Interpreting An Insurance Policy

It is doubtful anyone in Grand Prairie, Hurst, Euless, Bedford, Arlington, Dalworthington Gardens, Mansfield, North Richland Hills, Fort Worth, or anywhere else in Tarrant County is going to run a cross this particular situation, but it is kinda interesting.
The Texas Supreme Court issued an opinion in June 2011, in the case styled, Lancer Insurance Company v. Garcia Holiday Tours, Et Al. The question for this court to decide in this case was whether the transmission of a communicable disease from the driver of a motor vehicle to a passenger is a covered a loss under a business auto policy, which affords coverage for accidental bodily injuries resulting from the vehicle’s use. This Texas Supreme Court said no. Here is some background information.
Garcia Holiday Tours operates a commercial bus company. It contracted with the Alice ISD to provide a bus and driver for a field trip to Six Flags Fiesta in San Antonio. The trip was for Alice High School band members, several of whom observed the driver coughing during the trip. Upon return, the driver was hospitalized after being diagnosed with an active case of tuberculosis.
Turberculosis or TB, is a bacterial infection that can live in a person’s body without making the person sick. In this inactive state, referred to as latent TB, the disease is not contagious. Active TB, on the other hand, is contagious and commonly transmitted by the infected person coughing or sneezing.
The immune systems of most people who breathe in TB are able to fight off the disease. Only about 10% of those infected with TB develop an active case. Active TB, however, can be quite serious not only because it is contagious but also because the bacteria cause tissue death in the infected organs.
The students were tested for the disease after learning of the driver’s diagnosis, and several tested positive for TB. These passengers subsequently sued the driver and bus company, asserting they were negligently exposed to the disease as a result of being confined in the bus with the infected bus driver. The bus company notified Lancer Insurance Company, its insurance carrier, but Lancer refused to defend the claim, maintaining that such claims were not covered under the policy. The bus company defended itself and went trial where a jury awarded over $5 million in damages to the passengers who had contracted the disease.
The bus company and driver then sued Lancer, asserting violations of the Texas Insurance Code and breach of contract for Lancer’s refusal to defend them in the lawsuit.
Lancer’s business auto policy stated that coverage is afforded for damages the insured is legally obligated to pay “because of ‘bodily injury’ … caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto.'” The terms accident, auto, and bodily injury are defined in the policy as:
A. “Accident” includes continuous or repeated exposure to the same conditions resulting in “bodily injury” or “property damage.”
B. “Auto” means a land motor vehicle … designed for travel on public roads …
C. “Bodily injury” means bodily injury, sickness or disease sustained by a person including death resulting from any of these.
Lancer conceded to the court that the bus was a covered “auto,” the passengers’ claims involve an accident, and tuberculosis is a “bodily injury” under the policy’s definitions. Lancer maintained, however, that the accident and the injuries did not result from the use of the bus, as the policy requires, but rather from other causes, such as the use of a contagious bus driver. Lancer submitted that the risk of being exposed to an infectious individual and contracting a disease is general liability risk, not an auto liability risk, even when the infectious individual happens to be the vehicle’s driver. In short, Lancer contended that the nexus between the passengers’ injuries and the bus’s use was insufficient to invoke the policy’s coverage.
The bus company and passengers responded that the policy generally provides coverage for passenger injuries so long as the bus is being used as a bus. They submitted that the term “use” is broadly defined in Texas case law to extend coverage well beyond vehicular accidents or collisions. They maintained that because the bus was being used to transport the passengers at the time of their injury that a sufficient nexus existed between that use and their injuries.
Again, this court ruled in favor of the Lancer. Their reasoning in this case was spelled out in the opinion and makes for interesting reading for someone trying to understand how the courts look at these policy interpretation cases. When in doubt, a person should look to an experienced Insurance Law Attorney for advice on how to best proceed with a situation where there is a dispute about whether or not the insurance policy provides coverage.