Introduction

The Ninth Circuit Court of Appeals is set to rule on a dispute between a trucking company (Tengfei Trucking, Inc.) and a trailer supplier (Big Brother Transportation) over the trucking company’s duty to defend the trailer supplier in a fatal accident.[i] In Am. Sentinel Ins. Co. v. Nat’l Fire & Marine Ins. Co., the federal district court granted summary judgment to American Sentinel Insurance Company (“ASIC”), finding that the insurance policy issued to Tengfei Trucking (“Tengfei”) by National Liability & Fire Insurance Company (“National”) held a duty to defend Big Brother Transportation in an underlying personal injury suit involving a Tengfei driver and truck, and a trailer Big Brother leased to Tengfei.[ii]

The Facts

On March 15, 2020, a fatal motor vehicle accident occurred when a tractor-trailer driven by Alfred Green rear-ended a 2015 Volvo tractor-trailer driven by Yongchao Chen.[iii] Green eventually died from his injuries.[iv] Green’s estate filed a wrongful death complaint in federal court and named Tengfei, Big Brother, and other defendants.[v] The complaint alleged Big Brother or Tengfei owned the 2015 Volvo tractor and trailer, and the driver acted in the course and scope of his employment for one or both companies at the time of the collision.[vi] The estate then amended its cross-complaint, which resulted in the underlying action.[vii] It alleges that the driver of the 2015 Volvo tractor-trailer acted within the course and scope of his employment with Tengfei and raises claims of negligence and wrongful death against Tengfei, Big Brother, and others.[viii]

National claims that it issued a trucker’s policy to Tengfei which included hired auto coverage.[ix] Such coverage is intended to ensure that, in situations where a vehicle in the trucking business is leased for a short period (sometimes less than a day) those truckers driving the vehicle for this short period are qualified as “insured” by the leasing trucker’s insurance. However, under this policy, those truckers driving the vehicle for this short period are qualified as “insured” only if the trucker maintains primary coverage for owners of hired autos without the need to schedule the vehicles on the motor carrier’s policy formally.[x]

The ASIC policy, however, only insures “scheduled autos” – not hired autos – which means that coverage depends on whether Big Brother added the leased tractor or trailer from Tengfei to its policy before its use.[xi] This formality requirement, therefore, conflicts with National General’s primary hired autos requirement of what constitutes an insured.[xii]

National alleges the Central District missed this distinction.[xiii] Instead, the Central District took an approach that ASIC’s coverage could satisfy National’s Policy by reading limiting language into the Policy where language did not exist.[xiv] Instead, the court concluded the following:

The National policy does not require that the reciprocal policy provide primary coverage in all circumstances without limitations or exclusions. It only requires that Big Brother maintain insurance “for hired ‘autos’ under an ‘auto’ liability insurance form that insures on a primary basis the owners of the ‘autos’ and their agents and ‘employees’ while the ‘autos’ are being used exclusively in the ‘trucker’s’ business and pursuant to operating rights granted to the ‘trucker’ by a public authority.”[xv]

National thus concludes the court violated a fundamental rule for interpreting insurance contracts in California: policy language must be interpreted according to its plain and ordinary meaning.[xvi] This is an issue the Ninth Circuit will no doubt grapple with here. It underscores the importance of plain language interpretation in California for five reasons:

1. Clarity and Transparency: Insurance contracts are often complex legal documents with technical jargon and terminology. Plain language interpretation makes the terms and conditions more accessible and understandable for policyholders. It ensures that individuals can comprehend the coverage, limitations, and obligations under their policies without needing legal expertise, reducing confusion and misunderstandings.
2. Informed Decision-Making: When insurance contracts are written in plain language, policyholders can make more informed decisions about the coverage they need. They can better assess whether a policy aligns with their requirements and risk profile. This empowers consumers to choose policies that best suit their needs and protect them adequately in case of unforeseen events.
3. Reduced Disputes and Litigation: Ambiguous or unclear language in insurance contracts can lead to disputes between policyholders and providers. Plain language interpretation minimizes the potential for misinterpretations and disagreements, reducing the likelihood of costly and time-consuming legal battles. By promoting greater clarity, both parties can understand their rights and obligations more easily, fostering a smoother claims process.
4. Consumer Protection: Insurance contracts can have far-reaching financial security implications for policyholders. Plain language interpretation is crucial for ensuring hidden terms or unfair clauses do not exploit consumers. It promotes a fair and balanced relationship between insurers and policyholders, safeguarding consumers from deceptive practices and promoting transparency in the insurance industry.
5. Compliance and Regulatory Compliance: The California insurance market is subject to specific regulations and consumer protection laws. Plain language interpretation helps insurance companies comply with these regulations and ensures that policies meet the legal requirements for transparency and fairness. This, in turn, enhances the overall trust and credibility of the insurance industry in the eyes of consumers and regulators alike.

Conclusion

The pending case before the Ninth Circuit underscores the importance of plain language insurance policy interpretation. Plain language interpretation of insurance contracts in California is essential for fostering trust, transparency, and fair practices between insurers and policyholders. As California continues to be a hub for diverse industries and businesses, the clarity and accuracy of insurance policies are paramount in safeguarding individuals, companies, and their assets. And although the Ninth Circuit will need to wrestle with this doctrine in this pending case, it won’t be the last time.

Keep Reading

Cannabis Workers Allege Quota to Trim 4 Pounds a Day Violates the California Labor Code The Ninth Circuit Reminds Us: Every Word Matters NO WAY, PRO SE! The Consequences of Abusing the Judicial System as a Pro Se Litigant in Colorado Victim of Financial Mismanagement or Unlawful Retaliation? New Jersey City University Program Founder Claims School Retaliated After Reporting Alleged Sexual Harassment “Real Housewives” Gets a Reality Check Missing a Chapter: Insufficiency of Expert Deposition Testimony in Medical Malpractice Litigation Crash Course: Why Summary Judgment Misses the Mark in Illinois Multi-Cause Limousine Crash Collision Bitter Truths: Lead, Cadmium, and Defective Pleadings in California Chocolate Class Action The Law of Unintended Consequences: Including Insurance Brokers in Litigation Strategy Communication May Waive the Attorney-Client Privilege

More by this author

Modern Headache: Actress Sofia Vergara is Sued for $1.7 Million by Former Contractor A League of Their Own: Sports Leagues’ Novel Argument Fails to Persuade California Appellate Court Up In Smoke: Insurer Sues Landlord For Failure to Obtain Liability Insurance from Tenant  The Truck Stops Here: Dispute Over Trucking Company’s Liability Makes Its Final Stop at the Ninth Circuit You’re It: California Federal Court Tags Insurer to Defend in Habitability Case That’s a Wrap: California Appellate Court Shutters Theater Chain’s COVID-19 Business Interruption Bid Out of This World! California Supreme Court Agrees to Review COVID-19 Business Interruption in Another Planet Ent., LLC Trial and No Error: California Jury Shows the Good that Can Come from Effective Defense Strategies California Federal Court Maintains Broad Duty of Insurer to Defend

Sources

[i] (Am. Sentinel Ins. Co. v. Nat’l Fire & Marine Ins. Co. (9th Cir.) Dckt. 10, Case No. 23-55175.)

[ii] (Am. Sentinel Ins. Co. v. Nat’l Fire & Marine Ins. Co. (C.D. Cal. Jan. 26, 2023) CV 22-2602 PA (ASx).)

[iii] (Am. Sentinel Ins. Co. v. Nat’l Fire & Marine Ins. Co. (9th Cir.) Dckt. 10, Case No. 23-55175.)

[iv] (Am. Sentinel Ins. Co. v. Nat’l Fire & Marine Ins. Co. (C.D. Cal. Jan. 26, 2023) CV 22-2602 PA (ASx).)

[v] Ibid.

[vi] Ibid.

[vii] Ibid.

[viii] Ibid.

[ix] Id. at 2.

[x] (Am. Sentinel Ins. Co. v. Nat’l Fire & Marine Ins. Co. (C.D. Cal. Jan. 26, 2023) CV 22-2602 PA (ASx) at 2.)

[xi] Ibid.

[xii] Ibid.

[xiii] Ibid.

[xiv] (Am. Sentinel Ins. Co. v. Nat’l Fire & Marine Ins. Co. (9th Cir.) Dckt. 10, Case No. 23-55175, 14-5.)

[xv] (Am. Sentinel Ins. Co. v. Nat’l Fire & Marine Ins. Co. (C.D. Cal. Jan. 26, 2023) CV 22-2602 PA (ASx) at 1.)

[xvi] (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18.)