“Test Drive” Ambiguous

In Exotic Motorcars and Jewelry, Inc. v. Essex Insurance Co., a Florida appeals court found the trial court interpreted material policy terms too narrowly in denying coverage of the vehicle collision at issue.

In this coverage dispute, the insured Exotic Motorcars and Jewelry, Inc. (Exotic) sued its insurer Essex Insurance Co. (Essex) to recover its loss from a vehicle collision.  The collision occurred while the insured, an exotic car dealer, drove a newly acquired vehicle to another location for inspection.  The insured’s policy only covered losses incurred during a “test drive” or “transport of the covered vehicle for direct purchase or sale … .”

When the case was remanded on first appeal, the trial court, among other things, reviewed whether the vehicle was either in “transport” or on a “test drive” at the time of the accident.  In concluding for the insurer, the trial court determined the vehicle was in neither situation because Exotic, not a prospective buyer, was driving the vehicle.  In short, the vehicle was not on a test drive.  The trial court further held it was not in transport either because “transport” involves means other than driving the vehicle itself.

The insured filed an appeal arguing that the trial court erred by interpreting the terms too narrowly.  The appeals court agreed. Since the terms were not defined by the policy, the appeals court adopted their dictionary meanings. In reversing the trial court’s decision, the appeals court concluded that the term “test drive” does not require a potential purchaser to be driving the vehicle and that if there is more than one meaning, then such ambiguity should be resolved in favor of the insured. The decision also illustrates that when a seemingly unambiguous term carries more than one ordinary meaning, it would be wise to explicitly define it in the insurance policy.