ATV Accident Clearly Excluded

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Posted on April 21, 2022 by Barry Zalma

The Supreme Court was asked to determine if an all-terrain vehicle (“ATV”) is covered under a homeowner’s insurance policy as a “farm type vehicle.” The circuit court found the insurance contract language ambiguous and ruled in favor of coverage. In Erie Insurance Exchange v. Diamond Danelle Jones, An Infant, By Her Mother And Next Friend, Tracy Hardison, No. 210443, Supreme Court Of Virginia (April 14, 2022) interpreted the policy as written.
BACKGROUND

Diamond Jones was riding as a passenger on the back of an ATV. The daughter of Jennifer and Richard Rekowski (the “Rekowskis”) was driving the vehicle. While Jones was riding, a tree branch struck and injured her. The accident did not take place on the Rekowskis’ property.

The Rekowskis were insured by a homeowner’s policy issued by Erie Insurance Exchange (“Erie”). The exclusions section of the policy broadly provided that the policy does not cover “[b]odily injury, property damage or personal injury arising out of the ownership, maintenance or use of . . . any land motor vehicle.” Vehicles, however, are not excluded if “they are a recreational land motor vehicle not designed for use on public roads while at an insured location; or they are a lawn or farm type vehicle or snowblower, wherever used or located, if not subject to motor vehicle registration…”

The policy does not define “lawn or farm type vehicle.” If the vehicle in question is a “recreational land motor vehicle,” the policy would not cover the accident because it did not occur “at an insured location.” If the vehicle is a “lawn or farm type vehicle,” then the policy would cover the accident.
THE LAWSUIT

Jones sued for her injuries against the Rekowskis and their daughter. In its answer, Erie contended that the policy did not cover the accident. Jones then filed this action for declaratory relief against Erie, the Rekowskis, and their daughter, jointly and severally, seeking a judgment that Erie is obligated to pay the insurance claim. The Rekowskis never filed an answer. The guardian ad litem for the Rekowskis’ daughter filed an answer and endorsed the final order.

Testimony in the depositions presented in support of the motions for summary judgment established that the ATV in question was a 2016 Honda TRX250TE. It has a 250 cubic centimeter engine. Bill Uhl, an expert for the plaintiff “in the field of all-terrain vehicle uses,” explained that the vehicle in question is a “utility model designed for whatever kind of use that the owner has in mind.” He said that it is possible to purchase a towing hitch for the vehicle and that the user can attach various implements such as push blades, rototillers, or seeder spreaders. He also testified to other uses such a vehicle might have on a farm.

The Rekowskis have never used this vehicle as a lawn or farm vehicle or owned any attachments for it. Jennifer Rekowski described it as an “itty-bitty small four-wheeler. It’s the smallest four-wheeler they make.” She said the machine “barely pulls my daughter.” She was not aware of a place to attach implements to it. Richard Rekowski also did not believe any farm equipment could be attached to the ATV because of its limited power.

The circuit court concluded that the policy did cover the accident, reasoning that “lawn or farm type vehicle” was ambiguous language, and, therefore, it should be construed against the drafter.
ANALYSIS

Courts interpret insurance policies, like other contracts, by determining the parties’ intent from the words they have used in the document. When a disputed policy term is unambiguous, we apply its plain meaning as written. Where, however, “disputed policy language is ambiguous and can be understood to have more than one meaning, we construe the language in favor of coverage and against the insurer. A contract is not ambiguous merely because the parties disagree as to the meaning of the terms used.

The policy generally excludes motor vehicles from coverage, but an exception to that broad exclusion provides coverage for “a lawn or farm type vehicle or snowblower.” The evidence presented, including from the plaintiff’s expert, establishes that this ATV can potentially be used for either recreation or for use on a farm. It is a multi-use vehicle. A multi-use vehicle with potential for use on a farm is not a “farm type” vehicle unless it is used for farm operations. No evidence establishes that this ATV was designed for primary use as a farm vehicle like a combine or a tractor. To read “farm type vehicle” as encompassing any vehicle that could potentially be used on a farm would create an exception so broad it would render the limits on coverage meaningless since any vehicle like a SUV or even a motorcycle could be used for farm type operations.

Therefore, the Supreme Court concluded that as a matter of law the language “lawn or farm type vehicle or snowblower” does not encompass a multi-use vehicle like an ATV.

Concluding that the exception for a farm type vehicle does not apply, and the exclusion from coverage in the homeowner’s policy for “land motor vehicle[s]” does apply because the incident did not take place at an insured location. Therefore, the Supreme Court concluded that circuit court erred in denying Erie’s motion for summary judgment and reversed its decision and found for the insurer.
ZALMA OPINION

Many litigants and judges try valiantly to find an ambiguity in insurance policy language to obtain defense for an insured or indemnity for an injured party. However, simply because parties differ on the meaning of the language of a policy that does not make the terms ambiguous. The ATV in this case was a land motor vehicle, it was being operated off the insured’s premises, and it was never used for any farm, lawn or snowblower functions. The clear and unambiguous language of the policy deprived the owner of liability insurance coverage under a homeowners policy.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].

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