Policy Exclusions – Interpretations

Arlington insurance lawyers need to be able to know how the courts interpret insurance policy exclusions. A recent finding from a United States Magistrate Judge in the Northern District of Texas is helpful. The style of the case is, The Burlington Insurance Company v. Midlothian Chamber of Commerce, et al.
The Chamber sponsored a bike-a-thon in which John Shumaker participated. Shumaker was seriously injured and later sued the Chamber in Texas district court, claiming that his personal injuries resulted from various acts of negligence at the event. Shumaker alleges that the Chamber “organized and promoted” the bike-a-thon, which was a “scenic ride and tour of historic homes as well as newer neighborhood[s]” and was “not a race.” He asserts claims in the nature of negligence.
TBIC is paying the Chamber’s defense costs in the state case but initiated this declaratory judgment, requesting that the Court find that TBIC has no duty to defend the state suit or to indemnify the Chamber for the claims that Shumaker asserts.
Each party essentially seeks to have the Court adopt its own interpretation of the legal effect of the General Commercial Liability Policy in effect. TBIC seeks an order declaring that it has no duty to defend or indemnify the Chamber; the Chamber urges that there is a duty to defend but does not request that the Court make a finding as to duty to indemnify at this point.
The general commercial liability policy between TBIC and the Chamber contained two exclusions that are relevant here. The first exclusion, entitled “Exclusions – Described Hazards (Special Events Liability),” carves out from insurance coverage “bodily injury” that is suffered by “any person while practicing, instructing, demonstrating, or participating in any speed contest, demolition derby, livestock auction, rodeo, horse show, or any type of sport, athletic event, competition or contest.” A second endorsement, entitled “Exclusion – Athletic or Sports Participants,” excludes from insurance coverage “‘bodily injury’ to any person while practicing for or participating in any sports or athletic contest or exhibition” sponsored by the Chamber.
Each side filed cross motions for summary judgment.
TBIC reads these exclusions to preclude insurance coverage where, as here, a participant suffered personal injury during a bike-a-thon.
The Chamber, on the other hand, contends that “sport” or “athletic event” modifies “competition or contest.” That is, the Chamber urges that the activity must be “actively competitive” to fit within the exclusion.
Whether or not an “athletic event” requires some modicum of exertion, one “not unreasonable” reading of the underlying complaint is that the bike rally was nothing more than a mobile tour of homes that did not require any particular skill or cycling ability. That is, the bike-a-thon was not meant to be athletic at all. Shumaker describes an event that “encouraged participants to bring the family out for a scenic ride and tour of historic homes as well as newer neighborhood[s].” The organizers allegedly indicated that the bika-a-thon “is not a race. We will not be keeping track of ‘Who finished first’ nor will we be Awarding pri[z]es.” Although Shumaker explains that advertising and promotion “offered participants a closed course, 65 mile bikethon,” he does not contend that the riders were required or even encouraged to complete all 65 miles of the course. Indeed, the negligence that Shumaker alleges is that the Chamber changed the route of the bike-a-thon on the eve of the event into one that “included a significant peril” – suggesting that the event was not intended to require any skill or result in peril to the participants.
A plain reading of Shumaker’s complaint certainly makes plausible – or at least not unreasonable – the Chamber’s argument that the Sports and Athletic Participants exclusion does not excuse TBIC from the duty to defend the state lawsuit because the bike-a-thon was not a “sports or athletic contest or exhibition.” This is so regardless of whether its scope of exclusion is more or less specific than that of the Described Hazards endorsement, and so TBIC’s objection that one of the Chamber’s arguments improperly eliminates the Described Hazards exclusion is of no matter. Again, the nature of the event described in the underlying state action is one of a leisurely “tour of historic homes” that would be untimed and would not award prizes for faster finishers. And Shumaker’s complaint certainly does not allege that the tour participants were themselves part of a “sports or athletic exhibition” – despite TBIC’s belief that they were on view for the public when they rode by.
It is, therefore, at least “not unreasonable” to believe the Chamber’s argument that the bike tour described by Shumaker was neither a contest or exhibition that was excluded by the Athletic or Sports Participants provision.
In sum, the court found that the Chamber had stated a “not unreasonable” case that the insurance policy, read as a whole, imposes upon TBIC a duty to defend in Shumaker’s state litigation that is not excused by the exclusions cited by TBIC. TBIC has not shown that coverage for all claims is barred by the plain language of a policy exclusion.
Accordingly, the Chamber’s Motion for Partial Summary Judgment should be granted.