Nautilus Ins. Co. v. Bike & Build, Inc.

340 F.Supp.3d 399

NAUTILUS INSURANCE COMPANY

v.BIKE & BUILD, INC., et al.

CIVIL ACTION No. 16-4839

United States District Court, E.D. Pennsylvania.

Signed October 17, 2018

Filed October 18, 2018

Justin N. Kinney, Michael S. Chuven, Kinney Lisovicz Reilly & Wolff PC, Parsippany, NJ, Francis J. Deasey, Deasey, Mahoney Valentini, North, Ltd., Philadelphia, PA, for Nautilus Insurance Company.

Dominic C. Guerrini, David C. Williams, Thomas R. Kline, Kline & Specter, P.C., Philadelphia, PA, Carolyn Bates Kelly, John C. Falls, Kelly & DeMarco PC, Jenkintown, PA, for Bike & Build, Inc., et al.

MEMORANDUM

Juan R. Sánchez, C.J.

In this declaratory judgment action, Plaintiff Nautilus Insurance Company seeks a declaration that it has no duty to defend or indemnify Bike & Build, Inc., to which Nautilus issued a commercial general liability policy, in connection with a lawsuit filed against Bike & Build by Bridget Anderson. Defendant/Crossclaimant United Specialty Insurance Company, Bike & Build's excess insurer, seeks similar relief. Bike & Build seeks the opposite: a declaration that both insurers are required to defend and indemnify it in the underlying lawsuit and to provide coverage for Anderson's claims. All parties have moved for summary judgment.

The facts giving rise to the underlying lawsuit are undeniably tragic. In that lawsuit, Anderson seeks damages for serious injuries she sustained when she was struck by a car while participating in a cross-country charity bike trip organized by Bike & Build. The other rider who was struck along with Anderson was pronounced dead at the scene of the accident. Anderson alleges Bike & Build was negligent and grossly negligent in the planning, operation, and execution of the bike ride, including the selection of the route for the ride, which Anderson contends exposed riders to an unreasonable risk of harm from passing vehicles.

The coverage issues in this case turn on the applicability of certain exclusions in the Nautilus and United Specialty insurance policies. Because the Court finds two of those exclusions—the Auto Exclusion in the Nautilus Policy and the Athletic or Sports Participants Exclusion in the United Specialty Policy—unambiguously preclude coverage for the claims in the underlying lawsuit, summary judgment will be granted in favor of Nautilus and United Specialty. Bike & Build's motion for summary judgment will be denied.

FACTS¹

Bike & Build is a nonprofit corporation whose core mission is to benefit affordable housing and empower young adults for a lifetime of service and civic engagement through service-oriented cycling trips. See Nautilus Ex. D (hereinafter "Collins Dep.") 34-35; Nautilus Ex. C (hereinafter "Villere Dep") 92-93, 120, 265. Bike & Build accomplishes its mission by organizing cycling trips in support of affordable housing. See Collins Dep. 35-36; Villere Dep. 246-47. Prospective riders apply to participate in a Bike & Build cycling trip, Villere Dep. 61; Nautilus Ex. E, and must commit to raise a certain amount of money, typically $4,500, by the start of the trip, Collins Dep. 36; Nautilus Ex. E at NAUT 000179. The funds raised by riders support the riders' participation in Bike & Build's cycling trips. See Collins Dep. 55 (noting riders "rais[e] money for themselves to go on the trip"), 89; Villere Dep. 101. Bike & Build also uses funds raised by riders to make grants and contributions to affordable housing organizations selected by riders and for its own overhead. See Villere Dep. 101; Collins Dep. 54-55, 67-68, 89. Approximately 90 percent of Bike & Build's funds are generated by its riders.² Villere Dep. 101.

Bike & Build's cycling trips are led by trip leaders who are Bike & Build employees. See id. at 94; Collins Dep. 39-40. Bike & Build determines the routes for the trips, including where riders will stop along the route for overnight stays. See Villere Dep. 55-59. During cycling trips, Bike & Build provides riders with overnight accommodations and food, though riders also have the option of staying with friends or family or eating on their own. See id. at 59-60; Collins Dep. 86. While on a trip, riders stop periodically to volunteer at housing build sites. See Villere Dep. 270, Ex. I at BIKE0001172-73. Riders are also expected to follow Bike & Build's rules and to perform chores necessary to make the trip function, such as cleaning up the overnight location, shopping for groceries, or making presentations regarding affordable housing or bike safety. See Collins Dep. 40-41, 61, 95; Nautilus Ex. I at BIKE0001169, BIKE0001172, BIKE0001249-54.

In the summer of 2015, Bridget Anderson participated in a cross-country cycling trip organized by Bike & Build which originated in Portland, Maine, in June 2015 and was to end in Santa Barbara, California, on August 30, 2015 (hereinafter "the ME2SB trip"). Nautilus Ex. G (hereinafter "Anderson Dep.") 41-42, 44, 64. Anderson had applied to participate in the trip seven months earlier in November 2014, id. at 64, and in the months leading up to the June departure date, she engaged in fundraising to support the trip, ultimately raising approximately $9,200 in charitable donations for affordable housing.³ Id. at 15, 104.

On July 30, 2015, while riding through the State of Oklahoma on Oklahoma State Highway 152 as part of the ME2SB trip, Anderson and another rider were struck by a motor vehicle driven by Sarah Morris.⁴ See id. at 45, 58, 60, 66-67. The collision catapulted Anderson from her bicycle into the air and threw her approximately 156 feet, causing her to sustain serious injuries, including open knee dislocation and vascular injury to the left knee, grossly contaminated wound secondary to vascular injury, lateral condyle fracture, popliteal vascular injury, left foot metatarsal fracture, and L-3 spine fracture. Bike & Build Ex. G (hereinafter "Underlying Compl.") ¶¶ 15, 22; Anderson Dep. 61-62. Anderson has undergone at least eleven surgeries for her injuries to date. Anderson Dep. 61. The other rider who was struck along with Anderson was pronounced dead at the scene of the accident as a result of his injuries. Underlying Compl. ¶ 16. Morris was not affiliated in any way with Bike & Build, and Bike & Build had no ownership interest in the vehicle Morris was driving at the time of the accident.

On July 31, 2015, the day after the accident, Bike & Build notified its general liability carrier, Nautilus, of the accident. Villere Dep. 284; Bike & Build Ex. L. A few weeks later, on August 17, 2015, Nautilus sent a reservation of rights (ROR) letter to Bike & Build, advising that Nautilus was investigating the matter to determine whether the commercial general liability policy it issued to Bike & Build (the Nautilus Policy) provided coverage for Anderson's injuries or the other rider's death as a result of the accident.⁵

The Nautilus Policy includes the following grant of coverage for bodily injury and property damage liability, referred to in the Policy as "Coverage A":

We will pay those sums that the insured [i.e., Bike & Build] becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.

Bike & Build Ex. D at BIKE0001464. The Policy specifies the insurance provided by Coverage A applies to bodily injury if the bodily injury (1) "is caused by an ‘occurrence,’ " i.e., an accident, "that takes place in the ‘coverage territory,’ " which includes the United States; (2) "occurs during the policy period," i.e., May 7, 2015, to May 7, 2016; and (3) was not known by the insured to have occurred before the policy period. Id. at BIKE0001464; see also id. at BIKE0001451, 0001475, 0001477. The insurance provided in Coverage A is subject to numerous exclusions, some of which are set forth in the body of the form Policy and some of which are set forth in separate endorsements appended to the form Policy.

In the August 17, 2015, ROR letter, Nautilus noted that although Anderson and the other rider appeared to have suffered "bodily injury" caused by an "occurrence," as required to trigger the Policy's bodily injury liability coverage, there were certain endorsements to the Policy that might restrict coverage for the riders' injuries and damages. Bike & Build Ex. M; Nautilus Response Ex. C. In the signed version of the letter, Nautilus identified two specific endorsements that could result in a denial of coverage: (1) an endorsement captioned "EXCLUSION – INJURY TO EMPLOYEES, CONTRACTORS, VOLUNTEERS AND WORKERS" (the Volunteer Worker Exclusion), and (2) an endorsement captioned "EXCLUSION – PARTICIPANTS" (the Participant Exclusion). Nautilus Resp. Ex. C. The unsigned version of the letter identified the Volunteer Worker and Participant Exclusions as well as a third endorsement, captioned "EXCLUSION – AIRCRAFT, AUTO OR WATERCRAFT" (the Auto Exclusion), which could result in a denial of coverage. Bike & Build Ex. M. On September 11, 2015, Nautilus sent a revised ROR letter to Bike & Build. Nautilus Resp. Ex. D. The revised ROR letter mentioned all three of the endorsements that Nautilus believed could result in a denial of coverage, and included an expanded discussion of the Auto Exclusion.⁶ The revised ROR letter differed from the initial ROR letter primarily with respect to the discussion of the Auto Exclusion, which was either new altogether or expanded, depending on which version of the August 17, 2015, ROR letter was sent.

On October 16, 2015, Nautilus sent a disclaimer letter to Bike & Build, setting forth its position that the Nautilus Policy did not provide coverage for claims by Anderson relating to the accident. See Nautilus Resp. Ex. E. The disclaimer letter again cited the Auto, Volunteer Worker, and...