Insurance Lawyers – Read The Policy

Here is a policy interpretation case from the United States Fifth Circuit.  The opinion was issued on June 2, 2022, and is styled, Kiolbassa Provision Company, Incorporated v. Travelers Property Casualty Company of America.

Kiolbassa ran out of storage space in its warehouse and loaded 49,016 pounds of organic beef trim onto a “reefer trailer” (a trailer with an attached refrigeration unit) located on its premises.  The refrigeration unit malfunctioned; the beef spoiled; and Kiolbassa lost about $167,000 worth of product.  Kiolbassa then filed an insurance claim under the Equipment Breakdown Policy.

Travelers denied coverage under the Equipment Breakdown Policy because the refrigeration unit was mounted on the reefer trailer, which (Travelers argues) does not meet the definition of “Covered Equipment” in the Policy.  Kiolbassa sued for its denial of coverage under only that policy, which insures damage to “Covered Property” caused by a “Breakdown” of “Covered Equipment” on “Covered Premises.”

In defining the term “Covered Equipment,” the Policy states that it “does not
mean” any equipment that is “mounted on or used solely with any vehicle.”  The refrigeration unit was “mounted on or used solely with” the reefer trailer.  Travelers argues that the reefer trailer is a vehicle, making its denial of coverage appropriate.  Kiolbassa, on the other hand, argues that the reefer trailer is not a vehicle because, at the time of spoilage, the trailer was not able to “move on its own”—it was not attached to a semi-truck and was therefore stationary.

The district court agreed with Travelers and granted summary judgment to Travelers.

The relevant portions of the policy were cited in the opinion and then a discussion followed.

In the policy, the term “vehicle” is undefined.

Under Texas law, undefined policy terms must be given their “common, ordinary meaning,” which is determined with the aid of dictionaries, with those terms “contextually and in light of the rules of grammar and common usage.

The reefer trailer at issue here falls plainly within the ordinary meaning of the term “vehicle.”  Consulting Black’s Law Dictionary, the term “vehicle” means: (1) “An instrument of transportation or conveyance”; or (2) “Any conveyance used in transporting passengers or things by land, water, or air.”  Other dictionaries provide very similar definitions.

Kiolbassa does not contest that the reefer trailer is used to transport cargo.  To be ambiguous, there must be “two or more reasonable interpretations.”  But
Kiolbassa does not supply a single dictionary (or similar) definition for
“vehicle” in its briefing to this court that would support its position, even though “the insured bears the initial burden of showing that the claim against her is potentially within the insurance policy’s scope of coverage.”

Instead, Kiolbassa argues that the dictionary definitions are unreasonable in light of the Policy and that those definitions should be limited to a conveyance that can move on its own.  The Court disagreed.  First, that limitation is not consistent with the common understanding of the word “vehicle.”  Self-propulsion is not a vehicle’s defining feature, and whether it can fulfill that function at the time in question is irrelevant to its definition or classification.  Second, additional contextual clues point to the reefer trailer being a vehicle: the Texas Department of Transportation considers trailers to be vehicles, Texas Transportation Code Section 621.001(9); the trailer was registered with the Texas Department of Motor Vehicles; and the trailer was accordingly assigned a Vehicle Identification Number.

So to summarize, the trailer is used to transport, which is how vehicles are commonly defined and understood; it is considered a vehicle by the
relevant state agency; and it is registered as a vehicle.  The Court would have to
sufficiently change the word “vehicle”
to exclude the reefer trailer from its
definition.  The Court was not inclined to do so.

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