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by Megan Zeller

In what perhaps is truly a “sign of the times,” the Fifth Circuit recently analyzed whether a Commercial General Liability (“CGL”) policy covered drag racing events. See Kinsale Insurance Company v. Flyin' Diesel Performance & Offroad LLC, 99 F.4th 821 (2024). While the Western District of Texas partially granted the insured’s motion for summary judgment finding that an insurer owed the insured a duty to defend, the Fifth Circuit reversed and remanded this position.

In a one-day amateur “no prep” drag racing event in Texas, a car careened off the raceway and collided into spectators, which resulted in multiple fatalities and severe injuries. Prior to the event, the host, Flyin’ Diesel, purchased a CGL policy, which included a Motorized Vehicles Endorsement, which excluded coverage for:

[A]ny claim or ‘suit’ for ‘bodily injury,’ ‘property damage’ or ‘personal and advertising injury’ arising directly or indirectly out of, related to, or, in any way involving the operation, maintenance, use, entrustment to others, or ‘loading or unloading’ of any motorized vehicle of any type.

Additionally, the Motorized Vehicles Endorsement stipulated that:

This exclusion applies to any claim or “suit” regardless of whether any motorized vehicle is the initial precipitating cause or is in any way a cause, and regardless of whether any other actual or alleged cause contributed concurrently, proximately, or in any sequence, including whether any actual or alleged “bodily injury”,  “property damage” or “personal and advertising injury” arises out of a chain of events that involves any motorized vehicle.

Finally, all endorsements in the policy – including the Motorized Vehicle Endorsement – contained a statement in the header that “This endorsement changes the policy. Please read it carefully.” All policy endorsements also included a footer statement, which read: “All other terms and conditions of the policy remain unchanged.”

The lower court initially found that the policy was ambiguous, due to header and footer statements in the Motorized Vehicle Endorsement. Specifically, Flyin’ Diesel argued that the multiple endorsements created a conflict amongst the endorsements and, therefore, an ambiguity in the policy because any endorsement containing a footer statement ignored and denied the existence of other exclusionary endorsements.  The Fifth Circuit, however, disagreed. Specifically, the Fifth Circuit found that this policy construction was “piecemeal” and failed to consider each part of the CGL policy “with reference to the whole instrument as well as with reference to every other clause.” Wynnewood State Bank v. Embrey, 451 S.W.2d 930, 932 (Tex. App.— Dallas 1970, writ ref'd n.r.e.) (cleaned up). As a result, Flyin' Diesel “incorrectly g[ave] priority to a single section of the policy instead of considering the entire policy in its analysis.” Gastar Expl. Ltd. v. U.S. Specialty Ins. Co., 412 S.W.3d 577, 588 (Tex. App.—Houston [14th Dist.] 2013, pet. denied).

Instead, by construing every part of the policy “simultaneously,” the Fifth Circuit found that the policy was not ambiguous because:

As the . . . [Motor Vehicle] Endorsement illustrate[s], the CGL Endorsements modify express subsets of provisions in the CGL Form. They do not, however, expressly purport to modify the CGL Declaration, other provisions in the CGL Form, or other CGL Endorsements.

As a result, Flyin’ Diesel was unable to argue against a policy exclusion that clearly denied coverage for motor vehicles and therefore, drag racing. Instead, insurers should be able to breath a sigh of relief with this ruling: the Fifth Circuit upheld an endorsement that historically has been considered clear and unambiguous, with relatively good caselaw in Texas behind it. Overall, this was a positive ruling that insurers can rely on not only for the Motor Vehicle Endorsement, but also for general CGL policy interpretation.