CONVERSION OF CUSTOMER'S FUEL BY EMPLOYEES HELD INTENTIONAL AND NOT A COVERED "OCCURRENCE"

CONVERSION OF CUSTOMER'S FUEL BY EMPLOYEES HELD INTENTIONAL AND NOT A COVERED "OCCURRENCE" 270_C114

CONVERSION OF CUSTOMER'S FUEL BY EMPLOYEES HELD INTENTIONAL AND NOT A COVERED "OCCURRENCE"

A GL policy carried by an oil tank servicing company, in pertinent part, applied to BI or property damage only if caused by an "occurrence." The word "occurrence" was defined as an "accident."

Four employees of the insured were arrested for theft of fuel oil from a refinery with which the insured had a contract to perform services on the equipment. They were authorized to remove fuel from pipeline systems, tanks and storage facilities and to deposit it into tank or vacuum tank vehicles owned by the insured in the course of their duties. It was alleged and established that the men, over a period of time, removed more than a million and a half gallons of fuel from the customer's premises and converted it for their own gain.

The insurer filed a motion for summary judgment, when the customer sued to recover its loss, seeking a declaration that it did not have a duty to defend or indemnify its insured. The allegations in the underlying lawsuit were lengthy but, in substance, stated that the employees stole the property and that their employer failed to exercise reasonable care and control over them in the performance of their assigned duties.

The court found that "....there is nothing in the complaint that even suggests that the conduct causing the harm, i.e., conversion and theft, was anything but intentional, and thus not accidental." It said that "....the alleged negligence on the part of the employer....in supervising and hiring its employees may have created an atmosphere which made the theft and conversion possible, but the original and direct conduct causing the harm was alleged to be intentional, not negligent."

The court concluded that there was not an "occurrence" within the meaning of the policy and that the insurer did not have a duty to defend. The insurer's motion for summary judgment was granted.

(COMMERCE & INDUSTRY INS. CO., Plaintiff v. SNOW ENVIRONMENTAL SERVICES, INC., Defendant. U. S. District Court for the Eastern District of PA. No. 95-2241. December 30, 1996. CCH 1997 Fire and Casualty Cases, Paragraph 5947.)