California Court Holds Food Truck Constitutes Mobile Equipment

In American States Insurance Company v. Travelers Property Casualty Company of America, 2014 Cal. App. LEXIS 74 (January 27, 2014), California’s Second Appellate District had occasion to consider whether a food truck constituted mobile equipment under a general liability policy.

The underlying injury in American States involved a food truck that collided with another truck.  At the time, one of the food truck workers was standing in the back of the truck, nearby the on-board deep fryer.  The worker was burned by oil that splashed out of the deep fryer as a result of the collision.  The worker was standing at the rear of the truck while it was moving because a non-employee guest was occupying the truck’s passenger seat at the time.  All three persons brought suit against the company (“Royal”) that leased the truck to the food truck operator (“Gomez”).

At the time of the accident, Royal was insured under a primary and excess auto liability policy issued by American States Insurance Company (“American States”).  Royal also had primary and excess general liability coverage through Travelers.  American States agreed to defend Royal, but Travelers declined.  The underlying matter proceeded to binding arbitration, and Royal was found 40% liability based on a theory of products liability; namely, its defective deep fryer. A stipulated judgment against Royal for $2,428.577.34 was entered into based on the arbitration award.

American States subsequently brought an action against Travelers, and Travelers cross-complained back against American States, each seeking to establish coverage for Royal under the other’s policy.  Each filed motions for summary judgment, with the trial court granting Traveler’s motion, finding that the truck was an “auto” and not “mobile equipment,” and not within the exception to the Traveler’s policy’s auto exclusion.

The appellate court looked at that part of the Traveler’s policy’s definition of “mobile equipment” that included vehicles “maintained primarily for purposes other than transportation of persons or cargo.”  The appellate court concluded that under a plain reading of the Traveler’s policy, the food truck was “mobile equipment” as its primary purpose was to serve as a mobile kitchen and not to transport persons or cargo.  The court also noted that the omission of a food truck from the list of special use vehicles with permanently attached equipment considered “autos” under the definition of “mobile equipment,” supported this finding.  The court further concluded that coverage was unavailable under the American States’ policy as a result of a “completed operations” exclusion. 

Illinois Court Holds Auto Exclusion Applicable To Underlying Loss

In its recent decision in Cincinnati Ins. Co. v. William F. Braun Milk Hauling, Inc., 2013 U.S. Dist. LEXIS 150665 (S.D. Ill. Oct. 21, 2013), the United States District Court for the Southern District of Illinois had occasion to consider whether there was coverage under a commercial general liability policy for injuries that arose out of the use of an auto.

Cincinnati’s insured, Braun Milk, was a freight shipping and trucking company. One of its trucks was involved in an automobile accident that caused a fuel spill. Braun Milk was ordered by the Environmental Protection Agency to clean the spill, so it hired a contractor, which in turn subcontracted another company to handle those duties.

Braun Milk was sued by an employee of the subcontractor, Amy Fasig, in an underlying suit for its alleged negligence that resulted in Fasig’s left arm being amputated. Stephen Braun, an employee of Braun Milk, hit Fasig while driving a Braun Milk semi-tractor at the clean-up site. Fasig filed a complaint against Braun Milk and Stephen Braun that contained ten separate causes of action based in negligence and violations of the Road Construction Act. At the time of the injury to Fasig, Braun Milk had an automobile liability insurance policy issued by Northland and a commercial general liability policy issued by Cincinnati. The Cincinnati policy contained an automobile exclusion that provided:

2. Exclusions. This insurance does not apply to:

            …

“Bodily injury” or “property damage” arising out of the ownership, maintenance, use or entrustment to others of any aircraft, “auto” or watercraft owned or operate by or rented or loaned to any insured.

This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the “occurrence” which caused the “bodily injury” or “property damage” involved the ownership, maintenance, use or entrustment to others of any aircraft, “auto” or watercraft that is owned or operated by or rented or loaned to any insured.

Northland agreed to defend Braun Milk and Stephen Braun against four of Fasig’s claims. Braun Milk and Stephen Braun tendered its defense for counts three and four of Fasig’s complaint to Cincinnati; counts three and four alleged that Braun Milk was negligent in handling the clean-up and that Braun Milk violated the Road Construction Injuries Act. Cincinnati filed a declaratory judgment action and a subsequent motion for summary judgment seeking a declaration that it had no duty to defend or indemnify Braun Milk or Stephen Braun.

Relying on Northbrook Prop. And Cas. Co. v. Transp. Joint Agreement, 194 Ill. 2d.96 (Ill. 2000), Cincinnati argued that auto exclusion barred coverage because claims three and four did not arise from events wholly independent of Stephen Braun’s negligent driving. Cincinnati argued that the claims were “inextricably intertwined” with excluded claims. Braun Milk and Stephen Braun argued that there was coverage because counts three and four arose out of a “separate and distinct occurrence of alleged negligence”, relying on Louis Marsch, Inc. v. Pekin Ins. Co., 140 Ill. App. 3d 1079 (1985) and State Farm v. Abesamis, 2012 IL App (1st) 120541-U (2012).

The Court granted Cincinnati’s motion for summary judgment, holding that the claims arose from an excluded injury. The Court declined to follow Marsch’s reasoning as it related to the argument that Fasig’s injuries could have arisen from causes other than Stephen Braun’s use of the truck. The Court noted that the Seventh Circuit considered the issues presented in Marsch when it analyzed Northbrook in Nautilus Ins. Co. v. 1452-4 N. Milwaukee Avenue, LLC, 562 F.3d 818 (7th Cir. 2009). The Court concluded that Northbrook and Nautilus “provide the indication that the Illinois Supreme Court may decide the issues in Marsch differently.” The Court noted, referring to claims three and four: “While these are different theories of recover [sic], the fact remains that the bodily injury arose from Braun Milk’s use of an automobile which is clearly excluded from coverage.” Consequently, Cincinnati owed no duty to defend or indemnify Braun Milk or Stephen Braun.