California Court of Appeals Decides Mobile Equipment or Auto
February 25, 2014
On cross motions, the Court of Appeals, Second District, Division 5 of California reversed and remanded the decision of the Superior Court of Los Angeles County, holding that food truck lessor's automobile fell within the mobile equipment exception to CGL's auto exclusion. This case is American States Insurance Co. v. Travelers Property Casualty Co. of America, 223 Cal.App.4th 495 (2014).
Royal Catering Company leased a food truck from its fleet to Esmeragdo and Irais Gomez, who operated the truck from site to site selling Royal Catering Food. Royal held auto and excess auto policies with American States Insurance Company, as well as CGL and excess-umbrella liability policies with Travelers Property and Casualty Company. Intended to transport a driver and cook only, the truck rented to the Gomez's had only two seats and two safety belts. Otherwise, the truck was outfitted with a deep fryer, grill, steam table, oven and refrigerator. Typically, food was prepared only when the truck was in park at the Royal lot.
On the day in question, Mrs. Gomez stood in the rear of the truck while a guest sat in the passenger seat and Mr. Gomez operated the vehicle. Mr. Gomez collided with another vehicle at an intersection and, just before the collision, hot oil splashed on Mrs. Gomez resulting in severe burns. The Gomez's brought suit against Royal for injuries sustained in the accident.
American States and Travelers brought cross actions seeking to establish coverage under the insurance policies of the other. On appeal, American States argued that Mrs. Gomez's injuries should be covered under the Travelers policy because the food truck was mobile equipment immune from the auto exclusion of the CGL, which defines “mobile equipment” as a vehicle maintained primarily for purposes other than the transportation of persons or cargo.
Conversely, Travelers argued that American States had the duty to defend and indemnify Royal in the Gomez action because the food truck involved in the accident was a covered auto under the American States policy. Exclusion h. of the CGL states that coverage does not apply to BI or PD arising out of the transportation of mobile equipment by an auto owned or operated by or rented to or loaned to any insured. Under the policy “auto” means a land or motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment, save for mobile equipment.
Using a plain reading of the policies in relation to the facts, the Court focused on the “inherent purpose” of the food truck, noting that 8 of 10 hours each workday the food truck was immobile; that during this time the truck was used to cook in and sell from and was not actually transporting anything; and that the truck was not equipped to transport any more passengers than a cook and a driver. Furthermore, stated the Court, had Travelers intended to exclude from coverage food trucks along with other special use vehicles, then it should have identified them accordingly in the policy.
Therefore, the Court of Appeals found that food truck was “mobile equipment” and not an “auto” and reversed the decision of the lower court to rule that the food truck fell within the exception to CGL's automobile exclusion.
Editor's Note: In deciding whether a special use vehicle was an auto or mobile equipment, the Court looked to the inherent purpose of the food truck, the plain meaning of the policies and the intent of the parties.