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A Pennsylvania appellate court, reversing a trial court’s decision, has concluded that an insurance policy exclusion for “ongoing business operations” did not bar coverage for damages resulting from a fire at a vehicle dismantling facility in Harrisburg.

The Case

On May 12, 2014, a fire started at a vehicle dismantling facility operated by Hebron Inc., in Harrisburg, when one of Hebron’s truck drivers was attempting to pump gas into a flatbed truck in the loading dock area outside the facility. The fire caused damage to Hebron’s facility as well as to neighboring businesses and vehicles parked in the area.

At the time of the fire, Hebron was the named insured under a commercial liability policy issued by Tuscarora Wayne Insurance Co. (TWIC) that excluded coverage for “property damage arising out of [vehicle dismantling], regardless of whether such operations are conducted by you or on your behalf or whether the operations are conducted for yourself or for others.”

The policy did not define the phrase “vehicle dismantling.”

Several months after the fire, TWIC went to court seeking a declaration that it was not obligated to defend or indemnify Hebron for any property damage claims arising from the fire in light of the exclusion.

The trial court granted summary judgment in favor of TWIC, concluding that refueling a truck used to transport vehicles to Hebron’s facility to be dismantled was “incidental to the vehicle dismantling business.” Therefore, the trial court decided, claims arising from refueling the truck were subject to the exclusion in the TWIC policy for “ongoing business operations, namely ‘vehicle dismantling.’”

Hebron appealed.

The Appellate Court’s Decision

The appellate court reversed.

In its decision, the appellate court explained that the fire started shortly after 5 p.m. in a loading dock area outside the building that housed vehicle dismantling operations. The appellate court pointed out that Hebron’s facility closed at 5 p.m. but that vehicle dismantling operations ceased each day at 4:30 p.m., and that all Hebron employees involved in dismantling vehicles already had left the facility when the fire occurred.

The appellate court noted that the operations manager and a truck driver were fueling a truck so it would be ready for dispatch the following day, but it found that the only “connection” the fueling process had with vehicle dismantling operations arose from the fact that the fuel used by Hebron trucks was drained from vehicles that were dismantled.

According to the appellate court, the fuel drained from vehicles during the dismantling process was deposited in a drum to be pumped into larger holding tanks in the loading dock area outside the facility, and the fuel remained in the holding tanks until pumped into another holding tank or used to fuel Hebron vehicles.

The appellate court then ruled that the trial court’s grant of summary judgment based on its conclusion that fueling a truck used to transport vehicles to be dismantled was “incidental to the vehicle dismantling business” misconstrued the facts of the case and was counter to the obligation to construe policy exclusions in favor of the insured.

After finding that the fire did not occur in the course of vehicle dismantling so as to be subject to the exclusion, the appellate court concluded that TWIC was required to defend and indemnify Hebron under the terms of TWIC’s policy and that Hebron was entitled to summary judgment in its favor.

The case is Tuscarora Wayne Insurance v. Hebron.

Steven A. Meyerowitz is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. As FC&S legal director, Meyerowitz, a member of the team that conceptualized FC&S Legal, provides daily analysis and commentary on the most significant insurance coverage law decisions from courts across the country and news regarding legislative and regulatory developments. A graduate of Harvard Law School, Meyerowitz was an attorney at a prominent Wall Street law firm before founding Meyerowitz Communications Inc., a law firm marketing communications consulting company.