Work On Owner's Dune Buggy Not Insured 'Garage Operation'

A garage owner who insured only non-owned autos on his garage liability policy had no insurance to cover injuries to others which resulted from his negligent welding of his own dune buggy in his own garage, the Eastern District of the Court of Appeals has ruled.

The court, in an opinion by Judge James R. Reinhard, held that the terms of the insurance policy were unambiguous and must be enforced as written. It rejected the garage owner’s argument that the negligent welding was an insured “garage operation” because it was “necessary or incidental” to the garage business.

The court’s ruling came in the case of American Economy Insurance Company v. Otte, et al., MLW No. DE-8005, on November 30.

“The garage owner had the choice to get coverage that would have insured against the injuries sustained in this case, but he chose not to do so,” said Kansas City plaintiff’s lawyer Louis Accurso.

“The case shows that if you are afforded the opportunity to buy coverage and you don’t do so, the court is not going to re-write the policy for you,” he continued.

Dune Buggy Wreck

The garage owner operated a shop where he did welding and repaired radiators, minor engines and farm tractors. He bought a garage insurance policy for the shop, which provided coverage for liability, medical payments and garagekeepers.

In early 1989, he bought a dune buggy, but he was dissatisfied with its handling, so he welded additional framework onto the chassis and made other modifications to it. He then tried to sell the vehicle.

A cousin of the garage owner considered buying the dune buggy and took it out for a test drive. An accident occurred and the cousin was thrown from the vehicle and injured. The cousin claimed one of the garage owner’s welds broke, and the accident and injuries resulted from the garage owner’s negligent welding.

The garage owner turned to his insurance company for help; but they denied coverage and sought a declaratory judgment that they had no duty to defend the lawsuit because the garage liability policy provided no coverage. The trial court entered judgment for the insurance company and the garage owner appealed.

‘Garage Operations’

In its policy, the insurance company agreed to pay all sums the garage owner must pay for damages because of bodily injury “to which this insurance applies caused by an ‘accident’ and resulting from ‘garage operations.'” The policy further defined “garage operations” to include “all operations necessary or incidental to a garage business.”

The garage owner argued that the welding of the dune buggy was an operation “necessary or incidental” to the garage business, so it was a “garage operation.” He reasoned that his cousin’s injuries were a result of the “garage operation,” and he was thus covered by the policy.

But the court of appeals ruled otherwise, because of the coverage the garage owner chose when he purchased his insurance policy. The garage owner had ten options as to the type of coverage he preferred. The coverage he chose covered only “non-owned ‘autos’ used in your garage business.

Choice Of Coverage

Reinhard found that the coverage chosen by the garage owner pertained only to garage operations involving non-owned autos, so there was no coverage of the dune buggy he owned. Reinhard thought the policy’s language was unambiguous.

Reinhard found no Missouri cases directly on point, but cited a 1974 Louisiana case and a 1985 Missouri case which found no coverage existed where policyholders elected not to purchase coverage which was available for an additional premium.

“[The garage owner] chose to pay an additional premium only for non-owned autos, and rejected payment of additional premiums for owned vehicles,” Reinhard wrote. The policy by its terms therefore excluded coverage. “Our function is not to rewrite a contract of insurance…it is our duty to interpret it as written.

Analysis

“The court in this case used other policy provisions as an aid to interpret the basic insurance clause,” said Jefferson City attorney Michael A. Dallmeyer. “The court focused on the fact that other coverage was available to the garage owner, and presumably he was given an opportunity to buy it, but he chose not to do so,” he added.

“The language of the policy was not exactly ‘plain language,’ and sometimes that will cause a court to focus on a single ambiguous clause and construe the whole coverage issue against the insurance company,” he continued. “But in this case, the court went to the four corners of the policy to determine whether there was an ambiguity, compared the language for non-owned autos with the language for owned autos, and decided there was no ambiguity.”

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(The full text of the Eastern District’s opinion in American Economy Insurance Company v. Otte, et al. is available from Missouri Lawyers Weekly, DE-8005 – 6 pages.)