Opposition — Carolina Casualty Insurance v. Transport Indemnity Co.

IN THE

SUPREME COURT OF THE UNITED STATES

CAROLINA CASUALTY INSURANCE COMPANY,

Petitioner,

versus

TRANSPORT INDEMNITY COMPANY,

Respondent.

BRIEF Cz RSSPONDENT IN OPPOSITION TO THE

PETIYION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Keating L. Simons, III

Wade H. Logan, III

HOLMES, THOMSON, LOGAN

& CANTRELL

100 Broad Street

P.O. Box 1090

Charleston, S.C. 29402

(803) 722-1634

Attorneys for Respondent.

QUESTIONS PRESENTED FOR REVIEW

This is a coverage dispute between insurers for a truck

owner and an I.C.C. motor carrier who entered into a

truck leasing arrangement regulated by the I.C.C. In

this context the following questions are presented:

(Il) Pursuant to I.C.C. regulations, a certificated

motor carrier inust obtain and file proof of surety con-

ditioned to pay any final judgment against the motor

carrier. Do these regulations require that a lessee motor

carrier obtain insurance to provide coverage and a

defense to owners and drivers of leased vehicles?

(II) Does the Interstate Commerce Act or related

regulations require that the insurer for the lessee always

assume primary responsibility for claims arising out of

the use of a leased vehicle, regardless of the terms of the

lessee’s policy or the presence of a second insurer

specifically insuring the vehicle, its owner and the driver

whose negligence gave rise to the claims?

TABLE OF CONTENTS

Page

Questions Presented for Review.................000- i

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TABLE OF AUTHORITIES

Carolina Casualty Insurance Company v. Trans-

port Indemnity Company, 488 F.2d 790 (10th

Eis MOVED dacvdcccteocesscccdsccccoceseccocs

Jenkins v. Southern Railway Company, 130 S.C.

180, 125 S.B. 912 (1924)... ncccccccccccces

Kansas City Fire and Marine Insurance Com-

_ pany v. The Hartford Insurance Group, 368

N.Y.S.2d 791, 82 Misc.2d 109 (1975) ..........

Lankford v. Ryder Truck Systems, Inc., 41

PRD. GODS... ISBT)... cccccccccccsece

National Mutual Insurance Company v. Liberty

Mutual Insurance Company, 196 F.2d 597

Leh | PPPPTTTT TCT TTT TT TTT eee

Providence Washington Insurance Company of

Alaska v. Alaska Pacific Assurance Company,

603 P.2d 899 (Alas. 1979) ...... 2. ccc ecceeeees

Seaboard Air Line Railroad Company v. Coastal

Distributing Company, 273 F.Supp. 343

Gees MS esha sdicccsecccccscccececes

Transamerican Freight Lines, Inc. v. Brada

Miller Freight Systems, Inc., 423 U.S. 28

GIPUEE dd enseccevvoccccvsccscosceccesccetoe

Transport Indemnity Company v. Teter, 575

DoW cee POD GEDs BOFED ccc cccccccccccccecece

OTHER AUTHORITIES

ES ER aes ea eee

A I EE I a

TE aD

No.

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1982

CAROLINA CASUALTY INSURANCE COMPANY,

Petitioner,

TRANSPORT INDEMNITY COMPANY,

Respondent.

BRIEF OF RESPONDENT IN OPPOSITION TO THE

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

REPORTS OF OPINIONS

The order of the District Court has been submitted for

publication, but no citation is yet available. The opinion

of the Court of Appeals has not been reported.

SUMMARY OF ARGUMENT

Petitioner points to conflicting decisions of federal and

state courts to justify a grant of certiorari in this case.

Although a conflict exists, this is not the case in which to

attempt a resolution.

2 CAROLINA CASUALTY INSURANCE COMPANY, PETITIONER, VERSUS

In various cases and contexts courts have examined the

impact of the Interstate Commerce Act and associated

regulations on coverage disputes arising between insurance

carriers for I.C.C. certificated carrier lessees and

owner/operator lessors. As Petitioner points out in its

argument, there are two lines of decisions reaching op-

posite conclusions on the question of whether the Act and

regulations require that the insurance carrier for the

1.C.C. certificated lessee always assume primary respon-

sibility for claims arising from operation of the leased

unit.

In the cases cited by Petitioner as being in conflict, two

or more insurance companies had overlapping coverage.

In this case, however, the courts below held that Respon-

deat, unlike Petitioner, had no coverage as to the personal

liability of the active tortfeasor driver, and on that basis

granted judgment to Respondent.

The dispositive holding below was that Respondent’s in-

surance policy did not expressly provide coverage to the

driver and that neither the Interstate Commerce Act nor

associated regulations required such coverage. This was

the central issue in the case and the decision on this point is

not in conflict with any decision of any ourt.

ARGUMENT AND REASONS FOR

DENYING THE WRIT

There are no special or important reasons for granting

the Petition herein. The decision rendered below is not in

conflict with decisions of other courts, state or federal, on

the dispositive issue presented. On the contrary, the result

in the instant case is consistent with the reasoning of all

other courts which have had occasion to address the ques-

tion. Furthermore, the result in this case, to the extent it

TRANSPORT INDEMNITY COMPANY. RESPONDENT 3

involves a question of federal law, is consistent with the

analysis applied by this Court in a prior case, and no im-

portant question of federal law is raised in this Petition

which requires the attention of this Court at this time.

This case arises in the context of a trip lease under which

the owner leased a vehicle, together with a driver, to a

motor carrier holding an Interstate Commerce Commis-

sion certificate. The owner of the vehicle in this case had

obtained insurance from Petitioner Carolina and the

I.C.C. certificated motor carrier had obtained insurance

from Respondent Transport. An accident occurred while

the vehicle was being operated under the trip lease and the

question arose whether Carolina or Transport would be

required to assume primary responsibility to pay claims

arising out of the negligence of the driver of the leased

vehicle.

In order to receive a certificate from the Interstate Com-

merce Commission a motor carrier must establish to that

body’s satisfaction its ability to pay any final judgment

rendered against it for injuries arising out of a unit

operating under its certificate. 49 U.S.C. §315; 49 C.F.R.

§1043.1(a). Additional regulations provide that a cer-

tificated carrier may lease units but in doing so must main-

tain responsibility and control over the operation of such

leased units. 49 C.F.R. §1057.12(d). Insurance carriers for

owners and/or operators, such as Petitioner herein, have

argued that a lessee’s insurance coverage is primary as a

matter of law by virtue of these control and responsibility

regulations and/or the financial responsibility regulations.

As Carolina points out in its argument, and as Judge

Hawkins noted in his opinion below, decisions in this area

have gone both ways. Carolina has accurately listed the

4 Carouima CASUALTY InsURANCE ComPany, PeTrrioner, VERSUS

key cases in conflict and it would unduly prolong the

length of this Brief to repeat that analysis. In rendering

judgment for Transport, however, the district court in this

case was not called upon to simply make a choice between

In all of the decisions cited by Carolina as being in con-

flict, courts were asked to decide which of two or more in-

and for that reason Transport has offered its alternative.

The Transport policy has no omnibus clause, or any

TRANSPORT INDEMNITY COMPANY. RESPONDENT b

Transport extend coverage to the owner or driver. Thus,

any payment made by Transport would have been on

behalf of its named insured, the lessee motor carrier,

which would have had a common law indemnity action

available to it against its statutory employee, the negligent

driver. Seaboard Air Line Railroad Co. v. Coastal

Distributing Co., 273 F.Supp. 343 (D.S.C. 1967);

Lankford v. Ryder Truck Systems, Inc., 41 F.R.D. 430,

431-432 (D.S.C. 1967); Jenkins v. Southern Railway Co.,

130 S.C. 180,189,125 S.E. 912 (1924). Since Transport

would be subrogated to its insured’s indemnity right

against the negligent driver, in order to avoid circuity of

action, Carolina, having specifically insured the owner,

driver, and the vehicle involved, was held to have the

primary obligation to defend and pay claims arising out of

the negligence of the driver.

The conflicting decisions cited by Petitioner were

reviewed by the district court solely to determine whether

the Interstate Commerce Act, associated regulations, or

public policy considerations read into the Transport policy

an implied omnibus clause extending coverage to the per-

sonal liability of a driver of a vehicle leased to an I1.C.C.

carrier.

Upon reviewing applicable statutes, regulations, and

decisions, Judge Hawkins held that the public policy in-

volved was the protection of innocent members of the

public from financially irresponsible truckers. He further

held that public policy to be fully served by requiring the

1.C.C. certificated carrier to obtain insurance against its

own liability and that public policy did not require an

I.C.C. carrier to obtain insurance to satisfy the personal

liability of owners or operators of leased vehicles.

This result is consistent with decisions of various state

6 Camouima CASUALTY INSURANCE ComPany, PETTTIONER. VERSUS

courts in analogous situations. Transport Indemnity Com-

pany v. Teter, 575 S.W.2d 780 (Mo. 1978); Providence

Washington Insurance Company of Alaska v. Alaska

Pacific Assurance Company, 603 P.2d 899 (Alas. 1979);

Kansas City Fire and Marine Insurance Company v. The

Hartford Insurance Group, 368 N.Y .S.2d 791, 82 Misc.2d

109 (1975); See also: National Mutual Insurance Company

v. Liberty Mutual Insurance Company, 196 F.2d 597

(D.C. Cir. 1952).

The conclusion reached below on this issue is not only

consistent with the above-cited authorities, it also is not

known to conflict with any reported decisions, state or

federal. At the very least, it can safely be said that neither

Petitioner, Respondent, or the courts below have located

any conflicting authority. Further, it is interesting to note

the apparent view of the Tenth Circuit on this question. Of

course, as noted in Carolina’s Petition, among the federal

circuit courts the Tenth stands as the sole support for the

proposition that the lessee’s insurance coverage is always

primary. And even that court has refused to hold, in the

face of an apparent opportunity to do so, that federal law

requires that the driver be insured under the lessee’s

policy. Carvilina Casualty Insurance Company v.

Transport Indemnity Company, 488 F.2d 790 (10th Cir.

1973). There the Transport policy contained no omnibus

coverage clause and the court noted that the driver was in-

sured only under Carolina’s policy. 488 F.2d at 794.

Finally, the result below is entirely consistent with the

analysis employed by this Court in 7ransamerican Freight

Lines, Inc., v. Brada Miller Freight Systems, Inc., 423

U.S. 28 (1975). Although Brada Miller is not directly ap-

plicable on its facts, both the result and analytical ap-

proach strongly support the conclusion that neither the In-

terstate Commerce Act, nor regulations issued thereunder,

TRANSPORT INDEMNITY COMPANY, RESPONDENT 7

nor implied notions of public policy require that the lessee

obtain coverage protecting the driver or owner of a leased

vehicle.

At issue in Brada Miller was a iease agreement which

contained an indemnification clause whereby the lessor

agreed to indemnify the lessee for claims arising out of the

negligence of the lessor or its employees. When the lessee

attempted to enforce the clause following its settlement of

a claim, the lessor argued that the clause was unen-

forceable as against public policy because the control and

responsibility regulations placed full responsibility on the

lessee. This, of course, is strikingly similar to Carolina’s

arguments in this case that because of those same regula-

tions the lessee’s insurance carrier is always primary as a

matter of law.

This Court reviewed the background of the rulemaking

proceeding which resulted in the issuance of the control

and responsibility regulations and noted that the Interstate

Commerce Commission was concerned “‘...with that

ultimate control in the lessee that makes and keeps it

responsible to the public, the shipper, and the Commis-

sion.”’ 423 U.S. at 39. The I.C.C. has not proscribed an

arrangement which places ultimate responsibility on the

party responsible in fact, ‘‘...so long as the lessee does not

absolve itself from the duties to the public and to shippers

imposed upon it by the Commission’s regulations.’’ /d. at

40. The Court concluded this phase of its opinion with the

observation that ‘‘[a]lthough one party is required by law

to have control and responsibility for conditions of the

vehicle, and to bear the consequences of any negligence,

the party responsible in law to the injured or damaged per-

son may seek indemnity from the party responsible in

fact.”” Id. at 40.

L) Carouma CASUALTY INSURANCE ComPany, PETITIONER. VERSUS

If the position of Carolina is accepted, that the lessee

and its insurance carrier are always primarily responsible,

then the lessee or its insurance carrier could not seek in-

demnity from the party responsible in fact. Such a result is

clearly inconsistent with the views of this Court as ex-

pressed in Brada Miller.

Of even more significance is the analysis employed in

portion B of the opinion.

If Carolina’s position is accepted, then the owner would

know that so long as his equipment is leased to an I.C.C.

carrier neither he nor his insurance company need respond

to a claim for damages arising out of his or his employee’s

negligence. Can public policy or safety be promoted by a

rule of law under which an owner/lessor would have no in-

centive to properly inspect or maintain his equipment, or

to properly qualify and train his drivers? In light of these

considerations, the so-called public policy arguments

advanced by Carolina are somewhat less than compelling.

CONCLUSION

While there are certainly divergent decisions under

myriad circumstances in this area of insurance law, this is

not the case in which to attempt a resolution of all the

various questions involved. In this case a federal court has

for only the first time addressed the question of whether

federal law requires an I.C.C. motor carrier to buy in-

TANSPORT INDEMNITY COMPANY, RESPONDENT 4

surance which provides coverage as to the personal liabili-

ty of owners and operators of units leased to the I.C.C.

carrier. The result below is consistent with all the reported

decisions on this point and an appropriate course would be

to deny certiorari. This would provide an opportunity for

the doctrines expressed below to develop and withstand

the tests of time and further scrutiny.

We be oO

HOLMES, THOMSON, LOGAN

& CANTRELL

100 Broad Street

Charleston, S.C. 29402

(803) 722-1634

Counsel for Respondent

10 CAROLINA CASUALTY INSURANCE COMPANY, PETITIONER, VERSUS

CERTIFICATE OF SERVICE

I hereby certify that I am this date serving three (3) true

and correct copies of Brief for Respondent in Opposition

to Petition for Writ of Certiorari to the United States

Court of Appeals for the Fourth Circuit, upon the persons

and in the manner indicated below, said persons being

counsel for all parties required to be served.

Addressed as Follows:

Stephen E. Darling

SINKLER, GIBBS & SIMONS

160 East Bay Street

Post Office Box 340

Charleston, South Carolina 29402

(803) 722-3366

Counsel for Petitioner

Dated this 422:day of June, 1982.

7