Richards v. Princeton Insurance Company, (S.D.N.Y. 2001)
Background. Churches often use rented vehicles to transport members in the course of church activities. Do church insurance policies cover injuries resulting from the use of such vehicles? This was the issue addressed in a recent case.
A group of students and teachers from a church-operated school rented a bus for a church-sponsored trip to a fruit farm. After arriving at the destination, and while the bus was unattended, some of the students entered the bus and accidently disengaged the parking brake, causing the bus to roll down a hill, killing a child and injuring three other children. The victims were attending the trip with their parents and were not students at the school.
The victims’ families (“plaintifffs”) sued the church, the bus company, bus manufacturer, and the fruit farm. The plaintiffs alleged that the church was legally responsible for the death and injuries on the basis of its negligent supervision of the bus and its students.
The church submitted the plaintiffs’ lawsuit to its general liability insurance company, which denied coverage on the basis of an “autmobile exclusion” in the church’s insurance policy that excluded coverage for bodily injury or property damage “arising out of the ownership, maintenance, use or entrustment to others of any auto owned or operated by or rented or loaned to [the church].” The church’s insurer insisted that this exclusion applied to the plaintiffs’ claims, but the church claimed that it did not. The parties asked a court to determine whether or not the church’s insurance policy covered the plaintiffs’ claims.
The court’s ruling. The plaintiffs claimed that the automobile exclusion in the church’s insurance company did not apply to their claims since the church’s alleged “negligent supervision” did not arise out of the “ownership, maintenance, use or entrustment” of the bus. Plaintiffs further argued that the automobile exclusion did not apply because the church had chartered the bus and therefore did not own, operate, or rent it. The court disagreed, and concluded that the accident did “arise out of” the church’s use of a rented bus and therefore the policy’s automobile exclusion applied and so no insurance coverage was available. It observed,
[The church] hired the bus and driver for use on a field trip. The bus was a necessary element of the school trip, without which the church would have been unable to travel to … [the fruit farm]. That use presumably began at the commencement of the trip, when the bus was available and accessible to the church, and remained continuous for so long as it, under the terms of the rental, had some measure of dominion or control over the availability of the vehicle for the purpose covered by the agreement. That the bus was not in operation transporting passengers on the road, but rather was parked following the first part of the trip, did not render it less subject to the church’s use. In fact, the church availed itself of the bus’s travel and stationary storage capacity by permitting children to return to, and wait inside, the bus. Access to the bus merely for the purpose of waiting in it for any legitimate reason would constitute as much use of the vehicle as actual conveyance of passengers and goods from one point to another …. That the children did not wait on the bus in an orderly manner is to be expected; it is common experience that children often act rambunctiously on school buses. Accordingly, the court concludes that the church’s use of the bus pursuant to their rental agreement, and the church’s supervision of children during the school trip, are inseparably intertwined, so that plaintiffs’ injuries and death here asserted undoubtedly arose out of the church’s use of the bus during the school trip.
The court also rejected the plaintiffs’ argument that the automobile exclusion did not apply since the church had “chartered” rather than “rented” the bus. The insurance company claimed that the church rented the bus and that any distinction between a charter and rental is a “distinction without a difference.” The court agreed with the insurance company. It noted that “under a typical charter transaction a party hires a vehicle along with a crew or driver.” It asked, “Why exactly the hiring of a crew in addition to the hiring of a vehicle brings the chartered vehicle outside the definition of rental is not explained by plaintiffs’ arguments.” Further, the court noted that the plaintiffs failed to produce any evidence to show that the church and bus company entered a “charter” agreement “as something they considered to be legally different from rental of a bus along with a driver. For instance, plaintiffs did not introduce a copy of the contract setting forth the alleged charter agreement defining the basis for the legal consequences plaintiffs claim differentiate the church’s contract from an ordinary rental.”
The court concluded that the automobile exclusion applied, and therefore the plaintiffs could not look to the church’s general liability policy for compensation.
The court acknowledged that insurance policy exclusions “must be narrowly construed and the burden is on the insurer to bring the case within the exclusion,” because “insurance companies possess all the expertise and unilaterally prepare the varied and complex insurance policies.” However, the court added that “where the language of an insurance policy is clear, a court must enforce its terms as written. Likewise, courts should not write for the insured a better policy of insurance than the one purchased.”
Relevance to church treasurers. This case demonstrates the importance of purchasing automobile insurance. The problem in this case was that the church failed to purchase automobile insurance, and so any insurance coverage for the plaintiffs’ injuries had to be based on the church’s “comprehensive general liability” (CGL) insurance policy. But in most cases, CGL policies contain no coverage for injuries arising from the use of vehicles since the insured is expected to obtain automobile insurance separately. As the court observed, “Typically, an insured purchases an automobile insurance policy to cover only those risks associated with the use or ownership of a motor vehicle. A comprehensive general liability policy, on the other hand, often is purchased to cover risks arising out of the use or possession of a site, be it a workplace or home.”
The court concluded that the church’s CGL policy did not provide any coverage for the plaintiffs’ injuries because of the automobile exclusion in that policy. It rejected the plaintiffs’ arguments that the exclusion did not apply to their “negligent supervision” claims, or could not be applied to a “chartered” bus.
Church treasurers should review their church insurance coverages with their insurance agent to be sure that the church has adequate coverage for injuries resulting from the operation of church-owned or rented vehicles, as well as “non-owned” vehicles. As this case illustrates, “gaps” in a church’s insurance coverage can result in uninsured claims that can expose a church to substantial damages. In this case, those damages included the death of one child and serious injuries to three other children. Without insurance, few churches would be able to pay the damages that a jury might award in such a case. This could force a church to sell its sanctuary and liquidate other assets in order to satisfy the judgment.
Need more information? See the church insurance checklists that appeared in the July and August 2002 issues of Church Treasurer Alert!
This article first appeared in Church Treasurer Alert, May 2003.