Question of Fact Found on Applicability of Auto Insurer's Speed Contest Exclusion

PERSONAL AUTO – SPEED CONTEST EXCLUSION
MIC Prop. & Cas. Corp. v. Avila
(2nd Dept., decided 9/29/2009)

Many personal auto policies exclude liability coverage for the ownership, maintenance or use of a vehicle in "any race, speed contest or performance contest."  Some modern personal auto policies, such as ISO's PP 00 01 01 05 personal auto form, limit the application of that exclusion to vehicles "located inside a facility designed for racing" while being used for the purpose of competing in, practicing or preparing for "any prearranged or organized racing or speed contest."

MIC Property & Casualty Corp. insured Pedro Avila and his vehicle.  On October 3, 2005, the Avila vehicle, being driven by Merqui Avila, struck an automobile, killing one of the passengers in that vehicle and injuring two others.  Merqui and the driver of another vehicle, Carlos Molina, were charged with manslaughter in the second degree as a result of the accident.  During their plea allocution to the reduced charge of criminally negligent homicide, both admitted that at the time of the accident, they were engaged in a speed contest.  In their prior statements to the police, however, they admitted only that after being stopped adjacent to each other at a traffic light, they each attempted to pass the other over the ensuing blocks until the accident occurred.

The injured passengers and the decedent's estate sued all three vehicles' drivers and owners.  MIC disclaimed coverage to the Avilas based upon a policy provision that excluded liability for a vehicle that was used in or preparing for "any race, speed contest or performance contest."  MIC then commenced this action for a judgment declaring that it had no duty to defend or indemnify Merqui or Pedro Avila in the underlying actions.  Nassau Supreme granted MIC's motion for summary judgment declaring, in effect, that MIC owed no liability coverage to the Avilas.  The decedent's executrix appealed.

In a 3-2 decision, the Second Department REVERSED the order appealed from and denied MIC's summary judgment motion.  In the three-justice majority's opinion, the statements made by the drivers to the police on the day after the accident, which were admissible for the purpose of defeating a motion for summary judgment,  raised a triable issue of fact as to whether Merqui's conduct fell within the speed contest exclusion:

Merqui's plea of guilty to criminally negligent homicide does not, in itself, establish that he was engaged in a speed contest at the time of the accident. "A person is guilty of criminally negligent homicide when, with criminal negligence, he causes the death of another person" (Penal Law § 125.10). Since nothing in the statutory language requires that, to be convicted of that crime, a person have been engaged in a speed contest, the conviction of criminally negligent homicide does not, in itself, establish that Merqui was involved in a speed contest (see Allstate Ins. Co. v Zuk, 78 NY2d 41, 45).

Merqui's admission that he was engaged in a speed contest at the time of the accident also is not dispositive here. At issue here is the meaning of the term "speed contest" in the exclusion from coverage contained in the insurance policy issued by MIC. To " negate coverage by virtue of an exclusion, an insurer must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case'" (Belt Painting Corp. v TIG Ins. Co., 100 NY2d 377, 383, quoting Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640, 652; see Incorporated Vil. of Cedarhurst v Hanover Ins. Co., 89 NY2d 293, 298). Any ambiguity in the exclusion is to be construed against the insurer (see Allstate Ins. Co. v Noorhassan, 158 AD2d 638, 639). "The test for ambiguity is whether the language in the insurance contract is susceptible of two reasonable interpretations. The focus of the test is on the reasonable expectations of the average insured upon reading the policy" (NIACC, LLC v Greenwich Ins. Co., 51 AD3d 883, 884 [internal quotation marks and citations omitted]). "The insurance company bears the burden of establishing that the exclusions apply in a particular case and they are subject to no other reasonable interpretation" (MDW Enters. v CNA Ins. Co., 4 AD3d 338, 340; see Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311; Gaetan v Firemen's Ins. Co. of Newark, 264 AD2d 806, 808). MIC failed to carry this burden here.

The policy does not define the term "speed contest." Where the term is used in New York law, however, in Vehicle and Traffic Law § 1182(1), it does not encompass the conduct in which Merqui engaged here. Merely speeding down the street, even in tandem with another vehicle, does not constitute a "speed contest" within the meaning of that statute (see People v Grund, 14 NY2d 32; see also Shea v Kelly, 121 AD2d 620, 621). "Violation of this statute means that, at least by implication, some race course must have been planned by the competitors along a street. It is not enough that an automobile operated by defendant and one by his codefendant left an intersection abreast when the traffic light changed to green and, thereafter, travelled abreast at about 55 miles an hour, each car jockeying for position" (People v Grund, 14 NY2d at 34).

The statements made by Merqui and Molina to the police on the day after the accident, which are admissible for the purpose of defeating a motion for summary judgment (see Ashif v Won Ok Lee, 57 AD3d 700; Westchester Med. Ctr. v Progressive Cas. Ins. Co., 51 AD3d 1014, 1017; cf. Niyazov v Bradford, 13 AD3d 501, 502), raised a triable issue of fact as to whether Merqui's conduct falls within the exclusion as so defined. Therefore, MIC's motion for summary judgment should have been denied (see Alvarez v Prospect Hosp., 68 NY2d 320, 324).

The two dissenting justices disagreed with the majority's reliance on the "speed contest" section of New York's Vehicle & Traffic Law to find that there was a question of fact on the applicability of MIC's speed contest exclusion:

[I]n the case at bar, the issue is not the sufficiency of evidence with respect to the drivers' criminal convictions, but rather, whether MIC met its burden of establishing that the conduct at issue falls within the policy exclusion. In contrast to Vehicle and Traffic Law § 1182, the policy at issue does not require that a race be prearranged or organized, nor does it cite to the Vehicle and Traffic Law. The policy merely uses the same phrase, "speed contest." In this regard, it is to be noted that the phrase "speed contest" also has been interpreted to mean "a challenge coupled with a response in speed and relative position indicating acceptance of the challenge," which is a lower standard of proof than that required for a criminal conviction for drag racing under Vehicle and Traffic Law § 1182 (Shea v Kelly, 121 AD2d 620, 621, citing People v Grund, 14 NY2d 32). Moreover, based on the statements which the drivers made to the police at the time of their arrest, I believe that it is fair to conclude that their actions prior to the accident constituted such a "speed contest." Indeed, both drivers indicated that just before the accident occurred, and after stopping at a traffic light, Merqui pulled away at a high rate of speed and Molina raced to catch up with him. After stopping at a second traffic light, they continued "playing with each other," and pulled away at a high rate of speed as Merqui tried to pass Molina.

The dissenting justices also noted that both charged drivers, in allocuting to their guilty pleas, admitted that they had been engaged in a speed contest:

Furthermore, although no specifics as to the speed contest were elicited during the plea allocution, neither Merqui nor Molina was charged with a violation of the Vehicle and Traffic Law. Finally, and most significantly, the drivers clearly admitted that they had participated in a speed contest when they were asked that question during their plea allocution. Indeed, a review of the plea minutes indicates that not only did the court specifically elicit such admissions from them, but also, that there was no concern expressed at that time about the meaning of the questions being posed.