Sixteen-year-old Cheyenne Sauls and seventeen-year-old Jason Lark went to a party at their friend Justin McAllister’s house. While there, they consumed alcohol that Justin’s father provided. Sauls then left in Lark’s car. Lark collided with a disabled truck and Cheyenne sustained fatal injuries. Saul’s parents sued the McAllisters, among others, alleging that they served minors alcohol and that the alcohol proximately caused the injuries. The McAllisters notified Allstate, their homeowner’s insurer, of the lawsuit. Allstate filed a Declaratory Judgment action seeking a determination that the policy did not cover the claims. The trial court ruled in Allstate’s favor and the Sauls appealed. Sauls v. Allstate Prop. & Cas. Ins. Co., Georgia Court of Appeals, Civil Case A14A0452.
At issue on appeal was a coverage exclusion in the McAllister’s homeowner’s policy. The exclusion stated that Allstate does not cover “bodily injury arising out of the ownership, maintenance, use, occupancy, renting, loaning, entrusting, loading or unloading of any motor vehicle or trailer.”
Attempting to avoid the operation of this exclusion, the Sauls argued that their claim arose from the illegal furnishing of alcohol to minors, not the operation of a motor vehicle. The McAllisters, they alleged, facilitated the minors’ consumption of alcoholic beverages, which placed their daughter in a “situation of jeopardy.” She would not have died but for the McAllister’s creation of this situation of jeopardy. The Court of Appeals did not agree.
As the appellate court noted, when the phrase “arising out of” is found in an exclusionary clause in an insurance policy, a “but for” test applies. Claims arise out of excluded conduct when “but for” that conduct, there could be no claim against the insured. In applying this standard, courts examine the facts and circumstances underlying the plaintiff’s claims–not the plaintiff’s theories of liability. If claims arise out of the excluded conduct (i.e., “but for” the conduct, no claim would exist), then no coverage exists.
Based on this reasoning, the Court of Appeals affirmed the trial court’s decision that the policy exclusion applied. The conduct from which the claims arose was Lark’s use of the motor vehicle. “But for” Lark’s use of the car, there would have been no wreck and no injury to Saul. Accordingly, the Court of Appeals affirmed the trial court’s grant of partial summary judgment to Allstate and its conclusion that no coverage existed under the McAllister’s homeowner’s policy.
The decision was a victory for Allstate and a defeat for both the McAllisters and the Sauls. It relieved Allstate of the obligation of defending the McAllisters or paying the claim. It left the McAllisters exposed to the Sauls’ claim, for which they could still be held liable. But if left the Sauls without coverage for that claim, meaning they would need to collect directly from the McAllisters if they ultimately prevailed. More broadly, the case signaled that Georgia courts will narrowly construe the issue of causation when construing policy exclusions, which is generally good for insurers and bad for both insureds and injury victims.
David S. Fried is a trial lawyer that specializes in complex business, employment and personal injury litigation.