RFIP – When the Full Policy is Read by the Court Common Sense Prevails
Barry Zalma, Esq., CFE
Insurance claims expert, consultant at Barry Zalma, Inc. and author/Publisher at ClaimSchool, Inc.
Posted on December 9, 2020 by Barry Zalma
Wise Insurer Settles Third Party Suit and then Resolves Coverage Issue by Declaratory Relief Action
It is the obligation of every liability insurer to protect the interests of its insured. When there is a coverage dispute it is best to resolve the negligence claim against the insured and then resolve the dispute by, after protecting the rights of the insured, resolving the coverage dispute by a suit for declaratory relief.
The insurer did that in Scottsdale Insurance Company,as successor in interest to Western Heritage Insurance Company v. Charles Dylan Kuntz, Case No.: 2:19-cv-00113-JES-MRM, United States District Court Middle District Of Florida Fort Myers Division (December 3, 2020) Charles Dylan Kuntz (defendant or Kuntz) sued Whalen Auto Group, LLC (the insured or Whalen Auto)( the Circuit Court of the Twentieth Judicial Circuit in and for Charlotte County, Florida (the Negligence Action). Kuntz sought to recover damages for bodily injuries he sustained in an accident on December 10, 2016, involving an All-Terrain Vehicle (ATV) owned by Whalen Auto and driven by its employee. The Insurer denied coverage because clear and unambiguous exclusions.
FACTS
Kuntz, Whalen Auto, and Scottsdale resolved the Negligence Action pursuant to a written settlement agreement. The settlement agreement required Scottsdale to institute a declaratory judgment action to determine the rights and obligations, if any, of the parties arising from the insurance Policy, and to pay Kuntz $150,000.00 should Kuntz prevail in the declaratory action.
The undisputed material facts are as follows: On a signed application (the Application) for an insurance policy, Whalen Auto’s representative Esther Whalen described its business operations as buying, selling and servicing motorcycles, and selling protective gear, cleaning supplies, tires and motor oil. The Application also stated that 98% of Whalen Auto’s business consisted of sales and repairs of motorcycles, while 2% of its operations were sales and repairs of Dirt Bikes or ATVs/UTVs and all other recreational autos.
On December 10, 2016, Charles Dylan Kuntz (defendant or Kuntz) sustained bodily injuries while riding as a passenger on a “Stampede Bad Boy,” a four-wheel ATV owned by Whalen Auto and driven by its employee Brett DeGrasse (DeGrasse). The ATV was not licensed nor equipped for use on Florida roads or highways. DeGrasse was driving from Whalen Auto’s service facility to its showroom area when the ATV flipped over, injuring Defendant. At the time of the accident, DeGrasse was twenty years old. DeGrasse is not identified in the Policy as a driver of a covered “auto” nor named as an authorized driver in the Schedule of Youthful Drivers. Defendant Kuntz was not employed by Whalen Auto, nor was he test driving the ATV as a prospective purchaser.
ANALYSIS
In ruling on a motion for summary judgment, the Court views all evidence and draws all reasonable inferences in favor of the non-moving party. However, if reasonable minds might differ on the inferences arising from undisputed facts, then the court should deny summary judgment.
Plaintiff Scottsdale asserted that the damages sought by Kuntz are not covered by the Policy because the claim falls within the Youthful Driver Exclusion (the Exclusion) of the Policy, or the Policy’s Covered Driver(s) or Operator(s) Limitation (the Limitation), or both. As defendant succinctly states, “the only issue for this Court to decide is whether the Youthful Driver Exclusion, or the Covered Driver Limitation, operates to preclude coverage.”
Coverage: The Youthful Driver Exclusion
The Policy states in relevant part:
“YOUTHFUL DRIVER EXCLUSION – DEALERS ONLY
“We will not pay for ‘bodily injury,’ ‘property damage’ or ‘loss’ while anyone under the age of twenty-one (21) is operating a covered ‘auto’ at any time. This exclusion does not apply to the persons named in the Schedule of Youthful Drivers or to a prospective purchaser while on a test drive accompanied by you or your ‘employee.’”
As noted earlier, it is undisputed that at the time of the accident DeGrasse was under twenty-one years of age and was not named in the Schedule of Youthful Drivers, and that Kuntz was not a prospective purchaser on a test drive. Thus, the only disputed issue is whether the ATV involved in the accident was a covered “auto” within the meaning of the Youthful Driver Exclusion provision of the Policy.
Pursuant to Section VI’s definitions, “auto” is defined as “a land motor vehicle, ‘trailer’ or semitrailer.” It is undisputed that the ATV is neither a trailer nor a semitrailer. The Policy does not further define land motor vehicle, and the phrase is not in quotation marks in the Policy, indicating that it is not given any special meaning in the Policy.
It is apparent that the ATV in this case is a land motor vehicle because the ATV carries or transports something over the solid part of the surface of the earth while being powered by a gasoline engine that imparts motion. Accordingly, the ordinary, non-technical definition of land motor vehicle includes the ATV at issue in this case.
PIP Endorsement Definition of “Motor Vehicle”
The Court had to consider the language of the Policy as a whole, including the PIP Endorsement. The Court found that the PIP Endorsement’s definition of “motor vehicle” is not applicable to the meaning of land motor vehicle as used in the Youthful Driver Exclusion.
Since 1971, Florida law has required that an insurer issuing policies in Florida include provisions which comply with the Florida no fault statutes, which include providing personal injury protection (PIP). The PIP Endorsement in this Policy declares in large capital letters that it “CHANGES THE POLICY” and that it modifies the “Garage Coverage Form.” Specifically, the PIP Endorsement states that “with respect to coverage provided by this endorsement, the provisions of the Coverage Form apply unless modified by the endorsement.” (emphasis added). In relevant part the PIP Endorsement provides: “We will pay Personal Injury Protection benefits in accordance with the Florida Motor Vehicle No Fault Law to or for an “insured” who sustains ‘bodily injury’ in an ‘accident’ arising out of ownership, maintenance or use of a ‘motor vehicle.’”
It is clear on the face of the Policy that the PIP Endorsement changes the Policy and modifies the Garage Coverage Form in some regard, i.e., to the extent necessary to comply with the Florida law requirements. The Court concluded however, that the PIP Endorsement special definition of “motor vehicle” does not change, nor was it intended to change, the plain meaning of “land motor vehicle” as used in the Exclusion in the Garage Coverage Form. The clear intent is that meaning of the PIP Endorsement’s definitions, including “motor vehicle,” are limited to the PIP provisions, and do not apply to or supersede the definitions contained in other portions of the Policy. Looking at the Policy as a whole, the Court found that the term “motor vehicle” as used in the PIP Endorsement is not applicable to determining whether an ATV is a land motor vehicle.
Accordingly, Plaintiff’s Motion for Summary Judgment was granted and defendant’s motion was denied. It was thereby declared that the Policy provided by Scottsdale Insurance Company, as successor in interest to Western Heritage Insurance Company, does not provide coverage for the claims and judgment is entered in favor of Scottsdale Insurance Company, as successor in interest to Western Heritage Insurance Company, and against Charles Dylan Kuntz.
ZALMA OPINION
Scottsdale should be commended for protecting its insured by effecting a settlement with the claimant and protecting its insured. Only after protecting the insured did it then litigate the issue of coverage with a potential of paying the claimant more, and resolved it to the benefit of both Scottsdale and its insured.
? 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at https://www.zalma.com and [email protected].
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
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