Compania Transatlantica Espanola, S.A. v. Hartford Accident & Indemnity Co.
Docket: No. 88 Civ. 6130 (JES)
Court: District Court, S.D. New York; October 15, 1990; Federal District Court
Plaintiff Compania Transatlántica Española, S.A. (CTE) filed a lawsuit against several insurance companies—Hartford Accident Indemnity Company, National Union Fire Insurance Company of Pittsburgh, and Fireman’s Fund Indemnity Corporation—seeking a declaratory judgment that their insurance policies provide coverage for liabilities stemming from the judgment in the case Matthews v. CTI Container Transport Int’l, Inc. CTE claims the defendants breached their insurance contracts and seeks damages, including attorney fees and punitive damages. All parties agree that New York law applies. CTE has moved for summary judgment to confirm coverage for itself, Grato, and Rodino, while Hartford and National Union have countered with their own motion asserting that coverage does not exist.
The underlying case involved a motor vehicle accident on October 24, 1985, resulting in serious injuries to Thomas J. Matthews, who, along with his wife, sued multiple parties, including Rodino and Grato, for negligence. The trial culminated in a jury and judge awarding significant damages against several defendants, including CTE, which was determined to owe contractual and equitable indemnity to Grato and Rodino. The court must now decide which insurance company is responsible for covering the judgments against CTE, Grato, and Rodino related to the ownership and operation of the involved chassis. CTE’s motion for summary judgment is denied, while the cross-motions by Hartford and National Union are granted.
The chassis was initially acquired by the First National Bank and Trust Company of Evanston, acting as trustee for International Paper Leasing Corp. The Financing Agreement stipulated that the Bank would nominally own the chassis, holding it in trust for Int’l Paper, with title transferred to the Bank. However, the Bank did not possess the chassis as it leased it long-term to Interpool, which subsequently leased it to CTE, and then CTE leased it to Grato. Grato instructed Rodino to use the chassis for transporting a container on the day of the incident.
Lease agreements among the parties included indemnification clauses and insurance requirements. Specifically, the Bank's agreement with Interpool mandated that Interpool secure liability insurance for the chassis, naming both as insureds and covering at least $5,000,000 for liability. CTE was also required to have liability insurance when leasing from Interpool, with specified minimum limits. Similarly, agreements between CTE and Grato required both to have liability coverage for the chassis.
Grato acquired insurance from Fireman's Fund, while Interpool secured coverage from National Union and an excess policy from Hartford. Notably, despite claiming to have insurance, CTE did not procure any for the chassis. National Union issued two policies during the same coverage period, both with $1,000,000 limits, which covered Interpool’s liabilities related to the chassis lease. However, the General Liability policy lacked a permissive user clause, excluding coverage for CTE, Grato, and Rodino. The central issue is whether CTE, Grato, and Rodino are covered under the Business Auto policy issued by National Union.
Hartford's Umbrella Policy No. 10 HUJV 2369 provides excess coverage of up to $10 million over the $1 million limits of National Union policies, covering the same period from December 1, 1984, to December 1, 1985. CTE, Grato, and Rodino claim to be insureds under the Business Auto policy issued by National Union to Interpool, arguing that the chassis they used was covered as a "trailer." However, the court finds that the terms "chassis" and "trailer" are not interchangeable and that the chassis is explicitly not covered under the Business Auto policy, which only covers "autos" as defined. Interpool’s insurance contracts distinguish between the Business Auto policy, covering cars and certain trailers, and the General Liability policy, covering equipment like the chassis. The lease agreement between CTE and Interpool also confirms that CTE was leasing a "chassis," not a "trailer." The court references the Second Circuit's interpretation of insurance policy language, emphasizing the clear distinction made by Interpool. Additionally, the Second Circuit's previous ruling that Interpool was the "owner" of the chassis for liability purposes under New York law does not imply that the chassis is considered a "trailer" under the insurance policy. Even if the court accepted CTE's argument, the Business Auto policy explicitly excludes coverage for the chassis.
The insurance policy specifies coverage for trailers, stating that liability insurance includes trailers with a load capacity of 2,000 pounds or less designed for public road travel. However, the chassis in question exceeds this capacity, thereby excluding it from coverage based on the insurance agreement's explicit language. CTE claims coverage under a "Contingent and DIC Insurance" endorsement, which is intended to exclude coverage for losses covered by a lessee's insurance. The endorsement also indicates that if the lessee's insurance is invalid, Interpool would be covered, allowing National Union to charge additional premiums for the increased risk. This provision cannot rationally be interpreted to benefit CTE, who failed to secure the agreed insurance for Interpool.
Additionally, the Hartford policy, as excess insurance, covers losses exceeding the limits of underlying insurance or self-insured retention for specified injuries. CTE argues for coverage based on the chassis being covered by the General Liability Policy and that they qualify as insured persons under the Hartford Policy. They contend that they are entitled to primary coverage even if no underlying policies apply. However, to establish coverage, it must be shown that Interpool "owned" the chassis or had it "hired for use." The term "own" is not defined in the policy but is interpreted based on its ordinary meaning, typically involving possession of title and the ability to convey it. The court concludes that CTE, Grato, and Rodino have not demonstrated they are additional insureds under the excess insurance contract.
Interpool was determined not to be an owner of the chassis in question, as established by the lease agreement with the Bank, which explicitly maintained the Bank's ownership and designated Interpool as the lessee. The lease prohibited Interpool from transferring or assigning any rights without the Bank's written consent, although subleasing was allowed. Additionally, the lease required Interpool to display a sign on the chassis indicating Bank ownership. The chassis was registered in the names of both the Bank and Interpool, reflecting their respective roles. CTE’s argument relying on a Second Circuit case was found to be misplaced, as that case addressed specific New York law defining ownership to include leased possession with security interests, which was not applicable here. The Court clarified that the purpose of the statute in that case was to ensure financial responsibility for injured plaintiffs, a concern not relevant to the current matter. While Hartford contended that the chassis was not "hired for use" by the named insured because it was not directly used in its business, the Court noted that "use" could be interpreted as leasing the chassis to others, akin to prior case law. Lastly, any ambiguity in the insurance contract must be interpreted in favor of the insured, a principle applicable even to third-party claims for additional insured status.
Ambiguities in the insurance policy must be interpreted against the insurer, leading the Court to determine that the chassis was "hired for use by" Interpool, triggering the applicability of section III F of the insurance contract. However, the Court must assess whether CTE, Grato, and Rodino are excluded from coverage under section III F(2), which excludes coverage for any owner or lessee of a hired automobile, other than the named insured, Interpool. The Court concludes that even if the chassis qualifies as a "hired automobile," CTE, Grato, and Rodino, as lessees, are excluded from coverage.
Further support for this exclusion arises from the requirement that each lessee of vehicles from Interpool carry liability insurance on those vehicles. The case of American Home Assurance v. Hartford Ins. Co. does not contradict this conclusion, as it pertains to vehicles owned by the named insured and would not apply in this instance, where Interpool is not the owner. Thus, the exclusion effectively removes coverage for parties other than the named insured without undermining the permissive user clause of the policy.
As a result, the Court denies CTE's motion for summary judgment and grants Hartford and National Union's cross-motions for summary judgment, confirming that CTE, Grato, and Rodino are not covered by the specified insurance policies. The Court also notes that it need not consider the defendants' equitable and standing arguments due to this conclusion. The excerpt also clarifies the composition of the tractor-trailer, defining the chassis as a wheeled frame for container transport, and mentions related claims against other parties that were dismissed based on New York's vicarious liability provisions.
Interpool claimed it was not liable for Rodino’s negligence, arguing it lacked title and possession of the chassis under N.Y. Vehicle & Traffic Law § 128, thus asserting it could not be vicariously liable under § 388. Both the district court and court of appeals rejected this defense, determining that the lease was for security purposes and classifying Interpool as the owner of the chassis under the statute. Fireman’s Fund issued an insurance policy on September 25, 1985, with a $1,000,000 limit covering Grato, Rodino, the tractor, and CTE. Fireman’s Fund sought summary judgment, claiming policy provisions barred CTE's recovery. The Business Auto Policy stated that anyone using a covered auto with permission is insured, except for certain exceptions. Defendants provided affidavits asserting Interpool's intent to cover leased equipment under its General Liability policy and the Business Auto policy for its fleet, claiming that CTE, Grato, and Rodino are not covered under the Business Auto Policy. The plaintiff failed to submit counter-evidence to challenge these affidavits, merely arguing they were "illusory statements of intent," which was deemed insufficient under Fed.R. Civ. P. 56(e). The court noted that even if the affidavits were alone insufficient for summary judgment, the plaintiff was clearly excluded from coverage based on the policy's terms, which limited coverage for vehicles leased by the insured's subsidiaries only to avoid duplicate coverage for claims already defended under another enforceable policy.
If the lessee's insurance is rendered invalid, the primary insurance policy will take effect, with the premium determined at audit based on established composite rates. CTE's claim of being an insured under the Business Auto policy due to an endorsement for entities leasing equipment to Interpool is unfounded. The endorsement specifically covers those leasing to Interpool, not those leasing from it, like CTE. Further, even if such coverage existed, the chassis involved is not listed among the 35 automobiles covered under the endorsement, meaning neither the chassis nor CTE is protected. CTE's argument that it, Grato, and Rodino are additionally insured under the Hartford Umbrella Policy due to their status under National Union's Business Auto Policy is flawed. Since the Business Auto Policy does not cover the chassis, there can be no corresponding coverage under the Umbrella Policy. The relevant insurance provisions specify that various parties are insured only under specific conditions, and coverage applies only to actual use of vehicles owned or hired by the named insured, excluding owners or lessees other than the named insured. While New York law allows for some flexibility regarding vehicle ownership definitions, the cited cases differ significantly as they involved clear intentions to transfer title, which is not present in this case, as there was no intent to transfer the chassis title to Interpool without an exercised purchase option at the lease's end.
N.Y. Ins. Law § 5102(e) is deemed irrelevant for determining whether Interpool "owned" the chassis in the context of its agreement with Hartford, as it simply mirrors the definition of "owner" from the Vehicle & Traffic Law, which pertains to liability under New York's no-fault insurance law. Relevant case law, specifically McConnell v. Fireman’s Fund and Thomas v. Travelers Ins. Co., does not support Hartford's position. In McConnell, the court ruled that a parked car is not considered "used or operated" under no-fault laws, and in Thomas, it was determined that entering a parked vehicle does not constitute "using" the car. Both cases focus on statutory interpretations rather than the terms of a liability insurance contract between businesses.
