activity that was not a normal part of the restaurant business but was incidental to a social and non-business pursuit.

 

Bookkeeping at home:  Record-keeping at home in connection with a business conducted off premises did not constitute a "business pursuit" within the meaning of business pursuits exclusion, because the injury sustained by plaintiff did not "arise out of " such record-keeping.

 

F  Exception to the "business pursuits" exclusion of a policy for activity ordinarily incident to non-business pursuit, is applicable only where the insured is not engaged in his employment, is not operating an instrumentality ordinarily related to his business, or is not motivated by a business purpose.

 

Injury to child while baby-sitting:  The business exclusion of liability coverage for bodily injury arising out of or in connection with business engaged in by the insured applied to the child's injury from placing his hand in boiling water left by babysitter in pre­paring her lunch.

 

Electrocution from power lines while operating boom from truck:  Vehicle exclusion did not preclude coverage for injuries occurring when victim was electrocuted by overhead power lines while operating boom and cherry picker attached to the insured's truck, since vehicle was stationary and motor not engaged, and where boom and cherry picker were being operated inde­pendently of truck to which they were attached.  Business pursuits exclusion did not exclude cover­age for owner's liability, although victim was employee of the insured, since there was no work on date of accident and victim was not receiving remuneration.

 

ORDINARILY INCIDENT TO NON-BUSINESS

 

Self protection not a business pursuit:  Where, although the insured was on duty for employer, he fired shots at plaintiff in order to protect himself, rather than to protect employer's property, business pursuits exclusion of the insured's Homeowners policy held not applicable.

 

Horseplay not business pursuit:  Under Homeowners policy that excluded coverage for business pursuits, horseplay of the insured while on duty at work was an activity "ordinarily incident to non-business pursuits," subjecting the insurer to liability under the policy.

 

CONSUMER APPLICATION

Business pursuits exclusion was inapplicable where police officer accidentally injured another police officer by shooting him at the police station just prior to the time both officers went on duty.  It was held that, although the insured police officer was engaged in a business pursuit at the time of the shooting, the shooting accident, which arose out of a discussion concerning a revolver's trigger pull, was ordinarily incident to nonbusiness pursuits, meaning that the injury was not excluded by the police officer's Homeowners policy. 107  (Although not stated in the case annotation, it would appear that the fact that both officers were off-duty was the deciding factor in this case.)

 

Accidental gun discharge during social visit:  The accidental discharge of a revolver during a purely social visit at the insured's business office falls within the exception of "activities ordinarily incident to non-business pursuits" contained in the policy's business pursuit exclusionary clause.

 

 

CONSUMER APPLICATION

A gun-shot victim was throwing rocks at a residence covered by a Homeowners policy.  The landlord was standing outside of the doorway of his residence, when he was grabbed by the victim, who was identified as a friend of one of the tenants that the landlord was trying to evict.  The insured was attempting to prevent personal injury to himself when he shot the victim.  This evidence supported the conclusion that that the victim's injuries arose out of activities "ordinarily incident to a non-business pursuit" and, as such, were expressly excepted from business pursuit exclusion in Homeowners policy. 108

 

A Parade:  Insured, by entering a steam tractor in a parade, was held not to be engaged in activity that was "ordinarily incident to nonbusiness pursuit" but, to the contrary, was engaged in advertising and promotion that was incident to implement business, and thus business pursuit exclusionary clause in Homeowners policy was applicable.

CHILD CARE

 

Baby-sitting in home considered as a business:   Despite the insured's claim that baby-sitting job in home was temporary, the court found that baby-sitting in home had continued full time for seven months when child was injured at the insured's residence. Also, the insured advertised baby-sitting services in newspaper and was paid for her services for caring for at least five children. Therefore the business pursuits exclusion found in the  insured's Homeowners policy applied to baby-sitting activities.

 

CONSUMER APPLICATION

In considering issue of coverage under Homeowners policy, the court held that, where claim was brought against insureds for sexual molestation of children while in child-care facility operated by insureds in their home, such claims were excluded by the "business pursuits" exclusion of the Homeowners policy.  Where it was not disputed that the insureds' baby-sitting service constituted a business pursuit, the activity of molesting the children could not be severed so as to avoid the exclusion.  The crux of the plaintiff's claim against the insureds was their negligent care or supervision of the children; therefore the nonbusiness activity exception therefore did not apply.  Court also held that the claim was excluded by the intentional injury exclusion of the policy. 109

 

Part-time baby-sitting can be considered as a business pursuit:  Business pursuit exclusion encompasses part-time or supplemental income projects such as baby-sitting.

 

Baby-sitting in the home:  The insured, while baby-sitting in the home of the child, was engaged in a business pursuit and therefore not entitled to coverage for liability to the child on whom the baby-sitter spilled boiling water while preparing meal for herself and child. Baby-sitter's activities were not usual to nonbusiness pursuits.

 

Supervising activities of children:  Exception to business pursuits exclusion for "activities which are ordinarily incident to non-business pursuits" was found to be  not applicable where the insured operated baby-sitting business out of her home for 10 years and the insured's 18-year old son molested a child.  The failure to supervise the insured's son was the activity that was ordinarily incident to the day-care business, a business pursuit.

 

Providing day care for a fee:  In a situation in which the insured had been providing day care to a child every day for several months for a set fee, the insurer would not be liable under the liability coverage section of a Homeowners policy, because of "business pursuits" exclusion, for injuries caused to the child by the insured.

(The following Consumer Application discusses foster parents.)

 

CONSUMER APPLICATION

Child was struck and killed by an automobile while in the care of the insured.  Insured received $80 per month from Department of Welfare to care for the child and her younger brothers.  No other children were cared for by the insured.  Insurer sought to exclude on basis of business pursuit exclusion in policy.  The Business pursuit exclusion was held not to apply since Department of Welfare did not certify the insured's activities as a day-care business, notwithstanding the fact that compensation was made by Department of Welfare to the insured.  Further, the insured's motive was not to earn living or make profit but to care for and supervise children out of love and affection.  110

 

1 


LOSSES ARISING OUT OF PREMISES OWNED, RENTED TO INSURED OR RENTED TO OTHERS

 

ISO.     1.  Coverage E-Personal Liability and Coverage F-Medical Payments to Others do not apply to bodily injury or property damage: ...

d.    arising out of a premises:

(1)   owned by an insured;

(2)   rented to an insured; or

(3)   rented to others by an insured; that is not an insured location;

 

Other Company.         1.         Coverage L and Coverage M do not apply to: ...

d.    bodily injury or property damage arising out of any premises owned or rented to any insured which is not an insured location.  This exclusion does not apply to bodily injury to a residence employee arising out of and in the course of the residence employee's employment by an insured;

 

CONSUMER APPLICATION

The insureds sold their property to buyers who later brought suit for defects allegedly discovered after the sale.  The suit claimed that the insureds had made misrepresentations and committed fraud during the sale.  The insureds' policy was cancelled effective the date of the sale.  A new policy was issued on the insureds' new home seven months later.

The court held that the injury occurred at the time the complaining party was damaged, not at the time the wrongful act was committed, even though the policies failed to define accident or occurrence.  Therefore injury occurred after cancellation of the original policy.

The policy on the new home did not apply because it excluded coverage for injury arising out of premises other than the insured location. 111

 

Personal representative renting property to others:  House rented to a family by personal representative of an estate, upon which a policy of liability insurance was written, was not also an "insured premises" under separate Homeowners policy for residence of personal representative, and family could not recover under policy of personal representative for injuries sustained in fire at rented house.  The definition of "insured premises" in the policy of the personal representative was not ambiguous and contemplated that rental of premises would be accompanied by personal use of the premises by the insured; coverage did not extend to a house situated elsewhere and rented to others.

 

Damage to adjacent stream:  Provision excluding coverage for "property damage to property owned by the insured" did not apply to insureds who backfilled their lot under municipal permit and, as a result, caused damage to adjacent stream and violated county landfill ordinance. Insureds' actions did not cause actual damage to the insured premises but only to adjacent streams.

 

1 

 

 


BODILY INJURY/PROPERTY DAMAGE EXPECTED OR INTENDED BY INSURED

 

ISO.  1.    Coverage E-Personal Liability and Coverage F-Medical Payments to Others do not apply to bodily injury or property damage:

a.  which is expected or intended by the insured;

 

Other Company.         1.         Coverage L and Coverage M do not apply to:

a.  bodily injury or property damage:

(1)   which is either expected or intended by an insured; or

(2)   to any person or property which is the result of willful and malicious acts of an insured;

 

NOTE:  This short section of this provision has aroused much discussion in the courts.  In order to keep it as simple as possible, it has been broken into segments of the losses upon which there has been considerable judicial interest.

 

F   “Collateral estoppel” is an affirmative defense barring a party from relitigating an issue determined against that party in an earlier action, even if the second action differs significantly from the first one.

(And as earlier stated:)  Estoppel arises when one is concluded and forbidden by law
         to speak against his own act or deed.

 

Cannot regurgitate (or relitigate) previous actions:  Where the insured was convicted of killing his wife intentionally, the insured was precluded by collateral estoppel from relitigating the issue of intent in action brought under the policy by next friend.

 

Murder:  Insurer has no duty to defend or pro­vide coverage to the insured for negligence claim arising out of murder and attempted murder to which he pleaded guilty.

 

Sexual assault is intended injury:  Insurer owes no duty to defend or provide coverage to the insured for injury produced by criminal act of sexual assault against a child because that is injury expected or intended by the insured within the exclusion.

 

Conduct certain to result in some injury:  Insurer owes no duty to defend where suit against the insured alleges only intentional conduct or conduct that is so inherently injurious that it is certain to result in some injury.

STANDARD OF INTENT; BURDEN OF PROOF

 

F  Subjective Standard:  A legal standard that is peculiar to a particular person and based on the person’s individuals views and experience

 

Several States apply a subjective standard when determining whether an insured expected or intended to inflict bodily injury upon another.  "Under this test an injury is 'intended from the standpoint of the insured' if the insured possessed the specific intent to cause bodily injury to another; whereas an injury is 'expected from the standpoint of the insured' if the insured subjectively possessed a high degree of certainty that bodily injury to another would result from his or her act." Foreseeability is not a measure of expectation or intent.

 

Basketball:  Summary judgment for the insurer was improper where the insured intentionally threw an elbow during a heated basketball game but claimed no subjective intent to injure. The court distinguished an elbow from a deliberate punch in the face, where intent to injure would be inferred as a matter of law.

 

Malicious prosecution:   Insurer had no duty to de­fend or indemnify the insured in connection with action for malicious prosecution since there was no possibility of the insurer's liability under the policy. If insureds were found to have acted with "mal­ice," a required element of malicious prosecution.  If insureds did not act with malice, there would be no tort liability and thus nothing subject to indemnity under the policy.

 

Intent to kick the wife:  Exclusion for intentional acts served to exclude coverage for the insured's intentional kicking of woman he mistook for his wife.

 

Both negligent and intentional acts:  (An appellate court ruling) Where a complaint alleged both negligent and intentional acts, the insurer was obliged to provide a defense to the entire suit as long as negligence claims remained, despite the insurer's argument that the proof would ultimately show the insured's acts to have been intentional and not negligent.  In doing so, the court declined to follow the lower court ruling, and adopted the reasoning of the separate opinion in that case.

 

The “intention” if slight damage:   When minor bodily injury is intended, and such results, the bodily injury is barred from coverage; likewise, when severe bodily injury is intended, and such results, the bodily injury is barred from coverage; but when minor bodily injury is intended, and a substantially greater or more severe injury results, whether by chance, coincidence, accident, or whatever, coverage for the more severe injury is not barred.

 

Shooting through doors:  Intentional acts exclusion bars coverage where the insured fires a gun at a closed bathroom door when the insured knows that someone is in the bathroom, because the insured should have been well aware that it was substantially certain that the person behind that door would be injured, thus supporting the conclusion that the insured intended the result that was almost certain to occur.

 

CONSUMER APPLICATION

The Homeowners policy does not exclude liability for an expected or intended "act," but rather for an expected or intended "injury."  Therefore, the exclusionary clause is inapplicable where the insurer only proved that its insured pushed plaintiff in an attempt to get her out of his home, and not that its insured intended to shove plaintiff to the floor or intended to harm or injure her in any manner.  The circumstances of the case and nature of the insured's actions are not so aggressive as to reasonably justify a presumption that the insured intended to injure the

plaintiff. 112

 

Under influence:  Insurer was liable under Homeowners liability policy where it failed to carry its burden of proof to bring the alleged incident under the intentional acts exclusion. Insured assaulted and battered a woman in a shopping center park while under the influence of drugs and alcohol, and the court found the insurer was liable for the "negligent or reckless conduct of (the insured) in having placed himself in a condition which he knew or should have known would generally expose others to a risk or harm."

 

Reaction:  Intent to injure, within the meaning of an intentional acts exclusion, would not be inferred as a matter of law where the insured claims that he struck the other party reflexively after sustaining a deep cut to his finger as a result of an altercation with the injured party.

 

Don’t hurt the hatcheck girl:  Intentional acts exclusion does not apply unless the insured acted with intent to cause a bodily injury or when the character of the act is such that an intention to inflict an injury can be inferred. When the act itself is intended, but the resulting injury is not, the exclusion does not apply. So the exclusion did not bar coverage for an insured cafe patron who was sued by an injured hatcheck girl after an assault, because patron did not intend the injuries sustained by the hatcheck girl.

 

CONSUMER APPLICATION

Insurer was not required to defend estate of the insured in action arising out of shooting spree, despite allegations that the insured accidentally, negligently, or inadvertently fired the shots that caused injury.  There was considerable evidence that the insured intended to cause injury, because one week before the incident, the insured expressed his desire to shoot everyone in the house, that he selected an automatic handgun and took extra ammunition with him, and that he drove to the house and shot repeatedly every person he encountered.  Expert psychiatric testimony was irrelevant to the issue of coverage.  The fact that the shootings were irrational did not alter their intentional nature. Further, coverage under these circumstances would be violative of public policy. 113

            CONVICTIONS & PLEAS; COLLATERAL ESTOPPEL

 

CONSUMER APPLICATION

Where the insured was convicted of first-degree murder, the insurer had no duty to defend or indemnify the insured in connection with wrongful death action brought by victim's wife. Since the record from the criminal case indicated that the insured's sole defense was that he had acted with the deliberate intent to kill the victim, albeit in self-defense, that the jury had rejected this defense, and that the insured had no other potential defense that had not been raised for tactical reasons, the judgment of conviction was entitled to collateral estoppel effect in favor of the insurer. 114

 

Intent proven by conviction:  Insured's conviction for murder necessarily required conclusion that the insured intended to kill victim. Collateral estoppel served to preclude recovery on basis of intentional acts exclusion.

 

Innocent victim litigating negigence action:  Collateral estoppel was not invoked to prevent an innocent victim from litigating a subsequent negligence ac­tion to determine if the criminally convicted the insured had intentionally caused the harm.

 

CONSUMER APPLICATION

Insured was convicted of assault in the first degree arising out of a shooting incident and defaulted in a subsequent civil action brought by his victim.  In a direct action brought by the victim against the insurer, the court held that the victim was collaterally estopped from relitigating the issue of the insured's intent to cause injury because (1) the victim stood in the shoes of, and had no greater rights than, the insured and was therefore in privity (mutuality of interest) with the insured; (2) the identical issue of intent to cause injury was essential to the jury's determination in the criminal action; and (3) the insured had a full and fair opportunity to litigate the issue of intent in the criminal action.  The court further found that it was fair to apply the doctrine of collateral estoppel and that it would be anomalous to permit the victim to relitigate (retry) an issue the jury had already determined under a higher standard of proof in the criminal case in which the victim gave evidence supporting the jury's finding. 115

 

Injury expected or intended are two separate actions:  Where the insurer refused to defend an action against the insured on grounds that the insurance policy was inapplicable because injuries inflicted by the insured were "intentional or expected,"-  the insurer is not bound by result of tort action against the insured in later lawsuit filed by plaintiff against the insurer.  The doctrine of collateral estoppel does not apply because the identity of interest in the tort action was not sufficient to bind the insurer to result of tort action.  Insurer and the insured had adverse interests as concerns question of whether injury was expected or intended from standpoint of the insured.

ASSAULTS

 

Three separate decisions pertaining to the shooting by insured: 

 

  1. Insurer was not obligated to defend or indemnify the insured under exclusion of Homeowners policy for personal injury expected or intended by the insured where the insured wielded his pistol and was aggressor in the action leading to the shooting.

 

  1. An insurer was not liable under a Homeowners insurance policy to an insured whose minor son fatally shot another youth in light of policy exclusion for an insured's intentional acts.

 

  1. In considering issue of coverage under Homeowners policy, the court held that the insured's conduct of firing gun in direction of his pursuers (after the insured had committed armed robbery) did not constitute an accident or occurrence, and that one "would simply have to take leave of one's senses to conclude that this was an accident."

 

Tyson was not the first:  Under a Homeowners policy, an insurer was not obligated to defend or pay damages in an action arising as a result of its insured allegedly biting off the nose and ears of the plaintiff, since the policy excluded coverage for conduct expected or intended by the insured.

 

Left-handed gun?: Insured minor intentionally loaded a single bullet into a handgun, intentionally pointed the handgun at the victim, and intentionally pulled the trigger, killing the victim.  He did not, however, intend for the gun to discharge as he believed the bullet had been placed in such a position so that it would rotate away from the hammer on the handgun. Policy included standard exclusion for intentional acts.  Because the insured loaded the gun in such a manner as to reasonably believe that the gun would not fire, the resulting injury was neither expected nor intended, and the intentional acts exclusion did not apply.

 

CONSUMER APPLICATION

Intentional acts exclusion applied and coverage was excluded where, after continuing dispute between the insureds and their neighbors, one insured intentionally shot both neighbors, despite the insured's claim of self-defense and his anticipation of being fired upon by the victims.  Policy endorsement, which modified criminal acts exclusion so that it did not apply if bodily injury resulted from willful acts or omissions done for the preservation of life or property, did not extend coverage to injuries that resulted from intentional acts, which were not within risks insured by policy.  The scope of exception was solely to allow coverage for unexpected or unintended bodily injury or property damage resulting from willful acts or omissions that were crimes under state laws, but were for preservation of life or property.  Coverage only extended to damages arising from an accident and the state defines "accident" as event that takes place without foresight, expectation, or design, and the injuries were not the results of accident. 116     

 

 

 

 

 

 

 

 

 

 

CONSUMER APPLICATION

An Insurer under his Homeowners policy a brought declaratory judgment* action to determine its duty to defend and/or indemnify the son of the insured in a lawsuit filed by a cadet at The Citadel against the son, a fellow cadet, alleging assault, trespass, and intentional infliction of emotional distress.  The insurer contended the policy was inapplicable as it excluded coverage for intentional actions.  Additionally, the insurer argued that the injury of emotional distress alleged by the injured cadet was not covered by policy as it was not "bodily injury" as defined by the policy.  Insurer's motion for summary judgment was denied on the basis that for an intentional acts exclusion of an insurance policy to apply, not only must the acts causing the loss be intentional, the loss or injury resulting from the acts must have been intended.  "Bodily injury" also covered injured cadet's claim for intentional infliction of emotional distress since emotional strain is "bodily injury" in insurance parlance. 117

 

*Declaratory judgement is a binding adjudication that establishes the rights and other legal relations of the parties without providing for or ordering enforcement.  Declaratory judgements are often sought, for example, by insurance companies in determining whether a policy covers a given insured or peril. 

 

Note:  “Bodily injury” is defined in the “Dictionary of Insurance Terms, Third Edition”, as “physical damage to one’s person.  The purpose of liability insurance is to cover bodily injury to a third party resulting from the negligent or intentional acts and omissions of an insured.”

The “legal definition” according to “Black’s Law Dictionary, Seventh Edition”: Bodily Injury is “Physical damage to a person’s body.”  Also termed physical injury.  (Interestingly, the definition of “physical injury” is “bodily injury.”)  While one may easily disagree with the decision in the above court case, it is presented here to further illustrate that many times the decision is not popular, but a representative of an insurer that provides HO insurance should be aware that the court decisions of policy provisions are not always what they seem to be.

 

SEXUAL OFFENSES

 

Nonviolent sexual abuse of child:   Homeowners liability policy provided coverage to an insured for any civil liability resulting from the insured's nonviolent sexual abuse of minor granddaughter, notwithstanding policy exclusion for injuries "intended" or "expected" by the insured, where the insured had no specific intent to cause bodily harm to granddaughter and did not subjectively possess a high degree of certainty that bodily injury to granddaughter would result from acts.

 

Intent to injury or harm a minor inferred:  The intent to injure or intent to harm can be inferred as a matter of law where an insured sexually manipulates a minor, and summary judgment is proper if the policy excludes coverage for such intended injuries.

 

(Typical decision in a sexual abuse of a child situation):   The purely subjective standard for determination of whether an insured either "expected or intended" to inflict bodily injury upon another, for purposes of applying the "intentional acts" exclusion in the policy, was not applicable where the injury resulted from the insured's alleged sexual abuse and molestation of children. The policy provision also excluded coverage for the insured wife for harm directly attributable to the intentional conduct of her husband.

 

(Another “typical” judgement in sexual assault against a child):  (This was an appellate court decision, reversing the lower court who had denied a declaratory judgement in favor of the insurer).   In a Homeowners policy under which a claim was asserted for damages for alleged sexual assault and abuse by the insured against his stepdaughter, the insurer was not obligated to provide a defense to the insured, since such allegations and activity by the insured of having daily sexual relations with his stepdaughter for 10 years fell within the exclusionary language of the policy as to injury or damage expected or intended by an insured.  In spite of expert testimony to the contrary that adult males involved in such activity do not expect or intend that the females sustain injury, the court held that all reason, common sense, and experience indicates that the insured's acts were certain to cause a particular kind of harm and that a declaratory judgment in favor of the insurer was in order.

 

Sexual abuse from baby-sitting:  In considering issue of coverage under Homeowners policy, the court holds that insureds' sexual molestation of children left in their care for baby-sitting purposes fell within the intentional injury exclusion of the policy; that to contend that a child molester intends anything but harm to the child defies logic; that specific intent to omit harm is not required by the intentional injury exclusion, in that all intentional acts are properly excluded by the express language of the policy; and that therefore the insured's claim of diminished mental capacity did not avoid the operation of the exclusion.  Another court stated that sexual molestation is so inherently injurious, or substantially certain to result in some injury, that the intent to injure, or the expectation that injury will result, can be inferred as a matter of law.

 

INTOXICATION; MENTAL CAPACITY

 

Depression not a defense:  Testimony was given that, at the time the insured struck friend of his estranged wife, the insured’s depression and events of the evening in question, significantly compromised his judgment and reasoning in that he had no intention of hurting anyone, was insufficient to preclude applicability of intentional injury exception in his Homeowners policy.

 

Mental condition:  Where the insured's mental capacity was in issue, the insurer could not rely on "intentional acts" exclusion unless it satisfied its burden of proving that the insured was not suffering from a mental disease or defect that deprived him of capacity to intend to set the fire and cause property damage or that deprived him of capacity to govern his conduct in accordance with reason.

 

However “insanity” is defined:  In considering issue of coverage under Homeowners policy, the court holds that, where the insured shot members of SWAT team while the insured was insane, intentional injury exclusion did not prevent coverage.  In another case, in considering issue of coverage under Homeowners policy, the court held that, where the insured was insane when he shot claimant, under such circumstances the intentional exclusion did not apply.  And in another case:  An injury inflicted by an insured who is psychotic is not an "accident" and is an intentional act within the meaning of the policy provisions if the insured intended to cause the injury, even if the insured's conduct was the result of the insured's mental condition. The court found no inconsistency in deciding that an individual intended a crime for purposes of a civil insurance claim even though that person might escape criminal liability by reason of insanity.

 

Voluntary intoxication is a jury matter:  Whether voluntary intoxication made the insured incapable of forming intent or expectation of injuring another so as to place the insured's act of killing his son and daughter-in-law within exclusion from coverage in Homeowners insurance policy was question of fact for jury.

 

Does insured have purpose and volition to kill:   Verdict of not guilty of murder by reason of insanity in related criminal trial does not necessitate a finding that Homeowners insurer has a duty to defend against civil claims.  Insured's action may still fall within intentional injury exclusion of policy if the insurer is able to prove, as a factual matter, that the insured had the purpose and volition to kill.  Insanity verdict established only that the insured was unable to distinguish right and wrong.

 

Drunk, but knows the difference between right and wrong:   Where a Homeowners policy excluded coverage for damage expected or intended by an insured, there was no coverage for damage to the insured's house caused by a fire set by the insured's son, despite the contention that the son was too intoxicated to form the requisite intent.  The son stated that beer he had consumed did not affect him at the time of the fire, and the evidence was undisputed that the damage sustained was expected.

 

How much drink is too much (a “common-sense” finding):  Voluntary intoxication may not be used to deny an intent to injure one's victim, when circumstances of assault otherwise compel inference of such intent; thus the intentional acts exclusion was applicable.  The court was "not inclined to create a situation where the more drunk the insured can prove himself to be, the more likely he will have insurance coverage."

 

Conviction of assault does not automatically allow insurer to deny coverage:   Insured, while intoxicated, inflicted gunshot wounds on his friend. Insured was criminally convicted of assault and the insurer disclaimed liability in a subsequent civil suit that contained counts sounding both in intentional tort and negligence. Court held: (1) insurer's refusal to defend civil suit does not estop it to litigate the issue of negligence as related to coverage; and (2) insured is not collaterally estopped to deny intent by the guilty verdict at his criminal trial.

 

If it’s insanity, the insurer is liable:  If the intentional act that caused injury was the result of insanity, then the insurer is liable, notwithstanding the policy exclusion.

 

 

 

 

 

 

 

 

CONSUMER APPLICATION

The insured pleaded guilty to assault in the second degree for intentionally causing injury to a third party.  Several years later, the insured was permitted to substitute a plea of assault by recklessness by asserting, for the first time, that his conduct was unintentional and was caused by the influence of alcohol.  The purpose of the change was to increase the possibility of coverage in the event the insured was found civilly liable to the injured third party.  Summary judgment was entered in favor of the insurer on the grounds that the insured expected or intended to injure the third party and that his recollection that his conduct was influenced by alcohol, six years after admitting that his acts were intentional, was incredible as a matter of law and merely an attempt to create insurance coverage where none had existed. 118

 

SELF-DEFENSE

 

Self defense, but negligent in amount of force:  If insured acted in self-defense with no basic desire or intent to harm victim, but negligently used greater force than necessary for self-defense, insured's liability would be covered. (This ruling reversed a lower court ruling).

 

Firing a warning shot:  Where the insured's only intent was to fire a warning shot for self-protection and not to hit the plaintiff, the fact that the bullet on hitting the ground shattered and fragments thereof hit the plaintiff, did not preclude coverage for the insured under his Homeowners policy, since the insured did not intend to injure plaintiff.

 

Even in self-defense, intentional injury excluded:  In considering issue of coverage under liability policy, the court held that where the insured shot and killed claimant in self defense such was within the intentional injury exclusion, in that the insured did in fact intend to injure plaintiff.

 

CONSUMER APPLICATION

If the insured under a Homeowners policy actually and reasonably believed he was in imminent danger, he may use such force as appears reasonably necessary to protect himself against the danger and coverage will still be provided.  However, the insured's act in punching plaintiff in the face was intentional and within the meaning of the intentional acts exclusion, since plaintiff posed no imminent danger to the insured and insured's use of force cannot be regarded as a negligent miscalculation of appropriate conduct. 119

 

Self-defense dictates that Homeowner’s insurance may not refuse to defend:  When the insured admits that he intentionally injured third party and surrounding circumstances indicate that he acted in self-defense in causing injury, the insured's Homeowners insurer may not refuse to defend the insured against third party's intentional tort claim on ground that third party's injuries fall within exclusion from coverage for "bodily injury" that is either "expected or intended from the standpoint of the insured."

 

Exclusion is ambiguous:  Intentional injury exclusion is ambiguous and does not apply to bar coverage where the insured engaged in privileged acts of self-defense.  Exclusion does apply, however, to preclude indemnification if the insured engages in unreasonable acts while attempting to defend himself.

 

OTHER

 

Hate crime defense not allowed:  Where an insured was sued for injuries caused by his racially motivated hate crimes, the insurer had no duty to defend or indemnify because the policy excluded coverage for intentional acts of the insured and the acts did not constitute "accidents."
(Laws &/or Insurance Code in some states exclude coverage for these criminal acts.)

 

CONSUMER APPLICATION

An insurer that timely and adequately reserved its rights to deny coverage while defending action against its insured, and which does not subsequently intentionally waive its reservation of rights, is not collaterally estopped from denying coverage by a judgment in favor of the third party against the insured.  (To put this in simpler terms:  The insurer stated that they reserved the right to deny coverage under the policy while still defending action against its insured.  If the insurer lost the court case – a judgement was entered against the insured by a third party – the insurer still has the right to deny coverage.  This sort of arrangement is often made when the decision whether the insurer can refuse coverage or not, depends upon the outcome of a trial and the presentation of all evidence upon which the insurer can base their decision.  The court is saying that the insurer may do this, and the fact that they defended the insured does not “estop” them from later refusing coverage.)  This case evidently involved sexual molestation of a child, as the court further held that insurers are not required to indemnify their insureds for damages caused by an insured's sexual molestation of a child under applicable state law. 120

 

A minor shooting a minor:  A minor's shooting of another minor was excluded under the policy provision of the shooter's parents' Homeowners policy excluding coverage for intentional acts of an insured.

 

Wrongful death suit followed by conviction for murder:  (This case was a case on appeal, and the court affirmed the previous judgement of the lower court)  The underlying wrongful death suit against the insured was settled pursuant to a stipulated judgment that the insured had not intended to kill the victim.  The underlying criminal suit resulted in a second degree murder conviction.  (The wrongful death suit decision and evidence, resulted in the murder conviction)  The court held that "regardless of whether a verdict for second degree murder translates into a finding of willfulness within the meaning of applicable state law, the insured “intended to commit the extreme and lethal acts resulting in [the victim's] death," and the intentional acts exclusion therefore applied to bar coverage. 

 

Deadly force:  The use of deadly force in self-defense constituted intentional conduct causing harm to another within the insurance policy's intentional acts exclusion.

 

Dislike for the son-in-law:  Coverage was excluded for injury sustained when the insured struck a guest in the face in self-defense.  The fact that the punch was thrown in self-defense did not establish that the insured had no purpose to injure, and, in fact, the insured had testified that he intended to strike the guest with the force that he expended and that resulted in serious injuries.

 

Retarded insured:  Insured's son pleaded guilty to sexually molesting three minor children and claimed mental illness or retardation.  The trial court ruled in the insured's favor in a declaratory relief action to determine coverage for defense and indemnity in the underlying suit brought by the children and their parents.  The appellate court reversed, holding that the specific intent to harm is inferred, as a matter of law, precluding coverage.  When the insured's specific intent to injure is inferred as a matter of law, evidence of the insured's diminished capacity is irrelevant. The court expressly reserves ruling on coverage in circumstances where the insured is insane.

 

NOTE:  The following two decisions seem quite opposite, which in fact, they are.  The first is the decision of the lower court, and the following decision is from the appellate court.  There must have been some evidence which justified the decision of the appellate court, as the most typical decision in a situation of this type, is that voiced by the lower court.

 

Firing into a crowd:  (Lower court ruling) The insured engaged in a fight with 20 to 30 other people.  He fired shots at the group of people, causing bodily injury.  Under these circumstances, the insured's acts fell within the policy exclusion for intentional acts, even if he did not intend to shoot the specific person that the bullet did, in fact, hit.

-however-

(The appellate court ruling)  Where the insured fired shots in the general direction of a crowd, an intent to injure could not be inferred and exclusion for intentional acts did not relieve insurer of duty to defend.  (See if you can figure this one out!)

 

Insured robbers:  Insurers were not liable to defend or indemnify their insureds under Homeowners policies for damages arising from participation by insureds in assaults and robberies, since such activities did not constitute an "occurrence" under one policy and were excluded under the other policy because the injuries were expected or intended by the insureds.

 

No coverage for sexual harassment:  Insurer had no duty to defend the insured under Homeowners policy in a lawsuit alleging nonconsensual sexual assault, sexual harassment, intentional infliction of emotional distress, and intentional interference with a contract of employment, since nonconsensual assault and battery was an intentional injury that was excluded from coverage as a matter of law, and the other claims were excluded because each required proof of intent to injure.

 

1 


ASSUMED LIABILITY

 

ISO.         2.    Coverage E-Personal Liability, does not apply to:

                 a.    liability: ...

(2)   under this contract or agreement. However, this exclusion does not apply to written contracts:

(a) that directly relate to the ownership, maintenance or use of an in­sured location; or

(b) where the liability of others is assumed by the insured prior to an oc­currence;

unless excluded in (1) above or elsewhere in this policy;

 

Other Company.         2.         Coverage L does not apply to:

a.    liability: ...

(2)   assumed under any unwritten contract or agreement, or by contract or agreement in connection with a business of the insured;

 

 

CONSUMER APPLICATION

Where the insured was sued for alleged misrepresentations in connection with sale of property, insurer had no duty to defend or indemnify the insured since lawsuit did not seek damages that arose as a result of an "occurrence" or "property damage." he policy also specifically excluded liability for claims arising as a result of any contract or agreement except those directly relating to the maintenance or use of the insured location. 121

 

1 


DAMAGE TO OWNED PROPERTY

 

ISO.     2.  Coverage E-Personal Liability, does not apply to: ...

                 b. property damage to property owned by the insured;

 

Other Company.         2.         Coverage L does not apply to: ...

b. property damage to property owned by any insured;

 

CONSUMER APPLICATION

The mortgagee foreclosed on the insured's condominium.  Before the mortgagee could take possession, the insured removed certain improvements to the condo.  The bank therefore sued the insured, and the insured tendered defense of the action.  In affirming an order granting summary judgment to the insurer in the declaratory relief action, the court held that the exclusions for prop­erty damage (1) expected or intended by the insured; (2) to property owned by the insured; and (3) to property rented to, occupied or used by, or in the care of an insured each precluded coverage. 122

 

1 

 

 


PROPERTY DAMAGE TO PROPERTY RENTED TO/BY INSURED

 

ISO.  2.    Coverage E-Personal Liability, does not apply to: ...

c.    property damage to property rented to, occupied or used by or in the care of the insured. This exclusion does not apply to property damage caused by fire, smoke or explosion;

 

Other Company.         2.         Coverage L does not apply to: ...

c.    property damage to property rented to, occupied or used by or in the care of any insured. This exclusion does not apply to property damage caused by fire, smoke or explosion;

 

CONSUMER APPLICATION

Adult son who wrecked borrowed snowmobile while vacationing at Canadian cabin of his parents, was not an insured under their Homeowners policy since he maintained his own separate residence, and insurer had no obligation to pay judgment entered against son for damage to a snowmobile.  The policy exclusion for property damage to property used by or in care of an insured would operate to avoid coverage even if the son were an insured. 123

 

1 

 


BODILY INJURY TO PERSON RECEIVING BENEFITS FROM OTHERS

 

ISO. 2.

3.

Coverage E-Personal Liability, does not apply to: ...

d.    bodily injury to any person eligible to receive any benefits

(1)   voluntarily provided; or

(2)   required to be provided; by the insured under any:

(1)   workers' compensation law;

(2)   non-occupational disability law; or

(3)   occupational disease law; ...

Coverage F-Medical Payments to Others, does not apply to bodily injury:..

b.    to any person eligible to receive benefits:

(1)   voluntarily provided; or

(2)   required to be provided; under any:

(1)   workers' compensation law;

(2)   non-occupational disability law, or

(3)              occupational disease law;

c.     from any:

(1)   nuclear reaction;

(2)   nuclear radiation; or

(3)   radioactive contamination; all whether controlled or uncontrolled however caused; or

(4)   any consequence of any of these.

 

Other Company.    2.         Coverage L does not apply to: ...

d.    bodily injury to a person eligible to receive any benefits required to be pro­vided or voluntarily provided by an insured under a workers' compensation, non-occupational disability, or occupational disease law; ...

3.  Coverage M does not apply to bodily injury: ...

b.    to a person eligible to receive any benefits required to be provided or volun­tarily provided under any workers' compensation, non-occupational disabil­ity or occupational disease law;

c.     from nuclear reaction, radiation or radioactive contamination, all whether controlled or uncontrolled or however caused, or any consequence of any of these;

 

 

 

 

CONSUMER APPLICATION

An employee of the operator of a thoroughbred horse racing and selling business was precluded from recovering under the employer's Homeowners insurance for injuries suffered when she was thrown from a horse.  The Homeowners policy contained a workers' compensation and business pursuits exclusion that applied to the situation of the employee.  The training of the horses was a business pursuit of the insured employer, and the employee's injury occurred in the course and scope of her employment.  Although riding the thoroughbred horse was not one of her regular duties, it was an incident to her employment. 124

 

1 

 


MEDICAL PAYMENTS - RESIDENCE EMPLOYEES

 

ISO.  Coverage F-Medical Payments to Others...

... This coverage does not apply to you or regular residents of your household except residence employees.

 

Other Company.         Coverage M-Medical Payments to Others... ... This coverage applies only: ...

3.    to a residence employee if the occurrence causing bodily injury occurs off the in­sured location and arises out of or in the course of the residence employee's em­ployment by an insured.

 

Son not a resident:  Insurer may be obligated to pay claims, medical payments, judgments, or settlements with respect to claim of son against parents on account of personal injuries where son was not a resident of the parents' dwelling.

 

1 


MEDICAL PAYMENT EXCLUSION

 

ISO.  3.    Coverage F-Medical Payments to Others, does not apply to bodily injury: ...

d.    to any person, other than a residence employee of an insured, regularly residing on any part of the insured location.

 

Other Company.         3.         Coverage M does not apply to bodily injury: ...

d.    to a person other than a residence employee of an insured, regularly residing on any part of the insured location.

 

1 


ADDITIONS TO THE LIMITS OF LIABILITY

 

ISO.  We cover the following in addition to the limits of liability: ...

3.    Damage to Property of Others. We will pay, at replacement cost, up to $500 per occurrence for property damage to property of others caused by an insured.

 

Other Company.         We cover the following in addition to the limits of liability: ...

3.    Damage to Property of Others.

a.    We will pay for property damage to property of others caused by an insured.

b.     We will not pay more than the smallest of the following amounts:

(1)         replacement cost at the time of loss;

(2)         full cost of repair; or

(3)         $500 in any one occurrence.

 

CONSUMER APPLICATION

In considering issue of coverage under Homeowners policy, where insureds cut trees owned by neighbors, the court held that coverage provided by policy for damage to property of others did not apply where the policy excluded such coverage for property damage caused intentionally by any insured and that the exclusion applied to neighbor's complaint, which alleged that the insured willfully cut the trees. 125

 

1 


PROPERTY DAMAGE BY INSUREDS OVER AGE 12

 

ISO.     We cover the following in addition to the limits of liability ....

3.  Damage to Property of Others ....

We will not pay for property damage: ...

b.    caused intentionally by an insured who is 13 years of age or older;

 

Other Company.         We cover the following in addition to the limits of liability: ...

3.  Damage to Property of Others ....

c.     We will not pay for property damage: ...

(2)   caused intentionally by an insured who is 13 years of age or older;

 

1 


EXCLUSION – PROPERTY OF INSURED OR RENTED BY INSURED

 

ISO.     We cover the following in addition to the limits of liability: ...

            3.         Damage to Property of Others.... We will not pay for property damage: ...

c. to property owned by an insured;

d. to property owned by or rented to a tenant of an insured or a resident in your household;

 

Other Company.         We cover the following in addition to the limits of liability: ...

3.    Damage to Property of Others....

c.  We will not pay for property damage: ...

(3)   to property owned by or rented to an insured, a tenant of an insured, or a resident in your household;

 

 

 

1 


ADDITIONAL COVERAGE EXCLUSIONS

 

ISO.  We cover the following in addition to the limits of liability: ...

3.    Damage to Property of Others....

We will not pay for property damage: ...

e.  arising out of:

(1)   a business engaged in by an insured;

(2)   any act or omission in connection with a premises owned, rented or controlled by an insured, other than the insured location; or

(3)   the ownership, maintenance, or use of aircraft, watercraft or motor vehicles or all other motorized land conveyances.

This exclusion does not apply to a motorized land conveyance designed for recreational use off public roads, not subject to motor vehicle registration and not owned by an insured.

 

Other Company.         We cover the following in addition to the limits of liability: ...

3.  Damage to Property of Others....

c.     We will not pay for property damage: ...

       (4)   arising out of:

(a) business pursuits;

(b) any act or omission in connection with a premises an insured owns, rents or controls, other than the insured location; or

(c) the ownership, maintenance, or use of a motor vehicle; aircraft; or watercraft, including airboat, air cushion, jet ski sailboard or similar type watercraft.

 

1 

 


EXCLUSION OF PROPERTY DAMAGE IF THERE IS OTHER COVERAGE

 

ISO.

We cover the following in addition to the limits of liability: ...

3.    Damage to Property of Others....

We will not pay for property damage:

a.  to the extent of any amount recoverable under Section I of this policy;

 

Other Company.

We cover the following in addition to the limits of liability: ...

3.    Damage to Property of Others....

c.  We will not pay for property damage:

(1)   if insurance is otherwise provided in this policy


STUDY QUESTIONS

 

1.  Under the Motor Vehicle exclusion of Section II, Liability, which of the following is considered a Motor Vehicle:

      A.  a stock car racer.

      B.  a truck in dead storage.

      C.  a Dune Buggy.

      D.  a motorized golf cart used to play golf on the municipal links.

 

2.  A contractor building a shopping center uses an independent contractor for surfacing the parking lot.  The contractor’s employees accidentally spray hot tar on a customer of a nearby store.   The contractor is sued for liability, and this is called

      A. Vicarious liability.

      B.  pro-facto liability.

      C.  subrogation.

      D.  inherent vice.

 

3.  Where there are two negligent acts that together result in injury, one act being covered under the policy, and the other excluded, this is called ______ _______, and the insurer’s responsibility is to ______________.

      A.  mutual causes   -   not provide defense or coverage.

      B.  compounded negligence   -   provide defense only under the covered negligent act.

      C.  dual causation   -   provide defense on either and both acts.

      D.  mixed negligence   -   pay any judgement that arises, but not to defense.

 

4.  A Homeowners policy provides liability protection arising out of using a watercraft, with inboard or outboard power ___________________ and length of _________.

      A.  50 hp or less  -  25 ft or less

      B.  50 ft  or less  -  25 hp or less

      C.  100 hp outboard, 125 hp inboard or inboard-outboard  -  35 ft or less.

      D.  of more than 50 hp  -  25 feet or less

 

5.  Dependent upon, subordinate to, arising out of, or otherwise connected with something else, usually of greater importance, is the definition of

      A.  predominant.

      B.  incident.

      C.  subrogation.

      D.  menial.

 

6.  Under a Homeowners policy, a business pursuit is a continuous or regular activity,

      A.  operated at or near the address shown on the Declarations page.

      B.  subservient to other more lucrative business(s).

      C.  done for the purpose of earning a profit.

      D.  as a donation for a charitable organization.

 

7.  There are exceptions to the business pursuits exclusion of a policy, ordinarily incident to non-business pursuit, but it is applicable

      A.  where the insured is engaged in the employment.

      B.  where it is operating in a place that is ordinarily related to this business.

      C.  if it is not motivated by a business purpose, the insured is not engaged in the business and is not operating an instrumentality ordinarily related to his business.

      D.  where it is motivated by a business purpose.

 

8.  Personal liability or Medical Payments to Others coverage apply to bodily injury or property damage arising out of a premises

      A.  owned by an insured.

      B.  rented to an insured.  

      C.  rented to others by an insured.

      D.  owned by a person who is not an insured.

 

9.  Several States apply a test when determining whether an insured expected or intended to inflict bodily injury upon another.   This is called the

      A.  Specific Intent test.

      B.  foreseeability of expectation of intent.

      C.  inherent negligence test.

      D.  Subjective Standard.

 

10. Milo is a small man who lives in a “rough” neighborhood.  He was tired of being beaten up by neighborhood bullies, so he became proficient at martial arts.  Three hoodlums attempted to rob him one evening and he tried to escape but they had him cornered.  In self-defense, Milo gave a demonstration of his proficiency at Karate and Kung Fu and injured one of the thugs, who then cried for his attorney and his mother, in that order.  What would Milo’s Homeowners policy do for him?  Why? (Choose the better answer)

      A.  Milo is now considered as a “lethal weapon” so there is no coverage or defense offered for him in this situation.

      B.  Provide defense and coverage because Milo acted in self-defense and he did not intend to injure the hoodlum.

      C.  Because Milo might be considered negligent in using his martial arts powers, his liability would be covered, so the insurer would provide defense and would pay judgements.

      D.  The law of “last clear chance” would come into play, so Milo, in effect, took matters into his own hands, thereby relieving the insurer of any coverage.

 

ANSWERS TO STUDY QUESTIONS

 

1D     2A     3C     4A     5B     6C     7C     8D     9D     10C