Allstate Insurance Co. v. General Fire and Casualty Co.
| Decision Date | 31 August 1972 |
| Docket Number | Civ. A. No. 69-698,69-2252. |
| Citation | 348 F. Supp. 682 |
| Parties | ALLSTATE INSURANCE COMPANY v. GENERAL FIRE AND CASUALTY COMPANY. CLARK TRANSFER, INC., Plaintiff, v. TRANS COUNTRY VAN LINES, INC. Defendant. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Edwin F. McCoy, LaBrum & Doak, Philadelphia, Pa., for plaintiff.
William R. Dimeling, Montgomery, McCracken, Walker & Rhodes, Philadelphia, Pa., for defendant.
Two related cases have been submitted for determination by the court without a jury as to liability. The basic issue for determination is which of two insurance carriers is the "primary" carrier and which is the "excess" carrier. The record consists of admissions in the pleadings and a stipulation of facts. None of the basic facts are in dispute. The following is a summary of the agreed facts, and shall for purposes of these decisions be deemed findings of fact.
Clark Transfer, Inc. (Clark Transfer) and Trans Country Van Lines, Inc. (Trans Country) are entirely separate corporations, both engaged in the trucking business including the transportation of property by automobile for others. By written lease dated March 29, 1968, Clark Transfer, as lessor, leased to Trans Country, as lessee, a tractor-trailer combination and a driver. The lessee, Trans Country, was to utilize the leased equipment and driver to transport property of a third party from Delaware to Texas, under Interstate Commerce Commission franchise rights and routes issued exclusively as between the parties to Trans Country.
Under the terms of the lease, Clark Transfer, the lessor, warranted that the driver was competent and that the driver and equipment met all legal and governmental requirements. Clark Transfer further agreed to "indemnify Lessee against (1) any loss resulting from the injury or death of such driver(s) and (2) any loss or damage resulting from the negligence, incompetence or dishonesty of such driver(s)." Trans Country, as lessee, agreed that the "vehicle(s) shall be solely and exclusively under the direction and control of the Lessee who shall assume full common carrier responsibility (1) for loss or damage to cargo transported in such motor vehicle and (2) for the operation of such vehicle."
Both Clark Transfer and Trans Country carried comprehensive liability insurance policies with "omnibus insured" clauses and "Truckmen's endorsements." Except as to the amounts of coverages, the terms of both policies, insofar as relevant to these cases, were substantially the same. Allstate Insurance Company (Allstate) insured the lessor, Clark Transfer and General Fire and Casualty Company (General Fire) insured the lessee, Trans Country (Policy No. NA 004484).
The "omnibus insured" clauses covered the named insured's lessees and employees of those lessees for "excess insurance over any other valid and collectible insurance available." The "Truckmen's endorsements" provided that as to persons engaged in transporting property by automobile and employees of such persons, the policy would cover as to a vehicle hired from another if (1) the vehicle was being used exclusively in the business of the named insured and over a governmentally authorized route of the named insured, and (2) the owner of the vehicle carried an insurance policy with reciprocal coverage "on a direct primary basis" as to any vehicle hired by such owner. The endorsement further provided, insofar as applicable to these cases, that where the above conditions were met, "the insurance under this endorsement is primary insurance."
While operating under the terms of the lease, and traveling on the authorized route, the driver of the tractor-trailer, Roland Thompson, negligently and proximately caused the death of Paul E. Weatherholtz. Civil action was instituted by the administrator of the decedent's estate against Clark Transfer in the District Court for the Eastern District of Pennsylvania and a separate action against Trans Country in the District Court for the Eastern District of New York (Civil Action No. 69c309). Allstate, as the insurer of the lessor, Clark Transfer, called upon General Fire as the insurer of the lessee, Trans Country, to defend Clark Transfer on the theory that General Fire's policy provided the primary coverage under the "Truckmen's endorsement." General Fire refused to take over the defense on behalf of the lessor, Clark Transfer. Allstate settled the action against Clark Transfer with court approval upon paying $200,000 and obtaining a general release for Allstate, Clark Transfer, General Fire, Trans Country and the driver, Roland Thompson, being all parties involved. The New York action was thereafter discontinued.
The present action by Allstate against General Fire, C.A. No. 69-698, seeks a declaratory judgment that General Fire was the primary insurer for Clark Transfer and that Allstate was the excess carrier, and further seeks to recover all counsel fees and costs of the defense. The maximum coverage by General Fire was $25,000.00. In addition to recovering the $25,000.00, Allstate claims approximately $50,000 in counsel fees and costs.
The companion action of Clark Transfer against Trans Country, C.A. No. 69-2252, is an indemnity claim by Clark Transfer which, in reality, by reason of subrogation is a claim by its insurer, Allstate, for the entire amount paid plus costs.
All parties agree that were it not for the "Truckmen's endorsement," lessor's insurer, Allstate, would be the primary carrier and lessee's insurer, General Fire, would be the excess carrier. Although the owner's carrier is usually the primary insurer, under Pennsylvania law, the issue of primary coverage depends upon the wording of the insurance policies. Walters v. Dunlap, 250 F.Supp. 76, 80-81 (W.D.Pa. 1966), aff'd, 368 F.2d 118 (3rd Cir. 1966), citing Speier v. Ayling, 158 Pa. Super. 404, 45 A.2d 385 (1966). Because Allstate's limit of coverage was at least $200,000.00, if Allstate is the primary insurer, it is not entitled to recover from General Fire.
All parties also appear to agree that the purpose and effect of the "Truckmen's endorsement" is to reverse the normal liabilities of the respective insurers when the conditions of the endorsement come into play. This view is in accord with Walters v. Dunlap, supra; Cf. Carolina Casualty Ins. Co. v. Pennsylvania Threshermen and Farmers' Mutual Casualty Ins. Co., 327 F.2d 324 (3rd Cir. 1964).1 The purpose of the "Truckmen's endorsement" is to place the responsibility on lessee's carrier. The party upon whom the Interstate Commerce Commission regulations impose a direct responsibility to the public is the lessee, and the insurance industry accepted this as a rationale for making lessee's carrier primarily liable. The reciprocal insurance coverage provision, which requires the owner's carrier to provide similar primary coverage for hired vehicles, is simply a self-protective clause for the insurance carriers to prohibit the vehicle owner from getting any free coverage.
The record is clear, and the parties agree that the requisite conditions from bringing the "Truckmen's endorsement" into operation were met. The lessee's policy expressly provided that the coverage under the endorsement is "primary insurance." General Fire contends, however, that in this case, it is relieved from what would be its normal obligation under the "Truckmen's endorsement" by reason of the terms of lease between Clark Transfer and Trans Country wherein the lessor, Clark Transfer, agrees to indemnify lessee against "any loss or damage resulting from the negligence, incompetence or dishonesty of the driver." Because General Fire's policy is liability only, it contends that its named insured, Trans Country, should be indemnified by Clark Transfer against any liability and that General Fire acquires the same right by subrogation.
General Fire's argument overlooks the coverage afforded under its policy to persons other than the named insured. Under the definition of "insured persons" are the following: (1) the named insured (Trans Country), (2) "any other person while using an owned automobile or a hired automobile with the permission of the named insured," provided such use is within the scope of such permission (under this clause the driver, Roland Thompson, was clearly an insured person), and (3) any other person or organization, but only with respect to his or its liability because of acts or omissions of an insured under (1) or (2) above. (This clause would make Clark Transfer, as lessor, an insured person to the extent any liability could be imposed against it by reason of the negligence of the driver, Roland Thompson.) Thus, under the terms of the policy of General Fire, both the driver and the owner of the vehicle were insured persons, as well as the named insured, Trans Country. In the action against Clark Transfer brought in the Eastern District of Pennsylvania, Clark Transfer and the driver were insured persons under both the General Fire and Allstate policies. Under the "Truckmen's endorsement," General Fire expressly became the primary insurer for the "persons insured." The fact that Clark Transfer may have agreed to indemnify Trans Country against any loss, in no way helps General Fire in its defense against Allstate since the duty of General Fire was to insure Clark Transfer under the "Truckmen's endorsement" as one of the "persons insured" against liability.
This protection is wholly aside from the protection it also owed its named insured, who in fact suffered no loss in the actions and, therefore, did not have to rely on its indemnification agreement with Clark Transfer.
Allstate, the insurer for Clark Transfer as the named insured under the Allstate policy, expressly excluded any "liability assumed by the insured under contract or agreement." Allstate, not...
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