First Circuit recently claimed that a "Special Hazard and Fluids Limitation Endorsement" was ambiguous and therefore there was excessive coverage for a fuel spill that occurred after a tanker overturned.
I Performance Trans. Inc. v. General Star Indem. Co. converted the First Circuit District Court's grant of a summary judgment in favor of the General Star Indemnity Company. The district court found that the surplus policy issued by General Star to Performance Trans. Inc. excludes coverage for a spill that resulted in the leakage of thousands of gallons of fuel. The district court invoked the existence of a total exclusion of contaminants to cover bars and considered that the policy's special risks and fluid limitation could not create an ambiguity that would provide coverage.
In the opposite direction, First Circuit found that the clear text of the Special Hazard Endorsement was ambiguous because "it [was] was susceptible to at least three interpretations." First, the approval can be read to provide coverage for each exception listed in the approval, regardless of other policy exceptions. Second, the approval can be interpreted as providing coverage for a single exception, which was the only one that started with the phrase "coverage under this article:.. Will be available …" Finally, the approval can be interpreted as providing only coverage where it is not otherwise excluded by the policy.
In addition, First Circuit claimed that other languages in the Special Hazards Endorsement increased the ambiguity. The Court considered that the use of the terms "exclusion" and "restriction" created confusion as to the purpose and effect of the provision, thus the clear text for the exclusion of particular danger was ambiguous. including a total exclusion of pollutants, did not resolve the ambiguity in the Special Hazards Endorsement because the policy was unclear if there was any overlap e ller abundance was intentional.
Finally, First Circuit considered that since the special risk exclusion was ambiguous, it must be interpreted in favor of fuel emission coverage. Thus, it reversed the district court's summary judgment and decided that there was coverage for the fuel emission.
This decision provides an important reminder that inconsistent language in a policy and its claims can create ambiguity, which is generally interpreted in favor of coverage.