Summary
The First Circuit held that an auto dealer's liability policy did not cover an auctioneer and its employee for an accident during an auction because the "auto business exclusion" in the policy's New Hampshire Endorsement excluded coverage for anyone using a covered auto while working in a business of selling autos, and the auctioneer's business was not the named insured's business. The court also affirmed that the umbrella policy provided no coverage because it followed form to the primary policy, which afforded no coverage. Key topics: auto business exclusion, garage coverage, auctioneer liability, following-form umbrella policy, and New Hampshire insurance law.
Topics
Practice areas
Questions Presented
- Whether the auto business exclusion in the Primary Policy excludes coverage for Lynnway and Hartwell
- Whether the Umbrella Policy provides coverage for the underlying claims
Holdings
- The auto business exclusion applies because Lynnway and Hartwell were working in a business of selling autos, and that business was not Nashua's.
- The Umbrella Policy does not provide coverage because its Following Form Endorsement limits auto coverage to that available in the Primary Policy, which does not cover the claims.
Key quotations
“A reasonable person understands that an auction is a sale, and thus that someone engaged in an auction business is engaged in a selling business.” (at 10)
“No reasonable insured that procured the policy would ordinarily have any interest in paying for a policy that provided coverage for another person who works for another unrelated seller of autos.” (at 14)
“If we were to conclude that the relevant business was a unitary 'activity' of selling Nashua's cars, and that that 'business' was Nashua's, then the auto business exclusion would appear to be inapplicable in most of the circumstances for when its purpose would seem to make it applicable.” (at 15)
Factual background
Nashua Automotive, LLC (Nashua) is a New Hampshire car dealership. It received a 2006 Jeep Grand Cherokee as a trade-in and arranged for Lynnway Auto Auction, Inc. to auction the Jeep. On May 3, 2017, while the Jeep was being displayed for bidding at Lynnway's facility in Billerica, Massachusetts, it accelerated into a crowd, killing five and injuring many others. Lynnway employee Roger Hartwell was driving the Jeep at the time. The victims filed state court lawsuits against Lynnway, Hartwell, Nashua, and others.
Procedural history
Motorists initiated this federal action seeking a declaratory judgment that its policies do not provide coverage. Both sides moved for summary judgment. The district court granted summary judgment in favor of Motorists. Defendants appealed.