In Mough v. Progressive Max Ins. Co., a man was shot and killed while riding his motorcycle.  The motorcyclist was involved in a road-rage incident and was clipped by the driver of another vehicle. Id. at *1.  After following the driver of the vehicle to her house, the motorcyclist was shot and killed by the driver's father. Id. 

The motorcyclist's policy provided uninsured motorist coverage for injury arising out of the "use" of an uninsured motor vehicle. Id. at *1.  The motorcyclist's parents argued that his death arose out of the "use" of the driver's vehicle because "without [the vehicle] leading [the motorcyclist] to the barrel of [the shooter's gun], the occasion for [the motorcyclist] to be shot and killed would not have occurred." Id.  

The Georgia Court of Appeals noted that "'arising out of' does not equal proximate cause or require that the injury be directly caused by the use of a vehicle; only a 'slight causal connection' between the damages and the use of the vehicle is required." Id. 

In cases involving shootings, the "general rule is that where a connection appears between the 'use' of the vehicle and the discharge of the firearm and resulting injury, such as to render it more likely that the one grew out of the other, it comes within the coverage defined." Id. 

Despite the general rule, the court concluded that the death of the motorcyclist did not arise out of the "use" of the vehicle because the father was never in the vehicle during the course of events leading to the shooting, and the father's decision to shoot the motorcyclist was independent of the daughter's use of the vehicle. Id. at *3. 

Conversely, in Dunn-Craft v State Farm Mut Ins Co., the plaintiff had exited her vehicle to check on what she believed was an injured animal or person when she was struck by an underinsured driver.  The issue was whether the plaintiff was using her vehicle at the time of the accident such that she was entitled to stack UM coverage under O.C.G.A. § 33-7-11(a)(1). Id. at *2. 

As the Georgia Court of Appeals discussed in Hays, whether an injury arises out of the "use" of a motor vehicle turns on a number of factors including (1) the proximity of the site of injury to the location of the vehicle; (2) the conduct that caused the injured party to be in a perilous situation, and (iii) whether the vehicle was being 'utilized' as a vehicle.  Thus, the court concluded that a fact question remained regarding whether the plaintiff was using her vehicle at the time of the accident because she was not inside her vehicle at the moment she was struck. Id.

These cases are consistent with those decided by other Georgia courts regarding the "use" of a motor vehicle.  In cases such as Mough where the insured was injured by conduct of a third party that bore no relationship to the vehicle, it is easy for courts to determine, as a matter of law, that the injury did not arise out of the "use" of the vehicle.  On the other hand, where the insured is, for example, on the side of a roadway and is struck by another vehicle, it is highly unlikely that courts will be able to determine, as a matter of law, whether the injured party was using the vehicle at the time of the accident.  In those situations, as in Dunn-Craft, a jury must determine whether, under the facts presented, the vehicle was in "use" at the time of the accident.   

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The Georgia Court of Appeals recently confirmed that the term "use" in motor vehicle exclusions contained in homeowner's policies is not ambiguous.  In Hays v. Georgia Farm Bureau Mut. Ins. Co., the homeowner's policy contained a typical motor vehicle exclusion that excluded coverage for bodily injury "arising out of the ownership, maintenance, use, loading or unloading or motor vehicles owned or operated by or rented or loaned to [the insured]." Id.  

The homeowner's friend was injured when the homeowner attempted to lift a portable toilet onto a deer stand on the homeowner's property using a pulley system tied to the end of the homeowner's truck. Id.  When the homeowner pulled the truck forward in an attempt to lift the toilet onto the stand, the stand and the homeowner's friend fell 20 feet to the ground. Id.

The trial court granted the insurer's motion for summary judgment, finding that the motor vehicle exclusion applied, and the friend appealed. Id.  The Georgia Court of Appeals upheld the trial court's grant of summary judgment to the insurer, finding that the phrase "use of a motor vehicle" is not ambiguous and finding that under the facts and circumstances, the exclusion applied. Id. at *3.

The court noted that the term "use" means "to employ for some purpose," and the question of "[w]hether an injury arose out of the 'use' of a motor vehicle, turns on consideration of (1) the physical proximity of the injury site to the vehicle, (ii) the nature of the conduct which caused the situation of jeopardy, and (iii) whether the vehicle was being 'utilized' in the plain and ordinary sense of the word." Id. at *2.  According to the court, an evaluation regarding physical proximity necessarily requires a consideration of "how close the [vehicle] was to the accident scene, because 'use' also embraces the notion that the person 'using' the [vehicle] had control over it or that such control was reasonably at hand." Id. 

Under the facts, the court concluded that the phrase "use of a motor vehicle" is not ambiguous, the truck was in "use" at the time of the accident, and the motor vehicle exclusion in the policy applied. Id. at *3.  In reaching its conclusion, the court noted that the truck was "at or near the location of the accident," the homeowner "had control of the truck at the time [of the injury], and [the homeowner's] operation of the truck was the conduct that caused the accident." Id.  Furthermore, as the court noted, the way in which the truck was being used at the time of the accident was within the scope of "an ordinary use of the truck," as opposed to a use completely foreign from an expected use. Id. 

The friend also argued the exclusion did not apply because the truck was not the "predominating cause" of the accident and his subsequent injuries. Id.  The court disagreed, finding that the phrase "arising out of" is interpreted pursuant to the "'but for' test traditionally used to determine cause-in-fact for tort liability." Id. at *4.  Under that test, the friend would not have sustained injuries "but for" the homeowner's use of the truck as the friend himself testified that the tree stand would not have fallen over had the homeowner not attempted to use the truck to place the portable toilet on the stand. Id.    

The court's finding in Hays confirms that motor vehicle exclusions in homeowner's policies are non-ambiguous and enforceable.  The Hays decision also further reinforces the tendency of Georgia courts to broadly interpret the term "use" in such policies.

The insured's homeowner's policy excluded liability and medical payments coverage for claims brought against the insured by "any person who is in the care of any insured because of child care services provided by or at the direction of any insured," and "any person who makes a claim because of bodily injury to any person who is in the care of any insured because of child care services provided by or at the direction of any insured." Id. at *2.  By its express terms, the exclusion for child care services did not apply "to the occasional child care services provided by any insured." Id.  

The plaintiff obtained a judgment against the insured and sued the insurer directly. Id. at *1. The trial court denied the insurer's motion for summary judgment, finding that the term "occasional" was ambiguous, creating a jury question as to whether the insured provided "occasional" child care services. Id. at *2.  The insurer appealed and the Georgia Court of Appeals reversed, finding that the policy excluded coverage for the claims against the insured. Id.  The court noted that

"a word or phrase is ambiguous only when it is of uncertain meaning, and may be fairly understood in more ways than one so that it involves a choice between two or more constructions of the contract." Id.

The court concluded that while the term "occasional" was not defined in the policy, under its generally accepted definition, the term means "occurring from time to time; not habitual; infrequent." Id.  Because the evidence clearly showed that the insured was not providing "infrequent" childcare for the plaintiff's daughter but was, in fact, providing childcare services "frequently and habitually on a weekly basis," the child care exclusion applied to bar coverage. Id.       

Under the facts of this case, it is clear that the childcare provided by the insured clearly did not occur only "occasionally."  That is not to say, however, that every court will be able to determine, as a matter of law, that some conduct was "occasional" or was not "occasional."  The holding of Bauman merely confirms that the term "occasional" is not ambiguous and will be interpreted pursuant to its generally accepted meaning.

Amica Mutual Insurance, which had previously been defending under a reservation of rights, filed this declaratory judgment action seeking a declaration that it has no duty to provide defense or indemnification in the underlying civil case based on the policy's expected or intended injury exclusion.  Citing South Carolina Farm Bureau v. Dawsey (Ct. App. 2007), the Court noted that "an insurance company can exclude coverage for the unintentional or unexpected results of an insured's intentional acts by using express language to that effect in the policy."  The Court held that the jury's criminal murder conviction forecloses any argument that the actions giving rise to the claim were not intentional.  Based on the policy language excluding coverage for injuries that were expected or intended by an insured even if the resulting bodily injury is different than intended, the Court found that Amica had no duty to defend or indemnify Mr. Edwards in the underlying civil suit.

R. Michael Ethridge, Attorney
Katie Sullivan, Attorney
South Carolina Insurance Coverage Practice Group

R. Michael Ethridge, Attorney
Katie Sullivan, Attorney
South Carolina Insurance Coverage Practice Group

Warmest wishes for a happy holiday season and a wonderful new year.

Declaratory judgment actions are often filed in federal court requesting a determination of the rights and responsibilities of the parties with regard to insurance coverage.  However, Judge Norton pointed out that the power granted to district courts by the Federal Declaratory Judgment Act is considered nonobligatory and discretionary.  In particular, when a related action in pending in state court, the federal court may abstain from exercising jurisdiction over state-law claims.  

Looking to factors outlined by the Fourth Circuit when related state court litigation is pending, Judge Norton held that the issues raised in the declaratory judgment can be "more efficiently resolved in the state court where the action is pending."  Specifically, Judge Norton noted that "the State of South Carolina has an overwhelming interest in having its courts decide issues related to insurance coverage because those issues are governed purely by South Carolina law."  Judge Norton went on to say that he "cannot imagine an issue creating more federal and state court 'entanglement' than the determination of what constitutes an 'occurrence' in a CGL policy under South Carolina law." 

A motion to reconsider the decision was denied.  Given the propensity of parties looking to resolve coverage issues to file a declaratory judgment action in federal court, it will be interesting to see if other South Carolina District Court judges will follow Judge Norton's lead and will dismiss these actions so that they can be resolved in state court.  

R. Michael Ethridge, Attorney
Katie Sullivan, Attorney
South Carolina Insurance Coverage Practice Group

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The underlying litigation involved allegations that the windows manufactured by the insured were defective, allowing water to leak into homes causing progressive damage over a six-year period.  The insured window manufacturer maintained six one-year standard CGL policies spanning the time period involved in the underlying litigation. 

The insured argued that the entire progressive water damage during the policies constitutes a single occurrence so each insurer is only liable for part of an occurrence; therefore, the insured argued that "it would be inequitable to force a policyholder to pay a full per-occurrence deductible for indemnification of a partial occurrence.  The insured further argued that it should only be required to pay a singe $500,000 deductible for the resolution of a claim arising from progressive damage spanning 6 policy periods.    

The Court began its analysis by noting that an insured "could not selectively tender its losses arising from progressive damages spanning multiple policies to a single Liberty Mutual policy" and that "Liberty Mutual had the right to compel contribution from other insurers that provided coverage for a portion of the progressive damage period."  After reviewing the policy language and South Carolina case law, the Court concluded that the only reasonable interpretation is that the damage that happens in one policy year constitutes a single occurrence.  Noting that the majority of courts applying a pro rata allocation method have agreed that an insurer is entitled to a full deductible for each triggered policy, the Court concluded that the insured must pay a separate deductible for each triggered policy during progressive damage.

R. Michael Ethridge, Attorney
Katie Sullivan, Attorney
South Carolina Insurance Coverage Practice Group