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September 18, 1998


The opinion of the court was delivered by: COHILL


 Plaintiff Assicurazioni Generali, S.p.A., ("Generali") brought this declaratory judgment action pursuant to 28 U.S.C. ยงยง 2201 and 2202, seeking a declaration that Indiana law applies to this case and that the defendants are not entitled to recover underinsured motorists ("UIM") benefits under an insurance policy issued by the plaintiff. Generali also seeks rulings on questions of the stacking of insurance policies and the setoff of funds already recovered. The defendants here are Iva L. Clover and her husband, Gordon E. Clover ("the Clovers"). Before us are cross motions for summary judgment, and responsive briefs, filed by both parties. For the reasons set forth below, we will grant defendants' motion (Doc. 39) insofar as it requests a determination that the substantive law of Pennsylvania governs this action, and we will deny plaintiff's motion (Doc. 41) on that issue. Under Pennsylvania law, all disputed issues remaining in this case must be resolved by a panel of arbitrators. Accordingly, we cannot reach the remaining issues and must dismiss this declaratory judgment action.

 I. Background

 The factual background to this action, though complicated, is largely undisputed. Plaintiff Generali is an Italian insurance corporation, with its principal place of business in Trieste, Italy. Generali is a surplus lines carrier and is not an admitted insurance carrier in the United States; rather, the company conducts its business in this country through its authorized agent, Alexander & Alexander ("A&A"), an Oklahoma corporation.

 The Accident

 Defendants in this action are Iva L. and Gordon E. Clover. During the relevant timeframe, the Clovers resided with Mrs. Clover's son and Mr. Clover's stepson, Leroy T. Anderson, at R.D. 1, Box 58A, Bear Lake, Pennsylvania. Mr. Anderson was a self-employed trucker, who leased the equipment he owned to other trucking companies.

 On July 9, 1992, in Warren County, Pennsylvania, Mrs. Clover was involved in an accident, in which the vehicle she was driving was struck from behind by another vehicle. Neither of the vehicles involved in the accident was owned by Mr. Anderson. Mrs. Clover sustained numerous serious injuries including permanent paraplegia; her medical expenses alone are approximately $ 1.5 million dollars. In April of 1993, the Clovers settled their claims against the tortfeaser and his employer for $ 620,000, which represented the bodily injury limits of liability under the driver's automobile insurance policy along with contributions from the assets of the driver and his employer.

 The Clovers filed a claim under the ("UIM") Endorsement of an insurance policy for non-trucking liability ("the Policy"), which had been issued by plaintiff Generali and which covered several of Leroy Anderson's vehicles. Mr. Clover's claim is for loss of consortium and other damages. Generali's claims adjuster is Ron Coleman & Associates ("Coleman & Associates"), which is incorporated in the state of Virginia. After an investigation, the insurer filed this action, seeking, inter alia, a declaratory judgment that Mr. Anderson was not a "named insured" under the Policy and that therefore neither of the Clovers can recover under the UIM endorsement.

 Intrenet and ADS

 Leroy Anderson came to be insured by Generali through his employer, Advanced Distribution Systems ("ADS"), a transportation company incorporated in Florida with its principal place of business in Ohio. ADS was a wholly owned subsidiary of Intrenet, Inc. ("Intrenet"), a holding company which owned a number of transportation companies throughout the United States. *fn1" Intrenet was incorporated in Indiana and had its principal places of business in Indiana and New Jersey. Intrenet itself did not own or lease trucking equipment. In some instances, Intrenet's transportation companies purchased or leased trucking equipment directly from distributors; in other cases, the affiliates entered into so-called "permanent" leases with independent owner-operators through various local trucking concerns. ADS used only leased equipment, and had an arrangement, among others, with Perrin Trucking in Warren, Pennsylvania.

 Perrin Trucking was Leroy Anderson's local terminal. Mr. Anderson owned a number of tractors and trailers, which he garaged at his home in Bear Lake, Pennsylvania. During the relevant timeframe, he leased several of these vehicles to ADS, and, in each case, he applied for non-trucking use insurance through his employer. Perrin Trucking was his contact with ADS. He was dispatched from either the ADS office in Ohio or from the terminal, and he turned in paperwork from his loads at the terminal. Mr. Anderson's paychecks were issued at Perrin Trucking, and he picked them up there.

 The Insurance Process at ADS

 Intrenet and its affiliates purchased primary liability insurance policies for the business use of its company-owned vehicles. A different arrangement was in place to insure leased vehicles. In addition to carrying insurance for business use, the lease agreement required an owner-operator such as Mr. Anderson to purchase non-trucking or non-business use insurance for the relevant vehicles. Such insurance is also referred to as "Bobtail/Deadhead" coverage within the industry. Non-trucking insurance protected ADS, whose logo appeared on the leased vehicles, against liability for damage that might be caused when the leased vehicles were driven outside the course of business, such as when the vehicle was being operated without a load, or when the trucker was on his way home after delivering a load. Leroy Anderson carried the required non-trucking insurance on the vehicles he leased to ADS.

 Owner-operators could obtain non-trucking insurance themselves, and provide the company with a certificate of insurance as proof of coverage. ADS also made non-trucking insurance available to its owner-operators at a group rate, through the Independent Hauler's Association ("IHA"), a national trade association for independent truck drivers headquartered in Kentucky. Owner-operators could also purchase physical damage insurance through ADS and IHA.

 When an owner-operator such as Mr. Anderson chose to obtain this insurance through the company, the procedure was as follows: After executing a permanent lease agreement with ADS, the trucker would fill out an Application for Group Insurance ("Application"). Leroy Anderson prepared his Application at Perrin Trucking. ADS provided IHA with a list of permanently-leased equipment that needed coverage, along with the names of the vehicle owners. IHA then obtained the necessary coverage through an insurance broker; in this case, IHA worked through A&A, in Tulsa, Oklahoma, who was plaintiff Generali's agent. A&A issued a binder on behalf of Generali with respect to non-trucking liability insurance; the binder and then the policy were delivered to Intrenet; they was not sent to the individual owner-operators. A&A also prepared Certificates of Insurance and Loss Payable Clauses, and sent copies of these documents to IHA, ADS, the owner-operator, and any lender having a lien on the leased equipment.

 The policy premiums were paid by the owner-operators, who authorized ADS to deduct this as an expense from their paychecks. ADS would remit the premium payments to IHA once a month and IHA passed it on to the broker.

 IHA also maintained computer records of vehicle information, which changed frequently during the effective policy period, since ADS would continue to execute new lease arrangements and would also terminate existing leases. ADS would indicate any changes in coverage for an owner-operator on a Truck Policy Change form. ADS would send the form to IHA, and, in turn, IHA would make the necessary changes in its computer data base and send the form on to the broker, A&A. IHA also prepared monthly computerized printouts adding or deleting owner-operators and vehicles to the lists submitted by each of the Intrenet affiliates when they initially applied for insurance coverage, and sent these reports to A&A. The "Non Business Liability Audit Reports" provided this updated information for non-trucking liability coverage. The parties dispute the accuracy of the information in some of these reports.

 The Policy

 We now turn to the specific policy and disputed coverage at issue. On October 18 and 19, 1991, Intrenet and each of its four transportation affiliates applied for physical damage insurance on some of their owned and leased vehicles. App. 681-689. The applications were executed in Rockport, Indiana, and delivered to an IHA representative, John Dillard, either in Rockport or in Madisonville, Kentucky, IHA's place of business.

 On October 24, 1991, Eck Miller, ADS, and C.I. Whitten, the affiliates which used leased vehicles, executed an application for Insurance for Non-Trucking Use. App. at 691-92. The application was headed "Intrenet, et al". It stated that said policy would cover between 1000 and 1500 vehicles leased to Eck Miller, ADS, and C.I. Whitten, for the policy period October 18, 1991 to October 18, 1992, and that a list of drivers and a schedule of vehicles had already been sent to the insurer. App. at 691-92. The application was executed in Rockport, Indiana, and signed by George Carter, President of Eck. It was then delivered to John Dillard of IHA in Kentucky, who sent it on to A&A in Oklahoma.

 A&A issued a binder of insurance, underwritten by Generali, with respect to both the physical damage insurance and the non-trucking liability insurance. App. at 287-88; 693. Policy # AGBT-91-289 for non-trucking use was issued on January 8, 1992. App. at 694. *fn2" Policy AGBT-91-289 was effective from September 16, 1991 to September 16, 1992; and was later extended to provide coverage until October 16, 1992. App. at 736-38. The Policy was mailed to Intrenet, in Rockport, Indiana; Certificates of Insurance were mailed to each owner-operator.

 The Policy provides for $ 1,000,000 combined single limit of liability coverage, and $ 60,000 combined single limit of uninsured motorists coverage. App. at 736.

 Paragraph B of the UIM Endorsement defines the scope of coverage for UIM benefits:

1. You.
2. If you are an individual, any "family member."
3. Anyone else "occupying" a covered "auto" or temporary substitute for a covered "auto." The covered "auto" must be out of service because of its breakdown, repair, servicing, loss or destruction.
4. Anyone for damages he or she is entitled to recover because of "bodily injury" ...

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