Why it matters

What is the primary purpose of a food truck? When faced with that question, a California appellate panel determined that the truck met an insurer’s definition of “mobile equipment,” triggering coverage under a commercial general liability policy. The insurer argued that the truck was a vehicle and therefore exempt from coverage due to an auto exclusion, but the court said “a plain reading” of the policy resulted in coverage under the CGL policy, reversing summary judgment for the insurer. The court added that the policy enumerated special use vehicles subject to the auto exception but – despite the fact that the policyholder maintained a fleet of food trucks and was in the business of leasing them – failed to include food trucks on the list.

Detailed discussion

Royal Catering Company owned a fleet of food trucks and leased them to operators who drove from site to site selling food. One of the trucks was leased by Esmeragdo Gomez, who operated the truck with his wife Irais.

Each day, the Gomezes cooked their food in the truck using a specially designed deep fryer, grill, steam table, oven, refrigerator, and coffee maker. They spent the rest of the day making a dozen stops to sell the food. The truck was equipped with only two seats and seatbelts.

One day, a guest rode in the truck and Mrs. Gomez stood in the back. At an intersection, Mr. Gomez swerved to avoid an approaching truck and hot oil splashed on Mrs. Gomez, burning her. The Gomezes filed suit against Royal.

Royal tendered the complaint to American States Insurance Company, its automobile insurer. American States provided a defense under a reservation of rights but also notified Travelers Property and Casualty, which had issued Royal a commercial general liability policy, about the Gomez suit.

The auto insurer reached a settlement with the Gomezes under the auto policy that allowed the plaintiffs to pursue their products liability claims against Royal to the extent that the claims were covered by Travelers’ policy. An arbitrator assigned 40 percent of the fault to Royal, awarding the Gomezes almost $2.5 million.

The two insurers then fought over who had to pay up.

American States’ policy excluded from coverage claims arising out of equipment furnished in connection with Royal’s “completed operations.” The Gomez action therefore did not trigger coverage under the auto insurer’s policy because the Gomezes’ work was deemed completed by putting the truck, including the deep fryer basket, to work, the court said.

The Travelers policy contained coverage for bodily injury and property damage liability with an auto exclusion. The policy defined an auto as “a land motor vehicle, trailer or semitrailers designed for travel on public roads, including any attached machinery or equipment. But ‘auto’ does not include ‘mobile equipment.’ ” In addition to a list of specified vehicles, the term “mobile equipment” included vehicles “maintained primarily for purposes other than the transportation of persons or cargo.”

“Under a plain reading of the [Travelers policy], the Gomezes’ food truck was ‘mobile equipment’ and not an ‘auto,’ ” the court wrote. “The primary purpose of the Gomezes’ food truck was to serve as a mobile kitchen and not to transport persons or cargo.” The first two hours of the day, the truck was parked while the Gomezes cooked food in it, the court noted; the rest of the day, the truck was driven not to transport anything but rather to stop and sell food.

Travelers could have included food trucks among the vehicles identified as “autos” and not subject to the “mobile equipment” exception, the panel added. “If Travelers had intended to exclude food trucks from coverage as ‘autos’ – a significant consideration in light of the fact that Royal maintained a fleet of food trucks and was in the business of leasing such vehicles – it would have identified them along with the other special use vehicles it identified as ‘auto,’ ” the court concluded.

Travelers had a duty to defend and indemnify Royal, the panel said, reversing summary judgment in its favor.

To read the decision in American States Insurance Co. v. Travelers Property & Casualty Co., click here.