A latest opinion in Atlantic Enterprise Company d/b/a ABO Prescription drugs v. RLI Insurance coverage Firm 1 offers a lesson that in property insurance coverage legislation, a single phrase might be the hinge between tens of millions in protection and a complete denial of a declare.
The case arose from a cargo of blood plasma paste, a fragile and extremely temperature-sensitive cargo, bought by ABO Prescription drugs from a fractionator in Mexico. Packed into fiber drums with some dry ice and “thermal blankets,” the plasma was meant to be flown by FedEx to New York after which onward to a South African purchaser. ABO insured the cargo beneath RLI’s Marine Open Cargo coverage.
Issues went improper nearly instantly. FedEx refused to load the pallets as packed as a result of the quantity of dry ice violated flight security laws. The cargo was repacked and finally flown out, however as soon as in Memphis, the plasma confronted one other hurdle attributable to a regulatory maintain by the FDA. That meant the plasma sat an additional twenty-four hours in FedEx’s facility.
The issue? The cargo had not been booked beneath FedEx’s “Temperature Managed Service.” It was booked as “Worldwide Precedence Freight,” which supplied no obligation to observe or keep temperature. By the point the product reached New York on June 18, it had exceeded allowable temperature thresholds. The plasma was declared spoiled and nugatory for its supposed use.
ABO promptly filed a declare beneath the RLI coverage, pointing to the endorsement that promised protection for deterioration or spoilage “from any trigger” throughout transit. To ABO, the protection was simple: the plasma spoiled in transit, so the coverage ought to pay.
RLI disagreed, citing three separate warranties: the Delay Guarantee, the Temperature Guarantee, and the Packing Guarantee. After months of investigation, RLI formally denied protection, and litigation ensued.
The district court docket sided with RLI, and the Eleventh Circuit Courtroom of Appeals affirmed. The appellate opinion pressured that beneath Georgia contract legislation, when coverage phrases are clear and unambiguous, courts should implement them as written. “From any trigger” sounds sweeping, however it didn’t particularly discuss with, not to mention expressly assume, the chance of delay. The court docket discovered that the Delay Guarantee was “paramount” and trumped the endorsement’s broader phrasing, seemingly indicating all causes of loss.
When studying the policyholder’s arguments for protection, ABO’s attorneys pressed a number of inventive arguments. They steered that the “danger” excluded by the Delay Guarantee was not delay itself however deterioration of cargo, with delay as merely a trigger. In addition they leaned on testimony from Bennett Worldwide Transport, the freight forwarder, calling it RLI’s “licensed agent” who allegedly anticipated delay losses to be lined.
The court docket brushed these apart. The coverage’s phrases, not subjective expectations of the events nor post-loss recollections, ruled the contract evaluation.
That is true with regards to court docket interpretation of coverage language. Possibly RLI ought to warn its clients and people who select to cope with RLI that its ads of broad protection could also be challenged by fine-print contract phrases limiting protection. That is what RLI advertises about its Marine Cargo Coverage:
RLI’s ocean cargo marine coverage affords safety for items shipped by water or air, safeguarding towards bodily loss or injury. This protection begins on the warehouse of cargo, extends to the warehouse of vacation spot, and consists of all intermediate transit by rail or truck. It’s tailor-made to satisfy clients’ particular enterprise necessities and usually consists of protection for struggle danger, strikes and riot exposures, in addition to warehouse storage, home transit, exhibitions, and extra.
RLI ought to present examples of what it and its attorneys will declare as not lined to be truthful to potential clients. Possibly this can be a good thought for all insurance coverage firms, however I’m not holding my breath that it will ever occur.
For claims professionals, the lesson is sensible. One should study not solely what protection grants, but additionally what warranties and exclusions silently take away protection. For policyholders, it’s a warning to not assume that broad-sounding protection swallows exclusions and make sure you buy insurance coverage from firms actually offering broad grants of protection quite than shopping for on value with insurance policies containing extra limitations.
Ultimately, ABO’s plasma sat spoiled and uninsured as a result of the phrase “from any trigger” was trumped by “delay means no protection.” Phrases matter with regards to insurance coverage contract interpretation.
Thought For The Day
“Phrases are, in fact, probably the most highly effective drug utilized by mankind.”
—Rudyard Kipling
1 Atlantic Enterprise Corp. v. RLI Ins. Co., No. 24-13244, 2025 WL 2674583 (11th Cir. Sept. 18, 2025). (See additionally, ABO preliminary transient, and RLI reply transient)