When there Exist Two or More Causes of a Loss and One is Excluded and the Other Not Coverage Exists to Defend and Indemnify
North Star Mutual Insurance appealed from a declaratory judgment holding that a commercial general liability policy it issued to Jayme Ackerman, doing business as Ackerman Homes, provides coverage for Ackerman’s potential liability arising from an accident involving Kyle Lantz and that North Star has a duty to defend Ackerman. North Star argues the district court erred in finding coverage because the policy excludes accidents arising out of the use of an automobile. In North Star Mutual Insurance v. Jayme Ackerman d/b/a Ackerman Homes, Levi Chase, Progressive Insurance Company, and State Farm Mutual, and Kyle Lantz, No. 20190135, 940 N.W.2d 857, Supreme Court of North Dakota. (March 25, 2020) the Supreme Court was asked to reverse because of a clear and unambiguous exclusion.
North Star sued Ackerman, Lantz, Levi Chase, Progressive Insurance Company, and State Farm Mutual for declaration of the parties’ rights and responsibilities under the commercial general liability (CGL) policy North Star issued to Ackerman. North Star alleged that on July 13, 2017, Ackerman was driving eastbound on Interstate 94; a wheelbarrow allegedly fell out of Ackerman’s pickup truck and landed on the interstate; Chase was traveling on the interstate behind Ackerman and lost control of his vehicle after he came upon an object on the road; and Chase’s vehicle went through the median and struck Lantz, who received severe injuries.
Lantz and North Star moved for summary judgment. North Star argued the policy did not cover the claims because of exclusions for the use of motor vehicles as well as the loading and unloading of equipment. Lantz agreed the policy contains a motor vehicle exclusion but argued there were also covered non-vehicle related negligent acts and the concurrent cause doctrine applies to provide coverage.
The district court granted Lantz’s motion for summary judgment. The court explained that the primary issue was whether the concurrent cause doctrine applies; that Lantz claimed many forms of negligence occurred, including Ackerman’s failure to remove the wheelbarrow from the highway after it fell from the vehicle and Ackerman’s failure to give notice to the public of the presence of the wheelbarrow on the highway; and that Lantz argued those causes are not excluded under North Star’s policy.
The court concluded the policy provides coverage, generally, for portable tools and equipment, including the wheelbarrow, and the policy excludes vehicle-related acts. The court concluded the policy does not exclude nonvehicle acts, including the failure to remove the wheelbarrow from the highway and failure to give notice to the public of the presence of the wheelbarrow on the highway; and a person who causes or permits an item, which creates an unreasonable risk of injury, to be placed on the highway has a duty to remove the item and a duty to give notice of the presence of that item. The court concluded both included and excluded risks contributed to the accident, the concurrent cause doctrine applies, and the policy provides coverage for Ackerman’s potential liability and North Star has a duty to defend Ackerman.
The interpretation of an insurance policy is a question of law. The court must look first to the language of the insurance contract, and if the policy language is clear on its face, there is no room for construction. If coverage hinges on an undefined term, the court applies the plain, ordinary meaning of the term in interpreting the contract. A court will not strain the definition of an undefined term to provide coverage for the insured. The entire contract is to be taken together to give effect to every part, and each clause is to help interpret the others. Exclusions from coverage must be clear and explicit and are strictly construed against the insurer.
CGL policies are intended to protect an insured against certain losses arising out of business operations. The policy states, “We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.” The policy excludes: “‘Bodily injury’ or ‘property damage’ arising out of the ownership, maintenance, use or entrustment to others of any aircraft, ‘auto’ or watercraft owned or operated by or rented or loaned to any insured.” The district court concluded there were at least two possible acts of negligence that contributed to the accident, including loading and securing the wheelbarrow, failing to remove the wheelbarrow from the highway after it fell from the pickup, and failing to give the public notice of the wheelbarrow on the highway.
The transportation of the wheelbarrow and its fall out of the vehicle onto the interstate are vehicle-related activities, which constitute “use” of an automobile. The policy excludes coverage for injuries arising out of that use. The wheelbarrow also was left on the road for some time before the accident occurred, and Ackerman did not remove it or warn other drivers of its presence. These were independent, nonvehicle-related, acts that did not arise out of the use of the automobile. The exclusion for injuries arising out of the use of an automobile does not apply to these acts.
The Supreme Court of North Dakota noted that several potential acts of negligence exist in this case: the loading and securing of the wheelbarrow in the vehicle and the failure to remove the wheelbarrow from the interstate and failure to warn. These excluded and covered risks under the policy allegedly contributed to the accident.
North Dakota adopted the concurrent cause doctrine which concludes that coverage exists when both a covered risk and an excluded risk contribute to an accident. Under the doctrine, coverage will be found if there is a “causal connection” between the insured risk and the injury, the injury cannot be disassociated from the covered risk, and the potential of creating an unreasonable risk of injury arose just as much from the insured risk as it did from the excluded risk.
The Supreme Court concluded that under the concurrent cause doctrine the GCL policy provides coverage in this case. The failure to remove the wheelbarrow from the road and the failure to warn were independent acts that allegedly were a cause of the injury. The injury potentially arose just as much from failure to remove the wheelbarrow and warn other drivers, which are covered risks, as it arose from the transportation of the wheelbarrow.
The concurrent cause doctrine applies in third party liability policies to resolve the obvious problem when more than one event causes injury to a third party. Although the wheelbarrow fell off a vehicle and that wheelbarrow was a cause of the the loss the fact that it was not removed from the road for many hours so that the injury causing accident could occur much later, was negligent, not connected to an auto, and, therefore, a covered cause.
© 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.
Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts
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