Multiple Theft Losses of Amounts Less than the Deductible Defeats Claim

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Common Meaning of “Occurrence” Applied Since Policy Did not Define Term

In Port Consolidated, Inc. v. International Insurance Company Of Hannover, PLC, No. 19-13544, United States Court Of Appeals For The Eleventh Circuit (September 8, 2020) Port Consolidated, Inc. (“Port”), a Florida corporation, appealed the district court’s order granting summary judgment in favor of International Insurance Company of Hannover, PLC (“InterHannover”), a foreign corporation, on Port’s breach of contract claim, as well as the district court’s final order dismissing the remaining counts of Port’s complaint and the final judgment in favor of InterHannover.

FACTUAL HISTORY

Port is a fuel distribution company that operates a cardlock fuel facility in Riviera Beach, Florida (the “Garden Road Facility”). According to the parties, cardlock facilities are similar to traditional gas stations, but are unattended fueling facilities at which only authorized customers who have a preexisting contractual relationship can pump gasoline and diesel fuel. A customer  with access to a cardlock facility the customer must apply for and then sign an agreement with the facility’s owner. If approved, the customer receives a “CFN card,” which can be used to pump fuel at a cardlock facility, such as Port’s Garden Road Facility.  Customers can request restrictions on their CFN cards, including limits on the gallons of fuel to be pumped per transaction, the frequency of transactions, and the hours during which fuel may be pumped.

InterHannover issued a commercial property insurance policy (the “Policy”) to Port. Under the Policy, InterHannover provided coverage for “direct physical loss to covered property at a ‘covered location’ caused by a covered peril,” subject to a deductible. As to the deductible InterHannover pays only that part of a loss over the deductible amount stated on the schedule of coverages in any one occurrence and the schedule of coverages form provides that the per occurrence deductible is $1,000.

In February 2015, Port discovered that it had a fuel inventory shortage. Port’s investigation concluded that an incorrectly programmed setting on its fuel pumps at the Garden Road Facility, originating from a 2013 upgrade to that facility had not enforced the CFN card fuel limitation requested by Allied Trucking of Palm Beach (“Allied”), one of Port’s customers. Allied had placed a fuel purchase limitation of seventy-five gallons of fuel per transaction on its CFN cards. The incorrect setting, however, allowed Allied’s affiliated drivers, who work as independent contractors, to exceed the seventy-five-gallon limit by up to an extra hundred gallons despite Allied only being invoiced for seventy-five gallons per transaction.

Port informed InterHannover that it was asserting a claim under the Policy for the loss resulting from the allegedly stolen fuel. After InterHannover denied coverage, Port sued InterHannover.

Eventually InterHannover moved for summary judgment, arguing that Port was not entitled to coverage because the alleged thefts were expressly excluded under the Policy and that each alleged theft was a separate occurrence that did not exceed the $1,000 deductible in the Policy. The district court granted InterHannover’s motion for summary judgment. Applying the Florida Supreme Court’s decision in Koikos v. Travelers Insurance Co., 849 So. 2d 263 (Fla. 2003), the district court observed that, “absent contrary language in the policy, each act of fuel theft was a discrete occurrence for insurance purposes.”

ANALYSIS

Under Florida law, insurance contracts are construed according to their plain meaning.  In order for an insurance policy’s provision to be ambiguous, the provision must actually be ambiguous. If the relevant policy language is susceptible to more than one reasonable interpretation, one providing coverage and the other limiting coverage, the insurance policy is considered ambiguous. However courts may not rewrite contracts, add meaning that is not present, or otherwise reach results contrary to the intentions of the parties.

The term “occurrence” is not defined in the general definitions section of the Policy. Under Florida law, when an insurance coverage term is not defined, the term should be given its plain and ordinary meaning.

Under Florida law, a contract should not be read so as to make one section superfluous, and so all the various provisions of a contract must be so construed as to give effect to each. The Policy only defines “occurrence” to include multiple or a “series” of acts or unauthorized uses within a portion of the supplemental coverages endorsement that had no relationship to the claim of theft. The Eleventh Circuit concluded that determining that specific definitions of “occurrence” within certain supplemental coverages govern the entire Policy would render the absence of “occurrence” from the core Policy’s general definitions section meaningless.

The reasonable interpretation of the Policy as a whole is that the parties specifically expanded the scope of “occurrence” to include a series of actions if, and only if, a claim was made under those specific supplemental coverage provisions. An ambiguity is not invariably present when a contract requires interpretation. coverage does not necessarily render the term ambiguous.  Because “occurrence” is defined in sections of the supplemental coverage endorsement, but not in the Policy’s general definitions section, does not, according to the Eleventh Circuit, make the term ambiguous and concluded that none of Port’s losses exceeded the Policy’s deductible and InterHannover was not required to pay Port under the Policy for those alleged fuel thefts. Summary judgment in favor of InterHannover on Port’s breach of contract claim was found to be proper and the Eleventh Circuit affirmed the trial court because each alleged fuel theft Port suffered constituted a separate occurrence under the Policy and none of those alleged thefts exceeded the Policy’s deductible, the district court properly entered summary judgment in favor of InterHannover.

ZALMA OPINION

Port, the insured, tried to change its error in setting up its computer system into a theft failed because the evidence established that each “theft” was 100 gallons or less over the 75 gallon limit or $400. The $1,000 deductible applied to each “theft” when the drivers pumped more gas than allowed by the contract the incorrect software allowed them to pump more than the contract allowed. The Eleventh Circuit refused to rewrite the policy to help Port and had no choice but to affirm the trial court’s decision.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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