Summary
In Buckeye Union Ins. Co., v. Shelby Mut. Ins. Co., 12 Ohio St.3d 46, 465 N.E.2d 403 (Ohio 1984), the policyholder leased its tractor to a third party.
Summary of this case from Lindsey v. Colonial Lloyd's Ins. Co.Opinion
No. 83-1572
Decided July 3, 1984.
Insurance — Leased equipment agreement not altered by endorsements to insurance policy covering the leased equipment, when.
O.Jur 2d Insurance §§ 254, 645.
The risks and liabilities assumed by parties to a leased equipment agreement cannot be considered altered by endorsements to an insurance policy covering the leased equipment which are incorporated under the terms of the lease and are dated prior to its inception.
APPEAL from the Court of Appeals for Belmont County.
On February 18, 1977, an employee of C D Oil Company was operating a tractor-trailer on Interstate 70 in Belmont County. A serious accident occurred causing the death of one person, personal injuries to several other persons, and property damage. At the time of the accident, the tractor portion of the rig was owned by Hoffman and Kuhn, Inc. It had leased the tractor to C D. The trailer portion of the rig was wholly owned by C D.
Plaintiff-appellee, the Buckeye Union Insurance Company, was the insurer of the tractor on a policy issued to the tractor owner, Hoffman and Kuhn, Inc. Defendant-appellant, Shelby Mutual Insurance Company, was the insurer of the trailer and the driver of the tractor-trailer on a policy issued to C D, the lessee of the tractor and owner of the trailer.
Claims were made of Buckeye as insurer of the tractor owner, Hoffman and Kuhn. Buckeye was obligated pursuant to the policy to defend Hoffman and Kuhn. While giving notice of the proceedings to Shelby, Buckeye negotiated a total settlement among the various parties in the amount of $162,461.58.
After this settlement, Buckeye requested indemnification from Shelby. As a result of Shelby's refusal to indemnify or contribute any of the settlement, Buckeye instituted this action in the Belmont County Court of Common Pleas.
At trial, the court considered the parties' stipulation of facts, the leased equipment agreement for the tractor between Hoffman and Kuhn and C D, both insurance policies, the accident report, and the expert testimony of Buckeye's witness who testified that the defective brakes on the trailer owned by C D caused the accident. Also at trial, counsel for Shelby admitted that the driver of C D (its insured) was negligent. Upon considering all of the evidence, the court held that Buckeye was entitled to indemnification from Shelby for the full amount of the settlement.
On appeal, the appellate court affirmed and held that the lease was controlling, and that pursuant to this lease, Hoffman and Kuhn undertook to insure against losses caused by its tractor, but C D assumed the risk of loss caused by its own negligence or that of its driver. The court then concluded that C D had admitted its liability for the accident, that C D was not covered by the insurance policy issued by Buckeye but was covered by the policy issued by Shelby, and that, therefore, Shelby was obligated to indemnify Buckeye.
The cause is now before this court pursuant to the allowance of a motion to certify the record.
Sommer, Solovan Piergallini Co., L.P.A., Mr. Lawrence T. Piergallini and Mr. Keith A. Sommer, for appellee.
Lancione Law Office Co., L.P.A., and Mr. Bernard G. Lancione, for appellant.
The relevant part of the leased equipment agreement between Hoffman and Kuhn, owner of the tractor and the insured of Buckeye Union Insurance, and C D, insured of Shelby, provides the following:
"5. (a) The LESSOR agrees to secure and pay for and maintain public liability and property damage insurance protecting the interest of all parties to this contract against liability for damage, personal injury or death caused by any vehicle leased hereunder, to the extent of 300,000 per accident subject to limits of 100,000 per person, and the sum of 50,000 per accident against liability for damage to property caused by any vehicle leased hereunder, and furnish evidence thereof to the LESSEE.
"* * *
"(d) The LESSEE to hold the LESSOR harmless for any accident or other claims resulting from the negligence of the LESSEE or its driver in the operation of the automobiles herein rented, except as to such accident or other claims covered by the personal injury and property damage, liability insurance covering the vehicles leased hereunder as provided for above."
Therefore, as the court of appeals correctly found, pursuant to 5(a), Hoffman and Kuhn agreed to insure for damages if an accident was caused by a leased tractor, but not for accidents caused by C D or its employees. Moreover under 5(d), it is clear that Hoffman and Kuhn did not agree to insure the negligent acts of C D or its driver under the express language of the lease. Considering the testimony at trial, which stated that C D's driver was negligent and the brakes of C D's trailer were defective, it follows that Shelby or its insured, C D, would be required to pay for the loss resulting from the accident.
Nevertheless, although Shelby stipulated that C D's driver was negligent, Shelby contends that an endorsement on Buckeye's policy covering Hoffman and Kuhn, expands the coverage of the policy concerning the tractor. The endorsement reads as follows:
"It is hereby understood and agreed that this policy provides coverage for any Lessee up to the limit of liability stipulated in the individual Certificate of Insurance issued to that Lessee under this policy, and/or as stipulated in the Leased Equipment Agreement between the individual Lessee and Hoffman Kuhn, Inc., and/or as stipulated by separate endorsement to this policy."
The endorsement, however, was dated April 1, 1974, while the lease was dated December 5, 1975. Hence, the lease being later in time is controlling and does not extend coverage to the lessee, C D. The risks and liabilities assumed by parties to a leased equipment agreement cannot be considered altered by endorsements to an insurance policy covering the leased equipment which are incorporated under the terms of the lease and are dated prior to its inception.
There was also another endorsement to Buckeye's policy covering Hoffman and Kuhn, which provides the following:
"It is understood and agreed that the Automobile Liability Insurance provided by Coverage C and D of form Auto 6698 of the above captioned policy applies to any trailer owned by other than the named insured, while being operated with a power unit leased or rented from the named insured, provided the power unit is not operating under the rights or authority of others."
This endorsement extends coverage to any trailer owned by someone other than Hoffman and Kuhn, while being operated by a tractor owned by Hoffman and Kuhn, provided that the tractor is being operated by Hoffman and Kuhn. It does not become effective in this fact situation, because it is unmination disputed that the tractor was not being operated by Hoffman and Kuhn at the time of the accident.
Therefore, the pertinent parts of the lease control this case. Considering the lease and the two insurance policies, along with the above-mentioned facts in the record, Shelby is responsible for the loss caused by its insured's driver and must indemnify Buckeye for the accident.
For the foregoing reasons, the judgment of the court of appeals is affirmed.
Judgment affirmed.
CELEBREZZE, C.J., SWEENEY, LOCHER, HOLMES, C. BROWN and J.P. CELEBREZZE, JJ., concur.
REILLY, J., of the Tenth Appellate District, sitting for W. BROWN, J.