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United States Fidelity & Guaranty Co. v. American Automobile Insurance Co.


August 6, 2007


On appeal from the Superior Court of New Jersey, Law Division, Passaic County, Docket No. PAS-L-69-05.

Per curiam.


Submitted May 23, 2007

Before Judges Wefing, Parker and Messano.

Defendant American Automobile Insurance Company (American) appeals from an order entered on August 11, 2006 (1) granting summary judgment in favor of plaintiff United States Fidelity & Guaranty Company (USF&G) and ordering American to provide primary coverage to Noel A. Mattis for all claims arising out of an accident that occurred on November 3, 2001; (2) ordering American to pay plaintiff $52,259.75 in legal fees for defense of the underlying suit; and (3) awarding plaintiff costs in connection with the underlying suit. The issue presented on appeal is which carrier is obligated to provide primary coverage for the accident.

The facts relevant to this appeal are as follows. Noel A. Mattis was the owner/operator of a tractor-trailer that he leased to W.R.J. Trucking Company (W.R.J.), a common carrier registered with the U.S. Department of Transportation. Pursuant to the lease, Mattis used the tractor and trailer to pick up and deliver cargo for W.R.J. On November 2, 2001, Mattis drove the tractor from his home to the W.R.J. terminal, where he picked up the trailer and freight that he carried to various stops in New Jersey and Pennsylvania. After his last delivery, he returned to the terminal and left for home after midnight. On his way home, he was involved in an accident on Route 80 near Lodi. Byron Paul Rea died in the accident and his estate filed suit against Mattis in Passaic County.

USF&G issued a truckers liability policy in which W.R.J. was a named insured. The policy was in effect on the date of the accident. American issued a policy, commonly referred to as a Bobtail Policy, to the Independent Trucker's Association (ITA) of which Mattis was a member. By virtue of Mattis's membership in the ITA, the tractor was insured under the Bobtail Policy at the time of the accident.

American maintains that its Bobtail Policy excludes coverage for the tractor while in use for business or while used in the business of anyone to whom it was rented. American denied coverage to Mattis for any damages arising out of the accident. As a result, USF&G paid for Mattis's defense in the action brought by Rea's estate. USF&G then commenced this suit in January 2005, seeking a declaration that American's policy provided primary coverage.

On December 29, 2006, USF&G moved for summary judgment, alleging that Mattis was not operating the tractor in the business of W.R.J. at the time of the accident and that it was entitled to reimbursement for its defense and coverage of Mattis.

American cross-moved for summary judgment on the grounds that the terms and conditions of the USF&G policy provide for coverage of claims arising out of this accident and that coverage is excluded under the American policy because the vehicle was operated in the business of trucking at the time of the accident.

USF&G's motion for summary judgment was granted and American appeals, arguing that the trial court erred in (1) holding American responsible for coverage; and (2) determining that the USF&G policy only provides excess coverage over the American policy.

After hearing argument on February 10, 2006, the trial judge found that the material facts were undisputed:

On November 2, 2001, Mattis drove the tractor from his home to W.R.J.['s] terminal where he picked up a trailer. At that point, Mattis was dispatched by W.R.J. to haul a trailer from the terminal to various points in New Jersey and Pennsylvania. . . .

. . . Following his last delivery, Mattis returned the trailer to the terminal late in the evening of November 2, 2001.

Since it's not really disputed, I'm going to find that he was permitted by W.R.J. to park his tractor overnight in the terminal. However, Mattis drove the tractor to commute to his house.

Mattis left the terminal destined for his home after midnight. That's admitted. En route from the terminal to his home, Mattis was involved in an accident on Interstate 80 at or near Lodi, New Jersey. At the time of the accident, he [said] the tractor was not being used to carry property in any business. He was not carrying property. He was bobtail.

At the time of the accident . . . . [Mattis] wasn't carrying any freight, he wasn't dispatched, etcetera, for W.R.J. That's not disputed.

The question becomes one of when he is commuting back and forth to his home, is that deemed engaged in the business of his employer.

[Mattis] states at the time of the accident, [he] was using the tractor for his own convenience. I find that as a matter of fact. It's really not disputed. He could have left the tractor in Parsippany and used the car to go back and forth. He decided to use the tractor.

There's no issue of fact. It's admitted that USF&G issued a trucker's liability policy, which named W.R.J. as a named insured and was in full force and effect on November 3, 2001.

American issued a policy to Mattis, which was in full force and effect on November 3, 2001. The American policy excluded coverage for, A, a covered auto while used to carry property in any business, which clearly is not the case here. And, B, a covered auto while used in the business of anyone to whom the auto was rented.

All right. There's no question that the policies were in effect. Also, there's no question[,] it's admitted that American denied coverage to Mattis for any injuries arising out of the accident. As a result, USF&G has been paying for Mattis's defense in the Passaic County action.

The court then analyzed the legal issues and concluded:

The legal standard is set forth in USF&G's policy. The burden is on the insured to prove the matter in dispute falls within any claimed exclusionary policy -- provision of the policy.

As [American's counsel] has basically stated, the issue for the Court's determination is fairly straightforward. Was Mr. Mattis still engaged in W.J.R.'s business at the time he was returning home[?]

USF&G cites a law that says insurance policy exclusion[s] are to be narrowly construed. And the construction favoring coverage must be adopted. USF&G argues that at the time of the accident, Mattis was not under dispatch by W.R.J., which is not in dispute. Mattis was using the tractor for his own convenience. He had the alternative of parking the tractor at the terminal and arranging for alternate transportation, but opted to drive the tractor home.

Counsel for USF&G had cited the three cases; the one from Illinois, St. Paul Fire [&] Marine [Ins. Co. v. Frankart, 370 N.E. 2d 1058 (Ill. 1977)]; one for North Carolina, McLean Trucking [Co. v. Occidental Fire & Cas. Co, 324 S.E. 2d 633, review denied, 330 S.E. 2d 611 (N.C. 1985)]; and one from Maryland, Empire Fire [&] Marine [Ins. Co. v. Liberty Mut. Ins. Co., 699 A. 2d 482 (Md. Ct. Spec. App.), cert. denied, 703 A. 2d 148 (1997)], which we have discussed at some length and in detail during . . . oral argument.

Clearly, those cases stand for the proposition that commuting back and forth from home . . . to a terminal is not considered in the employ . . . of the employer.

We have discussed at length the Cox v. Bond Transp. [Inc., 53 N.J. 186, cert. denied, 395 U.S. 935, 89 S.Ct. 1999, 23 L.Ed. 2d 450 (1969)] case, which refers extensively to ICC, now DOT, regulations. And in that case, there was . . . no comment about any other insurance. And the Court there ruled that it was a jury question as to whether or not the driver in that case was in the business of his employer as he was using the tractor to travel to his home.

. . . [D]espite the characterization of the case in Planet [Ins.] v. Anglo [Am. Ins. Co., 312 N.J. Super. 233 (App. Div. 1998)], I don't read Cox as basically saying flat out that driving back and forth . . . from home to an employer's terminal necessarily means that it is deemed within the . . . . business of the employer.

There are two Appellate Division decisions which are of more recent origin. Of course, one is the Planet [Ins.] [case] and the other one is Griffin v. [Pub. Serv. Mutual Ins. Co., 327 N.J. Super. 501 (App. Div. 2000)] . . . . [I]n Griffin . . . the Appellate Division indicated that the Third Circuit has said that,

"ICC regulations may alter the terms of the insurance agreement when the protection of the public is at stake, but not a provision affecting the dispute between two insurance companies on the question of who is to provide primary insurance coverage. Where the case is concerned, with responsibility as between insurance carriers and not with the federal policy of protecting the public, ICC considerations are not determinative and the Court should consider the express terms of the parties' contracts. ICC regulations have no further effect on insurance policy interpretation so long as the public interest is protected and third parties have been compensated."

. . . [B]ased upon that statement in Griffin and . . . the fact the Appellate Division seemed to base its decision in Planet on the fact that this was not simply a matter of coming and going and commuting from a home to [a] terminal, but the fact that the . . . tractor was being picked up from a repair shop and brought to a home, the Court there found that . . . getting the tractor repaired inured to INS, that's the carrier's benefit, and that the essential nature of the trip was business, not personal.

Based upon all of that law, I am going to rule that the American policy -- the exclusion in the American policy . . . did not apply; that the American policy was triggered by . . . the facts of this case; that the decision of American to decline coverage was not valid; and that it should have insured Mr. Mattis under the circumstances of this case.

. . . I would order also that USF&G be reimbursed for the defense costs to date.

After deciding the summary judgment motion in favor of USF&G, the court ordered the parties to submit further briefs on the question of whether the USF&G policy was excess to the American policy or the two policies provided co-primary coverage. On April 28, 2006, the court heard argument on that issue and on June 9, 2006, rendered its decision on the record:

The issue becomes one of whether the American policy . . . or the USF&G policy . . . should be considered [co- primary], . . . . Or should one be primary and one be excess.

The Court finds and rules that based upon the language of the policies and the controlling law, that the American policy is primary and the USF&G is excess. The Court has already held that Mattis was not in the business of the motor carrier, [W.R.J.], at the time of the accident on . . . November 4, 2001.

Mr. Mattis had what is known in the industry as a bobtail policy, and that is when a tractor is seen on the road without a trailer. They call that bobtail.

As indicated, the Court held that Mattis was not in the business of [W.R.J.] The auto was owned by Mattis and was being used by Mattis for convenience. And . . . the Court is finding that the American policy thus provides primary . . . coverage.

In rendering its decision, the court referred to Griffin, supra, 327 N.J. Super. at 501, to explain that the Interstate Commerce Commission (ICC) -- now the Department of Transportation and the Service Transportation Board -- "required motor carriers to obtain minimal levels of financial responsibility and to file a certificate of insurance with the ICC" to protect third parties who might be injured in accidents with the trucks. When there is a dispute between two carriers, however, the insurance policies themselves are determinative. Carolina Cas. Ins. Co. v. Ins. Co. of N. Am., 595 F.2d 128, 138 (3rd Cir. 1979). The court then concluded:

In this particular case, there was in effect the American policy and the USF&G policy. Therefore . . . the Court concludes that Griffin requires the Court to read the policies which are contracts . . . to be interpreted based upon their express terms.

Reading the USF&G policy and the American policy and recognizing that this is not a lease that by its terms stands for more than six months, I accept the argument made on behalf of USF&G that pursuant to the terms of those two policies, the American policy is primary and the USF&G policy is excess.

American argues that the trial court erred in finding its policy primary and USF&G's policy excess. American maintains that the language in the USF&G policy relating to a "leased auto" governs coverage because Mattis leased the tractor and trailer to W.R.J. for an indefinite period of time. The USF&G endorsement covering a "leased auto," however, requires that two conditions be met: (1) the auto must be leased for a period of six months or more; and (2) the rental agreement must require W.R.J. to provide primary coverage. There is nothing in the record to indicate that the lease between Mattis and W.R.J. required W.R.J. to provide primary coverage. In short, the USF&G policy language provides that it is excess to the American policy.

We have carefully considered the record in light of American's arguments and the applicable law. We are satisfied that American's arguments lack sufficient merit to warrant further discussion in a written decision. R. 2:11-3(e)(1)(E). We affirm substantially for the reasons set forth by Judge Thomas J. LaConte in his decisions rendered on the record of February 10 and June 9, 2006.



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