In Haines v. State Auto Property and Insurance Company, the insured family owned a golf cart which struck a child. The child’s family sued the insureds, and the insureds submitted a claim to their insurer for defense and indemnification from the lawsuit.
The homeowner’s insurance policy that the insureds had included a “Motor Vehicle Exclusion.” The policy excluded from coverage liability caused by recreational motor vehicles like golf carts, unless they were used “solely to service the residence premises.”
The insurer’s investigation led it to discover that the golf cart was not used solely to service the residence premises. Therefore, citing the policy exclusion, the insurer refused to indemnify or defend the insureds in the lawsuit against them.
The insured then sued the insurer, asserting claims for both breach of contract and bad faith. The district court granted summary judgment to the insurer, and the insured appealed to the Third Circuit. It argued on appeal that (1) the district court incorrectly ruled that the insurer had no duty to defend or indemnify the insured, and (2) it incorrectly allowed the insurer to rely on extrinsic evidence when it sought declaratory judgment.
The Third Circuit agreed with the district court on all issues. The insureds had admitted that the golf cart was a recreational vehicle, and the court held that the victim’s family’s complaint clearly fell within the Motor Vehicle Exclusion. Also, the court determined that the exception to the exclusion for using the vehicle solely to service the residence premises did not apply. Finally, because the extrinsic evidence the insurer relied upon was used to show that the exception to the policy’s exclusion did not apply, the court ruled that the district court did not err in allowing the insurer to use that evidence. The Third Circuit therefore held that the district court properly granted summary judgment to the insurer and affirmed the ruling.
Date of Decision: March 9, 2011