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
- 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.
- 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.