Homeowner’s coverage for ATV denied

The Supreme Court of Virginia reversed a lower court’s ruling and denied homeowner’s insurance coverage for an all-terrain vehicle, or ATV, after determining the vehicle did not qualify as a “farm type vehicle.”

The Pittsylvania County Circuit Court had previously ruled in favor of coverage due to “ambiguous” language in the insurance contract.

Virginia Supreme Court Justice Stephen R. McCullough authored the opinion in Erie Insurance Exchange v. Jones (VLW 022-6-023) on April 14.

Background

In December 2019, Diamond Jones was a passenger on the back of an ATV owned by Jennifer and Richard Rekowski and driven by the Rekowskis’ daughter. While the daughter was driving the ATV off of the Rekowskis’ property, a tree branch struck and injured Jones.

The Rekowskis were insured by a homeowner’s insurance policy issued by Erie Insurance Exchange, the appellant. The policy covers incidents that occur on the Rekowskis’ property, with an exclusion that the policy does not cover “bodily injury, property damage or personal injury arising out of the ownership, maintenance or use of … any land motor vehicle.”

However, some vehicles are exempt from the exclusion, including if such vehicles “are a lawn or farm type vehicle or snowblower, wherever used or located, if not subject to motor vehicle registration.” According to the opinion, the policy from Erie Insurance Exchange does not further define what a “farm type vehicle” is.

Furthermore, the policy includes another exemption for accidents involving a “recreational land motor vehicle.” However, this exemption only applies if an accident occurs “at an insured location,” which was not the case with the accident involving Jones.

Jones’ mother, as next friend, brought a negligence action against the Rekowskis and their daughter. After Erie contended that the policy did not cover the accident, an action for declaratory relief was filed against Erie, the Rekowskis and their daughter, seeking a judgment that Erie was obligated to pay the insurance claim per the policy.

Both parties eventually filed a motion for summary judgment, with the circuit court ruling that the homeowner’s insurance policy covered the accident because “lawn or farm type vehicle” was ambiguous language. As such, the Pittsylvania County Circuit Court ruled, it should be construed against the drafter, Erie. Erie appealed the court’s decision.

Testimony in depositions related to the summary judgment motions established the ATV could in theory be attached to various instruments, like a push blade or seeder spreader, that could be used in farming. The Rekowskis never used the vehicle as a land or farm vehicle, did not own any attachments for it, and said they were not aware of how to attach farm equipment to the vehicle.

Judgment reversed

In the high court’s opinion, McCullough wrote that in cases where disputed policy language exists, “we construe the language in favor of coverage and against the insurer.”

However, the court cited TM Delmarva Power, LLC v. NCP of Virginia, LLC, a 2002 case which found “a contract is not ambiguous merely because the parties disagree as to the meaning of the terms used.”

In this case, the court juxtaposed the ATV in question with vehicles such as a combine or tractor that “indisputably” are farm type vehicles.

“A combine or a tractor can be used for other purposes, of course,” McCullough wrote, citing uses such as hayrides, tractor pulls and movie props. “Still, what identifies a combine or a tractor as a ‘class or kind’ and the qualities that distinguish them from other vehicles is that they are designed to be primarily used on a farm.”

While the court agreed that expert testimony in the circuit court established potential farm uses for the ATV, it stopped short of deeming it a “farm type” vehicle on par with a combine or tractor, since “no evidence establishes” that the vehicle was designed primarily for farm use.

“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,” McCullough wrote. The judge noted examples of other vehicles, such as pickup trucks and motorcycles, that are not “farm type” vehicles despite having potential uses on a farm.

Furthermore, McCullough said that language in the clause shows the intent by Erie to exclude vehicles with “a specialized or primary purpose.”

“The clause in question provides an exception to the general rule of exclusion from coverage of any ‘land motor vehicle’ by covering, in addition to farm type vehicles, lawn type vehicles or snowblowers,” the judge wrote. “Multipurpose vehicles are not ‘an identifiable class or kind’ or specialized farm ­ vehicle.”

“We conclude as a matter of law that the language ‘lawn or farm type vehicle or snowblower’ does not encompass a multi-use vehicle like an ATV,” the court said.

After ruling that the exclusion for “land motor vehicles” did apply, the court ruled the exemption for “recreational land motor vehicles” did not apply, because the incident took place away from the Rekowskis’ property and therefore away from the insured location. Therefore, the Supreme Court of Virginia reversed the circuit court’s ruling denial of Erie’s motion for summary judgment.