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A refrigerated trailer is a vehicle



Kiolbassa Provision Company (“Kiolbassa”) operates a smoked meat company from San Antonio, Texas, where it retains its offices, production facilities and a warehouse for storage. Given the nature of the business, Kiolbassa purchased a “Policy” equipment policy from Travelers Property Casualty Company of America (“Travelers”) to cover damage to fragile goods when the damage was caused by a malfunction of “Covered Equipment” on Kiolbassa’s premises. .

IN Kiolbassa Provision Company, Incorporated v. Travelers Property Casualty Company of Americano. 21-51033, United States Court of Appeals, Fifth Circuit (June 2, 2022) asked the Fifth Circuit to determine if a refrigerated trailer was a vehicle and as a result the loss was ruled out.

FACTS

In August 2019, Kiolbassa ran out of storage space in its warehouse and loaded 49,016 pounds of organic beef on a “freezer trailer” (a trailer with a connected refrigeration unit) located in its premises. The cooling unit malfunctioned; the beef spoiled; and Kiolbassa lost the product worth approximately $ 167,000. Kiolbassa then submitted an insurance claim according to the travelers’ policy.

Both allegations were denied. Travelers denied coverage under the equipment failure policy because the refrigeration unit was mounted on the refrigerated trolley, which does not meet the definition of “Covered Equipment” in the insurance. Kiolbassa sued for its denial of coverage only under that insurance, which insures damage to “Covered Property” caused by a “Final Violation” of “Covered Equipment” on “Covered Room.”

Travelers do not dispute that the beef is “Covered Property”; that the damage occurred due to a “breakdown” of the cooling unit; and that the unit was located in “Covered Premises.” The dispute is about whether the refrigeration unit is “Covered Equipment”.

In defining the term “Covered Equipment”, the policy states that it “does not mean” any equipment that is “mounted on or used only with any vehicle.” The cooling unit “was mounted on or used only with” the cooling trolley. Travelers claimed that the refrigerated cart is a vehicle, which makes its denial of coverage appropriate. Kiolbassa, on the other hand, claimed that the refrigerated truck was not a vehicle because at the time of the destruction the trailer could not “move by itself” – it was not connected to a semi-truck and therefore stood still. .

The district court agreed with Resenärer.

POLICYN

The relevant parts of the policy provide, in the relevant part, the following:

We will pay for. . . . [s]spoilage damage on “perishable goods” caused by or as a result of an interruption in public service which is the direct result of a “breakdown” to “Covered equipment” owned, operated or controlled by a private or public company, landlord or other supplier with whom you have an agreement to provide you with one of the following services: air conditioning, communication services, electricity, gas, heating, cooling, steam, water or waste treatment.

Section F contains contract definitions that define “Covered Equipment” as follows:

“Covered equipment” means any:. . . electrical or mechanical equipment used in the generation, transmission or use of energy. . . . “Covered equipment” does not mean:. . . [v]vehicles, aircraft, self-propelled equipment or floating vessels, including all “Covered equipment” mounted on or used only with any vehicle, aircraft, self-propelled equipment or floating vessel.

The term “vehicle” is undefined.

Under Texas law, undefined policy terms must be given their common, ordinary meaning, determined using dictionaries, with these terms read contextually and in the light of the rules of grammar and general usage.

The cooling trolley in question clearly falls within the usual meaning of the term “vehicle”. Consultation of Black’s Law Dictionary means the term “vehicle”: (1) “A transport or transport instrument”; or (2) “Any means of transport used for the carriage of passengers or things by land, water or air.” VehicleBlack’s Law Dictionary 1788 (10th edition 2014).

Kiolbassa could not provide a single dictionary (or similar) definition of “vehicle” in its briefing that would support its position. The insured bears the initial burden of showing that the damage is potentially within the insurance’s coverage area.

Instead, Kiolbassa argued that the dictionary definitions are unreasonable in the light of the policy and that these definitions should be limited to a medium that can move on its own. First, that restriction is not compatible with the common perception of the word ‘vehicle’. Self-propulsion is not a decisive feature of a vehicle, and whether it can fulfill that function at the time in question is irrelevant to its definition or classification. Second, additional contextual clues indicate that the refrigerated truck is a vehicle: The Texas Department of Transportation considers trailers to be vehicles, Tex. Transp. Code Ann. § 621.001 (9); the trailer was registered with the Texas Department of Motor Vehicles; and the trailer was consequently assigned a vehicle identification number.

To summarize, the trailer is used to transport, which is how vehicles are usually defined and understood; it is considered a vehicle by the relevant government agency; and it is registered as a vehicle. The court refused to change the meaning of the word “vehicle” sufficiently to exclude the refrigerated trolley from its definition. It refused to do so.

Sometimes all a court needs to resolve a dispute over insurance coverage is to deal with the obvious. When a trailer is registered by the state as a “vehicle”, it is probably, in order to determine the insurance cover, a vehicle. The insured took a chance with his meat when its stock was full and lost. Although its argument was interesting, it could not overcome common sense and Texas statutes.


(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his internship to the position of insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

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