The Fifth Circuit Court of Appeals recently affirmed summary judgment finding an automobile exclusion in a daycare’s insurance policy precluded coverage for a three-year-old child’s tragic accidental death when left on a bus after a field trip. In Scottsdale Insurance Co. v. Discovering Me Academy, L.L.C., 2022 WL 3040663 (5th Cir., August 2, 2022), the caretaker checked the child off the list as having exited the bus following a field trip. And when a teacher later noticed the child was not present, a classmate erroneously reported that the child left the field trip with his parents. Later, when a parent came to pick him up from school, the child was eventually found on the floor of the bus dead from heat exhaustion.

Scottsdale Insurance filed a declaratory judgment action to determine its duties and obligations under a general liability insurance policy issued to the daycare, which included and additional coverage for damages “arising out of sexual and/or physical abuse, caused by one of your employees, or arising out of your failure to properly supervise.” “Sexual and/or physical abuse” is defined as “sexual or physical injury or abuse, including assault or battery, negligent or deliberate touching.” But the policy also included an automobile exclusion precluding coverage for “’bodily injury’ … arising out of the ownership, maintenance or use of any … ‘auto’ owned or operated by or rented or loaned to any insured.”

The daycare did not contest whether injuries arose out of the use of an auto, but instead asserted that the additional sexual and physical liability coverage form did not include an auto exclusion. The court disagreed, noting that the form states that “[c]overage is subject to this coverage form and the exclusions, conditions and other terms of this policy.” Applying the long-accepted rule that courts must “read all parts of a policy together, giving meaning to every sentence, clause and word to avoid rendering any portion inoperative.” The court found that “[t]he use of the word “and” here clearly incorporates those exclusions in the policy as a whole into the particular form.” Accordingly, the district court’s decision finding that the automobile exclusion precluded coverage was affirmed.

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