Argonaut Midwest Ins. Co. v. Morales

• Decision Date: 03 September 2014
• Docket Number: No. 1–13–0745.,1–13–0745.
• Citation: 19 N.E.3d 32
• Parties: ARGONAUT MIDWEST INSURANCE COMPANY, Plaintiff–Appellee, v. Gabriel MORALES, Land Truck Inc., and Insurance Company of the State of Pennsylvania, Inc., an Illinois Corporation, Defendants–Appellants (Raymond J. Jones, Stanley Herbert, Morris K. Stevens, and Gloria Stevens, Defendants).
• Court: United States Appellate Court of Illinois

19 N.E.3d 32

ARGONAUT MIDWEST INSURANCE COMPANY, Plaintiff–Appellee

v.Gabriel MORALES, Land Truck Inc., and Insurance Company of the State of Pennsylvania, Inc., an Illinois Corporation, Defendants–Appellants (Raymond J. Jones, Stanley Herbert, Morris K. Stevens, and Gloria Stevens, Defendants).

No. 1–13–0745.

Appellate Court of Illinois, First District, Third Division.

Sept. 3, 2014.

Perry M. Shorris and Alice Ye, both of Lewis, Brisbois, Bisgaard & Smith, LLP, of Chicago, for appellants.

Joshua Vincent and Kimberly Jansen, both of Hinshaw & Culbertson, LLP, of Chicago, for appellee.

OPINION

Presiding Justice HYMAN

delivered the judgment of the court, with opinion.

¶ 1 This case involves cross motions for summary judgment on issues involving insurance coverage of a trucking accident. Appellants–Defendants Gabriel Morales, Land Truck, Inc., and Insurance Company of the State of Pennsylvania, Inc., appeal the trial court's summary judgment order in favor of plaintiff Argonaut Midwest Insurance Company, which held that Argonaut's policy did not cover the accident. Appellants raise two issues on appeal: (i) whether coverage is excluded under the “Trucker—Insurance for Non–Trucking Use” endorsement; and (ii) whether Land Truck is entitled to a defense under the policy. We affirm, holding that Argonaut has no duty to defend or indemnify Morales under the “Trucker—Insurance for Non–Trucking Use” exception, and that Land Truck is not considered an insured under Argonaut's policy.

¶ 2 BACKGROUND

¶ 3 Gabriel Morales entered into an “Owner Operator Contract” with Land Truck in April 2007. The contract described Land Truck as “a common carrier by motor vehicle holding authority from the Federal Highway Administration.” The contract identifies Morales as an independent contractor and the owner of a motor vehicle who “is engaged in an independently established business of hauling commodities by motor vehicle pursuant to contract with contract or common carriers.” Land Truck agreed to pay Morales a “flat rate percentage of Gross revenue.” (Strikeout in original.)

¶ 4 Regarding insurance, the contract provides that “[u]nless required by statute or ordinance,” Land Truck will not provide any insurance to Morales. Moreover, the contract required Morales carry his own insurance, including “Bobtail Insurance naming Land Truck Inc as an ‘Additional Named Insured’ and Certificate Holder.” “ ‘Bob-tail’ in trucking parlance is the operation of a tractor without an attached trailer,” and “bobtail insurance” typically refers to insurance for when a tractor is not being used in the business of an authorized carrier. Prestige Casualty Co. v. Michigan Mutual Insurance Co., 99 F.3d 1340 (6th Cir.1996)

. Land Truck required Morales pay “all costs and expenses incident to the performance of” the contract, including premiums for insurance to cover physical damages, vehicle operating and maintenance costs, fees and taxes, and tolls, among others.

¶ 5 Morales agreed to haul commodities for Land Truck, but could refuse loads and do business with other carriers as long as Land Truck received proper notice. Morales would display Land Truck's placards and identifications when hauling for it, and remove them when not. Morales had sole responsibility for the “direction and control” of his operators, and discretion regarding the “methods and means” of fulfilling his obligations to Land Truck.

¶ 6 Land Truck agreed to comply with the rules and regulations of the Interstate Commerce Commission, the Department of Transportation, and state regulatory authorities. Subject to those rules and regulations, Morales had the right to “control and direct, in all respects, the operation of the equipment used in the performance” of the contract. The contract lasted one year, subject to automatic renewal.

¶ 7 Effective early March 2009, plaintiff Argonaut Midwest Insurance Company issued a $1 million insurance policy to Morales. Under the policy, Argonaut agreed to “pay all sums an ‘insured’ legally must pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies, caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto’.” Argonaut agreed to “defend any ‘Insured’ against a ‘suit’ asking for these damages * * *. However, [it had] no duty to defend any ‘insured’ against a ‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ * * * to which this insurance does not apply.”

¶ 8 The policy defines “insureds” to include “You [Morales] for any covered ‘auto’.” Among the schedule of covered autos, Morales's 2003 Freightliner truck is listed. An endorsement titled “Truckers—Insurance for Non–Trucking Use” states, “This insurance does not apply to: * * * A covered ‘auto’ while used in the business of anyone to whom the auto is rented. ” (Emphasis added.)

¶ 9 Later in March 2009, Land Truck notified Morales of a pickup from Waukegan, Illinois. Morales got a dispatch sheet from Land Truck, went to get his truck and trailer from a parking spot he rented, and went to retrieve the empty container. Morales paid tolls with an I–Pass provided by Land Truck. Morales was driving north on I–294 when he struck a vehicle carrying Stanley Herbert, Raymond Jones, and Morris Stevens.

¶ 10 In 2009, Herbert, Jones, and Stevens sued Morales and Land Truck. Their amended complaint alleges negligence against Morales and Land Truck, and Stevens' wife, Gloria, alleges lost of consortium.

¶ 11 Argonaut filed a complaint for declaratory judgment against Morales, Land Truck, Herbert, Jones, and the Stevenses, claiming it had no duty to defend or indemnify Morales or Land Truck in the underlying suit. Alternatively, Argonaut claimed that the defense costs of the underlying suit should be apportioned between itself and Land Truck's insurer, defendant Insurance Company of the State of Pennsylvania.

¶ 12 The parties filed cross motions for summary judgment. The trial court granted Argonaut summary judgment, holding that it had no duty to defend either Morales or Land Truck. This appeal timely followed.

¶ 13 STANDARD OF REVIEW

¶ 14 Summary judgment may be granted where no triable issue of material fact is present and the movant is entitled to a judgment as a matter of law. 735 ILCS 5/2–1005(c)

(West 2010). “A genuine issue of material fact * * * exists where the material facts are disputed or, if the material facts are undisputed, reasonable persons might draw different inferences from the undisputed facts.” (Internal quotation marks omitted.) Windmill Nursing Pavilion, Ltd. v. Cincinnati Insurance Co., 2013 IL App (1st) 122431, ¶ 18, 377 Ill.Dec. 666, 2 N.E.3d 582. Cross motions for summary judgment indicate none of the movants believe a factual dispute exist regarding the issues raised. Illinois Emcasco Insurance Co. v. Waukegan Steel Sales Inc., 2013 IL App (1st) 120735, ¶ 11, 374 Ill.Dec. 800, 996 N.E.2d 247. “We review the circuit court's grant of summary judgment de novo.”

Skokie Castings, Inc. v. Illinois Insurance Guaranty Fund, 2013 IL 113873, ¶ 27, 375 Ill.Dec. 777, 998 N.E.2d 69.

¶ 15 ANALYSIS

¶ 16 Appellants argue (i) the “Trucker—Insurance for Non–Trucking Use” endorsement does not apply, and (ii) Land Truck is an insured under Argonaut's policy. We conclude that neither argument has merit.

¶ 17 Non–Trucking Endorsement

¶ 18 Appellants assert two reasons for the inapplicability of the endorsement: (i) Land Truck did not rent the Freightliner because it did not take exclusive possession or control of it; and (ii) the term “rented” is ambiguous. We reject both assertions.

¶ 19 We interpret an insurance policy as we would any other contract, reading the terms to give effect to the intent of the parties. Gaudina v. State Farm Mutual Automobile Insurance Co., 2014 IL App (1st) 131264, ¶ 17, 380 Ill.Dec. 418, 8 N.E.3d 588

. We give unambiguous policy terms their plain, ordinary, popular meaning. Id. ¶ 18. Ambiguity exists where the policy terms can produce more than one reasonable interpretation. Id. Where there is ambiguity, we construe the policy liberally in favor of coverage. Id.

¶ 20 Appellants note that the endorsement excludes coverage where the Freightliner “used in the business of anyone to whom the auto is rented.” They argue that Morales's truck was never rented under the terms of the agreement between Land Truck and Morales. “Rent,” they assert, requires the right to exclusive possession and control. Dictionary definitions of “rent,” however, do not require exclusive possession. See Black's Law Dictionary 1410 (9th ed. 2009) (as a noun, “Consideration paid, usu. periodically, for the use or occupancy of property”); Webster's Third New International Dictionary 1923 (1993) (as a verb, “to grant the possession and enjoyment of for rent: hire out”).

¶ 21 Appellants also cite foreign case law indicating that renting or leasing property requires the transfer of exclusive possession. E.g., Canal Insurance Co. v. Liberty Mutual Insurance, 395 F.Supp. 962 (N.D.Ga.1975)

(holding use of truck incidental to service contract did not constitute lease of vehicle). In addition, they point to Millennium Park Joint Venture, LLC v. Houlihan, 241 Ill.2d 281, 309, 349 Ill.Dec. 898, 948 N.E.2d 1 (2010), where our supreme court stated, regarding real property, “[i]f the contract gives exclusive possession of the premises against all the world, including the owner, it is a lease, but if it merely confers a privilege to occupy the premises under the owner, it is a license.” (Internal quotation marks omitted.) They cite as well the Automobile Renting Occupation and Use Tax Act (35 ILCS 155/1 et seq.

(West 2012)), which defines vehicle rental as requiring “any transfer of the possession or right to possession of an automobile.” 35 ILCS 155/2 (West 2012). Appellants acknowledge this statute does not apply to commercial trucks.

¶ 22 Further, appellants argue that Morales did not transfer complete possession or control of his truck to Land Truck, and...