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The Superior Court of New Jersey has reversed the decision of the trial court and decided that an auto policy does not provide coverage for third-party injuries that stemmed from the use of a golf cart owned by the insured.
The case
United Services Auto Association (USAA) insured Joseph Tolotti's pick-up truck under a USAA standard auto policy. Tolotti also owned a golf cart which was not identified on the policy as a covered vehicle. A third party alleged that on March 17, 2016, he suffered injuries when he was thrown from the golf cart and injured. The third-party claimed the injuries were proximately caused by Tolotti's negligent operation of the golf cart.
The golf cart was not identified as a covered vehicle under the policy, and Tolotti never asked USAA to add the golf cart as a covered vehicle. Tolotti sought defense and indemnification from USAA, which denied coverage. Tolotti filed suit, and the trial court found in his favor, finding that the policy provided coverage. USAA appealed.
The appeal
The Superior Court of New Jersey overturned the lower court's decision.
The "Insuring Agreement" section of the policy stated that the insurer would pay compensatory damages for bodily injury or property damage for which any covered person becomes legally liable for due to an automobile accident and that the insurer will settle or defend a suit asking for damages. However, it specified that the insurer has no duty to defend or indemnify a claim not covered under the policy; the "Exclusions" section included a provision that stated that the insurer would not provide coverage for the use of any vehicle other than the covered auto, unless that vehicle is, among other things, a miscellaneous car having at least four 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 coverage and the second taking it away, created an ambiguity which, he argued, is required to be interpreted against USAA and in favor of coverage.
USAA disagreed, arguing that the first exclusion, the exception to the exclusion, and the second exclusion was clear. The insurer disagreed that ambiguity could arise from two clear clauses, and that interpretation in such a way would violate a prevailing principle of insurance law, which provides that insurers do not insure, and insurers are not entitled to coverage for a risk for which no premium has been paid.
The Superior Court of New Jersey established that undefined words in an insurance policy are generally given their plain ordinary meeting. If the policy language is clear, the policy should be enforced as written. If the language is ambiguous, they are 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 was not so egregiously confusing that the average policyholder could not make out the boundaries of coverage, so no ambiguity existed.
Second, each exclusion is meant to be read with the insuring agreement, independently of the other exclusion. If any single exclusion applies, then there should be no coverage. Since each exclusion has no relationship with any other exclusion, in no instance can an exclusion properly be ruled to be inconsistent with another exclusion. So, the court ruled that the second exclusion was unambiguous in its exclusion of coverage for owned vehicles other than a covered auto identified on the policy's declaration page.
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 policy seemed to be ambiguous to a layman, the court ruled that the provisions in question were completely unambiguous because, as it is well established in the insurance industry, exclusions are to be read independently of one another. Since one of the exclusions specifically precluded coverage for owned vehicles not listed in the Dec page, which included the golf cart.
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