A commercial auto policy’s “mechanical device” exclusion applied only where the device was used in the movement of property to or from the covered auto. ( Palp , Inc., v. Williamsburg National Ins. Co. (2011) 200 Cal.App.4th 282)
Facts
Palp, Inc., dba Excel Paving (Excel Paving) undertook to demolish a parking lot. Excel Paving hired REH Trucking, Inc. (REH) to haul away excavated asphalt from the job site.
An Excel Paving employee was using an excavator to load broken asphalt into a truck at the job site. In the process, the excavator struck a separate dump truck owned by REH and operated by REH employee Christian Suarez. Suarez suffered injuries. Suarez later filed a personal injury lawsuit against Excel Paving.
At the time of the accident, Excel Paving was the named insured on a general liability policy issued by Virginia Surety Company, Inc. (Virginia Surety). The Virginia Surety general liability policy provided that Virginia Surety would indemnify Excel Paving for damages because of bodily injury caused by an accident and arising from Excel Paving’s paving operations (including Excel Paving’s use of “mobile equipment” such as the excavator).
In addition, Excel Paving was an “additional insured” on a commercial auto policy that REH had obtained from Williamsburg National Insurance Company (Williamsburg). The Williamsburg auto policy provided that Williamsburg would indemnify Excel Paving for damages because of bodily injury caused by an accident and resulting from the ownership, maintenance or use of a “covered auto” (such as REH’s dump). However, the Williamsburg policy also contained a “mechanical device” exclusion which barred coverage for bodily injury “resulting from the movement of property by a mechanical device … unless the device is attached to the covered ‘auto’.”
Virginia Surety agreed to defend Excel Paving against Suarez’s personal injury lawsuit. Williamsburg, on the other hand, declined to defend Excel Paving based on the “mechanical device” exclusion in the Williamsburg policy. Virginia Surety paid all defense costs on behalf of Excel Paving, and eventually paid $319,000 on behalf of Excel Paving in settlement of Suarez’s personal injury lawsuit.
Excel Paving and Virginia Surety then jointly sued Williamsburg for declaratory and other relief. However, the trial court ruled that the Williamsburg policy’s “mechanical device” exclusion barred coverage for any liability that Excel Paving may have had to Suarez in the underlying personal injury lawsuit, and that Williamsburg thus had no duty to defend or indemnify Excel Paving in the underlying lawsuit. Excel Paving and Virginia Surety appealed.
Holding
The Court of Appeal reversed, holding that Suarez’s personal injury claim against Excel Paving did not fall within the scope of the “mechanical device” exclusion in the Williamsburg commercial auto policy.
The appellate court began by noting that exclusions are construed narrowly, and that any ambiguity in an exclusion will be resolved in favor of the insured’s reasonable expectation of coverage. Here, the “mechanical device” exclusion precluded coverage for bodily injury “resulting from the movement of property by a mechanical device … unless the device is attached to the covered ‘auto’.” According to the appellate court, this exclusionary language should be interpreted to apply only when an unattached “mechanical device” is involved in the “movement of property” to or from the “covered ‘auto’.” In this case, the unattached “mechanical device” (i.e., the excavator) had not been used in the “movement of property” (i.e., the asphalt) to or from the “covered auto” (i.e., the REH dump truck). Rather, the mechanical device had been used to load another truck, separate from the dump truck occupied by Suarez. Thus, the Williamsburg policy’s “mechanical device” exclusion did not apply, and Williamsburg was obligated to participate in defending and indemnifying Excel Paving in the underlying personal injury lawsuit brought by Suarez.
Comment
There is the first reported California case involving a “mechanical device” exclusion in a commercial auto policy. However, courts in other jurisdictions have considered the exclusion, and those courts have all discussed the exclusion in the context of the movement of property in relation to the covered vehicle. The Palp court relied on these out-of-state cases to support its holding that the exclusion should apply only when the mechanical device is used in the loading or unloading of the covered vehicle.