A Race by Any Other Name Is Still a Race -- Racing Exclusion Found to Negate Coverage for Total Loss of Insured's Racing Equipped BMW E30 M3 During Driving School Participation

PERSONAL AUTO – COLLISION COVERAGE – RACING EXCLUSION
Stephan v. Clarendon Natl. Ins.
(NYC Civil Ct., New York Co., decided 3/8/2010)

According the Genesee Valley Chapter of the BMW Car Club of America's website,

A driving school provides an opportunity for you to learn high performance driving skills in your own vehicle, on a racetrack, in a controlled environment, with in-car instruction.

The purpose of a driving school is quite simple: to improve your driving skills.

It is hoped that the skills you learn will benefit you in your day-to-day driving, especially when confronted with emergency situations such as slippery road conditions or having to avoid hitting a deer on a country road.

Yeah, right.  People pay $400-$500 just to learn how to drive better on slippery or deer populated roads.

The Genesee Valley Chapter's website also answers this FAQ about insurance for using one's own auto in a driving school weekend:

Does my insurance cover my car at the track?
Read your policy.  It probably says that you are not covered if you participate in “racing” or “timed” events.  Driving Schools are NOT “racing events” and timing is strictly forbidden.  However, our driving schools are held at facilities that are specially designed for racing. The intent of our school is to make you a better driver, not to teach you how to race.  It is up to you to fully understand what your policy covers or doesn’t cover.

On May 11, 2007, plaintiff Peter Stephan totaled his 1989 BMW E30 M3 while participating in one of the Genesee Valley BWMCCA's Ultimate Driving School weekends at the Watkins Glen racetrack in Watkins Glen, New York.  At the time of the accident, Stephan was an advanced driving student who was permitted to drive without an instructor.  According to plaintiff, the front tire on the driver's side of his vehicle went onto the grass shoulder as plaintiff was maneuvering a turn at an exit and subsequently spun onto the other side and hit the guardrail in his attempt to steer the BMW back onto the track, which resulted in a total loss to the vehicle.  Plaintiff estimated that he was traveling at approximately 50-70 miles per hour at the time of the accident. Additionally, plaintiff maintained that no other vehicles were in proximity to his BMW at the time of the accident and that no timing devices were used on the racetrack.  There were no witnesses to this accident.  

Two weeks later, Stephan was looking to replace his totaled BMW with another "race-prepared" BMW M3. 

Stephan's personal auto policy with Clarendon National Insurance Company contained the following racing exclusion for collision and comprehensive coverage:

There is no collision or comprehensive coverage for the following:

g.  Loss to any auto or trailer while inside any racing facility for the purpose of practicing for, preparing for, or participating in any prearranged or organized racing or speeding contest.

Clarendon's investigation of the accident revealed, among other things, that Stephan's BMW was "enhanced by the prior owner," "equipped for racing" and "loaded with aftermarket racing parts".  Clarendon denied collision coverage to Stephan based on the policy's racing exclusion, and he commenced this action to recover payment for his vehicle's loss. 

The matter was tried non-jury to New York City Civil Court Judge Tanya R. Kennedy, who correctly identified the determinative issue as being whether Stephan's operation of his vehicle during the driving school at the Watkins Glen racetrack constituted "practicing for, preparing for, or participating in any prearranged or organized racing or speeding contest" as defined by the terms of Clarendon's policy.

On what appeared to Judge Kennedy to be an issue of first impression in New York, the court adopted the reasoning set forth by the Superior Court of Massachusetts in Metropolitan Prop. and Cas. Ins. Co. v Stevens (10 Mass. L. Rptr. 729 [Mass Super 1999]) and by the Court of Appeals of Georgia in Progressive American Ins. Co. v Horde (259 Ga. App 769, 577 N.E. 2d 835 [2003]) and concluded that Clarendon had met its burden in establishing that plaintiff's loss fell within the policy's racing exclusion:

The 1989 BMW E 30 vehicle is characterized as a "street-legal version of the marque's racing car," with such advantages as "real racing heritage," "strong performance," and "active club support" (see Defendant's Exhibit F in Evidence). Such vehicles are often modified which result in a faster performance on the track (see Defendant's Exhibit F in Evidence). Although plaintiff testified that he only used his BMW for pleasure to drive on country roads or public highways, the Court did not find such testimony to be credible. Plaintiff has held himself out to the world as an amateur racer with fifteen (15) years experience (see Defendant's Exhibit D in Evidence). Additionally, plaintiff has participated in at least twelve (12) BMW CCA driving events prior to the May 11, 2007 accident as a member of BMW CCA or Sports Car Club of America.

Further, plaintiff acknowledged during trial that the prior owner modified the vehicle by removing the rear seats, replacing the original front stock seats with racing seats, installing a roll-bar and cage (which was bolted into the car frame), modifying the hose and engine, replacing the tires and wheels with those used for racing and installing an additional 4-point harness seat belt system, which holds a driver into her/her seat. Plaintiff also acknowledged at trial that removing the rear seats would cause the vehicle to travel faster and that he never replaced such seats in the BMW after purchase. Although plaintiff testified that the prior owner provided him with the original stock tires, wheels and seats, plaintiff also indicated that he never used these items.

During cross-examination, plaintiff initially testified that the prior owner removed the rear seats because the owner used the BMW for auto cross racing. However, plaintiff subsequently testified during cross examination that he was unaware as to the reason why the prior owner removed the rear seats and that plaintiff assumed that the BMW was involved in auto cross racing, which the Court found incredible. Similarly, the Court found as incredible plaintiff's testimony that he was unaware as to the reason why the prior owner installed a 4-point harness system into the BMW.

Plaintiff's counsel contends in his post-trial memorandum that the aforementioned cases are inapplicable since (1) the purpose of the driver's school was "awareness" and not speed; (2) racing was prohibited at the event; (3) no timing devices were utilized; and (4) no vehicles were in close proximity to plaintiff's BMW at the time of the accident.

Plaintiff's counsel also addresses the fact that plaintiff was operating his vehicle at a lesser speed than the vehicle in the Progressive case. However, the fact that plaintiff was not traveling in excess of 100 miles per hour does not prevent the Court from concluding that plaintiff's loss fell within the terms of the subject policy exclusion. The totality of the circumstances clearly establish that plaintiff's operation of a vehicle during an automobile club sponsored driver's school event located at a racing facility constituted "practicing for, preparing for, or participating in any prearranged or organized racing or speeding contest"as defined by the terms of defendant's policy.

As the court stated in Metropolitan, "[j]ust as a rose by any other name is still a rose, so a race by any other name is still a race; so much like a race that any damage to vehicles, or personal injury, are outside insurance coverage" (supra at fn 4).

Although there's no mention of it in her decision, do you think Judge Kennedy also found and watched these videos on Stephan's YouTube channel?  And just yesterday, Stephan responded to this posting of a BWM CCA Club Racing M3 track racing car for sale. 

For slippery roads and deer?  Not in this case.