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Transport Indemnity Co. v. Home Indemnity Co.

decided as amended june 3 1976: April 29, 1976.

TRANSPORT INDEMNITY COMPANY, APPELLANT,
v.
HOME INDEMNITY COMPANY, APPELLEE



Appeal from the United States District Court for the Eastern District of Pennsylvania. D.C. Civil Action No. 74-1913

Gibbons, Forman and Rosenn, Circuit Judges.

Author: Forman

Opinion OF THE COURT

Forman, Circuit Judge.

On November 10, 1970, a truck leased by Lansdale Transportation Company (hereafter Lansdale) from Lancaster Truck Leasing Company (hereafter Lancaster) was involved in a collision with a passenger car. The driver and passengers of that car, alleging serious injuries, filed actions in the Court of Common Pleas, Bucks County, Pennsylvania, in October 1972 against the driver of the truck, an employee of Lansdale, Lansdale and Lancaster. At the time of the accident Lansdale was the named insured under a policy of insurance issued by Appellant, Transport Indemnity Company (hereafter Transport); Lancaster held insurance policies with Appellee, Home Indemnity Company (hereafter Home). Lansdale and Transport called on Home to take over the defense of the state court actions. On Home's refusal, Transport undertook the defense of Lansdale and, alleging diversity jurisdiction,*fn1 filed this suit in the United States District Court for the Eastern District of Pennsylvania for a judgment pursuant to 28 U.S.C. § 2201 et seq., declaring Home's responsibility to defend the lawsuits, to indemnify Lansdale for any judgment and to reimburse Transport for costs already incurred. Both parties moved for summary judgment. The lease and insurance contracts were made part of the record.

The main thrust of Transport's argument in the District Court and on appeal was that the coverage extended to Lansdale by its policy was "excess" coverage only and that Lansdale's use of the truck was also insured under the policy issued by Home to Lancaster, either under the " Comprehensive General Liability" insurance, which included coverage for the operation of "mobile equipment," or alternatively under the "Comprehensive Automobile Liability" insurance. This latter insurance had a Truckmen's endorsement which in one clause, (b), seemed to exclude persons engaged in transporting property for others, and therefore to exclude the operation of the truck in the occurrence at issue, but in another clause, (f), to extend excess insurance in such circumstances. Home in response argued that the truck leased to Lansdale was, under the definitions of the policies, clearly not "mobile equipment" but an automobile; that the Truckmen's endorsement excluded any coverage from the Comprehensive Automobile Liability insurance; and that it was clear from the lease between Lancaster and Lansdale that Lansdale's insurer was to provide primary insurance.

In an opinion filed May 12, 1975, the District Judge found that there was "a justiciable controversy between the parties, susceptible of determination by a declaratory judgment."*fn1a The court held that the truck was not "mobile equipment" under the terms of the Comprehensive General Liability policy, which policy explicitly excluded coverage for injuries resulting from the use of automobiles; that the Comprehensive Automobile Liability insurance would cover the occurrence but for the exclusion found in the Truckmen's endorsement; and that the lease between Lancaster and Lansdale made Lansdale responsible to third parties for any injuries which occurred while the trucks were operated by Lansdale. The court concluded that Home's policy extended no coverage of the accident and that therefore the "excess clause" of Transport's policy never came into operation. The District Judge accordingly denied Transport's motion for summary judgment and granted Home's cross-motion. This appeal was taken timely pursuant to 28 U.S.C. § 1291.

The Lease

The contract between Lancaster and Lansdale providing for the lease of the trucks allocated the responsibilities for insurance. Lancaster undertook to provide fire, theft, comprehensive and collision insurance on each vehicle; Lansdale convenanted:

"5(n) To obtain and keep in force at its sole expense, except as hereinafter provided, a policy or policies of insurance in one or more reputable insurance companies authorized to conduct business in the States wherein said motor vehicles are operated, in favor of the lessee, certificates to be supplied to lessor, against liability with respect to third parties . . . for death or injuries to person or damage to property resulting from the operation of lessor's motor vehicles in lessee's usual course of business by lessee, its servants, agents, or employees. Provided, however, that the minimum liability assumed by such insurance company or companies shall not be less than $200,000.00 for death or injury to any individuals in any single accident, and not less than $100,000.00 to any one individual, and not less than a $50,000.00 limit for damage to property for each and every accident."

and

"5(m) To indemnify and save lessor harmless from any and all claims for injuries . . . and further to indemnify and save lessor harmless from all loss and damage lessor may sustain or suffer because of the death of, injury to, or damage to the property of any third person, as a result of, in whole or in part, the use or maintenance of said equipment or any part thereof while in the custody, possession or control of lessee . . ."*fn2

Home argues that it is clear from the lease that Lansdale was to carry third-party coverage while using Lancaster's vehicles, that the coverage was to be at least $200,000.00 per accident and that the insurance contract "by clever wording" makes "only a token compliance with the terms of the lease"*fn3 in an attempt to avoid the lessee's obligations.

It is true that if the liability of the insurance carriers was governed by the contract between Lancaster and Lansdale, there could be little doubt that Transport, who issued a policy to Lansdale, would be responsible for the liability resulting from "injuries arising from the operation of lessor's motor vehicles in lessee's usual course of business." However, the insurance carriers were not parties to this contract and their liabilities are governed by their contracts with the insureds, and they cannot be held to anything beyond those contracted duties. Carolina Casualty Ins. Co. v. Transport Indemnity Co., 488 F.2d 790, 794 (10th Cir. 1973); Baltimore and Pittsburgh Motor Express v. Sustrick, 286 F. Supp. 524, 528 (W.D. Pa. 1968).*fn4 Under the terms of paragraph 5(n) of the lease quoted above certificates of insurance were to be supplied to Lancaster, and it could have pursued its contract rights if it found the insurance purchased by Lansdale inadequate. The contractual obligations assumed by Lansdale to Lancaster cannot extend the obligations assumed by Transport to its named insured, Lansdale, beyond the plain language of its contract. Nor does the clause 5(m) of the lease change the result, since if Lansdale is found to be covered as an ...


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