United States District Court,

S.D. New York.

UNITED STATES LIABILITY INS. CO. and Mobile Air Transport, Inc. by United

States Liability Ins. Co., as Subrogee, Plaintiffs,

v.

MOUNTAIN VALLEY INDEMNITY COMPANY, Defendant.

MEMORANDUM OPINION AND ORDER

HAIGHT, Senior District Judge.

BACKGROUND

A. Factual History

On October 19, 2001, Eric P. Curtis was killed when his vehicle was struck by a freight delivery truck driven by William M. Lane. The collision took place on State Route 4 in the Town of Halfmoon, County of Saratoga, State of New York. At the time, Lane was an employee of Mobile Air, and was driving while in the course of his employment. Mobile Air, in turn, had leased the truck from Leroy Holding Company, Inc. (“Leroy Holding”), the owner of the vehicle.

Following this accident, Sheila Curtis, administratix of the estate of her late husband, filed a civil action against Lane, Mobile Air, Leroy Holding, and Hudson River Construction Co., Inc (“Hudson River”) in the Supreme Court of the State of New York, Saratoga County, for negligence, wrongful death, and pain and suffering. [FN1]

FN1. With respect to Hudson River, the allegation was that it failed to maintain the roadway in a safe condition for travel thereon by vehicles. Lane, Hudson River, and Leroy Holding are not parties to the captioned action.

Curtis’s action settled for $1,500,000. According to the settlement decree, Lane, Leroy Holding, and Mobile Air were together responsible for contributing $1,450,000, while Hudson River was responsible for $50,000.

Of the $1,450,000, Mobile Air’s primary insurer–a nonparty identified in the papers for both parties as “CGU”–contributed $1,000,000. The remainder was paid equally by U.S. Liability and Mountain Valley, $225,000 each. Mountain Valley was the primary insurer of Leroy Holding. U.S. Liability was the excess insurer of Mobile Air. Both insurance policies provided a maximum coverage of $1,000,000.

That much is agreed upon. What is in dispute is which insurer is responsible for the $450,000 portion of the settlement that is in excess of the $1,000,000 paid by CGU. Mountain Valley believes U.S. Liability should be liable for the full $450,000. Unsurprisingly, U .S. Liability believes that Mountain Valley is liable for the full amount. As noted, the parties have for now decided to divide the cost evenly. Prior to resolving this dispute, I must first examine the various insurance and lease contracts between the parties.

B. Policy Provisions

There are three separate contracts which are applicable in this case. They are as follows: (1) the Truck Lease and Service Agreement between Mobile Air and Leroy Holding, dated Aug. 3, 2000 (the “Truck Lease Agreement”). See Plaintiffs’ Statement of Undisputed Facts and Exhibits, Oct. 11, 2004 (“Plaintiffs’ Statement”), at Ex. C; (2) U.S. Liability’s Commercial Umbrella Policy, numbered CUP 1004195 (“U.S. Liability’s Policy”). See Plaintiff’s Statement, at Ex. E; and (3) Mountan Valley’s Commercial Automobile Policy, numbered 331-007692-03/000 (“Mountain Valley’s Policy”). See Plaintiff’s Statement, at Ex. D.

1) The Truck Lease Agreement

The Truck Lease Agreement governed the rights and obligations of Mobile Air and Leroy Holding–the two insureds–with respect to each other. That lease agreement, which was operational at the time of the accident, provided in relevant part:

III. INSURANCE

A. Customer [Mobile Air] agrees to procure and maintain in full force and effect bodily injury and property damage liability insurance, covering both OWNER [Leroy Holding] and CUSTOMER as insureds, for all vehicles leased hereunder, of no less than $1,000,000 per accident combined single limit of bodily injury and property damage….

G. Insurance required of the CUSTOMER shall be considered primary, and insurance of the OWNER shall be considered excess, as may be applicable to claims which arise out of this agreement or contract.

See Plaintiff’s Statement, Ex. C (emphasis added).

2) U.S. Liability’s Policy

U.S. Liability’s Policy provided insurance coverage to Mobile Air for the policy period of July 31, 2001 to July 31, 2002. That policy provided coverage of up to $1,000,000 per 0occurrence, and also provided in relevant part:

VII. CONDITIONS

7. Other Insurance

The insurance afforded by this policy shall be excess insurance over all underlying insurance covering a loss covered by this policy whether or not valid and collectible. It shall also be excess insurance over all other valid and collectible insurance (except other insurance purchased specifically to apply in excess of this insurance) which is available to the Insured, covering a loss also covered by this policy, not described in the Schedule of Underlying Insurance.

See Plaintiff’s Statement, Ex. E, page 12 (emphasis added).

3) Mountain Valley’s Policy

Lastly, Mountain Valley’s Policy provided insurance coverage to Leroy Holding for the policy period from May 1, 2001 to May 1, 2002. That policy also provided up to $1,000,000 in coverage, and provided in relevant part:

SECTION II–LIABILITY COVERAGE

We will 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”….

A. Coverage

1. Who Is An Insured

The following are “insureds”:

a. You for any covered “auto”.

b. Anyone else while using with your permission a covered “auto” you own, hire or borrow except:

(1) The owner or anyone else from whom you hire or borrow a covered “auto”. This exception does not apply if the covered “auto” is a “trailer” connected to a covered “auto” you own.

(2) Your “employee” if the covered “auto” is owned by that “employee” or a member of his or her household.

(3) Someone using a covered “auto” while he or she is working in a business of selling, servicing, repairing, parking or storing “autos” unless that business is yours.

(4) Anyone other than your “employees”, partners (if you are a partnership), members (if you are a limited liability company), or a lessee or borrower or any of their “employees”, while moving property to or from a covered “auto”.

(5)A partner (if you are a partnership), or a member (if you are a limited liability company) for a covered “auto” owned by him or her or a member of his or her household.

c. Anyone liable for the conduct of an “insured” described above but only to the extent of that liability….

SECTION IV–BUSINESS AUTO CONDITIONS

B. General Conditions

5. Other Insurance

a. For any covered “auto” you own, this Coverage Form provides primary insurance. For any covered “auto” you don’t own, the insurance provided by this Coverage is excess over any other collectible insurance….

See Plaintiff’s Statement, Ex. D.

A reading of the above cited policy provisions reveals an incongruity between the Truck Lease Agreement on the one hand, and, taken together, U.S. Liability’s and Mountain Valley’s Policies on the other. According to the Truck Lease Agreement, at § III.G, Mobil Air’s insurance coverage is primary to Leroy Holding’s insurance coverage. Therefore, if the Truck Lease Agreement was the governing contract, then U.S. Liability (as Mobil Air’s insurer) would be liable for the full $450,000 at dispute in this case.

On the other hand, a reading of U.S. Liability’s Policy and Mountain Valley’s Policy leads to the opposite conclusion. U.S. Liability’s Policy, at § VII.7, states that it is in excess to any other “valid and collectible insurance … which is available to the Insured.” Meanwhile, Mountain Valley’s Policy, at § IV.B.5.a, states that it providesprimary insurance with respect to any “covered auto,” which includes Leroy Holding’s vehicle. Therefore, if U.S. Liability’s and Mountain Valley’s Policies were the governing contracts, then Mountain Valley (as Leroy Holding’s insurer) would be liable for the full $450,000.

Indeed, the parties are in agreement with this interpretation of the respective contracts. Where they disagree is on whether the Truck Leasing Agreement between Mobil Air and Leroy Holding takes legal precedence over the insurance companies’ respective policies (a position advocated by Mountain Valley), or whether the insurance policies take legal precedence over the Truck Leasing Agreement (advocated by U.S. Liability and Mobil Air). I hold that the insurance policies prevail over the Truck Leasing Agreement.

ANALYSIS

The parties’ briefs assume that the case is governed by New York law. There is no basis for the Court, exerting its diversity jurisdiction, to hold otherwise.

United States Fid. & Guar. Co. v. CNA Ins. Cos., 618 N.Y.S.2d 465 (3d Dep’t.1994) involved a similar conflict between terms of contracts. In that case, the City of Albany, New York contracted with Lehigh Structural Steel Company (“Lehigh”) to perform structural steel work at the site of the Knickerbocker Arena, located within the city. Lehigh in turn subcontracted with the Syracuse Rigging Company, Inc. (“Syracuse Rigging”) to install the steel. Beltrone Construction Company, Inc./McManus, Longe, Brockwehl, Inc. (“Beltrone”) was the general contractor and construction manager of the project.

In its subcontract with Lehigh, Syracuse Rigging agreed to indemnify Beltrone against all claims arising out of the performance of the work, and to procure liability insurance naming Beltrone as an additional insured. Pursuant to that agreement, Syracuse Rigging obtained commercial liability insurance from United States Fidelity & Guaranty Company (“USFG”), naming Beltrone as an additional insured. Meanwhile, Beltrone itself had procured insurance from CNA Insurance Companies (“CNA”).

After a Syracuse Rigging employee became injured on site and commenced a personal injury action against Beltrone, a dispute arose between conflicting terms of the various contracts. While, as stated above, Syracuse Rigging agreed in its subcontract with Lehigh to indemnify Beltrone against all claims, it was equally clear that both Syracuse Rigging’s insurance policy with USFG and Beltrone’s policy with CNA contained “identical ‘other insurance’ clauses which provided for contribution by equal shares between the [insurance] companies for defense and indemnification of Beltrone.” Id. Therein lay the conflict.

The Court held that the insurance policies governed. It held that

the scope of the insurance coverage actually obtained by Syracuse Rigging and Beltrone must be determined by the terms of the [insurance] policies, not the terms of the subcontract. It is axiomatic that the rights and obligations of the parties under insurance contracts are predicated on the language of the policies and unambiguous provisions must be given their plain and ordinary meaning…. Here, the terms of both policies clearly and unequivocally provide for equal contribution towards the defense and indemnification of Beltrone, and we are not at liberty to rewrite them to conform to the terms of a contract to which the insurance companies were not parties.

Id (emphasis added).

The Court found that the insurance provisions took precedence over Syracuse Rigging’s subcontract with Lehigh. It held so, in part, because the insurance companies themselves were never parties to the subcontract agreed to by Syracuse Rigging and Lehigh.

The primacy of insurance provisions over subcontract provisions was also made apparent in Travelers Indem. Co. v. American & Foreign Ins. Co., 730 N.Y.S.2d 231 (1st Dep’t.2001), where the Court held that “the motion court properly declined to give evidentiary weight to the insurance procurement provisions of the subcontract between plaintiff general contractor and the injured party’s employer, since it is the policy provisions that control and not the provisions of the subcontract.” Accord National Union Fire Ins. Co. of Pittsburgh, Pa. v. Hartford Ins. Co. of the Midwest, 677 N.Y.S.2d 105 (1st Dep’t.1998); B.K. Gen. Contractors, Inc. v. Michigan Mut. Ins. Co., 612 N.Y.S.2d 198 (2d Dep’t.1994).

What these cases make clear is that insurance policy provisions take precedence over conflicting provisions found in contracts between insureds. Applying this general principle to the present case, I conclude that Mountain Valley’s and U.S. Liability’s respective insurance policies take precedence over Mobile Air’s Truck Lease Agreement with Leroy Holding. Therefore, Mountain Valley is liable for the full amount of the $450,000.

Mountain Valley resists this conclusion by pointing to a recent decision in the New York Court of Appeals, Pecker Iron Works of New York, Inc. v. Travelers Ins. Co., 99 N.Y.2d 391 (2003) (“Pecker “). Defendant argues that the United States Fidelity & Guaranty case, discussed supra, is no longer sound law in the State of New York because it has been overruled by Pecker. However, the two cases are more akin to two ships passing in the night.

In Pecker, Pecker Iron Works of New York, Inc. (“PIW”) engaged the services of a subcontractor, Upfront Enterprises (“Upfront”) to provide labor, materials, and equipment for a construction project. Upfront also agreed to name PIW “as an additional insured.” Id. at 392. Meanwhile, Upfront had an insurance contract with the Travelers Indemnity Company of Connecticut (“Travelers Indemnity”) which provided that “additional insureds” (such as PIW) would only enjoy excess coverage unless Upfront had “agreed in a written contract for this insurance to apply on a primary or contributory basis.” Id.

After an Upfront worker was injured on site and sued the general contractor, a dispute arose about whether Travelers Indemnity was obligated to provide PIW with excess or primary coverage. That issue turned on whether–in Upfront’s agreement with PIW–Upfront had agreed in written form for its insurance coverage to apply to PIW on a primary basis, as was mandated by Upfront’s insurance contract with Travelers Indemnity.

The Court held that Upfront had so agreed. It first noted the undisputed facts that Travelers Indemnity provided Upfront with primary coverage, and that Upfront agreed to make PIW an additional insured. The Court then held that “additional insured” is a “recognized term in insurance contracts, with an understanding crucial to our conclusion in this case.” Id. That “well-understood meaning” was of an “entity enjoying the same protection as the named insured.” Id. (citing cases). Due to this well-understood meaning of the term “additional insured,” the Court held that Travelers Indemnity’s insurance provided primary coverage for Upfront.

Conceptually, there is a qualitative difference between Pecker and the case before the Court. In the present case, there is no disagreement as to the internal provisions either of the Lease Agreements or the insurance contracts. Both parties agree on the meanings of the various terms and conditions. The disagreement lies in the conflict between the Truck Lease Agreement on the one hand, and the insurance contracts on the other. In contrast, the dispute in Pecker lay strictly internal to the agreement between the insureds itself– that is, in the definition of the term “additional insureds.” There was never a conflict between the insureds’ agreement and the insurance provisions.

Mountain Valley submits that the Court of Appeals in Pecker “looked at the intent of the parties to the insurance procurement agreement, and found that by requesting additional insured coverage, the intent was for primary coverage to be procured.” Defendant’s Opposition, at 5. Mountain Valley argues that, similarly here, Mobile Air’s intent to provide primary insurance coverage–as evident in the Truck Lease Agreement–trumps the language in the insureds’ respective insurance agreements with their insurance providers.

I disagree. Defendant misinterprets the holding of Pecker, attempting to expand it beyond its reach. At issue in Pecker was whether Travelers Indemnity provided primary or excess coverage to Pecker, an “additional insured.” The Court held that it was the intention of the insureds that Travelers Indemnity provide primary coverage to Pecker. This “intent” is garnered solely from the “well-understood meaning” of “additional insured,” a term of art in the insurance universe.

That narrow holding cannot be said to apply to the present case, where questions concerning additional insured are not at issue. Based on prior precedent–which Pecker cannot be read to overrule–I find that it is the provisions found in the insurance policies which apply. Therefore, I hold that the coverage issued by U.S. Liability’s insurance policy is excess to the coverage issued by Mountain Valley. For these same reasons, Mountain Valley’s insurance policy covering Leroy Holding also provides primary coverage to Mobile Air.

Accordingly, U.S. Liability’s motion for summary judgment is granted and Mountain Valley’s cross-motion is denied. Counsel for U.S. Liability are directed to settle a Judgment consistent with this Opinion on five (5) business days’ notice.

United States District Court,

S.D. New York.

CONNECTICUT INDEMNITY COMPANY, Plaintiff,

v.

QBC TRUCKING, INC., JQ & Sons Trucking, Inc., Berry Chiu, Progressive Casualty

Insurance Co., APL Lines, Inc., Eagle Insurance Co., Sung-Ik Jung, Defendants.

May 5, 2005.

Philip A. Bramson, Schindel, Farman & Lipsius LLP, New York, New York, for Defendant Progressive.

MEMORANDUM AND ORDER

Plaintiff Connecticut Indemnity Co. (“Connecticut Indemnity”) brings this declaratory judgment action against Defendants QBC Trucking, Inc. (“QBC”), JQ & Sons Trucking, Inc. (“JQ & Sons”), Berry Chiu, Progressive Casualty Insurance Co. (“Progressive”), [FN1] APL Lines, Inc., Eagle Insurance Co. (“Eagle”) and Sung-Ik Jung (collectively, “Defendants”) to determine which insurance policies cover the vehicular accident between Chiu and Jung on July 18, 2002 (the “accident”). (Amended Verified Complaint (“Compl.”) ¶ 1; Progressive’s Rule 56.1 Statement (“Progressive 56.1 Stmt.”) ¶ ¶ 2-3.)

FN1. In its filings, Progressive refers to itself as United Financial Casualty Company. However, the policy at issue refers to the Progressive Casualty Insurance Co. and defendant has made no application for substitution of parties.

Connecticut Indemnity moves for summary judgment and a declaration that the exclusion contained in its insurance policy is valid and that Plaintiff does not bear any coverage responsibility for the accident. In turn, Progressive moves for summary judgment dismissing the counts against it and a declaration that its coverage obligation is excess to that of Connecticut Indemnity and/or Eagle.

BACKGROUND

I. The Accident

On July 18, 2002, Chiu and Jung were involved in a vehicular accident in Queens, New York. (Compl.¶ ¶ 12, 13, 15.) Chiu, QBC’s principal, was driving a 1996 Kenworth Tractor (the “Kenworth Tractor”), which prominently displayed a JQ & Sons logo. (Connecticut Indemnity’s 56.1 Statement (“CI 56.1 Stmt.”) ¶ 13.) QBC owns the Kenworth Tractor, but had leased it to JQ & Sons under a permanent lease agreement. (Progressive 56.1 Stmt. ¶ 3.) JQ & Sons, a federally regulated motor carrier registered with the Department of Transportation (“DOT”), regularly dispatched QBC for jobs in New York and New Jersey. (Progressive 56.1 Stmt. ¶ ¶ 7, 8 .) QBC carries its insurance through Connecticut Indemnity, while JQ & Sons is insured by Progressive and Eagle.

On July 18th, JQ & Sons dispatched Chiu to pick up a trailer in Elizabeth, New Jersey. On his return, Chiu collided with Jung near 37th Avenue in Queens. (Progressive 56.1 Stmt. ¶ 9 & Ex. B: Police Report.) Jung brought suit in New York Supreme Court, Kings County, against Chiu, QBC and JQ & Sons for his personal injuries. (CI 56.1 Stmt. ¶ 2; Compl. ¶ 14.) In his Kings County action, Jung seeks damages in excess of $20,000,000. (CI 56.1 Stmt. ¶ 2; Progressive 56.1 Stmt. ¶ 10.) Chiu, QBC and JQ & Sons are all defendants in that action. (CI 56.1 Stmt. ¶ 2; Progressive 56.1 Stmt. ¶ 11.)

II. The Insurance Policies

On the date of the accident, Chiu and QBC carried a non-trucking liability policy from Connecticut Indemnity (the “CI Policy”). (CI 56.1 Stmt. ¶ 17.) The CI Policy provided coverage for QBC’s personal use of the Kenworth Tractor and contained provisions excluding coverage for commercial use. (CI 56.1 Stmt. ¶ 19.) As a pre-condition for the insurance, Connecticut Indemnity required QBC to maintain a permanent lease providing that the lessor of the Kenworth Tractor carried insurance for business usage. (CI 56.1 Stmt. ¶ 22.)

JQ & Sons had two insurance policies, one from Progressive and another from Eagle. Progressive is registered with the DOT as JQ & Sons’ primary insurer, and its policy (the “Progressive Policy”) provides $1,000,000 in liability coverage for an accident. (CI 56.1 Stmt. ¶ ¶ 26-28; Progressive 56.1 Stmt. Ex. H.) The Eagle policy (the “Eagle Policy”) covers JQ & Sons’ “non-owned autos” and “hired autos,” and provides $500,000 in liability coverage. (CI 56 .1 Stmt. ¶ ¶ 23-25; Eagle 56.1 Statement (“Eagle 56.1 Stmt.”) ¶ ¶ 5, 10; Progressive 56.1 Stmt. ¶ ¶ 12-14.)

A. The Connecticut Indemnity Policy

The CI Policy excludes two categories of vehicles from coverage:

a. A covered “auto” while used to carry property in any business.

b. A covered “auto” while used in the business of anyone to whom the “auto” is rented, if the rental agreement requires the lessee to carry primary insurance for liability arising out of the lessee’s use of the “auto.”

However, the above exclusions apply only if there is other liability insurance which is valid and collectible, applicable to the covered “auto,” which provides the minimum kinds of insurance required by law and which meets the minimum limits specified by the compulsory or financial responsibility laws of the jurisdiction where the covered “auto” is being used or the minimum limits specified by any law governing motor carriers of passengers or property, whichever is applicable.

(CI 56.1 Stmt. ¶ 21; Progressive 56.1 Stmt. ¶ 18.) The CI Policy expressly schedules the Kenworth Tractor as a “covered ‘auto .” ‘ (CI 56.1 Stmt. ¶ 20.) Additionally, the CI Policy’s Certificate of Insurance contains a disclaimer:

THIS CERTIFICATE OF INSURANCE IS ISSUED BASED ON A WARRANTY BY THE CONTRACTOR THAT HE/SHE IS PERMANENTLY LEASED TO THE GOVERNMENTALLY REGULATED MOTOR CARRIER NAMED ON THIS CERTIFICATE. ALL COVERAGE EXPIRES WHEN THE PERMANENT LEASE HAS BEEN BROKEN, CANCELED, OR TERMINATED BY EITHER THE CONTRACTOR OR THE MOTOR CARRIER.

(CI 56.1 Stmt. ¶ 22.)

B. The Progressive Policy

The Progressive Policy provides that the insurance company “will pay damages … for which an insured is legally liable because of an accident.” (Progressive 56.1 Stmt. ¶ 20.) The accident must arise “out of the maintenance or use of [an] insured auto.” Further, the “insured” must be identified in the policy or must be driving an “insured auto” described in the policy. (Progressive 56.1 Stmt. ¶ 25.) The Progressive Policy expressly lists two vehicles that it covers and schedules two additional undescribed trailers for which JQ & Sons paid premiums. (Progressive 56.1 Stmt. Ex. H.) The Kenworth Tractor is not scheduled in the Progressive Policy. (Progressive 56.1 Stmt. ¶ 26.) Therefore, Progressive argues that its policy does not cover the Kenworth Tractor.

Because Progressive was insuring JQ & Sons, a federally registered motor carrier, it filed a BMC-91X form as required by DOT regulations. (CI 56.1 Stmt. ¶ ¶ 26-29.) A BMC-91X filing requires an insurer to carry an MCS-90 endorsement on its policy. (CI 56.1 Stmt. ¶ 29.) See also 49 C.F.R. § 387.15. An MCS-90 endorsement states, in pertinent part:

In consideration of the premium stated in the Policy to which this endorsement is attached, the insurer (the company) agrees to pay, within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance, or use of motor vehicles subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980 regardless of whether or not each motor vehicle is specifically described in the policy and whether or not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere…. It is understood and agreed that no condition, provision, stipulation, or limitation contained in the policy, this endorsement, or any other endorsement thereon, or violation thereof, shall relieve the company from liability or from the payment of any final judgment within the limits of liability herein described, irrespective of the financial condition, insolvency or bankruptcy of the insured. However, all terms, conditions, and limitations in the policy to which this endorsement is attached shall remain in full force and binding between the insured and the company.

(CI 56.1 Stmt. ¶ 32.) See also 49 C.F.R. § 387.15, at Illustration I.

Here, while the Progressive policy does not contain an MCS-90 endorsement, the terms of such an endorsement are included by reference. (Progressive 56.1 Stmt. Ex. H (“If we are required by any applicable filing which we have made on your behalf to provide coverage not otherwise provided by this policy … the coverage provided hereunder for such person shall be the minimum coverage required by law.”); see also Transcript of Oral Argument, dated Jan. 20, 2005 (“Tr.”) at 15.)

C. The Eagle Policy

JQ & Sons also carried a non-owned vehicle policy through Eagle. (Eagle 56.1 Stmt. ¶ 5.) The Eagle Policy provides coverage to vehicles that JQ & Sons “lease[d], hire[d], rent[ed] or borrow[ed]” and “used in connection with business.” (CI 56.1 Stmt. ¶ ¶ 23-24; Eagle 56.1 Stmt. ¶ 10.) The Eagle Policy provides a maximum of $500,000 of coverage for a single incident, and states the following with respect to other insurance policies held by JQ & Sons:

a…. For any covered “auto” you don’t own, the insurance provided by this Coverage Form is excess over any other collectible insurance.

(Eagle 56.1 Stmt. ¶ 10.)

DISCUSSION

I. Summary Judgment Standard

A court may grant summary judgment only if “there is no genuine issue of material fact” and “the moving party is entitled to summary judgment as a matter of law.” Fed.R.Civ.P. 56(c). The movant bears the burden of establishing that no genuine issues of material fact exist. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Overton v. N.Y. State Div. of Military & Naval Affairs, 373 F.3d 83, 89 (2d Cir.2004) (“An issue of fact is genuine ‘if the evidence is such that a jury could return a verdict for the nonmoving party.” ‘ (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986))). “A fact is material … if it ‘might affect the outcome of the suit under the governing law.” ‘ Overton, 373 F.3d at 89 (quoting Anderson, 477 U.S. at 248). Once the movant satisfies this requirement, the burden shifts to the non-moving party “to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322.

Although a court must resolve all ambiguities and draw all inferences in favor of the non-moving party, Flanigan v. Gen. Elec. Co., 242 F.3d 78, 83 (2d Cir.2001), the court must inquire whether “there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.” Anderson, 477 U .S. at 249-50. It is well established that “conclusory statements, conjecture, or speculation by the party resisting the motion will not defeat summary judgment.” Kulak v. City of New York, 88 F.3d 63, 71 (2d Cir.1996); accord Anderson, 477 U.S. at 249-50. An “opposing party’s facts must be material and of a substantial nature, not fanciful, frivolous, gauzy, spurious, irrelevant, gossamer inferences, conjectural, speculative, nor merely suspicions.” Contemporary Mission v. United States Postal Serv., 648 F.2d 97, 107 n. 14 (2d Cir.1981) (internal citations and quotation marks omitted).

II. Connecticut Indemnity’s Motion for Summary Judgment

A. Validity of Connecticut Indemnity’s Exclusion

Connecticut Indemnity seeks a declaration that the exclusion in the CI Policy is valid under New York law. In determining the validity of the exclusion, this Court has ample guidance because Connecticut Indemnity’s efforts to draft a legally binding exclusion are the subject of considerable precedent. See Conn. Indemnity Co. v. 21st Century Transp. Co., 186 F.Supp.2d 264 (E.D.N.Y.2002); R.E. Turner v. Conn. Indem. Co., 925 F.Supp. 139 (W.D.N.Y.1996); Conn. Indem. Co. v. Varela, No. 94 Civ. 1586(JFK), 1995 WL 16800 (S.D.N.Y. Jan.18, 1995).

In Royal Indemnity Company v. Providence Washington Insurance Company, upon certification from the Second Circuit, the New York Court of Appeals examined the validity of a similar business-use exclusion in a policy covering commercial vehicles. 92 N.Y.2d 653, 684 N.Y.S.2d 470, 707 N.E.2d 425 (1998). The New York Court of Appeals answered the following question in the negative:

Whether a non-trucking-use exclusion from coverage in an insurance policy obtained by the owner of a commercial vehicle is valid under New York law, despite the absence of express language in the policy stating that the exclusion is effective only if the vehicle’s lessee is required to obtain insurance coverage, where the insurer has established that its standard underwriting policy is not to issue a policy containing such an exclusion unless the vehicle has insurance coverage.

92 N.Y.2d at 656, 684 N.Y.S.2d 470, 707 N.E.2d 425. It relied on New York’s policy that “part[ies] injured by the negligent operation of a motor vehicle [have] ‘recourse to a financially responsible defendant.” ‘ Royal Indem., 92 N.Y.2d at 658, 684 N.Y.S.2d 470, 707 N.E.2d 425 (quoting Morris v. Snappy Car Rental, 84 N.Y.2d 21, 29, 614 N.Y.S.2d 362, 637 N.E.2d 253 (1994)). Thus, the New York Court of Appeals concluded that the exclusion in the insurance policy violated public policy because it was not expressly conditioned on the presence of insurance coverage for business use of the vehicle. Royal Indem., 92 N.Y.2d at 658, 684 N.Y.S.2d 470, 707 N.E.2d 425. Significantly, in Royal Indemnity, the court held the exclusion invalid even though the insured had coverage available in addition to the insurance policy subject to litigation. Royal Indem., 92 N.Y.2d at 657-58, 684 N.Y.S.2d 470, 707 N.E.2d 425; see also 21st Century, 186 F.Supp.2d at 271. In sum, the business-use exclusion was void not because of an actual gap in coverage, but because of a potential gap in coverage. See Royal Indem., 92 N.Y.2d at 658, 684 N.Y.S.2d 470, 707 N.E.2d 425.

In 2002, Senior District Judge Glasser held that a modified version of the exclusion was also contrary to New York’s public policy. 21st Century, 186 F.Supp.2d at 274. The court reasoned that “New York public policy requires victims of motor vehicle accidents to have ‘recourse to a financially responsib [e] defendant.” ‘ 21st Century, 186 F.Supp.2d at 270-71 (quoting Snappy Car Rental, 84 N.Y.2d at 29, 614 N.Y.S.2d 362, 637 N.E.2d 253). Because neither the “Non-Trucking Use Endorsement, nor the CI Policy as a whole,” included a provision “expressly provid[ing] that it is only operative if the lessee has business use liability coverage in effect for the accident in question,” the court found that the exclusion was invalid as being contrary to New York public policy. 21st Century, 186 F.Supp.2d at 274.

After 21st Century but before the accident, Connecticut Indemnity modified the exclusion again. As a result, the CI Policy now conditions its business-use exclusion on the presence of an alternate collectible liability insurance for a vehicle when used for business purposes. (CI 56.1 Stmt. ¶ 21 & Ex. K; Progressive 56 .1 Stmt. ¶ 18.) This new requirement removes the infirmity found to be fatal in 21st Century, because any potential gap in insurance is bridged by the contingent nature of the exclusion. See 21st Century, 186 F.Supp.2d at 274. Therefore, this Court finds that the modified business-use exclusion in the CI Policy is valid.

B. Applicability of Connecticut Indemnity’s Exclusion

Having determined that the business-use exclusion in the CI Policy is valid, this Court must address whether the exclusion in the CI Policy is applicable.

1. Timeliness of Connecticut Indemnity’s Disclaimer

Citing First Financial Insurance Company v. Jetco Contracting Corporation, Eagle argues that Connecticut Indemnity’s disclaimer of coverage forty-four days after the accident was unreasonable and, therefore, void. (Eagle Memorandum in Opposition to Connecticut Indemnity’s Motion for Summary Judgment, dated Nov. 29, 2004 (“Eagle Opp.”) at 6 (citing 1 N.Y.3d 64, 68- 69, 769 N.Y.S.2d 459, 801 N.E.2d 835 (2003)).) This Court disagrees.

In First Financial, the New York Court of Appeals addressed the question of whether an insurer was justified in delaying its denial of coverage “until after the insurer ha[d] conducted an investigation into alternate, third-party sources of insurance benefiting the insured, although the existence or non-existence of alternate insurance sources [wa]s not a factor in the insurer’s decision to deny coverage.” 1 N.Y.3d at 68, 769 N.Y.S.2d 459, 801 N.E.2d 835. Such is not the case here. Connecticut Indemnity’s delay in disclaiming coverage stems primarily from its efforts to determine the existence of alternate insurance sources. “In order to discourage an insurance company from disclaiming coverage too quickly, the reasonableness of the time that the insurer takes to disclaim coverage is measured from the date it has sufficient information to determine whether disclaiming coverage is proper.” U.S. Liab. Ins. Co. v. 204 W. 78th St. Hous. Corp., No. 01 Civ. 1033(NRB), 2002 WL 22049, at *3 (S.D.N.Y. Jan.8, 2002). Here, Connecticut Indemnity’s disclaimer was “within two months,” and, therefore, “reasonable as a matter of law” in light of Connecticut Indemnity’s investigation of alternate insurance sources. U.S. Liability Ins., 2002 WL 22049, at *3.

2. Presence of Alternate Insurance Sources

For Connecticut Indemnity’s business-use exclusion to apply, the CI Policy requires the presence of “other liability insurance which is valid and collectable, which provides the minimum kinds of coverage required by … [the] laws of the jurisdiction where the covered ‘auto’ is being used.” (CI 56.1 Stmt. ¶ 51.) The first step, therefore, is to determine whether federal and/or New York law regarding insurance coverage governs.

a. Coverage under Federal Law

If federal law applies, DOT regulations require that an insured carry a minimum coverage of $750,000 in liability insurance. See 49 C.F.R. § 387.9. In its papers, [FN2] Connecticut Indemnity argues that the federal minimum coverage requirements do not apply in this action and that only New York State’s minima must be satisfied by alternate insurance sources. (Connecticut Indemnity’s Reply Memorandum, dated Dec. 10, 2004 (“Conn.Reply”) at 22.) Progressive argues that Chiu’s trip from Elizabeth, New Jersey, to Queens cannot be the subject of DOT regulation because it occurred entirely within the New York City commercial zone. (Progressive’s Opposition to Connecticut Indemnity’s Motion for Summary Judgment, dated Nov. 24, 2004 (“Progressive Opp.”) at 10 (citing 49 U.S.C. § 13506(b)(1)).) Eagle counters that the DOT regulation applies because JQ & Sons is a federally licensed motor carrier. (Eagle Mem. at 5.)

FN2. At oral argument, Connecticut Indemnity did an about-face, arguing that federal minimum requirements for liability insurance applied in this case because one cannot “avoid federal regulation” when “cross[ing] from New York to New Jersey.” (Tr. at 23.)

Any transportation occurring within the commercial zone of New York City is beyond the DOT’s jurisdiction and therefore exempt from DOT regulations. 49 U.S.C. § 13506(d)(1); see Broadway Delivery Corp. v. United Parcel Serv. Of Am., 651 F.2d 122, 124 (2d Cir.1981) (noting that because the New York City commercial zone encompasses New York City and parts of Northern New Jersey, it is exempt from regulation by the Interstate Commerce Commission (now the DOT)). For the purposes of the DOT regulation, the commercial zone of New York City encompasses the five boroughs of the City and “[a]ll points within a line drawn twenty miles beyond the municipal limits of New York, N.Y.” 49 C.F.R. § 372.235.

On the day of the accident, Chiu was transporting goods from Elizabeth, New Jersey to Queens, which was also the site of the accident. (Progressive 56.1 Stmt. ¶ 9.) At oral argument, this Court took judicial notice of the fact that Elizabeth, New Jersey is within twenty miles of New York City’s municipal limits. (Tr. at 23.) Thus, all relevant transportation took place within the New York City commercial zone, outside the DOT’s jurisdiction. Accordingly, DOT regulations do not govern the minimum coverage required from alternate insurance sources. See Broadway Delivery Corp., 651 F.2d at 124; see also Siskey v. Gen. Teamsters, Local No. 261, 419 F.Supp. 48, 51 (W.D.Pa.1976) (holding that a driver with routes within a commercial zone was exempt from DOT regulations).

b. Coverage under New York State Law

None of the parties dispute the applicability of New York law, which requires a $50,000 minimum in insurance coverage. See N.Y. Comp.Code R. & Regs. Title 11, § 60-1.1(a). Here, the Eagle Policy provides a primary coverage of $500,000, far exceeding New York’s required minimum. [FN3] Indeed, at oral argument, Eagle’s counsel conceded: “I don’t believe that Eagle in any way, shape or form has walked away or said that we don’t have a primary coverage responsibility.” (Tr. at 21.) However, Eagle contends that its primary coverage responsibility is removed by the “Other Insurance” provision in its policy. (Eagle Opp. at 6.) That provision states that the Eagle Policy is excess to other collectible insurance policies for non-owned vehicles. (Eagle 56.1 Stmt. ¶ 10.) Because the Kenworth Tractor was not owned by JQ & Sons, Eagle argues that the Eagle Policy is excess to the CI Policy and cannot provide the minimum liability insurance required by New York law. (Eagle Opp. at 6.)

FN3. In its Answer, Eagle contended, as an affirmative defense, that its policy excludes from coverage “the owner … from whom [the insured] hire[s] or borrow[s] a covered ‘auto.” ‘ (Eagle Answer ¶ 151; Progressive 56.1 Stmt. Ex. M: Eagle Policy.) The provision in the policy cited by Eagle, however, does not support its contention because it only excludes the owner of the Kenworth Tractor if the owner is operating it. Despite his ownership of QBC, Chiu was not the Kenworth Tractor’s owner–QBC was. Indeed, the policy expressly includes Chiu as a permissive user of the Kenworth Tractor. (Progressive 56.1 Stmt. Ex. M.) Further, the Eagle Policy extends to QBC because it is “liable for the conduct of an ‘insured’ described above [i.e., Chiu].” (Progressive 56.1 Stmt. Ex. M.) In any event, Eagle does not raise the issue in its Opposition.

Eagle’s argument is unavailing. As an initial matter, the CI Policy excludes from coverage all business usage of the Kenworth Tractor. The CI Policy provides that the exclusion will cease to operate only if the Kenworth Tractor becomes uninsured or insured in an amount less than that required by applicable laws. Here, neither condition occurred; at the time of the accident, the Eagle Policy amply met the minimum amount of liability insurance under New York law.

Because the CI Policy does not constitute “other collectible insurance” for rendering the Eagle Policy secondary, the Eagle Policy is not excess with respect to the Kenworth Tractor. Thus, this Court finds that Connecticut Indemnity’s exclusion applies.

Accordingly, Connecticut Indemnity has no coverage obligation with respect to the accident.

III. Progressive’s Motion for Summary Judgment

Progressive’s summary judgment motion argues that any obligations it might have pursuant to its federal filings are excess to the obligations of Connecticut Indemnity and/or Eagle. For the reasons set forth below, Progressive’s motion is granted in part and denied in part.

First, Progressive’s application to dismiss all counts against it is denied in light of this Court’s holding that the CI Policy’s exclusion applies. See Section II supra. This Court similarly finds that Progressive’s obligations are not excess to that of Connecticut Indemnity. See Section II supra. All that remains of Progressive’s summary judgment motion is its request that the Court declare Progressive’s obligations in excess to those of Eagle.

Eagle does not dispute that the Progressive Policy provides no coverage except to the extent its federal filings require. [FN4] Thus, the sole question is whether Progressive’s obligations pursuant to the MCS-90 endorsement, as required by Progressive’s federal filing, creates primary coverage responsibility.

FN4. Indeed, Eagle does not make any argument opposing Progressive’s motion for summary judgment.

A. Effect of MCS-90 Endorsement

As noted above, federal regulations are inapplicable to this case. Nevertheless, this Court will examine the issues raised regarding the effect of the MCS-90 endorsement. The MCS-90 endorsement is designed to “assure that injured members of the public are able to obtain judgment[s] from negligent authorized interstate carriers.” John Deere Ins. Co. v. Nueva, 229 F.3d 853, 857 (9th Cir.2000). Where an injured party obtains a judgment, the MCS-90 creates a primary coverage responsibility as to that injured party. See Green v. Royal Indem. Ins. Co., No. 93 Civ. 4335(MBM), 1994 WL 267749, at *6 (S.D.N.Y. June 15, 1994) (“It follows that the plain language of the MCS-90 endorsement provides broad coverage for members of the public injured by commercial trucks.”); see generally T.H.E. Ins. Co. v. Larsen Intermodal Serv., Inc., 242 F.3d 667, 673 (5th Cir.2001); Integral Ins. Co. v. Lawrence Fulbright Trucking, Inc., 930 F.2d 258, 260-62 (2d Cir.1991); Pierre v. Providence Wash. Ins. Co., 99 N.Y.2d 222, 234-35, 754 N.Y.S.2d 179, 784 N.E.2d 52 (2002).

The question before this Court, however, is whether the MCS-90 creates a primary coverage responsibility as between insurers–not as between an insurer and an injured party. The Second Circuit has not considered this issue.

A majority of the circuits have held that an MCS-90 endorsement has no effect on the allocation of loss among insurers. See, e.g., Canal Ins. Co. v. Distrib. Serv., Inc., 320 F.3d 488, 492 (4th Cir.2003) (listing cases holding that the MCS-90 endorsement does not allocate loss between insurers, and agreeing with that holding); T.H.E. Ins. Co., 242 F.3d at 673 (5th Cir.2001); Empire Fire & Marine Ins. Co. v. J. Transp. Inc., 880 F.2d 1291, 1298-99 (11th Cir.1989); Occidental Fire & Cas. Co. of N.C. v. Int’l Ins. Co., 804 F.2d 983, 986 (7th Cir.1986); Grinnell Mut. Reinsurance Co. v. Empire Fire & Marine Ins. Co., 722 F.2d 1400, 1404 (8th Cir.1983); Carolina Cas. Ins. Co. v. Ins. Co. of N.A., 595 F.2d 128, 140-41 (3d Cir.1979). These Courts of Appeals reached their conclusion by relying on the plain language of the endorsement, which alters the terms of the insurance policy with respect to injured parties, but does not extend the changes to the relationship between the insurer and the insured. See 49 C.F.R. § 387.15, at Illustration I (stating that “no condition, provision, stipulation, or limitation contained in the policy … shall relieve the [insurer] from liability or from the payment of any final judgment [to an injured party],” even though “all terms, conditions, and limitations in the policy to which this endorsement is attached shall remain in full force and binding between the insured and the [insurer]”); see also Canal Ins. Co., 320 F.3d at 492 (“The language makes clear that the MCS-90 endorsement operates to protect the public but does not alter the relationship between the insured and the insurer as otherwise provided in the policy.”).

Other courts have held that the MCS-90 endorsement implicates insurer liability vis-à-vis other insurance companies. See Prestige Cas. Co. v. Mich. Mut. Ins. Co., 99 F.3d 1340, 1348-49 (6th Cir.1996); Empire Fire & Marine Ins. Co. v. Guar. Nat’l. Ins. Co., 868 F.2d 357, 361-62 (10th Cir.1989). However, these circuits have limited their holding, stating that the MCS-90 endorsement “does not establish primary liability over other policies that are also primary by their own terms.” Prestige Cas. Co., 99 F.3d at 1348; Empire Fire, 868 F.2d at 361. Under that view, an MCS-90 endorsement does not render the Progressive Policy primary to the Eagle Policy.

This Court holds that Progressive’s MCS-90 did not affect the allocation of loss between Progressive and Eagle. This view comports with a plain reading of the endorsement and fulfills the underlying policy objectives. It ensures that the public has a viable avenue of redress. Indeed, the DOT supports this interpretation, and noted in an amicus curiae brief filed with the Supreme Court that “the [MCS-90] form specifically preserves those terms as between the insurer and the named insured.” [FN5] Amicus Curiae Brief of United States in John Deere Ins. Co. v. Guillermo Nueva, No. 00-1491 (U.S. Supreme Court) at 6.

FN5. An agency’s interpretation of its regulations may be given “controlling weight unless it is plainly erroneous or inconsistent with the regulation.” Stimson v. United States, 508 U.S. 36, 45, 113 S.Ct. 1913, 123 L.Ed.2d 598 (1993). The fact that the agency provides its interpretation in a legal brief “does not … make it unworthy of deference.” Auer v. Robbins, 519 U.S. 452, 462, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997).

Here, because the Eagle Policy provides coverage for the accident, Progressive does not have a primary coverage obligation, and its motion for summary judgment on that issue with respect to Eagle is granted.

CONCLUSION

For the reasons set forth above, Connecticut Indemnity’s motion for summary judgment is granted, and Progressive’s motion for summary judgment is granted in part and denied in part.