53 F.4th 730
1st Cir.2022Background
- A 2006 Jeep auctioned at Lynnway Auto Auction accelerated into a crowd during a May 3, 2017 auction, killing five and injuring others; Lynnway employee Roger Hartwell was driving the Jeep.
- Nashua Automotive (AutoFair) owned the Jeep and had Motorists Commercial Mutual Insurance primary and umbrella policies covering Nashua/AutoFair but not Lynnway or Hartwell as named insureds.
- The Primary Policy (Garage Coverage Form), modified by a New Hampshire endorsement, defined insureds to exclude "someone using a covered 'auto' while . . . working in a business of selling . . . 'autos' unless that business is yours" (the "auto business exclusion") and also excluded insureds operating vehicles while their driver’s license was suspended.
- The Umbrella Policy included an "Automobile Liability -- Following Form" endorsement limiting umbrella auto coverage to what the underlying policies provide, and separately excluded employees of auto sales agencies the insured did not operate.
- Motorists sued for a declaratory judgment that its policies do not cover Lynnway or Hartwell; the district court granted Motorists summary judgment, and the First Circuit affirmed.
Issues
| Issue | Motorists' Argument | Defendants' Argument | Held |
|---|---|---|---|
| Whether Lynnway/Hartwell were "in a business of selling autos" (triggering the auto business exclusion) | Yes — Lynnway is an auction business engaged in selling autos, so its workers are excluded | No — an auctioneer is merely a broker; not in the "business of selling" for policy purposes | Held: Lynnway/Hartwell were engaged in a business of selling autos via auction; exclusion applies |
| Whether Lynnway's activity was "your" (Nashua's) business (so the exclusion’s exception covers them) | No — Lynnway operated an independent auction business; not Nashua's business | Yes — the auction activity supported Nashua's sale of its car, so the activity is Nashua's business (ambiguous) | Held: "Business" refers to the enterprise, not any activity supporting a dealer; Lynnway was not Nashua's business |
| Whether the Umbrella Policy provides independent auto coverage (despite Primary Policy exclusion) | Umbrella follows underlying; no broader auto coverage than Primary | Argued term "auto sales agency" ambiguous and should be read narrowly to include only dealerships | Held: District court correctly treated the Umbrella as follow-form; because the Primary provides no coverage, Umbrella provides none (defendants did not preserve a challenge) |
| Whether the Primary Policy’s suspended-license exclusion bars coverage | Motorists alternatively invoked the suspended-license exclusion | Defendants disputed license status; asserted coverage nonetheless | Held: Court did not reach this issue because the auto business exclusion was dispositive |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary-judgment standard)
- Todd v. Vt. Mut. Ins. Co., 137 A.3d 1115 (N.H. law: interpret policy by plain and ordinary meaning)
- Newell v. Markel Corp., 145 A.3d 127 (clear policy language given natural meaning)
- Brickley v. Progressive N. Ins. Co., 7 A.3d 1215 (ambiguities in insurance policies construed against insurer)
- Russell v. NGM Ins. Co., 176 A.3d 196 (rejects unreasonable constructions to create ambiguity)
- Carney v. Erie Ins. Co., 434 S.E.2d 374 (similar exclusion: working for a separate auction business not the dealer's business)
- Borden v. Progressive Direct Ins. Co., 30 N.E.3d 856 (explains exclusion rationale: lack of control increases risk to owner's insurer)
- Jalbert ex rel. F2 Liquidating Tr. v. Zurich Servs. Corp., 953 F.3d 143 (follow-form/excess-policy principle)