Insurance Contracts Must Be Read as They are Written
People injured in an accident where the tortfeasor’s insurer refuses to provide a defense or indemnity have two choices: (1) rely on the tortfeasor’s assets to indemnify the injured or (2) enter into an agreed judgment with the tortfeasor, agree to a covenant not to execute on the judgment and take an assignment of the tortfeasor’s rights against the insurer. Both options are gambles. However, greed often takes charge and hopes of punitive damages often cause the injured to select the latter choice.
In Donald Calvert, Individually and as Assignees other Travis A. Stewart other Shelly M. Stephens, Mariam Martin, Individually and as Assignees other Travis A. Stewart other Shelly M. Stephens v. Safeco Insurance Company Of Illinois, No. 20-12343, United States Court Of Appeals For The Eleventh Circuit (January 11, 2021) the plaintiffs took the second option only to have the trial court and the Eleventh Circuit to destroy the plaintiffs dreams of fortunes from litigation.
Donald Calvert and Mariam Martin were injured in a single-truck accident. They sued Shelly Stephens, the truck’s owner, and Travis Stewart, the truck’s driver. One of Stephens’s insurers, Safeco Insurance Company of Illinois, denied coverage for the accident. Stephens agreed to entry of judgment against her and assigned to Calvert and Martin all rights under her Safeco insurance policy. Calvert and Martin then filed this lawsuit, seeking a declaratory judgment that the Safeco policy covered the accident. The district court granted summary judgment in Safeco’s favor.
Shelly Stephens owned a Ford truck insured by a Safeco policy. That policy provided bodily injury and property damage liability, and other coverages irrelevant to the suit. The policy specifically provided liability coverage for “[a]ny person using [Stephens’s] covered auto with [her] express or implied permission” and expressly excluded from coverage “[a]ny vehicle, other than [a] covered auto.” The policy defined a “covered auto” as, among other things not relevant here, “[a]ny vehicle shown in the Declarations” and “[a]ny newly acquired vehicle.” The policy provided that a “newly acquired additional vehicle” would be covered for “the first thirty (30) days after [acquisition of] the vehicle, including the date of acquisition . . . only if” the vehicle was acquired during the policy period shown on the policy’s Declarations page and there was “no other insurance policy that provides coverage for the additional vehicle.”
Stephens purchased a 2005 Chevrolet truck within the policy period. That same day, she obtained insurance coverage for the truck under a policy issued by First Acceptance Insurance Company, Inc. The First Acceptance policy included personal injury protection, property damage, comprehensive, and collision coverage, but it did not provide liability coverage. Several days later, Travis Stewart was driving the 2005 Chevrolet truck with Stephens’s permission, and Calvert and Martin were passengers. The truck, without colliding with another vehicle, flipped; Calvert and Martin were ejected from the truck and sustained serious injuries.
Calvert and Martin sued Stephens and Stewart in state court. Stephens and Stewart turned to Safeco, which agreed to defend Stephens with a reservation of rights but refused to indemnify her, concluding that she lacked coverage under the policy.
The Safeco policy expressly and unambiguously stated that Safeco would “not provide Liability Coverage for the ownership, maintenance or use of . . . [a]ny vehicle, other than [a] covered auto, which is . . . owned by [Stephens].” The only question in the appeal was whether the 2005 Chevrolet truck was a “covered auto” at the time of the accident.
Under ordinary principles of contract interpretation, a court must first examine the natural and plain meaning of a policy’s language. Under Florida law, if the terms of an insurance contract are clear and unambiguous, a court must interpret the contract in accordance with its plain meaning. In determining whether a contract is ambiguous, the words should be given their natural, ordinary meaning, and ambiguity does not exist simply because a contract requires interpretation or fails to define a term. Courts are not authorized to put a strained and unnatural construction on the terms of a policy in order to create an uncertainty or ambiguity.
The Eleventh Circuit was unable to discern an ambiguity in the Safeco policy’s provisions explaining the scope of coverage for a newly acquired additional vehicle. By requiring that any such vehicle have “no other insurance policy that provides coverage for the additional vehicle,” the Safeco policy unambiguously excluded from coverage new vehicles covered by a separate insurance policy. Since Stephens had secured a First Acceptance policy for the 2005 Chevrolet truck, she had an “other insurance policy that provide[d] coverage” for the truck and was not covered for the accident under the Safeco policy.
The term “coverage” may either refer specifically to the inclusion of an individual risk covered by an insurance policy, or it may broadly refer to the overall scope of protection a particular insurance policy offers. The restriction on coverage for newly acquired additional vehicles was written into the insurance contract itself and the language of the Safeco policy unambiguously provided no coverage for a newly acquired additional vehicle that was covered by another insurance policy.
Because Stephens had insured the 2005 Chevrolet truck with a First Acceptance policy, she was not covered by Safeco for the truck’s accident. The district court correctly rendered summary judgment in favor of Safeco, and we affirm.
The Eleventh Circuit read the whole policy and found no ambiguity in the word “coverage.” Since the 2005 truck was “covered” specifically by a policy issued by First Acceptance it was specifically, clearly, and unambiguously not an “insured auto” on the Safeco Policy. The injured parties had available personal injury protection coverage – so-called “no fault” coverage – but no liability protection that needed proof of fault. There could be no question that the unambiguous language of the First Acceptance policy “covered” the 2005 truck and therefore did not meet the requirement for coverage under the Safeco newly acquired vehicle provision.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
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