Fifth Circuit: Insurer Can’t Escape Coverage in Fatal Unloading Accident

An insurer can’t evade its duty to defend a Texas construction company sued over the death of a truck driver on its premises, the U.S. Court of Appeals for the Fifth Circuit ruled in an April 4 decision.

Tarango Trucking held a commercial general liability policy issued by Penn-America Insurance Company when on March 2, 2020, driver SirMyron Birks-Russell, was killed when a tractor’s breaking system disengaged on Tarango’s sloped parking lot, causing the tractor to roll back and fatally strike Birks-Russell.

Birks-Russell’s survivors sued Tarango and the deceased’s employer in state court. Their petition claimed that Birks-Russell’s death occurred in part because Tarango failed to maintain a level parking and loading facility where dangerous and heavy equipment is routinely offloaded and parked, which “posed a serious likelihood that this unlevel parking lot would eventually cause serious injury and/or death.”

Tarango tendered claims in the underlying action to Penn-America, which defended the company but reserved its right to contest coverage.

Penn-America filed a declaratory judgment action in federal district court where it argued the allegations against Tarango fell within the policy’s Auto Exclusion, negating coverage along with its defense and indemnity obligations. Tarango filed a counterclaim, asserting that the Auto Exclusion does not apply to the claims in the petition and even it did, the Parking Exception to the Auto Exclusion restores coverage.

The district court ruled Penn-America has no duty to defend or indemnify Tarango, to which Tarango appealed.

The dispute centers on the language of the Auto Exclusion and its Parking Exception. The Auto Exclusion states that insurance does not apply to Bodily injury or property damage arising out of the ownership, maintenance or use by any person of any auto. . . . Use includes operation and “loading or unloading.”

The Parking Exception reinstates coverage in acts involving a parked auto.

Penn-America argues the Parking Exception cannot encompass the unloading process, “because the Auto Exclusion expressly states that “loading or unloading” constitutes an excluded “use” of an auto.”

The Fifth Circuit, however, construed the Parking Exception as reinstating coverage over bodily injury and property damage that arise out of parking an ‘auto’ on Tarango’s premises, as “the latter trumps the former and reinstates coverage.”

The Fifth Circuit reversed the district court’s conclusion, holding that Penn-America has a duty to defend and the district court was premature to decide the indemnity issue. The Fifth Court remanded the case to the district court for further proceedings consistent with its opinion.

Topics Carriers