Opinion ID: 764157
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Heading Rank: 2

Heading: Canal's Duty to Defend ATCO

Text: 9 Canal had a duty to defend ATCO in the Carlock litigation under the terms of the policy issued to McConnell. Under the general insuring provision, Canal is obligated to defend an insured against suits arising from the ownership, maintenance, or use of a covered automobile during the policy term and to pay damages on the insured's behalf up to the stated policy limits. 7 There is no dispute that the truck driven by Wilson was a covered automobile under the Canal policy or that the suit arose from the use of a covered automobile. ATCO also falls within the policy's definition of an insured. Section III defines the PERSONS INSURED to include the named insured--i.e., McConnell--and those employees using a covered auto with permission--e.g., Wilson--as well as [a]ny other person or organization but only with respect to his or its liability because of acts or omissions of the named insured, partners or executives, or permissive users. 8 Because the Carlock complaint alleged that ATCO was liable for the negligence of Wilson--a permissive user--ATCO clearly falls within the last category of persons insured. 10 Canal, however, asserts that an exclusionary endorsement, the E-45 Truckman's Endorsement, applies to exclude coverage for ATCO. The Truckman's Endorsement excludes coverage for any person, firm or organization using the described motor vehicle pursuant to any lease, contract of hire, bailment, rental agreement or similar contract or agreement. 9 According to Canal, ATCO was using the truck driven by Wilson pursuant to the Cutting and Hauling Agreement, which Canal contends is a contract of hire or similar agreement within the meaning of the Truckman's Endorsement. 10 Because the term contract of hire is not defined in the policy, under Mississippi law the term must be given its plain and common, everyday meaning. 11 To support its argument, Canal relies on the dictionary definition of the word hire and essentially asserts that the term contract of hire as used in the endorsement, includes any contract for labor or services. For example, Black's Law Dictionary defines the word hire to mean to arrange for the labor or services of another for a stipulated compensation. 12 Accordingly, Canal urges that because ATCO arranged for the services of McConnell for a stipulated compensation, the Cutting and Hauling Agreement constitutes a contract of hire within the meaning of the E-45 endorsement, thereby triggering the exclusion. The district court rejected such a broad interpretation relying on Canal Insurance Company v. T.L. James & Company, Inc., 911 F.Supp. 225 (S.D.Miss.1995); Canal Insurance Company v. Liberty Mutual Insurance, 395 F.Supp. 962 (N.D.Ga.1975); and Casino Air Charter, Inc. v. Sierra Pacific Power Company, 95 Nev. 507, 596 P.2d 496 (1979). We agree with the holdings of those courts and of the district court here. 11 In T.L. James & Company, Canal provided automobile liability insurance to Grinston Sand and Gravel Company (Grinston). Grinston entered into a subcontract with T.L. James & Company (James), the general contractor on a highway project, whereby Grinston agreed to furnish sand and gravel for the project. An adjacent business owner sued Grinston and James for property damage caused by Grinston's trucks. Because Canal refused to defend James, The Highlands Insurance Group (Highlands), James's automobile liability insurance carrier, defended James. After the trial, Canal brought a declaratory action against Highlands, asserting that an identical E-45 Truckman's Endorsement excluded coverage for James because the subcontract with Grinston constituted a contract of hire. Highlands counter-claimed, asserting that Canal breached its duty to defend James. The court agreed with Highlands and rejected Canal's argument that the subcontract was a contract of hire of Grinston's trucks, which triggered the E-45 exclusion. The court explained: 12 Canal asserts, without explication, that the agreement between James and Grinston, although styled as a subcontract, appears to contemplate merely the use of Grinston's vehicles for the purposes of hauling sand and gravel to the project. The court, however, finds no support for this position in the terms of the subcontract. To the contrary, the agreement, by its terms, appears, instead, to contemplate James' purchase of sand and gravel from Grinston, and the delivery thereof. Thus, James did not lease Grinston's trucks. Moreover, James did not contract to hire Grinston's drivers. It simply subcontracted with Grinston to do its own work in performance of its subcontract, and which operated its own trucks at all times by its own employees. Clearly, this endorsement was not intended to apply to situations when the named insured is using its own trucks in furtherance of its own business, providing its own drivers and materials. For these reasons, the endorsement is inapplicable. 13 13 Other jurisdictions have also rejected Canal's broad interpretation. In Canal Insurance Company v. Liberty Mutual Insurance, 14 the same parties disputed whether a harvesting contract similar to the Cutting and Hauling Agreement at issue here constituted a contract of hire triggering the E-45 exclusionary endorsement. In that case, Townsend had a service contract with Union Camp, whereby Townsend agreed to harvest and cut pulpwood on Union Camp's land and to deliver it to Union Camp's plant. West, a Townsend employee, was involved in a car accident while driving a Townsend truck and performing under the agreement. Canal provided automobile liability insurance to Townsend and Liberty Mutual insured Union Camp. Canal refused to defend Union Camp based on the E-45 endorsement and defended Townsend and West under a reservation of rights. At issue was whether Canal or Liberty Mutual was liable for the coverage and defense of the driver West. Canal argued that West was not insured under its policy because he was using the truck pursuant to a contract of hire. The court rejected this argument and instead embraced Liberty Mutual's position that the E-45 endorsement refers only to a contract or agreement which relates specifically to the 'described automobile' in question. 15 Noting that, among other things, the contract at issue was for labor and services in which the Townsend truck was used only incidentally, Townsend had total control over his employees and the equipment used to fulfill the contract, and Union Camp paid no fees for the truck, the court held that the harvesting agreement between Townsend and Union Camp was not a contract of hire. 16 14 Casino Air Charter, Inc. v. Sierra Pacific Power Company, 17 in the context of an airplane crash, considered whether a charter service had hired the aircraft. In that case, Sierra Pacific Power Company (Sierra) arranged a charter flight with Casino Air Charter for a government employee. During the flight, the plane crashed, killing the pilot and passenger. The passenger's estate sued Sierra, Casino Air Charter, and the pilot's estate. Casino Air Charter demanded coverage under Sierra's liability policy as an additional insured, asserting that Sierra had hired the airplane. The court rejected this argument, stating: 15 In the instant case, there was no hiring of an aircraft. Instead, Sierra contracted for the transportation services of an airplane and a qualified pilot. Sierra neither designated a particular aircraft nor took any part in the preparation of a flight plan. 18 16 The above cases all support the conclusion that the Cutting and Hauling Agreement was not a contract of hire of McConnell's truck within the meaning of the E-45 Endorsement. This contract for logging and transportation services is not a contract of hire of the McConnell truck since it is not similar to a lease, bailment, or rental agreement of a vehicle as contemplated by the endorsement. Although it incidentally contemplated the use of a vehicle in order for McConnell to fulfill his contractual obligations, the Agreement does not require McConnell to use any particular vehicle and did not entitle ATCO to operate, direct, or control any of McConnell's vehicles or drivers. And while ATCO selected the final delivery destinations, ATCO had no right under the Agreement to select the route taken by McConnell or his employees to deliver the timber products. We also reject Canal's assertion that this case is analogous to Wallace v. Boyte Enterprises, Inc, 19 which held that an exclusionary provision essentially identical to the E-45 endorsement excluded coverage for Boyte, a materialman that contracted with a truck owner to provide a truck and driver for an hourly fee. On the contrary, the Cutting and Hauling Agreement at issue here was unlike an arrangement to provide a truck and driver to ATCO for an hourly fee. 17 Finally, while we agree with the general proposition that words, terms and phrases that are not expressly defined in insurance policies must be given their plain and common, everyday meanings, the interpretation urged by Canal myopically focuses on the word hire and takes the term contract of hire completely out of context. The endorsement excludes coverage for any person or business that uses the described automobile pursuant to any lease, contract of hire, bailment, rental agreement, or any similar contract or agreement. When viewed in context, each of these terms--lease, contract of hire, bailment, and rental agreement--plainly contemplates a contract or agreement that specifically governs the described automobile. Hence, a contract of hire as used here cannot be construed as a broad reference to any contract for labor or services. Moreover, as noted above, we are required by Mississippi law to construe the Truckman's Endorsement narrowly against Canal. 20 In sum, we agree with the district court's conclusion that the Cutting and Hauling Agreement simply does not constitute a contract of hire within the meaning of the Truckman's Endorsement. 18