HOW FAR?

Jonny was driving a customer’s vehicle when he struck Charles and Delilah’s vehicle. Because Jonny was a valet for the Olivier House Hotel at the time of the accident, Olivier House Hotel was sued, but its CGL carrier declined coverage because the customer’s vehicle had been parked at a garage ten blocks away from the hotel.

See below how the courts reacted when asked to determine how close a vehicle needed to be in order for coverage to apply.

Jonny Larios (Larios) was employed by Olivier House Hotel (Hotel). During his employment, he was retrieving the parked Rutledge vehicle and returning it to the Hotel. An employee had parked the vehicle earlier roughly 10 blocks from the Hotel because, at that time, the adjoining parking lot was full. While driving the Rutledge vehicle, Larios struck a vehicle owned by Charles Vise, Jr., and Delilah Vise (Vise).

At the time of the loss the Hotel was insured under a general liability policy issued by American Empire that covered both the Hotel property and its adjacent parking lot.

Vise filed a petition for damages and named Larios, the Hotel, and Hartford (Vise’s uninsured motorist carrier). The Hotel filed a third-party demand against American Empire seeking defense and indemnity. American Empire filed a motion for summary judgment, asserting that it had no liability under the policy because of an automobile exclusion, which excluded coverage for damages arising out of the use of an automobile.

The Hotel filed a cross-motion for summary judgment, arguing that the auto exclusion did not apply here because of a parking exception. Hartford opposed American Empire’s motion for summary judgment based on the same argument advanced by the Hotel.

The trial court granted judgment in favor of American Empire and denied the Hotel’s cross-motion. The Hotel and Hartford filed appeals.

The policy automobile exclusion excluded coverage for:

“Bodily injury” or “property damage” arising out of the ownership, maintenance, use or entrustment to others of any aircraft, “auto” or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and “loading and unloading”.

The exclusion does not apply to:

Parking an “auto” on, or on the ways next to, premises you own or rent, provided the “auto” is not owned by or rented or loaned to you or the insured; [“parking exception”]

American Empire argued that at the time of the accident, Larios was not “parking” the Rutledge vehicle, and more importantly, he was not operating the vehicle “on, or on the ways next to” the premises operated by Olivier House Hotel. American Empire submitted that the accident occurred at an intersection roughly ten (10) blocks away from the Hotel and its adjoining parking lot. American Empire asserted that considering the unambiguous language of the exclusion, the policy does not provide coverage for parking a vehicle at a remote location.

The appellate court agreed and affirmed the ruling of the trial court.

Vise v. Olivier House Prop. Mgmt., LLC, 2016-0741 (La. App. 4 Cir. 4/12/17)

Aircraft, auto, and watercraft are excluded

Aircraft, autos, and watercraft should be insured on policies or coverage forms designed for them. However, there are situations when an auto or watercraft can be covered by the CGL because the exposure is very closely tied to the premises.

Here is the the PF&M analysis of this exclusion.

CG 00 01–COMMERCIAL GENERAL LIABILITY COVERAGE FORM

SECTION I–COVERAGES

COVERAGE A–BODILY INJURY AND PROPERTY DAMAGE LIABILITY

2. Exclusions

This insurance coverage does not apply to any of the following, except as noted:

1. Aircraft, Auto, or Watercraft (04 13 change)

Coverage does not apply to bodily injury or property damage when it arises out of owning, maintaining, using, operating, loading, unloading, or entrusting to others any aircraft, auto, or watercraft. This exclusion applies if any insureds owns, operates, rents, or has loaned to it the aircraft, auto or watercraft and applies even if a claim is due to any insured being negligent or engaged in wrongdoing in supervising, hiring, employing, training, or monitoring of others.

This exclusion has five exceptions. It does not apply to:

• Watercraft that is on the shore that is part of the premises the named insured owns or rent
• Watercraft the named insured does not own, that is less than 26 feet long and that is not used to transport people or property for a fee

 The parking of autos either on the named insured’s owned or rented premises or next to that premises. The autos being parked must not be owned by, rented, or loaned to the named insured or any insured.

 Liability that is assumed through any insured contract that applies to owning, maintaining, or using aircraft or watercraft

 Bodily injury or property damage caused by machinery or equipment that is attached to mobile equipment that is defined in this policy as auto only because it is subject to motor vehicle financial responsibility laws.

• Bodily injury or property damage caused by mobile equipment that is mounted on automotive or truck chassis and are used to raise and lower workers or equipment. The injury or damage must be due to the operation of the equipment, not the movement of the vehicle.
• Bodily injury or property damage caused by mobile equipment air compressors, pumps, and generators that are permanently mounted on self-propelled vehicles is also excepted. The injury or damage must be due to the operation of the equipment, not the movement of the vehicle.

The 04 13 edition deleted the words “in the state” before “where it is licensed” in the prior edition with respect to licensing and garaging locations.

 Related Articles:

CA 00 01–Business Auto Coverage Form Analysis

Aircraft Insurance Coverage Analysis

ISO Commercial General Liability Coverage Forms Available Endorsements and Their Uses – See the paragraph on CG 24 12 Boats that is available to delete this exclusion and extend coverage for certain boats.

Related Court Cases:

Injury from Truck Damage to Sidewalk Held Not Within Automobile Exclusion

Does Auto Exclusion Apply To Negligent Driver?

CGL’s Automobile Exclusion Held To Apply, Regardless Of Contention That An Unlicensed And Unregistered Truck Was “Mobile Equipment”

Business Liability Policy Cannot Be Construed As Automobile Policy

Transferring the exposure

The cost of maintaining an active valet staff can be very expensive and difficult to supervise so many businesses contract with a valet parking service to provide the valet services only as needed. The valet service maintains control of the valet and also provides the needed insurance coverages. If Olivier House Hotel had such a service, this case would have been served to the valet parking service and not to the hotel.

Review a narrative describing the exposures and coverage needs of a valet parking service.

Category: Service Businesses

SIC CODE: 7299 Miscellaneous Personal Services, Not Elsewhere Classified

NAICS CODE: 812930 Parking Lots and Garages

Suggested ISO Commercial General Liability Code: 46603, 46604

Suggested Workers Compensation Code(s): 8392

Description of Operations: Valet parking services are offered by hospitals, restaurants, shopping malls, and country clubs, hotels, museums and other retail and service organizations as a courtesy for their guests. The organization does not use its employees to provide this service. Instead, it will contract with a valet parking service. Individuals may also hire these services for parties at their homes or for special events. Guests stop at a marked valet station, give the vehicle’s key to the attendant, and receive a ticket. The valet parks the vehicle in a designated area. When the guest returns, presents the ticket and pays the parking fee (if any), the attendant retrieves the vehicle and returns it to the guest. The guest may tip the attendant. Additional services such as automobile washing, detailing and shuttle services may be provided.

Property exposures are from office operations and are minimal.

Crime exposures are from employee dishonesty and theft of money and securities due to the accumulation of cash collected by attendants when parking services are provided for a fee. Employees may steal client vehicles or property stored inside those vehicles. Hazards increase without proper background checks and reconciling tickets with cash collected from customers.

Inland marine exposures include accounts receivable from the service’s clients, computers, a special floater for property kept at valet stations (such as signs, traffic cones, and umbrellas), and valuable papers and records for client contracts and any required permits or licenses.

Premises liability exposures are limited due to lack of public access to the valet’s office location. Since valet parking is done at clients’ locations, the clients would be primarily responsible for any injuries to guests on their premises. Control of guest keys could be considered a liability exposure.

Automobile exposures are primarily of a nonownership nature but can be high because valets drive unfamiliar vehicles in congested areas. All drivers must have a valid driver’s license and acceptable MVR. Some valet services provide shuttle services using owned vehicles. Vehicles must be regularly maintained and records kept at a central location. If vehicles are taken home, there should be written procedures regarding personal use by employees and their family members.

Garagekeepers liability exposures are high because the valet service accepts the customer’s vehicle and must return it in undamaged condition. Lack of control over keys could result in a guest’s vehicle being stolen.

Workers compensation exposures are high. Valets park guests’ vehicles in congested areas and can be injured while driving or by other vehicles. The number of valets, their ages, and experience, field supervision and training is all-important. Valets should be trained to handle irate or inebriated customers. An accumulation of cash may be a target for robbers, resulting in injury to valets.

Minimum recommended coverages:

Business Personal Property, Accounts Receivable, Valuable Papers and Records, Employee Dishonesty, General Liability, Employee Benefits Liability, Commercial Umbrella Liability, Hired and Nonownership Auto Liability, Garagekeepers, Workers Compensation

Other coverages to consider:

Buildings, Earthquake, Flood, Money and Securities, Computers, Special Floater, Cyberliability, Employment-related Practices Liability, Automobile Liability and Physical Damage, Stop Gap Liability

Ask the question

Do any of your clients provide valet services? When clients add new services or change services they do not always remember to notify you. A renewal survey can be helpful to identify changes that could improve how to present your client to the insurance company and also identify potential coverage gaps.

Here is a letter you could e-mail or send to your clients offering to provide a survey.

Dear [Name]:

Since we first wrote your insurance coverage, there have been several changes in available policies, forms and rates. The insurance we arranged properly protected against financial losses at that time, and it may still be doing the right job.

However, may we review your loss exposure and insurance coverages in light of today’s conditions? It could be we’ll recommend leaving everything as it is, or maybe we’ll suggest improvements. In any event, there’s absolutely no charge for the “checkup.”

Please call me at [phone number], or drop us a note. We’ll talk it over with you at your convenience and make whatever suggestions are appropriate.

Very truly yours,