Countryway Insurance Company v. Walter P. Slaugenhoup

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 08-1677
COUNTRYWAY INSURANCE COMPANY,
Appellant
v.
WALTER P. SLAUGENHOUP; WALTER C. SLAUGENHOUP;
DUSTIN C. SAMS, an incapacitated person by JULIE L. RAYBUCK,
his guardian
On Appeal from the United States District Court
for the Western District of Pennsylvania
District Court No. 07-cv-01593
District Judge: The Honorable Arthur J. Schwab
Argued October 27, 2009
Before: SMITH, FISHER, and STAPLETON, Circuit Judges
(Filed: January 7, 2010 )
Louis C. Long, Esq. (Argued)
Martha S. Helmreich, Esq.
Pietragallo Gordon Alfano Bosick & Raspanti LLP
One Oxford Center, 38th Floor
Pittsburgh, PA 15219
Counsel for Countryway Insurance Company
Robert J. Donahoe, Esq. (Argued)
4800 Library Road
Bethel Park, Pennsylvania 15102

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The father’s name is Walter C. Slaugenhoup and the son’s given name is Walter1
P. (Paul) Slaugenhoup. For ease of reference, we will refer to the father as “Walter” and
the son as “Paul.”
2
Counsel for Dustin C. Sams, by Julie L. Raybuck, his guardian
OPINION
SMITH, Circuit Judge.
In this declaratory judgment action, the District Court held that appellant
Countryway Insurance Co. (“Countryway”) had a duty to defend its insured, Paul
Slaugenhoup, in a negligence lawsuit brought by Dustin C. Sams (“Sams”) against Paul
and his father, Walter Slaugenhoup. Countryway appeals. We will reverse.1
I.
Paul Slaugenhoup was the owner of a farmowner’s insurance policy issued by
Countryway. His policy provided personal liability coverage, under which Countryway
agreed to defend Paul in lawsuits seeking damages for bodily injury or property damage,
provided that coverage was not otherwise excluded by the policy.
Paul and his father Walter were joint owners of a combine used on the
Slaugenhoup farm. On July 17, 2006, Paul and Walter set out to repair a tire on their
combine. Paul removed the tire, loaded it onto Walter’s pickup truck, and told his father
to “go get her fixed.” Walter was 93 years old, had a history of glaucoma, and was not
wearing his glasses despite a driver’s license requirement that he wear corrective lenses
when operating a motor vehicle. As Walter drove to get the tire fixed, his vehicle

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The District Court had diversity jurisdiction under 28 U.S.C. § 1332(a)(1).2
This Court has jurisdiction under 28 U.S.C. § 1291.3
3
collided with Sams’s vehicle. Sams was severely injured.
Through his guardian, Sams filed a two-count complaint against the Slaugenhoups
in the Court of Common Pleas for Clarion County, Pennsylvania. Count I alleged that
Walter operated his motor vehicle negligently. Count II alleged that Paul was negligent
under § 302 of the Restatement (Second) of Torts, which provides that “an act or an
omission may be negligent if the actor realizes or should realize that it involves an
unreasonable risk of harm to another through the negligent or reckless conduct of the
other or a third person.” According to Sams, Paul was negligent when he placed the tire
in Walter’s pickup truck and asked Walter to transport the tire for repair, knowing that his
father was incapable of driving safely.
On November 21, 2007, Countryway filed a declaratory judgment action pursuant
to 28 U.S.C. § 2201 in the United States District Court for the Western District of
Pennsylvania. Countryway sought a declaration that it had no duty to defend or2
indemnify Paul in the negligence action brought by Sams, because Exclusion 1(f) of
Paul’s policy excluded coverage for that claim. The District Court held that Countryway
had a duty to defend Paul under the policy, and granted summary judgment for the
Slaugenhoups and Sams. Countryway filed this timely appeal.3

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The parties agree that no coverage is provided by an Incidental Motorized4
Vehicle or Watercraft Coverage.
4
II.
This Court exercises plenary review over the District Court’s grant of summary
judgment. Camiolo v. State Farm, 334 F.3d 345, 354 (3d Cir. 2003). Furthermore, the
interpretation of an insurance exclusion is a question of law, over which this Court
exercises plenary review. Canal Ins. Co. v. Underwriters at Lloyd’s London, 435 F.3d
431, 434 (3d Cir. 2006). The parties agree that Pennsylvania substantive law applies.
III.
Paul Slaugenhoup’s policy provided personal liability coverage (“coverage L”),
subject to certain exclusions. Exclusion 1(f), the only exclusion at issue in this appeal,
states that coverage L does not apply to:
“bodily injury” or “property damage” which results from
liability imposed by law on an “insured” for the use of a
“motorized vehicle,” aircraft, or watercraft, except if
coverage is provided for by an Incidental Motorized
Vehicle or Watercraft Coverage.4
The District Court found this exclusion ambiguous, and therefore interpreted it in
favor of coverage. The District Court offered three reasons for its conclusion that
Exclusion 1(f) was ambiguous. First, it thought it unclear whether Paul “used” the pickup
truck involved in the accident, since he neither owned nor operated it at any time relevant
to the accident. Second, the District Court believed that the policy was unclear as to
whose “use” of a vehicle would trigger the exclusion, and whether the exclusion applied

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5
in cases of vehicle use by anyone other than the insured. Third, the District Court
distinguished Exclusion 1(f) from the exclusions in other cases in which Pennsylvania
courts had applied motor vehicle exclusions in general liability policies. See Wilcha v.
Nationwide Mut. Fire Ins. Co., 887 A.2d 1254 (Pa. Super. Ct. 2005); Erie Ins. Exch. v.
Transamerica Ins. Co., 507 A.2d 389 (Pa. Super. Ct. 1986); Pulleyn v. Cavalier Ins.
Corp., 505 A.2d 1016 (Pa. Super. Ct. 1986). The Court pointed out that the exclusions
applied in Wilcha, Erie, and Pulleyn excluded coverage for bodily injury “arising from”
or “arising out of” motor vehicle use, while the Countryway exclusion contained no such
“arising from” language. The District Court held that the absence of such language
contributed to the policy’s ambiguity.
The District Court was correct that under Pennsylvania law, ambiguities in an
insurance policy are to be construed against the insurer. 401 Fourth St., Inc. v. Investors
Ins. Group., 879 A.2d 166, 171 (Pa. 2005). That rule is inapplicable here, however,
because Exclusion 1(f) is not ambiguous.
The District Court erred in asking as a threshold question whether Paul
Slaugenhoup used a motor vehicle. The Court should have first asked whether the
exclusion even required that the insured “use” the motorized vehicle. In our view, it does
not. Exclusion 1(f) states that the policy does not provide coverage for bodily injury
resulting from (1) liability imposed by law (2) on an insured (3) “for the use of a
motorized vehicle.” All three of those requirements are met here. The Sams negligence
action sought to (1) impose liability through law (2) on Paul, the insured (3) “for the use”

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6
of the pickup truck. The “use” in question, of course, was Walter’s use of his pickup
truck to transport the tire, which resulted in the accident and without which Sams would
have no claim against Paul. As Countryway notes, the operative word in the exclusion is
“use.” Walter was using a motor vehicle when he struck and injured Sams, and that use
was sufficient to trigger Exclusion 1(f). Nothing in the policy states that Exclusion 1(f)
applies only to Paul’s use of a vehicle. Because there is no need to decide whether Paul
used the pickup, one of the chief sources of ambiguity identified by the District Court
vanishes.
The District Court correctly noted that “the policy language begs the question of
who must be using the vehicle in order for coverage to be excluded.” The Court thought
that the policy’s failure to identify whose use of a vehicle would trigger the exclusion also
suggested that the exclusion is ambiguous. We disagree. A more natural reading of the
policy is that Countryway did not identify a specific person whose vehicle use would
trigger the exclusion because it did not intend to limit the exclusion based on the identity
of the user. Rather, it meant to exclude all coverage for liability imposed by law as the
result of motor vehicle use – by anyone. See, e.g., Hanson v. Northstar Mut. Ins. Co., 71
F. Supp. 2d 1007, 1014 (D.S.D. 1999) (interpreting nearly identical motor vehicle
exclusion to exclude coverage, when the insured loaned an ATV to a young woman
whose use of the ATV resulted in injuries and led to a lawsuit against the insured).
The District Court’s analysis effectively rewrites the policy to exclude “bodily
injury . . . which results from liability imposed by law on an insured for the use of a

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The District Court also overstated the significance of the absence of “arising5
from” language. It assigned great weight to the fact that, unlike the exclusions in Pulleyn,
Erie, and Wilcha, the Countryway exclusion did not contain the words “arising from” or
“arising out of.” The District Court implied that the presence of those words in Pulleyn,
Erie, and Wilcha was somehow central to those courts’ analyses. It was not. None of
7
motorized vehicle by the insured.” The exclusion could have been written to say just that,
but it was not. Notably, other exclusions in the policy are explicitly limited to the actions
of the insured, while Exclusion 1(f) is not. For example, Exclusion 1(c) excludes coverage
for “bodily injury . . . which results from the ownership, operation, maintenance, [or] use
. . . of motorized vehicles . . . owned or operated by or rented to or loaned to an insured”
(emphasis added). Similarly, Exclusion 1(j) applies to “bodily injury . . . which is
expected by, directed by, or intended by the insured; or that is the result of intentional and
malicious acts of the insured” (emphasis added).
Clearly, Countryway knew how to limit an exclusion to the actions of the insured
when it intended to do so. The presence of such limiting language in other exclusions,
coupled with its absence from Exclusion 1(f), demonstrates that Exclusion 1(f) was not
intended to be so limited. Reading the phrase “by the insured” into Exclusion 1(f) would
be inconsistent with Pennsylvania law, which honors the intent of the parties evidenced by
the language of the contract. See, e.g., Madison Constr. Co. v. Harleysville Mut. Ins. Co.,
735 A.2d 100, 106 (Pa. 1999) (where “the language of a contract is clear and
unambiguous, a court is required to give effect to that language . . . [and must not] distort
the meaning of the language or resort to a strained contrivance in order to find an
ambiguity”).5

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those cases turned on the “arising from” language in the policies. The presence of
“arising from” language may be sufficient for an insurer to effect a broad motor vehicle
exclusion, but there is no suggestion in any of those cases that it is necessary to do so.
8
Attempting to escape the plain language of Exclusion 1(f), Sams insists that his
negligence claim against Paul is not connected to any “use” of a motor vehicle. Sams
emphasizes that he has not asserted claims against Paul for vicarious liability, negligent
entrustment, or negligent supervision of Walter’s use of the pickup. Instead, he limits his
negligence allegations against Paul to two specific acts: placing the tire in Walter’s truck,
and requesting Walter to drive the tire for repair. Neither of those acts, Sams argues,
implicates the use of a motor vehicle, and therefore neither falls within the exclusion.
Pennsylvania courts interpreting motor vehicle exclusions have faced similar
arguments in negligent entrustment cases, and have consistently rejected attempts to
divorce allegations of negligent entrustment from the excluded “use” of a vehicle that
actually causes the plaintiff’s injuries. See, e.g., Pulleyn, 505 A.2d at 1020. In Pulleyn, a
man driving his employers’ vehicle crashed into another vehicle and killed two of the
passengers. The victims’ family sued the employers for negligent entrustment of their
vehicle. The issue was whether the employers’ insurer was required to defend them in
light of the motor vehicle exclusion in their liability policy, which excluded “bodily injury
or property damage arising out of the ownership . . . operation, [or] use . . . of any other
automobile or aircraft operated by any person in the course of his employment by any
insured.” Id. at 1018. The victims argued that this exclusion did not preclude coverage
for their negligent entrustment claim because the entrustment was separate and distinct

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Accord Bankert v. Thresherman’s Mut. Ins. Co., 329 N.W.2d 150, 156 (Wis.6
1983). In Bankert, the court held that a homeowner’s policy excluding coverage for the
“ownership, operation, maintenance or use of automobiles while away from the insured
premises” did not provide coverage for a negligent entrustment claim when the alleged
negligence entrustment occurred on the premises but the injury occurred away from
home. The court refused to separate the negligent entrustment from the actual “use” that
caused the injury, because “the parents’ acts could not render them liable without their
9
from the use of the vehicle that had caused their injury. The court rejected that distinction
and held that the policy excluded coverage for the negligent entrustment claim, because
“liability giving rise to the tort is not actually triggered until the motor vehicle is used in a
negligent manner resulting in injury.” Id. at 1020 (quoting Mich. Mut. Ins. Co. v.
Sunstrum, 315 N.W.2d 154, 157 (Mich. Ct. App. 1981)). It was not the entrustment of the
vehicle to the employee, the court reasoned, but the employee’s use of the vehicle that
gave rise to the insured’s alleged liability. Id. at 1020.
Other Pennsylvania cases involving motor vehicle exclusions have similarly
rejected attempts to separate allegations of negligent entrustment from the use of the
vehicle that caused injury. See, e.g., Erie, 507 A.2d at 394 (rejecting the view that
“negligent entrustment of the automobile” is “separate from the use of the vehicle” and
holding that motor vehicle exclusion in a homeowner’s policy excluded coverage for
negligent entrustment claim); Wilcha, 887 A.2d at 1259 (holding that a homeowner’s
policy excluding coverage for “bodily injury . . . arising out of the ownership,
maintenance, or use of a motor vehicle” owned or operated by an insured also excluded
coverage for a negligent entrustment claim, because “the use of the vehicle [was] an
integral part of the tort of negligent entrustment”).6

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son’s operation of the vehicle.” Id.
10
Admittedly, Pulleyn, Erie, and Wilcha are distinguishable in that they involved
allegations of negligent entrustment. Here, there is no allegation of negligent entrustment,
nor could there be, since Walter was driving his own truck at the time of the accident.
Nevertheless, we believe that the reasoning employed in those cases forecloses Sams’s
attempts to separate his negligent delegation allegations from the use of the vehicle that
actually gave rise to his claims. Here, Walter’s use of the pickup truck is “integral” to
Sams’s allegations against Paul, Wilcha, 887 A.2d at 1259, just as the use of the vehicle
was integral to the negligent entrustment claims in Pulleyn, Erie, and Wilcha. As in those
cases, there could be no negligence claim against the insured but for someone’s – i.e.,
Walter’s – “use” of a motor vehicle.
IV.
An insurance policy is ambiguous “if it is reasonably susceptible of different
constructions and capable of being understood in more than one sense.” Hutchison v.
Sunbeam Coal Co., 519 A.2d 385, 390 (Pa. 1986). Exclusion 1(f) is not ambiguous. It
excludes coverage for liability imposed by law resulting from the use of a motorized
vehicle, regardless of whose use of the motor vehicle caused the bodily injury. Sams’s
lawsuit clearly seeks to impose liability on Paul “for the use” of a motorized vehicle –
specifically, the use of a pickup truck by Walter. Therefore, coverage is excluded, and
Countryway has no duty to defend.
We will reverse the order of the District Court granting summary judgment for the

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11
Slaugenhoups and Sams. The case will be remanded, and the District Court is instructed
to enter judgment in favor of Countryway.
_____________________
FISHER, Circuit Judge, dissenting.
I write separately to express disagreement with my colleagues’ conclusion that
Exclusion 1(f) is not ambiguous. I agree the majority applied the correct Pennsylvania law
governing contract interpretation, but its holding is incorrect. I believe Exclusion 1(f) is
ambiguous, as it is subject to two reasonable interpretations. Further, the majority’s
analysis of the relevant case law, while thorough, relies on cases where the underlying
negligence claim is for negligent entrustment. As the underlying cause of action in the
instant case is for negligent supervision, and not for negligent entrustment, I do not agree
with the conclusions drawn from those cases. Therefore, I would affirm the District
Court’s finding that Exclusion 1(f) is ambiguous and that the ambiguity should be
construed in favor of the insured, thereby requiring coverage.
The question of an ambiguity “is not a question to be resolved in a vacuum. Rather,
contractual terms are ambiguous if they are subject to more than one reasonable
interpretation when applied to a particular set of facts.” Madison Constr. Co. v.
Harleysville Mut. Ins. Co., 735 A.2d 100, 106 (Pa. 1999). The exclusion in question here
has two equally reasonable meanings.
First, the exclusion can reasonably be read to exclude liability for any injury caused
as a result of the use of a motor vehicle. This interpretation allows for anyone, not only
the insured, to be operating the vehicle in order for the exclusion to apply. Second, it is
reasonable to interpret the clause as requiring that the “insured,” in this case Paul, be the
one using the motor vehicle, either through ownership or actual physical use. Under this
reading, the insured would have to have some type of connection to the motor vehicle at
issue.

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Restatement (Second) of Torts § 308 provides: “It is negligent to permit a third person7
to use a thing or to engage in an activity which is under the control of the actor, if the actor
knows or should have known that such person intends or is likely to use the thing or conduct
himself in the activity in such a manner as to create an unreasonable risk of harm to others.”
12
The ability to read Exclusion 1(f) in two different, yet equally reasonable, ways
leads me to the conclusion that the clause is indeed ambiguous. While we are bound to
interpret a policy to avoid ambiguities, not to find them, neither interpretation of the policy
language violates this principle. City of Erie v. Guaranty Nat’l Ins. Co., 109 F.3d 156,
162-64 (3d Cir. 1997). Rather, each has equal merit and comes directly from the text of
the exclusion.
In brushing aside Sams’ assertion that Exclusion 1(f) does not apply because his
negligence claims against Paul do not involve a motor vehicle, the majority relies on cases
applying the doctrine of negligent entrustment. Sams’ complaint does not seek to hold
Paul liable for negligent entrustment, but for (1) placing the tire in his father’s truck, and
(2) requesting his father to transport the tire for repair. Sams does not seek to hold Paul
liable for his use of a motor vehicle, but only for negligently allowing his father to
transport a tire.
Negligent entrustment, by its very definition, will always connect an insured to the
motor vehicle in question. The insured in these negligent entrustment cases always7
owned, controlled, or employed the motor vehicle that caused the harm. If the insured did
not have one of these relationships to the vehicle, there could be no claim of negligent
entrustment. Transposing the legal conclusions from these cases onto a case involving
negligent supervision or delegation under § 302A of the Restatement (Second) of Torts is
plainly incorrect. The opinion goes as far as to acknowledge that “there is no allegation of
negligent entrustment, nor could there be, since Walter was driving his own truck at the
time of the accident.” Majority Op. at Part III. The majority, in spite of this
acknowledgment, nevertheless relies heavily on the reasoning in these factually
distinguishable cases.

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13
The majority further relies on Exclusions 1(c) and 1(j) to support its conclusion that
Exclusion 1(f) is not ambiguous. The opinion asserts that the language in these exclusions
demonstrates that “Countryway knew how to limit an exclusion to the actions of the
insured when it intended to do so,” but chose not to include such language in Exclusion
1(f). Majority Op. at Part III. I find this reasoning unconvincing. Exclusion 1(c) excludes
coverage for “bodily injury . . . which results from the ownership, operation, maintenance,
[or] use . . . of motorized vehicles . . . owned or operated by or rented to or loaned to an
insured.” The majority emphasizes that this exclusion includes the “owned or operated”
language and that Exclusion 1(f) does not. Exclusion 1(c) is, in fact, designed specifically
to address claims of negligent entrustment against the insured. Negligent entrustment
requires control over another person or item. Thus, the very definition of negligent
entrustment dictates that the “owned or operated” language in this clause is required to
give it effect. If Countryway wished to exclude coverage for negligent entrustment, it had
no choice but to include the “owned or operated” language. This is no indication that
Countryway made a conscious decision not to limit Exclusion 1(f) to apply only to the
insured’s use of a motor vehicle. Further, Exclusion 1(j) applies to “bodily injury . . .
which is expected by, directed by, or intended by the insured; or that is the result of
intentional and malicious acts of the insured.” The majority emphasizes that this exclusion
contains “by the insured” as limiting language. I find this not to be language of limitation
but, rather, language of identification. I am unconvinced that either of the above
mentioned exclusions are indicative of Countryway choosing not to limit Exclusion 1(f)
only to the actions of the insured.
In sum, Exclusion 1(f) can be interpreted in two reasonable ways. First, the
exclusion can be read to disclaim coverage any time a motor vehicle is involved in causing
liability to be imposed on the insured, regardless of the insured’s use of or control over the
vehicle. Second, the exclusion can be read to apply only when the insured is the person
“using” the motor vehicle, either through physical use, ownership, or control over the user
of the vehicle. As such, Exclusion 1(f) is ambiguous and the ambiguity of the Exclusion

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14
should be construed against the insurer and in favor of the insured, thereby providing
coverage. For this reason, I would affirm the order of the District Court granting summary
judgment for the Slaugenhoups and Sams on Countryway’s Declaratory Judgement action.

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