Travelers Ins. Co. v. Transport Ins. Co., 85-1215
| Decision Date | 03 April 1986 |
| Docket Number | No. 85-1215,85-1215 |
| Citation | 787 F.2d 1133 |
| Parties | The TRAVELERS INSURANCE COMPANY, Plaintiff-Appellant, v. TRANSPORT INSURANCE COMPANY, Defendant-Third-Party Plaintiff-Appellee, v. FEDERAL INSURANCE COMPANY, Third-Party Defendant. |
| Court | U.S. Court of Appeals — Seventh Circuit |
James W. Riley, Jr., Callahan, Riley & Hillis, Indianapolis, Ind., for plaintiff-appellant.
John E. Doran, Doran, Manion, Boynton, Kamm & Esmont, South Bend, Ind., for defendant-third-party plaintiff-appellee.
Before CUDAHY and RIPPLE, Circuit Judges, and WILL, Senior District Judge. *
In this declaratory judgment action an insurance company seeks a determination as to which of three insurance companies must provide primary coverage for liability arising out of the collision of a tractor-trailer with an automobile. We affirm the district court's decision that the two policies covering the owner-operator of the truck afford primary coverage here.
FACTS. Clinton J. Flanigan, chairman and sole shareholder of Flanigan Tires, Inc. ("Flanigan Tires"), an Indiana corporation engaged primarily in the sale of tires, was driving a tractor-trailer owned by Flanigan Tires through Starke County, Indiana on August 29, 1982 when he made a left turn in front of an automobile. The automobile ran into the truck; one passenger in the automobile was killed and one passenger injured.
At the time of the accident Mr. Flanigan was hauling a load of tin cans from West Chicago, Illinois to Columbus Grove, Ohio under a "trip lease" agreement entered into the previous day with Commercial Motor Freight, Inc. ("Commercial"), 1 an Ohio corporation holding an Interstate Commerce Commission ("ICC") permit for commercial freight transport. The trip lease provided that Flanigan Tires would lease its truck to Commercial for a single one-way trip: Flanigan Tires provided the truck and driver and Commercial the ICC operating permits and placards to be displayed on the truck pursuant to ICC regulations. Mr. Flanigan's tire business required him to pick up tires from distant suppliers; so that the truck would not travel empty on the way to the suppliers, he would trip lease it to commercial truckers for one-way hauling jobs. In a deposition taken in the underlying negligence action and made part of the record in this case, Mr. Flanigan testified that he had been trip leasing his truck two or three times a month for the three years prior to the accident. This was the second such agreement he had entered into with Commercial. Deposition of Clinton J. Flanigan, at 38-40.
Eric Spriggs, the injured passenger, and the estate of Robert Spriggs, the deceased passenger, brought suit against Mr. Flanigan, Flanigan Tires, and Commercial in the federal district court for the Northern District of Indiana, alleging negligence in the operation of the tractor-trailer unit. At the time of the accident, Mr. Flanigan and Flanigan Tires were insured against motor vehicle liability up to a limit of $500,000 under a policy issued by the Travelers Insurance Company ("Travelers"). Both were also covered by a policy issued by Federal Insurance Company ("Federal") providing excess motor vehicle liability insurance up to a limit of $1,000,000. Commercial was covered by a policy issued by Transport Insurance Company ("Transport") that insured against motor vehicle liability up to a limit of $5,000,000. Travelers filed an action for a declaratory judgment in the Circuit Court of St. Joseph County, Indiana, naming Transport as the defendant and seeking a determination as to which policy provided primary coverage for the injuries sustained in the accident. Transport removed the suit to the Northern District of Indiana and joined Federal as a third-party defendant. Transport moved for summary judgment and, after exhaustive briefing by all parties, the trial judge entered an order on January 29, 1985, holding that Travelers' policy afforded primary coverage, Federal's policy applied after exhaustion of Travelers' policy and Transport's policy applied after exhaustion of Travelers' and Federal's policies. Travelers Insurance Co. v. Transport Insurance Co., No. S-83-463 (N.D.Ind. Jan. 29, 1985).
The trial judge ruled that an Indiana statute addressing primary motor vehicle coverage determines primary coverage in this case. The statute reads:
Sec. 1. Sections 2 and 3 of this chapter apply if:
(1) two (2) or more valid, collectible policies affording motor vehicle liability insurance apply to an occurrence out of which a loss occurs; and
(2) one (1) of the policies in subdivision (1) affords coverage to a named insured engaged in the business of selling, leasing, repairing, servicing, delivering, testing, road testing, parking, or storing motor vehicles.
Sec. 2. Except as provided by section 4 of this chapter, if the conditions of section 1 of this chapter are met, and at the time of the loss the motor vehicle involved in the loss was operated by a person (or that person's agent or employee) engaged in a business as provided by section 1(2) of this chapter:
(1) the insurance afforded by the policy issued to the person engaged in that business shall be the primary insurance; and
(2) the insurance afforded by any other insurance policy shall, within the limits of that policy, cover that part of the loss not covered by the primary insurance.
Sec. 3. Except as provided by section 4 of this chapter, if the conditions of section 1 of this chapter are met, and if at the time of the loss the motor vehicle involved in the loss was operated by any person other than the person (or that person's agent or employee) engaged in a business as provided by section 1(2) of this chapter, the insurance afforded by the policy issued to the person engaged in that business shall not be the primary insurance and shall, within the limits of that policy, only cover that part of the loss not covered by all other insurance available to the operator.
Sec. 4. The requirements of sections 2 and 3 of this chapter apply unless a written agreement to the contrary is signed by:
(1) all insurers who have policies applicable to a loss as provided in section 1 of this chapter; and
(2) all named insureds under policies applicable to a loss as provided in section 1 of this chapter.
Ind.Code Secs. 27-8-9-1 through 4 (1982). 2
The trial judge reasoned that both Sec. 1(1) and Sec. 1(2) were satisfied in this case because there were "two ... valid, collectible policies affording motor vehicle liability insurance" and because one of the policies, Commercial's, covered a "named insured engaged in the business of ... leasing ... motor vehicles." It rejected as "not supported by the record" Federal's argument that Flanigan Tires was also, for the purposes of the statute, engaged in the business of leasing vehicles. Since Flanigan was operating a Flanigan Tires-owned truck at the time of the accident, the district court concluded that Sec. 3 of the statute applied and that pursuant to the statute Flanigan's insurance--the Travelers policy and the Federal policy as excess coverage--should be the primary insurance in this case.
Travelers and Federal argue on appeal that the Indiana statute does not apply to the factual situation before us. Specifically they assert that the trial judge erred in concluding that Flanigan Tires was not in the business of leasing motor vehicles. The significance of their argument lies in their further contention that if two named insureds are in the business of leasing motor vehicles, the statute by its terms no longer applies.
We agree with the trial judge that the statute controls here, and we also agree that it requires that Flanigan Tires' insurers, Travelers and Federal, provide primary insurance coverage. We reach this result, however, through a different application of the statute to the undisputed facts. See Pfeil v. Rogers, 757 F.2d 850, 866 (7th Cir.1985) ().
APPLICATION OF THE STATUTE. We have been unable to find any legislative history or case law discussing these statutory provisions, which were in effect from 1980 to 1983. Thus we apply them here with an eye to their plain language and to the probable intent of the Indiana legislature. The first section of the statute specifies those situations in which the later sections should be applied: when two or more insurance policies provide motor vehicle liability insurance covering an accident, Sec. 27-8-9-1(1), and one of these policies affords coverage to a named insured engaged, inter alia, in the business of leasing motor vehicles, Sec. 27-8-9-1(2).
All three policies issued by the parties to this suit provide coverage for the underlying accident. The Travelers policy states: "We will pay all sums the insured legally must pay as damages because of bodily injury or property damage to which this insurance applies, caused by an accident and resulting from the ownership, maintenance or use of a covered auto." Garage Policy # 650-644-E232-5-IND-81, Business Auto Endorsement, at 1. There has been no suggestion that the truck Mr. Flanigan was driving is not a "covered auto." The Federal policy provides that it will pay the insured's "ultimate net loss," or the excess over the limit of underlying insurance, that the "insured shall become obligated to pay by reason of liability imposed upon the insured by law...." Commercial Umbrella Liability Policy # 7927-19-85, at 1. Finally, the Transport policy covers "all sums which the insured shall become legally obligated to pay as damages arising out of the occupation of the named insured ... as a result of [b]odily injury, sickness, disease, or death of persons...." Occupational Comprehensive Liability and Comprehensive Physical Damage Policy, # GL-664-75-1, at 2. Commercial's occupation is listed on the policy as that of "Truckman-Common...
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