| Q&A of the Week |
BAP Coverage for Trailers
A Kentucky subscriber recently asked the following question:
The insured has a personal auto policy but does not list on it a couple of trailers he owns. We believe that liability would extend to those trailers when he pulls them behind a vehicle listed on his personal auto policy. But what about when he pulls the trailers behind a vehicle covered on a business auto policy that is in his corporation's name?
I do not think liability would extend off the business auto policy to those trailers, but would they still be provided liability coverage by his personal auto policy even when being pulled by a vehicle listed on the business auto policy?
ANSWER: The PAP will provide liability coverage because the definition of "your covered auto" includes any trailer that the named insured owns. There is no stipulation that the owned trailer has to be towed by a covered auto, so long as the named insured owns the trailer, there is liability coverage even if the trailer is towed by a BAP auto.
As for the BAP itself, the named insured has liability coverage for any covered auto, and covered autos include trailers not owned by the named insured while attached to power units that the named insured does own. Of course, a lot depends on what covered auto designation symbol the named insured uses on the BAP so you would have to check that. If the BAP does have the proper symbol and there is an accident, the BAP provides primary coverage while the trailer is connected to a covered auto owned by the named insured.
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| Litigation Watch |
Nonowned Auto Definition in Dispute
The Cowins brought an equitable garnishment action against Shelter Mutual Insurance Company seeking to satisfy a judgment against the insured, Parsons, in a personal injury case arising out of a car accident. This case is Cowin v. Shelter Mutual Insurance Company, 2015 WL 2089773.
The Cowins were injured in an auto accident when a Western Star log truck owned by Todd Lumber Company and driven by Parsons struck the rear of the Cowins' auto. The log truck was insured under a policy issued by State Farm Mutual Auto Insurance Company with limits of $100,000 per claim. Parsons had coverage on his personal auto with Shelter Mutual with coverage of $50,000 each person and $100,000 each accident. Parsons' coverage was for damages that arose out of the ownership or use of the described auto or a nonowned auto. A nonowned auto was defined as any auto being used, maintained, or occupied with permission, other than an auto that the named insured has general consent to use. General consent was defined as the authorization of the owner of the auto of another to use it on one or more occasions without the necessity of obtaining permission for each use.
The Cowins sued Todd Lumber Company and Parsons. The parties entered into a settlement agreement and a consent judgment was entered in the amount of $300,000 for the Cowins. State Farm paid $200,000 of the judgment but Shelter denied coverage. This lawsuit followed. The trial court granted Shelter summary judgment and the Cowins appealed.
The Missouri Court of Appeals, Western District, noted that the Cowins presented two points on appeal. They contended that the trial court erred in finding no coverage under the Shelter policy since Parsons was driving an auto that he did not have general consent to use, which made that auto a covered nonowned auto as defined in the Shelter policy. The Cowins also argued that that term "general consent" is ambiguous and should be construed in favor of coverage.
The court said that under the Shelter policy, coverage is provided for damages arising out of the use of a nonowned auto and it is undisputed that the log truck was not owned by Parsons. The dispute then is on the question of whether the truck was a nonowned auto as defined in the Shelter policy. The Cowins do not argue, said the court, that Parsons was not authorized to use the truck on one or more occasions without first seeking permission, but they contended that because Parsons only had permission to use the log truck for limited purposes (only for business), he did not have general consent to use the truck.
The Cowins argued that general consent means consent without limitation or restriction and this suggests that any grant of authority falling short of that cannot be general consent. The court said this argument ignores the fact that general consent is expressly defined in the Shelter policy. The definition of general consent does not require consent to use the vehicle for any or all purposes. The unambiguous language of the definition requires only that the insured had the auto owner's permission to use the vehicle on one or more occasions without the necessity of obtaining permission for each use. The court found that the uncontroverted facts of the case satisfy the definition and bar coverage.
The court ruled that Parsons had general consent to use the log truck and so, the truck was not a nonowned auto as defined in the Shelter policy and coverage was properly excluded. The decision of the trial court was affirmed.
Editor's Note: The Missouri Court of Appeals holds that its ruling is consistent with the rationale behind nonowned auto provisions in policies, which is to cover occasional or incidental use of other cars without the payment of an additional premium, but to exclude coverage for habitual use of other cars, which would increase the risk on the insurer without corresponding increased premium. Parsons' use of the truck in this case was more than incidental and the court decided that to hold otherwise would extend liability under the Shelter policy well beyond what the parties intended. |
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