Pierre v. PROVIDENCE WASH. INS.

• Citation: 730 N.Y.S.2d 550,286 A.D.2d 139
• Parties: STEVE PIERRE, Respondent-Appellant,<BR>v.<BR>PROVIDENCE WASHINGTON INSURANCE COMPANY, Appellant-Respondent.
• Decision Date: 01 October 2001
• Court: New York Supreme Court Appellate Division

286 A.D.2d 139

730 N.Y.S.2d 550

STEVE PIERRE, Respondent-Appellant,

v.PROVIDENCE WASHINGTON INSURANCE COMPANY, Appellant-Respondent.

GOLDSTEIN, J.

October 1, 2001.

Schindel, Farman & Lipsius, L. L. P., New York City (Laurence J. Rabinovich of counsel), for appellant-respondent.

Bertram Herman, P. C., East Norwich, for respondent-appellant.

ALTMAN, J. P., and COZIER, J., with GOLDSTEIN, J., concur.

OPINION OF THE COURT

GOLDSTEIN, J.

At issue here is whether the MCS-90 endorsement to a policy issued by the defendant, Providence Washington Insurance Company (hereinafter Providence), to Blue Hen Lines, Inc. (hereinafter Blue Hen), a licensed interstate motor carrier, requires Providence to pay the plaintiff damages for his personal injuries pursuant to a judgment against the driver and owner of a tractor leased to Blue Hen. It is undisputed that the driver and the owner of the tractor fall within the policy definition of an "insured."

On November 30, 1994, the plaintiff's motor vehicle was involved in an accident with a tractor-trailer on St. John's Place in Brooklyn. The trailer portion of the tractor-trailer was owned by Blue Hen. The tractor portion of the tractor-trailer was owned by Preston Conquest and operated by Steve Harris. The tractor was leased by Conquest to Blue Hen pursuant to a lease which required Blue Hen to obtain and pay for insurance covering public liability for personal injuries. Pursuant to the lease, Conquest was required to provide a driver for the tractor, and it provided Harris as the driver.

Providence issued a commercial motor vehicle policy to Blue Hen which did not list either Conquest or Harris as named insureds. However, it is undisputed that Providence did insure the tractor and its driver, pursuant to the definition of "insured" contained in the policy.

The policy also contained an MCS-90 endorsement in compliance with Federal law mandating that such an endorsement be included in any liability policy issued to a registered interstate motor carrier such as Blue Hen (see, 49 USC § 13906 [a] [1]; 49 CFR 387.15; T.H.E. Ins. Co. v Larsen Intermodal Servs., 242 F3d 667). The endorsement provided, in pertinent part:

"In consideration of the premium stated in the policy to which this endorsement is attached, the Company agrees to pay, within the limits of liability prescribed herein, any final judgment recovered against the insured for bodily injury to or death of any person, or loss of or damages to property of others (excluding injury to or death of the insured's employees while engaged in the course of their employment, and property transported by the insured, designated as cargo), resulting from negligence in the operation, maintenance, or use of motor vehicles under certificate or permit issued to the insured * * * in interstate or foreign commerce * * * regardless of whether or not such motor vehicles are specifically described in the policy * * * It is understood and agreed that no condition, provision, stipulation, or limitation contained in the policy, or any other endorsement thereon or violation thereof, or of this endorsement, by the insured, shall relieve the Company from liability or from the payment of any final judgment, irrespective of the financial responsibility or lack thereof or involvency or bankruptcy of the insured. However, all terms, conditions, and limitations in the policy to which this endorsement is attached are to remain in full force and effect as binding between the insured and the Company, and the insured agrees to reimburse the Company for any payment made by the Company on account of any accident, claim, or suit involving a breach of the terms of the policy, and for any payment that the Company would not have been obligated to make under the provisions of the policy except for the agreement contained in this endorsement.

"It is understood and agreed that, upon failure of the Company to pay any final judgment recovered against the insured as prescribed herein, the judgment creditor may maintain an action in any court of competent jurisdiction against the Company to compel such payment."

In 1995, the plaintiff commenced an action to recover damages for personal injuries in the Supreme Court, Kings County, against Conquest and Harris. Judgment in the aggregate sum of $227,560 was entered against them upon their default in appearing, and after an inquest.

On August 1, 1997, the plaintiff served a copy of the judgment on Providence, which then disclaimed coverage on the ground that it was not provided with prompt notice of the loss.

Providence cited a policy provision requiring the "insured" to give prompt notice of the loss and to cooperate with any investigation, settlement, or defense of the claim.

Thereafter, the plaintiff commenced the instant action directly against Providence pursuant to Insurance Law § 3420. After issue was joined, Providence moved for summary judgment and the plaintiff cross-moved for summary judgment. The Supreme Court granted summary judgment to the plaintiff on the ground that Providence was "mandated by Federal law to pay plaintiff the full proceeds of the judgment."

On appeal, the defendant contends that the word "insured" in the MCS-90 endorsement refers solely to the named insured, Blue Hen. Therefore, "only a judgment against the motor carrier for which the endorsement was made triggers an insurer's obligation under that endorsement." However, 49 CFR 387.15, which sets forth the language of the MCS-90 endorsement and definitions applicable thereto, does not define the term "insured."

The statute from which the endorsement derives and the regulations promulgated thereunder were enacted "to stem the unregulated use of non-owned vehicles that threatened both public safety and the vitality of the trucking industry" (Integral Ins. Co. v Fulbright Trucking, 930 F2d 258, 261). A practice developed in the interstate trucking industry wherein a licensed interstate motor carrier would use nonowned equipment, leased from the owner and operated by an owner lessor not subject to the regulations applicable to licensed interstate carriers (see, American Trucking Assns. v United States, 344 US 298, 303-304). By so doing, the licensed interstate motor carrier attempted to avoid liability for the negligence of the operator of the equipment by claiming that the operator was an independent contractor (see, Perry v Harco Natl. Ins. Co., 129 F3d 1072; Prestige Cas. Co. v Michigan Mut. Ins. Co., 99 F3d 1340, 1342-1343). The purpose of the endorsement was to insure that if the injured member of the public is not adequately compensated, the licensed interstate motor carrier would provide sufficient compensation for the injuries incurred (see, 49 CFR 387.1, 387.3; T.H.E. Ins. Co. v Larsen Intermodal Servs., 242 F3d 667, supra; Canal Ins. Co. v First Gen. Ins. Co., 889 F2d 604, 610, amended on other grounds 901 F2d 45).

The obligation placed on the insurance carrier is one of suretyship: it "covers the public" and provides a safety net when other coverage is lacking (Canal Ins. Co. v Carolina Cas. Ins. Co., 59 F3d 281, 283; T.H.E. Ins. Co. v Larsen Intermodal Servs., supra). "Thus, the insurer's obligations under the MCS-90 are triggered when the policy to which it is attached provides no coverage to the insured" (T.H.E. Ins. Co. v Larsen Intermodal Servs., supra, at 672).

In the instant case, Providence disclaimed coverage under other provisions of the policy, triggering its obligations under the endorsement. Failure to comply with the requirement to notify the insurance carrier as soon as practicable of the loss constitutes the failure to satisfy a condition precedent to coverage (see, White v City of New York, 81 NY2d 955; Travelers Indem. Co. v Worthy, 281 AD2d 411). However, the endorsement specifically provides that "no condition, provision, stipulation, or limitation contained in the policy, or any other endorsement thereon or violation thereof, or of this endorsement, by the insured, shall relieve the Company from liability." Thus, the effect of the endorsement is that it "deletes limiting clauses in the policy to which it is attached" (Empire Fire & Mar. Ins. Co. v Guaranty Natl. Ins. Co., 868 F2d 357, 363). The endorsement "creates a duty running from the insurer to members of the public, regardless of any limitation in the insurance policy between the insurer and the insured" (Green v Royal Indem. Co., 1994 WL 267749, *5, 1994 US Dist LEXIS 7948, *14 [SD NY, June 15, 1994]), and regardless of a failure to notify the carrier as soon as practicable (see, Miller v Harco Natl. Ins. Co., 241 F3d 1331).

The United States Court of Appeals for the Second Circuit has noted that "[t]he plain meaning of the endorsement requires only (1) a final judgment against the insured which (2) arises out of the negligent operation, maintenance or use of the motor vehicle" (Integral Ins. Co. v Fulbright Trucking, supra, at 260-261). There is no requirement that the judgment be against a named insured (see, Federal Ins. Co. v Commercial Union Ins. Co., 126 AD2d 892). Indeed, limiting liability under the endorsement to judgments against the "named insured," which in most cases would be the registered interstate motor carrier itself, would defeat the purpose of the endorsement: to provide coverage when the registered interstate motor carrier leases equipment and the accident results from the negligence of the lessor.

In any event, it is undisputed that Conquest and Harris fall within the policy definition of "insured." It is well settled that when an insurance policy provides broader coverage than required, the language of the policy controls (see, Matter of Mostow v State Farm Ins. Cos., 88 NY2d 321; Patilla v Grissom, 1999 WL 743680, 1999 Del Super LEXIS 362 [Del Super, July 28, 1999]).

In a case where the named insured was not a registered interstate motor carrier, the United States Court of Appeals for the Ninth Circuit held that the endorsement did not...