When the insurance industry amended the “sudden and accidental” pollution exclusion to the “total” pollution exclusion it did not have the intended effect in every state. In many states, the total pollution exclusion, despite the name, was not upheld by courts to apply to all hazardous substances. Rather, it was limited to so-called traditional environmental pollution.
The “total” auto exclusion has not suffered the same fate. Here the auto exclusion, in a typical commercial general liability policy, is amended by eliminating the requirement that the auto be owned or operated by or rented or loaned to any insured. In general, courts have given “total” auto exclusions their expansive meaning. Nautilus Insurance Company v. 93 Lounge, No. 14-1029 (E.D.N.Y. Mar. 31, 2017) provides a good example of this.
At issue in 93 Lounge was coverage for, among other things, a suit filed by Ashley and Vanessa Encalada, alleging that they were injured on January 1, 2013, while walking along 93rd street in Kings County, New York when they were struck by a motor vehicle owned by Eileen Hughes and operated by Charles Amado. The Encaladas alleged that the accident was caused by the negligent operation of the motor vehicle. “The Encaladas also allege that, prior to the accident, Mr. Amado was a patron at 93 Lounge and Mr. Amado was sold, served and consumed alcoholic beverages while he was intoxicated at 93 Lounge, and therefore, 93 Lounge contributed to Mr. Amado's intoxication.”
Nautilus undertook 93 Lounge’s defense, against the Encalada suit, under a commercial general liability policy, subject to a reservation of rights. Nautilus cited the Liquor Liability exclusion and Auto exclusion.
The Nautilus general liability policy was amended to contain the following Auto exclusion, which is a total Auto exclusion; i.e., it eliminates the requirement that the auto be owned or operated by or rented or loaned to any insured: “‘Bodily injury’ or ‘property damage’ arising out of the ownership, maintenance, use or entrustment to others of any aircraft, ‘auto’ or watercraft. Use includes operation and ‘loading or unloading’. This exclusion applies even if the claims allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others, if the ‘occurrence’ which caused the ‘bodily injury’ or ‘property damage’ involved the ownership, maintenance, use or entrustment to others of any aircraft, ‘auto’ or watercraft. This exclusion does not apply to: . . .”
Nautilus filed an action against 93 Lounge seeking a declaration that it had no duty to defend or indemnify it for the Encalada action. Nautilus filed a motion for summary judgment. The court held that the Liquor Liability exclusion and Auto exclusion both served to preclude coverage.
Looking at the Auto exclusion, the court concluded that it “clearly and unambiguously exclude[d] coverage for any and all personal injuries ‘arising out of the . . . use . . . of any . . . auto[mobile],’ including use by third parties, and that an ordinary businessperson could not have reasonably believed otherwise.” The court made the important observation that “[n]othing in the language of the exclusion indicates that the exclusion was limited to only the insureds and others with a formal relationships with the insured.” In other words, the Auto exclusion applied for one reason -- it was amended to eliminate the requirement that the auto be owned or operated by or rented or loaned to any insured.