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Fifth Circuit Analyzes CGL Auto Use Exclusion: EMCASCO v. American International
04.10.06

In January, the United State Fifth Circuit Court of Appeals addressed the automobile usage exclusion in a commercial general liability policy. Jaime Langston was driving down a paved, public country road when she skidded on a patch of slick mud, clay, or sand. Her car swerved off the road and struck a tree. She suffered serious injuries and her passenger died. Ms. Langston sued the operator of a sand pit located immediately adjacent to the accident site.

The sand pit operator had two different insurance policies, a commercial automobile liability policy and a commercial general liability (“CGL”) policy. The CGL policy contained an exclusion for injury or damage arising out of “the ownership, maintenance, use or entrustment to others of any aircraft, auto or watercraft owned or operated by or rented or loaned to any insured.” Additionally, use included operation and loading or unloading. The automobile liability policy covered damages from injury or property “caused by an accident and resulting from the ownership, maintenance of use of a covered auto.”

The auto carrier eventually settled the case. The auto carrier then sued the CGL carrier for subrogation, seeking to recover all or part of the settlement. Ultimately, both parties filed cross-motions for summary judgment. The district court granted the CGL carrier’s motion, finding that the damages were covered by the auto policy and were explicitly excluded by the CGL policy.

On appeal, the Fifth Circuit initially concluded that the pleadings did not preclude a duty to defend but spent the bulk of its opinion analyzing the duty to indemnify. The court summarized the complete operation test in two parts:

  1. whether the insured’s act was an act incident to and having a connection with the use of the truck and
  2. whether the act proximately caused a plaintiff’s injury.

Turning to the CGL policy, the court noted that it would cover the allegations with respect to the washing of the mud by the rain, which were allegations unrelated to the use of the trucks (and a separate claim for negligence per se based on the obstruction of the road adjacent to the sand pit worksite). The court reasoned that the non-excluded event, the washing of mud from the unpaved roadway, would be covered by the general liability policy if it would have independently caused the injuries. In other words, when two separate events—one that is excluded and one that is covered by the general liability policy—independently caused an accident, Texas law mandates the general liability also provides coverage despite the exclusion.

Ultimately, the court concluded that there was, at least, a genuine issue of material fact on the issue of causation and remanded the case to the trial court.