Facts of Case
United Fire and Casualty Company (“United”) issued two homeowner’s insurance policies to Jeffrey Cox. Jeffrey had created a revocable living trust and titled a boat in the name of the trust. While using the boat, one of Jeffrey’s sons started the engine while another member of his party, Zachary Hall, was in the water. The propeller severed Zachary’s foot and he brought a claim.
United denied that the homeowner’s policies provided coverage. United contended that an owned-watercraft exclusion applied. This exclusion provided that there was no coverage for bodily injury arising out of the ownership, maintenance, or use of a watercraft “owned by or rented to an ‘insured’.” The policies did not define the phrase “owned by.” Because of this, Zachary contended that the policy was ambiguous and should be construed against the insurer. If true, this would result in insurance coverage for Zachary’s claims.
The Trial Court Ruling
The trial court agreed with Zachary and found the policy language to be ambiguous. United appealed.
The Ruling on Appeal
The Missouri Southern District Court of Appeals agreed with the trial court and found the policy ambiguous. The court found a distinction between the ownership of property in an individual capacity and ownership as a trustee. The court noted that, when property is titled in the name of a trust, the trustee is the holder of legal title and the beneficiary is the holder of equitable title.
The term “owned” could have multiple meanings. It could mean the possession of legal title or it may mean holding power to destroy, encumber, sell, or dispose of the property. Therefore, when there is a separation of ownership rights through placing property in a trust and a policy does not define “owned by,” the policy is ambiguous. Does it mean holding legal title alone or something else? Because ambiguous policies are construed in favor of coverage, the owned-watercraft exclusion did not apply. As a result the policy provided coverage for Zachary’s claims.
Analysis
Under this decision, any policy that does not define ownership risks ambiguity regarding coverage involving property titled in the name of a trust. Insurers should define terms such as “owned” or “owned by” to avoid this result.
For claimants and policy holders, what may seem like a proper denial of coverage may not be so simple if the claim involves property titled in the name of a trust. If you’re involved in a such a claim, either as the claimant or as the defendant property owned, you should consult with an attorney if the insurer is denying coverage.
The entire opinion can be found here.