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 is Tolotti v. United Servs. Auto Ass'n, 2020 N.J. Super. Unpub. LEXIS 371.
United Services Auto Association (USAA) insured Joseph Tolotti's pick-up truck under a USAA Standard Auto Policy (the 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 17th, 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 had never asked USAA to add the golf cart to the Policy as a covered vehicle. The Policy was in effect at the time of the golf-cart incident. Tolotti sought defense and indemnification from USAA, who denied coverage. Tolotti filed suit and the trial court found in his favor, finding that the Policy provided coverage. USAA appealed.
The Superior Court of New Jersey overturned the lower court's decision. The Policy included a "Declarations page" which identified Tolotti as the named insured and his pick-up truck as the covered vehicle. Another page in the policy contained the "Agreement" and "Definitions." Under the Policy "miscellaneous vehicle" specifically included "golf cart." After the definitions section, the Policy is divided into "Parts" which provide coverage such as Personal Injury Protection Coverage and Medical Payment Coverage. "Part-A – Liability Coverage" defined "a covered person." The "Insuring Agreement" 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. But, Part-A 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 vehicle having at least four wheels. As is typical, the Policy also excluded coverage for any vehicle, other than the covered auto, owned by the insured.
Tolotti argued that the exclusions, with the first exclusion providing coverage and the second exclusion taking coverage 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 were clear. The insurer disagreed with the stance that ambiguity could arise from two clear clauses, and argued that interpretation in such a way would violate a prevailing principle of insurance law which provides that insurers do not insure a risk for which no premium has been paid, and likewise insureds are not entitled to coverage for such a risk.
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 to 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.
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 Declarations page, which included the golf cart.
In a case of an opposite claim, the U.S. Court of Appeals for the Tenth Circuit ruled in 2018 that the uninsured/underinsured motorist (UM) coverage in a golf cart insurance policy did not cover the policyholder for injuries that were suffered in a car accident. In that case, the golf cart policy excluded UM coverage for injuries sustained while using any motor vehicle owned by or available for the regular use of the insured. The insured was involved in a car accident while driving a vehicle owned by his business. The other driver was underinsured. The business auto policy covering the insureds vehicle did not have UM coverage. The court ruled that a golf cart was not a motor vehicle and that no Oklahoma law required UM coverage outside the context of "motor vehicles," so the insurer was free to write the golf cart policy as it saw fit. That case is Progressive Northern Ins. Co. v. Pippin, No. 17-6182 (10th Cir. March 29, 2018).