Denial of Additional UIM Coverage Under Business Auto Policy Upheld

In a September 10, 2012 decision in the case of DiSomma v. Mutual Benefit Insurance Company, No. 2236 M.D.A. 2011 (Pa. Super. Sept. 10, 2012 Bowes, Ott, and Strassburger, J.J.) (Memorandum by Bowes, J.) (non-precedential decision), the Pennsylvania Superior Court reviewed the enforceability of a household exclusion clause in a commercial vehicle insurance policy.

The injured Claimant sustained fatal injuries while operating his Vespa Scooter that was insured under a separate policy with Progressive Insurance.

The separate Mutual Benefit policy listed the decedent as an individual eligible for UIM coverage under a business auto policy issued to the decedent's incorporated restaurants.

The Mutual Benefit policy contained an endorsement, “Drive Other Car Coverage – Broadened Coverage For Named Individuals,” which afforded liability, UM and UIM benefits to named individuals while occupying other vehicles not covered under the commercial policy. The fatally injured Claimant was one of the named individuals on the endorsement.

The liability coverage under the commercial policy was changed to include as a “covered auto” any vehicle being used by the named individual or spouse except “Any ‘auto’ owned by that individual or by any member of his or her household.”

With respect to medical payments and UM/UIM coverage, the endorsement added as an insured any named individual and his or her family members “while ‘occupying’ or while a pedestrian when being struck by any ‘auto’ you don’t own except an auto owned by that individual or by any family member.”

The insurance company denied UIM coverage based upon the latter exclusion for vehicles owed by the individual.

The party’s representative commenced an action and alleged that the exclusion was ambiguous and capable of multiple interpretations and, therefore, unenforceable. The trial court held that the exclusion unambiguously precluded recovery on the facts presented and granted the carrier’s Motion for Judgment on the Pleadings. The injured party’s representatives appealed.

On appeal, the Superior Court affirmed. In so ruling, the Superior Court set forth the standard for determining whether or not a policy’s language is ambiguous.

Ultimately, the Superior Court accepted the carrier’s argument that the endorsement in fact enhanced the original liability and UM/UIM coverage, but the household exclusion contained therein unambiguously barred UIM benefits while the injured party was occupying his own vehicle insured under another policy with a different insurance company.

Anyone desiring a copy of this decision may click this LINK.

I send thanks to Attorney Pete Speaker of the Harrisburg office of Thomas, Thomas & Hafer for bringing this case to my attention.

Third Circuit Addresses Auto Business Exclusion

In its recent decision in the case of Liberty Mutual vs. Sweeney, No. 11-4074 (3d Cir. Aug. 2, 2012), the Third Circuit Court of Appeals reversed judgment in favor of an insurer after finding that the auto business exclusion barring coverage for injuries sustained while using a non-owned motor vehicle in any kind of auto business did not apply to injuries sustained while the injured party was using a vehicle of another business for the purpose of running a personal errand, and even though the errand involved delivering a rental vehicle to a customer.  

 

The auto business exclusion in the case read, as follows:  "We will not pay for bodily injury sustained while using a non-owned motor vehicle in any kind of auto business.  Examples of auto businesses are: selling, repairing, servicing, storing, or parking motor vehicles."

 

The Sweeney case appears to address the rarely invoked auto business exclusion and may be a good case to review if you come across that issue. The opinion can be viewed online HERE.

 

Source:  “Court Summaries,” Pennsylvania Bar News (September 3, 2012) by Timothy L. Clawges.    

Rarely Invoked "Auto Business" Exclusion Upheld as Basis for Denial of UIM Benefits

In its recent October 7, 2011 opinion in the case of Liberty Mut. Ins. Co. v. Sweeney, Civl Action No. 06-2227 (E.D.Pa. Oct. 7, 2011, Tucker, J.), the court relied upon the rarely invoked "auto business" exclusion to rule in favor of the carrier's request for a declaratory judgment regarding the carrier's denial of the injured party's claim for UIM benefits.

According to the opinion, on the date of the accident, the injured party owned an auto mechanic business that specialized in transmission repairs.  He had a relationship with AAA Automotive Center, an auto repair and car rental service center.  As part of the relationship, AAA would provide rental cars to customers of the injured party at a discount while the injured party worked on his customer's cars.  In exchange, AAA would send any of its rental cars needing transmission work to the injured party's establishment for repairs.

On the date of the accident, the injured party picked up a vehicle owned by AAA to deliver it to his customer the next morning.  On the evening that the injured party picked up the business vehicle, he stopped by a store on a personal errand to pick up some groceries for himself.  On his way home from the store, the injured party was involved in the subject auto accident.

The vehicle owned by AAA was not covered under the injured party's own automobile insurance policy.  However, the injured party's policy did provide UIM coverage for certain "non-owned" vehicles.  The injured party therefore made a claim for UIM benefits under his own policy.

The carrier denied coverage and filed a declaratory judgment action raising various exclusions.  The focus of this opinion in the Eastern District Federal Court was on the rarely invoked "auto business" exclusion.

The "auto business" exclusion in the subject policy provided that the carrier would "not pay for bodily injury caused by anyone using a non-owned motor vehicle in any kind of auto business.  Examples of auto business are: selling, repairing, servicing, storing or parking vehicles."

In this case, the carrier asserted that the exclusion applied to preclude coverage because the insured was operating a "non-owned" vehicle that he had "rented" for one of his customers.  In opposition, the injured party asserted that the exclusion was inapplicable because he was running a personal errand--making a trip to get groceries--when the accident happened.

Relying on precedent handed down over 30 years ago, the court in Liberty Mut. Ins. Co. v. Sweeney upheld the exclusion as valid and granted summary judgment in favor of the carrier on the carrier's request for a declaratory judgment that it had properly denied coverage to the injured party under the circumstances presented.

It is also noted that the Court rejected the carrier's reliance upon the "regular use" exclusion contained in the policy since the injured party's one-time use of the non-owned vehicle in question was not a regular, or habitual, use of the vehicle as that term is defined in this context. 

Judge Tucker noted in footnote 3 of the Opinion that there is "no authoritative pronouncement of as to the level of activity amounting to "regular use.'"  He also noted that, since the Pennsylvania Supreme Court has not specifically addressed this issue, he would have to predict how that court would rule in this regard.  The Opinion goes on to provide a nice recitation of the current status of the law of the "regular use" exclusion and what constitutes sufficient use of a vehicle to fall within this exclusion.

Applying the ordinary meaning of the term "regular," the court noted the the type of use of a vehicle required to fall under this exclusion is a principle use of the vehicle as opposed to a casual or incidental use, or a habitual use as opposed to an occasional use.

With there being only an incidental use of the vehicle at issue in this matter, the carrier's reliance upon the regular use exclusion was rejected.  As noted above, however, the carrier did prevail based upon the application of the rarely invoked "auto business" exlcusion.

Anyone desiring a copy of the court's opinion in the case of Liberty Mut. Ins. Co. v. Sweeney may contact me at dancummins@comcast.net.

I give a tip of the hat and thanks to Pennsylvania Law Weekly reporter Ben Present for bringing this case to my attention.