Carolina Cas. Ins. Co. v. Underwriters Ins. Co.

• Decision Date: 10 March 1978
• Docket Number: No. 75-3434,75-3434
• Citation: 569 F.2d 304
• Parties: CAROLINA CASUALTY INSURANCE COMPANY and JRJ Trucking, Inc., Plaintiffs-Appellants, Cross-Appellees, v. UNDERWRITERS INSURANCE COMPANY, International Transportation Services, Inc., and International Bakerage, Inc., Defendants-Appellees, Cross-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 304

569 F.2d 304

CAROLINA CASUALTY INSURANCE COMPANY and JRJ Trucking, Inc., Plaintiffs-Appellants, Cross-Appellees, v. UNDERWRITERS INSURANCE COMPANY, International Transportation

Services, Inc., and International Bakerage, Inc.,

Defendants-Appellees, Cross-Appellants.

No. 75-3434.

United States Court of Appeals, Fifth Circuit.

March 10, 1978.

Lowell S. Fine, A. Paul Cadenhead, James C. Pratt, Atlanta, Ga., for appellant.

Edward W. Killorin, Atlanta, Ga., for Underwriters, et al.

Michael V. Elsberry, Atlanta, Ga., Millard C. Farmer, Jr., Newnan, Ga., for Mrs. L. A. Smith.

Ben L. Weinberg, Jr., Atlanta, Ga., for Rentco-Division.

Appeals from the United States District Court for the Northern District of Georgia.

Before BROWN, Chief Judge, COLEMAN and MORGAN, Circuit Judges.

BROWN, Chief Judge:

In this little declaratory drama, neither of two insurance companies wanted to play the part of primary insurer. Nonetheless, the District Court cast them both in that role and they appeal. We affirm.

It Happened One Night

At approximately 10:00 p. m. on February 21, 1973, Amos Williamson was backing a tractor-trailer into the driveway of his home. During this operation, the trailer extended across Georgia State Route 54, and an automobile driven by Kenneth Randall Smith collided with that unsubtle object. Smith was killed; his wife and a second passenger were injured.

Shortly thereafter, Mrs. Smith brought a diversity suit in the Northern District of Georgia alleging negligence of the driver Williamson and the defective condition of both tractor and trailer. She sought $1.5 million in damages for her injuries and the wrongful death of her husband. The cast of characters named as defendants and their alleged interrelationships were as follows:

J.R.J. Trucking, Inc. (JRJ): owner and lessor of tractor

Rentco Division Fruehauf Corp. (Rentco): owner and lessor of trailer

International Transportation Services, Inc. (ITS): lessee of tractor and trailer

International Bakerage, Inc. (Bakerage): sublessee from ITS of tractor and trailer

Williamson was alleged to be the agent of all four defendants.

Behind The Scenes

At the time of the accident, JRJ was the named insured under a policy issued by Carolina Casualty Insurance Company (Carolina). That policy covered both the tractor owned by JRJ and the trailer owned by Rentco. ITS and Bakerage were named insureds under a policy issued by Underwriters Insurance Company (Underwriters). Both policies were in full force and effect on February 21, 1973.

The Director Takes Over

During the pendency of Mrs. Smith's action, Carolina brought a declaratory judgment action against Underwriters, Rentco, ITS, Bakerage, and Mrs. Smith. It sought an adjudication of the respective rights and liabilities of the parties under the Carolina and Underwriters policies and a stay of the Smith action. Like the policies, also central to this dispute was the leasing agreement between JRJ and ITS. ¹

Under the terms of this contract, JRJ, owner-lessor of the tractor, undertook, inter alia, the following obligations: (i) to keep the leased equipment in first-class condition and repair and to pay all operating expenses ² (ii) to assume responsibility for and pay wages to the drivers; ³ (iii) to assume full responsibility for drivers as JRJ's employees, and to hold ITS-lessee harmless from drivers' claims against ITS; ⁴ (iv) (a) to provide and keep in force property damage and public liability insurance, (b) to furnish a certificate of insurance showing ITS as the named insured and providing for notice of cancellation, and (c) to assume the expense in the event JRJ was unable to furnish evidence of insurance and ITS procured insurance on behalf of JRJ. ⁵

ITS, an ICC carrier, assumed as required by applicable regulations ⁶ exclusive possession, control and use of the leased equipment and full responsibility to the public, shippers, and all state and federal agencies. ⁷

In order that the reader can more readily understand and compare the critical provisions of the two policies, they are numbered in brackets and set forth below in table form. The provisions will be referred to throughout using these numbers.

⁸, ⁹

Carolina argued below that its policy did not cover ITS or Williamson. ¹⁰ Its fallback position was if such coverage existed, it was excess only and ITS' coverage was primary as a matter of law. ¹¹ Underwriters urged that its policy did not cover Williamson, that JRJ's coverage was primary and extended to both Williamson and ITS. Underwriters further contended that because any liability of ITS was vicarious, it was subrogated to the right of ITS to seek indemnity from Williamson and ultimately Williamson's insurer, Carolina. Alternatively, Underwriters asserted that if any coverage were found to exist, it was excess only and not primary.

On cross-motions for summary judgment, the District Court held that (i) ITS was not an additional insured under Carolina's policy by virtue of exclusion (2) of the Truckmen's endorsement; (ii) the driver Williamson was an additional insured under definition (1) of Carolina's policy by virtue of the lease which made Williamson a JRJ employee and permissive user; (iii) Williamson was an additional insured under ITS' Underwriters policy definition (4) by virtue of the lease which made him a permissive user; ¹² Underwriters clause (5) was ineffective to exclude him from that definition under Trinity Universal Ins. Co. v. Farmers Mutual Auto. Ins. Co.; ¹³ (iv) a finding that Williamson was an additional insured under ITS' policy negated any possibility of subrogation and indemnity; and (v) because the "other insurance" provisions (3) and (6) were mutually repugnant, Carolina and Underwriters were primary insurers with respect to Williamson. Delighted not to have been the only one cast in a primary role, but definitely unhappy with equal billing, both companies appeal. ¹⁴

That Which They Giveth They Also Taketh Away?

Carolina limits its attack to one aspect of the District Court's decision: ¹⁵ the implicit rejection ¹⁶ of the contention that Underwriter's coverage was not primary as a matter of law. Carolina's theory proceeds along the following lines. ITS is a common carrier certified by the Interstate Commerce Commission and the Georgia Public Service Commission. The rig, in charge of Williamson, was operating under ITS' certificate of authority when the collision occurred. Underwriters filed on behalf of ITS certificates of insurance with the ICC and the Georgia PSC. The Underwriters policy is subject to the "Endorsement for Motor Carrier Policies of Insurance for Automobile Bodily Injury and Property Damage Liability under Section 215 of the Interstate Commerce Act" ¹⁷ (ICC endorsement). ¹⁸

According to Carolina, the fact that the Underwriters policy does not actually bear the ICC endorsement is of no moment. The Interstate Commerce Act and regulations promulgated pursuant thereto have the effect of stamping the endorsement on the policy, with the concomitant effects of nullifying the "other insurance" clause (6) and making Underwriters the primary insurer. In support of this argument, Carolina relies principally on two Tenth Circuit decisions, Argonaut Ins. Co. v. National Indemnity Co., 10 Cir., 1971, 435 F.2d 718, and Hagans v. Glens Falls Ins. Co., 10 Cir., 1972, 465 F.2d 1249. In rebuttal, Underwriters relies on yet another Tenth Circuit case, Carolina Casualty Ins. Co. v. Transport Indemnity Co., 10 Cir., 1973, 488 F.2d 790. We shall discuss these opinions in chronological sequence.

In Argonaut, Executive Car Leasing hired a driver (Blankenship) from Auto Driveaway to transport an Executive car from Oklahoma to California. En route, Blankenship struck a car driven by Seymour who died as a result. Seymour's estate sued Blankenship and Auto Driveaway; Executive Car Leasing was not joined as a defendant. Executive's insurer National refused to defend the action. Driveaway's insurer Argonaut defended, settled for $55,000, paid the judgment, and sued National on the basis that National had primary coverage. Both the National and Argonaut policies contained "other insurance" clauses. The Argonaut policy, however, contained the ICC endorsement, as to which the Court concluded as follows:

Blankenship had possession of the car under authority from Driveaway and drove negligently. The ICC endorsement, although not expressly referring to the "other insurance" provisions, says that no condition, provision, stipulation, or limitation of the policy "shall relieve the Company (the insurer) from liability hereunder." If the Argonaut position is accepted, it will be relieved from any liability except for excess coverage. We believe that the effect of the endorsement was to make Argonaut the primary insurer.

Whatever may be the liability of National under its policy, we agree with the trial court that " * * * Argonaut cannot escape the plain terms of its insuring agreement in this case." The ICC endorsement imposes primary liability and eliminates any need for consideration of the effect of the identical "other insurance" clauses. We have no question of excess because the recovery was within the limits of the Argonaut policy.

435 F.2d at 720-21 (emphasis added).

The facts in Hagans were slightly different. There the lessor Ryder (insured by Liberty Mutual) agreed to provide insurance covering Far-Go (lessee/ICC carrier) as an additional insured. Far-Go (insured by Glens Falls) agreed to indemnify Ryder. The driver Hagans was a Far-Go employee on Far-Go business at the time the accident occurred. Both policies covered Far-Go and its employees. Apparently the Glens Falls policy did not contain the ICC endorsement, but "all parties proceed(ed) on the premise that the policy of Glens Falls contain(ed) such." 465 F.2d at 1252. The Court ignored the terms of the lease by which Ryder agreed to provide public liability insurance, and on the basis of Argonaut...