Nautilus Ins. Co. v. Bike & Build, Inc.
340 F. Supp. 3d 399
E.D. Pa.2018Background
- Bike & Build organized a cross-country charity cycling trip (ME2SB); Bridget Anderson was a rider who raised funds and participated; she and another rider (who died) were struck by a third‑party motorist during the trip.
- Nautilus issued Bike & Build a commercial general liability policy (primary); United Specialty issued excess coverage that follows the Nautilus policy.
- Nautilus denied coverage relying principally on an "Auto Exclusion" endorsement, and also invoked Volunteer Worker and Participant exclusions; United Specialty relied on parallel Employee and Athletic/Sports Participants exclusions.
- Anderson sued Bike & Build (underlying action) alleging negligence and gross negligence in route selection and supervision; Bike & Build later assigned its rights against insurers to Anderson after a settlement/consent judgment.
- The insurers filed this declaratory-judgment action; all parties moved for summary judgment. The court evaluated whether the policy exclusions unambiguously precluded coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Nautilus "Auto Exclusion" bar coverage for injuries caused by a third‑party motorist? | Bike & Build: exclusion ambiguous / should apply only to insured's own vehicles; reasonable expectations of coverage for riders. | Nautilus: endorsement unambiguously excludes bodily injury "arising out of" use of any auto (no ownership/operation requirement). | Held: Auto Exclusion unambiguous; bars coverage because Anderson's injuries arose out of use of a motor vehicle. |
| Is Nautilus estopped from relying on its later, broader Auto Exclusion interpretation? | Bike & Build: Nautilus's initial ROR suggested a narrower reading, so insurer should be estopped from changing position. | Nautilus: initial ROR was investigatory and was promptly corrected; no prejudice or detrimental reliance. | Held: No estoppel—no prejudice and Nautilus timely amended position. |
| Does the Volunteer Worker / Employee exclusion bar coverage because Anderson performed fundraising/sweep duties? | Nautilus/United Specialty: Anderson was a volunteer/employee (sweep role, fundraising, wore jersey) and thus excluded. | Bike & Build: riders are participants, not workers; fundraising completed pre‑trip; "work" ambiguous. | Held: Anderson was not a "volunteer worker/employee" as a matter of law for these exclusions; those exclusions do not apply. |
| Do the Participant / Athletic or Sports Participants exclusions bar coverage for a cross‑country charity ride? | Bike & Build: "activity area" and "event" language ambiguous; route not a confined, "set aside" activity area; not a competitive race. | Insurers: ride is an athletic endeavor/event that Bike & Build sponsored/operated; exclusion applies. | Held: Participant exclusion (Nautilus) ambiguous as to "activity area" and thus construed for insured; not applied. United Specialty's Athletic/Sports Participants exclusion unambiguously covers athletic endeavors and barred coverage under its policy. |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard)
- Celotex Corp. v. Catrett, 477 U.S. 317 (movant's burden on summary judgment)
- Kvaerner Metals Civ. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 589 Pa. 317, 908 A.2d 888 (insurance‑policy interpretation is question of law)
- Madison Constr. Co. v. Harleysville Mut. Ins. Co., 557 Pa. 595, 735 A.2d 100 (policy language and ambiguity rule)
- Frog, Switch & Mfg. Co. v. Travelers Ins. Co., 193 F.3d 742 (duty to defend arises if complaint potentially states covered claim)
- Mut. Benefit Ins. Co. v. Haver, 555 Pa. 534, 725 A.2d 743 (compare complaint to policy to determine duty to defend)
- Essex Ins. Co. v. City of Bakersfield, 154 Cal. App. 4th 696 (discussed as contrary authority on scope of an auto exclusion)