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The Superior Court of New Jersey has reversed the decision ofthe trial court and decided that an auto policy does not providecoverage for third-party injuries that stemmed from the use of agolf cart owned by the insured.

The case

United Services Auto Association (USAA) insured Joseph Tolotti'spick-up truck under a USAA standard auto policy. Tolotti also owneda golf cart which was not identified on the policy as a coveredvehicle. A third party alleged that on March 17, 2016, he sufferedinjuries when he was thrown from the golf cart andinjured. The third-party claimed the injuries were proximatelycaused by Tolotti's negligent operation of the golf cart.

The golf cart was not identified as a covered vehicle under thepolicy, and Tolotti never asked USAA to add the golf cart as acovered vehicle. Tolotti sought defense and indemnification fromUSAA, which denied coverage. Tolotti filed suit, and the trialcourt found in his favor, finding that the policy providedcoverage. USAA appealed.

The appeal

The Superior Court of New Jersey overturned the lower court'sdecision.

The "Insuring Agreement" section of the policy stated that theinsurer would pay compensatory damages for bodily injury orproperty damage for which any covered person becomes legally liablefor due to an automobile accident and that the insurer will settleor defend a suit asking for damages. However, it specifiedthat the insurer has no duty to defend or indemnify a claim notcovered under the policy; the "Exclusions" section included aprovision that stated that the insurer would not provide coveragefor the use of any vehicle other than the covered auto, unless thatvehicle is, among other things, a miscellaneous car having at leastfour wheels. The policy also excluded coverage for any vehicle,other than the covered auto, owned by the insured.

Tolotti argued that the exclusions, the first providing coverageand the second taking it away, created an ambiguity which, heargued, is required to be interpreted against USAA and in favor ofcoverage.

USAA disagreed, arguing that the first exclusion, the exceptionto the exclusion, and the second exclusion was clear. The insurerdisagreed that ambiguity could arise from two clear clauses, andthat interpretation in such a way would violate a prevailingprinciple of insurance law, which provides that insurers do notinsure, and insurers are not entitled to coverage for a risk forwhich no premium has been paid.

The Superior Court of New Jersey established that undefinedwords in an insurance policy are generally given their plainordinary meeting. If the policy language is clear, the policyshould be enforced as written. If the language is ambiguous, theyare construed against the insurer.

Tolotti's argument overlooked two principles of insurance law.First, that only genuine ambiguities engage in the"doctrine-of-ambiguity," and that the phrasing in the policy wasnot so egregiously confusing that the average policyholder couldnot make out the boundaries of coverage, so no ambiguityexisted.

Second, each exclusion is meant to be read with the insuringagreement, independently of the other exclusion. If any singleexclusion applies, then there should be no coverage. Since eachexclusion has no relationship with any other exclusion, in noinstance can an exclusion properly be ruled to be inconsistent withanother exclusion. So, the court ruled that the second exclusion wasunambiguous in its exclusion of coverage for owned vehicles otherthan a covered auto identified on the policy's declarationpage.

Thus, the policy excluded coverage for the golf cart.

The case is Tolotti v. United Servs. Auto Ass'n, 2020 N.J.Super. Unpub. LEXIS 371.

Editors Note: Although the policyseemed to be ambiguous to a layman, the court ruled that theprovisions in question were completely unambiguous because, as itis well established in the insurance industry, exclusions are to beread independently of one another. Since one of the exclusionsspecifically precluded coverage for owned vehicles not listed inthe Dec page, which included the golf cart.

See also:

• Consumers' top-rated car insurance companies of2020

• Pump the brakes: Is auto racingcovered?