CAROLINA CASUALTY INSURANCE COMPANY v. TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, et al, No. 2:2009cv04871 - Document 106 (D.N.J. 2014)
Court Description: OPINION fld. Signed by Judge Kevin McNulty on 10/22/14. (sr, )
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY 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 Dockets.Justia.com CAROLINA CASUALTY INSURANCE COMPANY, 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-Ã -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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