Summary: Various insurance forms contain language excluding coverage for occurrences “arising out of” a particular set of circumstances, such as using a motor vehicle or engaging in a business.

The question, then, is what exactly does arising out of mean? Does the language equate with “caused by”? Or is it the same as “resulting from” or “in the course of”? Insurers may interpret the phrase as meaning “resulting directly from”, but that does not mean courts always agree.

In the following article, we examine the language as the courts in various jurisdictions have interpreted it. We will look at coverage forms such as the commercial general liability (CGL), personal auto policy (PAP), and homeowners. All of the forms discussed are those of Insurance Services Office (ISO) unless otherwise indicated; however, the language arising out of is common to many current forms.

Topics covered:
Introduction
Caused by; resulting from
Meaning of arising out of
Arising out of an auto: personal auto form
Arising out of a motor vehicle: homeowners form
Arising out of business pursuits: homeowners form
Arising out of and the CGL form
And finally…

Introduction

The term arising out of is a common one. It is found in many coverage forms, most generally with regard to exclusions. For example, in the Insurance Services Office (ISO) homeowners policy, there is no coverage for motor vehicle liability (with certain exceptions). “Motor vehicle liability” is defined as “liability for 'bodily injury' or 'property damage' arising out of the… ownership, maintenance, occupancy, operation, use, loading or unloading…. entrustment… failure to supervise or negligent supervision… or vicarious liability.” The CGL form excludes coverage for “'bodily injury or 'property damage' arising out of the actual alleged or threatened discharge, dispersal, seepage, migration, release or escape of 'pollutants.'”

But often a coverage grant will refer to “caused by”—as in the commercial auto form. The insurer promises to pay “all sums an 'insured' legally must pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies, caused by an 'accident' and resulting from the ownership, maintenance or use of a covered 'auto'.” Then, in the exclusions, we find there is no coverage for “'bodily injury' to any fellow 'employee' of the 'insured' arising out of and in the course of the fellow 'employee's' employment or while performing duties related to the conduct of your business.”

How, then, does one distinguish among the various terms? In the following discussion, we look at the meaning of arising out of, how the term applies in various coverage forms, and how various jurisdictions have interpreted the language.

Caused By; Resulting From

Before addressing arising out of, we first look at caused by and resulting from, since it will be easier to draw the distinctions. The use of caused by in a policy appears fairly straightforward. According to Webster's New World College Dictionary, “caused, causing” as transitive verbs mean “to be the cause of; bring about; make happen; effect, induce, produce, compel, etc.” To see how the phrase works, we look at the liability coverage grant of the current commercial auto form (CA 00 01 10 13). It states the insurer will “pay all sums an 'insured' legally must pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies, caused by [italics added] an 'accident' …” In other words, the accident brings about/makes happen/produces the bodily injury or property damage. The commercial auto coverage grant continues: “…and resulting from the ownership, maintenance or use of a covered 'auto'.” As an intransitive verb, “result,” also according to Webster's New World College Dictionary, means “1. to happen or issue as a consequence or effect; often with from [floods resulting from heavy rains]…” Thus, the bodily injury or property damage happens as/issues from a consequence of the ownership, maintenance, or use of a covered auto.

The case of Specialty Nat. Ins. Co. v. OneBeacon Ins. Co., 486 F.3d 727 (1st Cir. 2007) helps to illustrate this language. The case involved a dispute between a commercial general liability insurer and a commercial auto insurer. The insured's pickup, with a log chipper mounted on an attached trailer, was stopped along a busy road, partially blocking one lane. The insured's job was to cut some roadside trees and shred them. A driver stopped behind the pickup; a tractor-trailer did not see she had stopped and rear-ended her. Although the tractor trailer's insurance was primary, a dispute arose between the insured's commercial auto and CGL insurers as to which was secondary.

The commercial auto policy provided coverage for “all sums an insured legally must pay as damages because of bodily injury or property damage … caused by an accident and resulting from the ownership, maintenance or use of a covered auto.“ But because of the insured's operations at the time of the accident, it appeared it might be possible to trigger the CGL policy, which provided indemnification for “those sums that the insured becomes legally obligated to pay as damages because of personal injury or property damage…” Excluded from this coverage, however, were any such damages “arising out of the ownership, maintenance, [or] use … of any … auto … owned or operated by or rented or loaned to any insured. Use includes operation…” Therefore, the court was called upon to determine whether the operation of using the log chipper attached to the pickup fell under the auto policy or the commercial general liability policy. The district court had ruled that the CGL insurer was responsible for the settlement, referencing, among other facts, the argument that the insured was not in the vehicle at the time of the accident. But on appeal, the federal court applied Massachusetts law, and said that the auto insurer was liable. The court said, ” Massachusetts courts are regularly called upon to decide whether a particular injury 'arises out of' the use of an auto for purposes of insurance coverage, and [t]he distinctions drawn in this area are not always obvious. Indeed, [t]here is no bright line test indicating when an injury may be said to arise out of the use of an automobile. Nevertheless, the case law in this area does provide some guidance. The expression 'arising out of' indicates a wider range of causation than the concept of proximate causation in tort law. However, the expression does not refer to all circumstances in which the injury would not have occurred 'but for' the involvement of a motor vehicle.”

For example, continued the court, “Massachusetts courts have ruled that injuries to a pedestrian struck by a bullet shot from a parked car with the engine running did not arise out of the use of the vehicle (Sabatinelli v. Travelers Ins. Co., 341 N.E.2d 880 [Mass. 1976]), while injury to a pedestrian struck by a bottle thrown from a passing car did (Assetta v. Safety Ins. Co., 682 N.E.2d 931 [Mass. App. Ct. 1997]), ruling that injuries caused by a bottle thrown from moving vehicle arose out of its use because 'it is reasonable to assume that its movement affected both the trajectory of the bottle and the force with which it struck' plaintiff.” Thus, held the court, the “injuries suffered by motorist who was rear-ended while stopped due to insured pickup's front-end partly blocking roadway arose out of use of pickup under auto insurance policy, even if driver had exited pickup at time of accident and was grinding tree stump using equipment on trailer attached to pickup; driver's using pickup to back up grinder to stump was unquestionably a use of vehicle.” The court, finding that the auto policy applied, had no need to consider the CGL exclusionary language.

Meaning of Arising Out Of

So, what is the meaning of arising out of? The term has been frequently defined in various legal cases and jurisdictions.

In the case of Westchester Fire Ins. Co. v. Continental Ins. Cos., 312 A.2d 664 (N.J. Super. 1973), the court construed this term as used in an auto policy: “we do not agree that the words 'arising out of the * * * use' require or justify the interpretation that before coverage exists it must appear that the injury is a direct and proximate result, in a strict legal sense, of the use of the automobile. We think that such a construction would do equal violence to the normal meaning of those words. Specifically, the policy does not require that the injury be directly or proximately caused by the automobile itself or by its motion or operation. If such a meaning was intended to be projected by this important clause of the standard family automobile policy, it is difficult to understand why a phrase which clearly conveyed the idea of proximate causation, such as 'caused by' or 'resulting from,' was not employed.”

The New Jersey court went on to say that “we consider that the phrase 'arising out of' must be interpreted in a broad and comprehensive sense to mean 'originating from' or 'growing out of' the use of the automobile. So interpreted, there need be shown only a substantial nexus between the injury and the use of the vehicle in order for the obligation to provide coverage to arise. The inquiry should be whether the negligent act which caused the injury, although not foreseen or expected, was in the contemplation of the parties to the insurance contract a natural and reasonable incident or consequence of the use of the automobile, and thus a risk against which they might reasonably expect those insured under the policy would be protected… Whether the requisite connection or degree of relationship exists depends upon the circumstances of the particular case.”

In Taliaferro v. Progressive Specialty Ins. Co., 821 So.2d 976 (Ala. 2001), the court said “the term 'arising out of the use' in liability policies generally is a broad, comprehensive term meaning originating from, having its origin in, growing out, or flowing from…” Here, two men went hunting in a pickup. When the insured driver saw some deer, he got out and asked Taliaferro, his passenger, to pass him his rifle through the passenger side window. The rifle discharged, injuring Taliaferro. The Alabama Supreme Court found coverage for both medical payments and liability, holding that the insured's act of removing the rifle involved unloading, and the passenger's injury thus arose from the ownership, maintenance, or use of the vehicle.

Arising Out Of an Auto: Personal Auto Form

The phrase “arising out of the ownership, maintenance, or use of an auto” is not actually used in the insuring agreement of the current PAP. However, since some courts read the phrase into the insuring agreement and since the phrase is used in the exclusions section of the policy, its application should be considered.

Many jurisdictions, as in the Alabama case just noted, hold that arising out of the ownership, maintenance, or use of an auto applies where there is a minimal causal connection between the use of a vehicle and the injury. There need not be direct contact between a person alleging bodily injury and the vehicle. So, in Taliaferro, the court held a reasonable use of a motor vehicle was to transport firearms; unloading the firearm was an inherent use of the vehicle.

In Green v. Young, 54 P.3d 734 ( Wash. App. 2002) the court found that an insured's post-traumatic stress disorder, resulting from witnessing his wife and young son at the scene of a carjacking accident, was bodily injury arising from the use of an uninsured auto. The uninsured vehicle did not touch the insured; it ran over the wife's legs and causally contributed to the disorder.

And in the case of Atlanta Postal Credit Union v. International Indemnity Co., 494 S.E.2d 348 (Ga. App. 1997), the court found that when a man suffered a fatal heart attack when his daughter's car was being repossessed, his death arose from the use of the wrecker. There was no physical contact between the wrecker and the man.

This is not to say that in all instances involving a motor vehicle a court will automatically find that arising out of the ownership, maintenance, or use of a motor vehicle will provide (or exclude) coverage.

Florida, for example, has set up three rules to determine an insurer's liability: 1) the accident must have arisen out of the inherent nature of the automobile, as such; 2) the accident must have arisen within the natural territorial limits of an automobile, and the actual use, loading, or unloading must not have terminated; and 3) the automobile must not merely contribute to cause the condition which produces the injury, but must, itself, produce the injury. Thus, in the case of Race v. Nationwide Mutual Fire Ins. Co., 542 So. 2d 347 ( Fla. , 1989), the insurer was not liable for uninsured motorist benefits claimed by the insured. The insured was rear-ended by an uninsured vehicle. He got out of his car to exchange information with the other driver, and, when he reached into his car to retrieve his information the other driver thought he was reaching for a gun and assaulted him. The court said that “the most that could be said was that the driving of the uninsured motorist which caused the accident created an atmosphere of hostility between parties, but had nothing to do with insured's injuries, which came about several minutes later.”

The court distinguished this from an earlier Florida case, Government Employees Ins. Co. v. Novak, 453 So.2d 1116 ( Fla. 1984). In this case, the court found a “substantial connection” between the insured's use of a motor vehicle, and her injury. The insured was approached by a stranger and asked for a ride. When she refused, she was fatally shot. The court said that while there should be some nexus between the motor vehicle and the injury, the auto itself need not cause the injury. Obtaining a ride in, or possession of, the vehicle was what motivated the shooter.

And in California, the court said that an allegation of sexual molestation while driving did not mean that the act arose out of the use of an auto; “an automobile, whether parked or moving, could not predominantly cause or constitute a substantial factor” in the case. In an auto policy “such a clause requires the vehicle's use to be the predominating cause of or a substantial factor in the injury.” (See Miller v. Allstate, 489 F. Supp. 2d 1133 [ S.D. Cal. 2007].)

In Ohio , a somewhat unusual application of uninsured motorist benefits came as a result of the use of an automobile. The insured left her two-year-old twins in her vehicle unattended. One of the boys started a fire with matches he found in the vehicle, and the other was killed. Because of a family-member exclusion in the auto policy, the husband's claim against his wife was denied. The husband then claimed that the uninsured motorist provisions of the policy should apply if the liability did not. At trial, the court agreed that there was no liability coverage, and further found that there was no uninsured motorist coverage available for the wife because “her liability in that regard does not 'arise out of the ownership, maintenance, or use of' her vehicle, as the policy requires.” The court reasoned that the fire did not arise out of the use of the vehicle, in that it was not an instrumentality but only the location of the accident. The striking of the match was the sole cause of the accident.

The appellate court disagreed with this finding, essentially saying that the theory of proximate causation—but/for—did not apply. The court said that “In the context of automobile liability insurance, ownership, maintenance or use merely correspond to the element of control necessary to demonstrate potential liability. In that regard (quoting Couch on Insurance 3d, § 119:37) 'any exercise of control over the vehicle constitutes a use, regardless of its purpose, extent, or duration.'” The court also noted that the word use had a broader meaning than the word “operate“, so that a vehicle could be used for the owner's benefit without the actual operation by the owner. The court said that the “element of control” with regard to the wife's ownership, maintenance, or use of the vehicle meant that she was responsible for the condition of the vehicle, including its contents. The matches were among the contents, so the claim arose out of the wife's ownership, maintenance, or use of the vehicle. Thus, the case was returned to the trial court to determine the wife's legal liability with regard to uninsured motorist coverage. This case is Grange Mutual Casualty Co. v. Darst, 719 N.E.2d 24 (Oh. App. 1998).

(Note that the Darst decision was called into doubt by the Court of Appeals of Ohio, Eleventh District, Lake County, in Progressive Preferred Insurance Company v. Certain Underwriters at Lloyd's London, 848 N.E.2d 903 [2006]).

Arising Out of a Motor Vehicle: Homeowners Form

The situation is no less complex when it comes to the homeowners forms, particularly since a claim may be brought for damages because of some form of negligence not directly involving the operator of an excluded vehicle. Negligent supervision of a child operator comes to mind. It has not been a coincidence that the current homeowners forms define motor vehicle liability as bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading, entrustment, or failure to supervise or negligent supervision, or vicarious liability.

In a suit decided in 1988, the court found that the motor vehicle exclusion did not eliminate coverage for a child's death caused by negligent supervision. The child's grandfather was baby-sitting him, and left him in his car when he stopped at a marina. The vehicle rolled into Lake Michigan, and the three-year-old drowned. The grandfather's homeowners insurer sought a declaratory judgment that the motor vehicle exclusion (which did not contain exclusionary language for negligent supervision) precluded coverage. But the court, applying Illinois law, said that negligent supervision of the child in an auto, which resulted in the child's death, was a separate cause of action and non-auto related conduct, and so the motor vehicle exclusion did not preclude coverage (West American Ins. Co. v. Hinze, 843 F.2d 263 [C.A.7 Ill. 1988]). In other words, the court did not look at the motor vehicle as being the instrument of the child's death; it took the position that the grandfather's action, not the motor vehicle, was the cause. It is possible that the court felt that the death was not closely tied to the use of the motor vehicle as a conveyance for the child, and so coverage was possible.

In a somewhat similar case involving negligent supervision, the outcome was different. In Phillips v. Estate of Greenfield, 859 P.2d 1101 (Ok. 1993) the insured's unlicensed minor son took the keys to his father's uninsured motorcycle, and took a friend for a ride on a public road. The son was killed when he collided with a car, and the passenger was injured. She brought a garnishment action against the father's homeowners insurer, holding that there was no exclusion for negligent supervision or failure to control. But when the case wound its way to the Oklahoma supreme court, the court said, “[T]he homeowners policy in clear and unambiguous language excludes coverage where an injury arises out of the use of a motor vehicle owned or operated by an insured and the undisputed facts show the instant injury arose out of the use of a motor vehicle owned and operated by an insured… We hold the exclusion precludes coverage.”

Massachusetts takes the approach that the words arising out of have not equated with proximate causation in tort law. In this jurisdiction, the phrase does not refer to all circumstances in which an injury would not have occurred but/for the involvement of a motor vehicle. For example, injuries to a pedestrian shot by a person inside a car parked with the engine running did not arise out of the use of a motor vehicle (Sabatinelli v. Travelers Ins. Co., 341 N.E.2d 880[Mass. 1976]). The courts here prefer to make a judgment call on a case-by-case basis. In the case of Phoenix Insurance Co. v. Churchwell, 785 N.E.2d 392 ( Mass. App. 2003), a toddler was so seriously injured in an auto accident that she later died. The insured had placed her daughter in a child restraint seat, while the toddler was simply strapped in with a seat belt. The insured was sued based on negligent supervision of a minor, which was allegedly distinct from the insured's operation of her motor vehicle. The toddler's mother looked to other Massachusetts cases to prove her case, alleging that the negligent supervision was distinct from the use and operation of the motor vehicle. But the court said that in the other cases the vehicles in question had not been owned or operated by the insureds, and the severability of insurance clause operated to give coverage. But here, the vehicle was owned and operated by the insured, and so the coverage was quite properly the province of the auto insurer. The negligence on the part of the insured certainly contributed to the death of the child, but had there been no auto accident there would have been no death.

However, even when circumstances would appear to invoke the exclusion for injury arising out of the use of a motor vehicle the allegation of negligent supervision can outweigh the exclusion and provide coverage under the homeowners policy. In the case of Frazier v. State Farm Mutual Auto. Ins. Co., 347 So.2d 1275 (La. App. 1977), a small child in the care of the insureds was injured when the insureds' daughter ran over her. The child's parents alleged negligence on the part of the insureds in caring for their child, as well as negligent operation of a motor vehicle on the part of the daughter. The court found that the cause of action of negligence in baby-sitting was distinct from the one for negligent operation of a motor vehicle, and thus the homeowners insurer should provide a defense for that charge.

That is not to say that Louisiana will always accept “negligent supervision” as a reason to find coverage under a homeowners policy. In the case of Simmons v. Weiymann, 943 So.2d 423 (La. App. 1 Cir. 2006), two children were injured when a four-wheeler they were riding on went through a stop sign into the path of an oncoming car. Their parents sued the owner of the four-wheeler (his minor daughter was driving the vehicle) alleging negligent supervision of their children in allowing them to ride on the vehicle. The court found, though, that the homeowners insured owned the motor vehicle, the policy's definition of motor vehicle included all-terrain vehicles, and the injuries occurred as the children were riding in the vehicle. Therefore, the injuries arose out of the use of a motor vehicle and as such were not covered under the homeowners policy.

The U.S. District Court of Maryland went further in explaining how the phrase arising out of, as used in a homeowners motor vehicle exclusion, could eliminate coverage when a covered theory of liability (negligent supervision) was presented. In Nationwide Mutual Ins. Co. v. Nash, 2007 WL 1774487 (D. Md.) a toddler was killed when her day care provider neglected to place her into her van along with five other children. The day care provider left the child unattended in a public road, and negligently struck her. The auto policy paid its limit, and the child's parents sued for damages against the day care provider's homeowners policy, alleging negligent supervision arising out of the insured's activities as a day care provider. (The insured's homeowners policy carried a day care endorsement.) The question before the court was whether the policy covered injury caused by both excluded and covered acts. The court looked at earlier cases in Maryland, and said that the words “'arising out of' must be afforded their common understanding, namely, to mean originating from growing out of, flowing from, or the like.

While these words plainly import a causal relation of some kind, read in context, they do not require that [a motor vehicle] be the sole 'arising out of' cause of the injury; they require only that the injury arise out of the [vehicle].” The court further noted that a proximate cause or concurrent cause analysis should not be applied, since coverage would be provided in many other instances where it was clear none was intended. The court looked at the case of Hinze (previously discussed) and noted that while the case was similar to the one at bar, the court in Hinze had applied Illinois law, which was clearly at variance with Maryland law. The court said that under Maryland law, the proper focus should remain on the language of the exclusionary clause and on the instrumentality of the injury. There was no requirement that all of the causes contributing to injury or loss fall within the exclusion; here, the use of an auto was clearly the cause of the child's death regardless of the day care provider's negligence in failure to supervise her.

Arising Out of Business Pursuits: Homeowners Form

One of the most contentious areas of homeowners policies is that of injury or damage arising out of business pursuits. Earlier forms excluded coverage for this, but then often added that activities related to business, but not usually viewed as “business” in nature, should not fall under the exclusion. Current forms, however, do not have this exception. It is often then left to the courts to determine if claimed injury or damage should, in fact, be excluded. Couch on Insurance § 128:15 says “Where the insured under a homeowner's policy is an employee of a commercial enterprise, whether the injury is excluded under the business pursuit exclusion is determined by examining whether the injury arose out of or in connection with the insured's employment. If an accidental injury occurs at the place of employment, the 'business pursuits' exclusion likely applies, as long as the injury resulted from work-related activities. However, if the injury arises out of an independent act not performed for employment purposes, the business pursuits exclusion may not apply under those circumstances.”

Therefore, it is possible that an injury might occur at a place of business, and yet not be held to “arise out of” a business pursuit.

In the case of Scheer v. State Farm Fire & Cas. Co., 708 So. 2d 312 ( Fla. App. 4, 1998), three female co-employees of Dr. Scheer sued him and their joint employer for sexual harassment, battery, invasion of privacy and false imprisonment. The insured's homeowners and personal umbrella insurers declined to defend, citing the business pursuits exclusion. The insurer sought declaratory judgment that the policies provided no liability coverage for sexual harassment of fellow employees. On appeal, the court overturned the lower court's finding in favor of the insurer. The court said that there were tort claims against both the employer and the doctor. Those against the employer were not relevant to those against the doctor. The court looked at a previous case (Lambert v. Allstate Ins. Co., 593 So.2d 1172, 1173 [Fla. 1st DCA, 1992]), and continued that “it [does not] follow from the fact that this conduct occurred in the work place that it was within the business pursuits exclusion. That exclusion applies to conduct 'primarily taken in furtherance of a business interest,' and it must be assessed in light of the relationship of the alleged conduct to the business activity.” The acts did not arise out of the insured's profession; thus, the insured was owed a defense.

And, in the case of Lanoue v. Fireman's Fund American Ins. Companies, 278 N.W.2d 49 ( Minn. 1979), the court looked at both the business pursuits and the premises not an insured location exclusions. Lanoue owned a convenience store which sold beer. A minor employee, who was not working at the time, stole beer. He then broke into the insured's office, where he stole some whiskey that had been given to Lanoue for Christmas by distributors, and placed the beer and whiskey outside the rear door where he could pick it up unseen. The employee then gave some of the whiskey to a young driver, who was seriously injured in a one-car accident. The parents sued Lanoue. The businessowners and personal insurers both declined a defense; the first based on dram shop exclusion and the second based on both the business pursuits and “other premises” (that is, “arising out of a premises owned by an insured that is not an insured location”) exclusions.

The court said the businessowners insurer owed a defense; theft of personal property was neither selling nor serving alcohol. As for the homeowners insurer, the court said that keeping the whiskey, which was personal property, was an activity “ordinarily incident” to nonbusiness pursuits. That was not true for the beer, since there were large quantities on hand for business purposes. So the exclusion was not totally applicable.

As for the “other premises” exclusion, the court said that it had not considered it thus far. However, continued the court, it had considered the arising out of language in other contexts, and concluded that “causation is implied… Thus the premises must bear some causal relationship to the liability. Such a relationship is apparent when a claimant trips over improperly maintained steps. In this case, however, causation is more difficult to perceive. The fact that something occurs at a place is not sufficient by itself to imply causation as to that place. It is more appropriate under the facts of this case to focus on the personal property—the whiskey—as being allegedly carelessly possessed by Lanoue at his office. Thus the liability is causally related to the whiskey, not the premises involved.”

(Note that the Lanoue decision was overruled by the Supreme Court of Minnesota in American Standard Insurance Company v. Le, 551 N.W.2d 923 [1996]; however, note also that this ruling by the Supreme Court of Minnesota centered on the question of recovering legal fees absent statutory authority, not the “arising out of” issue.)

The court in a New York case, United Food Services, Inc. v. Fidelity & Casualty Company of New York, 189 A.D.2d 74 (N.Y. A.D. 1993), quoting 7A Appleman, Insurance Law and Practice § 4501.10, stated “[t]here are relatively few functions, such as walking, opening and closing doors, bending or standing, that a person performs in a business that cannot be viewed in isolation as nonbusiness activity. One cannot perform normal work without engaging in such functions or activities, and to treat these activities in isolation as incidental to nonbusiness activities would render [the business pursuits] exclusion meaningless.” In this case, the vice-president of a corporation traveled to a business seminar. He returned to his hotel room to pack, and accidentally hit a sprinkler head. His room, and others beneath it, were damaged. The CGL insurer and the homeowners insurer each declined to defend. The homeowners insurer cited the exclusion for injury or damage arising out of business pursuits.

The court found that the homeowners business pursuits exclusion applied, since the insured's activities at the hotel were not merely incidental to nonbusiness pursuits. The insured had been at a seminar, and returned to the meeting after the damage occurred. Therefore, the court viewed “the entire transaction as a whole,” and found the insured was pursuing his business at the time the incident occurred. There was thus no coverage under his homeowners policy for the damage.

The CGL insurer cited the “property you own, rent, or occupy” and “care, custody, or control” exclusions. The court said that it was clear that the businessman occupied the hotel room, and so there would be no coverage for damage to the hotel room. However, the businessman did not have “care, custody, or control” over the other damaged rooms, and did not occupy them, and so the CGL insurer owed a defense.

Arising Out of and the CGL Form

The CGL language with regard to arising out of the ownership, maintenance, use, etc. of an auto has already been examined in the case of Specialty Nat. Ins. Co. v. OneBeacon Ins. Co., 486 F.3d 727 (1st Cir. 2007). Another case construing this language is Hagen v. Aetna Cas. and Sur. Co., 675 So.2d 963 ( Fla. App. 5 1996). The insured owned a small carpet company. It was the company's practice, upon receiving a delivery of carpet rolls, to tie one end of a rope to the carpet roll, attach the other end to the bumper of a vehicle the company used for this purpose, and pull the roll from the delivery truck. Three rolls were successfully pulled out, but the fourth fell on the truck driver. He was injured, and sued, alleging negligent operation of the vehicle in unloading the carpet. (After the insurer determined the claim was not covered by the CGL policy, the claim was amended to negligence in not having proper equipment, such as a forklift, to unload the carpet. The insurer was not notified of this amended complaint. This case was actually one claiming bad faith against the insurer for failing to defend and indemnify.)

The trial court agreed with the insurer, and the insured appealed. The court noted the exclusion stated that the insurance did not apply to bodily injury arising out of the operation, use, etc., of any auto operated by the insured. The court agreed with other jurisdictions: “The term 'arising out of' is broader in meaning than the term 'caused by' and means 'originating from,' 'having its origin in,' 'growing out of,' 'flowing from,' 'incident to' or 'having a connection with' the use of the vehicle.” The court went on to say that “[I]f asked whether this injury arose out of the operation or use of a vehicle, any reasonable person would, after inquiring as to whether it was a trick question, answer in the affirmative.” The court, in what appears to have been a somewhat jocular state of mind, said that it had been suggested that the injury could have occurred had several strong men pulled the carpet out of the truck, and so the use of a vehicle to do the same was merely incidental to the injury. The carpeting was pulled out while the delivery truck driver was in the zone of danger, and the source of the energy that did the pulling—”the vehicle or the several strong men”—was critical to the cause of the injury. If the carpet had been unloaded by the several strong men, there would have been coverage; however, it was not. The vehicle was actually used in the unloading process, and so there was no coverage.

Although there are many instances in the CGL (or any coverage) form where the language refers to injury or damage arising out of a motor vehicle, there are other examples of exclusions using the same language. For example, in the case of American States Ins. Co. v. Bailey, 133 F.3d 363 (C. A. 5 Tex. 1998), a group of women sued their church, its associate ministers, and its pastor-in-charge for sexual misconduct. The women alleged they had been sexually abused by the pastor-in-charge, and stated that the associate pastors knew or should have known about the pastor's activities, and failed to take any action. Added to the allegations were: intentional infliction of emotional distress, negligent hiring, credentialing, and supervision of the pastor-in-charge, negligent counseling, and negligent failure to warn others of the pastor-in-charge's behavior. The church's CGL policy contained an exclusion for claims arising out of behavior “with sexual connotation or purpose.” The court said that it had previously held that the “words 'arising out of,' when used within an insurance policy, are broad, general, and comprehensive terms effecting broad coverage…The words are understood to mean 'originating from,' 'having its origin in,' 'growing out of' or 'flowing from'.” Thus, a claim need only bear an “incidental relationship” to the excluded injury for the policy's exclusions to apply. All of the underlying claims against the church and associate ministers, including intentional infliction of emotional distress, arose out of the behavior of the pastor-in-charge, and so there was no coverage.

Finally, we look at the case of Taurus Holdings v. U.S.F.&G., 913 So.2d 528 ( Fla. 2005). The CGL form in this instance was not a standard ISO form. The lawsuit was brought by various municipalities, alleging negligence, negligent supervision, negligent advertising, negligent entrustment, public and private nuisance, failure to warn, false advertising, and unfair and deceptive trade practices. The suit sought compensation for, among other things, police protection, hospital costs, emergency medical services, and prosecution of violent crimes involving the use of handguns.

The court, in finding that the insurer had no duty to defend or indemnify the insured, looked at the term “arising out of,” which Taurus claimed was ambiguous. Turning to other cases, the court said that Florida courts had not found the term to be ambiguous. The court agreed with Ohio Cas. Ins. Co. v. Cont'l Cas. Co., 279 F.Supp.2d 1281 (S.D. Fla. 2003) that “[T]he language 'arising out of' is not ambiguous… 'Arising out of' are words of much broader significance then [sic] 'caused by'.” In this case, had the court found otherwise, the insured could have reasonably argued that the weapons themselves did not cause the need for police action, hospital bills, etc., but rather the actions of those using the handguns.

The court also turned to other jurisdictions, among them Nebraska, Kansas, Washington, and Minnesota , and said that the words were commonly held to mean “originating from, having originated in, growing out of, or flowing from.” The court therefore found for the insurer.

And Finally…

For the most, courts have interpreted arising out of as unambiguous, and broadly defined the term as meaning that there has to be some causal connection between the injury and the act. However, in an Amicus Curiae filed by leave of the court by United Policyholders in support of Taurus in 2004, the argument was made that the undefined term was ambiguous.

One of the cases cited was Casualty Ins. Co. v. Northbrook Property & Cas. Ins. Co., 501 N.E.2d 812 (Ill. App. 1986). Here, an employee of a news agency was attacked in a terminal before work. The news agency leased a portion of the terminal, and Chicago & North Western was an additional insured under its general liability policy, “but only with respect to liability arising out of the ownership, maintenance or use of that part of the premises designated below leased to the named insured.” The employee was attacked in the unleased portion, and sued Chicago & North Western for negligence. Chicago & North Western then tendered its defense to the news agency's insurer. The court held that Chicago & North Western was entitled to a defense, stating that “[T]he phrase 'arising out of' is both broad and vague, and must be liberally construed in favor of the insured; accordingly, 'but for causation,' not necessarily proximate causation, satisfies this language.' Arising out of' has been held to mean 'originating from,' 'having originated in,' growing out of' and 'flowing from.' This court concluded that 'the instant injuries appear to have arisen from the operation and use of the leased premises, since they would not have been sustained 'but for' the victim's employment on the premises.”

However, despite the court's finding that the phrase arising out of was vague, and the applying of the “but for” test, that is not to say that another court finding the language was not ambiguous would not have reached the same conclusion. It could have been argued that the employee's injury arose out of the use of the leased premises—that is, her employment.