Quarterly Newsletter Winter 2019
In a recent case, the Oregon Court of Appeals analyzed whether an “occurrence” under an insurance policy was the alleged negligence or the resulting injury. In light of the plain language of the exclusion, the Court determined the resulting injury, not the nature of the claim, dictated coverage.
Epps v. Farmers Insurance Exchange, 295 Or App 385 (2018) arises from a lawsuit filed by a minor through his mother (“Plaintiff”) against Alta and John Pollard (“Insureds”). Alta agreed to babysit Plaintiff’s two-year old son while she ran errands. Despite knowing John was under the influence of alcohol, Alta allowed him to place the child between John’s knees on an ATV and drive around the premises. The child was not wearing a helmet or other protective gear. John ultimately rolled the ATV, causing the child serious bodily injury. After Plaintiff sued, the Insureds tendered defense of the lawsuit to their insurance company (“Defendant”).
At the trial court, the basis for Plaintiff’s negligence claim was that both Alta’s failure to reasonably supervise her son on the insured premises, and John’s actions on and off the premises, caused the child’s injuries. The trial court granted summary judgment in favor of Defendant on the basis of a motor vehicle exclusion to coverage in the policy. On appeal, Plaintiff did not dispute that the motor vehicle exclusion applied to exclude coverage of John because he was driving the motor vehicle. Plaintiff’s sole argument on appeal was Alta’s alleged failure to reasonably supervise was a covered occurrence because it took place on the Insureds’ premises and not in/on a motor vehicle.
The Oregon Court of Appeals ultimately rejected Plaintiff’s argument, reasoning that the exclusion was based on an occurrence and that the occurrence was the event that caused the injury—John’s use of the motor vehicle. The Court looked to the plain language of the policy, which defined “occurrence” as “an accident including exposure to conditions which result during the policy during the policy period in bodily injury or property damage.” The applicable exclusion provided in relevant part, “[w]e do not cover bodily injury, property damage or personal injury which: . . . results from the ownership, maintenance, use, loading or unloading of: . . . motor vehicles[.]” An ATV undisputedly was a motor vehicle.
Plaintiff argued that Alta’s negligent supervision was an occurrence because it exposed the child to injury and that the exclusion did not apply because the negligent supervision did not involve use of a motor vehicle. The Court determined the exclusion applied to the resulting injury, regardless of the claim. Thus, the Court affirmed summary judgment in favor of Defendant.
This case is important because it emphasizes the importance of the policy’s plain language in interpreting coverage. From an underwriting standpoint, it is important to phrase exclusions in terms of the resulting injury. When analyzing coverage, it is important to look to the plain language to confirm that the exclusion and therefore resulting coverage is based on the nature of the injury, rather than the type of claim.