(Article from Insurance Law Alert, September 2020)
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The Eleventh Circuit ruled that each alleged theft of gas at a filling station constituted a separate occurrence subject to a separate deductible, notwithstanding that all thefts occurred due to the same computer malfunction. Port Consolidated, Inc. v. International Ins. Co. of Hannover, PLC, 2020 WL 5372281 (11th Cir. Sept. 8, 2020).
Port Consolidated, Inc., a fuel distribution company, operates a cardlock facility in which only authorized customers with preexisting contractual relationships can pump gasoline and diesel fuel. Customers use “CFN” cards at the filling station and can request restrictions on the cards, such as limits on the gallons of fuel or frequency of transactions. Such restrictions are “pegged” to the CFN card so that the facility’s computer system can enforce them. Port discovered an incorrectly programmed setting on its fuel pumps that failed to enforce a fuel limitation request by Allied Trucking, one of its customers. The incorrect setting allowed Allied’s drivers to exceed the 75-gallon limit that should have been in place by up to an extra 100 gallons, despite Allied only being invoiced for 75 gallons per transaction. According to Port, Allied’s drivers engaged in thousands of fuel transactions and intentionally exploited the error to steal fuel. When Allied refused to pay the difference, Port sought coverage under a general liability policy issued by Hannover.
In the ensuing coverage dispute, Hannover argued that each alleged theft was a separate occurrence that did not exceed the $1000 deductible in the policy. A Florida district court agreed and granted Hannover’s summary judgment motion. The Eleventh Circuit affirmed, rejecting Port’s assertion that all of its losses should be construed as a single occurrence pursuant to a definition included in policy endorsements. The term “occurrence” is not defined in the general definitions section of the policy, but in three sections of a supplemental coverage endorsement, it is defined to include “a series” of unauthorized actions or uses. Port argued that the supplemental coverage definitions should be applied to the policy as a whole, or alternatively, established ambiguity. Dismissing these arguments, the court concluded that under Florida law, the undefined term “occurrence” is unambiguous and is determined by “the immediate injury-producing act.” Further, the court emphasized that each alleged theft was an act “separated and distinguishable in ‘time and space.’” Because no single fuel theft exceeded the $1000 deductible, the court concluded that Port was not entitled to coverage under the policy.