Clarendon National Insurance v. Medina
2011 U.S. App. LEXIS 14286
| 7th Cir. | 2011Background
- Guillermo Medina, a commercial truck driver, used a Volvo truck owned by Maria Medina, with Town Trucking as the carrier.
- Town entered a nine-page Contractor Operating Agreement (COA) with Guillermo to supply the Volvo and Guillermo as driver; Maria did not sign the COA but knew and permitted the arrangement.
- Town maintained a $1 million primary insurance policy; Guillermo obtained bobtail insurance with Clarendon, the policy excluding coverage for autos rented to a lessee.
- Guillermo hauled loads for Town; his earnings and related activity were conducted with Maria’s knowledge and joint control over funds.
- In 2006, Guillermo’s independent operation for Town led to a fatal accident; Occidental settled with Schulman’s estate; a $2 million consent judgment against Town and the Medinas contemplated payment from Guillermo’s Clarendon policy.
- Clarendon denied coverage based on the exclusion; the district court granted summary judgment for Clarendon, holding that the COA created a lease.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the COA is a lease under the policy. | Clarendon: COA does not constitute a lease because Guillermo alone signed it. | Town/Medinas: COA satisfies lease elements and fits the federal leasing framework. | COA constitutes a lease. |
| Whether an agency relationship between Maria and Guillermo makes Guillermo an owner/authorized representative. | Clarendon: no agency; Maria is the owner and Guillermo is not acting for her. | Town/Medinas: agency exists; Maria empowered Guillermo to act for her regarding the Volvo. | Agency relationship exists between Maria and Guillermo. |
| Whether the exclusion applies to bar coverage because the Volvo was 'rented' to Town. | Clarendon: exclusion applies if Volvo was rented to Town by Guillermo acting on Maria's behalf. | Town/Medinas: Volvo cannot be rented by Guillermo as he did not own it; COA and agency show rent occurred through Town. | Exclusion applies; coverage denied. |
Key Cases Cited
- Hartford Ins. Co. of the Se. v. Occidental Fire & Cas. Co., 908 F.2d 235 (7th Cir. 1990) (policy ambiguities limited; more often interpreted by contract terms)
- Frankart, 69 Ill.2d 209 (Ill. 1977) (similar lease/exclusion analysis in Illinois)
- Hobbs v. Hartford Ins. Co. of the Midwest, 214 Ill.2d 11 (2005) (contract interpretation; ambiguity standard for policy exclusions)
- Williams v. Nagel, 162 Ill.2d 542 (1994) (leases treated as ordinary contracts; enforceability of contracts)
- Capital Plumbing & Heating Supply Co. v. Snyder, 2 Ill.App.3d 660 (1971) (agency concepts in Illinois contract law)