The Supreme Judicial Court of Massachusetts recently held that claims against a livery service for negligently dropping off a drunken passenger in a location where he was likely to drive home “arose out of” the use of the livery service’s van, as the term “arise out of” is broadly interpreted in construing the scope of coverage under auto policies. Commerce Insurance Company v. Ultimate Livery Service, Inc., SJC-10149 (Mass. Nov. 26, 2008).
The passenger had been part of a bachelor party that hired Ultimate Livery Service, Inc. to transport the partiers to various destinations. Ultimate’s van transported the party to a sports bar in Boston, then to a club in Rhode Island, and finally back to the same sports bar. The passenger in question then attempted to drive home and was involved in a serious accident. The occupants of the other vehicle sued Ultimate for negligence for dropping the passenger off at the sports bar when the van driver was aware that the passenger had driven a car there and was likely to drive the car home.
Ultimate had two policies with Commerce Insurance Company: a commercial automobile policy and a business owner’s policy. Commerce sued for a declaratory judgment that neither of the policies obligated Commerce to defend or indemnify Ultimate. The automobile policy provided coverage for “bodily injury caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto.’” The business owner’s policy provided coverage for “bodily injury arising out of operations necessary or incidental to [Ultimate’s] premises,” but also expressly excluded bodily injury “arising out of the use of any auto owned or operated by any insured.”
The Court first found that Ultimate violated its duty to “use care to avoid leaving an intoxicated passenger at a location where it is likely the passenger will drive.” The Court then found that the tort claims against Ultimate “arose out of” the use of Ultimate’s van under the automobile policy because Ultimate knew that the passengers were getting drunk in the van and should have dropped off those passengers at a location from which they likely would not drive. Finally, under that same “broad construction,” the court found that the claims “arose out of” the use of “any auto owned or operated by any insured,” and therefore were excluded from coverage under the business owner’s policy.
This case expresses new law with respect to the obligation of a livery service for intoxicated passengers. It’s ruling on the scope of the term “arising out of” as used in the insuring agreement of auto policies, however, is consistent with prior case law. In those cases, once a chain of causation begins with the use of an auto, a superseding, intervening event must occur prior to injury before coverage is precluded.
For a copy of the decision, please click here.