EASTLAND COURT OF APPEALS ENFORCES “CARE, CUSTODY OR CONTROL” EXCLUSION IN CGL POLICY
MDJ&W congratulates Kevin Cain, Todd Lonergan, Ruth Brenton, and the firm’s appellate team for another great appellate win on behalf of our client, Unitrin Specialty Lines Insurance. In Hallmark Specialty Ins. Co. and Unitrin County Mut. Ins. Co. v. Manriquez Trucking, No. 11-12-00082-CV (Tex. App.—Eastland, Nov. 27, 2013) (slip op.), the Eastland Court of Appeals upheld the “care, custody and control” exclusions in two CGL policies, reversing the trial court and rendering judgment that the carriers had properly declined to defend their mutual insured in an underlying lawsuit against the insured.
The underlying suit involved a train/truck collision in which a train struck a tractor-trailer truck that was stopped on the railroad tracks. The truck was carrying a crane which the insured, Manriquez Trucking, had contracted to haul. The crane was seriously damaged in the collision and rendered a total loss. The owner of the crane sued Manriquez for the loss of the crane. Unitrin and Hallmark, the liability carriers for Manriquez, refused to defend Manriquez because the crane was alleged to be in the care, custody or control of Manriquez at the time of the accident and thus fell within the “care, custody or control” exclusions in the policies. In particular, the Unitrin policy contained the following exclusion:
This insurance does not apply to any of the following:
“Property damage to… property owned or transported by the insured or in the insured’s care, custody or control.”
Such exclusions are designed to prevent the insured from using a CGL policy as de facto property insurance and to require separate property insurance for the insured’s own property or property of which it takes custody as part of its business. Manriquez sought a declaratory judgment requiring the carriers to defend it, alleging the crane was not in its care, custody or control at the time of the accident, but was instead in the care, custody or control of an independent contractor to whom it subcontracted the hauling of the crane.
After the trial court granted summary judgment in favor of Manriquez, holding the carriers owed a duty to defend it, the Court of Appeals reversed. The court observed that the underlying purpose of the “care, custody and control” exclusion was to exclude coverage for personal property held under a bailment, and noted the crane owner’s allegations specifically alleged the factual elements of a bailment relationship between itself and Manriquez. The court also observed that the owner’s allegations stated specifically that the crane was in the care, custody or control of Manriquez at the time of the accident. Applying the eight-corners rule, the court concluded the allegations clearly triggered the “care, custody or control” exclusions and there was no duty to defend. Although Manriquez argued certain ambiguous phrases about the relationship between Manriquez and the truck operator could lead to the inference that the truck operator was an independent contractor who had custody of the crane at the time of the accident, the court rejected that inference as unreasonable in light of the clear allegation that the crane was in the care, custody or control of Manriquez.