COMPANIA TRANSATLANTICA v. Hartford Acc. & Indem.

• Decision Date: 15 October 1990
• Docket Number: No. 88 Civ. 6130 (JES).,88 Civ. 6130 (JES).
• Citation: 748 F. Supp. 214
• Parties: COMPANIA TRANSATLANTICA ESPANOLA, S.A., Plaintiff, v. HARTFORD ACCIDENT & INDEMNITY COMPANY, National Union Fire Insurance Company of Pittsburgh, Pa., and Fireman's Fund Indemnity Corporation, Defendants.
• Court: U.S. District Court — Southern District of New York

748 F. Supp. 214

COMPANIA TRANSATLANTICA ESPANOLA, S.A., Plaintiff, v. HARTFORD ACCIDENT & INDEMNITY COMPANY, National Union Fire Insurance Company of Pittsburgh, Pa., and Fireman's Fund Indemnity Corporation, Defendants.

No. 88 Civ. 6130 (JES).

United States District Court, S.D. New York.

October 15, 1990.

Martocci & Burns, New York City (Michael D. Martocci, Sam D. Delich, pro hac vice, of counsel), for plaintiff.

Mound, Cotton & Wollan, New York City (Stuart Cotton, Philip C. Silverberg, of counsel), for defendant Nat. Union Fire Ins. Co. of Pittsburgh, Pa.

Speyer & Perlberg, New York City (John M. Speyer, Jodi Goodelman, of counsel), for defendant Hartford Acc. & Indem. Co.

Lester Schwab Katz & Dwyer, New York City (Stuart W. Axe, of counsel), for defendant Fireman's Fund Indem. Corp.

OPINION & ORDER

SPRIZZO, District Judge:

Plaintiff Compania Transatlantica Espanola, S.A. ("CTE") brings this action against defendants Hartford Accident & Indemnity Company ("Hartford"), National Union Fire Insurance Company of Pittsburgh, PA. ("National Union"), and Fireman's Fund Indemnity Corporation ("Fireman's Fund") seeking a declaratory judgment that certain insurance policies issued by the defendants provide coverage to CTE, Grato & Son's Trucking, Inc. ("Grato"), and Raymond Rodino for their liabilities arising out of the judgment in Matthews v. CTI Container Transport Int'l, Inc., et al., 86 Civ. 1420 (MGC) (S.D.N.Y.), aff'd, 871 F.2d 270 (2d Cir.1989) ("the underlying action"). Plaintiff also alleges that the defendants have breached those insurance contracts and therefore seeks damages, including attorneys fees and punitive damages. All parties agree that the Court must apply New York law.

Presently pending before the Court is CTE's motion for summary judgment seeking a declaration that CTE, Grato and Rodino are covered by the policies in question and dismissal of Hartford and National Union's counterclaims for indemnity and subrogation against CTE. Hartford and National Union cross-move for summary judgment declaring that the aforesaid entities are not covered by those policies. For the reasons that follow, CTE's motion for summary judgment is denied and the cross-motions by National Union and Hartford are granted.¹

BACKGROUND

The underlying action arose out of a motor vehicle accident in Jericho, New York on October 24, 1985 between an automobile and a tractor-trailer.² See Matthews v. CTI Container Transport Int'l, Inc., 871 F.2d 270, 273 (2d Cir.1989). Plaintiff in the underlying action, Thomas J. Matthews, was seriously injured in that accident. See id. He and his wife Kathleen sued Rodino, the operator of the tractor-trailer, and Dennis O'Connor, the operator of the automobile in which Matthews was a passenger, alleging that their negligence caused his injuries. See id. They also sued a number of individuals and entities on the ground that as owners of the vehicles involved in the accident they were vicariously liable for the negligence of their operators. See id.; see also N.Y. Vehicle & Traffic Law § 388 (McKinney 1986); id. at § 128 (defining "owner"). These included: Grato, as statutory owner of both the tractor and the chassis and Interpool, Ltd. ("Interpool") and CTE as statutory owners of the chassis.³ The action was tried simultaneously to both a jury and a judge because CTE, as a corporation owned by a foreign sovereign, was entitled to a bench trial under the Foreign Sovereign Immunities Act. See 28 U.S.C. § 1441(d) (1988).

The jury verdict, after a reduction by the judge, awarded Thomas Matthews $7,000,000 and Kathleen Matthews $400,000 against Rodino, Grato, Dennis and Barbara O'Connor and Interpool. See Matthews, supra, 871 F.2d at 274; Affidavit of Michael D. Martocci at Ex. 1 (sworn to Feb. 25, 1989) ("Martocci Aff."). The judge awarded Thomas Matthews $4,783,150 and Kathleen Matthews $300,000 against CTE pursuant to its findings of fact and conclusions of law. See Matthews, supra, 871 F.2d at 274; Martocci Aff., Exs. 1, 2. Additionally, the court found that CTE was entitled to contractual indemnity from Grato and equitable indemnity from Rodino, and that Interpool was entitled to contractual indemnity from CTE and equitable indemnity from Rodino. See Plaintiff's Statement Pursuant to Local Rule 3(g) at ¶¶ 10-11 ("Pltf's 3(g) Statement"); Martocci Aff., Ex. 1.

Since this action requires a determination of which insurance company must bear the burden of paying CTE's, Grato's, and Rodino's share of the judgment that arose from their ownership and operation of the chassis, some background regarding the chassis is appropriate. The chassis was originally purchased by the First National Bank and Trust Company of Evanston, Illinois ("the Bank"), as trustee for International Paper & Leasing Corp. ("Int'l Paper"). See Hartford's Statement Pursuant to Local Rule 3(g) at ¶ 6 ("Hartford's 3(g) Statement"). The Financing Agreement between the Bank and Int'l Paper provided that the Bank would be the nominal owner of the chassis and would hold it in trust for Int'l Paper. Accordingly, the bill of sale transferred title to the Bank. See id. at ¶ 7. The Bank never took possession of the chassis, however, because, as trustee on behalf of the beneficial owner, it entered into a long-term lease agreement with Interpool.⁴ See Farrell Aff. at ¶ 12. Interpool then leased the chassis to CTE, which in turn leased it to Grato. See Pltf's 3(g) Statement at ¶¶ 2-3. Grato then directed Rodino to use the tractor-trailer, including this chassis, to take the container to its destination on the date of the accident. See id. at ¶ 4.

Several of the lease agreements between the parties provided that the lessee would indemnify the lessor or that the lessee must provide insurance coverage for the chassis. For example, the agreement between the Bank and Interpool required Interpool to procure liability insurance on the chassis. See Pltf's 3(g) Statement at ¶ 12; Farrell Aff. at ¶ 5; Martocci Aff. at ¶ 7 & Ex. 4. The agreement further provided that such insurance must name Interpool and the Bank as named insureds and must insure against loss or damage to the person and property of others from all activities arising from the ownership, maintenance or use of the equipment, in an amount not less than $5,000,000 for each occurrence. See Martocci Aff. at Ex. 4. Similarly, when Interpool leased the chassis to CTE, that lease agreement required CTE to maintain liability insurance policies satisfactory to Interpool with limitations of not less than $250,000 for each person, $500,000 for each occurrence and $100,000 for each accident. See Farrell Aff. at ¶ 7; Martocci Aff. at Ex. 5, at 6. And when CTE leased the chassis to Grato, that agreement required that both Grato and CTE have an endorsement to their general liability insurance policies that covered liability for the leased chassis with limits of no less than $500,000 for bodily injury and $250,000 for property damage, or single limit bodily injury and property damage of at least $750,000. See Martocci Aff., Ex. 6, at 1.

In accordance with their respective obligations, Grato entered into an insurance contract with Fireman's Fund⁵ and Interpool entered into two insurance contracts with National Union and an excess insurance agreement with Hartford. However, although it represented to Interpool that it had obtained insurance coverage, see Farrell Aff. at ¶¶ 14-15, CTE did not obtain any insurance to cover the chassis. See id. at ¶ 16.

The first policy issued by National Union was policy No. BA 118 31 96 RA ("the Business Auto policy") (annexed to Martocci Aff. at Ex. 9). This policy had a limit of $1,000,000 and covered the period from December 1, 1984 to December 1, 1985. The second policy issued by National Union in favor of Interpool was policy No. GLA 117 06 09 RA ("the General Liability policy") (annexed to Martocci Aff. at Ex. 10). This policy was issued by National Union to cover the period from December 1, 1984 to December 1, 1985. The limit of this policy is also $1,000,000.

There is no dispute that the General Liability policy covered Interpool's liabilities arising out its lease of the chassis from the Bank and its sublease to CTE. See Farrell Aff. at ¶ 17; Martocci Aff., Ex. 10, at 38. However, as plaintiff concedes, that policy does not have a permissive user clause and therefore does not provide coverage to CTE, Grato or Rodino. See CTE's Memorandum of Law to Support Motion for Summary Judgment at 7-8 (Feb. 27, 1989). Therefore, the issue presented here with respect to National Union's policies is whether CTE, Grato and Rodino are covered by the Business Auto policy.

The excess insurance policy issued by Hartford, Hartford Umbrella Policy No. 10 HUJV 2369 ("the Hartford Umbrella Policy") (annexed to Martocci Aff. at Ex. 11), provided coverage up to $10,000,000 in excess of the $1,000,000 limits of the National Union policies. It covered the same period of time as the National Union Policies, December 1, 1984 to December 1, 1985.

DISCUSSION

The Business Auto Policy

CTE argues that it, Grato and Rodino are insureds under the Business Auto policy issued by National Union to Interpol because it was using the chassis with Interpool's permission.⁶ However, to prevail on this claim, CTE must first demonstrate that the chassis itself was covered under that policy.

An "auto" is defined by the policy as "a land motor vehicle, trailer or semi-trailer designed for travel on public roads, but does not include mobile equipment." Business Auto Policy at Part I, § D (Martocci Aff., Ex. 9, at 4). CTE argues that the "chassis" at issue was a "trailer" within the meaning of the insurance contract. The Court rejects that contention.

The terms "chassis" and "trailer" are clearly not interchangeable in this case. Interpool entered into two insurance contracts with National Union: the Business Auto policy, which by its terms covered cars and certain trailers, and the...