Insurer Owes Coverage After Longshoreman Drops Lathe

Amera-Seiki Corp. v. The Cincinnati Ins. Co., United States Court of Appeals for the Eighth Circuit, July 23, 2013 The Eighth Circuit Court of Appeals found that The Cincinnati Insurance Company owed coverage to its insured for equipment that was destroyed at port terminal based on ambiguous policy language. The Cincinnati Insurance Company insured a machine tool supplier, Amera-Seiki Corp., under a commercial property policy. During the policy period, Amera-Seiki purchased a vertical lathe from Taiwan for delivery to a customer in Illinois. The lathe arrived at the Port of Los Angeles and Amera- Seiki paid to store the lathe at the Port terminal. Subsequently, a long-shore worker was moving the lathe by tractor and the lathe fell and was destroyed. Cincinnati agreed to pay Amera-Seiki $10,000 for the claim, the sub-limit amount the policy provided for transportation coverage, which was significantly less than the policy limit. Amera-Seiki decided to sue Cincinnati, arguing that a clause in the policy extended full coverage for “newly acquired property,” which applied to extend full coverage for the loss of the lathe. The policy did not define the term acquire and the parties did not agree to its meaning as applied to the case. The court first stated that the term acquire generally has a broad meaning, as “to come into possession, control, or power of disposal of.”Cincinnati argued that Amera-Seiki did not acquire the terminal where the lathe was stored because it did not own, lease, possess or exercise any element of control over the terminal. Amera-Seiki only arranged passive arrangements for storage. Amera-Seiki argued that acquire is an extremely broad term including to get or obtain in any way and that it had obtained the terminal for storage. The court stated that “[a]lthough we are not persuaded the newly acquired property extension unambiguously extended coverage to the terminal, we agree with the district court that the phrase “any location you acquire” is “objectively susceptible to the reasonable interpretation pressed by [Amera-Seiki] and consistent with the ordinary meaning of those words.” Accordingly, the court found that Cincinnati owed full coverage under the extension of coverage for any location you acquire.

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