Defective CGL Auto Exclusion Applied Even Though Insured Did Not Own or Use the Auto

Evanston Insurance Company v. Travis Downing d/b/a Travis Downing Meter Testing, # SA-08-CA-0387-H (E.D. Tex. September 29, 2008)

This federal district court case reveals a serious coverage gap between some general liability (CGL) policies and commercial auto policies.   For our purposes, they both cover roughly the same thing: legal liability for bodily injury and property damage caused by an occurrence (i.e., accident).  The auto policy applies when the accident arises out of the ownership, maintenance, or use of a covered auto.  The CGL policy in this case explicitly excludes injury or damage arising out of the ownership, maintenance, or use of an auto.  As these policies are usually drafted, an otherwise covered occurrence should be covered either by the CGL or the auto depending on the legal proximity of the accident to the use or ownership of an auto.

Mr. Downing's experience shows, however, that he must not have had a standard CGL policy.  He runs a business that tests for leaks on cargo tank trucks.  A 2000 Freightliner tanker truck that he tested rolled over on the highway and caught fire (killing the driver) allegedly because fuel leaked from the lid of the tanker when the suspension failed and the truck rolled.  A lawsuit against Travis Downing alleged that his negligent testing contributed to the accident.  Downing's CGL insurer denied coverage on the theory that the driver's death arose out of the use of an auto, which is excluded.  One can imagine that Mr. Downing's auto carrier also denied (or would have denied if the claim was submitted to it) coverage because the accident didn't arise out of an auto covered under Downing's policy.

Hence the gap.  The court did not consider the coverage dilemma Mr.Downing found himself in and focused exclusively on the causal link between the roll over of the vehicle and the fuel spill.  Not surprising, the court found one.  The driver's death arose from the use of an auto, even if the fuel spill was a concurrent or contributing cause.  So, is Mr. Downing engaged in business operations that are largely uninsurable: testing other people's vehicles?

The answer is, not usually.  Either the judge failed to read the entire CGL policy, or Mr. Downing's CGL policy is defective.  The standard CGL policy excludes injury arising from the use, etc., of an auto "owned or operated by, or rented or loaned to any insured."  Since Mr. Downing only worked on the auto and did not own or operate it, this exclusion would not apply.  Under a standard CGL policy, the insurer would be obligated to defend the insured unless the auto in question was used or owned by the insured, in which case, it should be covered under a commercial auto policy.

Everybody that works on vehicles, check your CGL policies to make sure you have the standard auto exclusion language.