April 15, 2024 – An insurance policy’s exception to an exclusion of liability was ambiguous because it lacked terms of geographic limitation while related exceptions contained such terms, the Wisconsin Court of Appeals has ruled.

In Bolger v. Massachusetts Bay Insurance Company, 2022AP742 (March 26, 2024), the Court of Appeals (District III) held that because the exception was ambiguous, it must be interpreted against the insurer.

In 2018, Massachusetts Bay Insurance Company (MBIC) issued a homeowner’s policy to Bret and Amy Achtenhagen. The policy ran from November 2018 to November 2019.

The policy stated on the declarations page that it covered the Achtenhagens’ house in Waukesha County.

The policy excluded from coverage “bodily injury” and “property damage” that arose out of the ownership or use of motor vehicles owned by the insured.

However, Exception (4)(a) to that exclusion applied to a vehicle that was not subject to registration as a motor vehicle that was “[u]sed to service and ‘insured’s’ residence.”

Lawsuit Over UTV Crash

In December 2018, the Achtenhagens’ son Brady was driving a utility terrain vehicle (UTV) across the frozen lake at the family’s vacation home in Vilas County, with Robert Bolger on the UTV as a passenger.

Brady lost control of the UTV. The UTV flipped on its side and landed on top of Bolger, crushing his right leg.

In August 2018, Bolger sued Brady Achtenhagen and MBIC in Vilas County Circuit Court.

Motion for Declaratory Judgment

MBIC filed a motion for declaratory judgment.

MBIC argued that it had no duty to defend or indemnify the Achtenhagens because “Exception (4)(a)” didn’t apply, given that the UTV accident occurred away from the Achtenhagens’ residence in Waukesha County.

The circuit court concluded that the wording of Exception (4)(a) was ambiguous. The circuit court denied MBIC’s motion and scheduled a jury trial.

Before the trial, MBIC stipulated to a judgment of $150,000, conditioned on the outcome of an appeal.

After the circuit court entered an order awarding Bolger a judgment of $150,000 MBIC appealed.

Arguments on Appeal

On appeal, MBIC argued that Exception (4)(a) applied only to a vehicle that was serving the Waukesha County residence at the time of the crash.

Bolger argued that Exceptions (1)-(4) were contained ambiguities. Specifically, he argued that a reasonable insured could interpret Exception (4)(a) to apply to a vehicle that had been used to serve the Waukesha County residence at some point in the past.

Bolger also argued that the policy did not define “insured’s residence,” so that term could apply to the Achtenhagens’ Vilas County residence.

Exception Was Ambiguous

In an opinion for a three-judge panel, Judge Gregory Gill concluded that Exception (4)(a) was ambiguous.

“It is unclear from the exception’s language, ‘[u]sed to service,’ whether liability coverage exists only if the occurrence takes place while a conveyance is servicing an “an ‘insured’s’ residence,” or if coverage exists regardless of whether the occurrence takes place provided the conveyance at one point serviced “an ‘insured’s’ residence,” Gill wrote.

Judge Gill pointed out that Exception (4)(c) provided coverage for bodily injury arising out of a vehicle “[i]n dead storage on an insured location” – a geographic term – while Exception (4)(b) provided coverage for bodily injury arising out of a vehicle “[d]esigned for assisting the handicapped” – a non-geographic term.

Gill also noted that other exceptions for “personal liability” and “medical payments to others” included geographic limitations but the limitations were not limited to the “insured location.”

“Without the language used in the other exceptions to limit the re-instatement of liability coverage by a particular geographic location or by a particular use at the time of the bodily injury, a reasonable insured could interpret Exception (4)(a) to offer such coverage anywhere for any location or purpose, so long as the conveyance was once “[u]sed to service an ‘insured’s’ residence,” Judge Gill wrote.

MBIC argued that a reasonable insured wouldn’t expect it to provide liability coverage to the crash in Vilas County because it issued the policy to cover the Waukesha County residence.

But Gill pointed out that the policy provided coverage for liability beyond the Waukesha County residence. For instance, he noted, Exception (3) provided coverage for injuries that arose on a golf course, and there was no evidence the Achtenhagens had a golf course at their Waukesha County residence.

“Furthermore, MBIC chose to specify that it would cover medical payments to others if the bodily injury occurred “off the ‘insured location” and it “was caused by the activities of an ‘insured,’” Judge Gill wrote.

“It similarly did not limit personal liability coverage to an ‘insured location,’” Gill wrote. “While it is reasonable for an insured to assume that coverage would typically only exist at the ‘insured residence,’ it is equally reasonable, given the foregoing context, for an insured to interpret Exception (4)(a) as providing no such limitation.

Construed Against Insurer

Judge Gill explained that because Exception (4)(a) was ambiguous, Wisconsin Supreme Court caselaw required the Court of Appeals to construe the policy against MBIC.

“We conclude that MBIC had a duty to defend the Achtenhagens, and we affirm the circuit court’s order,” Gill wrote.