Petition for Writ of Certiorari — Insurance Co. of Pennsylvania v. Empire Fire & Marine Insurance

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NO.

in the

Supreme Court

of the

Gnited States

October Term, 1994

THE INSURANCE COMPANY OF THE

STATE OF PENNSYLVANIA, and EAST COAST

INTERMODAL SYSTEMS, INC., a/k/a

E.C.1.S., INC.,

Petitioners,

vs.

EMPIRE FIRE & MARINE INSURANCE COMPANY,

and LUIS CARBONELL,

Respondents.

On Petition for a Writ of Certiorari

to the Florida District Court of Appeals,

Third District

PETITION FOR WRIT OF CERTIORARI

WILLIAM G. BURD, Esq.

Counsel of Record

MADELYN SIMON LOZANO, Esq.

KENNEY BURD & MARKOWITZ

601 Brickell Key Drive, Suite 500

Miami, Florida 33131

Telephone: 305/374-3100

Counsel for Petitioners

ee See Oe, er ee

QUESTION PRESENTED

WHERE AN OWNER/OPERATOR OF A TRUCK TRAC-

TOR NEGLIGENTLY INJURES A MEMBER OF THE

PUBLIC WHILE OPERATING HIS TRUCK FOR A NON-

TRUCKING USE, CAN HIS INSURER BE ABSOLVED

FROM PRIMARY FINANCIAL RESPONSIBILITY FOR

COVERING THE RISK WHICH IT VOLUNTARILY AS-

SUMED AND FOR WHICH IT COLLECTED PREMIUMS

SOLELY BECAUSE ITS INSURED’S TRUCK WAS

LEASED TO AN INTERSTATE CARRIER, LICENSED BY

THE INTERSTATE COMMERCE COMMISSION?

LIST OF PARTIES

All parties to this petition are listed in the caption.

Robert L. LeCount, the Plaintiff in the underlying tort

action from which the instant declaratory action arises,

was an appellee below. His suit has been : solved,

however, and LeCount has been paid. Thus, he is not a

party to this petition.

RULE 29.1 LISTING

American International Group, Inc., 70 Pine Street,

New York, NY 10270 is the parent company of Co-

petitioner The Insurance Company of the State of

Pennsylvania. Co-Petitioner East Coast has no parent or

subsidiaries. Zurich Insurance Company, Zurich,

Switzerland is the parent company of Co-respondent

Empire Fire and Marine Insurance Company.

TASLE OF CONTENTS

QUESTION PRESENTED........................

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Conflict in the Courts’ Application of the

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Florida Court’s Holding in this Case

Effectively Eviscerates This Court’s

Holding in Brada Miller ................. 10

The Impact of Florida Court’s Ruling on

Interstate Commerce and the Insurance

Industry is of Great Importance and

Requires This Court’s Immediate

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TABLE OF AUTHORITIES

Cases:

American Trucking Ass’ns v. United States,

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Argonaut Ins. Co. v. National Indem. Co.,

435 F.2d 718 (10th Cir. 1971)...............

Carolina Cas. Ins. Co. v. Insurance Co.

of N. Amer.,

G66 F.3d 198 (66 Cir. 19789) ...... 2.0 .00c00e.

Carter v. Vangilder,

803 F.2d 189 (5th Cir. 1986) ................

Empire Fire & Marine Ins. Co. v. The

Insurance Co. of the State of Penn.,

and East Coast Intermodal Sys., Inc.,

a/k/a E.C.LS., Inc.,

638 So.2d 102 (Fla. App. 1994)..............

Empire Fire & Marine Ins. Co. v. Guaranty Nat'l

Ins. Co.,

868 F.2d 357 (10th Cir. 1989)...............

Gaskins v. Jowers,

775 F.2d 621 (5th Cir. 1985) ................

Hagans v. Glen Falls Ins. Co.,

465 F.2d 1240 (10th Cir. 1972)..............

Lease and Interchange of Vehicles by

Motor Carriers,

ee RE I yc deec i ciedsccceesesess

Neal v. St. Paul Fire & Marine Ins. Co.,

250 N.W.2d 648 (Neb. 1977) ................

iv

Page(s)

TABLE OF AUTHORITIES— (Continued)

Cases: ; Page(s)

Transamerican Freight Lines, Inc. v. Brada

Miller Freight Sys., Inc.,

ee OD b wiknie dee dcwccccccccenas 7, 8, 10, 11

Travelers Ins. Co. v. Transport Ins. Co.,

787 F.2d 1133 (7th Cir. 1986)............... 8,9

Transport Indem. Co. v. Paxton Nat'l Ins. Co.,

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

cert. denied, 455 U.S. 982 (1982) ............ 9

Wenkosky v. Protective Ins. Co.,

698 F.Supp. 1227 (M.D.Pa. 1988) ........... 4

Wilburn Boat Co. v. Fireman’s Fund Ins. Co.,

ie Se. 8, 12

Other Authorities

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NO.

in the

Supreme Court

of the

Gnited States

October Term, 1994

THE INSURANCE COMPANY OF THE

STATE OF PENNSYLVANIA, and EAST COAST

INTERMODAL SYSTEMS, INC., a/k/a

E.C.1.S., INC.,

Petitioners,

vs.

EMPIRE FIRE & MARINE INSURANCE COMPANY,

and LUIS CARBONELL,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE FLORIDA DISTRICT COURT

OF APPEALS, THIRD DISTRICT

Petitioners, The Insurance Company of the State of

Pennsylvania, and East Coast Intermodal Systems, Inc.,

a/k/a E.C.1.S., Inc., petition for certiorari review of the

judgment and decision of the Florida Third District Court

of Appeals in this case, which affirmed in part and reversed

in part the decision of the Dade County Circuit Court,

Eleventh Judicial Circuit.

OFFICIAL REPORT OF OPINION BELOW

Empire Fire & Marine Ins. Co. v. The Insurance Co. of

the State of Penn., and East Coast Intermodal Sys., Inc.,

a/k/a E.C.1.S., Inc., 638 So.2d 102 (Fla. App. 1994).

JURISDICTION

The Florida Third District Court of Appeal issued its

opinion in this case on May 24, 1994. Rehearing was

denied in an order dated July 12, 1994. The order herein

appealed was rendered by the state court of last resort,

pursuant to Article 5, section 3 of the Florida Constitution.

This Court’s jurisdiction is premised on Title 28, United

States Code, section 1257.

STATUTES & REGULATIONS INVOLVED

49 C.F.R. § 1057.12 (1987). Written lease

requirements. Except as provided in the

exemptions set forth in Subpart C of this part, the

written lease required under § 1057.11(a) shall

contain the following provisions. The required

lease provisions shall be adhered to and performed

by the authorized carrier.

* * *

(c) Exclusive possession and responsibilities —

(1) The lease shall provide that the authorized

carrier lessee shall have exclusive possession,

control, and use of the equipment for the

duration of the lease. The lease shall further

provide that the authorized carrier lessee shall

assume complete responsibility for the

operation of the equipment for the duration of

the lease.

(j) Insurance —

(1) The lease shall clearly specify the legal

obligation of the authorized carrier to maintain

insurance coverage for the protection of the

public pursuant to Commission regulations

under 49 U.S.C. 10927. The lease shall further

specify who is responsible for providing any

other insurance coverage for the operation of the

leased equipment, such as bobtail insurance. If

the authorized carrier will make a charge back

to the lessor for any of this insurance, the lease

shall specify the amount which will be charged-

back to the lessor.

* * *

STATEMENT OF THE CASE

A. Summary

This petition arises from a declaratory action brought

by a truck lessor’s insurer against the insurer of the truck’s

Interstate Commerce Commission [“ICC”] licensed lessee.

The coverage questions presented arose due to an

underlying suit brought by a man who was injured when

his vehicle was struck by the ICC carrier-leased vehicle. At

the time of the accident, the lessor was driving his truck

tractor in a “bobtailing” mode.' The Florida appellate court

1“Bobtailing” refers to those instances when the truck tractor is not

attached to a trailer or under load, when the equipment is being

(Footnote continued on next page)

iil ai |

misapplied ICC regulations in contravention of existing

law to wrongly decide that the ICC regulations require the

lessee’s insurance to be strictly primary as a matter of law

and the lessor’s coverage to be merely excess.

B. Facts

Petitioner East Coast Intermodal Systems, Inc.

[“Lessee”] is a carrier licensed by the ICC. Respondent Luis

Carbonell [“Lessor”] is the owner/operator of a truck

tractor. Carbonell leased his truck and his driving services

to East Coast. Carbonell’s and East Coast’s lease was

permanent in nature and provided that Lessor and his

truck would haul only for Lessee. The lease contained an

indemnity agreement which stated that Lessor would

indemnify Lessee for “all claims, loss, or damage caused by

Contractor [Lessor]. . . including, but without limitation,

personal injury and property damage... .”

The lease provided that Lessee East Coast would be

responsible for insuring the truck operations on a primary

basis when the truck tractor was under haul, i.e. being

used for trucking purposes. The lease further recognized,

as required by ICC regulations, that Lessee would provide

insurance at all times for the protection of the public and

shippers. However, as between the Lessor and the Lessee,

the parties agreed that Lessor’s insurance would be

primary in circumstances where Lessor used his truck for

non-trucking purposes, e.g. while the truck tractor was

“bobtailing”.

(Footnote continued from previous page)

serviced or when it is being used for some other nonrevenue purpose.

See, e.g., Wenkosky v. Protective Ins. Co., 698 F.Supp. 1227, 1233

(M.D.Pa. 1988); Neal v. St. Paul Fire & Marine Ins. Co., 250 N.W.2d 648

(Neb. 1977).

ef

Lessee obtained insurance from co-petitioner, The

Insurance Company of the State of Pennsylvania, to cover

its insurance obligations under the lease. Lessor obtained

insurance to cover his insurance obligations under the

lease from respondent Empire Fire & Marine Insurance

Company [“Empire”].

During the term of the lease, while bobtail driving his

rig, Lessor Carbonell collided with a vehicle driven by one

Robert LeCount. LeCount filed suit against Carbonell for

Lessor’s own negligence and as the truck tractor owner.

LeCount also sued Lessee East Coast claiming that the

Lessor’s truck tractor displayed an ICC placard issued to

Lessee at the time of the accident.

Lessor’s insurer, Empire, attempted to tender its

insured’s defense to Lessee East Coast and its insurer.

Lessee’s insurer refused to defend Lessor on the ground

that the lease agreement required Lessor to provide his

own insurance when he was involved in an accident while

bobtailing. Lessors insurer Empire then brought the

instant declaratory action. Empire claimed that because

Lessee was an ICC permittee, ICC regulations required, as

a matter of law, that Lessee’s insurance was primary.

The trial court held that ICC regulations did not

render Lessee’s insurance solely primary as a matter of

law, but that pursuant to the applicable ICC regulations,

the parties’ lease and their respective insurance policies,

both policies were primary. The lessor’s insurer appealed.

Lessee and its insurer cross-appealed, claiming that the

ICC regulations were not applicable to suits between

insurers. Thus, Lessee argued, according to the lease

agreement, the applicable insurance contracts and the

undisputed fact that Lessor was not under haul when the

accident occurred, the lessor’s bobtail insurance provided

primary coverage to pay the negligence claim.

The Florida appellate court rejected the Lessee’s

argument and agreed with the Lessor. The Court held that

the ICC regulations rendered the Lessee’s policy primary,

as a matter of law, regardless of the lease’s and insurance

policies’ terms. The Court ruled that, based on what it |

deemed to be the controlling ICC regulations as applied to

the insurance policies, Lessor’s bobtail insurance was

solely excess over Lessee’s insurance policy even though

Lessor Carbonell was bobtailing his own truck tractor on

his own time when the accident occurred.

REASONS FOR ;RANTING THE WRIT

A. Summary

Lessor’s insurer successfully contended below that by

virtue of the federal “control and responsibility” and

financial esponsibility regulations covering ICC

permittees, the Lessee’s insurance was primary as a

matter of law and the Lessor’s insurance policy was merely

excess. The Court ruled in respondent’s favor despite the

fact that (1) the Lessor’s policy was intentionally written to

provide primary coverage for claims made while the lessor

was bobtailing and (2) the lease agreement specifically

provided that the Lessor would obtain primary bobtail

coverage, thereby enabling him to indemnify the Lessee for

any liability it incurred due to the Lessor’s negligence

while bobtailing.

In ruling as it did, the Florida appellate court wrongly

held that ICC regulations, which were solely intended to

protect the public, also protect the Lessor’s insurer. The

Florida Court’s erroneous application of federal law in this

case requires reversal. Because the holding is but another

example of numerous courts’ misapplication of the

statutory intent underlying the ICC regulations and

because of the continued detrimental impact the Courts’

———EEE————

conflict on this issue of federal law has on interstate

commerce and the insurance business, this case presents

issues worthy of this honorable Court’s certiorari review.

B. Intent of the ICC Regulations Was Not to

Protect Insurers.

The federal laws at issue are two. First, 49 C.F.R.

§ 1057.12(c) requires that the authorized carrier maintain

“exclusive possession, control, and use of the equipment for -

the duration of the lease,” and “assume complete

responsibility for the operation of the equipment for the

duration of the lease.” The law also requires the ICC-

certified carrier to maintain insurance for the protection of

the public. See 49. U.S.C. § 10927. Second, 49 C.F.R.

§ 1057.12(j) states that the lease shall specify who is

responsible for providing any other insurance coverage for

the operation of the leased equipment, such as bobtail

insurance. In applying these regulations, the Florida court

effectively ruled on the federal issue of the operation and

effect of the ICC-mandated endorsement on the ICC

carrier's insurance policy. 49 U.S.C. § 10927; ICC Form

B.M.C. 90.

An examination of the statutory framework upon

which the ICC regulations at issue were founded shows

that the regulations were never intended to protect

insurers. Their purpose is to ensure that licensed carriers

who operate leased motor vehicles are responsible to the

public, shippers and the Commission, for the maintenance

and safe operation of leased equipment. E.g.,

Transamerican Freight Lines, Inc. v. Brada Miller Freight

Sys., Inc., 423 U.S. 28, 32, 34, 39 (1975). The rules were

never intended to nullify the effect of insurance policies

that are primary by their own terms. Empire Fire &

Marine Ins. Co. v. Guaranty Nat'l Ins. Co., 868 F.2d 357,

363 (10th Cir. 1989). ICC policy does not alter the

application of state insurance law and private agreements

between insurers. Travelers Ins. Co. v. Transport Ins. Co.,

787 F.2d 1133, 1140 (7th Cir. 1986). See Wilburn Boat Co.

v. Fireman’s Fund Ins. Co., 348 U.S. 310 (1955).

In fact, one of the major goals of the ICC regulations

was to eliminate hard core problems involving holding

owner/operators accountable for the safety of their vehicles

which they lease to ICC carriers. See Lease and

Interchange of Vehicles by Motor Carriers, 68 M.C.C. 553,

555 (1956). This Court in Brada Miller stated that

permitting parties to allocate the responsibility for the

lessor’s negligence to the lessor could increase operational

safety and provide greater protection to the public. 423

U.S. at 41. On the other hand, if the owner/operator is

permitted to rely on the lessee’s coverage as being primary

in bobtailing and other non-trucking situations, the

owner/operator’s safety incentive is lost.

C. Conflict in the Courts’ Application of the

Federal Law Exists.

In spite of this established statutory intent, a

significant conflict exists in the federal and state courts as

to whether ICC rules can be invoked by an insurance

company in order to avoid paying out on a risk which it has

voluntarily assumed. Citing to Empire Fire & Marine Ins.

Co. v. Guaranty Nati Ins. Co., 868 F.2d 357 (10th Cir.

1989), the Florida court below recognized this conflict in

the legal effect of ICC regulations in suits between insurers

when it observed: “Courts throughout the United States

are divided in their approach to insurance coverage issues

where trucking equipment is leased to an ICC carrier.”

Lower Court Opinion at 4. In Empire Fire, the Tenth

Circuit noted the “(cjurrent state of confusion concerning |

this issue” and stated that “[nJo consensus can be derived

from cases in other circuits. . . .” Id. at 366.

————E————————

The conflict exists because certain courts, including

the Florida court in this case, erroneously hold that ICC

regulations must be read as requiring that the leasee’s

insurance is always primary, as a matter of law, in suits

between insurers. E.g., East Coast, 638 So.2d 102 (Fla.App.

1994); Hagans v. Glen Falls Ins. Co., 465 F.2d 1240 (10th

Cir. 1972); Argonaut Ins. Co. v. National Indem. Co., 435

F.2d ‘718 (10th Cir. 1971). Other courts take a middle road.

E.g., Carter v. Vangilder, 803 F.2d 189 (5th Cir. 1986);

Gaskins v. Jowers, 775 F.2d 621 (5th Cir. 1985). The

majority of courts hold, however, that ICC rules have

absolutely no effect on suits between the lessee’s and the

lessor’s insurers in terms of establishing primary financial

responsibility for paying out on, a claim made. E.g.,

Travelers Ins. Co. v. Transport Ins. Co., 787 F.2d 1133 (7th

Cir. 1986); Transport Indem. Co. v. Paxton Nat'l Ins. Co.,

657 F.2d 657 (5th Cir. 1981), cert. denied, 455 U.S. 982

(1982); Carolina Cas. Ins. Co. v. Insurance Co. of N. Amer.,

595 F.2d 128 (3d Cir. 1979). These cases hold that, in

determining the issue of primary and excess liability

between insurers in cases involving ICC carriers, the court

should look to the terms of the lease agreement and the

parties’ individual insurance policies and not permit ICC

regulations which were instituted for the protection of the

public to be asserted by insurers.

The majority position provides the fairest and most

practical result and does not subvert the statutory purpose

underlying the promulgation of rules regulating interstate

carriers. The ICC regulations specifically provide that the

parties to the lease may contract to apportion coverage

liability risks between themselves where they set out in

the lease which party provides insurance under specified

circumstances, as for example, bobtailing. 49 CFR

§ 1057.12(j). It is therefore improper for courts to apply

federal law in a manner which disregards Congress’ and

the parties’ intent and finds that the lessee’s coverage is

always primary as a matter of law. This is especially true

in light of the fact that the statute was never intended to

protect insurers.

D. Florida Court’s Holding in this Case

Effectively Eviscerates This Court’s Holding

in Brada Miller.

If the Florida court below and other courts continue to

be permitted to hold that ICC regulations always cause the

lessee’s coverage to be primary regardless of the parties’

contract and insurance arrangements, and in spite of

statutory authority to apportion ultimate financial

responsibility between the parties, indemnity agreements

become virtually meaningless and this Court’s decision in

Brada Miller, 423 U.S. at 28, is eviscerated. In Brada

Miller, this Court approved the use of indemnity

agreements between the lessee and the lessor and held

that such agreements do not violate ICC regulations which

provide that any lease of trucking equipment must place

control and responsibility for the equipment’s operation in

the lessee. The Court further held that an indemnity

agreement did not conflict with ICC safety regulations.

It is difficult, if not impossible, to reconcile the Brada

Miller holding with the Florida and other courts’ holdings

which always make the lessee’s insurance policy primary

as a matter of law. Indemnity is generally only possible

based on the established priority of existing insurance

policies. However, in jurisdictions where the lessee’s

insurance is always primary as a matter of law, the

enforcement of an indemnity agreement, permitted under

Brada Miller, is rendered impossible. Unless the

indemnitor has insurance, especially as here where the

indemnitor is a one-man truck tractor operator, indemnity

is not possible unless the indemnitor has insurance which

is primary.

10

By viewing the lower court’s application of federal law

and the practical impact of that law in the proper

perspective, the Florida court's holding negates this

Court’s ruling in Brada Miller approving indemnity

agreements in cases such as this. In order for the Brada

Miller holding to apply uniformly throughout the federal

and state court systems, this Court should definitively

announce that ICC regulations, promulgated for the

protection of the public, have no impact on suits between

insurers. In this way, the conflict among the courts would

be properly resolved and the holding of Brada Miller would

have effect in all courts.

E. The Impact of Florida Court’s Ruling on

Interstate Commerce and the Insurance

Industry is of Great Importance and

Requires This Court’s Immediate Attention.

If lessors’ insurers continue to be permitted to hide

behind the ICC endorsement and thereby avoid paying

that for which they contracted to pay, these insurers will

wrongly continue to use federal law to reap an unfair

windfall. The lessors’ insurers will continue to be able to

sell insurance which was written as primary coverage and

for which a greater premium was thus paid, yet never have

to pay out on a claim, or only have to pay out as excess over

the Lessee’s policy. Lessors’ insurers will thus be able to

avoid their contract obligations by simply asserting the

protection of ICC regulations which are not even applicable

to them. ,

This Court’s immediate attention to this issue is

therefore important because until such time as this Court

resolves the lower courts’ conflict regarding statutory

intent, insurers of interstate motor carriers and

equipment, drivers, owners, lessors, lessees and ICC

permittees will continue to be uncertain as to the effect of

11

ICC regulations on their contracts and insurance

obligations. See Wilburn Boat Co., 348 U.S. at 316, 320-21.

Because the issue affects interstate commerce, this Court’s

timely resolution of the issue is of even greater necessity so

that federal law will not be applied differently depending

upon the jurisdiction in which an incident raising this

question of federal law may occur.

CONCLUSION

In sum, as the situation now stands, the ICC

regulations are being used to frustrate the economic

stability of the trucking industry, rather than to protect it,

as was the regulations’ intent. See, e.g., American Trucking

Ass’ns v. United States, 344 U.S. 298, 304-05 (1953).

Because the purpose of the ICC regulations, as with any

federal law, is to maintain a satisfactory, uniform condition

in the areas in which the federal law operates, certiorari

review is warranted due to the current uncertainty in the

commercial carrier industry as well as the insurance

system, caused by this unresolved issue.

Accordingly, Petitioners respectfully request that this

Court grant their petition for certiorari review.

Respectfully submitted,

William G. Burd, Esq.

Counsel of Record

Madelyn Simon Lozano, Esq.

KENNEY BURD & MARKOWITZ

601 Brickell Key Drive, Suite 500

Miami, Florida 33131

Telephone: 305/374-3100

Counsel for Petitioners

12

Appendix

IN THE DISTRICT COURT OF APPEAL

OF FLORIDA

THIRD DISTRICT

JULY TERM, A.D. 1994

JULY 12, 1994

CASE NO. 93-02183, 93-01315

LOWER TRIBUNAL NO. 91-25810

EMPIRE FIRE & MARINE INSURANCE COMPANY,

Appellant(s),

vs.

LUIS CARBONELL, et al.,

Appellee(s).

Upon consideration, appellee The Insurance Company

of Pennsylivania’s motion for rehearing is hereby denied.

Nesbitt, Cope and Gersten, JJ., concur. The Insurance

Company of Pennsylvania’s motion for rehearing en banc is

hereby denied.

A True Copy

ATTEST:

LOUIS J. SPALLONE

Clerk District Court of

Appeal; Third District

By:

Chief Deputy Clerk

cc: Rhea P. Grossman James I. Knudson

Joseph S. Kashi George V. Lanza

William G. Liston

/NB

App. 1

IN THE DISTRICT COURT OF APPEAL

OF FLORIDA

THIRD DISTRICT

JULY TERM, A.D. 1985

CASE NOS. 93-2183

93-1315

EMPIRE FIRE & MARINE INSURANCE COMPANY,

Appellant/

Cross-appellee,

Vs.

THE INSURANCE COMPANY OF THE STATE OF

PENNSYLVANIA, AND EAST COAST INTERMODAL

SYSTEMS, INC., A/K/A E.C.1L.S., INC.,

Appellees/

Cross-appellants,

AND LUIS CARBONELL AND ROBERT L. LECOUNT,

Appellees.

Opinion filed May 24, 1994.

Appeals from the Circuit Court for Dade County,

Philip Bloom, Judge.

Rhea P. Grossman, for appellant/cross-appellee.

Marlow, Connell, Valerius, Abrams, Lowe & Adler and

James Hughes Villacorta and William G. Liston, for

App. 2

appellees/cross-appellants; Sperry, Shapiro & Kashi and

Joseph S. Kashi (Ft. Lauderdale), for appellee Carbonell.

Before NESBITT, COPE and GERSTEN, JJ.

COPE, Judge.

Empire Fire & Marine Insurance Co. appeals final

judgments in a declaratory judgment action to determine

the priority of insurance coverage. We affirm in part and

reverse in part.

Appellee Luis Carbonell is the owner of a truck-

tractor. The owner entered into a lease with appellee East

Coast Intermodal Systems, Inc., a carrier operating under

an Interstate Commerce Commission permit (“the I.C.C.

carrier”). The lease was what is referred to in the industry

as a permanent lease. See Wales Transp., Inc. v. Interstate

Commerce Comm’n, 728 F.2d 774, 777 (5th Cir. 1984); see

generally 4 Saul Sorkin, Goods in Transit, § 45.03 (1994)

(discussing early and modern day permanent leases).

Under I.C.C. regulations:

Exclusive possession and responsibilities —

(1) The lease shall provide that the authorized

carrier lessee shall have exclusive possession,

control, and use of the equipment for the duration

of the lease. The lease shall further provide that

the authorized carrier lessee shall assume

complete responsibility for the operation of the

equipment for the duration of the lease.

49 C.F.R § 1057.12(c).

Under the terms of the lease, the owner-lessor not only

leased the truck-tractor to the I.C.C. carrier, but also

App. 3

contracted to provide a driver for the tractor. Under the

lease, the owner was also required to handle all repair and

maintenance at the owner’s expense.

Under the lease and under I.C.C. regulations, the

I.C.C. carrier is required “to maintain insurance coverage

for the protection of the public pursuant to Commission

regulations under 49 U.S.C. [§] 10927. The lease shall

further specify who is responsible for providing any other

insurance coverage for the operation of the leased

equipment, such as bobtail insurance.” 49 C.F .R.

§ 1057.12(j).

The I.C.C. carrier was insured by appellee The

Insurance Company of the State of Pennsylvania (“the

truckers’ policy”). Under the lease, the owner was

responsible for providing bobtail coverage. “Bob-

tail/deadhead insurance is a term generally used to

describe ‘non-trucking use insurance.’ It is intended to

cover the insured when the vehicle is not under load, when

it is being serviced, or when it is being used for some other

non-revenue purpose.” 4 Saul Sorkin, Goods in Transit

§ 45.01(1), at 45-4 to 45-5 (footnotes omitted). Appellant

Empire Fire & Marine Insurance Co. issued a policy to the

owner which provided truckers’ insurance for non-trucking

use (“the bobtail policy”).

In June, 1988, while the lease was in effect, there was

an accident between the truck-tractor and another

motorist, appellee Robert L. LeCount. The owner was

driving the truck-tractor at the time of the accident. The

tractor was “bobtailing,” that is, traveling without a truck-

trailer attached to it. The owner was on the way to obtain

an oil change for the truck, after which he was to proceed

to pick up a load for the I.C.C. carrier. Pursuant to the

lease, the truck-tractor was carrying the I.C.C. carrier’s

App. 4

placard and operating under the I.C.C. permit at the time

of the accident.

LeCount filed a lawsuit for damages arising out of the

accident. The tort lawsuit has been resolved and LeCount

has been paid.

The truckers’ insurer (The Insurance Company of the

State of Pennsylvania) and the bobtail insurer (Empire

Fire & Marine Insurance Co.) both agreed that their

insurance policies provided coverage for this accident.

However, the insurers could not agree on the priority of

coverage. Accordingly, the bobtail insurer brought a

declaratory judgment action. The trial court ruled that the

two policies would provide pro rata coverage. The trial

court also awarded attorney’s fees to the owner, against the

bobtail insurer, pursuant to section 627.428, Florida

Statutes. The bobtail insurer has appealed. The Insurance

Company of the State of Pennsylvania and East Coast

Intermodal, Inc. cross-appeal the trial court’s pro rata

coverage determination, arguing that the bobtail coverage

should be primary and the truckers’ policy should be

excess.

Courts throughout the United States are divided in

their approach to insurance coverage issues where

trucking equipment is leased to an I.C.C. carrier. See

generally 4 Saul Sorkin, Goods in Transit, chap. 45; Empire

Fire & Marine Ins. Co. v. Guaranty Nat'l Ins. Co., 868 F.2d

357 (10th Cir. 1989). The difficulty arises from the

interplay of the applicable I.C.C. regulations, the terms of

the lease agreements, and the terms of the insurance

contracts. See generally Empire Fire & Marine Ins. Co., 868

F.2d at 361 (The decisional law has “interpreted the effect

of [the] ICC endorsement in at least three ways. . . [each]

compel[ling] dramatically different results, yet each

[having] jurisprudential support.”)

App. 5

For present purposes we begin by examining the other

insurance clauses of the respective insurance contracts.

The truckers’ policy provides, in part:

1. This policy's liability coverage is primary for

any covered auto while hired or borrowed by you

and used exclusively in your business and

pursuant to operating rights granted to you by a

public authority... .

3. Except as provided in Paragraphs 1 and 2

above, this policy provides primary insurance for

any covered auto you own and excess insurance

for any covered auto you don’t own.

4. When two or more policies cover on the

same basis, either excess or primary, we will pay

only our share. Our share is the proportion that

the limit of our policy bears to the total of the

limits of all the policies covering on the same

basis.

In our view, the first-quoted sentence is the one

applicable here. The truck-tractor in this case had been

hired by the I.C.C. carrier pursuant to the lease

agreement. Under the applicable I.C.C. regulations, any

such lease agreement must “provide that the authorized

carrier lessee shall have exclusive possession, control, and

use of the equipment for the duration of the lease. The

lease shall further provide that the authorized carrier

lessee shall assume complete responsibility for the

operation of the equipment for the duration of the lease.”

49 C.F.R. § 1057.12(c\1). The leased vehicle was thus,

pursuant to the regulations, leased for the exclusive use of

the I.C.C. carrier in its business and pursuant to the

App. 6

operating rights granted to the I.C.C. carrier by the public

authority, namely, the I.C.C.

The I.C.C. carrier argues that the truck-tractor was

not being used for the I.C.C. carrier’s business because the

tractor was on the way to an oil change. Since under the

lease the owner was responsible for carrying out the

maintenance functions at the owner’s expense, the I.C.C.

carrier argues that the trip to obtain an oil change takes

the matter out for the first sentence of the “other

insurance” clause. We disagree.

One of the reasons for the adoption of I.C.C. regulation

over the use of leased equipment was to make sure that

leased equipment was being properly maintained. See 4

Saul Sorkin, Goods in Transit § 45.02-.03; Transamerican

Freight lines, Inc. v. Brada Miller Freight Sys., Inc., 423

U.S. 28, 36-41, 96 S. Ct. 229, 233-36, 46 L. Ed. 2d 169

(1975); Empire Fired & Marine Ins. Co., 868 F.2d at 360-

63. The oil change is a maintenance function which is a

part of the trucker’s business, just as it would be if the

truck-tractor had been owned by the I.C.C. carrier. See

Hartford Ins. Co. v. Occidental Fire & Casualty Co., 908

F.2d 235 (7th Cir. 1990) (Driver of tractor was using truck

“in the business of’ carrier lessee where injury occurred

while driver was en route to pick up trailer which had been

repaired); St. Paul Fire & Marine Ins. Co. v. Frankart, 370

N.E.2d 1058 (Ill. 1977Xtractor trailer used in business of

common carrier at time of accident where driver was

returning home from delivering cargo and made short

diversion to obtain fuel at a cheaper price). Moreover,

maintenance is necessary for the tractor’s continued

operation in the I.C.C. carrier’s business. Accordingly we

agree with the trial court that the truckers’ policy provides

primary coverage in this case.

App. 7

We part company with the trial court, however, on its

conclusion that the bobtail policy also provides primary

coverage. The bobtail policy provides, in part:

1. This policy's liability coverage is primary for

any covered auto while hired or borrowed by you

and used exclusively in your business and over a

route or territory, if any, you are authorized to

serve by public authority. This policy’s liability

coverage is excess over any other collectible

\ insurance for any covered auto while hired or

borrowed from you by another trucker. . .

2. Except at proved in Paragraph 1 above, this

policy provides primary insurance for any covered

auto you own and excess insurance for any

covered auto you don’t own.

3. When two or more policies cover on the

same basis, either excess or primary, we will pay

only our share. Our share is the proportion that

the limit of our policy bears to the total of the

limits of all the policies covering on the same

basis.

The first quoted sentence does not apply to the owner

in this case, but the second sentence does. The truck-

tractor in this case had been hired from the owned by the

I.C.C. carrier. The I.C.C. carrier’s policy provides primary

coverage. Under the terms of the bobtail policy, the bobtail

policy’s coverage is excess. z

The trial court had concluded that both policies

provided primary coverage and that the two policies would

be required to prorate. We agree with the trial court that

the truckers’ policy is primary, but conclude that the

bobtail policy provides excess coverage in this case. We

App. 8

therefore reverse the declaratory judgment in part and

remand with directions to enter judgment in accordance

with this opinion.

As to the award of attorney’s fees to the owner, the

appellant concedes that the award is correct. The

attorney’s fee order in favor of appellee Carbonell is

therefore affirmed in its entirety.

Affirmed in part, reversed in part, and remanded for

proceedings consistent herewith.

App. 9

IN THE CIRCUIT COURT

OF THE 11TH JUDICIAL CIRCUIT

IN AND FOR DADE COUNTY, FLORIDA

GENERAL JURISDICTION DIVISION

CASE NO. 91-25810 CA 25

EMPIRE FIRE AND MARINE INSURANCE COMPANY,

Plaintiff,

vs.

LUIS CARBONELL, EAST COAST INTERMODAL

SYSTEMS, INC. a/k/a E.C.LS., INC.,

THE INSURANCE COMPANY OF THE STATE OF

PENNSYLVANIA and ROBERT L. LECOUNT,

Defendants.

FINAL SUMMARY JUDGMENT

THIS CAUSE having come before the Court on May 7,

1993 on Defendants’ THE INSURANCE COMPANY OF

THE STATE OF PENNSYLVANIA, and EAST COAST

INTERMODAL SYSTEMS, INC., Motion for Final

Summary Judgment, it is hereby

ORDERED AND ADJUDGED:

1. Defendant’s Motion for Rehearing is GRANTED.

2. Paragraph four (4) of the Partial Summary

Judgment entered on February 17, 1993, is hereby

App. 10

RESCINDED and VACATED, to be replaced by the

following:

4. Liability insurance coverage will be provided

by both EMPIRE FIRE AND MARINE

INSURANCE COMPANY under policy number

BA 97 61 48 and by THE INSURANCE

COMPANY OF THE STATE OF PENNSYLVANIA

under policy number TA 191 21 40 on a pro rata

basis for the vehicular accident described in the

companion case, Lecount v. Carbonell and EAST

COAST INTERMODAL SYSTEMS, INC., Case

No.: 90-58738 CA (23) in the Circuit Court of the

llth Judicial Circuit, in and for Dade County,

Florida.

3. All portions of the Partial Summary Judgment

entered on February 17, 1993 not concerning the priority of

insurance coverage between EMPIRE FIRE AND MARINE

INSURANCE COMPANY and THE INSURANCE

COMPANY OF THE STATE OF PENNSYLVANIA remain :

in full torce and effect.

DEFENDANTS SHALL GO HENCE FORTH

WITHOUT DAY.

ORDERED AND ADJUDGED in Chambers at Miami,

Dade County, Florida this 12 day of May, 1993.

/s/ PHILIP BLOOM

CIRCUIT JUDGE

App. 11

IN THE CIRCUIT COURT

OF THE 11TH JUDICIAL CIRCUIT

IN AND FOR DADE COUNTY, FLORIDA

GENERAL JURISDICTION DIVISION

CASE NO. 91-25810 CA 25

EMPIRE FIRE AND MARINE INSURANCE COMPANY,

Plaintiff,

vs.

LUIS CARBONELL, EAST COAST INTERMODAL

SYSTEMS, INC. a/k/a E.C.I.S., INC.,

THE INSURANCE COMPANY OF THE STATE OF

PENNSYLVANIA and ROBERT L. LECOUNT,

Defendants.

SECOND PARTIAL SUMMARY JUDGMENT

On January 22, 1993, the court entered a Partial

Summary Judgment on the motion of defendant, ROBERT

LeCOUNT. The Partial Summary Judgment determined

all of the issues in this action with the exception of the

priority of liability insurance coverage between plaintiff,

EMPIRE FIRE AND MARINE INSURANCE COMPANY,

and defendant, THE INSURANCE COMPANY OF THE

STATE OF PENNSYLVANIA. :

On February 8, 1993, the court held a hearing on

plaintiffs Motion for Summary Judgment. Based upon the

motion, the argument of counsel for the respective parties,

and the record in this cause, the court is convinced that the

rulings contained in its Partial Summary Judgment of

App. 12

oO EE

January 22, 1993 are correct, and the court reaffirms those

rulings. In addition, the court determines that the coverage

afforded by defendant, THE INSURANCE COMPANY OF

THE STATE OF PENNSYLVANLA, is primary, and the

insurance coverage afforded by plaintiff, EMPIRE FIRE

AND MARINE INSURANCE COMPANY, is excess.

Accordingly, it is

ORDERED AND ADJUDGED, AND DECLARED

that:

1. Defendant INTERMODAL as the lessee/ interstate

carrier had exclusive possession, control and use of the

leased vehicle and assumed complete responsibility for the

operation, maintenance and use of defendant

CARBONELL’s vehicle during the lease term as though

defendant INTERMODAL were the owner pursuant to

federal law and ICC regulations, including 49 U.S.C. 11107

and 10321 and 49 CFR 1057.12, and, therefore, defendant

INTERMODAL is liable for any negligence of defendant

CARBONELL during the lease term causing injury and

damages to the public, including those which may be

recoverable by defendant LeCOUNT and his spouse in the

companion case, LeCount v. Carbonell, Case No. 90-58738-

CA-23, in the Circuit Court of the 11th Judicial Circuit, in

and for Dade County, Florida, due to any such negligence

of defendant CARBONELL causing, in whole or in part,

the subject accident. See Simmons v. King, 478 F.2d 857,

867 (5th Cir. 1978); Judy v. Tri-State Motor Transit Co.,

844 F.2d 1496, 1500 (11th Cir. 1988); Rodriguez v. Ager,

705 F.2d 1229, 1236 (10th Cir. 1983); Baker v. Roberts

Express, Inc., 1992 WL 19543 (S.D. Ohio 1992); and Empire

Fire and Marine Insurance v. Truck Insurance Exchange,

462 So.2d 76, 78 (1st DCA 1985).

2. Defendant EMPIRE affords liability coverage up

to its policy limits of THREE HUNDRED THOUSAND

App. 13

DOLLARS ($300,000.00) to defendant CARBONELL with

respect to the subject accident under its policy number BA

97 61 48, and any language in the policy attempting to

exclude coverage is contradictory to the language of the

policy extending coverage under the facts of the subject

accident, and therefore, unenforceable. See Transport

Indemnity Co. v. Carolina Casualty Insurance Co., 652

F.2d 134, 138 (Ariz. 1982).

3. Defendant PENNSYLVANIA affords liability

coverage up to its policy limits of ONE MILLION

DOLLARS ($1,000,000.00) to defendant INTERMODAL

and defendant CARBONELL with respect to the subject

accident under its policy number TA 191 21 40 RA, and any

language therein attempting to limit coverage to

defendants INTERMODAL or CARBONELL under the

facts of the subject accident is contrary to federal law,

including 49 U.S.C. 10927 and 49 CFR 1043.1 and the ICC

endorsement attached to and forming a part of said policy,

and therefore is negated by federal law and the ICC

endorsement and unenforceable. See Empire Fire and

Marine Insurance v. Guaranty Nat. Ins., 868 F.2d 357, 363

(10th Cir. 1989).

4. The coverage afforded by defendant, THE

INSURANCE COMPANY OF THE STATE OF

PENNSYLVANIA, is primary, and the coverage afforded

by plaintiff, EMPIRE FIRE AND MARINE INSURANCE

COMPANY, is excess.

5. The court reserves jurisdiction to award attorneys’

fees and costs.

ORDERED AND ADJUDGED in Chambers at Miami,

Dade County, Florida this 17 day of February, 1993.

/s/ PHILIP BLOOM

CIRCUIT JUDGE

App. 14

a

IN THE CIRCUIT COURT

OF THE 11TH JUDICIAL CIRCUIT

IN AND FOR DADE COUNTY, FLORIDA

GENERAL JURISDICTION DIVISION

CASE NO. 91-25810 CA 25

EMPIRE FIRE AND MARINE INSURANCE COMPANY,

Plaintiff,

vs.

LUIS CARBONELL, EAST COAST INTERMODAL

SYSTEMS, INC. a/k/a E.C.1.S., INC.,

THE INSURANCE COMPANY OF THE STATE OF

PENNSYLVANIA and ROBERT L. LECOUNT,

Defendants.

PARTIAL SUMMARY JUDGMENT

Defendant ROBERT L. LECOUNT’s Motion for

Summary Judgment, or Alternatively, Partial Summary

Judgment, in this declaratory decree action having come

on for hearing on the 15th day of January, 1993, with all

parties being represented by counsel as noted hereinbelow,

and the Court having reviewed the court file, heard

argument of counsel, and being otherwise duly advised in

the premises, and the Court finding therefrom that there

exists no material issue of fact with respect to the fact:

(1) that Defendants CARBONELL and LECOUNT were

involved in a vehicle collision in Dade County, Florida, on

June 27, 1988; (2) that at the time of the collision

Defendant CARBONELL was driving a truck (semi rig

without a trailer — i.e., Bobtailing) which truck was owned

App. 15

by CARBONELL and leased, with CARBONELL as driver,

to Defendant INTERMODAL pursuant to the lease

agreement, commonly known in the interstate trucking

industry as a “permanent lease agreement”, 2s produced

pursuant to discovery in this action and attached to

Defendant LECOUNT’s subject motion; (3) that Defendant

EMPIRE insured Defendant CARBONELL as the named -

insured under the insurance policy attached as Exhibit 1 to

Plaintiffs complaint in this declaratory decree action on

the date of the subject accident; and (4) that Defendant

PENNSYLVANIA insured Defendant INTERMODAL as

the named insured under the insurance policy attached as

Exhibit 2 to the Plaintiffs complaint in this action on the

date of the subject accident; and therefore, based upon the

foregoing facts and the applicable law, including the

United States Code provisions and Interstate Commerce

Commission regulations governing permanent lease

agreements and the relationship of the parties under said

lease agreements, as well as the liability insurance

coverage requirements for interstate carriers such as

Defendant Intermodal, partial summary judgment is

proper and should be granted as a matter of law in this

declaratory decree action with respect to the liability of

Defendant Intermodal for any negligence of Defendant

Carbonell in the operation, maintenance or use of the

leased vehicle during the term of the lease which may be

determined to have caused injury and damages to

Defendant LeCount and his spouse in the companion case

referenced hereinafter and regarding the coverage afforded

under the referenced policies with respect to the subject

accident; and,

NOW THEREFORE, it is,

ADJUDGED that:

App. 16

1. Defendant INTERMODAL as the lessee/interstate

carrier had exclusive possession, control and use of the

leased vehicle and assumed complete responsibility for the

operation, maintenance and use of Defendant

CARBONELL’s vehicle during the lease term as though

Defendant INTERMODAL were the owner pursuant to

federal law and ICC regulations, including 49 U.S.C. 11107

and 10321 and 49 CFR 1057.12, and therefore, Defendant

INTERMODAL is liable for any negligence of Defendant

CARBONELL during the lease term causing injury and

damages to the public, including those which may be

recoverable by Defendant LECOUNT and his spouse in the

companion case, LECOUNT V. CARBONELL, CASE NO.

90-58738-CA-23, In The Circuit Court Of The Eleventh

Judicial Circuit In And For Dade County, Florida, due to

any such negligence of Defendant Carbonell causing, in

whole or in part, the subject accident. See Simmons uv.

King, 478 F.2d 857, 867 (5th Cir. 1978); Judy v. Tri-State

Motor Transit Co., 844 F.2d 1496, 1500 (11th Cir. 1988;

Rodriguez v. Ager, 705 F.2d 1229, 1236 (10th Cir. 1983);

Baker v. Roberts Express, Inc., 1992 W.L. 19543 (S.D. Ohio

1992); and Empire Fire and Marine Insurance v. Truck

Insurance Exchange, 462 So.2d 76, 78 (1st DCA Fla. 1985).

2. Defendant EMPIRE affords liability coverage up

to its policy limits of THREE HUNDRED THOUSAND

DOLLARS ($300,000.00) to Defendant CARBONELL with

respect to the subject accident under its policy number BA

97 61 48, and any language in the policy attempting to

exclude coverage is contradictory to the language of the

policy extending coverage under the facts of the subject

accident, and therefore, unenforceable. See Transport

Indemnity Co. v. Carolina Casualty Insurance Company,

652 P.2d 134, 138 (Ariz. 1982).

3. Defendant PENNSYLVANIA affords liability

coverage up to its policy limits of ONE MILLION

App. 17

DOLLARS ($1,000,000.00) to Defendant INTERMODAL

and Defendant CARBONELL with respect to the subject

accident under its policy number TA 191 21 40 RA, and any

language therein attempting to limit coverage to

Defendants INTERMODAL or CARBONELL under the

facts of the subject accident is contrary to federal law,

including 49 U.S.C. 10927 and 49 CFR 1043.1 and the ICC

endorsement attached to an forming a part of said policy,

and therefore is negated by federal law and the ICC

endorsement and unenforceable. See Empire Fire and

Marine Ins. v. Guaranty Nat. Ins., 868 F.2d 357, 363 (10th

Cir. 1989).

4. This Court reserves and defers ruling pending

further proceedings in this action on the remaining issue of

priority of liability insurance coverage between Plaintiff

EMPIRE and Defendant PENNSYLVANIA under their

respective policies, and the Court does hereby confirm that

said issue of whether one of said carriers is primary and

the other excess, or both are co-primary, with respect to the

subject accident is the sole remaining issue to be

adjudicated in this action.

DONE AND ORDERED in Chambers at Miami, Dade

County, Florida this 22 day of January, 1993.

/s/ PHILIP BLOOM

CIRCUIT JUDGE

App. 18