Appendix — Mustang Transportation Co. v. Ryder Truck Lines, Inc.

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APPENDIX

IN THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF PENNSYLVANIA

Vivil Action No. 77-1620

MUSTANG TRANSPORTATION COMPANY, et al.

vs.

RYDER TRUCK LINES, INC., et al.

JUDGMENT

AND NOW, this 28th day of September, 1981, the

following is ORDERED and ADJUDGED:

1. Judgment is entered on plaintiffs’ complaint in favor

of defendants Ryder Truck Lines, Inc. and Liberty Mu-

tual Insurance Company and against plaintiffs Mustang

Transportation Company, R.L. Dease, Henry Crowder

and Canal Insurance Company.

2. Judgment in the amount of Fifty Eight Thousand

Seven Hundred Fifty ($58,759.00) Dollars, together with

costs, is entered in favor of defendants Ryder Truck

Lines, Inc. and Liberty Mutual Insurance Company and

against plaintiffs Mustang Transportation Company,

Henry Crowder and Canal Insurance Company. As to

plaintiff R.L. Dease, judgment on the counterclaim is

entered in his favor and against defendants Ryder Truck

Lines, Inc. and Liberty Mutual Insurance Company.

By THE COURT:

/s/ Clifford Scott Green

CLIFFORD ScoTT GREEN

Judge

2a

IN THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF PENNSYLVANIA

Civil Action No. 77-1620

MUSTANG TRANSPORTATION COMPANY, et al.

vs.

RYDER TRUCK LINES, INC., et al.

MEMORANDUM

Filed September 28th, 1981

GREEN, J.

This lawsuit arose out of a collision between an auto-

mobile and a tractor-trailer, which occurred on December

7, 1969 on U.S. Route 22 in Juniata County, Pennsyl-

vania. Edward Renzi, a passenger in the car, died as a

result of injuries suffered in the accident while Charles

Benedict and Daniel Mattia, the driver of the car and

another passenger, were injured. The estate of Mr. Renzi

instituted an action against Henry Crowder, the driver

of the tractor-trailer and the owner of the tractor por-

tion; Mustang Transportation Company (“Mustang”),

owner of the trailer portion; and R.L. Dease, Vice-

President and Secretary of Mustang. Ryder Truck Lines

(“Ryder”), which had hired the Crowder/Mustang

tractor-trailer to deliver a load from New York to

Michigan, was added to the initial lawsuit as a third-

party defendant. Messrs. Benedict and Mattia brought

another action against Henry Crowder and R.L. Dease.

Subsequently, the two cases were consolidated and even-

tually were settled for $117,500.00 pursuant to a court-

approved stipulation.

Under the terms of that stipulation, Ryder and its

insurer, Liberty Mutual Insurance Company (“Liberty”)

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agreed to pay one half of the settlement amount, and

Mustang, its insurer, Canal Insurance Company

(“Canal”) and R.L. Dease agreed to pay the other half.

However, the parties stipulated that these payments did

not constitute admissions of liability or of proportionate

responsibility. Pursuant to the agreement, the issues of

liability and insurance coverage were to be determined

by a court in another suit. Plaintiffs Crowder, Mustang,

Canal and Dease brought this diversity action in order

to resolve these questions, and defendants Ryder and

Liberty have counterclaimed. The matter has been sub-

mitted to me for trial without a jury. This memorandum

constitutes findings of facts and conclusions of law as

required by Fed. R. Civ. P. 52(a).

I.

For purposes of determining the issues of liability and

insurance coverage, the parties have stipulated to the

following facts. The acts and omissions of plaintiff Henry

Crowder were the proximate cause of the injuries and

damages suffered by Renzi, Benedict and Mattia. At the

time of the accident, Mr. Crowder was transporting a

load from New York to Michigan pursuant to a one-way

lease agreement with Ryder. (Exhibit A, Amended Com-

plaint) This lease agreement identifies “Mustang

Transportation-Henry Crowder” as the lessors and is

signed by Crowder on their behalf. The goods in this

haul were commodities regulated by the Interstate Com-

merce Commission (“ICC”); Mustang did not have an

ICC permit to haul regulated commodities in either

Pennsylvania or New Jersey. The truck driven by

Crowder consisted of a tractor portion owned by him

and a trailer portion owned by Mustang. He was operat-

ing the truck under a lease agreement between Mustang

and him, which was in effect at the time of the accident.

In the trip preceding the one during which the accident

occurred, Crowder had transported on behalf of Mustang

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goods from Georgia to New Jersey. On the instructions

of R.L. Dease, Vice-President of Mustang and another

plaintiff in this case, Crowder sought a load for the

return trip to Georgia from the Lester Newton Trucking

Company. It did not have a load but directed Crowder to

Ryder, which did have one. Without speaking to anyone

at Mustang, Crowder entered into, on behalf of Mustang

and himself, the one-way lease agreement with Ryder de-

scribed previously. On prior occasions, Crowder and

others driving vehicles owned or leased by Mustang had

entered into contracts with third parties for hauling

goods without first obtaining the permission of Mustang.

Also, in the past, when Dease was unable to find return

loads for Crowder and other drivers of vehicles owned

or leased by Mustang, he hold them that they could try

to find other loads to haul on behalf of Mustang. Mustang

did not learn of the lease agreement with Ryder signed

by Crowder until December 8, 1969, the day after the

accident. Ryder paid Mustang for the use of the tractor-

trailer in accordance with the agreement; in turn, Mus-

tang paid Crowder pursuant to the terms of the lease

between them.

II.

The first issue to be resolved is the nature of the

relationship of Henry Crowder to Mustang and to Ryder

at the time of the aceident. Disclaiming liability for the

acts of Crowder, Mustang and Ryder each denies that

he was its agent or employee (servant) at the time of

the accident. In fact, each contends that the other was

his principal or employer (master).

The Restatement (Second) of Agency defines agency

as:

. . . the fiduciary relation which results from the

manifestation of consent by one person to another

Master and servant are common law terms for employer and

employee. Comment d to § 2 of the Restatement (Second) of Agency.

5a

that the other shall act on his behalf and subject to

his control, and consent by the other so to act. RE-

STATEMENT (SECOND) OF AGENCY, § 1 (1957).

The one for whom action is to be taken is the principal,

and the one who is to act is the agent. Jd. The Restate-

ment characterizes a servant as “a species of agent”

(Comment a to § 2) and defines it as:

.. Han agent employed by a master to perform

service in his affairs whose physical conduct in the

performance of the service is controlled or is subject

to the right to control by the master. Id., § 2

An agent who is not a servant is an “independent con-

tractor.” An independent contractor is one who “con-

tracts to act on account of the principal.” (Comment b

to §2 of the Restatement (Second)). The distinction

between the relationship of master/servant and that of

principal/independent contractor, according to the Re-

statement, is that in the former situation, the master is

responsible to third persons for the physical conduct of

his servant. Jd. Since this case requires a determination

of liability for the physical conduct of Crowder at the

„„

tang and to Ryder, Crowder acted as a servant or as an

independent contractor.“ I begin with an analysis of the

relationship between Crowder and Mustang.

As noted earlier, at the time of the accident, the rela-

tionship between Mustang and Crowder was defined by a

lease agreement. Under Georgia law,’ one’s status as

2 Under Georgia law (see discussion in note 8 infra for why this

law applies), the general rule is that an employer is not liable for

the negligent acts of an independent contractor employed by him.

NEDA Constr. Co. v. Jenkins, 137 Ga. App. 344, 223 S.E.2d 732

(1976).

3 In a diversity action, the federal court must look to the choice of

law rules of the forum state to ascertain what law applies. Klaxon

Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, (1941). The relation-

scribes a party as an independent contractor, it is pre-

sumed that he is as designated. Family Life Assurance

Co. v. Welch, 120 Ga. App. 334, 170 S.E.2d 703, 707

(1969). However, if other provisions of the agreement

reveal that the employer has retained control over the

time, manner and method of execution of the work, this

presumption will not apply. A.L. Williams & Associates

v. Sun Life Assurance Co., 153 Ga. App. 371, 265 S.E.2d

285 (1980).

An examination of the lease agreement, which was

drafted by Mustang, reveals that despite the description

ship between Mustang and Crowder is defined primarily by a con-

tract employment, a lease agreement. Under Pennsylvania choice

of lau rules, in a contract action the method for determining the

applicable law combines “grouping of contacts,” as prescribed in

the Restatement (Second) of Conflicts of Law, and an “interest

analysis.” Melville v. American Home Assurance Co., 584 F.2d 1306,

1311 (3d Cir. 1978). Using this approach, it appears that Georgia

law would apply since the lease agreement was executed in Georgia

between a Georgia corporation and a Georgia resident.

7a

of Crowder as an independent contractor, Mustang main-

tained sufficient control over the execution of Crowder’s

work to establish a relationship of master and servant.

For example, paragraph 10 of the agreement states:

“The owner [Crowder] agrees that said vehicle(s) shall

be operated in accordance with all rules, policies and

practices of Mustang.” Paragraph 2 provides in relevant

part: “Any driver (including the owner if he shall drive

himself) shall comply with all safety regulations of

Mustang, the Interstate Commerce Commission and the

United States Department of Transportation, at all

times.” Similarly, Paragraph 5 states:

Owner [Crowder] hereby agrees that no freight will

be transported on said vehicle(s) while being used

in the transportation of freight other than at the

direction of Mustang, or with the knowledge and

consent of Mustang, and that all freight transported

While Mustang may have wished to limit its liability

by

describing Crowder as an independent contractor,

these provisions show that it maintained too much con-

Mustang denies that it was the employer or principal

of Henry Crowder when the accident occurred because

at the time he was transporting a load for Ryder. The

parties have stipulated that a lease agreement existed

between Crowder and Mustang at the time of the acci-

dent. Further, they have stipulated that although Crow-

der entered into the one-way lease agreement with Ryder

without the express knowledge and perinission of Mus-

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for the trip in accordance with the terms of

between them. Therefore, even if the prior custom

Mustang did not confer authority on Crowder to

into the agreement with Ryder on behalf of Mustang,

I believe it did, Mustang’s acceptance of the benefits

that agreement constituted a ratification of Crowder’s

agency. See Advance Mortgage Corp. v. Guaranty Title

Insurance Co., 416 F.2d 451 (5th Cir. 1969) ; Causey v.

Gulf Life Insurance Co., 62 Ga. App. 378, 8 S.E.2d 535

(1940).

Having determined that Crowder was the servant of

Mustang, I now must decide Crowder’s relationship to

Ryder. At the time of the accident, Crowder was trans-

porting goods from New York to Michigan for Ryder

g

2.118

that (1) the special master had complete control and

direction of the servant for the occasion; (2) the gen-

In ascertaining the nature of the relationship between Crowder

and Ryder, Georgia law would appear to govern. Both Crowder and

Mustang are citizens of Georgia. Crowder’s authority to enter into

an agreement with Ryder was created in Georgia, and ultimately

Mustang ratified the agreement there.

Without explaining why, defendants urge that either Florida or

Massachusetts law should control. However, the only connection I

can discern between this case and Florida is that Ryder is a citizen

of that state. Similarly, the only connection with Massachusetts is

that Liberty Mutual is a citizen. These contacts are not sufficient

uncer the standard set forth in Melville v. American Home Assur-

ance Co., 584 F.2d 1306 (3d Cir. 1978).

The lease agreement entered into by Crowder on behalf

of Mustang and himself with Ryder describes Crowder

and Mustang as the lessor and Ryder as the lessee. Its

provisions do not vest in Ryder complete control and

direction of Crowder while he was transporting goods for

Ryder. In fact, the agreement does not give Ryder any

control over the manner in which Crowder was to operate

the truck. It expressly limits Ryder’s control to the leased

vehicle:

The leased equipment under this agreement is in the

exclusive possession, control and use of the author-

ized carrier Lessee [Ryder] and that the Lessee

[Ryder] assumes full responsibility in respect to the

equipment it is operating to the public, the shippers

and the INTERSTATE COMMERCE COMMIS-

SION.

Turning to the second part of the test for borrowed serv-

ants stated in Six Flags, supra, there is nothing in the

lease agreements between Ryder and Crowder (and Mus-

tang) which divested Mustang of any control it had over

Crowder. As to the third element of the Six Flags test,

the one-way lease agreement provides:

In the event that equipment referred to herein is not

in proper mechanical condition or for any other rea-

son is deemed inadequate to the Lessee [Ryder], then

the Lessee [Ryder] shall have the authority to trans-

fer any shipment from this equipment and handle

D

[Ryder].

10a

This language focuses on Ryder’s control over the shipment

and not over the driver. Therefore, applying the three-

part test for a borrowed servant set forth in the Six Flags

case, Crowder does not qualify as a borrowed servant of

Ryder under Georgia law. Because Ryder merely had the

„. . right to require certain definite results in con-

formity with the contract. . .”, Employers Mutual Lia-

bility Insurance Co. v. Johnson, 104 Ga. App. 617, 122

S.E.2d 308, 309 (1961), at the time of the accident

Crower’s relationship with Ryder was that of independent

contractor and principal under Georgia law. Thus no

basis for liability of Ryder for the negligence of Crowder

arises under state tort law.

However, citing Simmons v. King, 478 F.2d 857 (5th Cir.

1973), Mustang argues that pursuant to ICC regulation

49 C.F.R. § 1057.4 Ryder, as lessee of the truck, was the

statutory employer of Crowder and therefore was liable

for his negligence as a matter of law. 49 C.F.R.

§ 1057.4(a) (4) requires that a carrier which leases a

motor vehicle not owned by it undertake in the lease “ex-

clusive possession, control and use of the equipment” and

assume complete “responsibility in respect thereto.”

While courts, including the Fifth Circuit in Simmons,

supra, have held that § 1057.4 imposes liability on the

lessee of a motor vehicle for harm done to a member of

the public or to a shipper as a result of the operation of

the leased vehicle, they have not found that the regulation

imposes exclusive liability on the lessee and its insurer.

In a case involving in part the question of liability under

§ 1057.4, the Third Circuit observed:

While a lessee cannot free itself of its federally im-

posed duties when protection of the public is at stake,

the federal requirements are not so radically intru-

sive as to absolve lessors or their insurers of other-

wise existing obligations under applicable state tort

law doctrines or under contracts allocating financial

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risk among private parties. Carolina Casualty Insur-

ance Co. v. Insurance Company of North America,

595 F.2d 128, 138 (3d Cir. 1979).

49 C.F.R. § 1057.4(a) (4) required that Ryder, as lessee,

assume exclusive possession, control and use of the trac-

tor-trailer as well as full responsibility for its operation,

and under a provision of the one-way lease agreement,

Ryder did just that.“ Under the principles stated in Sim-

mons, supra and other decisions, Ryder would be liable

to members of the public and to shippers who were dam-

aged by the negligence of Crowder in the operation of the

truck during that trip. That is, if a member of one of

those groups (the public or shippers) were seeking to

recover for harm caused by the negligence of Crowder,

Ryder would be vicariously liable as the statutory em-

ployer of Crowder pursaunt to 49 C.F.R. § 1057.4(a) (4).

However, Ryder’s responsibility to the public or to any

shipper is not at issue in this case. Rather, the question

now before me is how financial liability for the accident

is to be divided ultimately amongst the lessor and the

lessee and their insurers. As the Third Circuit pointed

out in Carolina Casualty Insurance, supra, § 1057.4 does

not prohibit a lessor and lessee from agreeing between

themselves to allocate financial risk in a certain manner.

A clause appearing in the one-way lease agreement pro-

vided that Mustang and Crowder would indemnify Ryder

for all losses resulting from the use of the tractor-trailer.

I turn now to an analysis of that provision and its effect

on the liabilities of the parties in this case.

5 The lease provides in relevant part:

It is understood that the lease equipment under this agreement

is in the exclusive possession, control, and use of the authorized

carrier Lessee [Ryder] and that the Lessee [Ryder] assumes

full responsibility in respect to the equipment it is operating

to the public, the shippers, and the INTERSTATE COMMERCE

COMMISSION.

12a

III.

Ryder contends, I believe correctly, that it is not liable

for the acts and omissions of Henry Crowder because of

the indemnity clause contained in the one-way lease. That

clause states:

It is agreed that Lessor [Mustang and Crowder] will

carry acceptable Public Liability and Property Dam-

age Insurance. Lessor [Mustang and Crowder]

agrees to reimburse and otherwise indemnify Lessee

[Ryder] for any and all losses sustained by Lessee

[Ryder] resulting from the use of the aforesaid

equipment.

Plaintiffs Mustang and Crowder first argue that this

provision is not valid because it is violative of 49 C. F. R.

§ 1057.4. They acknowledge that the United States Su-

preme Court has upheld one type of indemnity clause in

the face of a similar challenge. In Transamerican Freight

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

U.S. 28, 41 (1975), the Supreme Court found that an

indemnification clause directed to the lessor’s negligence

does not conflict with the regulations of the ICC. Plain-

tiffs contend that the indemnity clause found in the one-

way lease agreement between Ryder and them is not the

type of provision found permissible in Transamerican

Freight Lines, supra, as it is not directed specifically at

the negligence of the lessors. While I would agree that

the indemnity clause here is more broad in scope than

the one found enforceable in the Transamerican decision,

I do not believe that fact compels a conclusion that the

clause is invalid and not enforceable as to this transac-

tion involving Crowder’s negligence. There is nothing in

that decision which suggests that a provision like the in-

stant one would be violative of 49 C.F.R. § 1057.4(a) (4).

As I noted previously, the purpose of that regulation is

to protect members of the public and shippers by placing

primary responsibility for the safe operation of a leased

vehicle on the motor carrier lessee. The issue now before

13a

me is how the financial liability for the accident ulti-

mately must be allocated, which is a different question.

Mustang and Crowder also argue that the clause is not

valid because it is “sweeping” and “all inclusive” and

fails to state specifically that the indemnitee, Ryder, will

be indemnified for its own negligence and that of one of

its employees. I disagree. In Jones Truck Lines, Inc. v.

Ryder Truck Lines, Inc., 507 F.2d 100 (6th Cir. 1974),

the Sixth Circuit upheld an indemnity clause identical to

the instant one against the same challenge. The Court

stated:

... we think it is clear from the indemnity contract

that the parties intended that Ryder (indemnitee)

should be reimbursed for all losses which it sustained

resulting from its use of the equipment and while

under its exclusive dominion and control. In un-

equivocal terms the contract provides that the equip-

ment shall be in the ‘exclusive possession, control and

use’ of the lessee and that the lessee assume full re-

sponsibility in respect to the equipment ‘to the pub-

lic.“ The lessor, on the other hand, agrees to carry

acceptable Liability anc Property Damage insurance

and, ‘to reimburse and otherwise indemnify Lessee

for any and all losses sustained by Lessee resulting

from the use of the aforesaid equipment.’ Clearly

this language is susceptible of no meaning other than

that the lessor was to indemnify the lessee for all

losses sustained by it and resulting from its opera-

tion and use of the equipment, whether caused by the

lessee’s own acts of negligence or otherwise. 507 F.2d

at 103.

I share the view of the Sixth Circuit that this clause

should be construed as providing indemnity for the lessee

even for its own negligence.“

* See also Carolina Freight Carriers Corp. v. Pitt County Trans-

portation Co., 492 F.2d 243 (4th Cir. 1974); Allstate Insurance Co.

14a

IV.

The next issue to be resolved is whether the insurance

policies of either or both Mustang and/or Ryder provide

coverage for the accident in Juniata County, Pennsyl-

vania, involving the tractor-trailer driven by Henry

Crowder. Plaintiffs claim that Crowder is an insured

under the terms of Ryder’s insurance policy even if

Ryder were found not to be liable for the negligence of

Crowder. First, they allege that Crowder was covered

under Part II of the Liberty policy, which is entitled

“Comprehensive Automobile Liability Insurance.” They

point to the following portion of the “persons Insured”

section of Part II, which states:

Each of the following is an insured under this in-

surance to the extent set forth below:

(e) Any other person while using an owned auto-

mobile or a hired automobile with the permission

of the named insured, provided his actual opera-

tion or (if he is not operating) his other actual

use thereof is within the scope of such permis-

sion...

Plaintiffs concede that a separate provision in Part II

limits hired automobile coverage to excess insurance and

that the policy as it regards hired vehicles is modified by

a “truckmen’s endorsement,” in the Liberty policy labeled

“Truckmen-Form A.“ The purpose of a truckmen’s en-

v. Alterman Transport Lines, Inc., 465 F.2d 710 (5th Cir. 1972).

But cj. Alford v. Major, 470 F.2d 132 (7th Cir. 1972) (finding a

similar indemnity clause violative of ICC regulations).

7 However, as defendants point out, a subsequent provision in the

“persons Insured” section of the Liberty policy would appear to ex-

clude Crowder. Subparagraph (ii) states that The owner .. of a

hired automobile or the owner of a non-owned automobile, or any

agent or employee of any such owner” is not insured under the

policy. Plaintiffs cite Wellman v. Liberty Mutual Insurance Co.,

496 F.2d 131 (8th Cir. 1974), as support for their claim that Crowder

is covered under paragraph (c) in spite of the language found in

15a

dorsement is to place responsibility on the insurer of a

lessee of a hired vehicle, Allstate Insurance Co. v. General

Fire and Casualty Co., 348 F. Supp. 682, 685 (E. D. Pa.

1972), and the truckmen’s endorsement in the Liberty

Mutual policy does just that. However, as defendants

point out and plaintiffs agree, this truckmen’s endorse-

ment contains the following reciprocity requirement:

(b) Except with respect to the named insured or

an employee thereof, but subject otherwise to

the ‘Persons Insured’ provision, the insurance

does not cover as any insured person or or-

ganization, or any agent or employee thereof,

engaged in the business of transporting prop-

erty by automobile for the named insured or

for others under any of the following condi-

tions:

(3) If such person or organization so engaged

is insured under an automobile liability in-

subparagraph (ii). The Wellman case involved a similar policy and

the question of whether the policy would cover an owner of a hired

automobile. The Wellman court resolved the apparent conflict be-

tween the two provisions in favor of coverage. Presented with the

same issue, however, several other courts, in cases cited by the

defendants, have reached the contrary conclusion. See, e.g., Gilkey

v. Andrew Weir Insurance Company, 291 F.2d 132 (9th Cir. 1961).

However, I need not resolve this question because, as the parties

recognize, coverage in this situation is controlled by the truckmen’s

endorsement in Ryder’s insurance policy. Therefore, it is imma-

terial whether the inconsistency between paragraph (c) and sub-

paragraph (ii) in that policy is resolved in favor or against

coverage.

In Allstate, Judge Van Artsdalen noted:

The purpose of the “Truckmen’s endorsement’ is to place the

responsibility on lessee’s carrier. The party upon whom the

Interstate Commerce Commission regulations impose a direct

responsibility to the public is the lessee, and the insurance in-

dustry accepted this as a rationale for making lessee’s carrier

primarily liable. 348 F.Supp at 685.

16a

surance policy which afford coverage for

automobiles hired by such person or or-

ganization but which does not insure on a

direct primary basis the owners of such

automobiles and the agents and employees

of such owners while such automobiles are

being used exclusively in the business of

such person or organization and over a

route such person or organization is au-

thorized to serve by federal or public au-

thority; :

provided, however, a driver or other persons fur-

nished to the named insured with an automobile

hired by the named insured shall be deemed not to be

an employee of the named insured.

In substance, this clause states that Liberty will give

primary coverage to a vehicle leased by Ryder from an-

other company only if that company’s insurer provides

primary coverage to vehicles which it leases from another

company. Plaintiffs offer several theories for why Crow-

der is not excluded by this reciprocity clause.’ First,

citing an article by Edward C. German entitled “Hired,

Rented and Leased Vehicles—Long Haul Endorsements,”

they argue a reciprocal coverage claus: cannot apply to

Crowder as he is not a trucking compeny but merely a

one man, one truck operation. That article asserts that

a truckmen’s endorsement is aimed at relationships be-

tween truckers and if a lessor is not a trucker he will

not be bound by the reciprocity requirement in such an

endorsement to the lessee’s insurance policy. As defend-

ants point out, this argument is fallacious because at

the time of the accident Crowder was not acting as a

one man truck operation but as a servant of Mustang.

Under the terms of the reciprocity clause found in the

The courts have routinely found such reciprocity requirements

in truckmen’s endorsements to be vaild. See, e.g., Allstate Insurance

Co. v. General Fire and Casualty Co., id.

17a

Liberty truckmen’s endorsement, Mustang, as Crowder’s

employer, was required to extend primary coverage when

it was the lessee.

Plaintiffs next argue that the reciprocity clause in the

Liberty policy does not preclude coverage because Mus-

tang’s insurance policy does insure, on a primary basis,

vehicles leased by Mustang from others. First, they note

that the definition of insured contained in the Canal

policy includes

. any person while using the automobile and

any person or organization legally responsible for

the use thereof, provided the actual use of the auto-

mobile is by the named insured or such spouse or

with the permission of either.

Mustang contends that the owner lessor of a vehicle

leased by Mustang would fall into the category of a “per-

son legally responsible” for the vehicle’s use.

Plaintiffs acknowledge that the Gross Receipts En-

dorsement to the Canal policy provides:

2. It is further understood and agreed with respect

to hired equipment that shoul any other like,

valid and collectible insurance issued in the name

of the owner or lessor, or in favor of the named

assured herein, exist, this policy becomes excess

over and above such valid and collectible insur-

ance.

They argue, however, that this endorsement does not

render coverage under Canal excess coverage because

most insurance policies of lessors contain truckmen’s en-

dorsements; therefore, in most circumstances the lessor

will not have “like” insurance and the coverage under

the Canal policy will not become “excess.”

Defendants disagree with this interpretation of the

Canal policy. They argue that paragraph (c) in the sec-

tion of the policy entitled “Exclusions” establishes that

18a

the policy does not extend primary coverage to tractors

or trailers leased by Mustang from others.“ Ryder and

Liberty also contend that Mustang has misinterpreted

the meaning of the phrase “other like, valid and collecti-

ble insurance,” found in paragraph (2) of the Gross

Receipts Endorsement to the Canal policy. It is the de-

fendants’ position that since paragraph (c) of the “Ex-

clusions” section of the Canal policy denies coverage for

tractors or trailers leased by Mustang from others, there

is no primary Canal coverage to which “other like, valid

and collectible insurance” can be compared and the word

“like” in that endorsement cannot be defined in relation

to whether a particular insurance coverage is excess or

primary. Defendants argue, I believe correctly, that

“other like, valid and collectible insurance” means any

insurance provided by the own r or lessor of a vehicle

leased by Mustang covering that hired vehicle. Under

this interpretation, paragraph 2 of the Canal “Gross Re-

ceipts Endorsement” would, in all circumstances, give

only excess coverage for vehicles hired by Mustang.

Therefore, since the Canal policy gives only excess cover-

age, the reciprocity clause in Ryder’s policy would pre-

clude coverage for Crowder.

V.

Ryder elaims that its status in the underlying suits is

yet another reason why it is not liable to the plaintiffs

in this case. In the wrongful death action brought by the

estate of Edward Renzi, Ryder was a third-party de-

fendant. In addition, in the stipulation entered into by

counsel when that case was settled, it was agreed that

10 Paragraph (e) of “Exclusions” states:

This policy does not apply: under Coverages A and B, while

the automobile is used for the towing of any trailer owned

hired by the insured and not covered by like insurance in

company; or while any trailer covered by this policy is

with any automobile owned or hired by the insured and

covered by like insurance in the company.

1

argues, only if it were determined Mustang and

Ryder were joint employers of Crowder. I have found

that Mustang sole master or employer of Crowder

was

at the time of the accident. Ryder also argues that it is

able to Crowder for indemnity as indemnity is

one who is primarily liable to one who is sec-

ondarily liable. U the stipulation of facts, Crowder

is the primary tort-feasor. Plaintiffs have conceded that

if I were to find that Mustang was the sole employer of

Crowder at the time of the accident, Ryder’s assessment

that it was not liable for contribution or indemnity would

be correct. (p. 7 of plaintiffs’ reply brief) For the rea-

sons set forth above, I will enter judgment in favor of

all the defendants and against all the plaintiffs.

In addition, plaintiffs have agreed that if I found Mus-

tang liable for the actions of Crowder, the Gross Receipts

Endorsement to Mustang’s insurance policy would pro-

vide coverage for the accident. Jd. Having found that

Mustang was the employer of Crowder and thus vicari-

ously liable for his acts and the parties having agreed

that if I found Mustang liable, there would be coverage

for the accident under Mustang’s insurance policy, on

the counterclaim, I will enter judgment in favor of all

the defendants and against plaintiffs Mustang, Canal gd

Crowder."

1! Although the counterclaim includes claims against R.L. Dease,

there is no evidence of record which would provide a basis of lia-

bility against him.

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 81-2857

MUSTANG TRANSPORTATION COMPANY and

Dease, R. L. and CRowperR, HENRY

and CANAL INSURANCE COMPANY

V.

RYDER TRUCK LINEs, INC. and

LIBERTY MUTUAL INSURANCE COMPANY

MUSTANG TRANSPORTATION Co., HENRY

CROWDER and CANAL INSURANCE COMPANY,

Appellants

Appeal from the United States District Court

for the Eastern District of Pennsylvania

C. A. No. 77-01620

Argued July 21, 1982

Before: ADAMS and HIGGINBOTHAM, Circuit Judges,

and TEITELBAUM, District Judge *

JUDGMENT ORDER

* Honorable Hubert I. Teitelbaum, United States District Court

for the Western District of Pennsylvania, sitting by designation.

2la

After consideration of all contentions raised by appel-

lants, it is

ADJUDGED AND ORDERED that the judgment of

the district court be and is hereby affirmed.

Costs taxed ag: inst appellants.

BY THE CouRT,

s, Arlin M. Adams

Circuit Judge

ATTEST:

Dated: July 29, 1982

REGULATIONS INVOLVED

49 C. F. R. § 1057.4 Augmenting equipment.

Other than equipment exchanged between moter com-

mon carriers in interchange service as defined in § 1057.5,

authorized carriers may perform authorized transporta-

tion in or with equipment which they do not own only

under the following conditions:

(a) Contract requirements. The contract, lease, or

other arrangement for the use cf such equipment:

(4) Exclusive possession and responsibilities. Shall

provide for the exclusive possession, control, and use of

the equipment, and for the complete assumption of re-

sponsibility in respect thereto, by the lessee for the dura-

tion of said contract, lease or other arrangement.

49 C.F.R. § 1057.12 Written lease requirements.

Except as provided in the exemptions set forth in Sub-

part C of these regulations, the written lease required

under § 1057.11(a) shall contain the following provisions:

(d) Exclusive possession and responsibilities. The lease

shall provide that the authorized carrier lessee shall have

responsibility for the operation of the equipment for the

duration of the lease.