Bits & Pieces

Connecticut Indemnity v. QBC


United States District Court,

S.D. New York.



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.


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.


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:


(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.)


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.


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.

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