Charter Oaks Fire Ins. Co. v. Clayton

Citation62 F.3d 1414
Decision Date06 April 1995
Docket NumberNo. 94-2393,94-2393
PartiesNOTICE: Fourth Circuit Local Rule 36(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit. CHARTER OAKS FIRE INSURANCE COMPANY, Plaintiff-Appellee, v. Carol CLAYTON, an individual; Carol Clayton, as Administratrix of the Estate of James F. Sullivan, III, deceased, and as Administratrix of the Estate of James F. Clayton, deceased; Teresa D. Snyder, as Administratrix of the Estate of Stephen William McKinney, deceased, and natural guardian of Lysette D. McKinney and Joshua A. McKinney, infant children of Stephen William McKinney, deceased; Andrew S. Nason, as Ancillary Administrator for Robert J. Lagonterie and Joseph H. Curran, Co-Administrators of the Estate of Joseph R. Curran, Angela B. Curran and Kristin Curran, deceased; Andrew S. Nason, as Ancillary Administrator for Joseph H. Curran, Administrator of the Estate of Joseph M. Curran, deceased; Robert J. Lagonterie, an individual; Joseph H. Curran, an individual, Defendants-Appellants, and Double B Auto Sales, Incorporated, a corporation; Manuel A. Cruzado, Jr., an individual, Defendants. . Argued:
CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)

Appeal from the United States District Court for the Northern District of West Virginia, at Clarksburg. Irene M. Keeley, District Judge. (CA-93-103)

ARGUED: Michael Majewski, Mineola, NY, for Appellants.

Gordon Harrison Copland, STEPTOE & JOHNSON, Clarksburg, WV, for Appellee.

ON BRIEF: Brent D. Beveridge, BEVERIDGE LAW OFFICES, Fairmont, WV, for Appellants.

Robert G. Steele, Amy M. Smith, STEPTOE & JOHNSON, Clarksburg, WV, for Appellee.



Before RUSSELL and WIDENER, Circuit Judges, and CHAPMAN, Senior Circuit Judge.



Defendants-Appellants, administrators of the estates of eight individuals who died in a multi-vehicle accident and other surviving family members of the decedents, appeal the district court's decision that Plaintiff-Appellee Charter Oak Fire Insurance Company (Charter Oak) was not obligated to defend against or provide coverage for Appellants' tort claims stemming from the accident. We affirm.


This case arises out of an accident that occurred on July 26, 1990, when a motor carrier tractor-trailer owned by Double B Auto Sales (Double B) and operated by Manuel A. Cruzado, Jr., collided with two automobiles at a highway construction zone on Interstate 79 in Braxton County, West Virginia. The eight individuals who occupied the two automobiles died in the accident.

The fatal injuries in the accident were due in part to the fact that, after all the vehicles came to rest, a 1990 Lincoln Continental, which was attached on the carrier's overhead ramp, fell from the carrier and landed on top of one of the automobiles, a 1979 Dodge Aspen. The Lincoln's fall proximately resulted from the fact that Cruzado had negligently secured the Lincoln on the carrier in Florida a few days before the accident. Due to the impact from the fall of the Lincoln, the roof of the Aspen collapsed and the passenger in the back seat suffered multiple head injuries. Taking into account the prompt emergency response by the state police, fire departments, and rescue personnel, the National Transportation Safety Board concluded, "If the Lincoln on the head ramp had been properly restrained, the roof of the Aspen would not have been crushed, and one or more of the occupants of the Aspen may have survived by escaping or being extricated by rescuers from the windows or door on the left side of that vehicle." Instead, all three occupants of the Aspen died from heat trauma. All five occupants of the other automobile similarly died from heat trauma.

At the time of the accident, Double B and Cruzado, as an employee of Double B, were insured by Charter Oak under a commercial general liability policy effective April 2, 1990, through April 2, 1991. Among other limitations, the declarations under the policy provides a $1,000,000 "General Aggregate Limit (Other than Products Completed Operations)" and a $1,000,000 "Products-Completed Operations Aggregate Limit." The commercial liability coverage form includes three subsections under the section for "coverages": (a) bodily injury and property damage liability; (b) personal and advertising injury liability; and (c) medical payments.

The subsection for bodily injury and property damage liability begins:

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies.

Joint Appendix (J.A.) 94. The subsection then lists several exclusions, and the exclusion most relevant to this appeal is the "auto use" exclusion:

2. Exclusions.

This insurance does not apply to:

* * *

* * *

g. Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading". 1

J.A. 95. The final section of the coverage form is the definition section, which includes a definition for "products-completed operations hazard":

11.a. "Products-completed operations hazard" includes all "bodily injury" and "property damage" occurring away from premises you own or rent and arising out of "your product" or "your work"....

c. This hazard does not include "bodily injury" or "property damage" arising out of:

(1) The transportation of property, unless the injury or damage arises out of a condition in or on a vehicle created by the "loading or unloading" of it ....

J.A. 101 (emphasis added).

After the accident, the estates of the eight decedents instituted three separate civil actions in West Virginia state court against Double B, Cruzado, and numerous other defendants. On June 30, 1993, Charter Oak commenced the instant declaratory judgment in federal district court in the Northern District of West Virginia. In the action, Charter Oak sought a declaration that it was not obligated to defend or indemnify Double B or Cruzado in connection with the civil actions filed in state court. The parties agreed that no discovery was required and filed cross-motions for summary judgment.

On September 27, 1994, the district court held that the insurance policy Charter Oak provided to Double B excluded coverage for the accident, such that Charter Oak was not obligated to defend or indemnify Double B or Cruzado. Accordingly, the district court granted Charter Oak's motion for summary judgment. This Court reviews the grant of summary judgment de novo, applying the same standard as did the district court. Wagner v. Wheeler, 13 F.3d 86, 90 (4th Cir.1993).


The parties' dispute in this case centers on whether, under New York law, 2 the auto use exclusion or the "products-completed operations hazard" provision controls Charter Oak's coverage obligations for the accident on July 26, 1990. Charter Oak contends that the policy does not cover the accident because the auto use exclusion excludes the accident from coverage. Appellants contend that the exclusion does not apply, and that if the exclusion applies, an ambiguity exists in the policy because the accident is covered under the "loading or unloading" exception to the transportation of property exclusion in the products-completed operations hazard provision, quoted above. The presence of such an ambiguity, Appellants assert, would trigger the general rule that ambiguity in an insurance policy must be construed against the insurer and in favor of the insured. See, e.g., Breed v. Insurance Co. of N. Am., 385 N.E.2d 1280, 1282 (N.Y.1978); Sincoff v. Liberty Mut. Fire Ins. Co., 183 N.E.2d 899, 901-02 (N.Y.1962). Under New York law, "[a]n insurance policy ... is in essence a contract and must be construed in accordance with the intent of the parties as expressed in the clear language of the policy." Ruggerio v. Aetna Life & Casualty Co., 484 N.Y.S.2d 106, 107 (N.Y.App.Div.1985) (citing, inter alia, Zappone v. Home Ins. Co., 432 N.E.2d 783 (N.Y.1982)).

A. Auto use exclusion

Before we address any alleged ambiguity in the policy, we must first consider whether the auto use exclusion applies to the accident in question. In debating the applicability of the exception, the parties primarily disagree about the relevance of two New York decisions that have addressed the scope of auto use exceptions in insurance contracts. In the first case, Duncan Petroleum Transport, Inc. v. Aetna Insurance Co., 466 N.Y.S.2d 394 (N.Y.App.Div.), aff'd on mem. of App. Div., 460 N.E.2d 229 (N.Y.1983), two employees of a third party company were killed while transferring gasoline from the insured's truck to the third party's truck. The insured claimed that the auto use exclusion did not apply because the accident arose from such factors as a failure to inspect the vehicles and a failure to train and supervise personnel. The court, however, held that the exclusion barred recovery, reasoning that the insured's factors of causation did not change the fact that the explosion occurred during the use of the insured's vehicle while the vehicle was being unloaded. As in this case, "use" was defined in the policy to include the loading or unloading of vehicles. Id. at 395.

In the second case, Ruggerio v. Aetna Life & Casualty Co., 484 N.Y.S.2d 106 (N.Y.App.Div.1985), the court addressed whether the auto use exclusion excluded claims against an insured taxicab company for negligent hiring of an incompetent and unlicensed driver, and for negligent entrustment of an automobile to the driver when he was intoxicated. Paralleling the reasoning in Duncan, the court held that the accident arose out of the use of the taxicab and denied coverage. The court stated that the...

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  • Ruge v. Utica First Insurance Company, 2005-07873.
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    ...124-126 [1989]; Zandri Constr. Co. v Firemen's Ins. Co. of Newark, 81 AD2d 106, 109 [1981], affd 54 NY2d 999 [1981]; Charter Oaks Fire Ins. Co. v Clayton, 62 F3d 1414 [1995]; Jakobson Shipyard, Inc. v Aetna Cas. & Sur. Co., 775 F Supp 606, 613 [1991], affd 961 F2d 387 [1992]). "Exclusions i......

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