Transport Indem. Co. v. Carolina Cas. Ins. Co., 15660
| Decision Date | 30 September 1982 |
| Docket Number | No. 15660,15660 |
| Citation | 133 Ariz. 395,652 P.2d 134 |
| Parties | TRANSPORT INDEMNITY COMPANY, a corporation; and Illinois-California Express, Inc., a corporation, Plaintiffs-Appellees and Cross-Appellants, v. CAROLINA CASUALTY INSURANCE COMPANY, a corporation, Defendant-Appellant and Cross-Appellee. |
| Court | Arizona Supreme Court |
Gust, Rosenfeld, Divelbess & Henderson by Richard A. Segal, Phoenix, for defendant-appellant and cross-appellee.
This is an appeal from a judgment rendered on cross motions for summary judgment in a declaratory judgment action between two insurance carriers, both of whom claim to be excess insurers against the loss arising out of a vehicular accident. The court below ruled that both the insurers were "primarily liable" for any damages. Both insurers appealed, each claiming to be excess and urging that the other is primary. We have jurisdiction pursuant to Rule 19(e), Rules of Civil Appellate Procedure, 17A A.R.S. and Art. 6, § 5, Arizona Constitution.
The dispute between these insurers is but one more battle in a war commenced long ago between the insurers that write coverage for interstate truck lines and those that cover "independent" truckers who lease their rigs to the interstate lines. 1 Over-simplified for purposes of clarity, the basic issue presented is whether primary coverage for an interstate trucking rig, driven on a trip lease, is provided by the insurer for the owner-lessor or that of the certificated lessee.
The facts underlying this arcane question are as follows. On March 13, 1977, Jerry Works, an employee of Harold Powell, dba Powell Trucking, was operating tractor-trailer equipment owned by Powell. Works was involved in an accident which took place in Arizona and in which one Jack Ripley was seriously injured. Ripley filed a tort action against Works and Powell.
Illinois-California Express, Inc. (ICX) is an interstate carrier licensed by the Interstate Commerce Commission (ICC). At the time of the accident, the Powell truck was operating under ICX placards because Powell had entered into a "trip lease" with ICX. The lease provided that Powell would provide the tractor, trailer and driver, and would haul a load arranged by ICX for one of ICX's customers over routes authorized by the ICC for travel by ICX. According to the lease, Powell was to receive 80% of the revenue from the transport of the load and ICX was to receive 20%. Ripley did not join ICX as a defendant in the tort action. The reason for this is unexplained.
Powell's rig was insured for motor vehicle liability under a policy issued by Carolina Casualty Insurance Company (Carolina), while ICX, the lessee, was insured under a policy issued by Transport Indemnity Company (Transport).
The use of leased equipment by licensed interstate motor carriers is a common practice and is recognized by the Interstate Commerce Act. The act provides that the ICC may prescribe regulations respecting such use and that such regulations may be those which are "reasonably necessary in order to insure that while motor vehicles are being ... used [under lease] the motor carriers will have full direction and control of such vehicles and will be fully responsible for the operation thereof ... as if they were the owners of such vehicles ...." 49 U.S.C. § 304(e) (emphasis added). The lease between ICX and Powell was subject to regulations which had been made by the ICC to cover such trip leases. The regulations mandate that such trip leases "provide for the exclusive possession, control and use of the equipment, and for the complete assumption of responsibility in respect thereto, by the lessees ...." 49 C.F.R. § 1057.4 (emphasis added.) 2
The statutory enactment and regulations promulgated thereunder were intended to correct abuses historically incident to the use of leased equipment by licensed motor carriers. The law was designed to prevent the operation of unregulated, uninsured or underinsured vehicles on interstate trips by imposing responsibility for operation of trip-leased vehicles on the lessee holding the ICC certificate of convenience and necessity for the route to be traveled. American Trucking Association v. United States, 344 U.S. 298, 73 S.Ct. 307, 97 L.Ed. 337 (1953); Cox v. Bond Transportation, Inc., 53 N.J. 186, 249 A.2d 579 (1969). In addition, Congress intended to put the use and operation of leased equipment on a parity with the use of equipment owned by the authorized carrier and operated by its own employees, in effect making the driver of the leased unit a statutory employee of the lessee. See Brannaker v. Transamerican Freight Lines, Inc., 428 S.W.2d 524 (Mo.1968); Cox v. Bond Transportation, Inc., supra; Mellon National Bank & Trust Co. v. Sophie Lines, Inc., 289 F.2d 473, 477 (3d Cir. 1961), holding that federal law creates an irrebutable presumption that the lessor's driver is the employee of the lessee whose placards identify the vehicle.
Pursuant to the requirements of the ICC regulations, the lease between ICX and Powell contained clauses by which the lessee, ICX, assumed full responsibility with respect to the Powell equipment and by which Powell surrendered "full control, possession and management of said equipment" to ICX. Further in accordance with ICC regulations, the insurance policy issued by Transport to ICX contained the following endorsement, known as the "ICC endorsement":
In consideration of the premiums stated in the policy to which this endorsement is attached, [Transport] hereby agrees to pay ..., any final judgment recovered against the insured for bodily injury ... resulting from negligence in the operation, maintenance or use of motor vehicles under certificate of public convenience and necessity or permit issued to [ICX] by the Interstate Commerce Commission ....
... It is further understood and agreed that no condition, provisions, stipulation or limitation contained in the policy ... shall relieve the company from liability hereunder ....
(Emphasis supplied.)
The Transport policy 3 also contained an "Other Insurance" clause which provided The insurance [provided by this policy] does not cover ... any person or organization ... engaged in the business of transporting property ... for others ... if the bodily injury or property damage occurs while such [truck] is not being used exclusively in the business of [Powell] and over a route [Powell] is authorized to serve by federal or public authority ....
that the insurance extended by Transport under the policy should be excess over any other valid and collectible insurance covering any particular accident. The policy which Carolina issued to Powell contained a similar other insurance clause. However, because Powell was not certificated by the ICC, the Carolina policy did not have an ICC endorsement. The Carolina policy did include a so-called "Truckmen's Endorsement" which provided:
The Truckmen's Endorsement in the Carolina policy also contained a specific excess clause applicable to the accident which gave rise to this case and which provided as follows:
With respect to (1) any [truck] of the commercial type while leased or loaned to any person or organization ... engaged in the business of transporting property by [truck] for others ... [this] insurance ... shall be excess over any other valid and collectible insurance, whether primary, excess or contingent, available to the insured. Otherwise, the insurance under this endorsement is primary insurance.
(Emphasis in original omitted.)
Unable to reach an agreement as to payment of the loss, Transport and ICX filed this declaratory judgment action to determine the respective duties and liabilities between the two insurers. In a motion for summary judgment, Transport asserted that if its policy covered the loss at all, it should be excess to the policy issued by Carolina, and on a cross-motion for summary judgment Carolina argued that Transport's policy was primary and that its policy was excess. By judgment entered on October 25, 1979, the court below ruled that both Transport and Carolina were "primarily liable for any judgment" and "are equally and jointly responsible ... to the extent of the respective limits, dollar for dollar." Carolina filed this appeal from that judgment and Transport took a cross-appeal.
The Carolina policy contains a so-called omnibus clause. This clause is required 4 in a policy issued to the owner of a vehicle and expressly extends coverage not only to the owner, who is the named insured (Powell), but also to those driving the vehicle with permission of the named insured. The Carolina policy also covers those "legally responsible" for the use of the vehicle at the time of the accident. Since Powell's employee, Works, was driving the vehicle with Powell's permission at the time of the accident, he would be an insured under the omnibus clause of the Carolina policy. So, also, would ICX, because as lessee federal law made it "legally responsible" for the use of the vehicle.
On the other hand, Transport's policy provides nonownership coverage and thus need not contain omnibus coverage. 5 Transport's policy expressly limits the persons insured to the named insured, ICX, and its officers and directors. However, under federal law, ICX, a lessee of the equipment, is treated "as if [it] were the owner of the vehicle." 49 U.S.C. § 304(e). Although the federal statutes do not expressly require the licensed motor carrier's policy to cover any person other than the licensed carrier itself Thus, we conclude that both ICX, which was not sued, and Works and Powell, who were made defendants in the tort action, are covered under both policies. 7
they do require that a policy such as Transport's be certified as proof of the lessee's financial responsibility for...
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