CT Supreme Court Answers Question Posed by the 2nd Circuit Court of Appeals on Insurance Coverage - And Makes New Law in the Process

On March 16 the Connecticut Supreme Court issued a decision in the case of Arrowood Indemnity Co. v. King that not only answered a few arcane insurance questions, but also resulted in a major shift in Connecticut insurance coverage law.

The original claim arose when a homeowner's son zoomed down a street in a private community on his dad’s ATV, towing his friend on a skateboard. His friend fell off and suffered a head injury that resulted in his hospitalization for a coma. The child eventually recovered and the two families remained friendly over the next year, so the homeowner assumed no lawsuit would be filed. He did not put his insurer on notice of the accident. That was a mistake. A year after the accident, his friendly neighbors sued. The homeowner’s insurance company then sued in Federal District Court to be excused from covering the accident because it did not occur upon the homeowner’s property, and because of the delay in their being notified of a potential claim. The District Court granted judgment to the homeowner’s insurer holding that it did not have to cover claims arising out of the son’s off-site operation of dad’s ATV. On appeal, the 2nd Circuit Court of Appeals asked the Connecticut Supreme Court to answer three previously undecided insurance coverage questions under Connecticut law:

When a policy states it will cover negligent entrustment of a recreational vehicle owned by the insured and on an insured location ……did that mean coverage of the ATV was dependent upon (a where it was garaged or (b)where the accident happened or (c)where the entrustment took place?

If the insured home is part of a homeowner association, does all the property within the association become “insured property,” even if not regularly used by the named insured?

Does lack of notice that a lawsuit was imminent while the families socialized with one another justify a delay in the homeowner's notifying his insurance company of the incident when the policy states you shall give notice as soon as practical?