## Facts

- E.M.M.I., a jewelry business, bought a jeweler’s block “all risks” policy from Zurich covering direct physical loss to covered jewelry, subject to exclusions.
- The policy excluded “theft from any vehicle unless” the insured, an employee, or an attendant “are actually in or upon such vehicle at the time of the theft.”
- E.M.M.I.’s designated traveling salesman, Brian Callahan, transported jewelry in the trunk of his car.
- After hearing a noise, Callahan pulled over, left the engine running, exited the car, and crouched near the rear to inspect the exhaust, remaining about two feet from the car.
- A thief entered the car and drove away; the vehicle was later recovered but the jewelry was missing.
- Zurich denied E.M.M.I.’s claim, asserting the exclusion applied because Callahan was not “actually in or upon” the vehicle at the moment it was taken.

## Issues

1. Whether the policy’s vehicle-theft exclusion unambiguously precludes coverage when an employee briefly exits the vehicle but remains in close proximity and is attending to it when the theft occurs.
2. Whether, given California rules requiring exclusions to be conspicuous, plain, and clear, the “actually in or upon” language must be construed against the insurer as ambiguous in context.

## Decision

- The California Supreme Court reversed the summary judgment entered for Zurich and remanded.
- The Court held the vehicle-theft exclusion, read as a whole, was ambiguous as applied to an employee who was very near the vehicle and actively attending to it.
- Because the exclusion/exception language did not plainly and clearly state that a brief exit while remaining close and attentive defeats coverage, coverage was not barred as a matter of law.

## Legal Principles

- Insurance coverage provisions are interpreted broadly in favor of protection; exclusions must be stated in language that is conspicuous, plain, and clear.
- Ambiguities in exclusionary language are construed against the insurer and in favor of coverage, including ambiguities in exceptions to exclusions that restore coverage.
- Policy terms must be interpreted in context and from the standpoint of a reasonable insured; a term is ambiguous if it is reasonably susceptible to more than one meaning.
- An insurer seeking to rely on an exclusion bears the drafting burden to make the limitation unmistakable; unclear wording will not defeat coverage on summary judgment.

## Conclusion

Because “actually in or upon” within the vehicle-theft exclusion’s coverage-saving exception was reasonably susceptible to including close, attentive supervision of the vehicle, the exclusion did not clearly eliminate coverage when the employee stepped out briefly but remained nearby; summary judgment for the insurer was improper.


E.M.M.I. Inc. v. Zurich Am. Ins. Co., 32 Cal. 4th 465, 84 P.3d 385 (Cal. 2004)