Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-87-01116/USCOURTS-ca10-87-01116-0/pdf.json

Parties Involved:
Empire Fire & Marine Insurance Company
Appellee
Guaranty National Insurance Company
Appellant

Document Text:

PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

EMPIRE FIRE AND MARINE 

INSURANCE COMPANY, 

Plaintiff-Appellee, 

FILED 

United St.at.es Court of Appeals 

Tenth Circuit 

FEB 1 01989 

ROBERT L. HOECKER 

Clerk · 

v. 

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) 

) 

) 

) 

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) 

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) 

) 

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No. 87-1116 

GUARANTY NATIONAL 

INSURANCE COMPANY, 

Defendant-Appellant. 

Appeal from the United States District Court 

for the Northern District of Oklahoma 

(D.C. No. 85-C-713-C) 

Kevin L. Ward of Best, Sharp, Thomas, Glass & Atkinson, Tulsa, 

Oklahoma (Joseph A. Sharp and Renee J. Harter of Best, Sharp, 

Thomas, Glass & Atkinson, Tulsa, Oklahoma, on the briefs) for 

Defendant-Appellant. 

Gerald L. Friedrichsen of Fitzgerald & Brown, Omaha, Nebraska 

(Greg Morris of Morris & Morris, Tulsa, Oklahoma, with him on the 

brief) for Plaintiff-Appellee. 

Before MOORE, BARRETT, and EBEL, Circuit Judges. 

EBEL, Circuit Judge. 

Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 1 
This appeal involves a dispute between Empire Fire & Marine 

Insurance Company ("Empire") and Guaranty National Insurance 

Company ("Guaranty") as to which of their policies affords primary 

coverage relative to the accident here under consideration. The 

district court granted summary judgment in favor of Empire, 

holding that the Interstate Commerce Commission ("ICC") 

endorsement attached to Guaranty's policy makes Guaranty the 

primary insurer as a matter of law over any other insurer. In so 

holding, the district court expressed the view that our opinion in 

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

we disagree. 

The ICC endorsement does not establish automatic priority of 

the insurance policy to which it is attached, but rather serves 

only to negate limiting clauses that may appear in that policy. 

As modified by the endorsement, the policy still must be compared 

to all other relevant policies in order to determine, under 

traditional state insurance and contract law, the priorities among 

the policies. Although it appears on the record before us that 

this analysis ~ould likely lead to the same conclusion reached by 

the district court that Guaranty's policy is. the primary policy, 

the district court entered summary judgment for Empire on the 

ground that the mere existence of the ICC endorsement in 

Guaranty's policy made it primary over other policies as a matter 

of law. Therefore, the parties have not had the opportunity to 

submit evidence concerning a comparative analysis of the policies. 

Accordingly, we vacate the district court's decision and remand 

the case for further proceedings. 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 2 
I. FACTS 

The underlying facts are not in dispute. Jennings Trucking 

Service, Inc. ("Jennings") is an interstate motor carrier licensed 

by the ICC to haul goods over authorized routes. Jennings is 

insured by Guaranty. Kris Knaus owns an independent trucking 

company, which owns and leases trucks and drivers to motor 

carriers, such as Jennings, for hauling goods over ICC certified 

routes. Knaus is insured by Empire. 

On March 3, 1982, Knaus and Jennings entered into a lease 

agreement whereby Knaus provided Jennings with a Mack truck and a 

driver by the name of Billy Bellamy for use in Jennings' business. 

Knaus retained ownership of the truck, and Bellamy remained his 

employee under the terms of the lease. 

On June 27, 1984, Bellamy telephoned Jennings' dispatcher to 

ask if a hauling job was available. The dispatcher did not have a 

job available, so Bellamy proceeded to drive toward Jennings' 

dispatch yard to wait for a job. En route to the dispatch yard, 

Bellamy collided with an automobile driven by Christopher 

Gallagher. Gallagher died as a result of the accident. 

Following the accident, Gallagher's estate threatened 

litigation against Knaus and its insurance carrier, Empire. 

Empire demanded that Guaranty assume the defense, but Guaranty 

rejected that demand. Empire thereafter negotiated a settlement 

with Gallagher's estate in the amount of $158,565.71. Empire 

brought this suit against Guaranty to recover the settlement 

amount. The district court granted summary judgment for Empire, 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 3 
holding that the ICC endorsement in Guaranty's policy makes 

Guaranty the primary insurer as a matter of law, and Guaranty 

therefore was obligated to reimburse Empire for the entire amount 

paid by Empire in settlement to the Gallagher estate. 

II. THE INSURANCE POLICIES 

A. Empire's Policy 

Empire's policy with Knaus obligates Empire to pay all sums 

that Knaus is legally required to pay as damages for bodily injury 

or property damage resulting from the operation of an auto covered 

by the policy. 1 In addition to providing coverage for Knaus, the 

policy covers any other party "using with [Knaus'] permission a 

covered auto [Knaus] own[s]. 112 With respect to the allocation of 

liability among other insurance policies that also might be 

applicable, Empire's policy,. as modified by the Truckers Coverage 

Endorsement, provides as follows: 

PART VI - CONDITIONS 

B. OTHER INSURANCE - PRIMARY AND EXCESS INSURANCE 

PROVISIONS. 

1. • •• This policy's liability coverage is excess 

over any other collectible insurance for any 

covered auto while hir3d or borrowed from you by 

another trucker •••• 

1 Empire's policy defines "auto" as "a land motor vehicle, 

trailer, or semi-trailer designed for travel on public roads," 

which includes the Mack truck involved here. 

2 Under this provision, Empire's policy appears to cover 

Bellamy, the driver of the Mack truck at the time of the accident. 

3 Without the Truckers Coverage Endorsement, Part VI(B)(l) · would have provided, "For any covered auto you own this policy 

provides primary insurance." Although we assume that the Truckers 

[continued on next page ••• ] 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 4 
2. Except as provided 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 poiicies 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. 

B. Guaranty's Policy 

Guaranty's policy with Jennings obligates Guaranty to pay all 

sums that Jennings is legally required to pay as damages for 

bodily injury or property damages resulting from the use of a 

covered auto. 4 Guaranty's permissive user clause provides that 

"[a]nyone else is an insured while using with [Jennings'] 

permission any covered auto" hired or borrowed by Jennings. 5 The 

policy also covered the owner of covered autos that Jennings 

leases."while the covered auto is being used exclusively in 

[Jennings'] business, and is being used pursuant to operating 

[ ••• continued from previous page] 

Coverage Endorsement modifies this language, as reflected above, 

and makes the policy an excess coverage policy for purposes of 

this litigation, that issue has not been tried, nor have there 

been any findings below on the extent of Empire's coverage. We do 

not preclude consideration of the applicability of the Truckers 

Coverage Endorsement on remand. 

4 Guaranty's policy defines "auto" to include the Mack truck 

here involved. 

5 Under this provision, Guaranty's policy appears to cover 

Bellamy, the driver at the time of the accident. Guaranty argues 

on appeal that Bellamy was not covered under Guaranty's policy 

because, under state master and servant law, Jennings was not 

responsible for Bellamy at the time of the accident. This court 

rejected that argument in Rodriguez v. Ager, 705 F.2d 1229, 1236 

(10th Cir. 1983). 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 5 
rights granted to [Je,nnings] by a public authority. 116 (Guaranty's 

Policy, Part IV(D)(4).) 

With respect to the allocation of liability among other 

insurance companies that also might be liable, Guaranty's policy 

provides: 

PART VII - CONDITIONS 

B. OTHER INSURANCE - PRIMARY AND EXCESS INSURANCE 

PROVISIONS. 

1. This policy's liability coverage·1s piimary 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. 

Because Jennings is an interstate carrier operating pursuant 

to an ICC certificate and authority, the following special 

endorsement, ICC form BMC 90,7 is attached to the insurance policy 

provided by Guaranty: 

The insurance policy to which this endorsement is 

attached provides automobile liability insurance 

and is amended to assure compliance by the insured, 

within the limits stated herein, as a motor carrier 

6 Under this provision, Guaranty's policy also appears to cover 

Knaus, although we do not preclude the parties from addressing · this issue on remand. 

7 See 49 C.F.R. § 1003.3. 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 6 
of property, with Sections 29 and 30 of the Motor 

Carrier Act of 1980 and the rules and regulations 

of the Federal Highway Administration's Bureau of 

Motor Carrier Safety (Bureau) and the Interstate 

Commerce Commission (ICC). 

In consideration of the premium stated in the 

policy to which this endorsement is attached, the 

insurer (the company) agrees to pay, within the 

limits of liability described herein, any final 

judgment recovered against the insured for public 

liability resulting from negligence in the 

operation, maintenance or use of motor vehicles 

subject to the financial responsibility 

requirements of Sections 29 and 30 of the Motor 

Carrier Act of 1980 regardless of whether or not 

each motor vehicle is specifically described in the 

policy and whether or not such negligence occurs on 

any route or in any territory authorized to be 

served by the insured or elsewhere. Such insurance 

as is afforded, for public liability, does not 

apply to injury to or death of the insured's 

employees while engaged in the course of their 

employment, or property transported by the insured, 

designated as cargo. It is understood and agreed 

that no condition, provision, stipulation, or 

limitation contained in the policy, this 

endorsement, or any other endorsement thereon, or 

violation thereof, shall relieve the company from 

liability or from the payment of any final 

judgment, within the limits of liability herein 

described, irrespective of the financial condition, 

insolvency or bankruptcy of the insured. However, 

all terms, conditions and limitations in the policy 

to which the endorsement is attached, shall remain 

in full force and effect as binding between the 

insured and the company. The insured agrees to 

reimburse the company for any payment made by the 

company on account of any accident, claim, or suit 

involving a breach of the terms of the policy 

except for the agreement contained in this 

endorsement. 

(Emphasis added.) 

The primary issue raised on appeal is whether the underlined 

language in the above-quoted endorsement makes Guaranty's policy 

primary as a matter of law over Empire's policy, which does not 

contain such an endorsement. 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 7 
III. DISCUSSION 

Federal courts have interpreted the effect of this ICC 

endorsement in at least three ways. (1) The court below held that 

the endorsement makes the insurance policy to which it is attached 

primary as a .matter of law over all other insurance policies that 

lack similar provisions. Empire Fire & Marine Ins. Co. v. 

Guaranty Nat'l Ins. Co., D.C. No. 85-C-713-C (N.D. Okla. Dec. 19, 

1986). (2) Other courts have_held_ that the endorsement only 

negates limiting provisions in the policy to which it is attached, 

such as an "excess coverage" clause, but does not establish 

primary liability over other policies that are also primary by 

their own terms. American Gen. Fire & Casualty Co. v. Truck Ins. 

Exch., 660 F. Supp. 557, 569 (D. Kan. 1987). (3) Other courts 

have held that the endorsement applies only to situations in which 

a claim is being asserted by a shipper or a member of the public, 

and that the endorsement does not apply when allocating liability 

among insurance carriers. ~' Carter v. Vangilder, 803 F.2d 

189, 191-92 (5th Cir. 1986); Transport Indem. Co. v. Paxton Nat'l 

Ins. Co., 657 F.2d 657, 659 (5th Cir. 1981), cert. denied, 455 

U.S. 982 (1982); Carolina Casualty Ins. Co. v •. Und~rwriter's Ins. 

Co., 569 F.2d 304, 313 (5th Cir. 1978). 

Because these interpretations compel such dramatically 

different results, yet each has jurisprudential support, it is 

important that we clarify the Tenth Circuit's position on this 

issue.a We adopt the second approach listed above and hold that 

8 The following hypothetical illustrates the different results 

that would be reached under each of these three interpretations. 

[continued on next page ••• ] 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 8 
the ICC endorsement negates. any inconsistent limiting provisions 

in the insurance policy to which it is attached, regardless of 

whether a shipper or a member of the public is involved in the 

dispute or whether the dispute is among insurance companies. We 

do not, however, expand the effect of the ICC endorsement to make 

any policy to which it is attached primary over other policies 

which are also primary by their own terms but which lack an ICC 

endorsement. In reaching this result, we rely on legislative 

history, relevant ICC regulations, and the language of the 

[ ••• continued from previous page] 

Assume that an owner-lessor of a truck has an insurance policy 

which provides that it is "primary," and that the carrier-lessee 

of the truck has an insurance policy that provides that it is 

"excess.'' Assume also that the lessee's policy has an ICC 

endorsement identical to the one in this case and that the 

lessor's policy has no such endorsement. Finally, assume that the 

truck was involved in an accident which led to damages within the 

individual policy limits of both the lessor's and lessee's 

insurance policies. 

Under the first interpretation, the lessee's insurance 

company would be solely liable because the ICC endorsement would 

make that policy primary as a matter of federal law over all other 

policies not containing a similar endorsement, regardless of the 

primary coverage language in the lessor's policy. 

Under the second interpretation, both insurance companies 

would share pro rata in the liability because the ICC endorsement 

would merely have the effect of negating the "excess coverage'' 

limitations contained in the lessee's policy. Therefore, both of 

the policies would be primary policies and, under customary pro 

rata sharing provisions, both insurers would share in the 

liability. 

Under the third interpretation, the endorsement would be 

considered inconsequential in allocating risk between the 

insurance companies. Although the lessee's policy would be 

considered a primary policy insofar as the public and shippers are 

concerned, it would remain an excess policy for purposes of 

allocating liability between the insurance companies, and 

therefore the lessor's insurance company, as the only primary 

insurer, would be solely liable. 

-9-

Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 9 
endorsement itself. We also consider the diverse precedent 

concerning the issue. 

A. Federal Statutes and Regulations 

Although the history of the relevant federal statutes and ICC 

regulations does not expressly guide the disposition of this case, 

it does lend support to our result. Therefore, a brief overview 

of the history of the industry and regulations is in order. 

In the past, the use by truckers of leased or borrowed 

vehicles led to a number of abuses that threatened the public 

interest and the economic stability of the trucking industry. 

See, ~' American Trucking Ass'ns v. United States, 344 U.S. 

298, 304-05 (1953). In some cases, ICC-licensed carriers used 

leased or interchanged vehicles to avoid safety regulations 

governing equipment and drivers. Id. at 305. In other cases, the 

use of non-owned vehicles led to public confusion as to who was 

financially responsible for accidents caused by those vehicles. 

See,~, Mellon Nat'l Bank & Trust Co. v. Sophie Lines, Inc., 

289 F.?d 473, 477 (3d Cir. 1961). 

In order to address these.abuses, Congress amended the 

Interstate Commerce Act to allow the ICC to prescribe regulations 

to insure that motor carriers would be fully responsible for the 

operation of vehicles certified to them. 49 u.s.c. § 304(e) 

(1956). This section was revised and reenacted in 1978. See 

49 u.s.c. § 11107; see also 49 u.s.c. § 10927. In response to 

this mandate, 'the ICC promulgated regulations requiring that every 

lease entered into by an ICC-licensed carrier must contain a 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 10 
provision stating 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." 49 C.F.R. 

§ 1057.12(c). Further, the ICC requires that all ICC-certified 

carriers maintain insurance or other form of surety "conditioned 

to pay any final judgment recovered against such motor carrier for 

bodily injuries to or the death of any person resulting from the 

negligent operation, maintenance,· or use of motor vehicles" under 

the carrier's permit. 49 C.F.R. § 1043.l(a). 

To assure compliance with this requirement, the ICC developed 

a form endorsement to be included in insurance policies of 

carriers who use leased vehicles to transport property under ICC 

certificate. See 49 C.F.R. § 1003.3 (B.M.C. 90 (Rev. 1982), 

Endorsement for Motor Carrier Policies of Insurance for Automobile 

Bodily Injury and Property Damage Liability under 49 u.s.c. 

§ 10927). Thus, the ICC endorsement that is the subject of this 

appeal had its origin in the ICC's desire that the public be 

adequately protected when a licensed carrier uses a leased vehicle 

to transport goods pursuant to an ICC certificate. Cf. 

Transamerican Freight Lines, Inc. v. Brada Miller Freight Sys's 

Inc., 423 U.S. 28, 34 (1975); Rodriguez v. Ager, 705 F.2d 1229, 

1232 (10th Cir. 1983). 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 11 
B. Language of the ICC Endorsement 

The ICC endorsement provides in relevant part: 

It is understood and agreed that no condition, 

provision, .stipulation, or limitation contained in 

the policy, this endorsement, or any other 

endorsement thereon, or violation thereof, shall 

relieve the company from liability or from the 

payment of any final judgment, within the limits of 

liability herein described. 

(Emphasis added.) 

Nothing in the language of this endorsement purports to make 

the insurance policy to which it is attached primary over all 

. . 

other primary insurance policies. A straightforward reading of 

the language suggests only that it negates any clauses in the body 

of the policy to which it is attached that would have the effect 

of limiting that insurance carrier's liability. That is, it 

deletes limiting clauses in the policy to which it is attached, 

but it does not create new, additional obligations in the policy, 

nor does it purport to limit or delete clauses in other policies 

issued by other insurance companies that may also have 

contractually assumed primary liability for the risk involved. 

An "excess coverage" clause is a "condition" or "limitation" 

that could "re.lieve the company of liability." Thus, an excess 

coverage clause is the kind of limitation that the ICC endorsement 

is designed to render ineffective. Once the ICC endorsement 

removes the "excess coverage" clause, the policy is treated as 

affording primary coverage. See Argonaut Ins. Co. v. Nationql 

Indem. Co., 435 F.2d 718, 720 (10th Cir. 1971); American Gen. Fire 

& Casualty Co. v. Truck Ins. Exch., 660 F. Supp. 557, 567 (D. Kan. 

1987). The ICC endorsement cannot, however, nullify the effect of 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 12 
other policies that ~re also primary by their own terms. To hold 

otherwise would grant the insurers who issued those policies a 

windfall. We find no authority to suggest that the ICC intended 

to allow other insurance companies to escape their contractual 

obligations to provide additional primary coverage, for which they 

presumably collected premiums, merely because of the fortuity that 

another insurance policy involved in the matter contains an ICC 

endorsement. 

c. Tenth Circuit Precedent 

The district court concluded that our decision in Rodriguez 

v. Ager, 705 F.2d 1229 (10th Cir. 1983), required the holding that 

Guaranty's ICC endorsement makes Guaranty the primary insurer over 

all other insurers as a matter of law, regardless of the 

provisions in Empire's policy. In this regard, the district court 

is mistaken. 

In Rodriguez, an interstate motor carrier leased a truck and 

driver for use in its ICC-licensed trucking business. The truck 

bore the lessee's insignia at the time it was involved in a fatal 

accident, even though the truck and driver were engaged in 

business totally unrelated to the lessee's business. The family 

of the decedent, who was driving the automobile at the time it 

collided with the leased truck, sued the truck owner, the driver, 

and the lessee. The issue was whether the decedent's relatives 

could recover against the lessee even though the truck was not 

being driven on his behalf at the time of the accident. We held 

that the lessee was liable to the decedents' family because, as a 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 13 
matter of law, ICC regulations require the lessee to be 

responsible for all equipment leased to it during the term of the 

lease. Id. at 1236. 

Rodriguez is instructive on the issue of a lessee's· 

responsibilities to injured parties under ICC regulations, but it 

is not relevant to the issue of how liability should be allocated 

between two insurance companies, both of which arguably have 

insured the same event. Rodriguez did not involve insurance 

companies, nor did it address the effect of an ICC endorsement on 

the allocation of risk among insurance companies. Therefore, it 

was error to hold that Rodriguez is controlling i~ this case. 

There are, however, three other cases in which the Tenth 

Circuit has considered the effect of an ICC endorsement on the 

allocation of risk among multiple insurers, Argonaut Ins. Co. v. 

National Indem. Co., 435 F.2d 718 (10th Cir. 1971); Hagans v. 

Glens Falls Ins. Co., 465 F.2d 1249 (10th Cir. 1972); and Carolina 

Casualty Ins. Co. v. Transport Indem. Co., 488 F.2d 790 (10th Cir. 

1973). Although other circuits have occasionally interpreted 

those cases as establishing the proposition that an ICC 

endorsement makes that policy primary as a matter of law over all 

other policies without such an endorsement, that interpretation is 

not warranted.9 

9 See Gaskin v. Jowers, 775 F.2d 621, 625 (5th Cir. 1985) ("the 

Tenth"""CTrcuit arguably interprets the lessee~s coverage to be 

primary as a matter of law; the lessor's insurance provides excess 

coverage as a result of that Circuit's construction of the ICC 

regulations''); Carolina Casualty Ins. Co. v. Underwriter's Ins. 

·co., 569 F.2d 304, 312 (5th Cir. 1978) (''Even if we assume 

arguendo ••• that in this trilogy [Argonaut, Hagans, and 

Carolina v. Transport] the Tenth Circuit is saying that such an 

[continued on next page .•• ] 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 14 
In Argonaut Ins. Co. v. National Indem. Co., 435 F.2d 718 

(10th Cir. 1971), the earliest Tenth Circuit case addressing this 

issue, the lessor's and the lessee's insurance policies both 

contained identical "excess coverage" provisions. The lessee's 

policy also contained an ICC endorsement similar to the one at 

issue here. This ·court held that the provisions of the ICC 

endorsement attached to the lessee's insurance policy negated 

inconsistent provisions in the body of the policy, such as the 

riexcess coverage" limitation, and thereby converted that policy 

into a primary policy. Id. at 720. When the lessee's policy, 

thus modified, was compared with the lessor's policy, which 

remained "excess," the lessee's insurer obviously bore the 

ultimate liability. 

The holding in Argonaut is fully consistent with our result 

here. We hold that the ICC endorsement in Guaranty's policy 

negates any limiting language in Guaranty's policy that might 

otherwise be applicable, ·thereby making Guaranty's policy 

primary. 10 Guaranty's policy, as modified, must then be compared 

with the relevant provisions in Empire's policy to determine the 

ultimate allocation of liability. 

[ ••• continued from previous page] 

endorsement makes insurance coverage primary in all circumstances 

and for all purposes as a matter of law, we decline to follow such 

a rule." (Emphasis added)), cert. denied, 455 U.S. 982 (1982). 

10 As noted above, Guaranty's policy appears to be primary even 

without regard to the endorsement. If that is so, then the 

endorsement would have no effect on the comparison of the two 

policies because there would be no limiting language in Guaranty's 

policy for the endorsement to negate. 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 15 
Our holding in Hagans v. Glens Falls Ins. Co., 465 F.2d 1249 

(10th Cir. 1972), does not compel a different result. Hagans also 

involved a dispute between two insurance carriers over the 

allocation of liability when both policies arguably covered the 

event in question. The issue, however, was whether the lessee's 

insurance company could rely on indemnification language in the 

lease between the lessor and the lessee to limit its liability. 

We held that it could not. We held that the liability of the 

lessee's insurer had to be measured by the terms of its own 

policy, and not by the terms of a lease to which it was not even a 

party. Id. at 1252. The opinion contains dicta that could be 

read as interpreting Argonaut as holding that an ICC endorsement 

always makes that policy supreme over all other policies as a 

matter of law.11 However, such an overly broad reading of 

Argonaut was not necessary to the resolution in Hagans, where the 

parties conceded that the lessee's policy would be primary over 

the lessor's policy if the lessee could not escape liability 

through the indemnification provision in the lease. Id. at 1251. 

Thus, the effect of the ICC endorsement was not before the court 

as a disputed issue. 

11 The language in Hagans is as follows: 

The teaching of Argonaut is that because of the ICC 

endorsement in the policy issued Driveaway by Argonaut, 

Argonaut was the primary insurer as a matter of law, and 

such holding was obviously grounded on public 

policy •••• 'Hence, we too assume that the policy 

issued Far-Go by Glens Falls.contained the ICC 

endorsement. Such being the case, then, under Argonaut, 

Glens Falls is the primary insurer. 

465 F.2d at 1252. 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 16 
Carolina Casualty Ins. Co. v. Transport Indem. Co~, 

488 F.2d 790 (10th Cir. 1973), involved a similar dispute between 

two insurance companies, both of which had identical ICC 

endorsements. Rather than focusing on the endorsements, the court 

analyzed the relationships among the insured parties, the driver, 

and the terms of the insurance policies. To avoid circuity of 

action, we simply imposed liability on Carolina Casualty, the 

lessee's insurance company, because, after the resolution of all 

intervening actions and after consideration of the various legal 

duties.that the parties owed to each other, Carolina Casualty 

ultima~ely would have been liable. 12 Id. at 794. The ICC 

endorsements in both policies were not determinative because they 

effectively neutralized each other. 

These Tenth Circuit cases should not be read as broadly as 

some courts have done to establish a rule that an ICC endorsement 

always makes the policy to which it is attached supreme over all 

other policies as a matter of law. Argonaut simply stands for the 

proposition that an ICC endorsement should be read to negate 

inconsistent limiting language in the underlying policy. It did 

not hold that a policy with an ICC endorsement should be expanded 

to assume primary liability over all other policies that are also 

primary by their terms. Hagans merely refused to allow an 

insurance company to rely on the terms of a contract to which it 

12 Guaranty suggests a similar approach here, urging us to 

decide ultimate liability based on the recoupment provisions in 

the endorsement a~d to declare ultimate liability on Empire to 

avoid needless circuity of action. We decline that invitation, as 

did the district court, because the recoupment provision involves 

parties not present in this lawsuit. 

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Appellate Case: 87-1116 Document: 01019740001 Date Filed: 02/10/1989 Page: 17 
was not a party. Carolina Casualty v. Transport was decided on a 

"circuity of action" theory rather than on the meaning of the ICC 

endorsements. Our reading of Tenth Circuit precedent persuades us 

that in the case before us, although Guaranty's policy is rendered 

~ primary policy by the ICC endorsement, it does not preempt the 

need to compare coverage under that policy, as amended, with 

coverage under the Empire policy. 

D. Brada Miller 

In 1975, after the Tenth Circuit decided the cases discussed 

above, the United States Supreme Court decided Transamerican 

Freight Lines, Inc. v. Brada Miller Freight Systems, Inc., 423 

U.S. 28 (1975). Brada Miller did not address the effect of an ICC 

endorsement. Rather, the issue was the effect to be given to an 

indemnification agreement in a lease between Brada Miller, as 

lessor, and Transamerican, as lessee, whereby Brada Miller 

indemnified Transamerican for any claims arising out of Brada 

Miller's negligence. 

Brada Miller argued that the indemnification agreement was 

invalid because it contravened the ICC's "control and 

responsibility" requirement of 49 C.F.R. § 1057.3(a) (1975), which 

required Transamerican, as an ICC-licensed trucker, to retain 

control and responsibility for the equipment and to be liable to 

the public for liability in connection with the use of the 

equipment. The Court rejected this argument and found that the 

"control and responsibility" requirements were "not in conflict 

and that the indemnification clause does not impinge upon the 

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requirements of the lease and of § 1057.3(a) that operational -

control and responsibility be in the lessee." Id. at 38. The 

Court held that the indemnification clause did not affect the 

lessee's responsibility to the public· because it involved only the 

relationship between the insureds and their insurers, and 

therefore it was valid. Id. at 39. In reaching its conclusion, 

the Court stated: 

Although one party is required by law to have control 

and responsibility for conditions of the vehicle, and to 

bear the consequences of any negligence, the party 

responsible in law to the injured or damaged person may . seek indemnity from the party responsible in fact. 

Id. at 40. 

Brada Miller stands for the proposition that the purpose of 

the ICC regulations is to protect the public and shippers, and 

that so long as the public and shippers are protected, parties can 

allocate risks among themselves in any manner they wish. Because 

the purpose of the ICC endorsement is similarly to protect the 

public and shippers, some courts have relied on Brada Miller as 

authority for the proposition that the ICC endorsement should be 

given effect only in the context of litigation involving and 

affecting the rights of the public and shippers, and that it 

should not be given effect in litigation between two insurance 

companies as to how they should allocate risk among themselves. 

See,~, Carter v. Vangilder, 803 F.2d 189, 192 (5th Cir. 1986). 

However, the correct reading of Brada Miller, in our view, is not 

that certain provisions in a contract be given only selective 

application, but rather that parties may enter into contractual 

agreements allocating ultimate liability among themselves that 

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will be enforced so long as such agreements do not adversely 

affect the rights of the public and shippers. 

This is precisely the result that we reach here. By relying 

on the ICC endorsement to delete limiting language in the lessee's 

underlying policy, the public and shippers are protected. Having 

determined that the public and shippers are protected, the parties 

are then free, as among themselves, to allocate risk however they 

choose. Our task is simply to look at the insurance policies, as 

modified by relevant endorsements, and to make a determination 

under contract law as to how the parties have, in fact, chosen to 

allocate the risk.13 

E. Precedent from Other Courts 

No consensus can be derived from cases in other circuits 

because support can be found for each of the interpretations 

discussed at the beginning of this opinion. A brief synopsis of 

13 We recognize that the prologue language of the endorsement 

states that the endorsement is intended "to assure compliance by 

the assured" with Sections 29 and 30 of the Motor Carrier Act. 

Undoubtedly, the purpose of the endorsement was to provide 

financial protection to members of the public and to shippers. 

That fact, however, does not lead to the conclusion that the ICC 

endorsement modifies the policy only vis-a-vis the public and 

shippers, and not vis-a-vis insurance companies. Such a 

chameleon-like quality of a clause in a commercial contract that 

changes character depending on who is seeking to apply it should 

not be favored unless compelled by the language of the instrument. 

The ICC endorsement is not ''written in special ink.which appears 

for cases involving the public and disappears in cases involving 

other insurers. Here, the clause is physically attached to the 

policy and must be given effect." Transport Indemn. Co. v. 

Carolina Casualty Ins. Co., 133 Ariz. 395, 652 P.2d 134, 142 

(1982). 

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the law in other circuits will illustrate the current state of 

confusion concerning this issue. 

The Sixth Circuit and one Fifth Circuit case have cited with 

approval the Tenth Ciicuit cases of Argonaut Ins. Co. v. Nat'l 

Indem. Co., 435 F.2d 718 (10th Cir. 1971), and Hagans v. Glens 

Falls Ins. Co., 465 F.2d 1249 (10th Cir. 1972), for the 

proposition that, as a matter of law, an ICC endorsement makes the 

policy to which it is attached a primary policy. However, the 

Sixth and Fifth Circuits relied on other factors to determine how 

to allocate ultimate liability among two or more primary policies. 

See Indiana Ins. Co. v. Carolina Casualty Co., 510 F.2d 490, 494 

(6th Cir. 1974) (relying on avoidance of circuity of actions to 

assess ultimate liability); Empire Indem. Ins. Co. v. Carolina 

Casualty Ins. Co., 838 F.2d 1428, 1432 (5th Cir. 1988) 

(determining that when two policies contain an ICC endorsement, 

the policy covering the entity that held the ICC certificate under 

which the truck was being operated at the time of the accident was 

ultimately liable). 

Other Fifth Circuit cases, however, have held that the 

endorsement should not be considered at all in disputes between 

insurance companies. See Carter v. Vangilder, 803 F.2d 189, 191 

(5th Cir. 1986) ("Under federal law, an ICC endorsement does not 

require that an excess coverage clause of an insurance policy be 

read out of the policy, resulting in that policy then providing 

primary coverage vis-a-vis another insurance company."); Transport 

Indem. Co. v. Paxton Nat'l Ins. Co., 657 F.2d 657, 659 (5th Cir. 

1981) ("ICC policy factors are frequently determinative where 

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protection of a member of the public or a shipper is at stake, but 

those factors cannot be invoked by another insurance company which 

has contracted to insure a specific risk and which needs no 

equivalent protection." (quoting Carolina Casualty Ins. Co. v. 

Underwriter's Ins. Co., 569 F.2d 304, 312 (5th Cir. 1978)), cert. 

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

The Third and Seventh Circuits likewise appear to disregard 

the endorsement language in allocating responsibility between 

insurance companies. See Carolina Casualty Ins. Co. v. Insurance 

Co. of N. Am., 595 F.2d 128, 138 (3d Cir. 1979) (rejecting 

conclusion that ICC endorsement in policy rendered coverage 

primary); Occidental Fire & Casualty Co. of N.C. v. International 

Ins. Co, 804 F.2d 983, 986 (7th Cir. 1986) (same); Travelers Ins. 

Co. v. Transport Ins. Co., 787 F.2d 1133, 1140 (7th Cir. 1986) 

(ICC factors, such as an ICC endorsement, are not relevant in 

disputes between insurance companies). 

Cases from other circuits may appear at first blush to be 

contrary to the position advanced here, but in fact do not address 

the precise issue before us. See Grinnell Mut. Reinsurance Co. v. 

Empire Fire & Marine Ins. Co., 722 F.2d 1400 (8th Cir. 1983) (case 

did not involve ICC endorsement), cert. denied 466 U.S. 951 

(1984); Occidental Fire & Casualty Co. of N.C. v. Brocius, 772 

F.2d 47 (3d Cir. 1985) (same); Gaskin v. Jowers, 775 F.2d 621, 

625-26 (5th Cir. 1985) (same); National Mut. Ins. Co. v. Liberty 

Mut. Ins. Co., 196 F.2d 597 (D.C. Cir. 1952) (endorsement not 

applicable because driver/owner was not an insured under the 

policy). 

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None of these cases advances the precise conclusion we reach 

here, but we follow them ·insofar as they hold that an ICC 

endorsement attached to an insurance policy does not absolve the 

liability of another insurer that would otherwise provide primary 

coverage by its own terms. We decline to follow these cases, 

however, insofar as they disregard the effect of an ICC 

endorsement on the policy to which it is attached when the public 

or a shipper is not involved in the dispute. 

F. American General 

Our holding comports with a recent case from the United 

States District Court for the District of Kansas, American Gen. 

Fire & Casualty Co. v. Truck Ins. Exch., 660 F. Supp. 557 (D. Kan. 

1987) (O'Connor, J.). American General is helpful to our analysis 

because the operative facts there were nearly identical to those 

here. After a detailed analysis of numerous cases that have 

grappled with the effect of an ICC endorsement, the court there 

addressed Argonaut Ins. Co. v. National Indem. Co., 435 F.2d 718 

(10th Cir. 1971), and Hagans v. Glens Falls Ins. Co., 465 F.2d 

1249 (10th Cir. 197~), giving them the precise interpretations 

that we believe are faithful to their factual circumstances. 14 

14 With respect to Argonaut, the court said: 

Therefore, reading the case in light of its particular 

facts, we believe that the court only intended to hold: 

(1) that the inclusion of the endorsement modifies 

inconsistent terms in the insurance policy; and (2) that 

under the terms of both policies involved, Argonaut was 

a primaty insurer and National's coverage was excess 

only. 

[continued on next page ••• ] 

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American General, 550 F. Supp at 564. 

In American General, the court held, in reference to the 

lessee's policy that contained the ICC endorsement, that "the 

inclusion of the endorsement modifies inconsistent terms in the 

insurance policy." Id. at 564. The court further held that 

public policy does not require "that insurers of truck owners be 

absolved from the risks they voluntarily assumed solely because 

the vehicle was leased to an interstate carrier." Id. at 565. 

The court's conclusion is the same as the one that we advance 

here: 

[T]he court finds that federal statutes and regulations 

pertaining to an interstate carrier's use of nonowned 

equipment do not render the carrier or its insurer 

exclusively liable for personal injuries or property 

damage sustained in an accident involving such 

equipment. Instead, federal law, as interpreted by the 

Tenth Circuit, imposes liability on all insurers who are 

obligated to provide some type of coverage for damage 

pursuant to the terms of their policies and any 

endorsements thereto. Under federal law, the insurer of 

an ICC-licensed carrier is required to provide primary 

coverage for any final judgment obtained against the 

carrier. However, the mere fact that an interstate 

carrier is involved does not absolve other insurers from 

[ ••• continued from previous page] 

660 F. Supp. at 564 (emphasis added). 

With respect to Hagans, the court said: 

Regrettably, the broad language of Argonaut was 

used by the Tenth Circuit in Hagans. Yet in Hagans, the 

carrier's insurer, Glens Falls, conceded that it was the 

primary insurer. Glens Falls, however, attempted to 

evade its responsibilities as the primary insurer based 

on an indemnification clause found in the lease 

agreement. The court merely refused to alter Glens 

Falls' responsibilities under its policy because of the 

provision in the lease agreement to which it was not a 

party. 

Id. (citations omitted). 

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their obiigations under other policies which are 

applicable to the claims. 

Id. at 569. 

We are in complete agreement with the district court in 

American General, and adopt its reasoning: 

[T]here is no reason that state laws or private 

agreements should not be able to allocate ultimate 

financial responsibility in such a situation. Nor does 

public policy dictate that insurers of truck owners be 

absolved from risks they voluntarily assumed solely 

because the vehicle was leased to an interstate carrier. 

Id. at 565 (citations omitted). Similarly, Empire may not escape 

liability that would otherwise be primary simply because 

Guaranty's policy contains an ICC endorsement. 

VI. CONCLUSION 

In summary, we hold that the effect of the ICC endorsement in 

Guaranty's policy is to negate limiting language in the body of 

the policy, including any applicable "excess coverage" clause, but 

that the endorsement does not makes Guaranty's policy necessarily 

primary and supreme over Empire's policy. Rather, once limiting 

language is read out of Guaranty's policy, the two policies then 

must be compared pursuant to traditional state insurance and 

contract law principles to determine how liability should be 

allocated. Accordingly, ·we VACATE the summary judgment and REMAND 

for a determination of how the risks should be allocated between 

Guaranty and Empire when all the provisions of both policies, 

including the ICC endorsement, are considered. 

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