AJC International, Inc. v. Triple-S Propiedad
790 F.3d 1
1st Cir.2015Background
- Economy International stored AJC’s perishable goods in its freezers; a mechanical breakdown caused spoilage and mandated destruction by federal agencies, producing over $1M in losses.
- AJC sued insurer Triple‑S under Economy’s policy (diversity jurisdiction); both sides moved for summary judgment on coverage amount.
- The policy’s Declarations list a $500,000 limit for “Personal Property of Others.” The policy also contains a Mechanical Breakdown Exclusion.
- Economy obtained an Equipment Breakdown Endorsement that adds coverage for equipment “accidents,” including a Spoilage coverage with a $25,000 sublimit; the Endorsement states certain exclusions do not apply “as respects this endorsement only.”
- The magistrate and district court held the Endorsement did not delete the Mechanical Breakdown Exclusion from the main policy and that Spoilage Coverage (with its $25,000 sublimit) governs AJC’s loss; the First Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the Equipment Breakdown Endorsement delete the Mechanical Breakdown Exclusion from the main policy? | The Endorsement’s language (exclusions listed as inapplicable) effectively deleted that exclusion, restoring coverage under the main policy so the $500,000 limit applies. | The Endorsement only makes the exclusion inapplicable to the Endorsement’s coverage; it did not delete the exclusion from the main policy. | The Endorsement did not delete the exclusion; it limited the exclusion’s inapplicability to the Endorsement’s coverage. |
| If coverage arises from the Endorsement, does the $25,000 Spoilage sublimit or the $500,000 Declarations limit apply? | Even if the Endorsement supplies coverage, the $500,000 Declarations limit should control for personal property of others (sublimit is for insured’s own goods). | The Spoilage provision explicitly states "We will pay for your loss of 'perishable goods'... The most we will pay under this coverage is $25,000." "You/your" means Economy, so the $25,000 sublimit applies to losses of perishable goods in Economy’s care, regardless of ownership. | The Spoilage Coverage’s $25,000 sublimit applies; AJC’s recovery is capped at $25,000. |
Key Cases Cited
- Fidelity Co‑Operative Bank v. Nova Cas. Co., 726 F.3d 31 (1st Cir.) (endorsement language that expressly stated exclusions were deleted supported deletion of the exclusion)
- Stor/Gard, Inc. v. Strathmore Ins. Co., 717 F.3d 242 (1st Cir.) (describing all‑risks insurance and coverage/exclusion interplay)
- D & H Therapy Assocs., LLC v. Bos. Mut. Life Ins. Co., 640 F.3d 27 (1st Cir.) (standard for considering cross‑motions for summary judgment)
- Tropigas de P.R., Inc. v. Certain Underwriters at Lloyd's of London, 637 F.3d 53 (1st Cir.) (summary judgment standard on insurance coverage issues)