Filed Under:Claims, Auto

When one policy covers the tractor & another the trailer, which insurer pays?

The court ruled by providing primary coverage for the tractor, National Continental also provided primary coverage for the combined tractor-trailer.

Insurance coverage for a truck driver's injury was available under two distinct policies. (Photo: Shutterstock)
Insurance coverage for a truck driver's injury was available under two distinct policies. (Photo: Shutterstock)

This story is reprinted with permission from FC&&S Legal, the industry’s only comprehensive digital resource designed for insurance coverage law professionals. Visit the website to subscribe.

A federal district court in New Jersey has issued a decision resolving a dispute between two insurers over insurance coverage for an accident involving a tractor-trailer.

The case


Gerardo Villar, a truck driver employed by DJW Transport, Inc., alleged that he had been injured at a facility owned by the Passaic Valley Sewerage Commission (PVSC), which had contracted with Environmental Protection and Improvement Company, Inc. (EPIC) to pick up and transport bulk waste from its facility.

EPIC had subcontracted the hauling work to DJW, and Mr. Villar went to the PVSC site to load and haul away the bulk waste pursuant to the parties’ agreement.

Mr. Villar asserted that he was operating a tractor owned by DJW, which was connected to a trailer owned by EPIC; that after the trailer was filled with bulk waste and before leaving the facility, he attempted to cover the loaded trailer with a tarp secured by bungee cords as required by law; and that while attempting to cover the loaded trailer, he was standing on a rolling staircase at an elevation of approximately nine feet when one of the cords snapped and he fell backwards to the ground and was injured. 

Mr. Villar sued EPIC, contending that the rolling staircase, tarp, and bungee cords, allegedly supplied by EPIC, were defective.

Insurance coverage was available under two distinct policies.

The tractor Mr. Villar was operating was an “insured auto” under a commercial auto insurance policy issued by National Continental Insurance Company to DJW.

The trailer, which was owned by EPIC and which Mr. Villar said was connected to the DJW tractor at the time of the accident, was a “covered auto” under a business auto insurance policy issued by Liberty Mutual Fire Insurance Company.

Ultimately, Mr. Villar’s action was settled, with both National and Liberty contributing to the settlement.

Liberty asked a district court in New Jersey to determine that EPIC was entitled to primary coverage under the National policy and sought reimbursement in the amount of $312,500 paid toward the settlement of the Villar action and reimbursement of defense fees and costs of $80,315.99 incurred in the Villar action.

Liberty argued that the tractor and trailer were a connected unit, that EPIC was a “permissive user” of the tractor under National’s policy, that there was coverage under National’s policy, and that National’s coverage was primary.

For its part, National contended that this analysis was unnecessary because EPIC, as both the tortfeasor and the named insured under Liberty’s policy, was entitled to coverage under Liberty’s policy alone.

Liberty and National moved for summary judgment.

The Liberty Mutual policy


The Liberty policy provided:

5. Other Insurance

a. For any covered “auto” you own, this Coverage Form provides primary insurance. For any covered “auto” you don’t own, the insurance provided by this Coverage Form is excess over any other collectible insurance. However, while a covered “auto” which is a “trailer” is connected to another vehicle, the Liability Coverage this Coverage Form provides for “trailer” is:

(1) Excess while it is connected to a motor vehicle you do not own.

(2) Primary while it is connected to a covered “auto” you own.

The National Continental policy


The National policy provided:

3. Other Insurance

a. For any insured auto that is specifically described on the Declarations Page, this policy provides primary coverage. For an insured auto which is not specifically described on the Declarations Page, coverage under this policy will be excess over any and all other valid and collectible insurance, whether primary, excess or contingent. However, if the insured auto which is specifically described on the Declarations Page is a trailer, this policy will be primary only if the trailer is attached to an insured auto that is a power unit youown and is specifically described on the Declarations Page, and excess in all other circumstances.

(Emphasis in original.) 

The district court’s decision


The district court granted Liberty’s motion.

In its decision, the district court explained that it was an “accepted principle of insurance law” that where an accident arose out of the use of a “combined vehicle such as a tractor-trailer” and where separate policies covered the tractor and trailer, all insurance applicable to the combined vehicle came into play, regardless of which part of the rig had been physically involved in the accident.

Simply put, the district court stated, coverage variously on the tractor or the trailer was “merely a means of attaching insurance to the rig.”

The district court found “no question” that the tractor and trailer had been connected at the time of the accident. Thus, the district court ruled, the connected tractor-trailer “should be regarded as the equivalent of an inseparable unit for determining insurance coverage” and, accordingly, “all insurance applicable to the component parts” of the combined vehicle came into play in determining coverage.

The district court then considered whether EPIC had been using the combined unit at the time of the accident, and decided that it had been.

The district court reasoned that EPIC had been using the unit at the time of the accident because it had supplied allegedly defective equipment — the tarp, bungee cord, and rolling staircase — for the sole purpose of facilitating the loading and transporting of waste from PVSC.

'Complete operation' doctrine


Under the “complete operation” doctrine, the district court said, the “critical issue” was whether an act such as the supplying of the equipment was an “integral part of the loading activity.” It then rejected National’s contention that although the tarp was integral to loading and unloading because tarping was required by law, the bungee cords and rolling staircase were not necessary to load the waste into the trailer.

It found that the staircase and the bungee cords “were necessary to secure the tarp” because “without the bungee cords, the tarp would not have stayed on during transportation of the waste and, without the staircase, [Mr.] Villar could not have attached the cords.”

Finally, the district court, having determined that EPIC had been using the combined vehicle at the time of the accident, considered whether Liberty or National’s policy afforded primary coverage, and concluded that National’s policy was primary as a result of the policies’ “other insurance” provisions.

The district court observed that the covered auto owned by Liberty’s insured, EPIC, was a trailer. The trailer was “connected to another vehicle” — the DJW-owned tractor. Therefore, the district court ruled, pursuant to the “other insurance” provision in Liberty’s policy, Liberty’s policy provided excess coverage, which did not attach until primary coverage had been exhausted.

The district court summarized that National provided primary coverage for the DJW-owned tractor, that the tractor and trailer were treated “as one operating unit,” and that coverage on the one effectively served as coverage on the whole. Therefore, it concluded, by providing primary coverage for the tractor, National also provided primary coverage for the combined tractor-trailer.

The case is Liberty Mutual Fire Ins. Co. v. National Continental Ins. Co., No. 15-7869 (D.N.J. Nov. 30, 2017).

Steven A. Meyerowitz, Esq., (smeyerowitz@meyerowitzcommunications.com) is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. This story is reprinted with permission from FC&S Legal, the industry’s only comprehensive digital resource designed for insurance coverage law.

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