On February 20, 2018, the Superior Court of Pennsylvania affirmed an order entered in the Court of Common Pleas of Luzerne County, denying summary judgement in favor of Naro Enterprises, and granting summary judgement in favor of Great American Insurance Group.  The coverage dispute arose out of the question of whether a trailer was in “transit” at the time it was stolen.

The underlying facts are not in dispute.  On May 8, 2008 at 8:00 a.m., a driver for Naro picked up a trailer loaded with steel rods from Sandvick Materials.  After picking up the rods, the driver returned to Naro headquarters at 12:00 p.m. for a pre-trip inspection.  The trailer was destined for Texas, but damage to the trailer was discovered and an independent welder had to be brought in to repair it.  The repair was done on May 10, 2008.  The trailer had remained on the Naro property throughout the repair and was last seen at the Naro site on May 11, 2008 sometime around noon.  The trailer and steel rods were discovered to have been stolen on May 12, 2008 which was more than 85 hours after the driver’s arrival at Naro.

Naro submitted a claim to Great American seeking in excess of $210,000 for the stolen goods.  Great American denied the claim asserting that the goods were not in transit at the time of the theft because transit had ended after 72 hours passed with the trailer at the Naro site.  There is no dispute between the parties that the trailer remained at the Naro location for more than 72 hours.  Under the relevant insurance policy, “Transit begins” “with actual movement of the goods from point of shipment bound for a specific destination.  It remains in transit during the ordinary, reasonable and necessary stops, interruptions, delays or transfers incidental to the route and method of shipment.”  “Transit ends” when: (1) Covered Property is accepted by, or on behalf of, the consignee at the intended destination or at any intermediate point short of the original intended destination; (2) seventy-two hours after arrival at destination; or (3) any other stop that exceeds seventy-two hours.

Naro argued that the trailer and cargo were in transit pursuant to the definition of “Transit” in the policy and claimed that the 72-hour limit imposed in the definition did not apply.  Naro claimed that condition number 3, which states that transit ends when “any other stop exceeds 72 hours,” applies to stops “other” than those stops that are “ordinary, reasonable, and necessary” pursuant to the definition of “Transit” found in the policy.

The court disagreed with Naro as they held that “other”, as used in the definition of “transit ends” refers to the immediately preceding conditions 1 and 2, and not, as Naro contends, to the “ordinary, reasonable and necessary stop” referred to in the definition of “transit begins.”  Therefore, the court held that the 72-hour rule is applicable and that, because the trailer was on Naro’s property for more than 72 hours, that Great American did not owe coverage. Thanks to Garrett Gitler for his contribution to this post.  Please email Brian Gibbons with any questions.