|
Commercial Auto |
|
Duty To Defend And Indemnify |
|
Businessowners Policy Auto
Exclusion |
On August 11, 2001, a group
of friends rented a van from Ultimate Livery Service (Ultimate). They were
attending a bachelor party that night, and wanted someone else to drive so they
"wouldn't have to worry about driving home." They arranged to have
Ultimate's driver, Richard Broderick, pick them up at a sports bar in Boston.
The plan was to have Broderick drive them to a strip club in Rhode Island, then
back to Boston.
Broderick arrived at the bar
as scheduled. He went inside and observed the party drinking. He then drove the
party to Rhode Island. The group drank beer while in the van and at the Rhode
Island club. They boarded the van at around 1:00 a.m., returned to Boston and
continued drinking. When they arrived back in Boston, Broderick dropped off all
but two passengers. By this time, the sports bar and the nearby subway station
were closed. One of the passengers who left the van at the sports bar was
William Powers.
Powers had driven his
girlfriend's car to the bar that night, leaving the keys in it so that she
could pick him up later. Instead, Powers, along with his brother, Brian, and
his friend, James Podolske, got into the girlfriend's car. Powers drove the car
a short distance before he violently collided with another automobile driven by
Lillie Paquette. The occupants of both automobiles suffered serious injuries
and one of the passengers in Paquette's vehicle died. Powers' blood alcohol
level was later found to be three times the legal limit.
At the time of the accident,
Ultimate was insured under two Commerce Insurance Company (Commerce) policies.
One, a commercial automobile policy with limits of $1,000,000, provided
liability coverage for "all sums an 'insured' legally must pay as damages
because of 'bodily injury' . . . to which this insurance applies, caused by an
'accident' and resulting from the ownership, maintenance or use of a covered
'auto.'" The van used to transport the party was a covered "auto"
under the policy.
The other Commerce policy
was a businessowners policy with single liability limits of $1 million. That
policy limited coverage only to "'bodily injury' . . . arising out of . .
. [t]he ownership, maintenance or use of the premises shown in the Schedule and
operations necessary or incidental to those premises . . ." The
"premises" was identified as "287 Columbus Avenue, Boston."
The policy excluded coverage for bodily injury "arising out of the
ownership, maintenance, use or entrustment to others of any . . . auto . . .
owned or operated by or rented or loaned to any insured."
Several lawsuits resulted
from the accident. Commerce filed an action seeking a declaration that neither
of its policies provided coverage for the injuries the various plaintiffs
sustained. The judge found that the businessowners policy did not provide
coverage for the underlying lawsuits but that the automobile policy required
Commerce to defend and indemnify Ultimate with respect to some but not all of
the plaintiffs' claims. The plaintiffs appealed and Commerce cross-appealed.
On appeal, the parties
agreed that the key determinative issue as to whether the automobile policy
provided coverage was whether the plaintiffs' injuries "arose out of"
the use of Ultimate's van. Commerce argued that the injuries did not arise out
of use of the van because neither Ultimate nor Broderick supplied alcohol and
Ultimate's van was not involved in the collision.
The Supreme Judicial Court
of Massachusetts rejected this argument. Instead, it emphasized the fact that
the use of the van that night was consistent with Ultimate's business
objectives, namely, "to permit passengers to get intoxicated while another
(Ultimate's employee) took care of the driving." The court also noted that
Ultimate and Broderick should have dropped the passengers at a location they
were likely not to drive from. This was sufficient to create a "causal
connection" between the motor vehicle's use and the injuries suffered. As
a result, Ultimate's automobile policy provided coverage.
The plaintiffs argued that
the businessowners policy provided coverage because the very nature of
Ultimate's business would occur off its designated premises and that the
business of driving passengers was "incidental to the premises" within
the meaning of the policy. The court acknowledged the plaintiffs' theory but
found that the policy exclusion barred coverage because the injury "arose
out of" the use of the van.
The court concluded that
Commerce had a duty to indemnify the plaintiffs under the commercial automobile
policy but not under the businessowners policy.
Commerce Insurance Company
vs. Ultimate Livery Service, Inc.-Supreme Judicial Court of Massachusetts,
Suffolk-November 26, 2008-897 North Eastern Reporter 2d 50