CAROLINA CASUALTY INSURANCE COMPANY v. TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA
Filing
106
OPINION fld. Signed by Judge Kevin McNulty on 10/22/14. (sr, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAROLINA CASUALTY INSURANCE
COMPANY,
Plaintiff/Counter-Defendant,
V.
TRAVELERS PROPERTY CASUALTY
COMPANY, counter-claimant, third party
plaintiff, cross-claimant, cross
defendant, ILLINOIS NATIONAL
INSURANCE COMPANY, counter-claimant,
cross-defendant, LEXINGTON INSURANCE
COMPANY, counter-claimant, cross
defendant, OLD REPUBLIC INSURANCE
COMPANY, cross-defendant,
Defendants,
V.
PENSKE TRUCK LEASING CO., L.P.
GARDNER, MASSON, BISHOP &
COMPANY, counter-claimant, crossclaimant, cross-defendant, GARDNER M.
BISHOP, INC., counter-claimant, cross
claimant, cross-defendant, MARK
ALBANESE, counter-claimant, cross
defendant, JOSEPH PUCCIO, counter
claimant, cross-defendant JOHN
KANARD, cross-defendant,
Third Party Defendants.
: Civ. No. 09-487 1 (KM)(MCA)
OPINION
MCNULTY, U.S.D.J.:
rers. A tractor-trailer
This is a declaratory judgment action among insu
obtained a $5 million
driver, severely injured in a loading accident, sued and
s a declaratory judgment to
settlement, which has been paid. This action seek
the obligation to cover that
settle the potentially responsible carriers’ shares of
re me now are four motions for
$5 million award and the costs of defense. Befo
summary judgment.
t is as follows:
My ultimate allocation of the $5 million settlemen
Excess Coverage
Primary Coverage
Travelers
$1,000,000
Illinois National $1,492,500
CCIC
$1,000,000
Lexington
Old Republic
$
Primary Total
I.
=
$1,492,500
15,000
$2,015,000
Excess Total
=
$2,985,000
FACTS
op”) was a general
Gardner, Masson, Bishop & Company (“Gardner Bish
project. Ho-Ro Trucking
contractor for a New Jersey Turnpike construction
up concrete road barriers
(“Ho-Ro”) had a contract with Gardner Bishop to pick
to another location.
from a construction staging area and transport them
September 28,
.
John Kanard was an employee of Ho-Ro Trucking On
trailer to the construction
2007, Kanard drove a tractor’ and attached flatbed
as the “tractor,” the
I will refer to the front, towing-engine portion of the vehicle
as the “tractor-trailer.”
back, towed portion as the “trailer,” and the entire vehicle
the entire tractor-trailer
This may help avoid confusion arising from references to
k.”
combination, or the front part thereof, as a “truc
1
2
staging area. Ho-Ro owned the flatbed trailer. Ho-R
o leased the tractor from the
owner, Penske Truck Leasing Co., L.P. (“Penske”)
(Travelers’ R. 56.1 Statement
at ¶J89).2
Kanard parked the tractor-trailer at the staging area.
Gardner Bishop
employees began loading the 8,000-pound barriers
onto the trailer, using an
excavator outfitted with a specially designed clam
p. (Id. at ¶9). Kanard was
working with loading straps along the side of the traile
r. (Id. at ¶ 12). One of the
barriers fell, crushing and severing Kanard’s left foot.
(Id. at ¶J10-13).
On August 18, 2008, Kanard sued Gardner Bishop
and various other
defendants, alleging seven counts of negligence relat
ing to the loading process.
(Id. at ¶ ¶17-19). Gardner Bishop’s liability insurer, Trav
elers Property Casualty
Company (“Travelers”), provided a full defense. That
action settled for $5
million. (Id. at ¶30). Of that $5 million, Travelers
paid $1 million (the limit of
Travelers’ policy). The remaining $4 million was paid
by Illinois National
Insurance Company (“Illinois National”), Gardner Bish
op’s excess liability
insurer. (Illinois National’s policy had a $10 milli
on limit.) (See id. at ¶J30-31).
There was some uncertainty on this point in the parti
es’ initially filed L. Civ. R.
56.1. (See CCIC’s R. 56.1 Statement 3)(Ill. Nat.’s R. 56.1
¶
Statement ¶ 5)(Travelers’ R.
56.1 Statement ¶f 7-8) (Old Rep. and Penske’s R. 56.1
Statement ¶ 4). The evidence
demonstrates, however, and no one now seems to disp
ute, that Ho-Ro owned the
trailer and leased the tractor from Penske. Penske and
CCIC submitted a 2007 lease
between Ho-Ro and Penske, which included in its sche
dule of covered vehicles a 2007
Freightliner truck. (ECF No. 93, Attorney Cert. at Ex.
B). Penske acknowledges that it
“leased a 2007 Freightliner Columbia Tractor to Ho-Ro
on or about May 23, 2007.. .Mr.
Kanard delivered the concrete barriers utilizing a traile
r owned by Ho-Ro and a tractor
owned by Penske.” (Penske and Old Republic’s Statemen
t of Facts, Brief at 3 [ECF No.
93-3]). The tractor at the accident scene was a 2007 Freig
htliner. It bore Ho-Ro’s
name, but it had Indiana plates, and Ho-Ro produced
“an Indiana Registration Cab
Card for one 2007 power unit.., operated by Penske Truc
k Leasing Co LP in Ft. Wayne,
Indiana, under Penske’s US DOT Motor Carrier No.
327574.” (Declaration of Deborah
Metzger Mulvey, Esq. on the Subject of Vehicle Statu
s [ECF No. 98-1] at ¶11 2-3, 5).
The flatbed trailer also had Ho-Ro’s name on it, but it
had New Jersey plates and
registration, and “partial title” in Ho-Ro’s name. (Id. at
2, 7; see also NJMVC
Registration Card and Title for Trailer, in Ho-Ro’s nam ¶j
e, id. at Ex. 0).
2
3
rights to recover amounts for
Both Travelers and Illinois National reserved their
which other insurers might be liable.
At the time of the
And there were other potentially liable insurers.
e policies on the vehicles that
accident, Ho-Ro and Penske had dual insuranc
r, and Penske the tractor.) Ho
they owned. (Ho-Ro, remember, owned the traile
e Company (“CCIC”) and an
Ro had a policy from Carolina Casualty Insuranc
(“Lexington”). Penske had
excess policy from Lexington Insurance Company
Republic Insurance Company.
both a primary and an excess policy from Old
rage, and it has not paid
CCIC maintains that it does not owe any cove
have offered to participate in
out on any claim. It says that to the extent it may
vation of rights. Lexington and
Gardner Bishop’s defense, it did so under a reser
it is not clear that Gardner
Old Republic have not paid out either, although
provide coverage or defense costs.
Bishop or Travelers ever demanded that they
[ECF No. 90-1, at 9-10]
A. The Insurance Policies
ies of insurance. I focus
I now review pertinent terms of the various polic
affect the allocation of
on their “other-insurance” provisions, which will
coverage.
responsibility among the insurers found to owe
1. The CCIC Policy
y” to Ho-Ro as a named
CCIC issued a “Commercial Transportation Polic
IC Policy, Cert. of Deborah
3
insured, with a policy limit of $1 million. (CC
at 2, 77]). CCIC promised to “pay
Metzger Mulvey, Esq., Ex. Hi [ECF No. 89-17,
because of ‘bodily injury’ or
all sums an ‘insured’ legally must pay as damages
ies, caused by an ‘accident’ and
‘property damage’ to which this insurance appl
of a covered auto.” CCIC
resulting from the ownership, maintenance or use
red’ against a ‘suit’ asking for
also has “the right and duty to defend any ‘insu
additional insured, as
As explained further below, Penske is named as an
o.
required by its agreement to rent the tractor to Ho-R
4
such damages...” (Id. at Truckers Coverage Form
p. 2 [ECF No. 89-17, at 1920]). The CCIC Policy’s definitions of “Who Is An Insured” and what
is an “auto”
are discussed at section III.B.1, infra.
The CCIC policy addresses the possibility of separate ownershi or
p
coverage of a tractor and trailer. Its coverage
is primary for any covered ‘auto’ while hired or borrowed by you
and used exclusively in your business as a ‘trucker’ and pursuant
to operating rights granted to you by a public authority. This
Coverage Form’s Liability Coverage is excess over any other
collectible insurance for any covered ‘auto’ while hired or borrowed
from you by another ‘trucker.’ However, while a covered ‘auto’
which is a ‘trailer’ is connected to a power unit, this Coverage
Form’s liability Coverage is: (1) On the same basis, primary or
excess, as for the power unit if the power unit is a covered ‘auto’.
(2) Excess if the power unit is not a covered ‘auto’.
(Id. at Truckers Coverage Form p. 11 [ECF No. 89-17, at 28]).
The CCIC other-insurance provision further provides for allocation
among primary carriers and among excess carriers:
When this Coverage Form and any other Coverage Form or policy
covers on the same basis, either excess or primary, we pay only
our share. Our share is the proportion that the Limit of Insuranc
e
of our Coverage Form bears to the total of the limits of all the
Coverage Forms and policies covering on the same basis.
(Id.).
2. The Travelers Policy
Travelers issued a “Commercial Insurance” policy to Gardner Bish
op,
providing coverage for bodily injury with a limit of $1 million. (Trave
lers Policy,
Coverage Part Declarations, and General Liability Coverage Form
at pp. 5-10,
Cert. of Deborah Metzger Mulvey, Esq., Ex. H3 [ECF No. 89-19,
at 15, 25-301).
5
ce
The Travelers policy’s other-insurance provision states: “This insuran
primary, our
is primary except when b. below applies. If this insurance is
also primary.
obligations are not affected unless any of the other insurance is
described in c.
Then, we will share with all that other insurance by the method
primary
below.” [ECF No. 89-19, at 31]. I discuss first the exception to
coverage in part b. and then the sharing method in part c.
ially
The part b. exception to primary coverage contains one potent
applicable section:
This insurance is excess over: (1) Any of the other insurance,
(d) If
whether primary, excess, contingent or on any other basis
or
the loss arises out of the maintenance or use of aircraft, ‘autos’
watercraft.
...
..
[Id.]
limit of
Where part b. deems coverage to be excess, part b. then sets the
that excess coverage:
[W]hen this insurance is excess over other insurance, we will pay
only our share of the amount of the loss, if any, that exceeds the
sum of: (1) The total amount that all such other insurance could
pay for the loss in the absence of this insurance; and (2) The total
of all deductible and self-insured amounts under all that other
insurance.
[IcL]
ge and
Part c. then sets forth the method of sharing if Travelers’ covera
some other insurer’s coverage are both primary:
If all of the other insurance permit contribution by equal shares,
we will follow this method also. Under this approach each insurer
contributes equal amounts until it has paid its applicable limit of
ion g. of
This part b. provision applies only “to the extent not subject to Exclus
bodily injuries, but none
Section 1.” Exclusion g. is irrelevant here; it excludes certain
of the type at issue in this case. [ECF No. 89-19 at 241
6
insurance or none of the loss remains, whichever comes first. If
any of the other insurance does not permit contribution by equal
shares, we will contribute by limits. Under this method, each
insurer’s share is based on the ratio of its applicable limit of
insurance to the total applicable limits of insurance of all insurers.
(Id.).
3. The Illinois National Policy
Illinois National issued a Commercial Excess Liability Policy to Gardne
r
Bishop with a limit of $10 million per occurrence. (Policy Declarations,
Cert. of
Deborah Metzger Mulvey, Esq., Ex. H4 [ECF No. 89-20 at
p. 2]). That policy
promised to “pay on behalf of the Insured those sums in excess of
the Retained
Limit that the Insured becomes legally obligated to pay as damag
es by reason
of liability imposed by law because of Bodily Injury, Property Damag
e or
Personal Injury and Advertising Injury to which this Insurance applies
.
(Illinois National Policy at 1 [ECF No. 89-20 at
p. 13]). This policy is explicitly
excess to the “Retained Limit,” i.e., the policy limits of any applica
ble
underlying policies. Applicable policies are listed in an attached schedu
le, but
the list is not intended to be exclusive; also included is any “applicable
Other
Insurance providing coverage to the Insured.” (Id. at 24 [ECF No.
89-20 at 36]).
The Illinois National policy itself has an “other insurance” provision,
which
provides that “[i]f other valid and collectible insurance applies to
damages that
are also covered by this policy will apply excess of the Other Insuran
ce.” [ECF
No. 89-20, at p. 29]
. . .“
4. The Old Republic Policies
Old Republic issued Penske a Commercial Auto Coverage policy
(no. ML
14804 08), covering “all sums an ‘insured’ legally must pay as
damages
because of ‘bodily injury’ or ‘property damage’ to which this insuran
ce applies,
caused by an ‘accident’ and resulting from the ownership, mainte
nance or use
of a covered ‘auto’.” (Policy at p. 2, Cert. of Deborah Metzger Mulve
y, Esq., Ex.
7
l limit of $1
H5 [ECF No. 89-21 at p. 181). That Old Republic policy has a genera
million. (Policy Declarations [ECF No. 89-21 at p. 2]).
That Old Republic Policy has an “other insurance” clause, however, that
limits its scope:
If YOU[i.e., Penske] rent or lease an auto to others pursuant to any
to
contract or agreement whereunder there is no provision requiring YOU
provide liability insurance, the insurance afforded by the Policy shall;
(1) not apply to any person or organization other than YOU unless a
minimum limit shall be required by state statute; in which case, the
or
limit of our liability is the minimum limit required any compulsory
financial responsibility law with respect to any person or organization
other than you.
(2) be excess over other collectible insurance applicable to YOU.
[ECF 93-15, at 6]
Old Republic also issued Penke a second policy (no. MWZX 26522),
excess
which provides excess coverage up to $1.5 million per incident. This
primary
policy fully incorporates the terms and conditions of the underlying
Ex. H6
Old Republic policy. (See Policy, Cert. of Deborah Metzger Mulvey, Esq.,
in the
[ECF No. 89-22, at 4]). Its coverage is excess to the primary coverage
underlying Old Republic policy. [ECF No. 89-22, at 3]
5. The Lexington Policy
Lexington issued a Commercial Umbrella Liability Policy with a limit of
policy which
$2 million, naming Ho-Ro as the insured. Lexington’s is an excess
undertakes to “pay on behalf of the ‘Insured’ those sums in excess of the
as
‘Retained Amount’ that the ‘Insured’ becomes legally obligated to pay
damages because of ‘bodily injury’, ‘property damages’, or ‘personal and
of
advertising injury’ to which this insurance applies.” (Policy at p.1, Cert.
ned
Deborah Metzger Mulvey, Esq., Ex. H2 [ECF No. 89-18 at p. 8]). “Retai
amount” means the “total applicable limits of ‘scheduled underlying
8
insurance.. .plus any applicable ‘other insurance’ providing coverage to
the
‘Insured.”’ (Policy at 18, ¶ W [ECF No. 89-18 at
p. 25]). Essentially, then, this
policy covers the residue of Ho-Ro’s liability after all other applicable
policies
have exhausted their limits. This Lexington policy specifically names the
CCIC
policy as ‘scheduled underlying insurance’ to which the Lexington policy
is
excess. [Id. at Endorsement #004 [ECF No. 89-18 at
p. 3]).
The Lexington Policy has an other-insurance provision which states: “If
other valid and collectible insurance applies to damages that are also covere
d
by this policy, this policy will apply excess of the ‘other insurance.’ Howev
er,
this provision will not apply if the other insurance is specifically written
to be
excess of this policy.” (Policy at 22, ¶ K [ECF No. 89-18 at
p. 29]).
II.
PENDING MOTIONS
On September 23, 2009, CCIC filed this declaratory judgment action
against Travelers seeking a declaration that CCIC has no coverage obliga
tion in
relation to Kanard’s injury. [ECF’ No. 1] CCIC thereafter filed an amend
ed
complaint naming the three other potentially implicated insurers (Lexin
gton,
Illinois National, and Old Republic). [ECF No. 35] Counterclaims and cross
claims followed. Travelers impleaded as third party defendants severa
l
additional non-insurer parties: Penske, Kanard, Gardner Bishop, and
two
Gardner Bishop employees. [ECF No. 4]
Currently before this Court are:
•
CCIC’s motion for summary judgment. CCIC argues that it issued a
policy to Ho-Ro, not Gardner Bishop. Gardner is not its named
insured, and CCIC owes no coverage obligation to Gardner under the
policy or under any statute. And even if Gardner were CCIC’s insured
,
exclusions in the policy would bar coverage. Coverage of Gardner is
also barred by public policy (specifically, that the insurer of the victim
or the victim’s employer should not have to defend the tortfeasor). In
9
the alternative, CCIC argues that any coverage it might owe should be
shared pro rata among all other applicable policies. [ECF No. 89].
Illinois National and Travelers oppose CCIC’s motion. [ECF Nos. 88,
92], Lexington, Ho-Ro’s excess insurer, submits a short letter brief in
which it supports CCIC’s view, minus the pro rata sharing. [ECF No.
91].
Illinois National’s motion for summary judgment. Illinois National
argues that CCIC owes coverage to the permissive users of the tractor
•
and trailer, including Gardner Bishop, under the New Jersey
“Omnibus” coverage statute. Any policy exclusions that would deny
such coverage, it says, are void as against public policy. [ECF No. 87].
Illinois National sets forth a particular view of the relationship among
the various insurers’ policies and the proper allocation of coverage
among them. [Id.]. CCIC opposes this motion. [ECF No. 94; see also
ECF No. 98].
•
Travelers’ motion for summary judgment. Travelers seeks a
declaratory judgment that CCIC owes a primary coverage obligation,
including defense and indemnification, to Gardner. CCIC, in Travelers’
view, must also reimburse Travelers’ costs in defending Gardner. [ECF
No. 90]. CCIC opposes this motion. [ECF Nos. 95, 98].
•
Penske and Old Republic’s motion for summary judgment. These two
argue that the tractor leasing agreement between Penske and Ho-Ro
made Ho-Ro (and not Penske) responsible for supplying $1 million of
primary insurance coverage on the Penske-owned tractor. Old
Republic owes, if anything, the statutory minimum coverage of
$15,000 per person and $30,000 per occurrence, on an excess basis.
Illinois National and CCIC oppose this motion [ECF Nos. 97, 98].
10
III.
DISCUSSION
A.
Standard on Motion for Summary Judgment
Federal Rule of Civil Procedure 56(a) provides that summary judg
ment
should be granted “if the movant shows that there is no genuine dispute
as to
any material fact and the movant is entitled to judgment as a matt
er of law.”
Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248
(1986); Kreschollek v. S. Stevedoring Co., 223 F.3d 202, 204 (3d Cir.
2000). In
deciding a motion for summary judgment, a court must construe
all facts and
inferences in the light most favorable to the nonmoving party. See Boyle
v.
County of Allegheny Pennsylvania, 139 F.3d 386, 393 (3d Cir. 1998).
The
moving party bears the burden of establishing that no genuine issue
of
material fact remains. See Celotex Corp. v. Catrett, 477 U.S. 317, 322—
23,
(1986). “[W]ith respect to an issue on which the nonmoving party bears
the
burden of proof
the burden on the moving party may be discharged by
‘showing’— that is, pointing out to the district court— that there is
an absence
of evidence to support the nonmoving party’s case.” Id. at 325.
...
If the moving party meets its threshold burden, the opposing party
must
present actual evidence that creates a genuine issue as to a materi
al fact for
trial. Anderson, 477 U.S. at 248; see also Fed. R. Civ. P. 56(c) (settin
g forth
types of evidence on which nonmoving party must rely to support its
assertion
that genuine issues of material fact exist). “[UJnsupported allegations
and
pleadings are insufficient to repel summary judgment.” Schoch
v. First Fid.
...
Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990); see also Gleaso
n v. Norwest
Mortg., Inc., 243 F.3d 130, 138 (3d Cir. 2001) (“A nonmoving party
has created
a genuine issue of material fact if it has provided sufficient evidence
to allow a
jury to find in its favor at trial.”).
When, as here, the parties file cross-motions for summary judgm
ent, the
governing standard “does not change.” Clevenger v. First Option
Health Plan of
N.J., 208 F. Supp. 2d 463, 468-69 (D.N.J. 2002) (citing Weissman
v. U.S.P.S.,
11
motions
19 F. Supp. 2d 254 (D.N.J.1998)). The court must consider the
Goidwell of
independently, in accordance with the principles outlined above.
ms v.
N.J., Inc. v. KPSS, Inc., 622 F. Supp. 2d 168, 184 (2009); Willia
affd, 27 F.3d
Philadelphia Hous. Auth., 834 F. Supp. 794, 797 (E.D. Pa. 1993),
not imply that
560 (3d Cir. 1994). That one of the cross-motions is denied does
facts and
the other must be granted. For each motion, “the court construes
draws inferences in favor of the party against whom the motion under
credibility
consideration is made” but does not “weigh the evidence or make
Pichier v.
determinations” because “these tasks are left for the fact-finder.”
citations
UNITE, 542 F.3d 380, 386 (3d Cir. 2008) (internal quotation and
omitted).
B.
Does coverage under CCIC’s policy extend to Gardner?
r CCIC,
A major question that affects all of the pending motions is whethe
tion to
as Ho-Ro’s insurer for its trucking operation, owes any coverage obliga
policy, by its
Gardner Bishop. The answer depends on (1) whether the CCIC
us motor vehicle
terms, covers Gardner Bishop; (2) whether New Jersey’s omnib
CCIC to cover
insurance law (“Omnibus statute”), N.J.S.A. 39:6B-1, requires
(3) whether
Gardner Bishop because it “used” the insured tractor; and, if so,
Carrier
certain exclusions in CCIC’s policy, public policy, or the Federal Motor
d coverage.
Act, 49 U.S.C. § 10101, nevertheless defeat that statutorily-mandate
1. Does the CCIC policy, by its terms, cover Gardner?
ied as an
CCIC is correct that Gardner is not expressly or impliedly identif
“insured” as
“insured” under its policy. Section 1 of the CCIC policy defines an
follows:
a. You [i.e., Ho-Ro] for any covered “auto”
you
b. Anyone else while using with your permission a covered “auto”
own, hire or borrow except...
12
(4) Anyone other than your ‘employees’...., a lessee or borrower or any
of their ‘employees’ while moving property to or from a covered ‘auto’
d. The owner or anyone else from whom you hire or borrow a covered
‘auto’ that is not a ‘trailer’ while the covered ‘auto’:
(1) is being used exclusively in your business as a ‘trucker’; and
(2) is being used pursuant to operating rights granted to you by a
public authority.
(CCIC Policy, Truckers Coverage Form at p. 3 [ECF No. 35-4, at 20J).5 The
section 1 (b)(4) exclusion narrows the class of “users”; it excludes nonemployees of Ho-Ro who are “moving property to or from” a covered tractor
or
trailer. The Gardner employees who were loading the trailer were not Ho-Ro
’s
employees, lessees, or borrowers. They fit this exclusion’s description; their
liability would not be covered because they are, by definition, not “insure
ds.”
That, however, is not the end of the story. For the reasons that follow,
the New Jersey Omnibus statute, in combination with an agreement betwee
n
Penske and Ho-Ro, places certain statutory coverage obligations upon CCIC
as
Ho-Ro’s carrier.
2.
Does the New Jersey Omnibus statute impose coverage
obligations upon CCIC, whether explicitly or as a result
of an agreement?
New Jersey’s Omnibus statute provides in relevant part:
“Every owner or registered owner of a motor vehicle registered or
principally garaged in this State shall maintain motor vehicle liability
insurance coverage.. .insuring against loss resulting from liability
An “auto” is broadly defined to include “1. A land motor vehicle, ‘trailer,’ or
semitrailer designed for travel on public roads; or 2. Any other land vehicle
that is
subject to a compulsory or financial responsibility law or other motor vehicle
insurance law where it is licensed or principally garaged.” (Id. at
p. 12). Under Ho-Ro’s
declarations pertaining to its policy, all “autos” are “covered autos.” (See
Truckers/Motor Carrier Coverage Form Declarations [ECF No. 35-4, at 16]).
5
13
imposed by law for bodily injury, death and property damage sustained
by any person arising out of the ownership, maintenance, operation or
use of a motor vehicle...”
N.J.S.A. 39:6B- 1 (emphasis added).
(a) Tractors, but not trailers, are motor vehicles
The obligations of this statute fall upon the owner or registered owner of
ge
a “motor vehicle.” Ho-Ro, then, would have been obligated to provide covera
to the extent it was the actual or registered owner of a motor vehicle. A motor
vehicle, in turn, is defined to include “all vehicles propelled otherwise than by
muscular power, excepting such vehicles as run only upon rails or tracks and
motorized bicycles.” N.J.S.A. § 39:1-1. That sounds very broad, but a motor
vehicle is expressly distinguished from a “motor-drawn vehicle” (emphasis
added), which “includes trailers, semitrailers, or any other type of vehicle
drawn by a motor-driven vehicle.” Id.
The tractor, which is engine-propelled, meets the definition of a “motor
vehicle.” Ownership of such a motor vehicle gives rise to coverage obligations
under the Omnibus statute. But the owner of the tractor here was Penske; Ho
Ro was merely a lessor, and therefore cannot be liable as an owner or
registered owner. Of course, Ho-Ro was the owner of the trailer, but “trailers
[andj semitrailers” are defined as motor-drawn vehicles. Because the trailer is
not a “motor vehicle,” Ho-Ro’s ownership of it does not give rise to obligations
under the Omnibus statute.
(b) By contract, Ho-Ro took on the statutory insurance
obligation of Penske as owner of the tractor
So the tractor is a motor vehicle, but Ho-Ro doesn’t own it; Ho-Ro owns
the trailer, but it isn’t a motor vehicle. That leaves a coverage hole that CCIC
could drive a truck through, or so it would seem. It is not Ho-Ro but Penske, as
the owner of the tractor, who had the insurance obligation under the New
Jersey Omnibus statute. By agreement, however, Ho-Ro took on Penske’s
14
insurance obligation and obtained coverage for Penske through CCIC.
The leasing agreement between Penske and Ho-Ro shifted the insurance
obligation to Ho-Ro:
[Ho-Ro] shall, at its sole cost, provide liability coverage for [itself]
and Penske Truck Leasing. in accordance with the standard
provisions of a basic automobile liability insurance policy as
required in the jurisdiction in which the Vehicle is operated,
against liability for bodily injury, including death, and property
damage arising out of the ownership, maintenance, use and
operation of the Vehicle(s) with limits of at least a combined single
limit of One Million Dollars ($1,000,000.00) per occurrence. Such
coverage shall be primary and not excess or contributory and shall
be in conformity with the motor vehicle minimum financial
responsibility laws...
. .
(Vehicle Lease Service Agreement
§ 8, Cert. of Lawrence F. Citro at Ex. B [ECF
No. 93-8]).
And Ho-Ro complied with that leasing agreement by obtaining insurance
from CCIC. That liability coverage, as agreed, was “in accordance with the
standard provisions of a basic automobile liability insurance policy as require
d
in the jurisdiction in which the Vehicle is operated [i.e., New Jersey]
[and] in
conformity with the motor vehicle minimum financial responsibility laws.” The
...
policy that Ho-Ro obtained from CCIC covered both itself and Penske, as
owner. Penske is expressly named as an additional insured in the CCIC policy.
(See CCIC Policy, List of Parties Notified, including ‘Additional Insured PENSKE
TRUCK LEASING CO LP,’ Cert. of Citro at Ex. C [ECF No. 93-14 at
p. 14]).
The Ho-Ro/Penske agreement thus took the responsibility to obtain the
coverage of the tractor required by N.J.S.A. § 39:6B-1 and shifted it from
Penske, as “owner,” onto Ho-Ro, the lessee. The CCIC policy, which covers
the
owner of the tractor, must therefore be deemed to comply with the
15
requirements of N.J.S.A.
§ 39:6B-1. Indeed, under the leasing agreement, that
6
is its function.
3.
Did this action arise out of the “use” of the tractor?
A major requirement of the Omnibus statute, N.J. Stat. Ann. § 39:6B-1,
is that the owner’s insurance cover loss “arising out of the ownership,
maintenance, operation or use of a motor vehicle.” (Emphasis added.) If CCIC’s
policy covers Gardner’s liability, it must be because Gardner’s loading of the
7
trailer constituted “use” of a motor vehicle. That issue breaks down into two
questions: (a) Does loading constitute “use”? (b) If so, does loading the trailer
constitute (or arise out of) the “use” of the tractor that is covered by CCIC’s
policy?
a. Loading
It is well established that the phrase “use of a motor vehicle” includes the
loading of cargo. (Unless otherwise specified, the term “loading” herein includes
unloading.) A person injured during the loading of cargo is therefore considered
a “user” of the motor vehicle. See, e.g., Burlington Ins. Co. v. Northland Ins. Co.,
766 F. Supp. 2d 515, 525 (D.N.J. 2011) (Debevoise, J.) (“Generally, a person
injured in the process of unloading cargo from a vehicle is considered a user of
the vehicle”); Pisaneschi v. Turner Constr. Co., 345 N.J. Super. 336, 343 (App.
Div. 2001) (“Implicit within [New Jersey’s omnibus law] is the obligation to
provide omnibus liability coverage to all persons who ‘use’ the named insured’s
vehicle by participating in its loading or unloading.”); Bellafronte v. General
Motors Corp., 151 N. J. Super. 377, 382-83 (App. Div. 1977) (“[OJne who is in
the process of unloading cargo from the vehicle is, for the purposes of the
omnibus coverage, a user of the vehicle”).
6
Old Republic’s policies are discussed below.
It is undisputed that Gardner Bishop did not own, maintain, or operate the
tractor (or, for that matter, the trailer).
16
CCIC acknowledges the broad definitional sweep of that case law, but
seeks to distinguish this case on its facts. At oral argument, CCIC conten
ded
that the broad definition of “use” has been applied only in cases involv
ing the
simple delivery of cargo. Here, CCIC contends, Ho-Ro was going to deliver
the
concrete barriers, but the loading process remained in the specialized
hands of
Gardner Bishop. Gardner, which was using its own dedicated loadin
g
equipment in its own construction staging area, had full responsibility
and
control. CCIC states or implies that, under such circumstances, it
does not
make sense to shift Gardner’s responsibility to the insurer of the vehicle
.
The rationale of the cases, as I read them, is not so easily confin
ed; their
broad sweep is not incidental, but purposeful. The loading/unloading
doctrine
does not derive from what is being loaded, or from the precise manne
r in which
loading occurs. Rather, the courts have extended statutory covera
ge based on
the status of the injured person as a user of the motor vehicle. The only
connection required is a “substantial nexus between the injury and
the use of
the vehicle”. Burlington, 766 F. Supp. 2d at 525 (quoting Belafronte,
151 N.J.
Super. at 383). Indeed, that nexus has been stretched to cover injurie
s
incidental to the loading activity itself. See id. at 525-26 (finding substa
a
ntial
nexus where a worker was injured by a wrench that fell from anothe
r worker’s
tool belt even though the wrench was not being used to unload the
truck).
That substantial nexus between the injury and the use of the vehicle
is
enough, and it is present here. Kanard drove the tractor-trailer to Gardne
r’s
staging area for the very purpose of loading it with the concrete barrier
s.
Gardner Bishop employees were in the process of loading the trailer
when
Kanard, who was assisting with the loading, was struck by the falling
barrier.
That loading activity constituted “use” within the meaning of the
Omnibus law;
the injury was substantially connected to, and arose from, that “use.”
17
b. Loading of trailer vs. tractor
,
Loading, then, is “use.” Here, however, it is the trailer, not the tractor
of the
that was being loaded. A question therefore remains as to whether use
motor
trailer (which is not a motor vehicle) equates to use of the tractor (the
. N.J.
vehicle to which the coverage requirements of the Omnibus statute apply)
Stat. Ann. § 39:6B- 1. No case law settles that point under the New Jersey
er, in
Omnibus statute. Closely analogous issues have been decided, howev
connection with policy interpretation. Those cases persuade me that the
it.
loading of the trailer is inseparable from “use” of the tractor that pulls
In McDonald Indus. v. Rollins Leasing Corp., 95 Wn.2d 909, 631 P.2d 947
t fell
(1981), for example, liability arose when an 11-ton crane counterweigh
tractor
from the trailer portion of a tractor-trailer. The insured had rented the
ge
pursuant to an agreement that required him to purchase insurance covera
.
for liability “arising from the ownership, maintenance or use” of the tractor
to
(That contractual coverage mandate, of course, speaks in terms very similar
Supreme
those of New Jersey’s statutory mandate in the Omnibus statute.) The
sole
Court of Washington reasoned that the tractor “was being used for the
the
purpose for which it had been rented,” i.e., pulling the trailer, and that
tractor’s use was therefore, “a causative factor in the accident.” To put it
which the
another way, “the tractor was more than a mere coincidental place in
e
injury occurred. Without question its use ‘contributed in some way to produc
d a
the injury.’” 95 Wn. 2d at 912, 637 P.2d at 949. That court therefore affirme
nt in
8
ruling that the insurer of the tractor owed coverage for a loading accide
connection with the trailer.
The United States Court of Appeals for the Fifth Circuit gave similarly
“use” of
broad scope to policy language concerning liability “arising out of’ the
a tractor:
The policy contained an exclusion for loading and unloading, but the court
949found it to be ambiguous and did not apply it. 95 Wn. 2d at 912- 16, 631 P.2d at
51.
18
8
The question of which policy provides primary coverage for the
liability thus boils down to whether the accident arose out of
the
use of the tractor, the trailer, or both. We start from the premis
e
that “arising out of,” as we said in Red Ball Motor Freight v.
Employers Mut. Liability Ins. Co., 5 Cir., 1951, 189 F.2d 374,
378,
“are words of much broader significance than ‘caused by.’ They
are
ordinarily understood to mean ‘originating from,’ ‘having its
origin
in,’ ‘growing out of’ or ‘flowing from,’ or, in short, ‘incident to, or
having connection with’, the use of the car.” Reflecting this, nearly
every jurisdiction to face the question has held that an accident
involving a tractor/trailer unit arises out of the use of both
regardless of which part of the unit was actually involved in the
accident. See, e.g., Canal Ins. Co. v. State Auto. Ins. Assoc., 5
Cir.,
1970,433 F.2d 373 (Louisiana law); Insurance Co. of North Ameri
ca
v. Royal Indemnity Co., 6 Cir., 1970, 429 F.2d 1014; Smith
v.
Travelers Indemnity Co., 1973, 32 Cal.App.3d 1010, 108 Cal.Rp
tr.
643; Ryder Truck Rental, Inc. v. Schapiro & Whitehouse, Inc.,
1970,
259 Md. 354, 269 A.2d 826; Hartford Acc. & Indemnity Co.
v.
Liberty Mutual Ins. Co., Fla. 1973, 277 So.2d 775. As we stated
in
Canal Insurance Co., supra, at 375, “the tractor and trailer were
operated together as a unit, both being under the control, or lack
of it, of the driver.” See Risjord & Austin, 7 Automobile Liability
Insurance Cases 9540, where the authors approve the resul
t
reached in Smith, supra, and state, “Where a truck and towed
trailer are involved in an accident, the courts are well-advised
to
avoid the metaphysics and hold that the accident arose out
of the
use of each.”
Blue Bird Body Co. v. Ryder Truck Rental, Inc., 583 F.2d 717,
726-727 (5th Cir.
1978) (footnote omitted).
The United States Court of Appeals for the Third Circuit, applyin
g
Pennsylvania law, adopted Blue Bird’s reasoning as an accu
rate statement of
general insurance law:
It is an accepted principle of insurance law that where an accide
nt
arises out of the use of a combined vehicle such as a tractor-tr
ailer
and where separate policies cover the tractor and the trailer,
all
insurance applicable to the combined vehicle comes into play,
19
the
regardless of which part of the rig was physically involved in
accident.
166 (3d Cir. 1987)
Contrans, Inc. v. Ryder Truck Rental, Inc., 836 F.2d 163, 165(citing Blue Bird, supra).
g” a tractor
That approach is highly persuasive here. To speak of “loadin
unit—articulated,
is almost meaningless. The tractor/trailer rig functions as a
and back halves
to be sure, but no different in principle from the unitary front
te in accordance
of a straight truck. I construe the New Jersey Omnibus statu
or is covered by the
with those general principles of insurance law. When a tract
coverage extends
Omnibus statute, and a trailer is attached to it, the statutory
to accidents arising from the loading of the trailer.
statute, is
This accident, then, for purposes of the New Jersey Omnibus
use of a motor vehicle.” N.J. Stat. Ann. § 39:6B- 1.
one “arising out of
other policy
Coverage is therefore required by the CCIC policy, unless some
language validly excludes it. I turn to that issue.
...
4.
Do the CCIC policy exclusions operate to defeat the
coverage mandated by the Omnibus statute?
torily
CCIC’s next contention assumes arguendo that its policy is statu
tractor. Even
deemed to cover this accident because it arises from “use” of the
e it of liability. I
if that is so, says CCIC, certain explicit policy exclusions absolv
rary to the
hold that such policy exclusions are void because they are cont
Omnibus statute.
The claimed exclusions are as follows:
•
The definition of the “insured” excludes “Anyone other than your
[ECF
‘employees’.. .while moving property to or from a covered ‘auto’.”
No. 35-4, at 20]
•
The “Workers’ Compensation” exclusion disclaims coverage for “[amy
20
obligation for which the ‘insured’ or the ‘insured’s’ insurer
may be
held liable under any workers’ compensation, disability bene
fits or
unemployment compensation law.” [Id. at 211
•
The “Employee Indemnification and Employer’s Liability” exclu
sion
disclaims coverage for “[b]odily injury” to an “[e]mployee
of the
‘insured’ arising out of and in the course of: “[e]mploymen
t by the
‘insured’; or ‘[p]erforming the duties related to the conduct
of the
‘insured’s’ business.” [Id. at 21]
•
The “Movement of Property by Mechanical Device” exclusion
disclaims
coverage for “[blodily injury.., resulting from the movemen
t of property
by a mechanical device (other than a hand truck) unless the
device is
attached to the covered ‘auto’.” [Id. at 221
The New Jersey Omnibus statute invalidates exclusionary
language that
would effectively deny the very coverage it mandates. In 1990
, the New Jersey
Supreme Court held that “[b]ecause of statutorily-impose
d omnibus
requirements, any contractual attempt to exclude coverage
for an additional
insured will be held invalid.” Ryder/P.I.E. Nationwide, Inc.
v. Harbor Bay Corp.,
119 N.J. 402, 408 (1990) (a loading/unloading case). The Cou
rt reaffirmed that
holding in 2007, again stating that “a policy exclusion may
not override
statutory mandates to provide insurance coverage and the
attempt to do so in a
loading and unloading accident is void.” Potenzone v. Ann
in Flag Co., 191 N.J.
147, 155 (1992).
That general principle settles the issue. Fortifying that conc
lusion,
however, are cases that specifically invalidate the very kind
s of exclusions cited
here. In Parkway Iron & Metal Co. v. New Jersey Mfrs. Ins.
Co., the Appellate
Division held that an exclusion identical to CCIC’s “Mo
vement of Property by
Mechanical Device” was void as against public policy. Its
“net effect,” said the
21
ns or entities of
court, was an impermissible one: “to deprive certain perso
r. 386, 388-9 1 (App.
omnibus coverage in certain situations.” 266 N.J. Supe
lidated a provision
Div. 1993). In Burlington, supra, this district court inva
red, as well as an
identical to CCIC’s restriction on who qualifies as an insu
Employer’s Liability”
exclusion similar to CCIC’s “Employee Identification and
s impermissibly sought
clause. Judge Debevoise reasoned that those provision
F. Supp. 2d at 526.
to “disclaim coverage required under N.J.S.A. 39:6B-1.” 66
pensation” exclusion.
The same reasoning would invalidate the “Workers’ Com
ers’ compensation.
True, Kanard was an employee of Ho-Ro eligible for work
rage, not because
But the Omnibus statute requires CCIC to provide cove
d” the vehicle. The
Kanard was harmed on the job, but because Gardner “use
ride that statutory
“Workers’ Compensation” exclusion would effectively over
mandate, and is therefore void.
the coverage
In sum, then, the CCIC policy exclusions do not override
required by the New Jersey Omnibus statute.
5.
Does the Omnibus statute lose its force because its
underlying policy of compensation has been satisfied by
Gardner’s other insurance?
re that victims
The purpose of the Omnibus statute, says CCIC, is to ensu
le insurance
do not go uncompensated. Here, however, Gardner has amp
e two insurers have
through Travelers and Illinois National; between them, thos
ation policy of the
paid Kanard $5 million. CCIC urges that the compens
need to impose a
Omnibus statute is therefore satisfied, and that there is no
mandatory coverage obligation on CCIC.
by the
It is true, of course, that the Omnibus statute is motivated
for the innocent
“overriding legislative policy of assuring financial protection
345 N.J. Super. 336,
victims of motor vehicle accidents.” Pisaneschi v. Turner,
Omnibus law is to
343 (App. Div. 2001). Put differently, the purpose of the
cle owner failed to
ensure that innocent victims do not suffer because a vehi
fail to obtain
obtain insurance. It is also true that Gardner Bishop did not
22
insurance, and that its insurers, Travelers and Illin
ois National, have
compensated Kanard.
From those uncontested facts, however, CCIC draws
an implication that
is excessive. I do not think the Court may set aside
the explicit wording of this
statute because its underlying “policy” has fortuitous
ly been vindicated.
CCIC relies primarily on Connecticut Indem. Co. v.
Podeszwa, 392 N.J.
Super. 480 (App. Div. 2007), but the case is distingui
shable. Connecticut
Indemnity held that the Omnibus statute did not bar
enforcement of a policy
exclusion for claims arising out of the business use
of a truck. Id. at 486-87.
The truck was covered by two complementary polic
ies. The truck’s lessee had a
policy that covered “all liability claims” arising from
business use. Id. at 482.
The truck’s owner had a separate policy that covered
all non-business use. Id.
at 482-83. The owner’s policy, which covered nonbusiness use, also explicitly
excluded business use. The application of that exclu
sion, however, was
explicitly conditioned on the truck’s being covered
by “other liability
insurance.., which provides the minimum kinds of cove
rage required by law.”
Id. at 483. Thus, even if the owner’s policy did not cove
r a business-related
accident, the lessee’s “other liability insurance” wou
ld cover it. Id. at 487. The
court found that the parties had purposely provided
for seamless coverage of
all use—business and non-business—albeit by the
mechanism of two policies,
rather than one. Thus it held that the Omnibus statu
te was not offended.
9
Connecticut Indemnity does not stand for the “no harm
, no foul” rule
proposed by CCIC. There, coverage did not depend
on the fortuity of getting in
an accident with someone who happened to have adeq
uate business-use
insurance. Rather, at the inception, the truck owner
and the lessee split the
The court also reasoned that the federal Motor Carrier
Act mandates coverage
for both business and non-business use. Id. at 492-93 (citing
49 U.S.C. § 13906(a)(l)).
Thus the parties really had no choice but to provide both
kinds of coverage, whether in
one policy or two. The Motor Carrier Act is discussed in
the next section.
23
coverage. The owner
responsibility for securing the full range of required
e for business use. The
insured the truck for nonbusiness use, and the lesse
an abdication; it reflected only
owner policy’s exclusion of business use was not
h ensured “continuous
that prearranged division of responsibility, whic
insurance coverage.” Id. at 470.
ve muddle; the very
CCIC’s view, if it prevails, will produce an interpreti
rtainable until we know
meaning and scope of the statute will not be asce
insurance. Perhaps, as a
whether the victim was injured by a tortfeasor with
cle owner’s insurance were a
matter of public policy, it would be best if the vehi
rage applied. But such a
policy of last resort, applicable only if no other cove
ing of the statute. Likewise, it
rule cannot be found in or derived from the word
New Jersey legislature has
may be that one insurer is “enough”—i.e., that the
ed what is required to meet
chosen means that, in an individual case, may exce
-restrictive-alternative
its goals. But it was entitled to do so; there is no least
authorized to “improve” a
test for economic legislation, and this Court is not
ends. I must apply the
statute to bring about a closer fit between means and
0
policy.’
statute itself, not my impression of its underlying
lidate the inconsistent
I will therefore apply the Omnibus statute and inva
exclusions in CCIC’s policy.
gh a red light that, because
Thus, for example, it is no defense to my going throu
g “policy” of traffic safety.
I avoided a crash, I vindicated the legislature’s underlyin
iring coverage would “pose
CCIC raises one other policy consideration: that requ
to defend a tortfeasor [i.e.,
an obvious conflict for [CCIC] by putting it in a position
er.” See Halfko v. Cities Service
Gardner] against a suit brought by [CCIC]’s policy hold
awkwardness may result
Oil Co., 510 F. Supp. 1131, 1136-1137 (D.N.J. 1981). Some
ee. That is not sufficient
when the injured party is the primary insured or its employ
different from what it says.
reason to conclude that the statute means something
10
24
6.
Does compliance with the federal Motor Carrier Act
relieve CCIC of its obligations under the New
Jersey Omnibus statute?
CCIC’s next argues that its policy exclusions should be upheld, because
the policy as a whole complies with the federal Motor Carrier Act (MCA 49
),
U.S.C.
§ 10101 etseq.
The MCA “sets forth financial and omnibus coverage requirements for
trucks used in interstate trucking operations by ‘motor carriers.’” (CCIC Br.
at
12) It ensures that licensed truck operators in interstate commerce cannot
avoid financial responsibility for accidents by, for example, leasing rather
than
owning their vehicles. See Carolina Cas. Ins. Co. V. Yeates, 584 F.3d 868,
873
(10th Cir. 2009). The MCA requires that a motor carrier’s’ insurer certify
1
that
certain financial responsibility requirements have been met. That certific
ation
consists of a special endorsement “sufficient to pay... for each final judgm
ent
against the registrant for bodily injury to, or death of, an individual resulti
ng
from the negligent operation, maintenance, or use of motor vehicles, or for
loss
or damage to property
or both.” 49 U.S.C. § 13906(a)(l). That endorsement,
...
known as the MCS-90, must be attached to the motor carrier’s liability policy
to “provid[e] notice to the general public that [the MCA’s financial respon
sibility
requirements] have been met.” Minimum Levels of Financial Responsibility for
Motor Carriers, 46 Fed. Reg. 30974, 30978 (June 11, 1981). CCIC duly
attached its MCS-90 endorsement to the Ho-Ro policy. (See ECF No. 35-4
at p.
62).
CCIC first contends that cases such as Bellafronte
and Ryder, supra,
which disallow exclusions inconsistent with the Omnibus statute, have been
undercut. They were decided, says CCIC, before “the 1995 enactment”
of MCA,
and therefore should not be “considered the only authoritative law.” (CCIC Br.
at 11-12).
A “motor carrier” is not just any vehicle owner, but a “person providing
commercial motor vehicle transportation for compensation.” 49 U.S.C. 13102(
14).
11
§
25
That argument can be dismissed out of hand. The MCA was enacted, not
in 1995, but in 1980. See 49 U.S.C. § 10101. The MCS-90 endorsement form
ial
was promulgated shortly thereafter, in 1981. See Minimum Levels of Financ
Only
Responsibility for Motor Carriers, 46 Fed. Reg. 30982 (June 11, 1981).
Bellafronte, supra (1977) predates the 1980 statute and regulations. Ryder,
by
supra (1990), came ten years after. And even after the 1995 date proposed
CCIC, Potenzone, supra (2007) and Burlington, supra (2011) invalidated
us
exclusions that purported to disclaim coverage required under the Omnib
statute.
That timing issue aside, I do not accept CCIC’s position that its
the
exclusions should be upheld because the policy meets the requirements of
e is
2
MCA. The nature of CCIC’s argument is not entirely clear,’ but its premis
.
that the MCA “serves the same mandate” as the New Jersey Omnibus statute
(CCIC Br. 13) I disagree with that premise. The MCS-90 applies only to the
of
liabilities of a named insured (like Ho-Ro), not to those of a permissive “user”
the vehicle. See 49 C.F.R.
§ 387.15; see also Armstrong v. U.S. Fire Ins. Co., 606
F. Supp. 2d 794, 823 (E.D. Tenn. 2009) (holding that the “insured” refers only
to “the motor carrier named in the policy of insurance”). The MCS-90 is “not
intended, and do[esj not purport, to require a motor carrier’s insurer or surety
to satisfy a judgment against any party other than the carrier named in the
endorsement or surety bond or its fiduciary.” Regulatory Guidance for Forms
Used to Establish Minimum Levels of Financial Responsibility of Motor
Carriers, 70 Fed. Reg. 58065-66 (Oct. 5, 2005). Unlike the Omnibus statute,
the MCS-90 does not mandate coverage for judgments rendered against
additional insureds such as “users.” It merely creates a suretyship to protect
the public from the negligence of the motor carrier itself, “when a lease
CCIC insists this is not a preemption argument. Rather, it contends that the
s”
state omnibus law “should not be used to restrict the application of insurance policie
written to comply with the federal requirements like the MCS-90. (CCIC Br. at 12)
12
26
agreement might lead to a gap in coverage.” Canal Ins. Co. v. Underw
riters at
Lloyd’s London, 435 F.3d 431, 441 (3d Cir. 2006).
The financial guarantee provided by the MCS-90 is a limited one;
it does
not supplant the mandates of the Omnibus statute. I reject CCIC’
s argument
that compliance with the MCA should override any finding of noncom
pliance
with the New Jersey Omnibus statute.
C. Coverage Requirements
The upshot of the foregoing discussion is that CCIC owes covera
ge to
Gardner Bishop. I therefore proceed to the issue at the heart of
this case: To
what extent can Travelers and Illinois National recover from
the other insurers,
such as CCIC, the settlement payments they made to Kanard?
To answer that
question, I must determine the allocation, or proper priority,
of responsibility
among the various parties.
As a general matter, insurance policies may be divided into two
levels of
coverage: primary and excess. (I refer to the primary and excess
coverage as
“levels” of coverage.) A primary insurance policy “attaches immed
iately upon
the happening of the occurrence that gives rise to liability.” An
excess policy
“provides protection to an insured for liability for an amount
above the
maximum coverage provided by the primary policy.” W9/PHC
Real Estate LP v.
Farm Family Cas. Ins. Co., 407 N.J. Super. 177, 196 (App.
Div. 2009).
Where more than one policy applies at the same level of covera
ge, courts
look to those policies’ “other-insurance” provisions. Such provisi
ons are
designed to allocate payouts as among the insurers. See, e.g.,
CAN Ins. Co. v.
Selective Ins. Co., 354 N.J. Super. 369 (2002) (analyzing the
relationship
27
r-insurance
between two primary insurance policies with competing othe
clauses).
er a pro
Other-insurance provisions may be “pro rata” or “excess.” Und
“the insurer will
rata provision, where more than one insurer is liable for a loss,
icable limit of
not be liable for a greater proportion of such loss than the appl
y of all
liability in the policy bears to the total applicable limit of liabilit
N.J. Super. at 196.
insurance against such loss.” W9/PHC Real Estate LP, 407
contrast, is
A primary policy with an excess other-insurance provision, by
until the other
deemed to be excess; no payment is required unless and
primary policy exhausts its limits. Id.
must
Of course, both policies may have other-insurance clauses, which
the same coverage
be reconciled. Assume two policies, Policy A and Policy B, at
ce clause, there is no
level. Where both policies have a pro rata other-insuran
er must bear
conflict: “the policies are not mutually repugnant and each carri
Policy A has a
its respective proportionate share of the loss.” Id. at 199. Where
no conflict; the
pro rata clause, and Policy B has an excess clause, there is
nale for adopting
court will give effect to both. See id. at 202 (providing the ratio
ary and Policy B
this “majority rule”). In such a case, Policy A would be prim
urance
would be excess. But where both policies have excess other-ins
insurer
provisions, an Alphonse-and-Gaston cycle ensues, in which each
y deals with
deems itself to be excess and the other to be primary. New Jerse
lly repugnant,’
that situation as follows: “the provisions are [deemed] ‘mutua
nate share of the
and are disregarded”; each insurer is assigned a proportio
loss. Id. at 199.
1. Priority of Allocation Among Primary Policies
Illinois National and CCIC argue that CCIC, Travelers, and Old
each should
13
Republic are each primarily liable on a pro rata basis, and that
93-1,
Illinois National has released its claims against Old Republic. (ECF Nos.
lic on a
Repub
97-2). CCIC still argues, however, that “any coverage owed by Old
28
therefore contribute up to the $1 million limit of its policy. [ECF Nos.
87-1, at
33; 94, at 7-8] Travelers and Old Republic agree that CCIC is primar
ily liable.
Travelers, however, points to its other-insurance clause, which provid
es that
“[t]his insurance is excess over[] [a]ny of the other insurance... [ijf
the loss
arises out of the maintenance or use of...’autos[.]’” [ECF’ No. 90-1, at
21-22]
Old Republic maintains that, under its rental agreement with Ho-Ro
, its policy
is excess and is limited to the $15,000 minimum coverage required
by New
Jersey law. [ECF No. 93, at 9-1 1]. None of the parties contend that
Illinois
National or Lexington is primarily liable.
One issue—whether the CCIC, Travelers, and Old Republic covera
ge
should be deemed primary or excess under their other-insurance
clauses—is
moot. Each of those three policies has a maximum possible limit of
$1 million.
Added together, the policies provide, at most, $3 million of coverage,
far less
than the $5 million settlement amount. If there is coverage under
the three
policies, it will be exhausted. It therefore makes no difference whethe
r any
particular policy’s other-insurance provisions are read to require first-do
llar
pro rata coverage or excess coverage.
The only remaining issue is to confirm that the three policies in questio
n
are actually primary and that these three insurers—CCIC, Travelers,
14
and Old
Republic—are liable up to their policy limits.
Travelers asserts that its policy is excess. (ECF No. 90-1, at 2 1-22)
That
is true in a sense, but only in a specialized sense. Travelers is referrin
g here to
the operation of its other-insurance provision. A true “excess”
policy is different
from a primary policy that contains an excess other-insurance provisi
on. A true
excess policy “requires the existence of a primary policy as a conditi
on of
primary basis is also owed pro rata with other applicable policies.” (ECF
No. 94, at 78). That would remain true even if Illinois, via its release, ultimately absorb
s the cost.
“Primary,” as I use the term here, applies to any policy at the primar
y coverage
level, even if its other-insurance clause renders it excess vis-à-vis anothe
r primary
policy. See infra.
29
coverage.” CAN Ins. Co., 354 N.J. Super. at 379 (emphasis in original). A
provides
primary policy with an excess other-insurance clause, by contrast,
another
primary coverage that will become excess only if it turns out that that
primary policy covers the same risk. That “a primary insurance policy
y
contains an excess ‘other insurance’ clause does not transform that primar
true
policy into an excess policy.” Id. at 380. The Travelers policy is not, like a
y policy.
excess policy, wholly conditioned on the existence of a separate primar
ered
For example, there is nothing in the record to suggest that Travelers consid
ce
the exhaustion of CCIC’s coverage as a factor when it calculated its insuran
of a
premium or coverage amount. See id. 381-83 (listing the characteristics
this
true excess policy). Travelers’ coverage has become excess for purposes of
particular accident, but that is incidental. Were it not for the fortuitous
the
presence of other primary insurance, Travelers’ coverage would kick in at
first dollar. I therefore find that the Travelers policy is a primary policy.
Old Republic argues that its policy is an excess policy by virtue of
s
Penske’s tractor lease agreement with Ho-Ro. That lease agreement require
primary
that Ho-Ro, “at its sole cost, provide liability coverage.. .which shall be
as an
and not excess... and be endorsed to include PENSKE TRUCK LEASING
E
additional insured.” Furthermore, “any liability insurance obtained by PENSK
TRUCK LEASING shall be excess insurance over all insurance obtained by [Ho
Ro].” [ECF 93-8, at 5]
And Penske did obtain its own liability insurance. Penske’s primary
insurance policy with Old Republic—number ML 14804 08—explicitly
addresses the situation where Penske leases out one of its vehicles, and where
y
the agreement (like Ho-Ro’s) does not require Penske to provide liabilit
insurance:
d. If YOU [i.e., Penske] rent or lease an auto to others pursuant to
any contract or agreement whereunder there is no provisions
requiring YOU [Penske] to provide liability insurance, the
insurance afforded by the Policy shall;
30
(1) not apply to any person or organization othe
r than YOU [Penske]
unless a minimum limit shall be required by
state statute; in
which case, the limit of our liability is the mini
mum limit required
any compulsory or financial responsibility law
with respect to any
person or organization other than you.
(2) be excess over other collectible insurance appl
icable to YOU
[Penskel.
[ECF 93-15, at 6, paragraph d] Old Republic
argues that its coverage extends
only to the minimum required by statute, whic
h under the New Jersey
Omnibus statute is $15,000.
Old Republic is correct. Penske’s lease agreemen
t with Ho-Ro requires
Ho-Ro to get insurance, and “contains no prov
isions requiring [Penske] to
provide liability insurance.” Id. Therefore the “lim
it of [Old Republic’s] liability is
the minimum limit required by
law.” In New Jersey, that minimum is
$15,000. Id. See Tjong v. Penske Truck Leasing
Co., L.P., 2006 WL 1574079, at
*2
...
That other-insurance clause, however, does not
transform the Old
Republic policy into a true excess policy. The
Old Republic policy does not
depend for its very existence upon the existence
of a primary policy. There is
nothing to indicate that its rates or coverage amo
unts were calculated with the
primary CCIC policy purchased by Ho-Ro in
mind. As in the case of Travelers,
supra, I find that the Old Republic policy is
a primary policy, albeit one with an
excess other-insurance clause. Old Republic is
therefore bound, as one of the
three primary-level insurers, to pay up to its
statutory policy limit.
Accordingly, Travelers and CCIC are obligated
up to the limits of their $1
million policies. Old Republic must pay up to
its policy limit, set at the
statutory minimum of $15,000. Travelers has
already paid out in full,
exhausting its $1 million policy. The remainde
r of the $5 million settlement
was paid by Gardner Bishop’s excess insurer,
Illinois National. Therefore dcc
31
must pay its $15,000 share, to
must pay its $1 million share, and Old Republic
released its claims against Old
Illinois National. Because Illinois National has
of the $15,000 payment. [ECF
Republic, it has agreed to forgo reimbursement
ary insurance, however, and
No. 97-2] That $15,000 has been satisfied by prim
ced by that amount.
the obligations of the excess insurers are redu
which amounts to
That disposes of the primary level of coverage,
ject to policy limits) amounts to
$2,015,000 in total. The excess coverage (sub
million.
$5 million minus $2.0 15 million, or $2.985
Policies
2. Priority of Allocation Among Excess
ations of the excess
The court must next declare the respective oblig
of liability. There are three
insurers to cover the remaining $2.985 million
National (excess to the Travelers
potentially responsible excess insurers: Illinois
Old Republic (excess to its
policy); Lexington (excess to the CCIC policy); and
own primary policy, discussed supra).
That excess policy
The Old Republic excess policy is not triggered.
the underlying Old Republic
incorporates all of the terms and conditions of
g primary policy is that it
primary policy. One of the terms of that underlyin
(like 1-lo-Ro’s) that does not
generally does not apply at all to a third-party lease
state requires some
require Penske to obtain coverage. If the particular
bound to supply coverage only
minimum level of coverage, then Old Republic is
a. That $15,000 exhausts
to that extent—here, $15,000. See pp. 30-3 1, supr
did not agree to supply any
the agreed-upon coverage, see supra. Old Republic
further coverage, whether primary or excess.
the Illinois National
That leaves Illinois National and Lexington. Both
8, at 29] policies have
[ECF No. 89-20, at 29] and Lexington [ECF No. 89-1
r-insurance provisions will
excess other-insurance provisions. Those othe
See W9/FHC Real Estate LP,
therefore be disregarded as mutually repugnant.
a. Accordingly, each insurer is
407 N.J. Super. at 199; discussion at p. 28, supr
32
equally liable for the excess loss within policy limit
s. See, e.g., Hartco v.
Sisoukraj, 364 N.J. Super. 41, 47-48 (App. Div. 2003
) (apportioning loss
equally between insurers with mutually repugnant
excess insurance clauses
where both policies did not expressly provide for pro
rata sharing); Ambrosio v.
Affordable Auto Rental, Inc., 307 N.J. Super. 114,
125-27 (App. Div. 1998)
(same). The $2.985 million settlement balance will
therefore be divided equally
between Illinois National and Lexington—$ 1,492,50
0 apiece. (Each policy’s
limit exceeds that amount.) Because Illinois Nati
onal has already paid the
entire excess amount, Lexington must reimburse Illin
ois National in the
amount of $1,492,500.
D. Remaining Issues
The parties are directed to submit letters within
20 days outlining any
issues that must be decided in order for the Cou
rt to enter a judgment that is
final as to all claims and all parties. These may inclu
de fees and costs, as well
as any remaining third-party claims, counterclaims
, and cross-claims. It would
be preferable for the parties to agree upon a form of
final judgment that reflects
the rulings herein (subject to each party’s reservatio
n of its position, of course),
but in any event they should attempt to place the cour
t in a position to rule.
IV.
CONCLUSION
The underlying matter was settled for $5 million.
CICC owes coverage to
Gardner Bishop, a “user” of the covered motor
vehicle, up to the $1 million
policy limit. Old Republic’s coverage is limited to
$15,000. Illinois National and
Lexington owe excess coverage of $1,492,500 apiec
e. To that extent, and for the
reasons stated above, the motion for summary judg
ment of CCIC is DENIED
and the motions for summary judgment of Travelers
, Illinois National, Old
Republic and Penske are GRANTED. Because Trav
elers paid $1 million and
Illinois National paid $4 million of the settlement
(while releasing claims
33
liabilities by means of
against Old Republic), the parties shall adjust their
reimbursement payments to Illinois National.
An appropriate order will be filed.
N. KEVIN MCNULTY
United States District Judge
Dated: October 22, 2014
34
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