Michels, R.s. Cohen and Brochin. The opinion of the court was delivered by Cohen, R.s., J.A.D.
Russell Rice was driving a road tractor owned by Lynn-Trem, Inc., which was pulling a trailer owned by Farmland Dairies and loaded with Farmland's cargo. Rice lost control when a tractor tire blew out, and was killed in the resulting accident. Rice's widow sued Lynn-Trem and Farmland, asserting that the accident was caused by Lynn-Trem's defective and dangerous tractor and by Farmland's negligently loaded trailer. The defense of Lynn-Trem was undertaken by Integrity Insurance Company and then pursued by New Jersey Property-Liability Insurance Guaranty Association (Association) after Integrity went into receivership. The Association stood in Integrity's position and stands there also in the present litigation. Farmland was insured by Pennsylvania Manufacturers' Association (PMA). PMA undertook to defend Farmland when Lynn-Trem's carrier refused Farmland's request to do so.
Eventually, the Rice case was settled for $235,000, with Lynn-Trem agreeing to pay $50,000 and Farmland $185,000. Farmland then filed the present action for a declaratory judgment that the Association, as Integrity's successor, was duty-bound to defend and indemnify Farmland in the Rice case; that it provided Farmland with primary coverage, and that it owed Farmland the costs of defending the Rice action. Farmland moved for summary judgment, and it was granted. The Association appealed, and we affirm.
Lynn-Trem owned and operated tractors. It hauled Farmland's trailers filled with Farmland products for agreed fees. There was no written contract. The parties' understanding, however, was that Lynn-Trem would provide liability insurance to cover itself and Farmland. It provided the Integrity liability policy, but the Association takes the position that the policy did not cover this accident. PMA, Farmland's insurer which defended Farmland in the Rice action and will have to pay the $185,000 settlement unless the Association does, takes the position on Farmland's behalf that the Integrity policy covers the accident. Although Farmland asserts an underlying agreement with Lynn-Trem to insure Farmland for liability, apparently without exception, it did not join Lynn-Trem as a defendant on the thesis that Lynn-Trem failed to perform its agreement to insure.
The certificate of insurance issued by Integrity's agent names Farmland as an additional insured and describes coverage of "any non-owned undescribed trailer of Farmland Dairies while attached to [Lynn-Trem's] power units. . . ." The certificate does not, however, purport to confer rights to particular coverages or to protect against possible exclusions.
The Integrity policy itself included for liability coverage, as "covered autos," "any trailers you don't own while attached to any [owned] power unit. . . ." Trailer owners are included as insureds for liability:
The owner or anyone else from whom you hire or borrow a covered auto which is a trailer is an insured while the trailer is connected to another covered auto which is a power unit, . . .
There is, however, a separate policy endorsement for an "additional Insured-lessor." It names Farmland as an "additional insured (lessor)." It adds to the policy any "leased auto," which is "an auto leased to [Lynn-Trem] for one year or more . . . under a leasing agreement which requires [Lynn-Trem] to provide direct primary insurance for the lessor." Coverage for leased autos is narrower than coverage for autos Lynn-Trem hires or borrows. The difference is that the lessor is not
insured for its own acts or omissions, but only for acts or omissions of (1) Lynn-Trem, (2) Lynn-Trem's employees or agents, and (3)
Any person, except the lessor or any employee or agent of the lessor, operating a leased auto with the permission of any of the above.
The Law Division held as a matter of law that Farmland was not a lessor for one year or more, a ruling which made inapplicable the leased-auto exclusion of coverage for Farmland's own negligence, and left Farmland as an additional insured ...