Great West Casualty Co. v. National Casualty Co.
53 F. Supp. 3d 1154
D.N.D.2014Background
- Lessor-driver Steve Heinis owned a tractor-trailer leased to Avery Enterprises under a written lease requiring Heinis to keep equipment in good working condition, remain in constant contact with Avery dispatch, and pay for repairs and consumables; Avery agreed to maintain motor-carrier liability insurance.
- Avery maintained a motor-carrier liability policy with National; Heinis maintained a "bobtail"/non-trucking commercial policy with Great West.
- On June 16–18, 2011, after hauling contaminated flowback water for Avery, Heinis took his trailer to Avery’s shop for a repair he arranged; while Avery employee Jesse Miller welded the trailer on June 18, residual petroleum fumes ignited and Miller was injured; Miller sued Heinis in state court.
- Great West sued for declaratory judgment seeking a determination that Great West (or National) must provide coverage for Heinis; Great West moved for summary judgment and National cross-moved.
- Central legal question: whether National’s motor-carrier policy (including a "Hired Autos Specified as Covered Autos You Own" endorsement) or Great West’s non-trucking policy covers Heinis for Miller’s injury, and whether policy exclusions (employer’s liability / fellow-employee) bar coverage.
Issues
| Issue | Plaintiff's Argument (Great West) | Defendant's Argument (National) | Held |
|---|---|---|---|
| Whether National’s Motor Carrier Coverage Form covers Heinis for the June 18 accident | Great West: trailer was being used "exclusively in Avery’s business" (leased to Avery; repair furthered Avery’s commercial interests), so Heinis is an insured under § II (c) | National: trailer not under dispatch; repair was Heinis’s personal responsibility; coverage only when actually used in Avery’s business; factual dispute whether trailer was hooked | Court: trailer was being used exclusively in Avery’s business; National’s motor-carrier form affords coverage to Heinis (absent exclusions) |
| Whether the Hired-Autos-Specified endorsement makes the lessor an insured regardless of other coverage bases | Great West: endorsement expands "Who is An Insured" to include owner/lessor of scheduled auto for acts/omissions of named insured or employees (e.g., Miller welded) | National: endorsement applies only to owners named in schedule and cannot create coverage for acts imputable to Avery; factual disputes exist | Court: endorsement plausibly applies; factual issues exist (e.g., scheduling/identification) so endorsement would supply coverage if motor-carrier form failed; trial would be needed on endorsement fact issues if necessary |
| Whether National’s employer’s-liability exclusion or fellow-employee exclusion bars coverage | Great West: exclusions are ambiguous when read with severability clause and should be construed for the insured; exclusions should not bar coverage for an additional insured like Heinis | National: exclusions exclude injuries to Avery’s employee (Miller) and to fellow employees, and federal “statutory employee” definitions should be read into the policy to exclude coverage | Court: severability clause creates ambiguity as to employer’s-liability exclusion; construed against insurer — exclusion does not bar coverage here. Court also rejects importing the federal “statutory employee” definition into the policy; fellow-employee exclusion does not apply |
| Whether Great West’s non-trucking (bobtail) policy covers Heinis | Great West: seeks declaratory relief to force Great West to cover Heinis (but actually argued National is primary) | National: Great West’s policy excludes coverage when auto is used in business of lessee; trailer was used in Avery’s business so Great West’s policy excludes coverage | Court: Great West’s policy does not cover the accident because the trailer was used in the business of the lessee (Avery) at the time of the accident |
Key Cases Cited
- Hartford Ins. Co. of Southeast v. Occidental Fire & Cas. Co., 908 F.2d 235 (7th Cir. 1990) ("in the business of" means use that furthers the lessee’s commercial interests)
- Empire Fire & Marine Ins. Co. v. Brantley Trucking, 220 F.3d 679 (5th Cir. 2000) (repairs and related activities can be "in the business of" lessee)
- National Continental Ins. Co. v. Empire Fire & Marine Ins. Co., 157 F.3d 610 (8th Cir. 1998) (adopts Hartford’s interpretation in this circuit)
- Farmers Elevator Mut. Ins. Co. v. Carl J. Austad & Sons, Inc., 366 F.2d 555 (8th Cir. 1966) (employer’s-liability exclusion applied to bar coverage for an omnibus insured; court distinguished on severability grounds)
- Northwest G.F. Mut. Ins. Co. v. Norgard, 518 N.W.2d 179 (N.D. 1994) (North Dakota Supreme Court: severability clause can create ambiguity when read with exclusions; resolve ambiguity against insurer)
- Carolina Cas. Ins. Co. v. Insurance Co. of North America, 595 F.2d 128 (3d Cir. 1979) (MCS-90 endorsement is limited: it ensures minimum financial responsibility but does not rewrite underlying policy coverage)
Summary of disposition: Great West’s summary-judgment motion granted; National’s denied. Court declares Heinis has coverage under National’s policy (up to policy limits) and no coverage under Great West’s policy.