Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-89-05076/USCOURTS-ca10-89-05076-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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PUBLISH 

FILED 

Uaire& Sr~t~£ {P\if! ~f Apf.Cals 

Tenth Circuit 

UNITED STATES COURT OF APP&ALS 

~EB 11991 

&OBERT L HOECKER 

Clerk FOR THE TENTH CIRCUIT 

RAILHEAD FREIGHT SYSTEMS, INC., 

Plaintiff-Appellee, 

v. 

UNITED STATES FIRE INSURANCE COMPANY, 

Defendant-Appellant. 

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No. 89-5076 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF OKLAHOMA 

(D.C. · No. 88-C-370-B) 

Submitted on the briefs: 

Dale F. McDaniel, Tulsa, Oklahoma, for Defendant-Appellant. 

Brad Smith of Knowles, King and Smith, Tulsa, Oklahoma, for 

Plaintiff-Appellee. 

Before McKAY, McWILLIAMS, and EBEL, Circuit Judges. 

McKAY, Circuit Judge. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

Appellate Case: 89-5076 Document: 01019683903 Date Filed: 02/01/1991 Page: 1 
34(a); lOth Cir. R. 34.1.9. The case is therefore ordered submitted without oral argument. 

In this diversity case, United States Fire appeals from a 

summary judgment. The single issue on appeal is which of two 

trucker's insurance policies, both of which contain an ICC 

endorsement, is the primary policy covering an accident that 

occurred in Mayes County, Oklahoma. The parties stipulated to the 

relevant facts. 

Kroblin Refrigerated Xpress, Inc. leased both a truck and 

driver from a partnership called Group Three Investments, pursuant 

to an "Independent Contractor Operating Agreement." The truck was 

owned by Melvin Hutchison, who had given leasing authority to 

Group Three. The driver was employed by Railhead Freight Systems, 

Inc. While operating the truck on Kroblin's business, the driver 

was involved in an accident that resulted in one death and injuries to three other people. The parties stipulated that the 

driver was "solely responsible for the cause of the accident." 

Record, vol. 1, doc. 6 at 3. 

Two applicable insurance policies were in effect at the time 

of the accident. Kroblin was insured by United States Fire. 

Railhead and Mel Hutchison (son of Melvin Hutchison, the truck's 

owner, and a partner in Group Three) were insured by Integral 

Insurance Company. United States Fire settled the lawsuits 

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Appellate Case: 89-5076 Document: 01019683903 Date Filed: 02/01/1991 Page: 2 
resulting from the accident for the total sum of $860,000.00. 

In a consolidated case before the United States District 

Court for the Northern District of Oklahoma, both Integral's 

insured and United States Fire sought a declaratory judgment to 

determine which policy provided primary coverage of the accident. 

The district court granted summary judgment for Integral. It held 

that United States Fire's policy was primary and Integral's policy 

excess, and awarded Integral its attorney's fees. 

United States Fire appeals the judgment of the district 

court. It asserts two main arguments: 1) the ICC endorsements 

attached to both policies render Integral's policy primary or, at 

least, co-primary; and 2) Group Three indemnified Kroblin in the 

Independent Contractor Operating Agreement, rendering Integral's 

policy primary. Integral responds that the ICC endorsement in its 

policy issued to the lessors is inapplicable because the truck and 

driver were operating under the lessee's operating permit. Integral also contends that the lessee's policy, even absent the ICC 

endorsement, by its terms provides primary coverage of the accident. 

Our standard of review is de novo. We apply the same standard as the district court: whether any genuine issue of material 

fact is in dispute and, if not, whether the moving party is 

entitled to judgment as a matter of law. Applied Genetics Int'l, 

Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (lOth 

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Appellate Case: 89-5076 Document: 01019683903 Date Filed: 02/01/1991 Page: 3 
Cir. 1990). Because the parties stipulated to the operative 

facts, we limit our review to determine whether the substantive 

law was correctly applied and the policy language correctly interpreted. Id. 

The wording of the parties' insurance policies are practically identical. Both contain a standard ICC endorsement that 

requires the insurer to pay "any final judgment" against the 

insured "resulting from negligence in the operation, maintenance, 

or use of motor vehicles subject to (certain parts of the] Motor 

Carrier Act of 1980 ...... The endorsement also stipulates that 

nothing in the insurance policy can relieve the insurer of this 

liability. Record, vol. 1, doc. 9 at 2. This endorsement is 

attached to insurance policies covering interstate motor carriers 

operating pursuant to ICC authority. See 49 u.s.c. § 10927 

{1988); 49 C.F.R. § 1043.1 to .11 (1989). 

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

868 F.2d 357 (lOth Cir. 1989), we held that an ICC endorsement in 

a lessee's insurance policy does not automatically render that 

policy primary over all other insurance policies that do not contain a similar provision. This court in Empire therefore held 

that a lessee's policy containing an ICC endorsement was only coprimary with a lessor's policy which did not contain an endorsement but otherwise provided primary coverage. United States Fire 

argues that under the rationale of Empire, the addition of the ICC 

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Appellate Case: 89-5076 Document: 01019683903 Date Filed: 02/01/1991 Page: 4 
endorsement creates primary liability for both policies. It reasons that Integral is therefore at least a co-primary insurer. 

Empire does not provide specific guidance for this case, however, where both the lessor's and lessee's policies contain ICC 

endorsements. In an earlier case, Carolina Casualty Ins. Co. v. 

Transport Indem. Co., 488 F.2d 790 (lOth Cir. 1973), we examined 

the primary liability between two policies, both containing ICC 

endorsements. The lessor in Carolina, like the lessor here, 

argued that the ICC endorsement in its policy was not applicable 

because the truck was operating under the lessee's ICC permit. 

The Carolina court did not reach that issue, however, because it 

found that the lessor would·be ultimately liable for the accident 

even absent the ICC endorsement. To avoid circuity of action, the 

court then held the lessor's insured liable to the injured party. 

Carolina, 488 F.2d at 794. 

In Empire, 868 F.2d at 365, this court characterized the 

Carolina decision as holding that "[t]he ICC endorsements in both 

policies were not determinative because they effectively neutralized each other." We need not raise that characterization to a 

rule of construction here. After reviewing the language of the 

policies issued by United States Fire and Integral, we find that 

United State's Fire's policy, by its own terms, is primary. Like 

our decision in Carolina, therefore, we do not reach the issue of 

whether an ICC endorsement contained in a lessor's policy is 

effective when the truck is operating under a lessee's ICC permit. 

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Appellate Case: 89-5076 Document: 01019683903 Date Filed: 02/01/1991 Page: 5 
Under either rationale, the lessee's policy is the primary policy 

covering the accident. 

Both policies contain an "Other Insurance" clause, which 

states: * 

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 

*** 

3. Except as provided [] above, this policy provides 

primary insurance for any covered auto you own and 

excess insurance for any covered auto you don't own. 

This language, unaltered by the ICC endorsement, describes 

United States Fire's policy as primary for the truck Kroblin 

rented from Group Three, and Integral's policy as excess for the 

truck rented RY Group Three and Melvin Hutchison. 

* 

The policies also contain the following language: 

None of the following is an insured: 

1. Any trucker 

b. If the trucker is insured under an auto liability policy which does not insure on a primary basis the 

owners of the autos and their agents and employees while 

the autos are being used exclusively in the trucker's 

business and over a route or territory the trucker is 

We quote from Integral's policy here. United States Fire's 

policy language differs slightly, but, substantively, is 

identical. 

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Appellate Case: 89-5076 Document: 01019683903 Date Filed: 02/01/1991 Page: 6 
authorized to serve by public authority. 

By this language, both policies deny coverage to other 

truckers that do not supply primary insurance for the owners of 

leased vehicles the truckers use in their own business. Since 

both policies do provide for owner/agent coverage (see paragraph 4 

quoted below), and since both named insureds are truckers, both 

policies provide excess coverage for the other's insured. Nonetheless, the policies provide excess coverage only if the truckers 

themselves provide primary coverage, and only while the covered 

vehicles are being used in the trucker's own business. 

Additionally, United States Fire's policy, primary by its own 

terms, insures not only Kroblin, but the driver, Railhead, Group 

Three, and Melvin Hutchison as well. The applicable language of 

the policies in the "Who is Insured" section provides, in relevant 

part: 

1. You are an insured for any covered auto. 

2. Anyone else is an insured while using with your permission a covered auto you own, hire or borrow ·except: 

(exceptions not applicable). : 

*** 

4. The owner or anyone else from whom you hire or borrow a covered auto(] is an insured while the covered 

auto: 

a. Is being used exclusively in your business, and 

b. Is being used over a route or territory you are 

authorized to serve by public authority . • . . 

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Appellate Case: 89-5076 Document: 01019683903 Date Filed: 02/01/1991 Page: 7 
5. Anyone liable for the conduct of an insured 

described above is an insured but only to the extent of 

that liability. 

Under paragraph 2, both policies cover the driver because he 

was a permissive user relative to both Kroblin and Railhead. 

Record, vol. 1, doc. 6 at 3. Under paragraph 4, United States 

Fire's policy covers Melvin Hutchison and Group Three as the owner 

and lessor of the truck. Under paragraph 5, United States Fire's 

policy covers Railhead, as the driver's employer. 

United States Fire nevertheless argues that the Independent 

Contractor Operating Agreement contains language that indemnifies 

its insured, Kroblin, and that the indemnification should render 

Integral's policy primary. Primary coverage between insurance 

policies, however, is not determined by contractual arrangements 

between their insureds not covered under their policy. Carolina, 

488 F.2d at 794. We have also considered the remaining arguments 

tendered by United States Fire and find them to be unpersuasive. 

The judgment of the United States District Court for the 

Northern District of Oklahoma is therefore AFFIRMED. 

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