Court Rules School Buses are Not “Automobiles” Under State Farm Insurance Policy Fine Print

Whether a school bus is an automobile would seem to be a matter of common sense.  Unfortunately for the policyholder in one recent lawsuit, it’s actually a matter of reading the fine print.

Washington’s Court of Appeals recently issued a ruling that significantly limits policyholders’ coverage under many automobile insurance policies. In Koren v. State Farm Fire and Casualty Company, Case No. 34723-1-III, the court interpreted State Farm’s insurance policy as excluding coverage for injuries Mrs. Koren’s son sustained in a school bus crash.

Mrs. Koren’s State Farm policy covered harm “caused by an automobile accident.” After Ms. Koren’s son was injured in a school bus crash, Mrs. Koren submitted a claim under her State Farm policy. State Farm denied coverage, claiming school buses are not “automobiles” under State Farm’s policy.

The Court of Appeals agreed with State Farm. State Farm had added to its policy a limited definition of “automobile,” which meant, under the policy, only automobiles “designed for carrying ten passengers or less.” Mrs. Koren relied on existing Washington Supreme Court precedent holding that the term “automobile accident” in an insurance policy may be broader than the definition of the individual term “automobile.” The court rejected this argument, noting that Washington’s insurance statutes had a similar definition of “automobile” to State Farm’s.

Most policyholders would likely be surprised to learn a school bus or Port Authority bus is not an “automobile” covered under their insurance policy. Perhaps recognizing this, the court noted Mrs. Koren’s “concerns must be raised with the legislature.” Unless and until the legislature acts or the Washington Supreme Court reverses this ruling, policyholders should carefully review the terms and fine print of their policies to make sure their coverage comports with their own understanding.