Who's on First?
By Theodore J. Smetak and
Douglas D. McGhee
DETERMINING PRIMARY OR EXCESSCOVERAGE IN MINNESOTA MOTOR CARRIER LEASING SCENARIOS
Sorting the priority of liability coverages for trucking operations can be challenging because the types of policies in use build upon different concepts. Commercial auto policies - either with or without carrier endorsements - sometimes surface in "trucking" claims. Ownership of the vehicle is the primary determinant of risk under the basic commercial auto policy and is used to determine which policy's coverage is primary. In Minnesota a vehicle under lease for a period of six months or more is considered "owned" by the lessee, who then has the duty to obtain insurance as well as vicarious liability for use of the vehicle.
A truckers policy, such as ISO's CA 00 12, defaults to the same simple "ownership" rule in that the policy is primary for owned vehicles but excess for non-owned. However the truckers policy is primary for covered owned or non-owned autos "used exclusively in your business as a 'trucker' and pursuant to operating rights granted to you by a public authority." Written agreements between truckers, then, will usually not control which trucker's insurer becomes primary.
The Motor Carrier Policy (ISO's CA 00 20) uses the same default general rule: the liability coverage is primary for owned autos but excess for non-owned autos. However, that policy contemplates that as between two motor carriers, it may be proper that one or the other commit to hold the other harmless. The agreement is often consistent with operating authority. Or it may reflect which enterprise is best able to undertake the risk. When "motor carriers" are involved, the policy contemplates that a "written agreement" to hold harmless will be enough to determine which is primary and which is excess. Having said that, the policy is sometimes confusing to work through to that result. After all, the outcome depends upon "who is an insured" as well as other phrases. To help with this determination we have set out a Flow Chart for determining which of two motor carrier policies provides primary coverage. Try it. See if it doesn't produce the same result as when you work through the policy text itself. And if you find it accurate, we hope you might find it useful to keep near at hand.
About the Authors: Ted has practiced Minnesota insu
rance law for over a quarter century. With a concentration in insurance coverage he advises and counsels insurance companies and self-insured entities, including writing policies and self insured undertakings as well as operations/compliance. As a prolific writer and teacher, he has written extensively on general insurance law subjects, bad faith, ADR, complex settlement devices (such as Drake v. Ryan and Miller Shugart) and a wide range of subjects. Ted has authored and co-authored seven books on Minnesota motor vehicle insurance law and practice. He and the Minnesota Motor Vehicle Insurance Manual are regarded as primary authorities by the legal and insurance communities. Ted and Rich Besonen are working with a friend and colleague from the insurance industry to publish a Minnesota guide to CGL insurance coverage.
Doug is an associate in the Insurance Coverage, Commercial Litigation, and Appellate Groups. His practice emphasizes both plaintiff's and defendant's work in complex areas of the law, including insurance coverage, professional liability, and appeals. Doug was recently names "Rising Star" by Minnesota Law & Politics. Before joining the firm, Doug served as a law clerk to Magistrate Judge Franklin Noel of the United States District Court of the District of Minnesota and Judge Thomas Wexler of the Hennepin County District Court. During law school, Doug was a Student Articles Editor on Law & Inequality: A Journal of Theory & Practice, and was Editor-in-Chief of The Source , the law school newspaper.
© 2003 Arthur, Chapman, Kettering, Smetak & Pikala, P.A.
This publication is intended as a report on legal developments in the insurance coverage area. It is not intended as legal advice. Readers of this publication are encouraged to contact Arthur, Chapman, Kettering, Smetak & Pikala, P.A. with any questions or concerns.