Auto-Owners Ins. Co. v. Redland Ins. Co.

• Decision Date: 15 December 2008
• Docket Number: No. 08-1023.,08-1023.
• Citation: 549 F.3d 1043
• Parties: AUTO-OWNERS INSURANCE COMPANY, Plaintiff-Appellant, v. REDLAND INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

549 F.3d 1043

AUTO-OWNERS INSURANCE COMPANY, Plaintiff-Appellant, v. REDLAND INSURANCE COMPANY, Defendant-Appellee.

No. 08-1023.

United States Court of Appeals, Sixth Circuit.

Argued: October 29, 2008.

Decided and Filed: December 15, 2008.

ARGUED:

Allen J. Philbrick, Conlin, McKenney & Philbrick, P.C., Ann Arbor, Michigan, for Appellant. Laurence J. Rabinovich, Schindel, Farman, Lipsius, Gardner & Rabinovich, LLP, New York, New York, for Appellee.

ON BRIEF:

Allen J. Philbrick, Conlin, McKenney & Philbrick, P.C., Ann Arbor, Michigan, for Appellant. Laurence J. Rabinovich, Schindel, Farman, Lipsius, Gardner & Rabinovich, LLP, New York, New York, David J. Bloss, Bloss & Betz, P .C., Grand Rapids, Michigan, for Appellee.

Before: BATCHELDER, CLAY and SUTTON, Circuit Judges.

OPINION

SUTTON, Circuit Judge.

The question prompted by this insurance dispute is whether a driver of a tractor-trailer rig operates "in the business" of a motor carrier after he completes one delivery and, in anticipation of receiving another delivery order, begins to drive to find a place to sleep for the night—at which point a fatal car accident occurs.

I.

In March 2004, R & T Trucking leased a number of tractor-trailer rigs to Everhart Trucking. The lease agreement required Everhart to maintain a "blanket policy of insurance ... cover[ing] the usage of the insured vehicle[s] whi[le] engaging in the business of the carrier," but it provided that R & T would "pay for and maintain all other insurance coverage." JA 29. Everhart contracted with Auto-Owners to provide the required blanket insurance policy, and R & T secured a nontrucking liability policy, known as "bobtail" insurance, from Redland to cover the trucks when Everhart had not engaged them.

David Gale, an R & T employee, drove one of the trucks leased to Everhart. On the morning of June 22, 2004, Everhart directed Gale to pick up a load of coiled steel in Zanesville, Ohio, and to deliver it to a manufacturer in Grand Rapids, Michigan. Gale completed the delivery late that evening. At 11:17 p.m., Gale called Everhart's main line, leaving a voice mail to the effect that he had finished his delivery, he was going to find a place to sleep and he would "probably wake up early and drive off some more to get [to] Gary—East of Chicago." JA 90. In the same message, he asked Everhart not to make his next appointment "real early." Id. Not long after he left this message, while driving west on I-196 South, Gale apparently fell asleep at the wheel and collided with another vehicle, killing the driver.

The victim's estate sued Gale, Everhart and R & T. Claiming that the truck was not covered by its policy with R & T at the time of the accident, Redland denied coverage and refused to defend Gale and R & T. The other carrier, Auto-Owners, tendered a defense, settled the suit for $1 million and obtained an assignment of claims from R & T and Everhart.

Invoking the diversity jurisdiction of the federal courts, Auto-Owners filed statelaw claims against Redland, alleging that its policy covered the truck at the time of the accident and that Redland had breached its duty to defend. The district court granted summary judgment to Auto-Owners on the duty-to-defend claim but granted summary judgment to Redland on the coverage issue, concluding that the truck was being used "in the business" of the lessee at the time of the accident.

II.

Auto-Owners' appeal presents just one issue: Was the truck being used "in the business" of Everhart Trucking when the accident occurred? The relevant language of the policy exclusion denies coverage when a covered vehicle is:

[1.] [U]sed to transport goods or merchandise for any purpose, business or other, or while such goods or merchandise are being loaded or unloaded; or

[2.] ... [B]eing maintained or used ... at the direction of, under the control of, under orders from, after being dispatched by, or in the business of any trucking company or lessee of such auto ...; or [3.] ... [O]n a return trip to the place it is customarily garaged, or to a terminal or office of a party to whom it is rented, leased, or loaned, or to the home of the Named Insured, after having delivered goods or merchandise under direction, control, or dispatch to anyone other than the Named Insured under this policy....

JA 160 (emphasis added).

The policy thus excludes coverage: (1) when a leased truck "transport[s]" goods from one location to another; (2) when those goods are being "loaded or unloaded" from the truck; (3) when the truck is on a "return trip" from a delivery; (4) when the truck has been "dispatched" to handle a job; or (5) when the truck is otherwise being used "in the business of" the lessee. As applied here, this policy undoubtedly would have excluded coverage during these stages of Gale's trip: (1) on the drive from Valley City, Ohio to Zanesville, Ohio, after he had been "dispatched" to pick up this load of steel coil; (2) on the drive from Zanesville to Grand Rapids, Michigan, while the truck "transport[ed]" these goods; and (3) during the "unload[ing]" of the steel coil at the Grand Rapids plant. Once Gale had completed the Grand Rapids delivery, the exclusion also would have applied had Gale been in the midst of a "return trip" to Waynesfield, Ohio, his home base, at the time of the accident. And it would have applied had the accident occurred after Gale received an express "dispatch[]" from Everhart to proceed to Gary for a new pickup.

What happens, however, when the driver is involved in an accident while traveling in the direction of his next presumed, though not confirmed, dispatch and while he is on his way to finding a place to get some sleep? Is the truck being used "in the business" of a motor carrier at that point in time? Consistent with the district court's decision, we think that it is.

First, the "in the business" exclusion naturally covers Gale's use of the truck. He was not engaged in some frolic and detour, heading somewhere for his own purposes and no other. Having unloaded the goods at Grand Rapids after a long work day, he planned, as his last voice mail to Everhart indicates, to "go out here somewhere and go to sleep" and then "wake up early and drive off some more to get [to] Gary—East of Chicago." JA 90. Whether we choose to characterize the accident as occurring while Gale was driving somewhere to get some sleep (which, as it turns out, he tragically needed) or while heading in the direction of Gary, Indiana, Gale was operating "in the business" of Everhart Trucking. Both activities related to and directly served Everhart's commercial interests.

As for driving somewhere to get some sleep, federal regulations require truckers to spend a specific amount of time "off-duty" for every hour they spend driving. See 49 C.F.R. § 395.3. By the time Gale left the voice mail for Everhart, he had driven his load several hundred miles from Zanesville, Ohio to Grand Rapids, Michigan and had waited for several hours in Grand Rapids for his truck to be unloaded—hours that generally do not qualify as "off-duty" time. See 49 C.F.R. § 395.2. If Gale had not reached his driving limit by the time he unloaded the goods, he was undoubtedly close to it, and accordingly, with or without an express dispatch from Everhart, Gale could not have legally operated the truck for much longer without stopping to rest. Everhart's owner acknowledged that he would not have assigned Gale a new load until Gale had assured him that he had spent the required number of hours off-duty. Driving off "somewhere" to find a place to sleep, in other words, was a legal (as well as a practical) prerequisite for Gale to undertake another delivery, or at least to be available to undertake another delivery, for Everhart the next day. Faced with the same question, this court and others have concluded that a driver is operating "in the business" of a carrier when he is driving to find a place to sleep for the night. See, e.g., Greenwell v. Boatwright, 184 F.3d 490, 491-92 (6th Cir.1999); Mahaffey v. Gen. Sec. Ins. Co., 543 F.3d 738, 742-43 (5th Cir.2008). Auto-Owners points to no decision to the contrary on this point.

As for treating the accident as occurring while Gale was heading toward Gary in anticipation of receiving an order the next morning, that too served the commercial interests of Everhart Trucking. Gale had a reasonable, justified expectation of securing a load in the "Gary—East of Chicago" area at some point the next day. Cf. Mahaffey, 543 F.3d at 743 (noting that a driver was operating in the business of a carrier when he "was driving to a motel to sleep with a reasonable expectation that a load would be available the following day"). The uncontradicted testimony of Everhart's owner justified that assumption: (1) "90 percent of the time" Everhart's "trucks reload[ed]" in the Gary area, JA 369, and (2) it was common for the driver making the delivery to the auto-parts manufacturer in Grand Rapids to proceed to the Gary area to pick up another load. Cf. Hot Shot Express, Inc. v. Assicurazioni Generali, S.P.A., 252 Ga.App. 372, 556 S.E.2d 475, 478-79 (2001). Just five days earlier, Gale had driven a similar route in eventually picking up a load in Gary. And Everhart later confirmed that it had intended to dispatch Gale for the trip. Because Gale knew that it was likely that he would be assigned a load in that area, he positioned the truck so he would be able to make any "appointment" arranged for him the next day, and he took steps to ensure that he would have the required hours of rest so that he would be qualified to pick up the newly assigned load. See Lime City Mut. Ins. Ass'n v. Mullins, 83 Ohio App.3d 517, 615 N.E.2d 305, 309-310 (1992).

Second, the comprehensive nature of the other policy exclusions—applicable to trips transporting goods, to trips dispatched to pick up goods and to return trips—suggests that the catchall exclusion for other "in the business" activities...