Mobile Equipment Transportation Causes Damage

Our insured was transporting his auger in his pickup truck. The auger gear box came loose (cotter pin missing) and it fell into traffic causing a multicar accident. The auto policy paid for the loss and the auto insurer now wants reimbursement from the CGL carrier. The auto insurer claims that the damage was caused by a failure of the mobile equipment and not from the transportation of the equipment.

Does exclusion (h) on the CGL form pertaining to damage arising out of the transportation of mobile equipment apply in this instance?

Iowa Subscriber

The auto insurer is making an argument meant to skirt the mobile equipment exclusion in the CGL form. The property damage did not occur in this instance because the equipment failed. It occurred because the equipment fell into traffic and caused an accident. In other words, if the gear box had become loose but the equipment had not fallen into traffic, there would have been no accident. So, the actual property damage was caused by and arose out of the transportation of mobile equipment. Exclusion (h) will prevent any coverage for the damage under the CGL form.