APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (D.C. Civil No. 76-02132)
Before Weis, and Garth, Circuit Judges and Miller,*fn* Judge.
This appeal presents the question whether two insurance companies each owed a defense to the owner and lessee of a truck that was in a collision causing fatal injuries. Because the truck lease required that the lessee indemnify not only the owner but also its insurance carrier, and since the lessee's policy covered contractual liability, we conclude that the lessee's insurer is solely responsible for defense costs. Accordingly, we vacate the district court's judgment assessing joint liability.
The plaintiffs, Pennsylvania Manufacturers' Association Insurance Company (PMA) and George Wollman, Inc., filed suit against the Lumbermens Mutual Casualty Company, alleging that it shared the responsibility for defending their mutual insureds against personal injury and death claims. On stipulated facts, the district court concluded that both insurance companies afforded primary coverage and entered judgment for the plaintiff in the amount of $20,807.99, a share of the total defense costs prorated on the respective policy limits.
The accident occurred in New Jersey when a truck tire blew out, causing the vehicle to careen across the highway into the opposite lane where it struck an automobile and a bus. Nine people were killed and ten were injured. A number of claims resulted in litigation, but eventually all were settled through a cooperative and commendable effort by the insurers of the truck and the tire manufacturer. The only matter upon which the carriers could not agree was whether Lumbermens Mutual was obligated to provide a defense to the various parties alleged to be responsible for the operation of the truck, or whether PMA was solely responsible for the expense. The tire manufacturer's insurer has no interest in that question and is not a party to this litigation.
Hubler Rentals, Inc., which had its main office in Allentown, Pennsylvania, leased the truck and others to George Wollman, Inc., which had its principal place of business in Westville, New Jersey. The lease between the two companies required that Wollman provide liability insurance to "protect the interest of HUBLER and the LESSEE (Wollman), including their authorized drivers." The agreement also contained the following: "II. The LESSEE (Wollman) hereby covenants and agrees: (n) To indemnify HUBLER or its insurance carrier for all liability by reason of injuries or damages to any person or property resulting from VEHICLES or its operator " Also included was a provision requiring that the lease be construed in accordance with Pennsylvania law.
Wollman secured an automobile liability policy from PMA. It is conceded that the policy was applicable to the accident and covered not only Wollman and its driver, but Hubler as well. A special endorsement in the PMA policy stated that the "insurance applies as primary insurance" to the owner of vehicles leased to Wollman. The policy also contained an additional declaration covering the contractual liability of Wollman to Hubler and its insurance carrier under the terms of the lease. In this respect, the policy read,
"(PMA) will pay on behalf of the insured (Wollman) all sums which the insured, by reason of contractual liability assumed by him under a contract designated in the schedule for this insurance, shall become legally obligated to pay as damages because of Coverage Y bodily injury; or Coverage Z property damage to which this insurance applies "
The Wollman-Hubler lease was listed in the appropriate schedule.
PMA did defend Hubler, as well as Wollman, in the various suits and expended $51,829.20 for legal and investigative services. PMA does not contest that it was a primary insurer and as such owed a defense to both parties. Although Lumbermens insured Hubler under a number of policies, it refused to participate in the defense, claiming its coverages were excess only.*fn1
The district court discussed three of the Lumbermens policies. The first, No. T3L-26-450, was a garage policy. It did not cover automobiles rented to others by Hubler. Because the truck had been leased to Wollman, the district court gave effect to this exclusion and held that the policy did not apply. No. F3L-26-482 was a combination automobile-general liability policy that did provide coverage for trucks owned by Hubler "while leased to another under a written lease agreement." According to its terms, however, that policy was "excess insurance over any other valid and collectible insurance for Bodily Injury Liability and Property Damage Liability." The district court concluded that this policy was excess over the insurance issued to Wollman by PMA and, consequently did not impose a co-primary duty to defend.*fn2
The third contract, No. 2MF-13-506, was a comprehensive automobile liability policy, including garage insurance, which, according to the district court, provided primary coverage for Hubler. The policy defined the automobile hazard which it covered to include "the ownership, maintenance or use of any automobile owned by the named insured (Hubler) while furnished for the use of any person." A printed restriction at § e(2)(ii) of the policy excludes coverage arising out of the ownership of any automobile "while rented to others by the named insured." On its face, this language would deny coverage, but a typed endorsement specifically waived this exclusion "as regards any owned vehicle, rented to others, while in the care, custody or control of the Named Insured (Hubler)." The policy did not contain an "other insurance clause."*fn3
The district court held that the lease requirement that Hubler service and maintain the truck while rented to Wollman came within the definition of "care" under the terms of the insurance contract, and accordingly found that the policy provided primary coverage to Hubler.*fn4 Lumbermens ...