Exclusions Bar Coverage even in Automobile Liability Insurance Policies

When an insurer believes it does not owe a duty to indemnify its insured, it is not uncommon that it (1) starts to defend the insured under a reservation of rights and (2) files an action for declaratory relief contending it does not owe its insured the duty to defend and indemnify.  An example of this can be found in the Eleventh Circuit’s opinion dealing with an automobile liability insurance policy in Southern-Owners Ins. Co. v. Easdon Rhodes & Associates, LLC, 2017 WL 4323277 (11th Cir. 2017).   The issue is one that many companies confront when procuring an automobile liability policy, that being whether the company’s policy insures personal automobiles that are insured under separate personal automobile liability policies.

In this case, a company was formed to provide maintenance and construction-related services. One of the  company’s members got into an automobile accident with his personal vehicle.   The member’s personal vehicle struck a motorcycle. The company was one of the defendants sued by the injured motorcyclist in a personal injury lawsuit. The company tendered the lawsuit to its automobile liability insurer. The insurer started to defend under a reservation of rights but then filed an action for declaratory relief contending it is not liable for defending and indemnifying the insured-company.

The company’s policy contained an endorsement that excluded from coverage automobiles where there was other insurance available that afforded similar coverage. The exclusionary language provided that coverage was provided if “you [insured] do not have any other insurance available to you which affords the same or similar coverage.” Since the member was driving his personal vehicle, he did have coverage under his personal automobile liability policy. However, the member’s personal liability policy had significantly lower limits than the company’s policy, i.e., the company had higher limits of insurance.

The Eleventh Circuit, nevertheless, held that the limits of liability were essentially irrelevant because the policies insured the same risk, thus, the member’s personal automobile liability policy was similar coverage. See Southern-Owners Ins. Co., supra, at *5 (“Instead, the Endorsement’s exclusion clause remains solely concerned with whether the other available insurance protects against the same risks as the Endorsement rather than whether it offers the same overall level of protection. If both the Endorsement and the other available policy specifically protect against the same or similar risk at issue, the exclusion clause would apply and eliminate Southern–Owners’ [insurer] obligations under the terms of the Endorsement.”)

There is exclusionary language in all insurance, automobile liability insurance being no different.  Understand the impact of exclusions in your policies.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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