Eighth Circuit Adopts An Expansive Definition of Newly Acquired Property

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On July 23, a unanimous panel of the 8th Circuit held that it was reasonable to contend that a port terminal, where a shipping company hired by the policyholder had stored a piece of the insured’s equipment for six days, constituted an “acquired” location for coverage purposes even though the policyholder did not own, lease, possess or exercise any element of control over the facility. Given the fact that such an interpretation was deemed reasonable, the Court of Appeals held that the phrase “any location you acquire” was ambiguous, compelling a construction in favor of coverage.

In Amera-Seiki Corp. v. Cincinnati Ins. Co., -- F.3d --, 2013 WL 3795948 (8th Cir. 2013), the insured was an Iowa company that imported industrial equipment from overseas for customers here in the states. It purchased a vertical lathe in Taiwan for an Illinois manufacturer and retained a shipping company to transport the device by ship to Los Angeles, store it temporarily at the port, and then transport it by truck to Illinois. The lathe was delivered to Los Angeles on July 8, 2013, and it was stored for six days in a secured, fenced facility (South Terminal) at the port. South Terminal was owned by the Port of Los Angeles and operated by Eagle Marine Services. Amera-Seiki paid $1,950 to the shipping company, which in turn paid this sum to Eagle to store the device at the port.

On July 13, a longshoreman was using a yard tractor to move the lathe to a location where it could be picked up by the delivery driver when it fell and was destroyed. Amera-Seiki made an insurance claim under a commercial property policy issued by Cincinnati Insurance Company, contending that it had coverage under a “Newly Acquired or Constructed Property” clause. That provision extended coverage to “[b]usiness personal property, including such property that you newly acquire, at any location you acquire other than at fairs, trade shows, or exhibitions.”

Cincinnati denied liability, and the policyholder brought suit in state court in Iowa. Cincinnati removed the matter to the Northern District of Iowa, and the lower court subsequently granted Amera-Seiki’s motion for summary judgment and awarded compensatory damages in the amount of $337,025.50. An appeal to the 8th Circuit followed.

The issue was whether South Terminal constituted a location that Amera-Seiki had acquired within the meaning of the coverage extension. In a unanimous opinion by Chief Judge Riley, the 8th Circuit held that the language was susceptible to “two reasonable interpretations.” One (urged by Cincinnati) was that “Amera-Seiki did not ‘acquire’ [South Terminal] under the plain and ordinary definition of ‘acquire’ because Amera-Seiki did not own, lease, possess, or exercise any element of control, authority, or decision-making ability for the terminal.” One (urged by the policyholder) was that the insured “sufficiently got, obtained, possessed, and controlled – and thus acquired – the location at the terminal where the lathe was damaged when Amera-Seiki paid $1,950 for the right to store the lathe at a specific fenced and secured property for a specified time.”

The 8th Circuit deemed that “neither [interpretation] was unreasonable,” thereby rendering the language ambiguous. Because Iowa law required that any ambiguity be construed in the policyholder’s favor, summary judgment for Amera-Seiki was affirmed.

It bears noting that Cincinnati did not make any arguments regarding the word “you” as it appears in the phrase “any location you acquire.” As a result, Chief Judge Riley’s opinion specifically stated that his decision did not “address whether the policy, by referring to ‘any location you acquire,’ limited coverage to locations directly acquired by the insured” as opposed to those acquired by a third party such as the shipping company (emphasis in original).

 

 

Topics:  Acquisitions, Ambiguous, Heavy Equipment, Leases, Property Ownership, Summary Judgment

Published In: General Business Updates, Insurance Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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