8th Circuit Finds No Ambiguity in Motorcycle Exclusion

The 8th Circuit Court of Appeal ruled Monday that there is no ambiguity in the term “owned motorcycle” and affirmed a decision to deny a $3 million uninsured motorist claim.

Lauren Palazzolo was killed in 2017 while driving as a passenger on the back of a motorcycle operated by Joshua Yanczer, who collided with a 2008 Chevrolet Impala. Progressive Max Insurance paid $25,000 to Palazzolo’s estate because of Yanczer’s negligence.

Her parents and minor child filed a claim requesting $3 million in coverage under an automobile insurance policy they had with Safeco Insurance Co. of Illinois. The parents stated that Palazzolo, a single mother, was a member of their household and was listed as the co-owner of one of the cars that was insured by an umbrella policy with Safeco.

Safeco denied the claim, saying the policy excluded coverage for motorcycle accidents. The insurer filed a lawsuit in the U.S. District Court of Eastern Missouri seeking a declaratory judgment that no coverage was owed because of the exclusion.

U.S. District Judge Henry Edward Autrey in St. Louis ruled in favor of the insurer. The Palazzolos appealed.

The Safeco policy stated that coverage was excluded for any bodily injury sustained by any insured “while occupying or operating an owned motorcycle or moped.” The family argued that an “owned motorcycle” can mean a motorcycle owned by one lf the named insureds (Palazzolo’s parents) or any motorcycle owned by anyone at all. They argued since the policy is ambiguous, the exclusion cannot apply.

Safeco countered that the only reasonable interpretation of the term, in the context of the policy, was that coverage was excluded for injuries sustained by “any insured” while on a motorcycle, meaning the exclusion would apply to Lauren in addition to her parents Joseph and Nancy Palazzolo.

The 8th Circuit panel says the wording in the policy makes it clear that Safeco intended to exclude coverage for motorcycle injuries suffered by any insured. The policy routinely refers to Joseph and Nancy as “you” because they are named insureds. Other parts of the policy make reference to “you or any family member.”

“If the Palazzolos were correct that the phrase ‘owned motorcycle’ meant a motorcycle owned by Joseph and Nancy, then the policy would have said “a motorcycle you own,” the opinion says.

It is also clear in the larger context of the insurance industry that Safeco intended to exclude motorcycle injuries for all insureds on the policy, the panel said. According the the National Highway Traffic Safety Administration, motorcyclists are 29 times more likely to die in an accident than passengers in automobiles.

“To offset that increased risk, insurance companies typically offer separate motorcycle insurance policies at a higher price,” the opinion says. “It would make little sense for Safeco to exclude coverage for the two people paying for the Policy, but allow coverage against the same risk for Lauren.”