W.W. Roland Trucking v. Max America Co., No. 13-20341 (5th Cir. Feb. 24, 2014)
Roland was shipping a load of video-game consoles and left its trailer locked for the night in Roland's terminal. However, thieves cut through the fence and stole the trailer with the cargo. Roland's insurance policy covered:
[L]egal liability for loss to covered property: a. while under Roland's care, custody and control; [and] b. that Roland becomes legally obligated to pay as a common carrier . . .
This coverage, however, was subject to a warranty that Roland's terminal be "100% fenced, gated, locked, and lighted 24 hours per day, 7 days per week," . . . or else "coverage is null and void." Roland submitted its claim, which the insurer denied after investigation, finding that the fence perimeter actually had a hole, even though that had nothing to do with the theft. Roland brought a coverage lawsuit against Max America.
Roland asserted that that the warranty could not nullify coverage if the hole in the fence did not contribute to the loss in any way and supported its claim with the Texas Insurance Code's "Anti-Technicality Statute" [Section 862.054], which provides:
Unless the breach or violation contributed to the destruction of property, a breach or violation by the insured of a warranty, condition, or provision of a fire insurance policy or contract of insurance on personal property . . . (1) does not render the policy or contract void; . . .
The lower court agreed with Roland and required the insurer to cover the loss. On appeal to the Fifth Circuit, the insurer argued that the Anti-Technicality Statute should not apply to this case because the insurance at issue was a liability policy, not "a [first-party] fire insurance policy or contract of insurance on personal property." Nevertheless, the appellate court rejected this argument.
The Fifth Circuit held that policies referencing, as here, "legal liability," are not "by default liability insurance contracts." Relying on the Texas Supreme Court's decision in Hudiburg Chevrolet, Inc. v. Globe Indemnity Co., 394 S.W.2d 792 (Tex. 1965), the appellate court noted that Texas had adopted the majority rule for coverage of loss of property in the hands of a bailee like Roland), which states:
Policy provisions covering property contained in specified places and "for which the insured is liable" have been held to insure against loss and to indemnify insured against his legal liability in tort or by contract to the owners of the property.
Thus, an insured bailee may sue the insurer under this rule for losses of the owner's property. The Fifth Circuit reasoned that policies insuring against the theft of property belonging to a third party while under the care, custody, and control of the insured, "have previously been considered property policies under Texas law," even if the policy uses the term "legal liability." The property owned by a third party is thus deemd first-party insurance for purposes of the Anti-Technicality statute.
David S. White