The California Court of Appeal has held that an insurer that issued a CGL policy had a duty to defend its insured, a city, against a suit arising out of an auto accident allegedly caused by a dangerous condition resulting from a city-sponsored special event, notwithstanding various auto exclusions in the policy. ( Essex Insurance Company v. City of Bakersfield (2007) 65 Cal.Rptr.3d 1)
Facts
Essex issued a general liability policy to the City of Bakersfield to cover a special event sponsored by the City. The policy contained an “Auto Exclusion” which provided “This insurance does not apply to ‘bodily injury’ … arising out of, caused by or contributed to by the ownership, non-ownership, maintenance, use or entrustment to others of any ‘auto’.” The policy also contained a separate exclusion which provided that “The coverage under this policy does not apply to ‘bodily injury’ … arising out of: … automobiles ….”
The City held its special event on private property adjacent to a state highway. The operator of a van driving on the highway applied his brakes near a road that served as an exit from the event. The driver of a tractor-trailer that was following behind the van applied his brakes, causing the tractor-trailer to shift into the opposite lane of traffic and collide with an oncoming vehicle. Navarro was injured in the accident.
Navarro sued the driver of the tractor-trailer and the driver’s employer. Navarro also sued the City, alleging that the City’s location of the special event and lack of traffic control created a dangerous condition that contributed to causing the accident. Essex refused to defend the City against Navarro’s lawsuit, and then filed a lawsuit seeking a declaration that Essex had no duty to defend or indemnify the City. Essex argued that the auto exclusions in its policy eliminated coverage for any suit alleging bodily injury involving automobiles.
The trial court agreed with Essex that the auto exclusions applied and ruled that Essex had no duty to defend or indemnify the City.
Holding
The Court of Appeal reversed and held that Essex had a duty to defend the City. The Court held that Navarro’s lawsuit fell within the scope of coverage under the Essex policy based on allegations that the City created a dangerous condition on public property that caused bodily injury to Navarro. The Court then held that the auto exclusions were not plain enough or clear enough to defeat the City’s reasonable expectations of a defense against Navarro’s lawsuit.
Comment
According to the Court, the case law addressing auto exclusions involve situations where the automobile involved was owned, maintained, or used by an insured or an insured’s agent or employee. Here, the Court partly relied on the fact that the City did not own, operate, maintain, use, entrust to others any of the automobiles involved in the accident. In addition, the Court relied on the fact that the accident did not occur on the premises of the special event the City had sponsored, and on the fact there was no evidence that the drivers or automobiles involved were entering or leaving the insured premises.