Here is an interesting case from the San Antonio Court of Appeals. The opinion is styled, Infinity County Mutual Insurance Company v. Michael Tatsch.
Tatsch had auto insurance with Infinity. Tatsch made a claim for engine damage. Infinity denied the claim and sent Tatsch a letter explaining its decision. The letter read:
The vehicle damage occurred due to poor quality fuel being added to the vehicle which caused mechanical failure to your insured vehicle. There is an applicable exclusion in Your Texas Commercial Auto Policy that states we do not provide comprehensive coverage for damages resulting from mechanical failure.
This explanation states contaminated fuel caused the damage, and the contaminated fuel and/or damage “caused mechanical failure.” Infinity’s letter quoted the auto policy’s mechanical breakdown exclusion, which applies when mechanical breakdown causes damage.
A lawsuit resulted and the Court granted summary judgment in favor of Tatsch. This appeal followed and this Court reversed the judgment and remanded back to the trial Court.
The issues were clear in the case, they being whether the auto policy’s mechanical breakdown exclusion applies to the engine damages alleged in this case.
The Court discussed their construction of the policy language.
An insurance policy is construed according to the same rules of construction applied to contracts generally. We focus on the plain language of the policy and give the words and phrases their ordinary and generally accepted meaning, unless otherwise specified. The words and phrases are read in context of the policy as a whole, giving effect to all of the words and provisions so none is rendered meaningless. Language that can be given a certain or definite meaning is not ambiguous, and is construed as a matter of law. Neither party argues the mechanical breakdown exclusion is ambiguous, and we do not otherwise reach this conclusion. We therefore construe the insurance policy as a matter of law.
B. The Mechanical Breakdown Exclusion
The policy at issue is a commercial auto policy that lists the damaged truck as an insured vehicle. The policy contains Part E, which covers damage to Tatsch’s truck and certain mechanical parts. Part E provides as follows:
PART E – COVERAGE FOR DAMAGE TO YOUR INSURED AUTO
If you pay a specific premium for this coverage, we will pay for loss to your insured auto, including its factory-installed, permanently attached equipment which is considered standard for your insured auto, caused by:
2. Comprehensive; or
3. Fire and Theft with Combined Additional Coverage
less any applicable deductible shown on the Declarations for each separate loss.
ADDITIONAL DEFINITIONS USED IN THIS PART ONLY
. . . .
4. “Collision” means impact of your insured auto with another object or upset of your insured auto
. . . .
5. “Comprehensive”means loss other than that caused by collision
. . . . .
9. “Loss” means direct and accidental loss of or damage to your insured auto, including its equipment which is permanently installed at the factory by the original make and model manufacturer and considered standard equipment for such vehicle. . . .
. . . .
READ THE FOLLOWING EXCLUSIONS CAREFULLY. COVERAGE WILL NOT BE AFFORDED UNDER THIS PART FOR ANY OF THE EXCLUSIONS LISTED BELOW.
We do not cover loss:
. . . .
5. Resulting from or caused by any of the following, unless caused by other loss that is covered by this insurance policy:
a. Prior loss or damage;
b. Manufacturer’s defects;
c. Wear and tear;
e. Mechanical or electrical breakdown or failure; or
f. Blowouts, punctures, or other road damage to tires.
The operative language in the exclusion is the following: “We do not cover loss . . . resulting from or caused by . . . Mechanical . . . breakdown or failure.”
The policy does not define “mechanical breakdown or failure.” The plain meaning of “mechanical” is “of or relating to machinery or tools.” This according to the Merriam-Webster Online Dictionary. Read in context of the policy’s definitions and the plain meaning of undefined words, the mechanical breakdown exclusion effectively provides as follows: Infinity does not cover engine damage resulting from or caused by a machine not working properly. For the engine damage to be excluded, the plain language of the policy therefore requires establishing the engine damage either resulted from or was caused by some mechanical part not working properly.
This Court then discussed how Tatsch did not meet the burden needed in a summary judgment motion in order to prevail and thus, the Court’s ruling in favor of Tatsch was reversed.