| Q&A of the Week |
Creditor of Production Equipment as Mortgagee
A Lousiana subscriber recently asked the following question:
Is there anything definitive that states that a secured creditor of large production equipment (not permanently installed) can or cannot be listed as a mortgagee on a commercial property policy?
I believe the loan can be characterized as a chattel mortgage. My view is that a mortgagee can be on either real or personal property, it just needs to be some type of secured loan.
ANSWER: We agree with your view. In the ISO Mortgageholders E&O Coverage Form, CP 00 70, "mortgageholder's interest" is defined as "your interest, as mortgageholder, in real or personal property, including your interest in any legal fiduciary capacity." This acknowledges that the property can be real or personal. There is nothing in the ISO Commercial Lines Manual rules stating that a mortgage must be only on real property, so it is our opinion that it can be on real or personal property. |
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| Litigation Watch |
CGL Coverage versus Auto Coverage
This insurance dispute arose out of an accident in which a forklift and a truck were involved. The case is National American Ins. Co. v. Harleysville Lake State Ins. Co., No. 1:13-cv-1297-WTL-MJD, 2014 WL 6388783 (S.D. Ind. Nov. 14, 2014).
Venture Logistics offers trucking, freight, warehouse, and brokerage services to its clients. Powder Coatings was a customer of Venture Logistics. Parker was a truck driver for Venture and went to Powder to complete a job. Harden worked for Powder as a forklift operator and started to unload skids from the Venture truck driven by Parker. After Harden had unloaded some skids, Parker asked him if he was finished; he said no. Nevertheless, Parker began to drive away. Worried that the forklift would fall off the truck as it went up a hill, Harden got off the forklift and tried to get Parker's attention. The forklift subsequently slid down the truck and pinned Harden against the wall. As a result of the accident, Harden was seriously injured and sued Venture Logistics and Parker.
Venture was insured by State National Insurance Company under a commercial truckers coverage policy and by Harleysville Lake State Insurance Company under a commercial general liability policy. State National undertook the defense of the claim against Venture Logistics but after an investigation, noted that an exclusion might apply. This exclusion pertained to movement of property by a mechanical device, such as a forklift. State National notified Harleysville that it may have potential coverage liability for the accident. Harleysville investigated the accident and then denied coverage based on the auto exclusion in its policy.
The Harden lawsuit was settled by State National which then sued Harleysville seeking subrogation or a contribution from Harleysville.
The United States District Court for the Southern District of Indiana noted that the crux of this dispute was whether the relevant exclusions found in the Harleysville and State National policies clearly and unambiguously exclude coverage for the Harden lawsuit. State National claimed that the bodily injury occurred while Harden was using a forklift to load or unload property from a covered auto and so was excluded from coverage. Harleysville countered that the injury was caused due to the use of the truck and so was excluded under its policy.
Harleysville urged the court to apply the efficient and predominating cause standard in its decision, that is, one thing must be the efficient and predominating cause of something else. State National wanted the court to use the efficient proximate cause standard whereby a peril specifically insured against sets other causes into motion which, in an unbroken sequence, produce the result for which recovery is sought and the loss is covered. The court said that the distinction between the two causes is irrelevant as the efficient and predominating cause of the accident under Indiana law is that which sets in motion the chain of circumstances leading up to the injury.
Ultimately, the court agreed with Harleysville that what set in motion the chain of circumstances leading up to Harden's injury was Parker's use of the truck, specifically when she prematurely pulled away. The court said that it was only that moment that she drove away from the dock that the circumstances leading to Harden's injury were set into motion. There simply was no injury that occurred when the property was being moved by the forklift during the loading/unloading process. The court decided that Harden's injuries did not result from the unloading of the skids, but rather from Parker's driving the truck away.
The court ruled that Harden was injured by the negligence of the truck driver. Accordingly, the court ruled that Harleysville had no liability for the Harden lawsuit because the accident fell under the auto exclusion in Harleysville CGL policy.
Editor's Note: The court in this instance had to decide what the cause of Harden's injuries was and which insurance policy then applied to the accident. Both the efficient proximate cause standard and the efficient predominating cause standard pointed to the injuries being caused by the use of the truck. The Harleysville policy clearly and unambiguously excluded bodily injury arising out of the use of an auto (the truck) and so, the claim for subrogation against Harleysville failed.. |
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