New South Insurance Company v. Capital City Movers LLC

Background

New South Insurance Company sought a declaratory judgment about its obligations under a commercial vehicle insurance policy issued to Capital City Movers LLC. In April 2019, David Brown was seriously injured when he was struck while riding his bicycle by a 2011 International Box Truck owned by Capital City and operated on Capital City’s behalf. Brown filed state-court actions seeking compensation. Capital City and the other defendants associated with it did not appear in this federal case. New South was providing those defendants’ defenses in the state-court action.

The policy initially listed the truck as an insured vehicle, but later amendments removed it. The policy in effect on the date of the accident listed two different vehicles and provided a $750,000 combined single limit for each listed vehicle. New South had filed New York Department of Transportation Form E certificates before the accident, but it did not file an updated Form E after the final policy amendment.

New York regulations required a motor carrier that was not self-insured to maintain insurance covering each vehicle used to transport property for compensation. The regulations required $100,000 in coverage for personal injury or death to one person. Form E and the related Form F endorsement amended an insurance policy to provide the coverage required by those motor-carrier laws and regulations.

Motions and issues

New South moved for summary judgment against Brown and for default judgment against the defendants who had not appeared. Its summary-judgment motion sought declarations that Capital City’s coverage for the accident was limited to $100,000, that New South had no duty to defend or indemnify defendants for claims arising from the accident, and that New South could withdraw from the defense it was providing. Brown separately moved for summary judgment, arguing that the policy provided coverage up to the $750,000 combined limit and opposing New South’s position on the duty to defend.

The opinion decided the competing summary-judgment motions. It stated that the default-judgment request against the nonappearing defendants would be addressed separately after a scheduled hearing.

Coverage limit

The court held that the truck did not qualify as a “your insured auto” under the policy. It was not listed in the policy declarations at the time of the accident, Capital City had owned it before the policy period began, and it was not being used as a temporary substitute vehicle. The policy’s ordinary coverage therefore did not itself cover liability arising from the truck’s use.

The court nevertheless held that Form E and Form F amended the policy to provide some coverage for the truck. Capital City was using the truck to transport property for compensation, so New York regulations required coverage for it. The forms made New South responsible for the coverage required by those regulations, even though the truck was excluded from the policy’s ordinary coverage.

The court rejected Brown’s argument that the policy’s $750,000 combined limit applied to this coverage. It interpreted the forms as providing only the minimum coverage required by the regulations when coverage existed solely because of the forms rather than under the policy’s own terms. The court therefore held that Capital City had coverage of $100,000 for liability for bodily injury to one person arising from the accident.

The court also rejected Brown’s arguments based on the policy limits stated on earlier Form E filings, a New York trial-court decision, the federal Form MCS-90 endorsement, and public-policy concerns. The court concluded that those arguments did not overcome the language of the New York regulations and Forms E and F.

Duty to defend

The policy required New South to defend claims seeking damages for bodily injury or property damage arising from the use of a “your insured auto.” Because the truck did not meet that policy definition, the court held that the policy did not require New South to defend Capital City or the other defaulting defendants in the state-court action or in another action seeking compensation for injuries from the accident.

The court further held that Form F did not independently create a duty to defend. Form F required coverage in the amount required by New York law, while the regulations required insurance conditioned on payment of judgments. The court treated the duty to defend as a separate contractual obligation and found no comparable policy provision extending that duty to claims covered only through Forms E and F.

Disposition

The court granted New South’s motion for summary judgment and denied Brown’s motion for summary judgment. The court stated that it would issue one judgment containing all declaratory relief after resolving New South’s separate motion for default judgment against the nonappearing defendants. The Clerk was directed to close the two pending motions.