“Silence Speaks”: Fourth Circuit Confirms that Omitted Words in Parallel Insurance Exclusions Preserve Coverage for Negligent Entrustment & Interest Beyond Policy Limits

Introduction

The unpublished decision in J.H. v. Harford Mutual Insurance Group, Inc., No. 23-1733 (4th Cir. Aug. 8, 2025) sets an important guidepost for insurers, practitioners, and courts applying North Carolina insurance-contract law. The Court of Appeals affirmed a district court ruling that:

a commercial excess umbrella policy’s “Automobile Exclusion” did not bar coverage for negligent entrustment of a vehicle because, unlike a companion Aircraft/Watercraft exclusion, it omitted the word “entrustment”; and
the insurer must pay pre- and post-judgment interest even when the policy’s liability limit is reached, because the policy and a litigation settlement agreement preserved that obligation.

In effect, the opinion crystallizes two principles for future insurance-coverage litigation under North Carolina law and, more broadly, for diversity cases in the Fourth Circuit:

Ambiguities created by differences in parallel exclusionary clauses are construed against the insurer;
Unless interest is expressly disclaimed, insurers remain liable for pre- and post-judgment interest in addition to the policy’s stated limit.

Summary of the Judgment

Erica Chambers and her two minor children suffered catastrophic injuries when a truck owned by Big Boss Construction, Inc. collided head-on with their vehicle. Chambers sued multiple tort-feasors in state court and pursued a federal declaratory-judgment action seeking a determination that Big Boss’s $2 million Commercial Excess Umbrella Policy (“Excess Policy”) with Harford Mutual covered the loss.

The policy’s Automobile Exclusion removed coverage for injuries “arising out of the ownership, maintenance, operation, use, loading or unloading of any automobile.” A parallel Aircraft/Watercraft Exclusion used almost identical language but—critically—added “or entrustment to others.” Harford denied coverage, arguing that negligent entrustment is subsumed within “ownership, maintenance, operation … or use.” Both sides moved for judgment on the pleadings.

The district court entered judgment for Chambers, finding (i) coverage exists because the policy is ambiguous and must be construed in the insured’s favor, and (ii) Harford must pay statutory interest. The Fourth Circuit affirmed in all respects.

Detailed Analysis

A. Precedents Cited and Their Influence

State Capital Ins. Co. v. Nationwide Mut. Ins. Co., 350 S.E.2d 66 (N.C. 1986): reaffirmed that exclusionary clauses are strictly construed against the insurer and ambiguities create coverage.
Wachovia Bank & Tr. Co. v. Westchester Fire Ins. Co., 172 S.E.2d 518 (N.C. 1970): held that each word in a policy is presumed purposeful; relied upon by Harford but turned against it to highlight the significance of “entrustment” in one exclusion and not the other.
Ocean Accident & Guar. Corp. v. Piedmont Ry. & Elec. Co., 102 S.E. 636 (N.C. 1920) and progeny: stand for the holistic-construction rule—policies must be interpreted as a whole, not piecemeal.
Nationwide Mut. Ins. Co. v. McAbee, 150 S.E.2d 496 (N.C. 1966) & Jenkins v. Aetna, 378 S.E.2d 773 (N.C. 1989): allocate burdens—insured shows initial coverage; insurer must prove an exclusion.

These authorities together framed two interpretive guardrails: (1) read all provisions together; and (2) unresolved ambiguity triggers coverage.

B. The Court’s Legal Reasoning

Holistic Reading of the Policy
Because North Carolina law demands whole-instrument construction, the court compared the Automobile Exclusion with the more expansive Aircraft/Watercraft Exclusion. The deliberate inclusion of “entrustment” in one but not the other created a negative implication—i.e., the drafters knew how to exclude negligent entrustment when they wished.
Result: the Automobile Exclusion is ambiguous on negligent entrustment.
Application of the Contra-Proferentem Rule
Ambiguity is resolved against the drafter (the insurer). Hence, coverage attaches.
Interest Obligation Survives Policy Limits
The Excess Policy expressly indemnifies pre- and post-judgment interest “on that part of any judgment” and states such interest “will not reduce” the $2 million limit. A separate litigation agreement preserved “any obligation to pay money under the policies.” The court rejected Harford’s argument that no “judgment” existed and found Harford waived others.
Procedural Posture Matters
Cross-motions for judgment on the pleadings were governed by Rule 12(c) standards; the court accepted all well-pleaded facts as admitted under the parties’ stipulation.

C. Impact on Future Litigation

Drafting of Exclusions: Insurers operating in North Carolina—and by extension in Fourth Circuit diversity cases—must ensure that exclusions explicitly mention every theory of liability they intend to bar. Omission can be fatal.
Litigation Strategy: Policyholders and plaintiffs’ counsel will scrutinize “near-mirror” exclusions for textual differences; those differences now provide a roadmap for coverage arguments.
Interest Exposure: The holding underscores that interest is often an “add-on” exposure. Carriers should evaluate reserve practices accordingly, particularly in large-loss cases where post-judgment interest can be significant.
Waiver Doctrine: The case is a cautionary tale for appellants—failure to argue an issue in opening briefs or address district-court waiver findings is often fatal.
Persuasive Authority in Other Jurisdictions: Although unpublished and thus not binding precedent, the decision will likely be cited for its logical treatment of parallel exclusions and interest obligations.

Complex Concepts Simplified

Negligent Entrustment: A tort where the owner of a dangerous instrumentality (here, a vehicle) is liable for lending it to an incompetent or unlicensed person who then causes harm.
Automobile Exclusion vs. Aircraft/Watercraft Exclusion: Clauses within an umbrella policy that remove coverage for vehicle-related vs. aircraft/watercraft-related incidents. The key difference is the presence of the word “entrustment” in one but not the other.
Contra-Proferentem: A legal doctrine resolving ambiguities in a contract against the party that drafted it—commonly applied to insurance policies.
Pre- and Post-Judgment Interest: Statutory or contractual interest added to damages from the date of injury (or the filing of the complaint) until the judgment (pre-) and from judgment until payment (post-). Often designed to compensate for the time value of money.
Judgment on the Pleadings (Rule 12(c)): A procedural mechanism allowing courts to dispose of a case when only the contents of the pleadings are at issue and reveal no material dispute of fact.

Conclusion

J.H. v. Harford Mutual Insurance Group reaffirms and refines North Carolina’s pro-insured interpretive approach. By declaring that silence in an exclusion is as meaningful as express language elsewhere, the Fourth Circuit has placed insurers on notice: precision is paramount. The decision also highlights that interest obligations can extend beyond stated policy limits unless clearly disclaimed.

Going forward, courts are likely to apply this analytical template when confronted with adjacent or parallel exclusions containing divergent wording. Practitioners should heed the dual lessons of meticulous drafting and comprehensive briefing, while policyholders have gained a potent weapon in the perpetual coverage wars.