Home Indem. v. St. Paul Fire & Marine Ins.

• Decision Date: 11 September 1979
• Citation: 585 S.W.2d 419
• Parties: The HOME INDEMNITY COMPANY, Reserve Insurance Company, and L & B Express, Inc., Appellants, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Lloyd F. Adams, Roy Alfred Davis, Regina Davis, Stephen Harris, Individually and as Administrator of the Estate of Lydia Harris, Deceased, Appellees.
• Court: Kentucky Court of Appeals

585 S.W.2d 419

The HOME INDEMNITY COMPANY, Reserve Insurance Company, and L & B Express, Inc., Appellants, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Lloyd F. Adams, Roy Alfred Davis, Regina Davis, Stephen Harris, Individually and as Administrator of the Estate of Lydia Harris, Deceased, Appellees.

Court of Appeals of Kentucky.

March 9, 1979.

Discretionary Review Denied September 11, 1979.

William Mellor, Louisville, for Home Indem. Co. William Mellor, Louisville, Henry A. Triplett, Hogan, Taylor, Denzer & Bennett, Louisville, for Reserve Ins. Co.

William Mellor, Louisville, William S. Cooper, Elizabethtown, for L & B Express, Inc.

Robert Spragens, Jr., Lebanon, for St. Paul Fire & Marine Ins. Co.

Raymond Overstreet, Liberty, for Lloyd F. Adams.

Morris R. Butler, Greensburg, William A. Miller, Louisville, for Roy Alfred Davis and Regina Davis.

Robert L. Dowell, Greensburg, for Stephen Harris, Individually and as Administrator of the Estate of Lydia Harris, Deceased.

Before GANT, COOPER and WILHOIT, JJ.

GANT, Judge.

This declaratory judgment action was brought to determine the extent of liability, if any, of Home Indemnity Company (Home), Reserve Insurance Company (Reserve), and St. Paul Fire & Marine Insurance Company (St. Paul) with respect to an automobile accident involving a tractor-trailer owned and operated by Lloyd F. Adams and leased to L & B Express, Inc., a common carrier operating under Interstate Commerce Commission (ICC) regulations.

At the time of the accident, Adams was under dispatch from L & B to transport a load in Ohio on the day after the accident. On the day the accident occurred, Adams was driving his leased tractor to Indiana for the purpose of picking up a trailer he had purchased. The previous day Adams's employee had delivered L & B's trailer to its Madisonville terminal. The accident occurred in Kentucky, a state in which L & B was licensed to operate, before Adams reached Indiana, where L & B was not authorized by the ICC to operate. The trial court found, and there is sufficient evidence to support the conclusion, that L & B had knowledge of the purchase of the new trailer, and that L & B had given its implied consent for the use of the new trailer in its business.

The accident occurred on May 27, 1973. Roy Davis, Regina Davis and Stephen Harris were injured, and Lydia Harris was killed. Two tort actions were brought by these parties solely against Adams. More than one year later L & B was added as a party defendant to the action brought by Stephen Harris and the Estate of Lydia Harris. Home negotiated a settlement on behalf of L & B in that action and an order was entered dismissing all claims against L & B with prejudice. The other claims were consolidated for appeal and are decided as a companion case herewith.

This action was instituted to determine coverage between the three insurance policies. Home and Reserve have agreed by order entered January 28, 1978, that both their policies afford coverage to L & B for any liability which may be adjudged against L & B as a result of this accident. St. Paul in its brief concedes the correctness of the judgment of the trial court which determined that St. Paul's policy covered Adams in these circumstances with the coverage by the terms of the policy to be on a pro rata basis with any other insurance. This leaves only the following issues to be decided here.

1. Is Adams an "insured" under the Home/Reserve policies? In order to answer this question, we must consider the lease between Adams and L & B, the insurance policies and the applicable ICC regulations. The Home/Reserve policies are identical with respect to the terms of coverage, the only difference being the amount of coverage. The pertinent parts of the documents in question are as follows:

ICC REGULATIONS

I. 49 CFR § 1043.1 No common or contractual carrier . . . shall engage in interstate commerce . . . until there shall have been filed with and accepted by the Interstate Commerce Commission a . . . Certificate of Insurance . . . conditioned to pay any final judgment recovered against such motor carrier for bodily injuries to or the death of any person resulting from the negligent operation, maintenance or use of such motor vehicle. . ..

II. 49 CFR § 1057.4, setting forth the requirements for using leased vehicles, provides: (a) Contract requirements. The contract, lease or other arrangement for the use of such equipment. . . . (4) shall provide for the exclusive possession, control and use of the equipment; and for the complete assumption of responsibility in respect thereto, by the lessee for the duration of the contract, lease or other arrangement. . . .

The lease between Adams and L & B states at Paragraphs 7 and 20:

LEASE BETWEEN ADAMS AND L & B

7. During the existence of this agreement, the Carrier assumes liability for bodily injuries to or death of any person (except the Contractor, or the employees, agents or servants of the Contractor) or the loss or damage to the property of others (except the Contractor, or the employees, agents or servants of the Contractor) resulting from the negligent operation, maintenance or use of the vehicles described in Appendix A . . . The Carrier shall maintain insurance for the aforesaid liability for injuries, losses or damages as required by the ICC and state regulatory authorities. . . .

20. It is to be clearly understood and agreed and it is the intention of the parties of this agreement that the Contractor is and shall remain an independent contractor only and is not the agent, employee or representative of Carrier for any purpose whatever. Nothing herein contained shall be construed as inconsistent with that status. Neither the contractor nor the employees, agents or servants of the Contractor, are to be considered the employees or servants of the Carrier at any time, or under any circumstances.

INSURANCE POLICIES OF HOME AND RESERVE

II. PERSONS INSURED

Each of the following is an insured under this insurance to the extent set forth below:

. . . . .

(c) any other person while using an owned automobile or a hired automobile with the permission of the named insured, providing his actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission, . . .

None of the following is an insured:

. . . . .

(ii) the owner or lessee (of whom the named insured is a sub-lessee) of a hired automobile or the owner of a non-owned automobile, or any agent or employee of such owner or lessee;

. . . . .

TRUCKMEN — FORM B

It is agreed that the insurance applies with respect to any owned or hired automobile or the owner of a non-owned automobile of the commercial type, subject to the following additional provisions:

. . . . .

(d) The insurance does not cover as an insured the owner or any lessee (of whom the named insured is a sub-lessee) of a hired automobile . . . if the bodily injury or property damage occurs:

(1) while the automobile is not being used exclusively in the business of the named insured and over a route the named insured is authorized to serve by federal or public authority; but this limitation shall not apply to an automobile while en route, at the request of the named insured, to engage in such exclusive use and not transporting property for others;

. . . . .

and sub-paragraph (ii) of the "Persons Insured" provision is amended accordingly.

Let us examine the language of these more closely to determine whether Adams is covered under them. First, under the insurance policies Adams is obviously specifically excluded as an insured by subparagraph (ii) of II, Persons Insured. This section is modified and specifically amended by the Truckmen — Form B endorsement, however, which does provide coverage for ". . . any person . . . engaged in transporting property by automobile for the name insured . . ." so long as it is in the exclusive business of L & B. Further, Section (d) of the endorsement denies coverage to an owner/operator only if he is not using the vehicle in question exclusively in the business of L & B, thus modifying the "Persons Insured" section.

Appellants contend that Adams is excluded under the policies because he was neither using the vehicle in the exclusive business of L & B nor could he be classified as an employee of L & B under the policies. The testimony reveals that the purpose of the policies here in question was to comply with ICC regulations. It is our opinion that the policies must be construed simultaneously with those regulations and with the lease agreement, not as isolated documents.

The first case cited by appellants, American Fidelity & Casualty Co. et al. v. Pennsylvania Casualty Co. et al., Ky., 258 S.W.2d 5 (1953), dealt with coverage as between two policies covering two ICC licensed carriers, one of which had leased passenger buses to the other. The court held only that as to endorsements contained in both policies purchased to enable the respective insureds to obtain ICC certificates, the word "insured" ". . . is necessarily restricted to the motor carrier who obtains the permit or certificate as opposed to one operating under an entirely different permit or endorsement." Id., page 8. This has no bearing on our factual situation.

The two cases most clearly in point, Wellman v. Liberty Mutual Insurance Co., 496 F.2d 131 (8th Cir. 1974), and Cosmopolitan Mutual Insurance Co. v. White, 336 F.Supp. 92 (D.Del.1972), are not totally contradictory when one examines the facts of each. In Cosmopolitan, an accident occurred involving a vehicle operating under the standard ICC lease, where the driver (deceased, an employee of the owner) had delivered the carrier's load and was en route to pick up a load of a third party. Considering the factors of (1) failure of the carrier to remove his ICC placard or obtain a receipt from the driver and (2) evidence of the carrier's acquiescence in the driver's practice of obtaining loads for third parties, ...