Eleventh Circuit Finds Undefined Term "Primary Auto Policy" Ambiguous

The U.S. Eleventh Circuit Court of Appeals recently held that the undefined term "primary auto policy" is subject to more than one reasonable construction, and is thus ambiguous. Gov't Emp. Ins. Co. v. Gordon, 2018 WL 833949 (11th Cir. Feb. 13, 2018).

The claimant sued the insured for damages resulting from an auto accident while the insured was driving a rental vehicle with insurance coverage provided through the rental agreement. The insured's estate also sought coverage for the accident under the insured's umbrella policy. The umbrella policy stated that the insured was an "insured" under the umbrella policy only if the motor vehicle was "insured by a primary auto policy." The umbrella insurer brought a declaratory judgment action for a determination of its obligations under the policy, arguing that the rented vehicle was not insured by a "primary auto policy" because the insurance for the rented vehicle was not primary insurance as defined in the umbrella policy. The court, relying on the umbrella policy's definition of "primary insurance" held that because the claimant could not show that the insurance for the rented vehicle provided coverage, the insured was not an "insured" under the umbrella policy at the time of the accident. The claimant appealed.

The Eleventh Circuit reversed and held that the term "primary auto policy" is subject to more than one reasonable construction and is thus ambiguous. The Eleventh Circuit found the term "primary auto policy" ambiguous because it is subject to more than one reasonable construction, and that the district court improperly relied solely upon the defined term "primary insurance" in the umbrella policy in determining the meaning of "primary auto policy." In concluding that the term "primary auto policy" is something different than "primary insurance," the Eleventh Circuit stated that it gave meaning and effect to all the terms of the contract as required by the rules of construction to resolve any ambiguity. The Eleventh Circuit remanded the case to the district court to re-evaluate the parties' motions for summary judgment in light of the court's opinion.

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