So what happens when you run over a gas line with a wheeled electronic recycling bin in a residential building and rupture the gas line? Does the building’s all risks insurance cover the cost of restoring the gas service? Not according to the federal courts in New York.
In 1070 Park Avenue Corp. v. Fireman’s Fund Insurance Co., No. 18-1887-cv (2d Cir. Jul. 2, 2019) (Summary Order), the building sought coverage from its insurer for the cost of restoring the gas line service after the rupture. The insurer disclaimed coverage based on an exclusion for the costs associated with the testing of a gas system for integrity. Here, after the gas line ruptured, the gas system was required by law to pass an integrity test before it could be turned back on. The exclusion provided that there was no coverage for the costs associated with the enforcement of any law or ordinance that requires testing of a gas system for integrity. The exclusion did not apply if the testing was required by a direct loss causing physical damage to covered property from, among other things, vehicles. So, of course, the policyholder argued that the recycling bin was a “vehicle” because it had wheels so the exclusion should not apply.
Unsurprisingly, this argument was rejected by the district court and affirmed on appeal. The circuit court held that it agreed with the district court that the word “vehicle” in the context of the insurance policy here clearly did not include the e-cycle bin. The court noted that under New York law, insurance policies have to be interpreted according to common speech and consistent with the reasonable expectations of the average insured. The court opined that not everything with wheels is a “vehicle” as that word is commonly understood. The court held that the average insured would not reasonably expect that an exception that refers to “aircraft or vehicles” covers a recycling bin. As the court stated, “vehicle” plainly focuses on transportation or conveyance.
Because the court agreed that the e-cycling bin was not a “vehicle” and that the gas systems exclusion applied, it agreed that the insurance company was entitled to summary judgment.