On appeal from Superior Court of New Jersey, Law Division, Passaic County.
Dreier,*fn1 Skillman and Villanueva. The opinion of the court was delivered by Skillman, J.A.D.
[262 NJSuper Page 37] Hertz Penske Truck Leasing (Penske) is in the business of leasing trucks. It carried an insurance policy on its fleet with American Motorists Insurance Company (AMI), which provided
minimal liability coverage that was excess to the primary coverage Penske's lease customers were required by agreement to carry on leased vehicles.
Penske leased a truck to Kandall Fabricating & Supply Corp. (Kandall). The lease obligated Kandall to indemnify Penske from any claims, expenses and liabilities arising from the operation of the leased vehicle. In addition, the lease obligated Kandall to provide $500,000 of liability coverage for Kandall and Penske in connection with the operation of the leased vehicle. The lease required this coverage to be "primary and not excess or contributory."
In conformity with this lease obligation, Kandall secured a liability policy with Excelsior Insurance Company (Excelsior). This policy provided "primary insurance" for any "covered auto." The policy further provided that "[a]ny leased auto designated or described in this endorsement will be considered a covered auto you own and not a covered auto you hire or borrow" and that "[f]or a covered auto which is a leased auto WHO IS INSURED is changed to include as an insured the lessor named in this endorsement." Excelsior also issued a certificate of insurance to Penske listing it as an additional insured under the policy.
On December 18, 1987 Richard A. Normando (Normando), an employee of Kandall, was involved in a two-vehicle accident while driving the truck leased from Penske. The driver and a passenger in the other vehicle, Maroun and Brenda Kattoura, began separate suits for their personal injuries allegedly suffered in the accident. Thereafter, third-party complaints and cross-claims were filed, primarily raising questions regarding insurance coverage, and Excelsior and AMI became parties to the actions. Excelsior provided a defense to the Kattouras' personal injury actions for Normando and Kandall, and AMI provided a defense for Penske. The court granted summary judgment in favor of Penske, and Excelsior eventually settled the underlying personal injury actions on behalf of Normando and Kandall for a total of $23,750.
AMI subsequently moved for summary judgment on the coverage issue. The trial court ruled that the clause in AMI's policy that purported to make its policy excess to any primary insurance of the lessee was an illegal "escape" clause. It, therefore, found the Excelsior and AMI policies to be coprimary. The trial court apportioned fiscal responsibility between the companies based on a provision in the Excelsior policy that limited its share of liability to the "proportion that the limit of [its] policy bears to the total of the limits of all the policies covering on the same basis," which was found to be 97% of the total settlements. Finally, the trial court concluded that under the indemnification clause of the lease between Penske and Kandall, Kandall, through its insurer Excelsior, was responsible for any loss incurred by Penske.*fn2
Normando, Kandall and Excelsior appealed from the portion of the trial court's order that requires Kandall, through Excelsior, to hold Penske harmless; Penske and AMI filed a cross-appeal from the portion of the order that held the AMI policy to be co-primary.
We conclude that the Excelsior policy provided primary coverage to Normando, Kandall and Penske, and that AMI's coverage was secondary only. We further conclude that there is no statutory provision or other expression of public policy precluding enforcement of the Excelsior and AMI policies as written. Accordingly, Excelsior is liable for the full amount of the judgments in the underlying tort actions and for all the defense costs of all the insureds.
Preliminarily, we note that the order from which this appeal was taken is interlocutory. The order adjudicates coverage for the accident and the liability of Excelsior and AMI for the judgments and defense costs. However, it does not reduce that liability to a judgment for a specific sum of money. Instead, the order requires "Kendall Fabricating, through its insurer, Excelsior Insurance Company, [to] indemnify and hold Hertz Penske harmless for any damages, expenses, and liabilities arising from the operation of the truck, as well as the expenses incurred in the defense of plaintiffs' actions for bodily injury, including all reasonable costs, expenses, and attorney's fees expended by American Motorists and Hertz Penske in defense of the personal injury claims . . . ." Thus, this order leaves open the possibility of further litigation regarding the ...