The Expansive Auto Exclusion

Written by Gary Reinhardt, Esq.

In a case decided on June 21, 2018, the Western District of Virginia, by the Honorable Norman K. Moon, affirmed the broad scope of the auto exclusion.  In Admiral Ins. Co. v. W.W. Associates, Inc., et al., (Case No. 3:17-cv-00027), the Court applied the auto exclusion to a professional services policy issued to an engineering firm.

In W.W., plaintiffs in an underlying suit alleged that they suffered injuries, and even a death, following an automobile accident.  Part of the allegations included that the road where the accident happened was negligently designed.

W.W., the engineers, gave notice of the suit to Admiral.  Admiral asserted the automobile exclusion while defending under a reservation of rights.  The policy exclusion barred coverage for “any claim which arises from, or is related to, any collision or accident involving an automobile.”  Admiral then filed a Declaratory Judgment Action moving the Court to find the auto exclusion applicable and holding that Admiral did not owe W.W. a defense nor indemnity.

W.W. responded by claiming that the policy exclusion was ambiguous.  First, W.W. challenged the use of the word “claim.”  The policy defined “claim” and W.W. asserted that substituting the policy definition for the word “claim” in the exclusion rendered the auto exclusion “‘unintelligible.’”  (Page 5 of the Opinion).  The Court was not convinced, writing that W.W. was “straining” to find an ambiguity.  “Even if ‘claim’ was not defined in the Policy, the Fourth Circuit has had little trouble defining the word when unaccompanied by a definition.”  (Id., citing Ball v. NCRIC, Inc., 40 App’x 760,764 (4th Cir.  2002) (“The most common meaning of the noun ‘claim’ is ‘demand.’”))

Next, W.W. suggested a different meaning for the auto exclusion; that it covered “automobile accidents resulting from W.W.’s negligence as a roadway engineering firm” but did “not cover automobile accidents involving W.W. employees.” (Page 6 of the Opinion).  The Court disagreed stating that “the Automobile Exclusion does not carve out and permit coverage for automobile accidents resulting from W.W.’s wrongful acts as a civil engineering firm. . . This is broad exclusionary language that makes no reference to who caused the accident—only what cause the accident.”  (Id.).  The Court considered this an attempt to re-write the policy by limiting the scope of the auto exclusion.

Finally, W.W. claimed the “reasonable expectations” of an insured would be to expect coverage for this type of claim and the auto exclusion’s broad scope violated this doctrine.  The Court noted that the “reasonable expectations” doctrine is “used to clarify an ambiguity, not create one.”  (Page 7 of the Opinion (citations omitted)).  Even so, “Virginia has never explicitly adopted the ‘reasonable expectations’ doctrine . . . and Virginia courts do not interpret a contract based on the reasonable expectations of the parties.”  (Id. citing Jarrett v. Goldman, 67 Va. Cir. 367 (2005)).

The Court found the exclusion unambiguous.  “The exclusion removes from the scope of coverage all claims involving automobile accidents.”  (Page 8 of the Opinion).  The Court ruled in favor of Admiral and held that the policy excluded coverage and a defense to W.W. in the underlying lawsuit.

This broad interpretation of the Auto Exclusion left a significant gap in coverage for this civil engineering firm that designed roads.  However, the plainly written exclusion “means what is says:  there is no coverage for claims arising from automobile accidents.”  (Page 5 of the Opinion).

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