Title: Providence Wash. Ins. Co. v. Alaska Pac. Assur. Co.
Citation: 603 P.2d 899
Docket Number: 3369
State: Alaska
Issuer: Alaska Supreme Court
Date: December 7, 1979

603 P.2d 899 (1979) PROVIDENCE WASHINGTON INSURANCE COMPANY OF ALASKA, Appellant, v. ALASKA PACIFIC ASSURANCE COMPANY, Appellee. No. 3369. Supreme Court of Alaska. December 7, 1979. *900 Stephen G. Dunning and John L. Orlandini of Law Offices of Murphy L. Clark, Anchorage, for appellant. Charles Hagans, and Timothy M. Stone of Hagans, Smith, Brown, Erwin &amp; Gibbs, Anchorage, for appellee. Before RABINOWITZ, C.J., CONNOR and MATTHEWS, JJ., DIMOND, Senior Justice, and SOUTER, Judge [sitting as supreme court justice]. MATTHEWS, Justice. Leif Hamilton Strand owned a truck which he leased to Christy and Blohm Enterprises. While he was driving it as an employee of Christy and Blohm an accident occurred which resulted in the death of Robert Trigg. These facts and the final order of the superior court adequately set the posture of the case as it is presented to us: We first take up Providence Washington's contention that Strand was an insured under the Alaska Pacific policy. The relevant policy provisions are: These clauses are standard,[1] as is the practice of an owner leasing a truck to a certified motor carrier and then either driving it himself or having one of his employees drive it. It is therefore not surprising that the question whether the owner, or his employee, is an insured under the lessee's policy is one which has often been decided. The authorities are sharply split. Some, most of them quite recent, hold that the owner exclusion clause only applies to exclude owners or their employees who do not fall within the definition of persons insured. Ridgway v. Gulf Life Insurance Co., 578 F.2d 1026, 1031 (5th Cir.1978); Carolina Casualty Insurance Co. v. Underwriters Insurance Co., 569 F.2d 304, 314 (5th Cir.1978); Wellman v. Liberty Mutual Insurance Co., 496 F.2d 131, 136 (8th Cir.1974); *902 Trinity Universal Insurance Co. v. Farmers Mutual Automobile Insurance Co., 309 F.2d 283, 285 (7th Cir.1962).[2] Other cases hold that the owner exclusion clause does operate to remove from coverage those who fall within its terms even though they are also within the definition of an insured. Gilkey v. Andrew Weir Insurance Co., 291 F.2d 132, 134 (9th Cir.1961); Gonzalez v. National Surety Corp., 266 F.2d 667, 668-69 n. 1 (5th Cir.1959); Johnson v. Royal Indemnity Co., 206 F.2d 561, 565 (5th Cir.1953); National Mutual Insurance Co. v. Liberty Mutual Insurance Co., 90 U.S.App.D.C. 362, 364, 196 F.2d 597, 599 (D.C. Cir.1952), cert. denied, 344 U.S. 819, 73 S. Ct. 15, 97 L. Ed. 638 (1952); Longsdorf v. Tunson, 200 F. Supp. 828, 830-31 (D.Colo. 1962); Chesher v. United States Casualty Co., 303 N.Y. 589, 105 N.E.2d 99 (1952); Shumake v. Home Indemnity Co., 68 So. 2d 789, 793 (La. App. 1953). We think these cases have the better side of the argument. It is difficult to understand the function of the owner exclusion clause if it does not take away coverage from those who, except for its existence, would come within the definition of persons insured. If it only applied to those who were not covered anyway it would be superfluous. And the inclusionary and exclusionary clauses cannot be viewed as totally separate entities which thus create a logical conflict, for they both fall under the language at the beginning of the "Persons Insured" paragraph: "Each of the following is an insured to the extent set forth below. ..." (emphasis added). Thus a permissive user of a hired vehicle is an insured only to the extent set forth, which is to the extent he is not its owner or an employee of its owner. The purpose of the exclusion seems obvious. The owner should carry his own insurance to protect himself and his employees. The lessee who is the named insured will be protected under the policy, but the owner will not. National Mutual Insurance Co. v. Liberty Mutual Insurance Co., 90 U.S.App. D.C. 362, 364, 196 F.2d 597, 599 (D.C. Cir.1962); Longsdorf v. Tunson, 200 F. Supp. 828, 830-831 (D.Colo. 1962). It goes without saying that this purpose would be frustrated if the owner exclusion clause were held not to apply to owners who are also permissive users. This result is not changed by the fact that the lease made Christy and Blohm liable as an employer of Strand for the latter's operation of the truck during the lease term. The rule of expanded vicarious liability which is a requirement of the leasing regulations of the Alaska Transportation Commission, 3 AAC 64.010-.030, is made for the protection of the public.[3] It does not require that Christy and Blohm's insurer assume responsibility for the liability of anyone other than Christy and Blohm. The same is also true of the regulation requiring a motor carrier to maintain liability insurance "conditioned to pay any final judgment recovered against such motor carrier." 3 AAC 64.300. We next consider Alaska Pacific's coverage of Christy and Blohm. Christy and Blohm is an insured under both the Alaska Pacific and the Providence Washington policies.[4] Both policies have identical "other insurance" clauses which read as follows: Both policies contain the following special clause concerning other insurance for a hired automobile: This clause applies to the Alaska Pacific policy, for as to Christy and Blohm, Strand's truck is a hired automobile; it does not apply to the Providence Washington policy for under that policy the vehicle is an owned automobile. Consequently, with respect to Strand's vehicle, Alaska Pacific's policy supplies excess insurance to Christy and Blohm while Providence Washington's policy supplies primary insurance to Christy and Blohm. There is no conflict in the other insurance clauses and they therefore apply as written. Since the settlement of the Trigg case was within the $100,000 limits of the Providence Washington policy, Alaska Pacific is not required to pay anything. AFFIRMED. BOOCHEVER and BURKE, JJ., not participating. [1] Risjord, Austin, Automobile Liability Insurance Cases 266 (2d ed. Standard Provisions &amp; Appendix 1974). [2] See also American Interinsurance Exch. v. Hildebran, 444 F. Supp. 1248, 1253 (D.S.C. 1978); United Pac. Ins. Co. v. Truck Ins. Exch., 541 P.2d 448, 455 (Or. 1975); Federal Ins. Co. v. Allstate Ins. Co., 275 Md. 460, 341 A.2d 399, 407 (1975). [3] See Carolina Cas. Ins. Co. v. Insurance Co. of North America, 595 F.2d 128, 137 (3rd Cir.1979). [4] The Providence Washington policy covers Christy and Blohm as an insured under a clause which includes another "person or organization but only with respect to his or its liability because of acts or omissions of an insured... ."