A New Mexico court recently granted judgment on the pleadings against an insurer and found coverage, reminding the insurer that different words in a policy, indeed, have different meanings.
In Power of Grace, LLC v. Weatherby, Power of Grace, a policyholder, sued its insurer, Hudson Insurance Companies, and its insurance agent, Weatherby-Eisenrich Inc. Power of Grace alleged that Weatherby and Hudson were liable for damages it might incur in an underlying wrongful death lawsuit arising from a tractor-trailer accident.
At the request of Power of Grace, Weatherby procured two policies from Hudson: a $1 million primary coverage policy and a $5 million umbrella/excess policy. During the underlying wrongful death lawsuit, Hudson acknowledged coverage for the accident under the primary policy. It denied coverage under the umbrella/excess policy. It contended the umbrella/excess policy does not apply because of an automobile exclusion.
Power of Grace sued Hudson and Weatherby in New Mexico state court. It argued that the policy provided coverage and, even if it did not, that Hudson and Weatherby were nonetheless liable because of allegedly misleading statements they had made about the scope of the umbrella/excess policy coverage.
Weatherby moved for judgment on the pleadings, contending that it could not be liable because the Hudson policy did provide coverage. Weatherby argued as follows:
The policy was divided into coverage A (excess coverage) and coverage B (umbrella coverage). Coverage A included an “auto” exclusion, and “auto” was defined by the policy to include tractor-trailers. As a result, coverage A did not apply because the auto exclusion barred coverage. In contrast, coverage B excluded only claims involving “automobile.” “Automobile” was not defined in the policy. And in its everyday meaning, as reflected in dictionaries, “automobile” applies to only four-wheel, passenger transport vehicles. A tractor-trailer is not a four-wheel passenger transport vehicle, so tractor-trailers are not excluded by the automobile exclusion.
Hudson countered that “auto” and “automobile” are synonymous and thus both coverage A and coverage B excluded tractor-trailers.
The New Mexico court adopted Weatherby’s proposed interpretation. It interpreted “auto” and “automobile” separately. And it ruled that although “auto” includes tractor-trailers, “automobile . . . is not sufficiently clear to mean ‘semi-trailer.’” As a result, coverage B, the umbrella coverage, is available for the underlying tractor-trailer accident. And Hudson is liable for up to $5 million under the umbrella policy for the underlying wrongful death lawsuit.
The court’s ruling is a good reminder that different words have different meanings in insurance policies. Hudson defined and used “auto” throughout the policy. It separately used the word “automobile,” which it did not define. As the drafter of the policy, Hudson had to define the words that it used. If it wanted the defined word “auto” to mean the same thing as the undefined word “automobile,” it had to say so.
Hunton Andrews Kurth, LLP represented Weatherby in the lawsuit.