Judge Fremont-Smith of the Superior Court holds that damages both did and may not have arisen out of use of a vehicle

Judge Fremont-Smith of the Superior Court holds that damages both did and may not have arisen out of use of a vehicle

In Leone v. Schwartz, 2009 WL 3416398, the plaintiff, Leone, was a police officer who responded to an accident in which Schwartz's car had crashed through a fence and some small trees. Leone alleged that as he approached the car on foot, he lost his balance and fell in an area that was covered with debris from the fence, broken tree limbs, and snow and ice.

Leone sued Schwartz's homeowner's insurer, Great Northern, and automobile insurer, Arbella. Judge Fremont-Smith held on summary judgment that there was no coverage under the homeowner's policy because the policy excludes "damages arising out of the . . . use . . . of any motorized land vehicle." He wrote:

The allegations are that Schwartz negligently drove his motor vehicle off a road and into a lawn, causing the plaintiff to investigate the accident scene and suffer a "slip and fall" injury. The only theory on which Schwartz could be held liable, then, is as a result of his allegedly negligent operation of a motor vehicle, for which the policy excludes coverage.

Judge Fremont-Smith then turned to the automobile policy, which provided coverage for "damage to people injured or killed in accidents if you or a household member is legally responsible for the accident." "Accident" is defined in the policy as "an unexpected, unintended event that caused bodily injury or property damages arising out of the ownership, maintenance or use of an auto."

Although two paragraphs earlier Judge Fremont Smith had held that as a matter of law the accident arose out of the use of the car, he now wrote:

The fact that Schwartz's operation of a motor vehicle provides the only possible basis for his liability, so that Great Northern's motion must be allowed, does not necessarily mean that Arbella's motor vehicle policy provides coverage. It is true that, but for Scwartz's vehicle having gone off the road and onto a lawn, Leone would not even have been there. But this does not necessarily mean that Leone's injury arose out of Schwartz's operation of a vehicle. The vehicle was stationary when Leone arrived at the scene, and he has admitted that the yard in which he fell was covered by debris, snow, and ice. Even if the undisputed facts were to indicate that Schwartz was negligent in his operation of his vehicle, it is a disputed question of fact whether Leone's injuries arose out of Schwartz's use of his motor vehicle.

Judge Fremont-Smith concluded that if Leone fell on pieces of broken fence or other debris caused by the accident there would be coverage under the policy, but that if he slipped only on snow and ice or other debris that was not caused by the accident there would be no coverage.

I'm all for splitting hairs in interpreting insurance policies. I make my living doing it. But I do not see how the same opinion can hold as a matter of law that the damages arose out of the use of a vehicle and also hold that whether the injury arose out of the ownership, maintenance or use of the auto is a question of fact. In my opinion the judge can't have it both ways.

Judge Fremont-Smith of the Superior Court holds that damages both did and may not have arisen out of use of a vehicle

First circuit holds that injury from portable fire pit does not arise out of premises; in dicta asserts the issue is interesting

First circuit holds that injury from portable fire pit does not arise out of premises; in dicta asserts the issue is interesting

Judge Selya introduced his decision in Vermont Mut. Ins. Co. v. Zamsky, __ F.3d __, 2013 WL 5543915 (1st Cir. 2013) by proclaiming that the decision addresses "what some might regard as an oxymoron: an interesting insurance coverage question." 

Andrew Zamsky was an insured under three homeowners' policies issued to his parents by Vermont Mutual.  Each of the policies covered a separate parcel of residential real estate they owned. 

The policies provided coverage for claims of bodily injury caused by an occurrence.  They also contained a "UL exclusion," which excluded coverage for injuries "arising out of a premises" owned by an insured but not itself an insured location. 

On November 27, 2008, Zamsky, claimant Renata Ivnitskaya, and several friends drove to a house which was owned by Zamsky's parents but which was not an insured location under any of the policies. 

Zamsky retrieved from a shed on the property a portable fire pit he had purchased earlier that year.  The group tried to start a fire in it.  When the wood would not burn readily, one of the group retrieved a container of gasoline from the garage or the shed and poured its contents on the fire.

In the subsequent conflagration three people were burned.  Ivnitskaya suffered especially severe burns.

Ivnitskaya sued Zamsky.  As Judge Selya wrote, she alleged a "golconda" (presumably meaning a source of great wealth, and not a mystical state of enlightenment where a vampire is no longer subject to the beast [thank you, Google]) of negligent acts and omissions.

Vermont Mutual agreed to defend the claim under a reservation of rights, and then filed a declaratory judgment action. 

In rendering its decision the court relied on Massachusetts Appeals Court cases that interpreted the UL exclusion.  One held that a UL exclusion did not exclude coverage for a dogbite case because, while the bite happened at the uninsured premises, the dog was not a condition of the premises. 

In  a second Appeals Court case the claimant was on uninsured premises "in order to minister to  a dying tree" (perhaps so that it would no longer be subject to the beast?).  He fell from a ladder and was injured.  The Appeals Court held the UL exclusion applied because "where . . . a third person is on the property to repair a condition of the property . . . there is a sufficiently close relationship between the injury and the premises" such that the injury should be understood to have arisen out of the premises.

Taken together, the courts change the UL exclusion to claims "arising out of a condition of premises" owned by the insured that are not an insured location.  Judge Selya held that a portable fire pit stored at the premises was not a condition of the premises, so the exclusion did not apply. 

Vermont Mutual tried to change the debate by focusing not on "the premises" but on "arising out of," a phrase that is construed broadly.  Judge Selya held that the "arising out of" language only comes into play if there is some causal link between the covered occurrence and a condition of the premises.  "Here, there is no such linkage." 

Judge Selya also rejected Vermont Mutual's argument that if the group went to the premises with the intention of lighting a fire, the occurrence arose out of the premises.  "The group's reason for going to Falmouth was not material because that purpose was not related to a condition of the premises." 

Judge Selya added that if Vermont Mutual had wanted to exclude from coverage all injuries occurring at an owned location it did not insure, "it would have been child's play to say so."

I think Judge Selya's decision is correct as a matter of a federal court interpreting Massachusetts law.   He properly relied on Massachusetts Appeals Court cases because there are no SJC cases on point.  Although Judge Selya asserted that he was predicting how the SJC would rule, I'm not so sure it would follow the Appeals Court cases.  The exclusion does not exclude injuries "arising out of conditions of premises" that are not insured locations; it excluded injuries "arising out of premises" that are not insured locations.  I don't see a basis for reading "condition of" into the exclusion.

Moreover, it makes sense to me that an insured buying three separate homeowner's policies for three discrete houses would not expect that an injury occurring at another house he owns to be covered by those policies.  (The Zamsky family most likely had coverage from a different carrier for the house where the fire occurred.  My guess is that this is a fight between carriers concerned about which one of them will pay if Ivnitskaya prevails on liability in her underlying action, not a fight about whether an insurer or the Zamsky family will pay.  Not that that should make any difference in the contract interpretation issues, but it gives the fight a different flavor, right?) 

In this I find myself at surprising odds with Barry Zalma, an insurance fraud specialist whose posts tend to be in favor of limited coverage.  But here he claims that "the stupidity [of Vermont Mutual] arguing no coverage even outweighed the stupidity of throwing gasoline on a fire."

First circuit holds that injury from portable fire pit does not arise out of premises; in dicta asserts the issue is interesting

Appeals Court holds pollution exclusion in auto policy of oil delivery service applies to overfilled oil tank

Appeals Court holds pollution exclusion in auto policy of oil delivery service applies to overfilled oil tank

United Energy Oil Company, an oil delivery service, delivered oil from a truck to an oil tank in  a building owned by National Equity Properties.  It overfilled the tank and caused oil to seep into the ground. 


The truck was covered by a business auto insurance policy issued by Hanover Insurance.  Hanover determined that damages over $5000 came within the policy's pollution exclusion. 


A declaratory judgment action over the meaning of the pollution exclusion followed.  It was undisputed in that action that heating oil is a pollutant within the meaning of the pollution exclusion.


The first policy clause at issue in Izdebski v. Hanover Ins. Group, Inc., 86 Mass App. Ct. 1102, 2014 WL 2973681 (unpublished) was one that made the pollution exclusion applicable to property damage arising out of the actual discharge, release, or escape of pollutants:

a.  That are, or that are contained in any property that is:

(1)  Being transported or towed by, handled, or handled for movement into, onto or from, the covered 'auto.'

The Massachusetts Appeals Court held that the clause excluded coverage because the spill happened as the polluting oil was being delivered by the pump from the tank to its intended destination.    The plaintiffs argued that the oil had reached its final destination before it seeped into the ground, or that the oil that seeped into the ground was already in the tank before United began to fill it.  The court held that those interpretations ignored the meaning of "arising out of" in the exclusion. 


The second policy clause at issue was an exception.  The exclusion was for  damage arising out of the actual discharge, release, or escape of pollutants once they have been finally delivered. The exception applied to accidents with respect to pollutants not in a covered auto if

(1)  The pollutants or any property in which the pollutants are contained are upset, overturned or damaged as a result of the maintenance or use of a covered auto; and

(2)  The discharge, dispersal, seepage, migration, release or escape of the pollutants is caused directly by such upset, overturn or damage.

The phrase "upset, overturned or damages" was not defined.  The court held that a fair reading of the exception is that it applies to an accidental oil spill only  if United's truck is upset, overturned or damaged.  That doesn't make a lot of sense to me, as the exception plainly says that it is the pollutants "or any property in which they are contained" that must be upset, overturned, or damaged.  If it was only the covered auto that could be upset, overturned or damaged, the policy would have said so.  On the other hand, it does not seem that an overflow or seepage of oil comes within the definition either. 

Appeals Court holds pollution exclusion in auto policy of oil delivery service applies to overfilled oil tank

U.S. District Court holds that exclusion for loss involving a particular loan excludes coverage for claims that the loan was misappropriated

U.S. District Court holds that exclusion for loss involving a particular loan excludes coverage for claims that the loan was misappropriated

Marcia and Joseph Valenti donated $500,000 to the Clark School for Creative Learning.  They later sued the school and Jeffrey Clark, the school's director, alleging that the school had not carried through with promises made by Clark in order to induce their gift.  Specifically, they alleged that Clark promised to convey to them as security for the gift a security interest in a parcel of real property on which the school is situated, but that the school never acquired rights to the land; and that the funds would be used to develop a new facility for the school's high school, but that Clark conveyed a large portion of the funds to his mother and sister, purportedly as repayment for loans to the school. 

The school's insurer, Philadelphia Indemnity Insurance Company, denied coverage on the ground that the allegations of the complaint fell within the policy's exclusion for known circumstances revealed in financial statement.  The exclusion excluded claims "arising out of, directly or indirectly resulting from or in consequence of, or in any way involving" any circumstances disclosed in a financial statement that was attached to the policy.  That financial statement stated that the school was the recipient of a major unrestricted gift totaling $500,000.

In Clark School for Creative Learning, Inc. v. Philadelphia Indemnity Ins. Co., 2012 WL 6771835 (D. Mass.),  the United States District Court for the District of Massachusetts held that the claims were excluded.  The court discretely analyzed the phrases "arising out of," "directly or indirectly resulting from or in consequence of," and "in any way involving," and held that under any of the phrases the exclusion applied. 

U.S. District Court holds that exclusion for loss involving a particular loan excludes coverage for claims that the loan was misappropriated

SJC rules that drunk driving accident arose out of use of limo earlier in the evening

SJC rules that drunk driving accident arose out of use of limo earlier in the evening

In Commerce Ins. Co. v. Ultimate Livery Serv., Inc., 452 Mass. 639 (2008), the Supreme Judicial Court of Massachusetts held that an insurer providing commercial automobile coverage to a limousine service must indemnify the limousine service for its negligence in allowing an intoxicated passenger to drive a car after using the insured's services.

As usual, Mike Tracy, of Rudolph Friedmann LLP, sent me the decision on the day it came down in November, 2008.

William Powers and a group of his friends hired the insured, Ultimate Livery Service, to drive them from a sports bar in South Boston to a strip club in Rhode Island and back again. Powers drank heavily throughout the evening. After the van driver left for the night, Powers drove his girlfriend's car and was involved in a collision which seriously injured passengers of another car, killing one of them.

Commerce insured Ultimate Livery under a commercial automobile policy which provided coverage for bodily injury "caused by an accident and resulting from the ownership, maintenance or use of a covered auto."

The court analyzed whether the accident "arose out of" the use of Ultimate Livery's van, stating that there is no meaningful difference between "resulting from" and "arising out of." (The meaning of the term "arising out of" has been frequently litigated, including by me.)

The court found that there was coverage. It noted that the van was used consistently with Ultimate's business objectives. It stated that it was of no consequence that Ultimate Livery did not provide any alcohol because it and its driver knew that Powers was consuming alcohol in the van and getting drunk. The court concluded, "The risk of harm is not too far removed to lack the required nexus under the broad causation standard [under the terms "arose out of" or "resulting from"] that applies. It is a reasonable incident that was contemplated in the first instance when the parties originally entered a contract for transportation service."

SJC rules that drunk driving accident arose out of use of limo earlier in the evening