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Auto Accident Claims Covered by CGL Form?

Our insured traded a vehicle that was part of their business to a dealer. Two years later, the employee of the vehicle owner was injured in an accident caused by a tire that blew out. A claim is now being brought against the insured for the injuries sustained by the employee. Is the claim covered by the CGL form? The claimant is asserting the theory that the insured has strict liability with respect to sale, warning, and instructions. In addition, the claimant is alleging that if the insured knew of the retread and the puncture repair to the tire, and placed the tire on the wheel of the vehicle, the insured exposed the claimant to an unreasonable risk of harm.

The insured's commercial auto carrier is denying any coverage since the vehicle was no longer owned by the insured at the time of the accident, so it was not a covered auto. The general liability carrier is denying coverage due to the auto exclusion. We think that the CGL form does apply to the claim. What is your opinion?

North Dakota Subscriber

Based on the wording of the auto exclusion on the CGL form, and the wording of the complaint against the insured, we are of the opinion that the CGL form does apply to the claim.

The auto exclusion applies to BI or PD arising out of the ownership or use of any auto owned by or operated by any insured. Presuming that the current vehicle owner is not an insured under your insured's policy, this exclusion is not going to apply to the claim. Your insured no longer owned or operated the auto. The fact that the insured owned the car once is not the governing factor here. The general liability insurer denying coverage because the insured use to own the vehicle is broadening the scope of the exclusion, and exclusions are meant to be read narrowly in order to give the benefit of any reasonable doubt to the insured.

If the CGL insurer had wanted the auto exclusion to apply in such a situation as this, the auto exclusion could have been worded like the pollution exclusion: that is, no coverage for the escape of pollutants at or from any premises WHICH IS OR WAS AT ANY TIME OWNED by the insured. That is not the way the auto exclusion is worded and so, it is meant to apply to present ownership or use and not to past ownership of an auto.

Furthermore, the wording of the complaint is based on strict liability of a piece of property that the insured sold and on failure to warn, and not on the ownership or use of an auto. So, the CGL form does apply and if the insured is found legally liable for the injuries, the CGL form will pay the damages.

 

 

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