Petition for Writ of Certiorari — Millers National Insurance v. Axel's Express, Inc.

88-8 gg

SUPREME COURT OF THE UNITED STATE

OCTOBER TERM, 1988

NO.

MILLERS NATIONAL INSURANCE COMPANY;

JOHN CAULFIELD, dba CAULFIELD

TRUCKING; DONALD PRESTON THURMAN

Petitioners,

VW e

AXEL'S EXPRESS, INC.

FIREMAN'S FUND INSURANCE COMPANY,

Respondents

PETITION FOR A WRIT OF CERTIORARI TO

NINTH CIRCUIT COURT OF APPEALS

THE COURT OF APPEALS OF CALIFORNIA

CHARLES M. FARANO

FARANO AND KIEVIET

100 S. Anaheim Boulevard

Suite 340

Anaheim, CA 92805

(714) 778-2828

-

Q

STATEMENT OF ISSUES PRESENTED FOR REVIEW

i. Does a dispute concerning

liability for serious bodily injury

between a motor carrier operating in

interstate commerce pursuant to Federal

Regulations and the owner of a vehicle

leased to the motor carrier, pose a

substantial question of federal law so as

to vest jurisdiction in the Federal

District Court?

2. Does a dispute between two

insurers, one covering the motor carrier

and the other covering the vehicle owner,

involving coverage for liability for

serious injury, which occurred during a

shipment in interstate commerce, pose a

substantial federal question when

resolution of the dispute depends on

liability under Federal Law as well as

rules governing insurance of the

interstate motor carrier?

TABLE OF CONTENTS

Page

STATEMENT OF ISSUES PRESENTED

FOR REVIEW... cccccccccscccces 1

PARTIES TO THE PROCEEDING.... 2

TABLE OF AUTHORITIES ........ 3-5

REFERENCE TO OPINIONS BELOW.. 6

JURISDICTION... cccccccccccces 6-7

STATUTORY PROVISIONS AND

REGULATIONS INVOLVED......... 7-8

STATEMENT OF FACTS RELEVANT

TO ISSUE ON REVIEW........... 8-11

COURSE OF UNDERLYING

PROCEEDINGS... ccccccccccccccs 11-13

BASIS OF FEDERAL JURISDICTION

OF FIRST INSTANCE.......-.+-- 13

CONSTITUTIONAL PROVISIONS -

STATUTES AND REGULATIONS..... 14

ARGUMENT IN FAVOR OF

ALLOWING WRIT........ eccccecce 14-32

WHERE FEDERAL STATUTES AND

REGULATIONS GOVERN THE

LIABILITY OF A MOTOR CARRIER

FOR DAMAGES CAUSED BY A LEASED

VEHICLE, A DETERMINATION OF

THE MOTOR CARRIER'S LIABILITY

IS A DETERMINATION OF A

"SUBSTANTIAL" FEDERAL QUESTION

SO AS TO VEST SUBJECT MATTER

JURISDICTION IN THE DISTRICT

COURT... cc cccccccccces 17-24

TABLE OF CONTENTS (cont'd)

Page

THE DETERMINATION OF

LIABILITY OF THE MOTOR

CARRIER IS A SUBSTANTIAL

FEDERAL QUESTION AND

DENYING FEDERAL

JURISDICTION OVER

THE ISSUE WOULD BE

INCONSISTENT WITH THE RULE

CITED IN SMITH v. KANSAS

cI & CO., 255

U.S. 180 (1921) AND MERRELL

DOW _P Cc INC.

Vv. HENDERSON (1986), 478 U.S.

804; 92 L.Ed.2d 650; 51,

U.S.L.W. 5088 ; 106

S.Ct. 3229 .cccccccccceees 17-24

THE TRIAL COURT AND THE

COURT OF APPEALS

INCORRECTLY CONSIDERED

THEISSUE BEFORE IT BY ONLY

CONSIDERING THE ISSUE

OF IN S U RAN C E

COVERAGE.......- 25-29

THE ISSUE OF INSURANCE

COVERAGE IS ALSO AN

IMPORTANT FEDERAL INTEREST

WHICH MUST BE ENFORCED

ON A UNIFORM BASIS SO AS

TO CREATE A UNIFORM

TRANSPORTATION SYSTEM..... 29-32

ii

PARTIES TO THE PROCEEDING

All parties contained in the

caption of this case are parties to this

proceeding.

None of the petitioners in this

action have or are corporate affilliates

or subsidiaries or are affilliated with

any other corporation.

OF A ORITIES

U. S. Supreme Court

Bowman v. Chicago & N.W.

Ry. Co., 125 U.S. 465 (1888),

31 L.E@ 700, 8 8.Ct. 689..

Cook v. Pennsylvania, 97

U.S. 275 (1878), 97 U.S. 566,

24 LcEG. LOL. ccccsccccces

Cc v. Marsha Count

196 U.S. 201 (1904), 49 L.Ed.

Ee fe Se er

Franchise Tax Board v.

Construction Laborer's

Vacation Trust 463 U.S. 1

(1983), 27 L.Ed.2d 420, 51

U.S.L.W. 4945, 103 S.Ct.

SR i eee ee oo eer

Indiana Refrigerator Lines,

Inc.v. Dalton (1975 Cal.App.

6 Tenn.) 516 F.2d 795

cert. denied, 423 U.S. 985

46 L.Ed. 302, 96 S.Ct.

re can

Merrell Dow Pharmaceuticals

v. mpson ai, 478 U.S.

18

18

18

21

26

804, 92 L.Ed.2d 650, 54 U.S.L.W.

5088; 1065 S.Ct. 3229

ee ehecdace 26,49,22,233,24,29

Vv. Ci Ti

Trust Co. 255 U.S. 180

(1921) 65 L.Ed. 577, 41 S.Ct.

243 cccccccscccs cocccccce -15,22,24

Table of Authorities (cont'd)

Transamerican Freight v.

Brada Miller 423 U.S. 28

(1975) 46 L.Ed.2d 169, 96

Da bind Kes e0-0 cane 28,31

Wellon v. State of Missouri

91 U.S. 275, 23 L.Ed.

B47 (1875) cc cccccccccccecs 18

435 F.2d 718 (10th

Cir. IDTA) ccccccces sense eee 30,31

Ss v.G F

Insurance 465 F.2d 1249

(2TGER Cif. 1972) ccccccccse 31

Paxton National Insurance

Vv. t mni

657 F.2d 657 (5th Cir., 1981)

cert. denied, 455 U.S. 982

| See 31

Proctor & Colonial v.

Rodri Refri ¥

Transportation, Inc. 494 F.2d

89 (4th Cir. 1974)........ 18,24

Rodriguez v. Ager, 705 F.2d

1229 (10th Cir. 1983).. 21

Simmons v. King, 478 F.2d

SS7 (Sth Cir. 1973) «-- 18

-

:

Table of Authorities (cont'd)

United States Code

49 USC §10101 .......000. 7,9

49 USC $11107 .ccccccsceee 9,19,26

49 USC §10927 .........10,19,27,29,30

49 USC §10527 .nccccccccce 19

Code of Federal Regulations

49 CFR part 1043 .......4.. 7,30

49 CFR part 1057 ......4.- 9,19

49 CPR 1087.11 wcccecccces 8,20

49 CFR 1057.12 ..ccccceeee 9,20,30

a

REFERENCE TO OPINIONS BELOW

Entry of judgment by the United States

District Court, Central District of

California, was entered October 9, 1987,

and is reprinted in Appendix la.

The United States Court of Appeals for

the Ninth Circuit affirming the lower

entered July 1, 1988, was reported at 851

F.2d 269 (9th Cir. 1988) and is reprinted

in Appendix 3a.

The Petition for rehearing was denied

by United States Court of Appeals without

opinion on July 28, 1988, and is

reprinted in Appendix 13a.

JURISDICTION

The jurisdiction of this court is

invoked under 28 U.S.C. 1254(1)

permitting the United States Supreme

Court to review by Writ of Certiorari, a

Civil Case in the Court of Appeals before

or after rendition of judgment.

6

In cases which the petition is from a

denial of petition for rehearing by the

Court of Appeals, the time runs from the

date of denial (Supreme Court Rule 20.4).

The ninetieth day after denial is October

28, 1988. This Petition was filed on or

before October 28, 1988.

STATUTORY PROVISIONS AND REGULATIONS

INVOLVED

This case involves the allegations of

liability of motor carriers operating in

interstate commerce under the Motor

Carrier Act of 1980, 49 CFR 10101 et seq.

and regulations codified by the

Interstate Commerce Commission set forth

at 49 CFR part 1057.

This case also involves the allegation

of liability of the insurer of the motor

carrier under the Motor Carrier Act of

1980, 49 USC §10101 et seq. and

Regulations codified by the Interstate

Commerce Commission set forth at 49 CFR

part 1043.

STATEMENT OF FACTS RELEVANT TO ISSUE

ON REVIEW

This case arises because of an accident

which occurred on June 16, 1985, in Utah.

The accident resulted in severe personal

injuries to JAMES GAGNER.

GAGNER was standing between his car and

travel trailer parked along side the

highway when a truck driven by Petitioner

DONALD PRESTON THURMAN (THURMAN) struck

the rear of the trailer. As a result,

GAGNER'S leg was amputated and he had to

undergo neurological surgery.

The tractor, driven by THURMAN was

owned by JOHN CAULFIELD.

At the time of the accident, AXEL'S

EXPRESS, held a certificate of public

convenience and necessity issued by the

Interstate Commerce Commission

authorizing AXEL'S to haul general

commodities as a common carrier in

interstate commerce pursuant to 49

uSC 10101, et seq. (app. 7a)

At the time of the accident, CAULFIELD

had leased the tractor to AXEL'S. The

tractor was being operated under the

control and responsibility of AXEL'S

under a written lease agreement pursuant

to 49 U.S.C. §11107 and the ICC Leasing

Regulations set forth at 49 CFR part

1057. The identity of AXEL'S was

contained on CAULFIELD'S equipment

pursuant to 49 CFR §1057 (App. 7a-9a).

Neither CAULFIELD nor THURMAN were

licensed by any state or federal agency

to conduct transportation services.

At the time of the accident, THURMAN

was hauling a trailer belonging to

AXEL'S. The trailer contained

commodities for which AXEL'S had issued a

bill of lading from California to Salt

Lake City, Utah. The accident occurred

pricr to delivery of the goods and while

THURMAN was driving the tractor without

the trailer, and attempting to retrieve

his identification papers which had been

left behind at the Arizona/Utah boarder

check.

CAULFIELD was insured by MILLERS

NATIONAL INSURANCE. AXEL'S was insured

by FIREMAN'S FUND. FIREMAN'S FUND had

filed a Certificate of Insurance with the

Interstate Commerce Commission with the

required endorsement which provides

coverage for protection of the public in

compliance with Title 49 U.S.C. §10927.

GAGNER filed a complaint in the Utah

State Court for damages against

CAULFIELD, THURMAN and AXEL'S.

A settlement was reached in the GAGNER

action whereby FIREMAN'S FUND, on behalf

10

of its insured, AXEL'S EXPRESS, agreed to

contribute $450,000 toward settlement,

and MILLERS NATIONAL, on behalf of its

insured, CAULFIELD and THURMAN, agreed to

contribute $200,000 toward settlement of

the GAGNER action. FIREMAN'S FUND AND

MILLERS agreed to reserve the issue of

the ultimate liability as between them as

part of the settlement.

OF UND NG DINGS

MILLERS NATIONAL INSURANCE COMPANY,

INTERSTATE TRUCK UNDERWRITER'S, INC.,

JOHN CAULFIELD dba CAULFIELD TRUCKING,

AND DONALD PRESTON THURMAN, filed a

complaint in the Federal District Court

against AXEL'S EXPRESS, INC., and

FIREMAN'S FUND INSURANCE COMPANY for

damages, declaratory relief and for

insurance bad _ faith. The parties

subsequently stipulated to dismiss the

cause of action for bad faith.

11

FIREMAN'S -filed an Answer and

Counterclaim against MILLERS NATIONAL

INSURANCE COMPANY, INTERSTATE TRUCK

UNDERWRITERS, INC., JOHN CAULFIELD dba

CAULFIELD TRUCKING and DONALD PRESTON

THURMAN for declaratory relief and

damages.

At the pre-trial conference, for the

first time, the court orally raised the

question of federal subject matter

jurisdiction.

At the request of the trial court,

MILLERS submitted a Memorandum of Points

and Authorities Regarding Jurisdiction of

the U.S. District Court.

The trial court then raised additional

questions of jurisdiction and issued a

Further Order to Show Cause re

Jurisdiction. (App. l6a).

At the request of the trial court

MILLERS submitted a subsequent Memorandum

12

Pneneneneienaiill

of Points and Authorities re Federal

Jurisdiction of the Insurance Coverage.

On October 7, 1987, the court filed its

Order of Dismissal on the basis the

question of liability among the motor

carrier and the owner/operator was no

longer at issue and that the court had no

jurisdiction of any dispute between the

insurers. (See Appendix 1la-2a).

MILLERS filed an appeal to the U.S.

Court of Appeals for the Ninth District

on November 9, 1987. The Court of

Appeals affirmed the trial courts ruling

on July, 1, 1988 (App 5a). The request

for rehearing was denied without opinion

on July 28, 1988 (App. 5a).

BASIS OF FEDERAL JURISDICTION OF

} 4 T INSTANCE

The subject matter of this Petition is

of Federal Jurisdiction of First

Instance.

13

“Srrrrrrrercrrrerr

CONSTITUTIONAL PROVISIONS - Statutes

and Regulations

Relevant Text of Statutes and

Regulations are Set Out in Appendix A.

A. United States Code

Motor Carrier Act of 1980

49 USC §10101 et seq.

l. 49 USCS 10101 (app. 20a)

2. 49 USCS 10927 (app. 23a)

3. 49 USCS 11107 (app. 24a)

B. U.S. Code of Federal Regulation

1. Interstate Commerce

Commission Equipment

Regulation 49 CFR Part 1043

(app. 27a)

2. Interstate Commerce

Commission Insurance

Regulations 49 CFR Part 1057

(app. 30a)

ARGUMENT IN FAVOR OF ALLOWING WRIT

This case presents an important

question of subject matter jurisdiction:

Does the Federal District Court have

jurisdiction to determine the liability

of a motor carrier regulated by a federal

14

BPEETETEEGEGGEES

agency and whose conduct and liability is

strictly governed by federal law. A

second equally important question is

whether questions involving § insurance

coverage in a dispute involving a

federally regulated motor carrier is the

subject matter jurisdiction of the

Federal District Court. The trial court

and the Court of Appeals incorrectly held

that the issue of the motor carrier's

liability was not at issue since the

third party had already been compensated.

The Court of Appeals also incorrectly

applied the Supreme Court decisions in

Merre Dow Pharmaceuticals Inc. vs.

Thompson, 478 U.S. 804; 92 L.Ed.2d 650,

54 U.S.L.W. 5088; 1065 S.Ct. 3229 (1986)

and Smith v. Kansas City Title & Trust

Co. 255 U.S. 180 (1921), by holding that

the issues of insurance coverage of a

motor carrier do not arise under federal

15

law.

This court should grant certiorari so

as to clarify (1) whether a cause of

action to determine liability of a motor

carrier regulated by the Interstate

Commerce Commission is a_ substantial

federal question vesting jurisdiction in

the Federal District Court, and (2)

whether a cause of action to determine

liability of an insurer of a motor

carrier regulated by the Interstate

Commerce Commission is a determination of

a substantial federal question vesting

jurisdiction in the Federal District

Court.

16

FEEEEEEGELLELEE

I

WHERE FEDERAL STATUTE AND REGULATIONS

GOVERN THE LIABILITY OF A _ MOTOR

CARRIER FOR DAMAGES CAUSED BY A

LEASED VEHICLE, A DETERMINATION OF

THE MOTOR CARRIER'S LIABILITY IS A

DETERMINATION OF A "SUBSTANTIAL"

FEDERAL QUESTION SO AS TO VEST

SUBJECT MATTER JURISDICTION IN THE

DISTRICT COURT.

A. THE DETERMINATION OF LIABILITY~ OF

THE MOTOR CARRIER IS A _ SUBSTANTIAL

FEDERAL QUESTION AND DENYING FEDERAL

JURISDICTION OVER THE ISSUE WOULD BE

INCONSISTENT WITH THE RULE CITED IN SMITH

vs. KANSAS CITY TITLE & TRUST CO. 275

U.S. 180 (1921) and MERRELL DOW

PHARMACEUTICALS, INC. vs. HENDERSON, 478

U.S. 804; 92 L.Ed.2d. 650; 51 U.S.L.W.

5088; 106 (1986).

Pursuant to the Commerce Clause,

Congress and the ICC have preempted

common law and state law concerning the

liability of independent contractors by

holding motor carriers statutorily liable

17

for the acts of a leased driver and

vehicle. Proctor & Colonial v.

Refrigerator Transportation Inc., 494

F.2d 89 (4th Cir. 1974).

Congress created the ICC and the laws

governing motor carriers in order to

develop a sound uniform transportation

system. Simmons _v. King 478 F.2d 857

(5th Cir. 1973).

For the purpose of insuring uniformity

of commerce among the several states, the

commerce clause of the Constitution

provides that Congress shall have the

power to "Regulate Commerce with Foreign

Nations and Among the Several States".

Bowman v. Chicago & N.W. Ry. Co., 125

U.S. 465 (1885); Wello v. State of

Missouri, 91 U.S. 275 (1875); Cook v.

Pennsylvania, 97 U.S. 275 (1878); Cook v.

Marshall County 196 U.S. 201 (1904).

Pursuant to the commerce clause,

18

Congress empowered the Interstate

Commerce Commission to regulate

transportation conducted between a place

in one state to a place in another state.

(49 U.S.C. §10521(a)). Congress also

prohibited transportation in interstate

commerce unless an appropriate license

had been obtained from the Interstate

Commerce Commission. (49 U.S.C. 10927,

et seq).

Pursuant to 49 U.S.C. §11107, the ICC

promulgated the leasing regulations

regulating the leasing of Motor Vehicles

by Motor Carriers. (49 CFR part 1057).

The leasing regulations contain an

extensive set of rules which permits the

motor carrier to provide transportation

services through the use of leased

equipment and drivers. The relevant

portions of these regulations include:

requirements that the lease be in

19

PEER EEEREREER SES

writing. 49 CFR 1057. ll(a); that

receipts be provided for possession of

the equipment, 1057.11(b); that the

leased equipment contain the

identification of motor carrier

1057.11(c); that the motor carrier assume

exclusive possession and control of the

equipment, 1057.12(c); and that the motor

carrier eaintain ineurence coverage for

the leased vehicle, 1057.12(i).

The leasing regulations established by

the Interstate Commerce Commission were

thoroughly discussed in Transamerica

Freight Lines, Inc. v. Brada Miller

Freight Systems, Inc. 423 U.S. 28 (1975).

After review of the history of these

regulations, the court in Brada Miller

recognized that the importance of the

leasing regulation was to enforce the

motor safety regulation and to fix

financial responsibility for damage and

20

:

_

injuries to shippers and members of the

public (423 U.S. 28.37).

Despite the wishes of Congress, review

of State Court and Federal decisions

reveals a lack of uniformity in deciding

the liability of motor carrier vs. the

vehicle owner/lessor (Rodriguez v. Ager

(10th Cir. 1983) 705 F.2d 1229).

A cause of action will arise under a

Federal law vesting Federal jurisdiction

over a claim in two situations; one, if

the Federal Statute expressly creates a

cause of action. Franchise Tax Board v.

Construction Laborer's Vacation Trust,

463 U.S.1 (1983) at 8-9, or second, when

there appears that some substantial

disputed question of Federal Law is a

necessary element of one of the well-

pleaded state claims. Franchise Tax

Board vs. Construction Laborers Vacation

Trust, 463 U.S. at 13. The type of claim

21

- Zs

which will create a substantial federal

question was described in Smith v. Kansas

Ci Ti & st Co., 255 U.S. 180

(1921). "The General Rule is that where

it appears from the bill or statement of

the complaint that the right to relief

depends upon the construction or

application of the Constitution or laws

of the United States, and that such

federal claim is not merely colorable,

and rests upon a reasonable foundation,

under the statute granting federal

question jurisdiction" 223 U.S. at 199.

The Court of Appeals cited the Supreme

Court's recent decision of Merrell Dow

aceuti s 2... V2 enderson 470

U.S. 804; 92 L.Ed.2d 650, 511 U.S.L.W.

5088 (1986) to support its decision that

the issue of insurance coverage under a

motor carrier's policy does not arise

under federal law (App lla). The Merrell

22

Dow decision held that a state cause of

action for product liability which

alleges violation of the labeling

requirement of the Food and Drug Act as

an element of that action does not “arise

under" the Federal law in statute so as

to vest jurisdiction in the Federal

District Court. The court in Merrell Dow

concluded that since Congress did not

provide for an express cause of action

under the Food and Drug Act, the Act was

not a substantial federal interest so as

to vest jurisdiction in the federal

court. (478 U.S. 812).

The decision in Merrell Dow, however,

did not eliminate the "Arising under"

jurisdiction when the Federal Statute

fails to create an owner's cause of

action, as was suggested by the Court of

Appeals (App. 10a). Justice Brennan

argued in his dissent of MERRELL DOW,

- 23

rEerrre

that the Rule of Smith v. Kansas City

Title & Trust was not overruled by

Merrell Dow. 478 U.S. 820.

The federal issue in the present case

is not merely an element of a state cause

of action. The Federal Regulatory Scheme

creates strict liability on the motor

carrier for the conduct of drivers of

leased equipment. Proctor & Colonial v.

Refrigerator Transportation, Inc., 91

F.2d 89 (1974). The driver is deemed to

be the employee of the motor carrier so

as to assure the general public an

adequate avenue of recourse in the event

of injury. ee

The Rule—of—smith was not properly

applied to the cause of action to

determine liability of AXEL'S under the

Federal Regulatory Scheme. This Petition

should be granted to properly consider

the jurisdiction of that claim.

24

BPEEREEREEERERERER EEE

B. THE TRIAL COURT AND THE COURT OF

APPEALS INCORRECTLY CONSIDERED THE ISSUE

BEFORE THEM BY ONLY CONSIDERING THE ISSUE

OF INSURANCE COVERAGE.

The trial court recognized that

the determination of liability of a motor

carrier regulated by the Interstate

Commerce Commission to the _ insurers

caused by a leased vehicle is a

substantial federal question and vests

jurisdiction in the District Court. (See

Appendix 2A) The trial court incorrectly

held, however, that the determination of

the motor carrier's liability was no

longer at issue and that only the issue

of insurance coverage was at issuel.

(See Appendix 2A).

lit is further alleged by

petitioner that the determination of

insurance coverage also is a substantial

federal question.

25

The court's assessment that the motor

carrier's liability is no longer at issue

is incorrect. As discussed in Part A of

this argument, the Federal Regulatory

Scheme requires the motor carrier to

assume complete control and

responsibility of a leased vehicle and

its driver. In order to ensure the

safety of the public from the operations

of motor carriers utilizing non-owned

equipment, Congress empowered the ICC to

enact regulations which would permit the

motor carriers use of non-owned equipment

on the conditions that the motor carrier

assumes control and responsibility of the

motor vehicle and obtain liability

insurance of the vehicle (49 U.S.C.

§11107, Indiana Refrigerator Lines, Inc.

v. Dalton (1975 Cal.App.6 Tenn.), 516

F.2d 795, Cert. denied, 423 U.S. 985, 46

L.Ed. 302, 96 S.Ct. 392 (1975). Further

26

——— OO eee er

in its authority over interstate

commerce, Congress required the ICC to

issue operating authority only to

carriers that maintain insurance to pay

for any final judgments against’ the

carrier for bodily injury resulting from

the negligent operation of a motor

carrier under the issued authority (49

U.S.C §10927).

Based on this regulatory scheme, the

motor carrier is liable for injuries to

the third party caused by the driver of

the leased vehicle while operated on

behalf of the motor carrier. The vehicle

lessor is responsible for its own

negligence directly causing the injuries,

but is not legally liable for the conduct

of the driver of the vehicle leased to

the motor carrier. By the terms of the

motor carrier's insurance policy and by

Federal regulations, the motor carrier's

27

insurer must assume coverage for the

operation of the leased vehicle. Finally

the insurer of the leased vehicle's owner

does not provide coverage for damages

caused while the vehicle is leased to the

motor carrier and for vehicles for which

the motor carrier is held liable.

Based on these regulations, the issue

of the motor carrier's liability is

primary to that of the insurer's coverage

and must be decided before the question

of insurance coverage can be decided.

Both the factual paragraph and the

introductory paragraph to the discussion

by the Court of Appeals recognized

Petitioner's argument that the purpose of

this lawsuit is to determine the

liability of the motor carrier and that

such determination must be made prior to

deciding the issue of insurance coverage.

The Court of Appeals, however, reached

28

OQ ee

its decision to deny jurisdiction by

applying the rule of "Substantial Federal

Question" cited in Merrell Dow vs.

Thompson to the question of insurance

coverage (See Appendix 111A). The

question of whether liability of the

motor carrier is a "substantial Federal

question" was never fully addressed.

Cc. THE ISSUE OF INSURANCE COVERAGE IS

ALSO AN IMPORTANT FEDERAL INTEREST WHICH

MUST BE ENFORCED ON A UNIFORM BASIS SO AS

TO CREATE A UNIFORM TRANSPORTATION

SYSTEM.

In response to 49 USC §10927, the ICC

has devised an expansive set of

regulations which requires a motor

carrier to assume full coverage for

injuries occurring during the operation

of motor vehicles operating under the

29

insurer's carrier's policy. 49 CFR 1043

app. 27a, 49 CFR 1057.12(C) app. 29a.

Just as courts have differed on the

effect of ICC leasing regulations on the

liability of the motor carrier/lessee,

State and Federal Courts have also

radically differed on the interpretation

of the laws concerning insurance coverage

for regulated motor carriers.

One line of cases has held that a motor

carrier's public liability policy is

primary to that of the vehicle owner's

policy due to the public liability

endorsement required by 49 U.S.C. 10927

and, 49 CFR part 1043. Argonaut

Co. v j mni Ca..

435 F.2d 710 (10th Cir. 1971).

Another line of cases has held that a

motor carrier's insurance policy only

provides excess coverage and that

coverage was not altered by the attached

30

ICC endorsement. Hagans vs. Glen Falls

Insurance Co., 465 F.2d 1249 (1972);

(Paxton National Insurance Co., Transport

Indemnity Insurance, 657 F.2d 656, 659-60

(Sth Cir. 1981), Cert. denied, 455 U.S.

657 (1982). (It should be noted that

Justice White would grant Certiorari in

Paxton National Insurance vs. Transport

Indemnity to resolve the conflict between

the decisions of Argonaut Insurance Co.

v. National Indemnity Co. and Hagans vs.

Glens Falls Insurance Co. 465 F.2d 1249

(1972).

Allowing individual courts to

interpret these federal regulations could

very well cancel out the intent of

Congress that the motor carrier assume

the financial responsibilities of its

operation.

The issue of insurance coverage by

an insurer of a motor carrier for the

31

liability to the public is a substantial

federal interest which requires

uniformity in its enforcement by the

Federal District Court.

DATED: of 2 AS 5/2

FARANO AND ae

[?UM 5 = ’, ai

CHARLES M. FARANO

32