Watch the full video at https://rumble.com/v2jma1i-marine-policy-not-crop-insurance.html and at https://youtu.be/UbWs5-M95LI
After Hurricane Irma damaged its property, Pero Family Farm filed an insurance claim. Lloyd’s accepted coverage for part of the claim but denied coverage for the remainder. Lloyd’s sued seeking declaratory judgment that the policy did not cover the rejected portion of the claim. The district court gave Lloyd’s a verdict.
IN Certain underwriters at Lloyd’s London subscribe to Policy No. B0799MC029630K v. Pero Family Farm Food Co., Ltd., no. 20-12711, United States Court of Appeals, Eleventh Circuit (April 10, 2023) the Eleventh Circuit interpreted the policy.
ACTUAL BACKGROUND
Pero grows vegetables (mainly peppers and beans) which it prepares and packages for either retail in grocery stores or wholesale by food companies. The seeds that Pero uses are either prepared by Pero from its own vegetables or purchased from third party seed suppliers. Pero plants some of its seeds in fields it owns or leases in Florida. But Pero also sends seeds to Trans Gro, a third-party plant grower. Trans Gro plants the seeds and grows the plants in its greenhouses in Immokalee, Florida, until the plants are mature enough to be transported to Pero’s fields and planted in the ground.
After Pero harvests its vegetables, it transports them to its refrigerated storage facility in Delray Beach, Florida, where it cleans, sorts, stores and packages the vegetables. Pero packages some of its vegetables in plastic packaging. It then transports the vegetables from the Delray Beach facility to its end customers.
The policy
In its 2015 insurance application, Pero stated that its “primary business” was “[g]rower, [p]fields, [s]or of vegetables[,] mainly [p]eppers and [g]the reindeer [b]eans”; That the “[t]type of [g]oods to be [i]nsured” was “produce, mainly paprika [and] beans”; and that it sought to insure “[d]omestic broadcasts” of “[g]reen beans [and] peppers on vehicles (dumpers) moving from fields to warehouses[;] seed is also stored on-site.” The policy contained a Florida choice-of-law provision.
Insured item
All goods and/or goods of any description belonging to or in connection with the insured’s business.
Policy limits were $150,000 for “[a]new a domestic inland transport” and $5,000,000 for “[a]new place.”
Pero’s insurance claim
On September 10, 2017, Hurricane Irma hit South Florida. Pero filed a claim with Lloyd’s for the damage it suffered as a result of the hurricane. Pero sought coverage for the loss of vegetables stored in coolers at its packing house in Delray Beach, as well as: (1) seedlings grown in Trans Gro’s greenhouses in Immokalee; (2) plants that had grown in Pero’s fields; and (3) plastic sheeting that had been placed over the plants growing in Pero’s fields.
Lloyd’s accepted coverage (and issued payment) for Pero’s loss of the vegetables in its coolers in transit but denied coverage for the damage to the plants growing in Trans Gro’s greenhouses, the plantings in Pero’s fields and the plastic covers on Pero’s fields that were not in transit.
The trial
Lloyd’s sued Pero for a declaration that the insurance did not cover the damage to the plants, plantings or plastic covers. Lloyd’s argued that cover was not due under the policy because:
- “[t]the plants, planted crops and crop cover were not on the way at the time of the loss”, so “it [was] no “in transit” coverage”;
- “[t]the plants, planted crops and the crop cover were not stored in any place as defined by [policy],” so there [was] no “location coverage”; and
- “[s]seedlings and immature plants are crops and the [policy] d[id] not provide crop coverage”—as Pero “specifically sought cargo coverage for the transit and storage of fresh harvested produce, dry seeds[,] and packaging from field to storage and during storage’, not ‘crop insurance’.
Summary judgment for Lloyd’s
The district court granted summary judgment for Lloyd’s and denied Pero’s motion because “the unambiguous language of [p]police d[id] does not provide coverage for Pero’s damaged plants, plantings and plastic covers.”
DISCUSSION
The Eleventh Circuit agreed with Pero that the policy’s language was clear and unambiguous. But it also agreed with Lloyd’s and the district court that the policy did not cover Pero’s damaged plants, plantings and plastic sheeting.
The policy unequivocally covered goods or merchandise only when en route or, by extension, “in stock” as “stock” at a “place” during the transit process:
Within the geographic limits of this policy, coverage below shall apply from the time the insured assumes an interest in and/or responsibility for the subject [-] the case insured and continues uninterrupted, including transit, warehouse[,] and site coverage until that interest and/or responsibility ceases.
The geographic limits of the policy were from a starting point to an ending point, and anywhere goods or merchandise stopped in between. Coverage “continue[d] uninterrupted, including transit, stock [,] and site coverage,” during that trek.
The policy was entitled “Marine Cargo Insurance” and “cargo”, although not defined in the policy, was generally understood at the time to mean “[g]goods transported by a ship, aircraft or vehicle.”
In accordance with the “Duration of Trip Clause”, the title of the policy and the claims procedure, the other provisions of the policy indicated that it only covered goods or goods in transit or storage during the transit process.
The policy’s “Information” section stated that the policy covered “[t]ransack from field to warehouse.” And the value statement attached to the policy noted that Pero’s Delray Beach “pack house” contained “[s]though/[i]nventory” valued at $5,000,000 – the same amount as the policy’s coverage limit per “location”.
Pero’s 2015 insurance application, which was attached and made part of the effective insurance, which the Eleventh Circuit must treat as part of the agreement, explained that the insurance only covered goods or goods in transit or storage during the transit process. Specifically, the application documents showed that Pero sought to insure “[d]omestic broadcasts” of “[g]reen beans [and] peppers on vehicles (dumpers) moving from field to warehouse” and “the seed . . . stored on site.”
Because the policy clearly and unambiguously did not cover the portion of Pero’s claim contested by Lloyd’s, the trial court properly granted summary judgment to Lloyd’s and denied partial summary judgment to Pero.
Insurances are contracts and must be interpreted as written if they are unambiguous. The insurance obtained by Pero was not insurance of its crop but was limited to coverage for that portion of its crop while in transit. The hurricane caused damage to some crops and goods in transit but did not insure other damage caused by the hurricane to property that was not in transit. Lloyd’s used plain, clear, and unambiguous language that both parties agreed was unambiguous, and the Eleventh Circuit applied the insurance agreement as written.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance claims management, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims attorney and more than 54 years in the insurance industry. He can be reached at http://www.zalma.com and zalma@zalma.com
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