Race car driver Tony Stewart not covered by CGL policy for fatal track incident, says N.Y. court

At or around this time, the race track came under a "yellow caution" flag, understood by the drivers as a signal that required them to "slow down and move away" from the hazard on the track — in this case, Ward's wrecked vehicle.

While the remaining drivers, including Stewart, continued to race, Ward exited his disabled race car, walked down the track on foot, and was fatally injured when Stewart's car struck him. The Ward action alleged that Stewart had been negligent or reckless in striking Ward.

Stewart denied the central allegations of the complaint as well as any liability for the incident.

Flowers, far right, are seen at Canandaigua Motorsports Park Aug. 11, 2014, in Canandaigua, N.Y. (Photo: AP/Mel Evans)

Insurer denies coverage

On Aug. 17, 2015, the insurance broker for Tony Stewart Racing Enterprises (TSRE) notified Axis Insurance Company of the Ward action and requested that Axis provide Stewart with coverage under the insurance policies that it had issued for Stewart's race team operations.

Axis disclaimed coverage, arguing, among other things, that:

(1) The ESS event was not one of the 105 "Specified Event(s)" listed in the CGL policy's schedule of events endorsement; and

(2) The claims asserted in the Ward Action fell within the exclusion for claims "brought by one racing vehicle driver against another racing vehicle driver" contained in the "Participant Legal Liability—Motorsports" endorsement (the "PLL endorsement").

The parties moved for summary judgment.

The Axis CGL policy

The CGL policy issued by Axis provided that Axis would "pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies. The policy included a schedule of events and stated that:

Coverage provided by this policy applies only to the event(s) listed in the above Schedule, and only for the specific date(s) or said event(s). In the event of complete and total postponement of any of the event(s) shown in the Schedule, from the specific event date(s), upon sufficient prior notification by you to us or our representative, such coverages as afforded by this policy, and for which premium has been received by us, shall be provided for said event(s) on a reassigned date, with no additional premium due. All other terms and conditions remain unchanged. (Emphases added.)

The policy also included an endorsement for "Participant Legal Liability — Motorsports" to the description of "Participant Legal Liability Coverage" as follows:

We will pay for "participant legal liability."

Coverage includes those sums which you become legally obligated to pay because of actions brought against you for "bodily injury" or "property damage" by a "participant" while practicing or participating in any motorsports contest or exhibition.

The policy defined "Participant legal liability" as any amount that the insured becomes legally obligated to pay "because of actions brought against the insured for 'bodily injury' or 'property' damage to a 'participant' while practicing for or participating in any event sponsored by you."

But there was a notable exclusion:

This insurance does not apply to claims or actions brought by one racing vehicle driver against another racing vehicle driver. (Emphases added)

Related: Liability coverages could be in play after NASCAR driver Tony Stewart's fatal dirt track incident

The judge ruled in favor of the insurance company, and it's not clear yet whether Stewart will appeal. (Photo: Shutterstock)

Conflicting endorsements?

In arguing for coverage, Stewart pointed to a different pair of endorsements in the CGL policy to support his position. The first, titled "Race Team" deleted Exclusion H(2), which excluded coverage for bodily injury/property damage claims arising out of any "prearranged racing, speed, demolition, or stunting activity" from Section I—Coverages. The second endorsement, titled "Limitation of Coverage to Designated Premises or Project," further modified the CGL policy to include coverage for the [i]nsured's motorsports team operations, which were defined to include "testing, tuning or on-track operations."

Related: The 8 most misunderstood coverage issues in CGL insurance

Stewart also had an excess policy with Axis that said:

The insurance provided under this Coverage Part will follow the same provisions, exclusions and limitations that are contained in the applicable "controlling underlying insurance", unless otherwise directed by this insurance. To the extent such provisions differ or conflict, the provisions of this Coverage Part will apply. However, the coverage provided under this Coverage Part will not be broader than that provided by the applicable "controlling underlying insurance."

Court finds 'unambiguous limitation by endorsement'

The district court, applying New York law, granted summary judgment in favor of Axis.

In its decision, the district court found that the CGL policy was "unambiguously limited by the Schedule of Events endorsement," which did not include the ESS event at which Stewart struck Ward.

Therefore, the district court ruled, Axis was not obligated to provide a defense or indemnification to Stewart in connection with the Ward Action. 

The case is Axis Ins. Co. v. Stewart, No. 7:15-CV-1131 (N.D.N.Y. July 29, 2016).