Michael J. Carlson, Sr.,, Appellant,v.American International Group, Inc., et al., Respondents.BriefN.Y.October 18, 2017APL-2016-00041 Niagara County Clerk’s Index No. E143033/11 Court of Appeals STATE OF NEW YORK MICHAEL J. CARLSON, SR., Individually and as Administrator of the Estate of CLAUDIA D’AGOSTINO CARLSON, Deceased, and as Assignee of WILLIAM PORTER, Plaintiff-Appellant, —against— AMERICAN INTERNATIONAL GROUP, INC., AIG DOMESTIC CLAIMS, INC., Defendants, AMERICAN ALTERNATIVE INSURANCE CO., Defendant-Respondent, NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA and DHL EXPRESS (USA), INC., f/k/a DHL WORLDWIDE EXPRESS, INC., Defendants. (Caption continued on inside cover) BRIEF FOR AMICI CURIAE AMERICAN INSURANCE ASSOCIATION AND NEW YORK INSURANCE ASSOCIATION, INC. IN SUPPORT OF DEFENDANTS-RESPONDENTS CHARLES J. SCIBETTA STEVEN C. SCHWARTZ LIDIA H.S. REZENDE CHAFFETZ LINDSEY, LLP 1700 Broadway, 33rd Floor New York, New York 10019 Telephone: (212) 257-6960 Facsimile: (212) 257-6950 Attorneys for Amici Curiae American Insurance Association and New York Insurance Association, inc.August 31, 2017 MICHAEL J. CARLSON, SR., Individually and as Administrator of the Estate of CLAUDIA D’AGOSTINO CARLSON, Deceased, and as Assignee of WILLIAM PORTER, Plaintiff-Appellant, —against— AMERICAN INTERNATIONAL GROUP, INC., AIG DOMESTIC CLAIMS, INC., AMERICAN ALTERNATIVE INSURANCE CO., NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, DHL EXPRESS (USA), INC., f/k/a DHL WORLDWIDE EXPRESS, INC., Defendants-Respondents. CORPORATE DISCLOSURE STATEMENT Pursuant to New York Court of Appeals Rule of Practice 500.1(f), the American Insurance Association states that it is a trade association and that it has no parent, subsidiary or affiliate The New York Insurance Association, Inc. states that it is a trade association that has no parents, subsidiaries, or affiliates. i TABLE OF CONTENTS Page STATEMENT OF INTEREST OF AMICI CURIAE ................................................ 1 SUMMARY OF ARGUMENT ................................................................................. 3 ARGUMENT ............................................................................................................. 6 I. Under New York law, extrinsic evidence is inadmissible to add to or vary an insurance policy’s unambiguous terms. This Court should reject Appellant’s invitation to erode that rule. .................................................................................... 6 II. To trigger “hired auto” coverage, the named insured must have direct control over a vehicle it does not own, and must have given the driver permission to use the vehicle. The requisite control is akin to the control under a lease; control over the owner of the vehicle is insufficient. ........................................... 10 III. The cartage agreement set the terms of MVP’s services as independent contractor and defined MVP’s rights to use DHL’s intellectual property. It did not give DHL direct control over the vehicle, and it did not include DHL’s “permission” for MVP to use its own vehicle. ..................................................... 13 IV. Even if it were admissible, the extrinsic evidence does not support Appellant’s position. There was no $4 million coverage gap, and National Union could have charged premium based on the MVP vehicle count whether the vehicles were “hired” or not. ................................................................................ 18 CONCLUSION ........................................................................................................ 22 CERTIFICATE OF COMPLIANCE ....................................................................... 23 ii TABLE OF AUTHORITIES Page(s) Cases Dairylea Coop. Inc. v. Rossal, 64 N.Y.2d 1 (1984) ............................................................................................. 15 Greenfield v. Philles Records, Inc., 98 N.Y.2d 562 (2002) ........................................................................................... 6 Ins. Co. of N. Am. v. U.S. Fire Ins. Co., 67 Misc. 2d 7, 322 N.Y.S.2d 520 (Sup. Ct. N.Y. Cty. 1971) ............................... 7 McGrail v. Equitable Life Assur. Soc. of U.S., 292 N.Y. 419 (1944) ............................................................................................. 7 Murdza v Zimmerman, 99 N.Y.2d 375 (2003) ............................................................................... 6, 15, 16 Old Republic Ins. Co. v. Stratford Ins. Co., 777 F.3d 74 (1st Cir. 2015) ............................................................................. 9, 12 Phillips v. Enter. Transp. Serv. Co., 988 So. 2d 418 (Miss. Ct. App. 2008) ................................................................ 11 Slamow v. Del Col, 79 N.Y.2d 1016 (1992) ......................................................................................... 7 Toops v. Gulf Coast Marine Inc., 72 F.3d 483 (5th Cir. 1996) ................................................................................ 10 U.S. Fire Ins. Co. v. Milood Ben Ali, 198 F. Supp. 2d 1313 (S.D. Fla. 2002) ............................................................... 10 Unigard Sec. Ins. Co. v. N. River Ins. Co., 4 F.3d 1049 (2d Cir. 1993) ................................................................................... 9 Valley Forge Ins. Co. v. Allstate Indem. Co., 2014 WL 3689650 (Sup. Ct. Kings Cty. July 25, 2014) .................................... 11 W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157 (1990) ................................................................................... 5, 7, 8 iii Statutes Vehicle and Traffic Law § 388 .......................................................................... 15, 16 49 CFR 387 ........................................................................................................ 18, 19 Other Authorities 8A Couch on Insurance, § 118:52 ............................................................................ 11 1 STATEMENT OF INTEREST OF AMICI CURIAE The American Insurance Association (“AIA”), founded in 1866 as the National Board of Fire Underwriters, is a leading national trade association representing more than 320 major property and casualty insurance companies. AIA members collectively underwrite more than $125 billion in direct property and casualty premiums nationwide, including over 31 percent of the commercial insurance market in New York, and range in size from small companies to the largest insurers with global operations. AIA advocates sound and progressive public policies on behalf of its members in legislative and regulatory forums nationwide. AIA also files amicus curiae briefs in significant cases before federal and state courts, including this Court, on issues of importance to the insurance industry and marketplace. The New York Insurance Association (“NYIA”) is a state trade association that has represented the property and casualty insurance industry in New York for more than 130 years. NYIA’s membership includes both national and regional carriers, domestics and non-domestics, collectively writing more than $12 billion annually in New York premium. The association represents stock, mutual, and cooperative insurers writing in virtually every county of New York State. 2 NYIA’s mission is to promote an insurance market that is viable and strong in order to better serve the insuring public, to promote the economic, legislative and public standing of its members and the insurance industry, to provide a forum for discussion of policy issues of common concern to its members and the insurance industry, and to serve the public interest through activities promoting the safety and security of persons and property. AIA and NYIA offer this amicus brief because their members and their insured customers have a strong interest in maintaining clarity around the scope of coverage afforded under common auto liability policy provisions, including hired auto coverage and other commonly used terms of insurance coverage. This case arises out of Plaintiff-Appellant’s attempt to misconstrue an insurance policy. The underlying tort litigation arose because an employee of MVP, DHL’s independent contractor, had an accident while driving an MVP van on a personal errand. In that litigation, DHL was held not to be liable. Nonetheless, Plaintiff-Appellant now seeks a declaration that it is covered under DHL’s insurance policies on the theory that the MVP van was a “hired auto.” However, the Fourth Department correctly held that the van was not “hired auto” within the meaning of the policies, and therefore dismissed the case. Because “hired auto” provisions are common in insurance policies, this appeal raises a question that is 3 important to the insurance industry. Amici AIA and NYIA urge this Court to affirm the Fourth Department’s decision for the reasons discussed below. SUMMARY OF ARGUMENT The scope of hired auto coverage is clear and well recognized by the courts. The coverage applies (i) in relation to vehicles that are directly controlled by, but not owned by, the named insured, and (ii) only when the vehicles are being operated by someone with the named insured’s permission. In this case, the Fourth Department correctly held that there was no hired auto coverage for the accident involving MVP’s vehicle because the named insured, DHL, did not control the vehicle or give MVP’s employee permission to use it. The Fourth Department properly followed New York law for resolving a motion to dismiss. It interpreted the policies according to their plain language and consistently with long-standing precedent. It applied the clear policy plain language to the undisputed documentary evidence concerning DHL’s relationship to the vehicle (i.e., the cartage agreement) and the undisputed facts pertaining to the accident (i.e., that it occurred while the driver was on a personal errand and not while conducting DHL’s business). The court properly ignored Appellant’s extrinsic evidence because New York law requires enforcement of unambiguous contract terms without regard to extrinsic evidence. 4 In seeking reversal, Appellant asks this Court to erode this fundamental New York rule by creating an exception that would permit so-called “objective extrinsic evidence” to contradict the plain meaning of common, unambiguous policy provisions. This Court should not lead New York contract law down that path. The Court has long recognized why it is important to enforce unambiguous contract language. The contract language is the best, most direct evidence of the parties’ intent at the time of contracting. Additionally, enforcing an agreement as written serves New York’s strong interest in certainty in commercial arrangements. Reliance on extrinsic evidence, on the other hand, is fraught with complexity, unreliability, and uncertainty. Extrinsic evidence should be introduced only in cases where the provision of the contract at issue is ambiguous. If extrinsic evidence could contradict or vary unambiguous insurance contract language, straightforward insurance claims would become needlessly complicated. Clear and unambiguous terms would have different meanings in different cases, depending on the details of the evidence and the individual views of the judge or jury deciding each case. Underwriting and claims handling costs would increase, which could do nothing to enhance the availability of affordable insurance coverages in this State. 5 The extrinsic evidence that the Appellant relies on in this case demonstrates exactly why courts should not consider extrinsic evidence when policy language is clear and unambiguous. Appellant’s arguments rest on a fundamental misunderstanding of auto liability coverage and a fundamental mischaracterization of the interrelationship between the MVP primary policy, the DHL policies, and the federal minimum insurance regulations (see Argument, Point IV, below). Further proceedings on these flawed arguments would unnecessarily increase the costs and complexity of resolving this otherwise straightforward claim; it would require testimony from witnesses concerning email snippets written years ago; and a plenary trial would create the risk that a jury might misconstrue the extrinsic evidence in the same way that Appellant does. These are the exact dangers this very Court warned against in its decision in W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157, 162 (1990). See pp. 6-7, below. In addition, Appellant fundamentally misconstrues the concept of “permission” as it relates to the hired auto coverage. As the Fourth Department correctly held, permission to use a vehicle can only be granted by someone with control over the vehicle, which DHL did not have. To argue that DHL was somehow capable of giving permission to use a vehicle to which it did not have physical access, Appellant twists the undisputed terms of the cartage agreement. 6 However, the provisions that Appellant relies on relate solely to DHL’s grant of permission to use DHL’s trademark and related intellectual property. Those provisions do not deal with permission to use MVP’s own vehicle. This Court should confirm that “permission” for purposes of hired auto coverage refers to permission to use the vehicle, not to permission to use the insured’s intellectual property. In any event, the permission to use the DHL mark was expressly limited. Under the cartage agreement, MVP was not authorized to use any vehicle bearing a DHL mark “other than in connection with [MVP’s] performance of the services” under the cartage agreement. But, here, the vehicle involved in the underlying accident was not being used in connection with the performance of MVP’s services under the cartage agreement. See Murdza v Zimmerman, 99 N.Y.2d 375 (2003), discussed below at pp. 15-16. As a result, there is no basis for Plaintiff-Appellant’s contention that DHL had given MVP permission to use the vehicle. ARGUMENT I. Under New York law, extrinsic evidence is inadmissible to add to or vary an insurance policy’s unambiguous terms. This Court should reject Appellant’s invitation to erode that rule. Settled New York law requires courts to enforce unambiguous contract terms according to their plain meaning. Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569 (2002) (“[A] written agreement that is complete, clear and 7 unambiguous on its face must be enforced according to the plain meaning of its terms.”). Extrinsic evidence is inadmissible to add to or vary the writing. W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157, 162 (1990). This rule applies to insurance contracts. McGrail v. Equitable Life Assur. Soc. of U.S., 292 N.Y. 419, 424 (1944) (“Rules for the construction of contracts of insurance do not differ from those to be applied to the construction of other contracts.”) See also Ins. Co. of N. Am. v. U.S. Fire Ins. Co., 67 Misc. 2d 7, 10, 322 N.Y.S.2d 520, 523 (Sup. Ct. N.Y. Cty. 1971), aff'd sub nom. Ins. Co. of No. Amer. v. U.S. Fire Ins. Co., 348 N.Y.S.2d 122 (1973) (“An insurance contract is to be construed to give effect to the intention of the parties as expressed by the language used. The language used is given its usual and ordinary meaning.”). The reasons for this New York rule are clear. The contract’s wording is direct—and thus the best—evidence of the parties’ intentions at the time of contracting. Extrinsic evidence is, at most, indirect evidence of intent. Slamow v. Del Col, 79 N.Y.2d 1016, 1018 (1992) (“The best evidence of what parties to a written agreement intend is what they say in their writing.”). At the time of contracting, the parties understand that the contract is their binding statement of intent. Parties might express different intentions or desires before or after execution, or they might use words less precisely or incorrectly in less formal 8 communications. But they know the language of their contracts will be given legal effect, and so that language, when it is clear, trumps all other evidence of intent. Extrinsic evidence is susceptible to misuse and misunderstanding. It is, therefore, inadmissible unless ambiguous contract language leaves no choice but to look beyond the words of the contract for the parties’ intent. Enforcing a contract’s plain terms without regard to extrinsic evidence “imparts stability to commercial transactions by safeguarding against fraudulent claims, perjury, death of witnesses … infirmity of memory … and the fear that the jury will improperly evaluate the extrinsic evidence.” W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157, 162 (1990). The certainty afforded by the enforcement of plain and unambiguous contract terms is especially important to the insurance industry. If common insurance contract provisions were subject to re-litigation in every case because of differing arguments based on extrinsic evidence, the insurance market would suffer, to the detriment of both insurers and insureds. Especially when policy language is clear and unambiguous on its face, the efficiency of the “industry would not be enhanced by giving different meanings to identical standard contract provisions depending upon idiosyncratic factors in particular lawsuits. The meaning of such provisions is not an issue of fact to be litigated anew each time a 9 dispute goes to court.” Unigard Sec. Ins. Co. v. N. River Ins. Co., 4 F.3d 1049, 1070–71 (2d Cir. 1993). Appellant’s arguments on appeal would undermine New York’s strong public policy favoring contract certainty. Relying on Old Republic Ins. Co. v. Stratford Ins. Co., 777 F.3d 74 (1st Cir. 2015), Plaintiff-Appellant argues that “objective extrinsic evidence” may be considered to contradict the clear terms of an insurance policy. (Appellant’s Brief at 60). In that decision, however, the First Circuit interpreted New Hampshire law. In Old Republic, the language of the hired auto coverage was unambiguous, but the majority nevertheless held that “objective extrinsic evidence” could contradict those unambiguous terms. As the concurring opinion stated, the majority’s decision would undermine confidence and certainty in insurance policies. Id. at 87. The concurrence, therefore, would have applied the rule that “intent is found first and foremost in the words of the policy—words that when clear, are determinative.” Id. at 87-88. In other words, the Old Republic concurrence would have applied the same rule that New York applies. This Court should confirm that the majority opinion in Old Republic is not the law of New York. It should follow the approach urged by the Old Republic concurring opinion and “give effect to the plain meaning of” the hired autos coverage. Id. at 89. 10 II. To trigger “hired auto” coverage, the named insured must have direct control over a vehicle it does not own, and must have given the driver permission to use the vehicle. The requisite control is akin to the control under a lease; control over the owner of the vehicle is insufficient. The National Union primary policy language in issue is as follows: The following are insureds: a. You [i.e., DHL] for any covered “auto.” b. Anyone else while using with your permission a covered “auto” you own, hire or borrow … c. Anyone liable for the conduct of an “insured” described above but only to the extent of that liability. (R 1815-16). The umbrella policy similarly defines an “insured” as: “[a]ny person … or organization with respect to any auto owned by …., loaned to …, or hired by you or on your behalf and used with your permission.” (R. 970.) This critical language—i.e., “auto you hire” or “auto hired by you”— makes clear on its face that the linchpin for coverage under paragraph b is a direct connection between the named insured and the vehicle. By requiring that the auto must be hired by the named insured, the policy language does not refer to a situation where the named insured hires or contracts with a third party, who in turn uses a vehicle owned by that party to provide services to the named insured. A vehicle lease or rental agreement is the quintessential example of the arrangement that makes a vehicle a hired auto. See, e.g., Toops v. Gulf Coast Marine Inc., 72 F.3d 483, 487 (5th Cir. 1996); U.S. Fire Ins. Co. v. Milood Ben Ali, 11 198 F. Supp. 2d 1313, 1318 (S.D. Fla. 2002), aff'd sub nom. U.S. Fire Ins. v. Ali, 61 F. App'x 669 (11th Cir. 2003). Other arrangements might grant the named insured the same kind of direct connection to and control over the vehicle as a lease, and those arrangements could render an auto “hired” as well. But the insured’s control must be direct control over the vehicle itself. General control over the owner of the vehicle, who in turn controls the vehicle, is not enough: [F]or a vehicle to be considered a ‘hired auto,’ there must be either a contract between the insured and the truck owner whereby the insured specifically leases or rents the vehicle itself or, absent such an agreement, there must be evidence that the insured exerted dominion or control over the vehicle. Valley Forge Ins. Co. v. Allstate Indem. Co., 2014 WL 3689650 (Sup. Ct. Kings Cty. July 25, 2014) (emphasis added). The Fourth Department was correct to recognize the “distinction between hiring a company that provides transportation and hiring a truck.” (R-10) (quoting Toops, 72 F.3d at 487). Indeed, the general rule is that “a vehicle owned by an independent contractor who contracts with the insured to perform services for the insured is not a hired automobile.” 8A Couch on Insurance, § 118:52. “[T]he contract between the insured and the independent contractor in those situations is generally for the services of the subcontractor, not the vehicle used in providing the services’” Id. (emphasis added). See also Phillips v. Enter. Transp. Serv. Co., 988 12 So. 2d 418, 423 (Miss. Ct. App. 2008) (finding that a contract with an independent contractor did not mean control over the vehicle.). Because the linchpin for hired auto coverage is the direct control connection between the named insured and the vehicle, whether an auto is “hired” or not is determined by looking at the contractual arrangement giving rise to the use of the vehicle—here, the cartage agreement. The insured’s own characterization of a vehicle as “hired” is not sufficient to render a vehicle hired where that contractual arrangement does not give the insured control over the vehicle. For this reason, the schedule referred to in ITEM FOUR of the National Union declarations has no impact on whether any particular vehicle is “hired.” On its face, ITEM FOUR is the insured’s representation concerning the estimated cost it expects to incur to hire autos. But the schedule does not change the policy’s requirement that the auto must be hired by the insured. Whether a vehicle is “hired” is determined through the control test discussed above, not by the insured’s representation. See Old Republic, 777 F.3d 74 at 81 (estimates in schedules like Item Four are not binding). 13 III. The cartage agreement set the terms of MVP’s services as independent contractor and defined MVP’s rights to use DHL’s intellectual property. It did not give DHL direct control over the vehicle, and it did not include DHL’s “permission” for MVP to use its own vehicle. If DHL had contracted to supplement the trucks it owned with a fleet of MVP trucks that were to be driven by DHL and its employees, then those supplemental trucks could be deemed “hired” by DHL. But those are not the facts. The cartage agreement was a services agreement. MVP agreed to perform DHL’s delivery services as a subcontractor for DHL. The cartage agreement was not, and was not akin to, a fleet lease or rental agreement. MVP at all times maintained dominion and control over the MVP fleet. The cartage agreement did not give DHL or its employees the right to drive MVP’s trucks. Rather, those trucks were to be maintained by MVP and driven by MVP employees. DHL’s subcontract with MVP included provisions that ensured that MVP was qualified to perform the subcontracted service, and allowed DHL to audit MVP’s ongoing compliance. The agreement also included terms concerning the use of DHL’s intellectual property. It neither gave DHL control over the vehicles, nor reflected permission from DHL to MVP to use the vehicles. A. The cartage agreement did not give DHL control over MVP’s trucks. Appellant lists its alleged indicia of DHL control over the MVP trucks at pages 27 to 32 of its brief. Many of these have nothing to do with the trucks at all. 14 For example, MVP itself had to perform the contracted for services; it could not subcontract without DHL’s permission. AB, 30. The MVP delivery persons could not take drugs and had to pass background checks. AB 30-31. MVP had to scan its deliveries and obtain required signatures upon deliveries. AB, 31. MVP’s drivers had to dress in the DHL uniform, be clean and professional looking. AB, 31-32. MVP had to keep its facilities clean. AB, 32. And DHL, not MVP, would deal with customer relations. AB, 30. Appellant’s allegations that do concern the vehicles show that MVP, not DHL, maintained dominion and control over the vehicles. For example, if the vehicles were damaged, MVP had to repair them. AB, 29. MVP had to ensure that the vehicles were driven safely. AB, 30. And DHL could follow the vehicles while MVP was driving them to ensure that MVP was complying with the services agreement. AB, 30. Appellant relies heavily on the fact that the cartage agreement required the MVP vehicles to bear the DHL marks and barred MVP from using the trucks with DHL marks for other purposes. AB, 28-29. But these provisions reflect DHL’s control over DHL’s intellectual property, not over the MVP vehicles. Because MVP had access to and control over every MVP vehicle, MVP— not DHL—had the capacity to give or withhold permission to use its vehicles. 15 B. DHL did not give MVP permission to use MVP’s vehicles. As the Fourth Department correctly held, permission can only be given by a party with control over the vehicle, and since DHL did not control MVP’s trucks, it could not give permission to use them. This is in line with Dairylea Coop. Inc. v. Rossal. There, after finding that Dairylea had no control over the tanker, this Court concluded that Dairylea could not grant permission for the independent contractor to use it. 64 N.Y.2d 1, 9–10 (1984). Moreover, even if the permission granted to MVP in the cartage agreement were misconstrued as permission to use the vehicle, rather than the mark, here the vehicle was still being used without DHL’s permission. Section 3.5 of the cartage agreement expressly negates any permission to use the trucks with DHL’s mark for any purposes “other than in connection with [MVP’s] performance of the services” under the cartage agreement. Yet, at the time of the accident, Porter was driving the MVP van on a personal errand. This Court’s holding in Murdza confirms that DHL did not grant permission. Appellant argues that “permission” as used in the policies has the same meaning as “permission” as used in Vehicle and Traffic Law § 388(1), which “makes every owner of a vehicle liable for injuries resulting from negligence ‘in the use or operation of such vehicle … by any person using or operating the same with permission …’” Murdza, at 379 (quoting Vehicle and Traffic Law § 388(1)). 16 But in Murdza, this Court made clear that “permission” in section 388 refers to actual permission, as limited by any conditions, unless constructive permission has to be found to foster the public policy behind section 388. In the case of a vehicle owner who leases its vehicles to the general public for profit, the public policy behind section 388 may require a finding of constructive permission. But Murdza makes clear that the scope of actual permission controls in the case of an employer who permits its employees to use its vehicles. Finding constructive permission in the employer / employee context is not necessary to foster the policy of section 388 because employees can generally be expected to adhere to the use restrictions imposed by their employers. As the Court explained in Murdza: Indeed, an at-will employment relationship and the frequent contact between an employee and employer demand compliance with restrictions on vehicle operation placed on the employee. As a result of this relationship, it is reasonable for an employer to expect employees to comply with its use restrictions. Thus, allowing an employer explicitly to restrict those who may operate its vehicles, while simultaneously restricting its liability as an owner under Vehicle and Traffic Law § 388, encourages careful selection of operators—the curative policy underpinning of the section. Murdza, at 381-82. On this appeal, there are two reasons why a finding of constructive permission is not necessary. First, because section 388 relates solely to “owner” 17 liability, the public policy behind section 388 cannot require the application of constructive permission to a non-owner such as DHL. Second, DHL was not a lessor of vehicles to the general public. DHL was not the employer of MVP or Carlson, either. But just as an employer would expect its employees to respect conditions on permission, so would parties expect an independent contractor to adhere to clear and express conditions concerning use of property in the performance of its contract. In this respect, Appellant’s arguments concerning the level of control that DHL had over MVP cut against Appellant’s position with respect to permission. If DHL had the kind of control that Appellant alleges for purposes of trying to prove the vehicle was “hired,” then DHL would also have sufficient control over MVP’s use of the vehicle such that its restriction on the permission to use the vehicle would have been respected. That restriction, however, was not respected because MVP’s driver was on a personal errand and not engaged in business under the cartage agreement when the accident occurred. As such, even if Appellant could prevail on its arguments concerning “hired” (which it cannot), its position would nevertheless fail with respect to “permission” because any such permission would have been limited to using the MVP van in the performance of service under the cartage agreement—something Porter was indisputably not doing at the time of the accident. 18 IV. Even if it were admissible, the extrinsic evidence does not support Appellant’s position. There was no $4 million coverage gap, and National Union could have charged premium based on the MVP vehicle count whether the vehicles were “hired” or not. A. There was no “$4 million coverage gap.” The crux of Appellant’s argument on extrinsic evidence is that, notwithstanding the plain language of the DHL policies, those policies must cover the MVP vehicle as a “hired” auto because (i) federal law requires vehicles that haul hazardous materials to have a minimum of $5 million of coverage, and (ii) MVP had only $1 million of coverage under its primary policy and so DHL and its insurers must have intended to make up the $4 million gap. Appellant contends that this point “permeates every issue in this case.” (Reply, p.2.) Appellant’s argument on this point, however, misunderstands the federal regulations and the terms of the MVP policy. There simply was no “coverage gap.” First, 49 CFR 387.9 does not require $5 million of insurance from National Union or American Alternative Insurance Corporation on motor carriers subject to § 387.301(a)(1). The regulation requires minimum financial security, which can be satisfied by self-insurance, through the reserves of the motor carrier itself, or through any one of the motor carrier’s multiple insurance policies. Thus, the regulation is no basis for inferring intent with respect to any specific insurance policy. Moreover, the motor carrier must certify its compliance with the 19 regulations, and Appellant does not explain how MVP could use a DHL policy that, on its face, does not identify MVP or its vehicles as proof of compliance. Thus, the regulations are even less relevant to the intent under the DHL policy than they would be to the intent under a policy held by MVP. Second, the MVP vehicle had the minimum required financial security— there simply was no $4 million gap. Appellant seems to overlook the BMC-90 endorsement attached to the MVP Cincinnati Insurance Company Policy. (R 1411.) That endorsement is included in the policy specifically to ensure compliance with Title 49. It is named: ENDORSEMENT FOR MOTOR CARRIER POLICIES OF INSURANCE FOR AUTOMOBILE BODILY INJURY AND PROPERTY DAMAGE LIABILITY UNDER SECTION 13906, TITLE 49 OF THE UNITED STATES CODE. And, the endorsement expressly grants MVP coverage for the minimum limits required under 49 CFR 387: “The Liability of the Company on each motor vehicle shall be the limits prescribed in 49 CFR 387.303(b)(1), governing minimum amounts of insurance.” (R1411.) The limits prescribed in 49 CFR 387.303(b)(1) are the same limits as referenced in 49 CFR 387.9 that Appellant cites. This Court should reject Appellant’s erroneous arguments based on a $4 million “coverage gap.” The existence of a gap does not prove an intent to fill it, and the gap did not exist in any event. 20 B. The fact that National Union charged premiums relating to the MVP vehicles is irrelevant to whether the vehicles were “hired” autos. Appellant’s argument on the underwriting files rests on the false premise that National Union would never have charged premium relating to the MVP trucks unless they were “hired” autos. This is just not correct. National Union expressly covered DHL for liability arising out of the use of “any auto.” (R-525). National Union had to appreciate that the fleet of MVP vehicles presented a potential insurable risk, and thus that premium should be charged for those vehicles, whether or not the vehicles were “hired.” Given that the trucks were being used in the performance of a subcontract for DHL, and that they included the DHL mark, National Union and DHL could foresee the risk that DHL could be sued for accidents involving the vehicles, whether or not DHL had “hired” them. This case bears that assessment out: DHL was sued, even though the court ultimately concluded DHL had no liability for the accident because DHL did not have control or responsibility for the vehicle at the time of the accident. The underwriting record discussed by Appellant at pages 15-19 of its brief simply shows that the National Union underwriter referred to MVP’s vehicles as “Hired/Non Owned” in order to account for all of the known vehicles that could lead to risk under DHL’s “any auto” coverage. Nothing in the evidence cited suggests any intent to change the standard, unambiguous and well-settled 21 definition of “hired” auto coverage. In fact, the evidence suggests that the underwriter was referring to the vehicles as either hired or non-owned, without regard to the specific status of the vehicle. Nothing in this record suggests any reason why this Court should ignore the plain language of the policy to require a trial concerning the exact intent behind these extrinsic communications. For the reasons discussed at Point I, above, the plain language must control. 22 CONCLUSION For all the foregoing reasons, this Court should affirm the Appellate Division’s ruling dismissing Plaintiff-Appellant’s First Cause of Action. Respectfully submitted, August 31, 2017 _________________ Charles J. Scibetta Steven C. Schwartz Lidia Helena S. Rezende CHAFFETZ LINDSEY LLP 1700 Broadway, 33rd Floor New York, NY 10019 Tel. (212) 257-6960 Fax (212) 257-6950 c.scibetta@chaffetzlindsey.com www.chaffetzlindsey.com Counsel for Amici Curiae AMERICAN INSURANCE ASSOCIATION 555 12th St. NW, Suite 550 Washington, D.C. 20004 NEW YORK INSURANCE ASSOCIATION INC. 130 Washington Ave, Albany, N.Y. 12210 /s/ Steven C. Schwartz 23 CERTIFICATE OF COMPLIANCE Court Rule 500.1 & 500.13(c)(1) I hereby certify that the total number of words in the brief, inclusive of headings and footnote and exclusive of the brief cover, disclosure statement, table of contents, table of authorities, signature block, and certification of compliance is 4,815. I also certify that the body of this brief has been prepared in a proportionally spaced typeface using Microsoft Word in 14-point Times New Roman and the footnotes are printed in 12-point Times New Roman. Dated: New York, New York August 31, 2017 ________________ Steven C. Schwartz /s/ Steven C. Schwartz