FEDERAL JUDGE EXAMINES AUTO EXCLUSION AND EXCEPTIONS IN A CGL POLICY

In a tragic case involving a fascinating question of insurance policy interpretation, a federal district judge in Sherman held a CGL insurer was required to cover a loss that took place in a van despite its auto exclusion.  In Markel Ins. Co., v. 2 RJP Ventures, LLC, No. 4:19-CV-41-ALM-KPJ, 2020 WL 1465893 (E.D. Tex. Mar. 26, 2020) (slip op.), two people died of carbon monoxide poisoning after a generator was left running inside a van.  The Markel CGL policy contained an Auto Exclusion, which also contained certain exceptions. The heart of the battle was whether the generator was a piece of machinery or equipment excepted from the exclusion if it was not also permanently attached to a self-propelled vehicle.  It was undisputed that the generator was not permanently attached to the van.

In a fine analysis of the contract provisions, the court concluded that the “machinery or equipment” exception to the Auto Exclusion directs the reader to two specific sub-paragraphs of the definition of “mobile equipment.” The list of equipment found there expressly includes generators.  Importantly, the two specific sub-paragraphs the reader is directed to do not contain the additional requirement that the equipment be permanently attached to a self-propelled vehicle.  It is found in an earlier part of the definition of “mobile equipment” which is not referred to by the exception to the Auto Exclusion.

Therefore, because the injury arose out of the operation of a generator, which is equipment expressly referred to by the exception, the policy’s Auto Exclusion did not apply, and the CGL policy was required to cover the loss.

Editor’s Note: The court’s logic here is reminiscent of, and consistent with, the Texas Supreme Court’s logic in In re Deepwater Horizon.  Reading an insurance policy is not unlike reading a road map, and one must follow the directions precisely.  If the policy tells the reader to look elsewhere, whether to another section of the policy or to an external document, then one must look where one is told to look and must look exactly where one is told to look.