Penske Truck Leasing v. Republic Western Ins.

• Decision Date: 03 January 2006
• Docket Number: No. 5:04-CV-462-CR(3).,5:04-CV-462-CR(3).
• Citation: 407 F.Supp.2d 741
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: PENSKE TRUCK LEASING CO., Limited Partnership, Plaintiff, v. REPUBLIC WESTERN INSURANCE COMPANY, Defendant.

407 F.Supp.2d 741

PENSKE TRUCK LEASING CO., Limited Partnership, Plaintiff, v. REPUBLIC WESTERN INSURANCE COMPANY, Defendant.

No. 5:04-CV-462-CR(3).

United States District Court, E.D. North Carolina, Western Division.

January 3, 2006.

Christopher A. Page, Young, Moore & Henderson, George H. Pender, Teague, Campbell, Dennis & Gorham, Raleigh, NC, for Plaintiff.

Christopher A. Page, Young, Moore & Henderson, Raleigh, NC, for Defendant.

ORDER

BRITT, Senior District Judge.

The parties' cross-motions for summary judgment are before the court.

On 3 June 2004, Penske Truck Leasing Co., Limited Partnership (Penske) filed a complaint against Republic Western Insurance Company (Republic) in Wake County Superior Court seeking damages for Republic's alleged breach of an insurance contract. Republic removed the case to this court on 8 July 2004 and filed an answer to the complaint on 15 July 2004. On 25 April 2005, both Penske and Republic filed motions for summary judgment with supporting memoranda and exhibits. Republic filed a response on 16 May 2005, and Penske filed a response on 18 May 2005. Penske filed a reply on 24 May 2005.

Facts

Penske entered a contract with Bridgeways Company, Inc. (Bridgeways) in September 1996 pursuant to which Bridgeways leased vehicles from Penske. (Compl. ¶ 3.) As required by that agreement, Bridgeways made arrangements to have Penske included on Bridgeways' policy with Republic as an "additional insured." (Compl. ¶ 4; Def.'s Ans. ¶ 6.) The commercial automobile liability insurance policy that Bridgeways obtained from Republic provided that Republic would defend and indemnify its insured for, among other things, claims involving bodily injury arising from the operation of the vehicles insured under the policy. (Compl., Ex. B, Section II — Liability Coverage A, p. 2 of 12.) Penske was an additional insured on this policy effective 31 August 2000. (Compl. ¶¶ 6-7 & Ex. C.)

Willie White, an employee of Bridgeways, was injured on 27 September 2000, during the course and scope of his employment when he fell from a tractor-trailer owned by Penske. (Def.'s Ans. ¶ 9 & Ex. A; Joint Stipulation of Facts (JSF) ¶ 2.) White sought and obtained worker's compensation benefits from Bridgeways' worker's compensation insurer, Union Pacific Insurance Company. (JSF ¶ 4.) On 23 May 2001, White filed a personal injury suit against Penske based on the same incident, (Compl. ¶ 10), alleging that he fell from the Penske tractor while attempting to repair a light attached to the exterior of the tractor. White asserted that Penske had failed to attach a hand bar to the exterior of the tractor and that the absence of such a hand bar caused his injuries. (Def.'s Mem. In Support of Summ. Judg., Ex. D (Compl. filed by White against Penske) ¶¶ 8-12.) Penske tendered its defense of that suit to Republic, (Compl. ¶ 12), and Republic denied the demand for defense and indemnity on or about 2 July 2001, (Compl. ¶ 13; JSF ¶ 8), asserting that the worker's compensation and employee injury exclusions in the policy barred coverage. (Def.'s Ans., Ex. A.) Penske then defended the suit at its own expense and, after being awarded summary judgment, ultimately settled the suit during appellate mediation for $15,000. (Compl., Ex. A.) Penske incurred litigation expenses and attorneys' fees. (Compl. ¶ 16.) Subsequently, in June 2004, Penske filed this action against Republic seeking a declaratory judgment that Republic owes liability insurance coverage to Penske.

Standard of Review

Summary judgment is appropriate in those cases in which there is no genuine dispute as to a material fact, and in which it appears that the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c); Haavistola v. Community Fire Co. of Rising Sun, Inc., 6 F.3d 211, 214 (4th Cir.1993). Summary judgment should be granted in those cases "in which it is perfectly clear that no genuine issue of material fact remains unresolved and inquiry into the facts is unnecessary to clarify the application of the law." Id. In making this determination, the court draws all permissible inferences from the underlying facts in the light most favorable to the party opposing the motion. "[W]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, disposition by summary judgment is appropriate." Teamsters Joint Council No. 83 v. Centra, Inc., 947 F.2d 115, 119 (4th Cir.1991).

Discussion

The parties are in substantial agreement regarding the facts of this case. Republic concedes that Penske is an "additional insured" covered by the insurance policy at issue. (Def.'s Mem. at 9, 11; Pl.'s Mem., Ex. A, Def.'s Resp. to Pl.'s First Request for Admissions Nos. 20-21.) The insurance policy at issue contains the following pertinent exclusions:

B. Exclusions. This insurance does not apply to any of the following .... (3) Worker's Compensation: Any obligation for which the "insured" or the "insured's" insurer may be held liable under any workers' compensation, disability benefits or unemployment compensation law or similar law.

(4) Employee Indemnification and Employer's Liability: "Bodily injury" to: a. An "employee" of the "insured" arising out of and in the course of: (1) Employment by the "insured"; or (2) Performing the duties related to the conduct of the "insured's" business.... This exclusion applies: (1) whether the "insured" may be liable as an employer or in any other capacity .....

(Compl. Ex. B, Truckers Coverage Form, Section II — Liability Coverages. B. Exclusions, p. 4 of 12.) The completed operations exclusion provides that insurance coverage does not apply to the following:

"Bodily injury" or "property damage" arising out of your work after that work has been completed or abandoned.

In the exclusion, your work means:

a. Work or operations performed by you or on your behalf; and

b. Materials, parts or equipment furnished in connection with such work or operations ....

Your work will be deemed completed at the earliest of the following times:

(1) When all of the work called for in your contract has been completed.... Work that may need service, maintenance, correction, repair or replacement but which is otherwise complete, will be treated as completed.

(Id. at 4-5 of 12; Def.'s Exhibit A, Truckers Coverage Form, Section II. B.10, pp. 4-5 of 12.) The policy also contains the following severability of interests clause:

"Insured" means any person or organization qualifying as an insured in the Who is An Insured provision of the applicable coverage. Except with respect to the Limit of Insurance, the coverage afforded applies separately to each insured who is seeking coverage or against whom a claim or "suit" is brought.

(Compl., Ex. B, Truckers Coverage Form, Section VI — Definitions. "Insured," p. 11 of 12.)

The parties agree that North Carolina law governs the resolution of their motions, (see N.C. Gen.Stat. § 58-3-1; Pl.'s Mem. at 6; Def.'s Mem. at 7-8), but disagree as to the controlling law regarding the effect of the severability of interests provision set forth above. The court will address each of the exclusions cited by Republic in turn and determine how those exclusions interact with the severability of interests provision relied upon by Penske where applicable.

A. The Workers' Compensation Exclusion and Severability of Interests

Republic contends that the coverage provided to an additional insured is defined and circumscribed by the coverage provided to the named insured on a given insurance policy. (See Compl., Ex. E, Letter from Republic to Penske dated 2 July 2001 at 2.) Republic argues that State Farm Mutual Automobile Insurance Co. v. Employers' Fire Insurance Co., 256 N.C. 91, 123 S.E.2d 108 (1961), supports this proposition and, as such, is dispositive with respect to the application of the worker's compensation exclusion. In State Farm, an automobile dealer's employee, Anthony Byrnes, was injured in a car accident while riding with a customer of the dealership, John Ryck, who was test-driving the vehicle. Byrnes sustained injuries and sought worker's compensation, which was paid by the dealership's industrial insurance carrier. Byrnes also instituted a civil action against Ryck to recover damages for the injuries he sustained. Ryck was insured by State Farm Automobile Insurance Company (State Farm) and called on State Farm to defend him in the action brought by Byrnes. Acknowledging that its policy covered Ryck's liability for the accident at issue, State Farm nevertheless maintained that its insurance was "excess insurance" and that the dealership's garage liability policy, provided by Employers' Fire Insurance Co. (Employers'); provided the primary coverage that should be exhausted before State Farm incurred an obligation under its policy. State Farm thus brought a declaratory judgment action against Employers' to determine its duty to defend and indemnify Ryck under the policies at issue.

The Employers' garage policy contained two pertinent exclusions, one barring from coverage bodily injury sustained by any employee of the insured while engaged in his employment and the other barring coverage with respect to any obligation for which the insured could be held liable under worker's compensation law. State Farm, 123 S.E.2d at 109. Employers' argued that its policy with the dealer did not cover Ryck's liability to Byrnes because the injured individual, Byrnes, was an employee of an insured and thus coverage was barred under the employee injury and worker's compensation exclusions. As characterized by the court, State Farm argued that "the exclusion clauses in the garage policy remove from the coverage only the employees of Ryck and those whom Ryck pays workmen's compensation." Id. at 110. The North Carolina Supreme Court stated the question presented as follows: "whether the exclusion clauses in Employers' garage policy refer to and exclude from coverage Ryck's...