Integral Ins. Co. v. Lawrence Fulbright Trucking, Inc.
| Decision Date | 15 April 1991 |
| Docket Number | D,No. 1142,1142 |
| Citation | 930 F.2d 258 |
| Parties | The INTEGRAL INSURANCE COMPANY, Plaintiff-Appellant, v. LAWRENCE FULBRIGHT TRUCKING, INC.; Charles S. Klutz; A.L.C. Transportation, Inc.; Valley Transportation of Vale, Inc.; Kathleen McGoldrick; Patricia McGoldrick, Defendants- Appellees. ocket 90-9022. |
| Court | U.S. Court of Appeals — Second Circuit |
Edward Farman, New York City (Laurence J. Rabinovich, Schindel, Cooper & Farman, New York City, of counsel), for plaintiff-appellant.
Michael G. Glass, Melville, N.Y. (Robert A. Katz, Gandin, Schotsky & Rappaport, P.C., Melville, N.Y., of counsel), for defendants-appellees Kathleen and Patricia McGoldrick.
Before KEARSE, PRATT and McLAUGHLIN, Circuit Judges.
Plaintiff-appellant The Integral Insurance Company ("Integral") appeals from a judgment entered upon cross-motions for summary judgment declaring that it is obligated to indemnify pursuant to an MCS-90 endorsement included in a trucker's policy issued to defendant Lawrence Fulbright Trucking, Inc. ("Fulbright"). The MCS-90 endorsement, which is mandated by Sec. 29 of the Motor Carrier Act of 1980, 49 U.S.C. Sec. 10927 ("MCA"), requires the insurer to pay "any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles." The district court found that (a) Fulbright was "using" the motor vehicle when the accident occurred and (b) even if Fulbright was not "using" the vehicle, it remained the owner thereof and, as such, was covered by the Integral policy. We agree with the second ground and accordingly affirm.
On July 29, 1988, Kathleen McGoldrick was seriously injured in New York when her car was hit from behind by a tractor-trailer. Kathleen McGoldrick and Patricia McGoldrick, whose relationship to Kathleen is not disclosed in the record, sued in the Supreme Court of the State of New York, County of New York (the "state court action"). Among the defendants were (1) Charles S. Klutz, who owned the tractor portion of the tractor-trailer and who was driving the tractor-trailer, (2) Fulbright, the owner of the trailer portion of the tractor-trailer, (3) A.L.C. Transportation, Inc. ("A.L.C."), a motor carrier, and (4) Valley Transportation of Vale, Inc. ("Valley"), A.L.C.'s agent, which pursuant to a lease agreement more fully described below, had leased Klutz's tractor. The state court action was later settled for $1.94 million upon the understanding that Integral would contribute an additional $750,000 if a court should eventually hold that it was obligated to indemnify Fulbright, its insured.
Although Klutz owned the tractor portion of the tractor-trailer, he did not have an Interstate Commerce Commission ("ICC") license to carry goods in interstate commerce. A.L.C., however, had such a license. To circumvent ICC regulations, Klutz leased the tractor to A.L.C., which in turn, designated Klutz as the authorized driver of the tractor and had him insured under A.L.C.'s policy. Klutz paid A.L.C. $500 per month for this arrangement, but he did not receive compensation from A.L.C. and never hauled freight for A.L.C.
The legal status of the trailer portion of the tractor-trailer is only slightly more obscure. In February 1988, Fulbright agreed A trucker's policy issued by Integral to Fulbright, the trailer owner, was in effect on the day of the accident. The policy provided coverage only for scheduled vehicles, but the trailer was not included on the schedule. The policy, however, also included an MCS-90 endorsement, which extends the insurance coverage to all motor vehicles owned by Fulbright, regardless of whether the vehicle is listed on the schedule. The MCS-90 endorsement obligates Integral to pay
to sell the trailer to Klutz, who took immediate possession of the trailer. Although Klutz was to pay Fulbright $400 per month until the full purchase price of $8,000 was paid, Fulbright retained registration of, title to and the license plates for the trailer. Because Klutz had not paid the full purchase price to Fulbright on the day of the accident, the parties have stipulated that on July 29, 1988, Fulbright was still the owner of the trailer. Shortly after the accident, Klutz returned the trailer to Fulbright.
within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980.
The MCS-90 endorsement derives from the financial responsibility regulations promulgated by the Secretary of Transportation (the "Secretary") pursuant to the MCA. See 49 C.F.R. Sec. 387.15 (Illustration I) (1990). The regulations require motor carriers to obtain minimum levels of security, in the form of either insurance or a surety bond, to protect the public. Id. Sec. 387.7. At the time of the accident, the minimum level established by the Secretary was $750,000. See id. Sec. 387.9. The financial responsibility requirement is satisfied by the inclusion of Form MCS-90 as an endorsement to the motor carrier's insurance policy or a surety bond as approved in Form MCS-82. See id. Sec. 387.15. It was pursuant to these regulations that Integral issued to Fulbright the MCS-90 endorsement that is in controversy here.
After the settlement agreement in the state court action, Integral commenced this action in the district court against Fulbright, Klutz, Valley, A.L.C. and the McGoldricks, seeking a declaration that it is not obligated to indemnify Fulbright under the MCS-90 endorsement it issued to Fulbright. The McGoldricks and Integral cross-moved for summary judgment on stipulated facts. 1 The district court accepted the McGoldricks' interpretation of the MCS-90 endorsement in two critical respects. First, the district court agreed that Fulbright was "using" the trailer at the time of the accident, even though Klutz was operating the trailer and even though it was stipulated that Fulbright exercised no control over the trailer once Klutz took possession. The district court found in the alternative that even if Fulbright had not been "using" the trailer, Integral would still be liable under the policy because the MCS-90 endorsement does not require the insured's own "operation, maintenance or use." Thus, it found Integral liable to pay any "final judgment" against Fulbright. We agree with the alternative holding and accordingly affirm on that ground.
It is important to note at the outset that there is no evidence or, indeed, even an allegation that Fulbright itself was negligent. Its liability, if any, is a status liability, i.e., as owner of the trailer that was negligently operated by another: Mr. Klutz. The McGoldricks' principal argument is that the plain meaning of the language employed in the MCS-90 endorsement is that the insurer must indemnify even where the insured or one of its agents is not actively negligent. We agree.
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