Tenth Circuit Upholds Clear and Unambiguous ATV Exclusion in Homeowners Policy

The Tenth Circuit Court of Appeals declared that an insurer’s homeowners policy all-terrain vehicle exclusion barred coverage for a Utah insured’s injuries that did not occur at the “insured location.”

The case, Farm Bureau Property & Casualty Insurance Co. v. Cleaver, involved a claim arising out of injuries sustained by minor E.C. while riding an ATV on an unpaved, county-owned public road from a nearby gravel pit back to the insured’s home, which was insured by a Farm Bureau homeowners policy.

In June 2019, two of the Cleaver children and their cousin, E.C., were riding two ATVs recreationally at the gravel pit when one of the ATVs broke down. The children used the working ATV to tow the broken ATV back to the Cleaver home. While in tow and being steered by E.C., the broken ATV overturned, ejecting and injuring E.C.

The Cleaver’s policy “covered damages that result from bodily injury or property damage caused by an occurrence to which the coverages apply.” Excluded from coverage, however, were “any damages or medical expenses arising out of the ownership, operation, occupancy, maintenance, use, entrustment to others, loading or unloading of any recreational motor vehicle while not on an insured location.”

The policy defined an “insured location” as “any premises shown in the Declarations under Insured Locations” and “any premises used by you in connection with the ‘insured locations’ listed above.” The declarations listed the Cleaver home’s address as the “insured location.”

Based on the clear and unambiguous language excluding damages and medical expenses while operating an ATV while not at the Cleaver home, Farm Bureau denied coverage for E.C.’s injuries. In its denial, Farm Bureau noted: “Once the ATV drove off Mr. Cleaver’s property, the ATV became uninsured.”

Following the denial, Farm Bureau filed a declaratory judgment action in the U.S. District Court for the District of Utah seeking a declaration that there was no coverage for the accident and that it had no duty to defend or indemnify any action arising from the accident. In their answer, the Cleavers argued that “the accident happened on an ‘insured location’ as defined in the policy as it occurred on the common area of the insured’s location.”

The district court did not find the policy was susceptible to the Cleavers’ interpretation of “insured location.” In granting summary judgment in favor of Farm Bureau, the district court found that “premises generally means either land in which the insured has an ownership or possessory interest or else some structure” and “given the specific policy language here, it would not be reasonable to interpret the homeowners policy to cover a recreational motor vehicle accident on a public road.”

On appeal to the Tenth Circuit, the Cleavers argued that the district court erred by not finding the policy’s definitions of “insured location” and “premises” ambiguous and by not strictly construing the exclusion against Farm Bureau because “recreational motor vehicles” includes vehicles “designed for use on public roads.” However, the Tenth Circuit upheld the district court’s holding, noting that “the Policy’s coverage for recreational motor vehicles is based on their presence on an ‘insured location,’ not their foreseeable area of use.”

Based on the plain language of the policy, the Tenth Circuit held:

The term ‘premises’ must be interpreted to have a consistent meaning throughout the Policy. … Based on the plain language of the Policy and the common understanding of ‘premises,’ an ‘insured location’ does not include the public roadway connecting the Cleavers’ property to the gravel pit.

Because the term ‘premises,’ as used in the Policy and in accordance with its plain meaning, unambiguously excludes the public roadway connecting the Cleavers’ property to the gravel pit, we AFFIRM the district court’s order granting summary judgment for Farm Bureau. In upholding the denial, the panel noted that “the Cleavers’ proposed interpretation of ‘premises’ would extend the definition of ‘insured location’ under the Policy to permit coverage for incidents occurring anywhere they might drive their recreational motor vehicles to-or-from their residence.”

The court’s decision is in line with Utah law regarding insurance contract interpretation, which says courts must “first look to the policy and construe its terms to give effect to the intentions of the parties as gleaned from ... the text of the contract itself."