A QBE Insurance Group Ltd. unit has a duty to defend a tire retailer in connection with a fatal accident because the incident may not have fallen under the coverage’s policy exclusion, says a federal appeals court in overturning a lower court ruling.

Marshaun Tate had purchased used tires from Chico, California-based AR Business Group Inc., which does business as U.S. Tire & Wheel, that the retailer also installed, according to Tuesday’s ruling by the 9th U.S. Circuit Court of Appeals in San Francisco in Praetorian Insurance Co. v. Marshaun Tate et al. and AR business Group Inc., DBA U.S. tire & Wheel et al.

One of the tires failed and Mr. Tate’s vehicle overturned, resulting in the deaths of two passengers and serious injuries to Mr. Tate and a minor.

Mr. Tate sued the retailer, which sought defense and indemnity coverage from its insurer, Sun Prairie, Wisconsin-based Praetorian Insurance Co., a member of the QBE Insurance Group.

Praetorian filed suit in U.S. District Court in Sacramento, California, claiming the retailer’s used tire exclusion in its garage operations policy precluded coverage. The District Court granted summary judgment in favor of Praetorian, which a three-judge appeals court unanimously overturned.

The District Court correctly ruled the exclusion is enforceable, said the ruling. However, summary judgment in the insurer’s favor “is only proper if the district court exclusively establishes” that the plaintiff’s claims cannot fall within the terms of the garage operations policy, the ruling said.

“If there is any doubt as to whether the facts so establish, Tate is entitled to summary judgment on the question of Praetorian’s duty to defend” the retailer, said the ruling.

The ruling concludes this was the case. Based on a mechanical engineer’s testimony that the retailer had committed several errors in selling and installing the tires, a reasonable jury could conclude that the car would not have overturned even given the tire’s failure “if had been the proper type, proper size, or had been properly placed,” said the ruling.

Mr. Tate “has carried his burden of demonstrating at least a bare possibility that some aspects of the state-negligence claims against (the retailer) will fall within the garage operations coverage of the policy, and will not be excluded by the Exclusion,” said the ruling.

“Because Praetorian failed to conclusively demonstrate that Tate’s claims cannot fall within the terms of its garage operations policy with (the retailer) the district court erred in granting declaratory judgment in Praetorian’s favor,” said the ruling, in reversing the lower court’s ruling and remanding the case for further proceedings.