U.S. Specialty Ins. Co. v. LeBeau, Inc.

• Decision Date: 22 February 2012
• Docket Number: No. 10–CV–6533L.,10–CV–6533L.
• Citation: 847 F.Supp.2d 500
• Parties: U.S. SPECIALTY INSURANCE COMPANY, Plaintiff, v. LeBEAU, INC., et al., Defendants.
• Court: U.S. District Court — Western District of New York

847 F.Supp.2d 500

U.S. SPECIALTY INSURANCE COMPANY, Plaintiff,

v.LeBEAU, INC., et al., Defendants.

No. 10–CV–6533L.

United States District Court,

W.D. New York.

Feb. 22, 2012.

Frederick P. Alimonti, Alimonti Law Offices, Jeremy I. Hager, Alimonti Law Offices, P.C., New York, NY, Reed N. Summers, Sutter, Summers & Lydon, Webster, NY, for Plaintiff.

Samuel H. Caruso, Jr., Kaman, Berlove, Marafioti, Jacobstein & Goldman, Brian Edward Marianetti, Howard A. Stark, John C. Palermo, Joseph B. Rizzo, Igor Shukoff, City of Rochester, Law Department, Rochester, NY, Tammy L. Riddle, Hoganwillig, Getzville, NY, for Defendants.

DECISION AND ORDER

DAVID G. LARIMER, District Judge.

INTRODUCTION

On May 31, 2009, during and in proximity to an air show held at Ontario Beach Park in the City of Rochester, defendant Shane Full, a pedestrian, was struck and seriously injured by a motor vehicle operatedby a third party, Jessie Schlageter, who was driving a vehicle near the site of the air show.

On May 28, 2010, Kari Ann Full, individually and as Shane Full's guardian, filed an action in New York State Supreme Court, Monroe County, against the County of Monroe (which owns Ontario Beach Park and issued a permit to the Airport Authority for its use in the air show), the Monroe County Sheriff's Department and the Monroe County Sheriff, the Monroe County Airport Authority (which sponsored the air show) (collectively “County defendants”), LeBeau, Inc., d/b/a Beau Productions (the manager and producer of the air show), the City of Rochester, the City of Rochester Police Department, and the Town of Greece. The complaint in that action generally alleges that the parties' carelessness and negligence in controlling motor vehicle traffic and failure to afford proper safety measures for pedestrians caused Shane Full's injuries.

The permit issued to the Airport Authority by the County for the air show required LeBeau to obtain insurance, naming the County and the Airport Authority as additional insureds, to protect against claims for bodily injury, death, property damage, etc., “which may arise from the performance of work under this agreement whether or not such performance be by [LeBeau] or by any subcontractor or anyone else employed by them directly or indirectly ...” (Dkt. # 51–5, Permit Agreement at ¶ 17).

LeBeau procured that insurance (the “policy”, Dkt. # 51–6) through plaintiff U.S. Specialty (“USSIC”). After the underlying action was filed, USSIC denied coverage for Shane Full's injuries under the policy, due to the auto exclusion contained therein. USSIC then commenced this declaratory judgment action, seeking a judicial determination that the policy does not cover Shane Full's injuries, and further, that the defendants are not entitled to any defense or indemnification by USSIC, because Full's injuries were sustained outside of the “covered premises,” and because the incident fell within the auto exclusion.

USSIC and the County defendants have separately moved for partial summary judgment with respect to the discrete issue of whether the auto exclusion (as modified by endorsements to the policy) precludes coverage for the County defendants. (Policy: Dkt. # 51–6). The County defendants contend that the modified exclusion is at best ambiguous, and that a reasonable insured would not have believed that it disclaimed all coverage for any motor vehicle accident, including one caused by a vehicle which was not owned or operated by an insured, and with which none of the insured had any relationship. USSIC, on the other hand, claims that the policy exclusion and endorsement are clear and unambiguous, particularly within the context of a second endorsement that extended coverage to autos operated by the insured on airport grounds, and that anyone reading the exclusion would have understood that the policy excluded any injury caused by an automobile operated by third parties.

For the reasons set forth below, USSIC's motion for partial summary judgment (Dkt. # 50) is granted, the County defendants' cross motion for partial summary judgment (Dkt. # 51) is denied. The Court finds that the auto exclusion at issue is clear and unambiguous, and that in light of its clear terms, USSIC is not obligated to defend or indemnify the County defendants in the underlying personal injury action.

DISCUSSION

I. Summary Judgment

Summary judgment will be granted if the record demonstrates that “there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). (2000). In determining a motion for summary judgment, the Court's role is not “to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Id. When considering a motion for summary judgment, the Court must construe all inferences from underlying facts in the light most favorable to the non-movant. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587–88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962).

II. The Policy's Auto Exclusion

The material facts concerning the underlying accident, and the terms of the policy itself, are undisputed. The parties agree that at the time Shane Full was injured, the policy was in full force and effect.

In its boilerplate form, the policy contained an exclusion for “[b]odily injury ... arising out of the ownership ... use, or entrustment to others of any aircraft, auto or watercraft owned or operated by or ... loaned to any insured. ‘Use’ includes operation and loading or unloading.” (Dkt. # 61–6 at 8) (emphasis added). However, this exclusion was amended by an endorsement to the policy, which specified the same scope of coverage for injuries caused by aircraft and watercraft, but conspicuously expanded the exclusion as it pertained to automobiles, by dropping the requirement that the injury stem from a vehicle owned, operated or loaned to “any insured.”

That endorsement reads as follows:

[This insurance does not apply to] ...

a. Bodily injury ... arising out of the ownership, maintenance, use or entrustment to others of any aircraft or watercraft owned or operated by or ... loaned to any insured. “Use” includes operation and loading or unloading.

b. Bodily injury ... arising out of the ownership, maintenance, use or entrustment to others of any auto. “Use” includes operation and loading or unloading.

(Endorsement 20410, Dkt. # 56–6 at 31) (emphasis added).

A second endorsement was also added to the policy, which provided that the auto exclusion would not apply to (and thus, that coverage would extend to injuries arising out of) automobiles operated by the insured “on the airport.” (Endorsement 20420, Dkt. # 56–6 at 32).

A. Extent of Coverage

In support of its instant motion, USSIC claims that the policy's auto exclusion is clear and unambiguous, and that the issue of whether it excludes any and all injuries caused by an automobile may be resolved in the affirmative, as a matter of law, based upon the undisputed facts. The County argues that the auto exclusion is ambiguous, and/or that there are ample material questions of fact which preclude summary judgment. Under New York law, “[a]mbiguity exists where the terms of an insurance contract could suggest more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement.” 40 Gardenville, LLC v. Travelers Prop. Cas. of America, 387 F.Supp.2d 205, 212 (W.D.N.Y.2005).

Where insurance coverage is ambiguous, doubts are to be resolved in favor of the insured and against the insurer. Brabender v. Northern Assurance Co. of America, 65 F.3d 269, 273 (2d Cir.1995); Handelsman v. Sea Ins. Co., Ltd., 85 N.Y.2d 96, 101, 623 N.Y.S.2d 750, 647 N.E.2d 1258 (1994). More specifically, exclusionary clauses in which the insured had little or no input are to be strictly construed against insurers. Thomas J. Lipton, Inc. v. Liberty Mut. Ins. Co., 34 N.Y.2d 356, 361, 357 N.Y.S.2d 705, 314 N.E.2d 37 (1974). Furthermore, “[w]hen the exclusionary clause does not include the particular loss that the insurance company alleges, then the insured is entitled to be defended and possibly indemnified.” Westview Associates v. Guaranty National Ins. Co., 95 N.Y.2d 334, 340, 717 N.Y.S.2d 75, 740 N.E.2d 220 (2000).

The test for ambiguity in an insurance agreement is whether “an ordinary business man in applying for insurance and reading the language of these policies ... would have thought himself covered against precisely the damage claims now asserted.” Kenyon v. Security Ins. Co. of Hartford, 163 Misc.2d 991, 996, 626 N.Y.S.2d 347 (Sup.Ct. Monroe County 1993), quoting Thomas J. Lipton, Inc., 34 N.Y.2d 356 at 361, 357 N.Y.S.2d 705, 314 N.E.2d 37.

The Court's initial focus, then, is whether an “ordinary business man” would have reasonably believed that the policy's exclusion for injuries “arising out of the use ... of any auto” would exclude such injuries regardless of whether they were, as here, caused by a third party with no relationship to the insured. For the reasons that follow, I conclude that the auto exclusion clearly and unambiguously excludes coverage for any and all personal injuries “arising out of the ... use ... of any auto[mobile],” including use by third parties, and that an ordinary businessperson could not have reasonably believed otherwise.

I have examined the cases relied upon by the County defendants, wherein other courts concluded that similar clauses were ambiguous, and find that they are readily distinguishable from the facts and law applicable to this case. In Essex Ins. Co. v. City of Bakersfield, 154 Cal.App.4th 696, 65 Cal.Rptr.3d 1 (Ct.App.Cal., 5th App. Dist.2007), the California Circuit Court of...