549 F.Supp.3d 220
D. Mass.2021Background
- Motorists issued a primary Garage Coverage policy to AutoFair/Nashua and an Umbrella policy naming Nashua/AutoFair; underlying personal-injury suits were filed in Massachusetts state court after a vehicle accident at an auction facility.
- On May 3, 2017 a Jeep owned by Nashua and located at Lynnway Auto Auction accelerated into a crowd at Lynnway; Hartwell, a Lynnway employee, was driving and several persons were injured.
- Motorists sued for a declaratory judgment that it had no duty to defend or indemnify Lynnway or Hartwell in the underlying suits, invoking (1) an auto-business exclusion as modified by a New Hampshire endorsement and (2) a suspended-license exclusion; Motorists’ Umbrella policy excludes auto risks except as covered by underlying policies.
- Defendants argued Lynnway’s services were not an auto business for purposes of the exclusion, that the endorsement’s “unless that business is yours” language preserved coverage, and that Hartwell’s license was not suspended on the accident date.
- The court applied New Hampshire law, found the exclusions applicable, and granted Motorists’ summary judgment on duty to defend (denying defendants’ cross-motions).
Issues
| Issue | Motorists' Argument | Defendants' Argument | Held |
|---|---|---|---|
| Applicability of Auto-Business Exclusion (permissive user working in an auto business) | Lynnway/Hartwell were engaged in an auto business (auction/remarketing); exclusion bars coverage for permissive users working in auto businesses | Lynnway merely provided auction/parking-like services for Nashua; it did not sell or own the cars and thus should not be treated as an auto business | Exclusion applies: Lynnway/Hartwell were ‘‘in a business of selling/remarketing autos,’’ so Motorists has no duty to defend under the auto-business exclusion |
| Effect of New Hampshire Endorsement language change ("unless that business is yours") | Endorsement limits coverage for users working in another auto business; does not expand coverage to third-party auction operators | Endorsement broadens coverage beyond AutoFair’s garage operations to anyone "in" the activity; control by AutoFair makes exclusion inapplicable | Endorsement does not save coverage for Lynnway/Hartwell; ‘‘unless that business is yours’’ means the exclusion still applies to third-party auto businesses |
| Suspended-License Exclusion (license status of Hartwell on accident date) | RMV letter shows prior suspensions and an immediate revocation effective 5/3/17; exclusion bars coverage for operation while license suspended/revoked | Defendants contend Hartwell’s license had been reinstated in 2014 and no later suspension is shown on driving record; dispute precludes exclusion | Court accepts RMV letter showing suspensions in effect on 5/3/17; suspended-license exclusion also bars coverage for Hartwell (and thus Lynnway) |
| Umbrella Policy coverage dependency | Umbrella excludes automobile risks except to the extent covered by underlying policies; since primary coverage is barred, umbrella provides no coverage | Defendants urged separate umbrella arguments, but primary coverage controls | Umbrella provides no coverage because the Primary Policy exclusions preclude coverage; Motorists entitled to judgment on umbrella too |
Key Cases Cited
- United States Fidelity & Guaranty Co. v. Johnson Shoes, Inc., 123 N.H. 148 (1983) (insurer’s duty to defend is measured by allegations in the underlying pleadings)
- Lexington Ins. Co. v. Gen. Accident Ins. Co. of Am., 338 F.3d 42 (1st Cir. 2003) (courts should enforce plain meaning of policy language where possible)
- B & T Masonry Constr. Co. v. Pub. Serv. Mut. Ins. Co., 382 F.3d 36 (1st Cir. 2004) (ambiguities in exclusions construed against insurer)
- Case v. Fid. & Cas. Co. of New York, 105 N.H. 422 (1964) (policy language tested by what a reasonable insured would understand)
- Liberty Mut. Ins. Co. v. Sweeney, 689 F.3d 288 (3d Cir. 2012) (contrast when automobile-business exclusion does not apply because use was personal, not business)
- Borden v. Progressive Direct Ins. Co., 87 Mass. App. Ct. 391 (2015) (auto-business exclusion rationale: loss of owner’s control increases risk and shifts responsibility to the auto business)