W.W. Rowland Trucking Company, Inc. v. CRC Insurance Services, Inc. et al

Filing 27

OPINION on Summary Judgment 22 . (Signed by Judge Lynn N. Hughes) Parties notified. (ghassan, )

W.W.Rowland Trucking Company, Inc.,
Plaintiff,

versus
CRC Insurance Services, Inc., et al.,
Defendants.

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Civil Action H-I 2.91

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Opinion
I.

Introduction.

A truclang company sued its insurance company because it refused to pay for losses
resulting from the theft of one of its trucks. The insurance company says it does not have to
pay because the trucking company's terminal was not one.hundred.percent fenced

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warranty under the contract. The truclung company says the breached warranty is irrelevant
because it did not contribute to the loss. The trucking company will prevail.

2.

Background.

W.W. Rowland Trucking Company, Inc., purchased theft insurance from Alterra
America Insurance Company. Rowland told Alterra that its terminals are "100% fenced,
gated, locked and lighted 24 hours per day, 7 days per week." The insurance contract says,
"Coverage is null and void otherwise."
Thieves stole a truck from one of Rowland's terminals. Fencing at that terminal was
down in several areas. Ignoring those gaps, the thieves created their own larger hole in the
fence for their escape route. The stolen truck was loaded with $3 54,000 worth of goods.
Rowland wants Alterra to pay for its cargo losses. Alterra denied their claim because
it says Rowland breached its warranty that the terminal was completely fenced. Rowland also
sued the independent claims investigator - Engle Martin &Associates, Inc. - for negligently
investigating the claim.

3.

Brcacb of Contract.
Rowland says Alterra breached the insurance contract by refusing to pay, Alterra says

it is not obligated to pay because Rowland breached its warranty to completely fence the
terminal. In Texas, an insurance contract on personal property is not voided by a warranty
violation unless it causes or contributes to the loss.' T h e insurance company has the burden
of proof to show the warranty violation contributed to the loss.'
Alterra has not shown the old gaps in the fence aided in or encouraged the theft.
Alterra says the damaged fence contributed to the loss by making the terminal a more
tempting target for potential thieves. This is pure speculation. Alterra's own investigation
shows the thieves stole the truck by driving through a large gap that they cut themselves. In
Texas, Rowland's "technical" breach of warranty does not void the insurance company's
obligation to pay because the insurance company has not shown it contributed to the loss.
Alterra says Texas's anti-technicality statute is inapplicable because Rowland did not
own the stolen cargo. Alterra says the term "personal property" in the statute is intended to
limit protection to owners and exclude third parties like carriers. T h e statute does not support
this interpretation. A more natural reading of personal property is that it was intended simply
to contrast with real property. T h e cargo in question is clearly not real property.
Moreover, as a carrier, Rowland is a bailee for the cargo owner. As a bailee, Rowland
has all of the rights and responsibilities of a legal owner. As early as 1840, Justice Story said
a bailee ought to have the same general rights as the owner because the bailee is answerable
to the owner.3 It is a general rule that a bailee is entitled to recover the full value of bailed
goods as though it was the owner.4 Because Alterra points to a difference without distinction
when it contrasts the owner of the cargo with Rowland, the anti-technicality statute applies.

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Tex. Ins. Code Ann. art 862.054 (West 2009).

' Tex. Ins. Code A n n art. 554.002 (West zoo9).
3

Joseph Story, Commentaries on the Law of Bailments 73 (2nd ed. 1 8 ~ 0 ) .

Ray Andrews Brown, T h e Law of Personal Property 311 ( 1 ~ 5 5 ) ;
Southwestern
Bell Tel. Co. v. Commercial Metals Co., 389 S.W.2d I 16 (Tex. Civ. App. 1965) (bare
possession is sufficient title to recovery against naked trespasser).

4.

The Investigation.

Rowland says Engle Martin was not thorough in investigating its claim, which led to
inaccurate findings that harmed its reputation. No data supports this claim. Rowland has not
shown how its reputation has been harmed. It has not identified a single lost business
opportunity. It also has not identified a fact or process that was wrong - much less willfully
wrong. This case is about the legal interpretation of insurance rules, not an imprecise
investigation. Its including Engle Martin as a defendant was gratuitous or worse.

5.

ConcIusion.

Rowland admits that its fences were damaged in violation of its warranties. In Texas,
a breach of warranty may not be used to void a contract unless it is plausibly connected to the
loss. Rowland will prevail on summary judgment because its breached warranty was not
shown by Alterra to contribute to the loss.

Signed on January 13,2013, at Houston, Texas.

Lynn N. Hughes \J
United States District Judge