Supreme Court Rules for Insurance Company

After three workers fell to their deaths while repairing a communications tower, the insurance company for the responsible company denied coverage. In the recent case of Mid-Continent Casualty Company v. Global Enercom Management, Inc., ___ S.W.3d ___ (Tex. 2010)(10/1/01), the Supreme Court upheld that denial of coverage.
Global Enercom, which maintains communications towers, sent a written contract for repair work to All States; All States signed the contract and then returned it to Global. The contract required All States to provide insurance for Global. The boss of the three workers attempted to hoist them up the tower by using a pick-up truck to pull a rope attached to a pulley; when the rope broke, they fell to their deaths. Global subsequently signed the contract. The carrier denied coverage because of the “auto use” exclusion and the “subsequent-to-execution” exclusion. The Supreme Court ruled that the “auto use” exclusion in a CGL policy applied but that the “subsequent-to-execution” exclusion in a CGL and auto policy did not.

The parties disputed what caused the rope to break and the role of the pickup truck in the event. The Court employed, but not “as an absolute test,” the “Appleman/Couch” factors to analyze the “use” clause: “‘(1) the accident must have arisen out of the inherent nature of the automobile, as such, (2) the accident must have arisen within the natural territorial limits of an automobile, and the actual use must not have terminated, (3) the automobile must not merely contribute to cause the condition which produces the injury, but must itself produce the injury.'” Using these factors, “we conclude that the exclusion applies to this case as a matter of law.” The “nature” of the pickup is to “haul and tow.” The truck was leased for this job and had “eye hooks” that were used in the operation. The accident was within the truck’s “territorial limits” because the workers were “attached to the pulley system.” In addition, there is causation. Here, “the rope would not have broken if the truck was not used to hoist” the workers. Thus, the “‘auto-use’ exclusion in All States’s CGL policy precludes coverage for the accident under that policy.”
The “subsequent-to-execution” term excludes coverage for events unless they occur after the “insured contract” was executed. Here, it was not signed by Global until after the event. But, “execution” includes more than signing. A “contract need not be signed to be ‘executed’ unless the parties explicitly require signatures as a condition of mutual assent.” “‘The execution of a contract includes the performance of all acts necessary to render it complete as an instrument.'” In this case, there was mutual assent (which “can be inferred from the circumstances”) to the work, which had already begun. And the policies did not require “both parties to sign the insured contract.” Thus, this exclusion did not bar coverage in the CGL or auto policy.