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QBE Insurance Company v. P&F Container Services

July 30, 2003


On appeal from Superior Court of New Jersey, Law Division, Union County, L-156-02.

Before Judges Wefing, Wecker and Lisa.

The opinion of the court was delivered by: Wecker, J.A.D.


Submitted May 7, 2003

This appeal involves the scope of coverage required for a leased vehicle under a federally-mandated endorsement to an interstate trucker's liability policy. The Law Division judge decided cross-motions for summary judgment in favor of coverage shortly after the complaint was filed and before any discovery had taken place. We now reverse and remand for a determination whether the leased vehicle was involved in interstate commerce either by virtue of the terms of the lease agreement or the nature of the trip.

On January 16, 2001, a tractor owned by defendant Ioannis Kollas, leased to defendant P&F Container Services, Inc. (P&F), and operated without an attached trailer by P&F's employee, defendant Jimmy Bedon, collided with a passenger vehicle operated by defendant Augustin Semeina. Semeina sustained personal injuries. The accident occurred while the tractor was en route to the Elizabeth Marine Terminal at P&F's direction to pick up a shipment of goods allegedly intended for delivery elsewhere in New Jersey. The terminal, also known as Port Elizabeth, is operated by the Port Authority of New York and New Jersey.

P&F is a motor carrier registered with the Surface Transportation Board (the Board) of the United States Department of Transportation (DOT) for transportation of property.*fn1 See 49 U.S.C.A. §§ 13901, 13902. The Kollas tractor apparently was not carrying a DOT placard or other sign identifying it as a vehicle registered for interstate transport on the date of the accident.*fn2

P&F carried liability insurance under a trucker's liability policy issued by plaintiff, QBE Insurance Corporation (QBE). Kollas insured the vehicle under a non-trucker's policy issued by defendant Connecticut Indemnity Company (Connecticut) (also known as a"bobtail" policy). The Connecticut policy covered the tractor when it was not involved in business trucking activities.

The tractor was not listed on the QBE policy's schedule of covered vehicles. The policy included, however, Endorsement MCS-90, as mandated by Sections 29 and 30 of the Motor Carrier Act of 1980. See 49 C.F.R. § 387.7(d)(1), which requires insurance companies who insure vehicles owned or leased by interstate trucking companies to include this additional coverage, up to the required levels, 49 C.F.R. §§ 387.9 and 387.303, regardless of whether the vehicle is listed as a covered vehicle on the policy. 49 C.F.R. § 387.15, adopted pursuant to 49 U.S.C. § 13906(a)(1) and (f). A"lease" is defined under 49 U.S.C.A. § 13102 and 49 C.F.R. § 376.2(e) as"a contract or arrangement in which the owner grants the use of the equipment... to an authorized carrier for use in the regulated transportation of property."

The endorsement in the prescribed form reads, in relevant part:

In consideration of the premium stated in the policy to which this endorsement is attached, the insurer (the company) agrees to pay, within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980 regardless of whether or not each motor vehicle is specifically described in the policy and whether or not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere.

The insured agrees to reimburse the company for any payment made by the company on account of any accident, claim, or suit involving a breach of the terms of the policy, and for any payment that the company would not have been obligated to make under the provisions of the policy except for the agreement contained in this endorsement. [49 C.F.R. § 387.15 and Illustration I.]

Under the express terms of the MCS-90 (also referred to as"the endorsement"), its scope supercedes any limitations, exclusions, exceptions, or conditions of the base policy.

The history and policy behind federal regulation of interstate carriers, specifically with respect to their use of leased tractor trailers, has been set forth in many cases, both federal and state. E.g., T.H.E. Ins. Co. v. Larsen Intermodal, 242 F.3d 667, 672 (5th Cir. 2001); Progressive Casualty Ins. Co. v. Hoover, 809 A.2d 353, 359 n.9, n.10 (Pa. 2002). The Fifth Circuit in T.H.E. Ins. Co. summarized that history and the underlying public policy:

The MCS-90 was required under the regulations of the now-defunct Interstate Commerce Commission ("ICC"). When the ICC was abolished, its authority to regulate carriers was transferred to the Department of Transportation, but the old regulations remain in effect until new ones are promulgated. John Deere Ins. Co. v. Nueva, 229 F.3d 853, 855 n. 3 (9th Cir. 2000). This Court has stated that ICC endorsements are governed by federal law. Canal Ins. Co. v. First Gen. Ins. Co., 889 F.2d 604, 610 (5th Cir. 1989), modified on other grounds, 901 F.2d 45 (5th Cir. 1990) (citing Carter v. Vangilder, 803 F.2d 189, 191 (5th Cir. 1986)).

We have also held that the policy embodied in the ICC regulations"was to assure that injured members of the public would be able to obtain judgments collectible against negligent authorized carriers." Canal v. First Gen., 889 F.2d at 611. Thus, the insurer's obligations under the MCS-90 are triggered when the policy to which it is attached provides no coverage to the insured. The First Circuit has aptly described the obligation placed upon the insurer by the MCS-90 as one of suretyship."[W]e consider the ICC endorsement to be, in effect, suretyship by the insurance carrier to protect the public - a safety net.... [I]t simply covers the public when other coverage is lacking." Canal Ins. Co. v. Carolina Cas. Ins. Co., 59 F.3d 281, 283 (1st Cir. 1995). [T.H.E. Ins. Co., 242 F.3d at 672.]

The insurer's obligations under the MCS-90 are triggered when the policy to which it is attached otherwise would provide no coverage to the insured. Ibid. In other words, under the endorsement, the insurer becomes a surety for the interstate carrier in any case where there is no other coverage provided, either by that carrier or indirectly by the owner of the leased vehicle. See Progressive Casualty, 809 A.2d at 435 n.11. The overriding purpose of the MCS-90 is to protect innocent, injured members of the public, like Semeina. See T.H.E. Ins. Co., 242 F.3d at 673; John Deere Ins. Co. v. Nueva, 229 F.3d 853, 857-58, 860 (9th Cir. 2000). Federal statutes and regulations governing interstate truckers' use of leased tractors are aimed at protecting the public by applying safety and financial responsibility rules both to owned and leased vehicles. See, e.g., Harris v. Mitchell, 358 N.J. Super. 504, 507-08 (App. Div. 2003); Moore v. Nayer, 321 N.J. Super. 419, 428 and n.7 (App. Div. 1999); Casey v. Selected Risks Ins. Co., 176 N.J. Super. 22, 31 (App. Div. 1980); see also Pierre v. Providence Washington Ins. Co., 99 N.Y. 2d 222, 227-230, 754 N.Y.S. 2d 179, 181-84 (Ct. Of Appeals 2002).

The motion judge concluded that the MCS-90 endorsement was applicable in this case even if this accident occurred on a trip that was entirely intrastate, simply because P&F was a federally registered interstate carrier. The judge said:

[T]he Defendant, the carrier, the hauler in this particular case, P&F, is registered in interstate commerce, whenever they lease a tractor, whether or not it's in interstate commerce, the carrier [is] required to provide liability insurance to cover that vehicle. In this case therefore, I find that... regardless of the fact that the vehicle was not being used in interstate commerce, that it was nonetheless required to be covered,*fn3 and that therefore QBE owes a duty to defend the driver and owner of the vehicle as well as P&F, and therefore, I will order a summary ...

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