Summary: Food trucks are restaurants without a fixed location. Their location is wherever the truck is parked, and some have hundreds of followers who keep track of where the truck is by Facebook, Twitter, and other forms of social media. In addition to the need for automobile liability insurance—a food truck is still a truck that operates on public highways—they need some of the same insurance products that brick and mortar restaurants need. In addition, there will be disputes concerning which insurance policy must respond when someone is injured in an accident with a food truck.

Although the risks faced by operators is high, there has not yet been much litigation involving food trucks.

Topics covered:
Is a food truck an automobile or mobile equipment?
Personal injury issues
Coverages needed

Is a Food Truck an Automobile or Mobile Equipment?

In American States Insurance Company v. Travelers Property Casualty Company of America, 223 Cal.App.4th 495 (2014), a food truck lessor's automobile insurer sued the lessor's commercial general liability (CGL) insurer, and the CGL insurer cross-complained against the automobile insurer. The CGL insurer sought to establish coverage for injuries a lessee sustained when another lessee attempted to avoid a traffic accident.

Royal Catering Company owned a fleet of food trucks. In the course of normal operations, Royal would lease food trucks to operators who would drive the trucks from site to site selling food. Royal leased one of the food trucks to Esmeragdo Gomez, who operated the food truck with the assistance of his wife, Irais Gomez. The food truck had only two seats and two seatbelts. It was not equipped for transport of more than two people, assumedly a driver and a cook. At the end of each day, Mr. Gomez returned the truck to Royal, who washed, maintained, and repaired the truck as necessary.

The day of the accident, Mr. Gomez was driving the food truck while a passenger was sitting in the truck's passenger seat, and Mrs. Gomez stood in the food preparation section in the rear of the truck. At an intersection, Mr. Gomez swerved to avoid an approaching truck. Hot oil splashed out of the fryer and burned Mrs. Gomez. Despite Mr. Gomez's evasive action, the trucks collided.

The Gomezes and the passenger in their truck brought an action against Royal for the injuries sustained in connection with the accident. The Gomezes asserted causes of action against Royal for products liability (negligence), products liability (design defect), negligent infliction of emotional distress, and property damage.

Royal tendered the Gomez action to American States Insurance Company, which had issued automobile and excess automobile insurance policies to Royal. American States agreed to provide a defense under a reservation of rights. Royal and American States tendered the Gomez action to Travelers Property and Casualty Company of America, which had issued a CGL policy and excess-umbrella general liability policies to Royal. Travelers declined to provide a defense. American States negotiated with the Gomezes to settle their claims against Royal in the Gomez action. Travelers declined to participate in the settlement of the Gomez action. American States paid $500,000 to the Gomezes to settle all possible claims against Royal under American States's Auto Policy. Under the settlement, the Gomezes could pursue their products liability claims against Royal, but only to the extent such claims were covered by Travelers's insurance policies.

Based on the arbitrator's award, a judgment was entered against Royal on Mr. Gomez's loss of consortium claim and Mrs. Gomez's products liability claims in the amount of $2,428,577.34. The Gomezes' remaining causes of action were dismissed.

American States brought an action against Travelers, who cross-complained against American States; both insurance companies sought to establish Royal's coverage under the other company's insurance policies. The decision of the court that followed was necessarily fair since both parties were insurers and there was no basis for anti-insurer prejudice to enter into the decision.

A liability insurer owes a broad duty to defend its insured against claims that create a potential for indemnity. An insurer owes an insured a duty to defend is determined by comparing allegations in the complaint with the policy terms. If no potential coverage is found under the terms of the insurance policy, the insurer acts properly in denying a defense.

The California Court of Appeals concluded that under a plain reading of the Travelers CGL policy, the Gomezes' food truck was mobile equipment and not an auto because the primary purpose of the food truck was to serve as a mobile kitchen and not to transport persons or cargo. On a typical day, the first two hours would be spent stationary in the Royal parking lot preparing food in the food truck. The next eight hours the truck would make twelve or thirteen stops to heat up and sell food. The truck was immobile during the stops and was not transporting anything.

Although there was an inclusion of vehicles “maintained primarily for purposes other than the transportation of persons or cargo” in the Travelers CGL policy's definition of “mobile equipment,” other language in the definition seemed to support the conclusion that the food truck should be classified as mobile equipment and not an auto.

Similarly, in Harco Nat. Ins. Co. v. Sleegers Engineering, Inc., No. 06-CV-11314, 2014 WL 5421237 (E.D. Mich. Oct. 22, 2014), the court dealt with a products liability suit when a food truck exploded during maintenance. The issue of liability was not resolved in the case, but it pointed out the need for insurance for the vehicle, both as a truck and as a mobile restaurant.

Personal Injury Issues

In Evantigroup, LLC v. Mangia Mobile, LLC, No. 4:11-CV-1328 CEJ, 2013 WL 141605 (E.D. Mo. Jan. 11, 2013), the court was called upon to control litigation where the plaintiff sued to recover damages based on the defendants' alleged infringement of plaintiff's trademark. The defendants operated a food truck under the name Mangia Mobile, which Evantigroup contended was confusingly similar to the name of its restaurant.

In October 2011, Evantigroup was granted an injunction, which remained in effect; thus, the infringement (if it occurred at all) stopped more than two years before the action. Even if willful infringement was established, one wonders whether the amount of damages that reasonably could be recovered would have even come close to the expense that was incurred. To limit the litigation the court bifurcated the trial.

Similarly, Andrea Loguidice and Brandon Snooks, the owners of Wandering Dago Inc., wished to operate their food truck at the Empire State Plaza and the Saratoga Race Course. The state attempted to stop their business on state property because of the allegedly offensive nature of the name of their food truck. The business owners commenced a civil rights action, Wandering Dago Inc. v. New York State Office of General Services, 992 F.Supp.2d 102 (N.D. N.Y. 2014). Wandering Dago sought injunctive and declaratory relief and damages arising from the state's denial of its application to participate as a food vendor in the 2013 Empire State Plaza Summer Outdoor Lunch Program, and the subsequent termination of its status as a vendor at the Saratoga Race Course by the New York State Racing Association (NYRA). Wandering Dago alleged that the state took these actions under pressure from, or at the direction of, various New York State officials.

The case involves an important question regarding freedom of speech. While many may question just how offensive the use of the “D” word is on the truck, others should and will question whether the state's conduct would be permissible under the First Amendment if the name of the food truck at issue referenced other offensive ethnic epithets. Regardless, as a result of the district court's ruling there remained for decision at trial the first amendment claim against the NYRA defendants and the individual OGS defendants; the state and federal Equal Protection claims against the individual OGS defendants; the tortious interference with contract claims against the NYRA defendants and the individual OGS defendants; and the tortious interference with prospective economic advantage claims against the NYRA defendants and the individual OGS defendants.

Insurance would not protect the Wandering Dago for the business it loses as a result of the actions of the governmental entities. It might have had coverage if its name caused a riot and the food truck was destroyed or if a person of Italian ancestry filed suit for emotional distress arising from the sight of its logo.

Coverages Needed

Coverages protecting a food truck should include the following:

Auto liability: the insurer is asked to protect against bodily injury and property damage caused by a five-ton truck that contains propane tanks, gasoline, oils, and other flammable products. It can be described as a sixty-five mile per hour missile. The amount of damage an accident can cause can easily be more than the standard $1 million dollars carried.

Auto physical damage: collision and comprehensive coverage is needed to protect the owner for losses by collision or other accidental damage to the vehicle. Food trucks have been lost in floods, earthquakes, wildfires, arson, accidental fire, theft, vandalism, tagging, or many other losses similar to those covered by a personal auto policy.

General liability: consider the tainted taco or the hamburger slathered with bacteria infested mayonnaise. The Commercial General Liability policy (CGL) will be available to provide defense and indemnity to claims of bodily injury and property damage that are not auto related. The biggest exposures would be food-related claims such as food sickness and food allergies, as well as slip-and-fall-related claims. The CGL also provides coverage for personal injury and advertising injury claims including claims of defamation and trademark infringement.

Property: property coverage is needed to protect the business and its property. An auto policy covers the truck but typically nothing more. Adding in-depth property coverage to protect modifications, equipment, mechanical breakdown, and loss of business income is necessary and usually affordable.

Inland marine: coverage for merchandise stored on the truck or in a warehouse should be obtained.

Workers compensation: the law requires employers, including food truck operators, to provide workers compensation to all employees.

Liability and workers compensation umbrella: many venues will require more than $1 million in general liability coverage to do business. An umbrella policy increases available limits to $2 million, $3 million, or more depending on the limit chosen and can be designed to add limits to all of the other liability insurance coverages.

Across the United States there are specialty insurers and insurance brokers who have packaged various insurance coverages just for owners and operators of food trucks. Insurance is necessary and should cover all potential risks of loss even if there are still very few appellate decisions relating to food truck insurance issues.