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Fourth DCA Affirms Severability Clause in Homeowners’ Policy Does Not Render Vessel-Based Watercraft Exclusion Ambiguous
By John Bond Atkinson, Tiffany A. Bustamante, and Amanda Forti
We are pleased to announce that the Fourth District Court of Appeal has affirmed Summary Judgment in favor of the insurer in a declaratory action, agreeing that a Watercraft Exclusion in the homeowners’ policy at issue precluded coverage for injuries sustained by a third party in a boating accident.
This was an appeal from the Circuit Court for the Nineteenth Judicial Circuit, St. Lucie County. Our firm and attorneys John Bond Atkinson and Amanda Forti had the pleasure and privilege to represent the appellee, insurer ASI Preferred Corp., in this appeal.
As background, this matter arose out of a boating accident. The boat in question was owned solely by Mr. Aiello (“the father”), who along with his wife (“the mother”) were the named insureds under their homeowners’ policy with ASI. Their son was also an “insured” under the policy as a relative residing in their home. The son had his father’s permission to use the boat and to let others operate the boat.
On the day of the accident, the son had taken three friends out on the boat. As the boating party was returning home, the son allowed one of his friends to pilot the boat. Unfortunately, this friend crashed the boat into an unlit channel marker, ejecting the young man into shallow water, resulting in serious injuries to the young man’s head and face. The young man brought a personal injury action against not only the friend who crashed the boat, but also the son and the father.
ASI thereafter brought a separate declaratory action against the father, the mother, the son (collectively the “insureds”) as well as the young man and the friend who crashed the boat, as interested parties. ASI asserted, in pertinent part, that the Watercraft Exclusion in the homeowners’ policy applied to preclude liability coverage to any of the insureds for the young man’s injuries.
In pertinent part, the Watercraft Exclusion broadly precluded liability coverage for bodily injury “arising of the ownership, maintenance, use, loading, or unloading of an excluded watercraft,” which was defined to mean motor boats, jet-skis, and sailboats “owned or rented to an ‘insured.’” The policy contained four narrow exceptions to the Watercraft Exclusion based on the type of vessel, the size of the attached motor, and the ownership interest involved. Based on the characteristics of the boat at issue, only one of these exceptions could possibly apply. That exception provided that “This exclusion does not apply to watercraft … not owned by an ‘insured.” Thus, the Watercraft Exclusion broadly precluded liability coverage for bodily injuries arising out of the use of an entire category of items—watercraft—with just a few narrow exceptions.
ASI took the position that because the boat was undisputedly owned by the father, who was undisputedly an “insured” under the policy, the boat was an “excluded watercraft” and did not fall under the above-quoted exception, such that there was no coverage.
The insureds opposed summary judgment (and later sought reversal of summary judgment) on the basis that the Severability Clause of the homeowners policy rendered the Watercraft Exclusion ambiguous, such that it must be construed strictly in favor of insureds.
The policy’s Severability Clause stated, in its entirety, that “[t]his insurance applies separately to each ‘insured.’ This condition will not increase our limit of liability for any one ‘occurrence.’”
The insureds contended that by stating “this insurance applies separately to each ‘insured,’” the use of the phrase “an ‘insured’” throughout the Watercraft Exclusion should be interpreted as “the insured seeking coverage,” with the result that only the exclusion would apply only to the boat’s owner(s), and not to insureds with no ownership interest in the boat. In other words, because the boat was “not owned by [the son]” and “not owned by [the mother],” the Watercraft Exclusion did not apply to them and they had coverage. The insureds conceded that the Watercraft Exclusion applied to preclude coverage for the father as the boat’s owner.
ASI maintained, in the lower court and on appeal, that the insureds’ interpretation was unreasonable, ignored and rendered meaningless the policy’s consistent use of the term “an ‘insured,’” would vitiate the exception’s scheme for broadly precluding coverage for a category of excluded items (watercraft) and would impermissibly re-write the policy to turn a very broad watercraft exclusion into a broad watercraft coverage provision excluding only boat owners.
The trial court granted summary judgment for ASI based on the Watercraft Exclusion. On appeal, and after hearing oral argument, the Fourth District affirmed in a well-reasoned and well-written opinion which vindicated all of ASI’s. We invite you to read the Fourth District’s excellent opinion, which is set out in full below.
The Fourth District held that the Watercraft Exclusion was unambiguous and its plain meaning excluded coverage. In rejecting the insureds’ arguments, the Fourth District stated that “the severability clause does not render the Watercraft Exclusion ambiguous, as the [insureds] contend, because the interpretation they advance is not reasonable.”
The Court went on to thoroughly distinguish the decisions of its sister courts upon which the insureds had relied for support, which were primarily decisions interpreting severability clauses in conjunction with intentional acts exclusions.
The Fourth District concluded as follows:
Here, the Watercraft Exclusion establishes a well-defined scheme for limited coverage of certain boating accidents in a homeowners’ policy. This is a sensible scheme because a homeowner who owns a boat is more likely to be involved in a boating accident than a homeowner who does not own a boat and who may occasionally rent or borrow a boat. Coverage of boats “not owned by an insured” is a limited form of risk appropriate to include in a homeowner’s policy. It is unlikely that parties to a policy would include clauses in a policy allowing boating claims under narrow circumstances, but intend those exclusions to apply to one family member, while having no impact on other family members who are also insureds under the policy.
The Fourth’s District decision should be seen as a significant victory and strong reassurance to homeowners’ insurers throughout the state. As argued in our brief and at oral argument, the Watercraft Exclusion in this case was not the only thing at stake in this appeal; not only every watercraft exclusion, but also every similarly-structured, item-based exclusion (e.g., recreational motor vehicle exclusions and aircraft exclusions) in every homeowners’ policy in Florida was at risk of evisceration by severability clauses which were never meant to be interpreted or used in the way that the insureds argued. Accepting the insureds’ position would have cut the legs off of these common, broad exclusions, vastly and unjustifiable exposing homeowners’ insurers to far greater risk than they (or any insured, for that matter) reasonably bargained for when issuing homeowners insurance. Accepting the insureds’ position also would have allowed for a kind of “gamesmanship” whereby a homeowner could simply title their boat (or ATV, or plane) in the name of the insured in their household who was least likely to actually use it (for example, a young child or an elderly relative in the home) to maximize the coverage for the other insureds who actually intended to use the craft regularly.
We invite you to watch the archived video of Oral Argument in this matter using the following link: https://www.youtube.com/watch?v=wxoerj9bDv4
Should you have any questions with respect to the contents of this letter, or the Fourth District’s opinion, we welcome your call.
Very truly yours,
JOHN BOND ATKINSON
TIFFANY A. BUSTAMANTE
AMANDA FORTI
JBA/TB/AF
Enclosure
John Bond Atkinson Tiffany A. Bustamante John B. Atkinson
561-212-4089 305-431-7497 561-289-2331
Please Click on link: Encl for Aiello