The U.S. Court of Appeals for the Seventh Circuit has overturned the lower courts ruling and decided that an insurer must defend a horse farm and equestrian center in a golf cart accident. The case is Am. Bankers Ins. Co. v. Shockley, No. 20-1938, 2021 U.S. App. LEXIS 19107 (7th Cir. June 28, 2021).
St. Charles Farms (SCF), an Illinois-based horse farm and equestrian center, was in the business of maintaining, training, and boarding horses, and providing riding lessons. SFC was insured under a farmowners policy by American Bankers Insurance Co., an Assurant Inc. unit. The policy provided supplemental coverage for bodily injury arising out of a motorized vehicle designed only for use off of public roads, which is used to service the insured premises. Exclusion six in the policy clarifies that there is no coverage for bodily injury or property damage arising from use of a motorized vehicle except as provided by the supplemental coverage referenced above.
In November 2016, within the policy period, SFC employee, Ashley Ratay, transported horses, equipment, and an SFC golf cart from the farm to a riding center about fifteen miles away from the farm property. While at the riding center, Ratay was responsible for supervising people riding SFC horses. She did so while riding around on the SFC golf cart. At some point, Robert Shockley was a passenger on the golf cart. While he was in the passenger seat, Ratay used the golf cart to chase a horse. She quickly drove the cart off of the mowed path and onto a grassy field where the cart hit some uneven ground. Shockley flew out of the vehicle and landed on the ground, where Ratay ran over his leg.
Shockley filed suit over the accident. American argued that it had no duty to defend or indemnify SFC because the accident occurred at the riding center, and, alternatively, based on exclusion six of the policy, arguing that since a golf cart is a motorized vehicle, there is no coverage. The U.S. District Court in Chicago held that American Bankers had no duty to defend or indemnify SFC in the underlying lawsuit.
This court found that the supplemental motorized vehicle coverage does arguably provide coverage. American will pay for bodily injury arising out of "a 'motorized vehicle' which is designed only for use off public roads and which is used to service the 'insured premises'." Immediately following this provision is a parenthetical stating, "(However, this coverage does not apply to 'bodily injury' or 'property damage' which results from a 'motorized vehicle' while used for recreational purposes away from the 'insured premises'.)" The court found that the parenthetical was important because it created ambiguity, which is compelling against American.
According to the complaint, the injury resulted from using a golf cart away from SFC's property. The parenthetical states that there is no coverage when the vehicle is used for recreational purposes, which implies that there is coverage when a motor vehicle is used for business purposes. So, since American's argument that the complaint does not allege the golf cart was used to service the insured premises is ineffectual.
The complaint does allege that the golf cart was being used for business purposes, an allegation that is sufficient to trigger the supplemental motor vehicle coverage. The three-judge appeals court panel found the policy to be ambiguous, overturned the lower court's ruling on the issue and remanded the case for further proceedings. The panel refused to discuss the merits of the question of indemnification, stating it is premature at this point, and remanded the issue for dismissal.
Editor's Note: This is one of those confusing points in insurance coverage where something may have been covered by the policy, excluded by an exclusion, and then covered again by an exception to the exclusion. Insurers are very specific with their policy language to include only risks they are prepared to defend and indemnify. FC&S can be exceedingly helpful in interpreting these convoluted policy provisions.