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Argonaut Midwest Insurance Co. v. Morales

Court of Appeals of Illinois, First District, Third Division

September 3, 2014

ARGONAUT MIDWEST INSURANCE COMPANY, Plaintiff-Appellee,
v.
GABRIEL MORALES, LAND TRUCK INC., and INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, INC., an Illinois Corporation, Defendants-Appellants (Raymond J. Jones, Stanley Herbert, Morris K. Stevens, and Gloria Stevens, Defendants)

As Corrected.

Appeal from the Circuit Court of Cook County. No. 09 CH 27901. The Honorable Rodolfo Garcia, Judge, presiding.

SYLLABUS

In an insurance dispute over the coverage for a trucking accident involving defendant, the owner of a motor vehicle engaged in an independent business of hauling commodities pursuant to a contract, the company whose commodities he agreed to haul and plaintiff, the insurer that issued a bobtail insurance policy to defendant providing coverage for defendant when he used his truck and trailer for his own purposes but not when he rented it out, the trial court properly entered summary judgment holding that defendant's insurer had no duty to defend or indemnify defendant under the policy for the injuries suffered by the passengers of a vehicle struck by defendant's truck and trailer while he was engaged in hauling for the company with which he had an agreement, since the policy issued by plaintiff contained a " Trucker-Insurance for Non-Trucking Use" endorsement excluding coverage for defendant's covered vehicle while used in the business of anyone to whom it is rented.

For Plaintiff-Appellee: Joshua Vincent, Kimberly Jansen, Hinshaw & Culbertson, LLP, of Chicago, IL.

For Defendants-Appellants: Perry M. Shorris, Alice Ye, Lewis Brisbois Bisgaard & Smith, LLP, of Chicago, IL.

PRESIDING JUSTICE HYMAN delivered the judgment of the court, with opinion. Justice Neville concurred in the judgment and opinion. Justice Mason dissented, with opinion.

OPINION

HYMAN, PRESIDING JUSTICE.

Page 33

[¶1] This case involves cross motions for summary judgment on issues involving insurance coverage of a trucking accident. Appellants-Defendants Gabriel Morales, Land Truck, Inc., and Insurance Company of the State of Pennsylvania, Inc., appeal the trial court's summary judgment order in favor of plaintiff Argonaut Midwest Insurance Company, which held that Argonaut's policy did not cover the accident. Appellants raise two issues on appeal: (i) whether coverage is excluded under the " Trucker--Insurance for Non-Trucking Use" endorsement; and (ii) whether Land Truck is entitled to a defense under the policy. We affirm, holding that Argonaut has no duty to defend or indemnify Morales under the " Trucker--Insurance for Non-Trucking Use" exception, and that Land Truck is not considered an insured under Argonaut's policy.

[¶2] BACKGROUND

[¶3] Gabriel Morales entered into an " Owner Operator Contract" with Land Truck in April 2007. The contract described Land Truck as " a common carrier by motor vehicle holding authority from the Federal Highway Administration." The contract identifies Morales as an independent contractor and the owner of a motor vehicle who " is engaged in an independently established business of hauling commodities by motor vehicle pursuant to contract with contract or common carriers." Land Truck agreed to pay Morales a " flat rate percentage of Gross revenue." (Strikeout in original.)

[¶4] Regarding insurance, the contract provides that " [u]nless required by statute or ordinance," Land Truck will not provide any insurance to Morales. Moreover, the contract required Morales carry his own insurance, including " Bobtail Insurance naming Land Truck Inc as an 'Additional Named Insured' and Certificate Holder." " 'Bob-tail' in trucking parlance is the operation of a tractor without an attached trailer," and " bobtail insurance" typically refers to insurance for when a tractor is not being used in the business of an authorized

Page 34

carrier. Prestige Casualty Co. v. Michigan Mutual Insurance Co., 99 F.3d 1340 (6th Cir. 1996). Land Truck required Morales pay " all costs and expenses incident to the performance of" the contract, including premiums for insurance to cover physical damages, vehicle operating and maintenance costs, fees and taxes, and tolls, among others.

[¶5] Morales agreed to haul commodities for Land Truck, but could refuse loads and do business with other carriers as long as Land Truck received proper notice. Morales would display Land Truck's placards and identifications when hauling for it, and remove them when not. Morales had sole responsibility for the " direction and control" of his operators, and discretion regarding the " methods and means" of fulfilling his obligations to Land Truck.

[¶6] Land Truck agreed to comply with the rules and regulations of the Interstate Commerce Commission, the Department of Transportation, and state regulatory authorities. Subject to those rules and regulations, Morales had the right to " control and direct, in all respects, the operation of the equipment used in the performance" of the contract. The contract lasted one year, subject to automatic renewal.

[¶7] Effective early March 2009, plaintiff Argonaut Midwest Insurance Company issued a $1 million insurance policy to Morales. Under the policy, Argonaut agreed to " pay all sums an 'insured' legally must pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies, caused by an 'accident' and resulting from the ownership, maintenance or use of a covered 'auto'." Argonaut agreed to " defend any 'Insured' against a 'suit' asking for these damages *** . However, [it had] no duty to defend any 'insured' against a 'suit' seeking damages for 'bodily injury' or 'property damage' *** to which this insurance does not apply."

[¶8] The policy defines " insureds" to include " You [Morales] for any covered 'auto'." Among the schedule of covered autos, Morales's 2003 Freightliner truck is listed. An endorsement titled " Truckers -- Insurance for Non-Trucking Use" states, " This insurance does not apply to: *** A covered 'auto' while used in the business of anyone to whom the auto is rented." (Emphasis added.)

[¶9] Later in March 2009, Land Truck notified Morales of a pickup from Waukegan, Illinois. Morales got a dispatch sheet from Land Truck, went to get his truck and trailer from a parking spot he rented, and went to retrieve the empty container. Morales paid tolls with an I-Pass provided by Land Truck. Morales was driving north on I-294 when he struck a vehicle carrying Stanley Herbert, Raymond Jones, and Morris Stevens.

[¶10] In 2009, Herbert, Jones, and Stevens sued Morales and Land Truck. Their amended complaint alleges negligence against Morales and Land Truck, and Stevens' wife, Gloria, alleges lost of consortium.

[¶11] Argonaut filed a complaint for declaratory judgment against Morales, Land Truck, Herbert, Jones, and the Stevenses, claiming it had no duty to defend or indemnify Morales or Land Truck in the underlying suit. Alternatively, Argonaut claimed that the defense costs of the underlying suit should be apportioned between itself and Land Truck's insurer, defendant Insurance Company of the State of Pennsylvania.

[¶12] The parties filed cross motions for summary judgment. The trial court granted Argonaut summary judgment, holding that it had no duty to defend either

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Morales or Land Truck. This appeal timely followed.

[¶13] STANDARD OF REVIEW

[¶14] Summary judgment may be granted where no triable issue of material fact is present and the movant is entitled to a judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2010). " A genuine issue of material fact *** exists where the material facts are disputed or, if the material facts are undisputed, reasonable persons might draw different inferences from the undisputed facts." (Internal quotation marks omitted.) Windmill Nursing Pavilion, Ltd. v. Cincinnati Ins. Co., 2013 IL App. (1st) 122431, ¶ 18. Cross motions for summary judgment indicate none of the movants believe a factual disputes exist regarding the issues raised. Ill. Emcasco Ins. Co. v. Waukegan Steel Sales, Inc., 2013 IL App. (1st) 120735, ¶ 11. " We review the circuit court's grant of summary judgment de novo." Skokie Castings, Inc. v. Ill. Ins. Guar. Fund, 2013 IL 113873, ¶ 27.

[¶15] ANALYSIS

[¶16] Appellants argue (i) the " Trucker -- Insurance for Non-Trucking Use" endorsement does not apply, and (ii) Land Truck is an insured under Argonaut's policy. We conclude that neither argument has merit.

[¶17] Non-Trucking Endorsement

[¶18] Appellants assert two reasons for the inapplicability of the endorsement: (i) Land Truck did not rent the Freightliner because it did not take exclusive possession or control of it; and (ii) the term " rented" is ...


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