Dairylea Co-op., Inc. v. Rossal

• Citation: 64 N.Y.2d 1,473 N.E.2d 251,483 N.Y.S.2d 1001
• Decision Date: 29 November 1984
• Docket Number: No. 1,No. 2,1,2
• Court: New York Court of Appeals Court of Appeals
• Parties: , 473 N.E.2d 251, 39 UCC Rep.Serv. 1666 DAIRYLEA COOPERATIVE, INC., Plaintiff, and Lumbermens Mutual Casualty Company, Appellant, v. Robert ROSSAL et al., Individually and Doing Business as R & H Hauling, et al., Defendants, and Aetna Casualty and Surety Company, Respondent. (Action) AETNA CASUALTY AND SURETY COMPANY, Respondent, v. LUMBERMENS MUTUAL CASUALTY COMPANY, Appellant. (Action)

Page 1001

483 N.Y.S.2d 1001

64 N.Y.2d 1, 473 N.E.2d 251, 39 UCC

Rep.Serv. 1666

DAIRYLEA COOPERATIVE, INC., Plaintiff, and Lumbermens Mutual Casualty Company, Appellant, v. Robert ROSSAL et al., Individually and Doing Business as R &

H Hauling, et al., Defendants,

and

Aetna Casualty and Surety Company, Respondent. (Action No. 1.)

AETNA CASUALTY AND SURETY COMPANY, Respondent, v. LUMBERMENS MUTUAL CASUALTY COMPANY, Appellant. (Action No. 2.)

Court of Appeals of New York.

Nov. 29, 1984.

David W. Silverman and Carolyn A. Campe, New City, for appellant

Jeffrey Kyle Anderson, Troy and John Dall Vechia, Kingston, for respondent.

OPINION OF THE COURT

MEYER, Judge.

The execution by the purchaser of a vehicle of a note and purchase agreement, and by both seller and purchaser of a security agreement stating that the vehicle is owned by the purchaser is a sufficient transfer of ownership of the vehicle to constitute the purchaser's insurance carrier the primary insurer of personal injuries thereafter inflicted during the purchaser's operation of the vehicle, notwithstanding that the prior owner's license plates remain on the vehicle and that the certificate of title is not transferred until after the injury-causing accident. The order of the appellate Division, 96 A.D.2d 136, 469 N.Y.S.2d 226, insofar as appealed from should, therefore, be reversed, with costs, and judgment granted in favor of Lumbermens Mutual Insurance Company declaring that Aetna Casualty and Surety Company is solely responsible for defense of the personal injury action and payment of the verdicts therein as compromised.

I

On September 23, 1978, Brockway tanker 83050, registered in the name of Dairylea Cooperative, Inc., and carrying license plates issued to it, was involved in an accident with a vehicle operated by Mathias Selthafner in which several of the passengers in the Selthafner vehicle were injured. The tanker was being operated by Robert Rossal who, together with Richard Hendrickson, did business as R & H Hauling. On September 1, 1978, Rossal and Hendrickson had executed to Dairylea a promissory note in the amount of $13,500, an agreement authorizing Dairylea to withhold from any amounts due R & H, as the purchase price of tanker 83050, a stipulated monthly sum until a total of $13,500 plus interest had been retained, and a security agreement in which the tanker was stated to be owned by Rossal and Hendrickson doing business as R & H Hauling and they acknowledged Dairylea's security interest in it to the extent of $13,500 plus interest. A financing statement was filed with the Sullivan County Clerk on September 21, 1978, but the transfer portion of the certificate of title was not executed by Dairylea until February 1, 1979, and transfer to R & H was not made on Department of Motor Vehicle records until April 25, 1979. The purchase agreement and note were signed only by R & H; the security agreement and financing statement were signed by both R & H and Dairylea.

Hendrickson had on May 5, 1978 entered into a tank farm hauling contract with Dairylea and on May 22, 1978, a lease of the Brockway tanker, both of which required him to hold Dairylea harmless from any and all claims and to obtain insurance naming Dairylea as an additional insured. It is not disputed that in doing so he was acting on behalf of R & H. On August 1, 1978, Aetna Casualty issued to R & H its business automobile policy with liability limit for each occurrence of $750,000, which listed Brockway tanker 83050 as a vehicle owned by R & H and named Dairylea not as an additional insured but as a loss payee. Aetna thereafter furnished Dairylea with two certificates stating that its policy covering the tanker had been issued to R & H, neither of which identified Dairylea's interest under the policy. At all relevant times Dairylea was insured by Lumbermens Mutual under a comprehensive liability policy which stated, without specification of particular vehicles, that it covered all of Dairylea's vehicles, and the liability limit of which was $500,000 for each occurrence.

In the personal injury action brought by the Selthafners, Rossal, Dairylea and R & H were joined as parties defendant and Dairylea claimed over against R & H. Prior to trial of the personal injury action, each insurer began a declaratory judgment action with respect to coverage. In the personal injury action the jury returned verdicts in behalf of the plaintiffs and the Trial Judge granted Dairylea judgment on its claim over against R & H on both common-law principles and on the basis of its hold harmless agreement.

The verdicts as against Rossal, Dairylea and R & H were thereafter compromised for $315,000, it being stipulated that the settlement was without prejudice to the declaratory judgment actions. Those actions were then consolidated and presented for decision on a stipulation of facts and annexed exhibits. Supreme Court held that notwithstanding transfer of the tanker to R & H, Dairylea remained an owner under section 2-401 (subd. par. ) of the Uniform Commercial Code because no document of title had been delivered, but nonetheless held R & H's insurer, Aetna, primary because its policy listed the tanker as an owned vehicle. The Appellate Division agreed that under the Uniform Commercial Code Dairylea was an "owner" for purposes of Lumbermens' policy, but held the "other insurance" clause of the latter policy inapplicable and, therefore, modified the judgment to declare that Lumbermens was also a primary insurer. We conclude that the tanker was an owned vehicle under the Aetna policy, but a nonowned vehicle under the Lumbermens policy, notwithstanding the Vehicle and Traffic Law provisions which Aetna argues impose liability upon both Dairylea and Lumbermens as its insurer and the Uniform Commercial Code provision referred to by the courts below. We therefore reverse.

II

There can be no question that the tanker was at the time of the accident an owned automobile covered by the Aetna policy, for it provided liability insurance for any auto and the annexed "Schedule of Covered Autos You Own" listed Brockway tanker 83050, among others. There also is no question that the Aetna policy protected not only R & H as an insured but Dairylea as well, for its definition of "insured" included the statement that, "Anyone liable for the conduct of an insured described above is an insured but only to the extent of that liability." ¹ Nor is it of consequence that the Aetna policy excluded liability assumed under any contract, for Dairylea's judgment over against R & H is based not only on the hold harmless agreement between them but also on Dairylea's common-law right to indemnification, which depends not on contract but on the fact that Dairylea has been held vicariously liable, without fault on its part, to the Selthafners, for the negligence of R & H (O'Dowd v. American Sur. Co., 3 N.Y.2d 347, 353, 165 N.Y.S.2d 458, 144 N.E.2d 359; Interstate Motor Frgt. System v. Michigan Mut. Liab. Co., 87 A.D.2d 715, 448 N.Y.S.2d 884, mot. for lv. to app. den. 57 N.Y.2d 602, 454 N.Y.S.2d 1026, 439 N.E.2d 1245; Hertz Corp. v. Dahill Moving & Stor., 79 A.D.2d 589, 434 N.Y.S.2d 386, affd. 54 N.Y.2d 619, 442 N.Y.S.2d 502, 425 N.E.2d 890; see Rogers v. Dorchester Assoc., 32 N.Y.2d 553, 566, 347 N.Y.S.2d 22, 300 N.E.2d 403; 1 NY PJI2d 551). ² And because the Aetna policy stated that, "For any covered auto you own this policy provides primary insurance," there can be no question that Aetna's coverage was primary.

III

The situation is, however, different with respect to Lumbermens, whose policy covered no more than the liability of Dairylea and provided no protection at all for Rossal, Hendrickson or R & H Hauling. True, its declaration of coverage listed "all vehicles owned or operated by or for the named insured Dairylea Cooperative, Inc.," but it is only where the policy by its terms covers the operator as an insured that the insurer of a vehicle's former owner will be liable to pay a judgment obtained against an operator-transferee after execution of a bill of sale or similar document (General Acc. Fire & Life Assur. Corp. v. Piazza, 4 N.Y.2d 659, 666, 176 N.Y.S.2d 976, 152 N.E.2d 236; Mason v. Allstate Ins. Co., 12 A.D.2d 138, 144, 209 N.Y.S.2d 104; cf. Nationwide Mut. Ins. Co. v. Liberty Mut. Ins. Co., 43 N.Y.2d 810, 402 N.Y.S.2d 395, 373 N.E.2d 290).

By its terms Lumbermens' policy excluded as an insured "the owner of a non-owned automobile, or any agent or employee of any such owner," a nonowned automobile being defined as one not owned by the named insured. The sale and security agreements and note which, it is stipulated, were executed 22 days prior to the accident leave no question that at the time of the accident the tanker was not owned by Dairylea within the meaning of the policy, notwithstanding that it still carried plates issued to Dairylea. Furthermore, although the policy definition of "insured" included in addition to Dairylea "any other person while using an owned automobile or a hired automobile with the permission of the named insured," the tanker, by reason of the sale and security agreement, was not an owned automobile, nor did the tank farm milk hauling contract, which called for transportation of milk by R & H as an independent contractor rather than use of a particular tanker in the rendition of such service, constitute the tanker a hired automobile within the meaning of that provision. Moreover, it cannot be said in any realistic sense that once the September 1, 1978 agreements and note were executed, Dairylea had any control over use of the tanker or could grant R & H permission to use it (Mason v. Allstate Ins. Co., supra; see Fidelity & Cas. Co. v. Cosmopolitan Mut. Ins. Co., 33 N.Y.2d 966, 967, 353 N.Y.S.2d 734, 309 N.E.2d 133). As the owner of the tanker, R & H had the right to use it without permission from Dairylea or anyone else.

IV

Thus, on the basis of policy language alone, Aetna's...