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CONNECTICUT INDEMNITY COMPANY v. QBC TRUCKING

May 5, 2005.

CONNECTICUT INDEMNITY COMPANY, Plaintiff,
v.
QBC TRUCKING, INC., JQ & SONS TRUCKING, INC., BERRY CHIU, PROGRESSIVE CASUALTY INSURANCE CO., APL LINES, INC., EAGLE INSURANCE CO., SUNG-IK JUNG, Defendants.



The opinion of the court was delivered by: WILLIAM PAULEY, District Judge

MEMORANDUM AND ORDER

Plaintiff Connecticut Indemnity Co. ("Connecticut Indemnity") brings this declaratory judgment action against Defendants QBC Trucking, Inc. ("QBC"), JQ & Sons Trucking, Inc. ("JQ & Sons"), Berry Chiu, Progressive Casualty Insurance Co. ("Progressive"),*fn1 APL Lines, Inc., Eagle Insurance Co. ("Eagle") and Sung-Ik Jung (collectively, "Defendants") to determine which insurance policies cover the vehicular accident between Chiu and Jung on July 18, 2002 (the "accident"). (Amended Verified Complaint ("Compl.") ¶ 1; Progressive's Rule 56.1 Statement ("Progressive 56.1 Stmt.") ¶¶ 2-3.)

Connecticut Indemnity moves for summary judgment and a declaration that the exclusion contained in its insurance policy is valid and that Plaintiff does not bear any coverage responsibility for the accident. In turn, Progressive moves for summary judgment dismissing the counts against it and a declaration that its coverage obligation is excess to that of Connecticut Indemnity and/or Eagle.

  BACKGROUND

  I. The Accident

  On July 18, 2002, Chiu and Jung were involved in a vehicular accident in Queens, New York. (Compl. ¶¶ 12, 13, 15.) Chiu, QBC's principal, was driving a 1996 Kenworth Tractor (the "Kenworth Tractor"), which prominently displayed a JQ & Sons logo. (Connecticut Indemnity's 56.1 Statement ("CI 56.1 Stmt.") ¶ 13.) QBC owns the Kenworth Tractor, but had leased it to JQ & Sons under a permanent lease agreement. (Progressive 56.1 Stmt. ¶ 3.) JQ & Sons, a federally regulated motor carrier registered with the Department of Transportation ("DOT"), regularly dispatched QBC for jobs in New York and New Jersey. (Progressive 56.1 Stmt. ¶¶ 7, 8.) QBC carries its insurance through Connecticut Indemnity, while JQ & Sons is insured by Progressive and Eagle.

  On July 18th, JQ & Sons dispatched Chiu to pick up a trailer in Elizabeth, New Jersey. On his return, Chiu collided with Jung near 37th Avenue in Queens. (Progressive 56.1 Stmt. ¶ 9 & Ex. B: Police Report.) Jung brought suit in New York Supreme Court, Kings County, against Chiu, QBC and JQ & Sons for his personal injuries. (CI 56.1 Stmt. ¶ 2; Compl. ¶ 14.) In his Kings County action, Jung seeks damages in excess of $20,000,000. (CI 56.1 Stmt. ¶ 2; Progressive 56.1 Stmt. ¶ 10.) Chiu, QBC and JQ & Sons are all defendants in that action. (CI 56.1 Stmt. ¶ 2; Progressive 56.1 Stmt. ¶ 11.) II. The Insurance Policies

  On the date of the accident, Chiu and QBC carried a non-trucking liability policy from Connecticut Indemnity (the "CI Policy"). (CI 56.1 Stmt. ¶ 17.) The CI Policy provided coverage for QBC's personal use of the Kenworth Tractor and contained provisions excluding coverage for commercial use. (CI 56.1 Stmt. ¶ 19.) As a pre-condition for the insurance, Connecticut Indemnity required QBC to maintain a permanent lease providing that the lessor of the Kenworth Tractor carried insurance for business usage. (CI 56.1 Stmt. ¶ 22.)

  JQ & Sons had two insurance policies, one from Progressive and another from Eagle. Progressive is registered with the DOT as JQ & Sons' primary insurer, and its policy (the "Progressive Policy") provides $1,000,000 in liability coverage for an accident. (CI 56.1 Stmt. ¶¶ 26-28; Progressive 56.1 Stmt. Ex. H.) The Eagle policy (the "Eagle Policy") covers JQ & Sons' "non-owned autos" and "hired autos," and provides $500,000 in liability coverage. (CI 56.1 Stmt. ¶¶ 23-25; Eagle 56.1 Statement ("Eagle 56.1 Stmt.") ¶¶ 5, 10; Progressive 56.1 Stmt. ¶¶ 12-14.)

  A. The Connecticut Indemnity Policy

  The CI Policy excludes two categories of vehicles from coverage:
a. A covered "auto" while used to carry property in any business.
b. A covered "auto" while used in the business of anyone to whom the "auto" is rented, if the rental agreement requires the lessee to carry primary insurance for liability arising out of the lessee's use of the "auto."
However, the above exclusions apply only if there is other liability insurance which is valid and collectible, applicable to the covered "auto," which provides the minimum kinds of insurance required by law and which meets the minimum limits specified by the compulsory or financial responsibility laws of the jurisdiction where the covered "auto" is being used or the minimum limits specified by any law governing motor carriers of passengers or property, whichever is applicable.
(CI 56.1 Stmt. ¶ 21; Progressive 56.1 Stmt. ¶ 18.) The CI Policy expressly schedules the Kenworth Tractor as a "covered `auto.'" (CI 56.1 Stmt. ¶ 20.) Additionally, the CI Policy's Certificate of Insurance contains a disclaimer:
THIS CERTIFICATE OF INSURANCE IS ISSUED BASED ON A WARRANTY BY THE CONTRACTOR THAT HE/SHE IS PERMANENTLY LEASED TO THE GOVERNMENTALLY REGULATED MOTOR CARRIER NAMED ON THIS CERTIFICATE. ALL COVERAGE EXPIRES WHEN THE PERMANENT LEASE HAS BEEN BROKEN, CANCELED, OR TERMINATED BY EITHER THE CONTRACTOR OR THE MOTOR CARRIER.
(CI 56.1 Stmt. ¶ 22.)

  B. The Progressive Policy

  The Progressive Policy provides that the insurance company "will pay damages . . . for which an insured is legally liable because of an accident." (Progressive 56.1 Stmt. ¶ 20.) The accident must arise "out of the maintenance or use of [an] insured auto." Further, the "insured" must be identified in the policy or must be driving an "insured auto" described in the policy. (Progressive 56.1 Stmt. ¶ 25.) The Progressive Policy expressly lists two vehicles that it covers and schedules two additional undescribed trailers for which JQ & Sons paid premiums. (Progressive 56.1 Stmt. Ex. H.) The Kenworth Tractor is not scheduled in the Progressive Policy. (Progressive 56.1 Stmt. ¶ 26.) Therefore, Progressive argues that its policy does not cover the Kenworth Tractor.

  Because Progressive was insuring JQ & Sons, a federally registered motor carrier, it filed a BMC-91X form as required by DOT regulations. (CI 56.1 Stmt. ¶¶ 26-29.) A BMC-91X filing requires an insurer to carry an MCS-90 endorsement on its policy. (CI 56.1 Stmt. ¶ 29.) See also 49 C.F.R. § 387.15. An MCS-90 endorsement states, in pertinent 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. . . . It is understood and agreed that no condition, provision, stipulation, or limitation contained in the policy, this endorsement, or any other endorsement thereon, or violation thereof, shall relieve the company from liability or from the payment of any final judgment within the limits of liability herein described, irrespective of the financial condition, insolvency or bankruptcy of the insured. However, all terms, conditions, and limitations in the policy to which this endorsement is attached shall remain in full force and binding between the insured and the company.
(CI 56.1 Stmt. ¶ 32.) See also 49 C.F.R. § 387.15, at Illustration I.

  Here, while the Progressive policy does not contain an MCS-90 endorsement, the terms of such an endorsement are included by reference. (Progressive 56.1 Stmt. Ex. H ("If we are required by any applicable filing which we have made on your behalf to provide coverage not otherwise provided by this policy . . . the coverage provided hereunder for such person shall be the ...


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