Insurance Policy Exclusion Must Be Enforced

Public Policy Only Applies if it Injuriously Affects a Material and Substantial Part of the Public

Insurance exclusions, and all provisions of an insurance policy, must be enforced as long as they are clear and unambiguous unless the exclusion is in violation of the state’s public policy. Arguing that an exclusion of a policy is against public policy to avoid the effect of a clear and unambiguous exclusion, Danny Reddick v. Chubb National Insurance Co.,  Civil Action No. 5:17-cv-00059, United States District Court Western District Of Kentucky At Paducah, (November 2, 2017) asked the USDC to require an insurer to pay a claim the clear language of a policy provided it did not owe. Because of the problem with collusion a liability policy will invariably exclude coverage for injury to its own insured or members of his family.


The case arose out of a boating accident that took place on Lake Barkley in Trigg County, Kentucky on July 26, 2016. Plaintiff was participating in a local fishing competition and utilizing his personal boat. Plaintiff allowed Joe Noel, who was accompanying Plaintiff that day, to operate the boat. Noel allegedly operated the boat at a high right of speed which resulted in a collision with another vessel. As a result of the crash, Plaintiff suffered numerous injuries, including fractured vertebra. Plaintiff has an ongoing lawsuit against Noel in state court, which is being held in abeyance.

The subject of the dispute currently before the Court is the insurance policy which covered Plaintiff’s boat. Specifically, Plaintiff’s Boatsman Policy, purchased from Defendant, provides for “bodily injury liability coverage in the amount of $300,000.00.” However, Plaintiff’s policy also contains a liability exclusion for precisely the type of incident that occurred on Lake Barkley on July 26, 2016. The exclusion at issue provides as follows:

PART B: LIABILITY COVERAGE…EXCLUSIONS: We do not provide coverage under PART B: LIABILITY COVERAGE for: (a) Liability of other Covered Persons to you or any Resident Relative (b) your liability to any Resident Relative; (c) liability assumed by a Covered Person under any contract or agreement; …”

Plaintiff, after accepting the language of the policy and that Noel was an insured, argues that the Boatsman Policy exclusion goes against public policy and is therefore non-enforceable and plaintiff should be able to recover from his own policy as a result of the negligence of he co-insured, Noel, who was operating the boat with his permission.


Under Kentucky law, “if a contract, howsoever innocently entered into, has a direct tendency to, and would if upheld and enforced, injuriously affect a material and substantial part of the public, it will be declared to be one against public policy and most generally nonenforceable.” Forbes v. Ashland, 55 S.W.2d 917, 919 (Ky. 1932). Notably though, contracts voluntarily made between competent persons are not to be set aside lightly.

A contract term is unenforceable on public policy grounds only if the policy asserted against it is clearly manifested by legislation or judicial decisions and is sufficiently strong to override the very substantial policies in favor of the freedom to contract and the enforcement of private agreements.

In support of his argument that the insurance policy he has with Defendant is unenforceable on public policy grounds, Plaintiff cites principally to Lewis v. West Am. Ins. Co., 927 S.W.2d 829 (Ky. 1996). In Lewis, the Kentucky Supreme Court held that the so-called “family” or “household” exclusion in an automobile insurance policy was unenforceable as contravening public policy. The family/household exclusion “limit[ed] the insurance coverage available for a person’s injuries solely on the basis of the injured party’s status as a member of the policyholder’s family.” The defendant in Lewis tried to use this policy provision in order to minimize its payment to a nine-year old girl who was seriously injured in a car wreck. Whereas the automobile insurance policy covering the car in which she was riding provided liability coverage in the amount of $100,000 per person and $300,000 per accident, the family/household exclusion provision limited the girl’s recovery to $25,000, the “statutory minimum where the injured person is the named insured or a member of a named insured’s family, regardless of who is driving the automobile.”

The USDC declined to extend the decision in Lewis to boatsman insurance policies, especially in the face of direct language from the Kentucky Supreme Court limiting its holding to automobile policies based upon statutory language that exists for automobiles and because no similar statute exists as to boat insurance.

It is true that the Lewis Court addressed public policy at length, as well as “[t]he need for adaptation in the law [which] was fully recognized by the founders of our Republic.” However, the judicial system’s ability and authority to make changes under the guise of public policy is not absolute. The establishment of public policy is not within the authority of the courts. It is the prerogative of the legislature to declare that acts constitute a violation of public policy.

Plaintiff could not, and did not, point to analogous constitutional provisions, statutes, or decisions of courts of last resort that pertain to boatsman insurance policies. It was from an automobile liability insurance statute that the Kentucky Supreme Court’s decision in Lewis flowed. Because there is no applicable boating laws or court decisions, the USDC declined the plaintiff’s request to entertain the notion of holding boating policies unenforceable.

Plaintiff’s suit was, therefore, dismissed.


Liability insurance is designed to protect the person insured if he or she causes injury to a third person. By allowing another to operate his boat does not change the risk the insurer agreed to take. Although the plaintiff may have a serious lawsuit against the operator of the boat it does not create coverage that was clearly and unambiguously excluded. The state of Kentucky did not state a public policy to change a provision, only after injury, that the plaintiff wanted the policy he bought changed.


© 2017 – Barry Zalma

This article, and all of the blog posts on this site, digests and summarizes cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

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 50 years in the insurance business. He is available at and

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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