Intransit Inc. v. Travelers Property and Casualty Company of America, District Court of Oregon Cause no. 1:11-cv-03146-CL, Order on Motion for Summary Judgment (Dkt. No. 37) (October 22, 2012)
This case involves whether an insurer’s Inland Marine liability policy covering loss of property during transit, covers theft by a fraudulent or imposter carrier.  Finding the policy language ambiguous, the court construed it in favor of coverage and found for the insured. 
In October 2010, Travelers sold plaintiff inland marine insurance, providing up to $300,000 in coverage for property being transported from one location to another. The policy covered loss of the “property of others … [f]or which [the insured] arranged transportation with a ‘carrier’ of the type described in the Declarations … ”  The declarations defined “carrier” as any railroad company, motor transportation company, or air freight company.  The policy also contained an exclusion that barred any coverage for losses resulting from “dishonest or criminal acts” by the insured’s employees, carriers, and others with “interest in, or entrusted with, the property.”  The endorsement, however, provided limited coverage up to $50,000 for property losses resulting from dishonest acts by a carrier.
The insured hired a third-party carrier to transport a shipment of LCD monitors.  An individual who represented himself as an employee of the transporter picked up the load of LCD monitors, but the load never made it to its destination.  A subsequent criminal investigation found that an imposter had posed as a driver of the transporter and had stolen the cargo.
The insured filed a proof of loss with Travelers.  Travelers took the position that the fraudulent or imposter carrier was still a “carrier” under the policy and paid the $50,000 limits for dishonest acts by a carrier.  The insured disputed Traveler’s coverage determination, arguing that the policy fully covered theft by fraudulent or imposter carriers and that it should be awarded $300,000 under the general coverage grant.
The policy language at issue provides:
I. Coverage grant.
The policy in the coverage grant provides as follows:
We cover “loss” to Covered Property from any of the Covered Causes of”Loss.”
1. Covered Property, as used in this Coverage Form, means property of others:
(a) For which you have arranged transportation with a “carrier” of the type
described in the Declarations; and
(b) That you have agreed to insure.
We cover such property while in the due course of transportation.
1. “Carrier” means any
a. Railroad company;
b. Motor transportation company; or
c. Air freight company.
II. Exclusions.
The policy in the exclusion section provides as follows:
We will not pay for “loss” caused by or resulting from any of the following:
a. Delay, loss of use, loss of market, loss of income, interruption of business or
any other consequential loss.
b. Dishonest or criminal acts by any of the following whether or not acting alone
or in collusion with other persons or occurring during the hours of
(1)   You, your employees or authorized representatives;
(2) The “carrier” or its employees or authorized representatives; or
(3) Anyone else with an interest in, or entrusted with, the property.
But this exclusion does not apply to coverage provided by the “carrier”
Dishonesty Additional Coverage.
III. Endorsement.
The endorsement in the exclusion section provides as follows:
“Carrier” Dishonesty
We will pay up to $50,000 in any one occurrence for loss of or damage to
Covered Property caused by or resulting from any fraudulent, dishonest, or
criminal act committed by a “carrier.” But this Additional Coverage does not
apply to any fraudulent, dishonest, or criminal act committed by you.
In their motions for summary judgment to the district court, the insured and Travelers offered competing interpretations of two terms in the insurance policy: “carrier” and “entrustment.”  Travelers argued that the term “carrier” means “legitimate carrier,” and thus the coverage grant only covers property loss when the carrier transporting the load is legitimate. Travelers further contended that because its loss was the result of a transportation arrangement with a fraudulent or imposter carrier, the insured cannot recover anything under the policy’s general coverage grant. In response, the insured contended it “arranged transportation with a carrier” or at a minimum the meaning of “carrier” is ambiguous, and thus should be construed in plaintiffs favor to include “fraudulent or legitimate carrier” and cover plaintiffs loss up to $300,000.
Finding that the term “carrier” remained ambiguous after a Hoffman analysis, the court interpreted it against the drafter and in favor of the insured. Hoffman, 313 Or. 464 at 469. Accordingly, the court concluded, the “term “carrier” in the coverage grant is construed in favor of plaintiff to include fraudulent or imposter carriers, including the fraudulent or imposter representative of C&A.; Defendant could have easily clarified the coverage grant by defining “carrier” to only include “authorized,” “legitimate,” or “licensed” carriers.”
The court further found that the term “entrust” was ambiguous regarding whether an insured could actually “entrust” property to an imposter and thus found that exclusion (b)(3) did not apply to preclude coverage despite the fact that Travelers argued that the insured had entrusted its shipment to the imposter carrier.  “The court’s finding that Exclusion (b)(3) is ambiguous and thus should be construed in favor of plaintiff is bolstered by the fact that defendant could have avoided ambiguity by drafting the policy to specifically exclude coverage for “theft by fraud, false pretense or trickery by imposters.””