Recently, the Court of Appeals of Connecticut affirmed a decision by a lower court, which granted a motion for summary judgment in favor of several insurance carriers. It confirmed that these carriers did not have a duty to defend and indemnify two policyholders under certain insurance policies in an action that sought to recover damages for injuries sustained in an automobile accident caused by the policyholders’ minor son while he was under the influence of alcohol.[1]
The case
This lawsuit centers around two policyholders who sought coverage from several insurance carriers after their minor son left their home in the middle of the night with a friend as a passenger in their vehicle. The son, who was driving, lost control of the car, struck a telephone pole, and injured his friend.[2]
The injured friend sued the son’s parents (and others) in an attempt to recover damages. He claimed that their son had consumed alcohol at a bar and at his family home earlier in the evening prior to getting behind the wheel.[3]
The policyholders were accused of negligence—and the father specifically was accused of vicarious liability for allowing his son to consume and/or have access to alcohol within the family home and subsequently allowing him to leave the home and operate a vehicle while under the influence.[4]
The policyholders sought coverage against these claims under three different insurance policies that were issued by three different insurance carriers: a homeowners policy, an automobile policy, and an umbrella policy.[5] Their argument was that their alleged negligence in serving their child alcohol arose from conduct within their home and that there was “no nexus between their alleged negligence [at their home] and the operation of a motor vehicle.”[6]
The insurance carriers sought declaratory judgment in court—they believed they were not obligated to defend or indemnify the policyholders since the friend’s lawsuit did not seek damage covered by the insurance policies issued to the policyholders by the insurance companies.[7] In connection with the homeowners policy, the insurance carriers noted exclusions of coverage for “‘bodily injury’ or ‘property damage … arising out of (1) [t]he ownership, maintenance, use, loading or unloading of motor vehicles or all other motorized land conveyances, including trailers, owned or operated by or rented or loaned to an ‘insured’ [motor vehicle exclusion] . . . .’”[8]
Regarding the automobile policy, the insurance carriers asserted that coverage for bodily injury and property damage for the vehicle involved in the crash had been canceled just a few weeks prior to the accident. The companies presented documentation to prove the deletion of coverage, a letter from the carrier to the policyholders to confirm their change in coverage, and an affidavit to attest to the accuracy of such letter as evidence of such.[9]
Lastly, the insurance carriers argued that the umbrella policy does not afford coverage against liability for bodily injury arising out of the use of an automobile owned by any insured unless the liability is covered by an underlying policy.[10] Thus, the carriers argued that because there was no underlying coverage under the other two policies, there was also no coverage under the umbrella policy.[11]
What the court had to say
After reviewing the policyholders’ arguments on appeal, including an analysis of various distinctions between other litigated cases involving similar policy language, the appellate court affirmed the decision of the trial court in favor of the insurance carriers.[12]
The appellate court believed that the trial court correctly had determined that the motor vehicle exclusion in the homeowners policy precluded coverage and agreed that it was undisputed that bodily injury and property damage coverage had been deleted from the automobile policy just weeks before the accident.[13]
The appellate court also agreed with the trial court regarding the umbrella policy—with no coverage to an underlying policy, the insurance carrier that issued that umbrella policy had no duty under it to provide the policyholders coverage.[14]
The takeaway
This case serves as a reminder to your insureds to be aware of their insurance portfolio and the implications of making certain decisions in connection with their insurance policies, such as the addition or deletion of coverage.
Besides the obvious takeaway of not allowing any minor children to consume alcohol, and in this case, subsequently allow them access to a motor vehicle after such consumption, there are a few things insurance producers should be mindful of when advising their clients about coverages allotted under their homeowners, automobile and umbrella insurance policies.
It should be stressed to clients that homeowners insurance policies do not typically cover motor vehicle accidents. A standard homeowners policy focuses on and provides liability protection primarily on the home and the personal property within such home, excluding coverage for motor vehicles in many cases.
If a client owns a vehicle, he or she should secure a separate automobile insurance policy with comprehensive, collision and liability coverages to cover liabilities and damages related to auto accidents that may occur with that vehicle, including injuries to others and damages to their property when the policyholder is at fault in an accident.
Having an umbrella policy is a great addition to an insurance portfolio and it can provide extra needed protection, but it is important to stress to clients that typically they require underlying policies to be in place. They are, by design, meant to offer additional liability coverage beyond the limits of an insured’s homeowners, auto and other primary insurance policies.
You should encourage clients to review their insurance portfolios regularly to ensure that underlying policy requirements are met, umbrella policies are aligned with foundational coverage to not experience gaps in coverage, as well as note any continuous coverage requirements and any specific situations or exclusions that could impact these additional layers of protection.
[1] Liberty Ins. Corp. v. Johnson, No. AC 45933 (Conn. App. Ct. Dec. 5, 2023)
[2] Appellate Court Affirms No Duty to Indemnify Auto Crash Injuries Under Home, Umbrella Policies
[3] Ibid.
[4] Ibid.
[5] Ibid.
[6] Liberty Ins. Corp. v. Johnson, No. AC 45933 (Conn. App. Ct. Dec. 5, 2023)
[7] Ibid.
[8] Ibid.
[9] Ibid.
[10] Ibid.
[11] Ibid.
[12] Ibid.
[13] Ibid.
[14] Ibid.
Danielle Caswell, Esq.
Danielle Caswell joined PIA Northeast as associate counsel in the Government & Industry Affairs Department in 2023. She earned her bachelor’s degree from New York University and her law degree from Brooklyn Law School with a particular focus on intellectual property, information, and media law. Prior to joining PIA, Danielle was an associate at a law firm in New York City where she focused primarily on intellectual property and entertainment-related transactional and litigation matters.
