595 F.

2d 128

The CAROLINA CASUALTY INSURANCE COMPANY, a

corporation of
the State of Florida, and Charles Stanford
v.
The INSURANCE COMPANY OF NORTH AMERICA, a
corporation of the
Commonwealth of Pennsylvania, Refrigerated Transport Co.,
Inc., a corporation of the State of Georgia, and Courtland
T. Babcock, II and Barbara Babcock.
Appeal of REFRIGERATED TRANSPORT CO., INC.
No. 78-1465.

United States Court of Appeals,

Third Circuit.
Argued Dec. 11, 1978.
Decided March 5, 1979.

Howard M. Berg, and William J. Cattie, III, Berg, Aber, Heckler & Wyatt,
P. A., Wilmington, Del., for appellant.
Robert G. Carey, Prickett, Ward, Burt & Sanders, Wilmington, Del., for
appellees Carolina Casualty Insurance Co. and Charles Stanford.
H. Murray Sawyer, Jr., Wilmington, Del., for appellee Insurance Co. of
North America.
Before GIBBONS, VAN DUSEN and ROSENN, Circuit Judges.
OPINION OF THE COURT
VAN DUSEN, Circuit Judge.

The pattern of facts in this case is a common one. See, for example, Insurance
Co. of North America v. Continental Casualty Co., 575 F.2d 1070, 1071 (3d
Cir. 1978); Carolina Casualty Insurance Co. v. Underwriters Insurance Co., 569

F.2d 304, 306 (5th Cir. 1978); Walter v. Dunlap, 368 F.2d 118 (3d Cir. 1968).
An ICC-certified motor carrier (here, Refrigerated Transport Co.) leases a
truck; the lessor of the vehicle (here, Charles Stanford) also provides the driver
(here, Hugh F. Wicker). The truck, while carrying goods on the lessee's
business and displaying the lessee's ICC placards, is involved in an accident.
Members of the public (here, the Babcocks), alleging injury in the accident, sue
lessee, lessor and driver for damages. The insurers of the defendants in that
case, meanwhile, stand anxiously by, each trying to bow the other through the
courtroom door first. The result is a separate declaratory judgment action in
which the lessor's insurer (here, the Carolina Casualty Insurance Co.) and the
lessee's insurer (here, The Insurance Company of North America) seeks a
determination as to which has the unwanted honor of first entering to defend
and pay a settlement or judgment in the underlying action against their insureds.
2

This is an appeal from such a declaratory judgment. The district court in this
declaratory action granted summary judgment in favor of the lessor and his
insurer, declaring that the defendants had primary responsibility for defending
and paying any settlement or judgment in the underlying tort action, which was
then pending in the District Court of Delaware. We affirm in part and reverse in
part, holding that the lessor and his insurer also have duties of defense and
payment, and we remand for further determinations of fact and law.

I. FACTS AND HISTORY OF THE CASE

3

The Carolina Casualty Insurance Company ("Carolina") and Charles Stanford

("Stanford"), appellees in this appeal, brought the action in the district court,
alleging jurisdiction under 28 U.S.C. 13321 and seeking a declaration that
Carolina's "policy of liability insurance applies only as excess insurance over
other valid and collectible insurance . . ." (5a). Carolina is the insurance carrier
for Stanford. Stanford is the owner of a tractor-trailer rig which he leased to
Refrigerated Transport Co. ("Refrigerated"), appellant in this appeal and
defendant in the declaratory judgment action. Also a defendant in that action
was The Insurance Company of North America ("INA").2 Refrigerated held a
special contract of automobile liability insurance with INA, under which
Refrigerated was in effect a self-insurer for the first $25,000. of loss resulting
from any one occurrence,3 while INA's coverage extended to the amount of
loss in excess of $25,000. up to a combined limit of $1,000,000.4

After defendants had filed an answer and a counterclaim for a declaration that
Carolina's coverage was primary and their own merely excess (40a-42a),
plaintiffs and defendants moved for summary judgment (51a, 52a).

For the purpose of the cross-motions for summary judgment, the parties
entered into the following stipulation of facts (53a-55a):

6 or about August 29, 1973, Refrigerated entered into a trip-lease contract with
"On
Charles Stanford by which Refrigerated paid a specified compensation for the use of
Mr. Stanford's 1969 white (sic) tractor and 1971 utility van trailer, with driver, for
the hauling of certain goods over Refrigerated's interstate commission's route to New
York City, New York. (5 . . .
7 and prior to August 30, 1973, Refrigerated engaged in interstate trucking as a
"On
certificated carrier licensed by the Interstate Commerce Commission. Refrigerated's
ICC permit No. is 107515. To protect itself against liability for certain motor vehicle
accidents, Refrigerated, as required by ICC rules and regulations and federal law,
entered into a contract of liability insurance with INA. (6 Under that policy the driver
(Hugh F.) Wicker, was an 'additional insured' by virtue of plaintiff's 'omnibus
clause'. INA certified its policy with refrigerated (sic) to the ICC as required by 49
U.S.C.A. 315. . . .
8
"Stanford,
the owner-lessor, was not in the business of transporting freight and
merchandise, except exempt agricultural commodities, in Inter-State Commerce.
Stanford is and was not licensed as a certificated carrier by the Inter-State
Commerce Commission. At the time of the lease of his tractor-trailer to
Refrigerated, Stanford had in effect a liability insurance policy with the Carolina
Casualty. (7 . . .
9 August 30, 1973, the tractor-trailer, during the lease by Charles Stanford to
"On
Refrigerated, and while engaged in hauling goods and materials under the authority
of Refrigerated's ICC permit and displaying the latter's ICC placards, collided with a
1973 BMW driven by Courtland T. Babcock, II, at the toll booths of the Delaware
Memorial Bridge. Courtland T. Babcock, II, was the operator of the 1973 BMW; his
(then-) wife, Barbara, was riding in the right front seat; their two children were
riding as passengers in the rear seat. Courtland and Barbara Babcock brought suit in
this Court for their alleged personal injuries. (The title of that action is Babcock v.
Wicker, Stanford & Refrigerated Transport Co., Civil No. 75-133 (D.Del., Nov. 30,
1978). During the course of trial, Barbara Babcock withdrew her claim for relief
against all defendants.) . . .
10
"Both
INA and Carolina Casualty contend that its (sic) respective policy of liability
insurance applies only as excess insurance over the other company's valid and
collectible insurance for the claims of the Babcocks. Both companies take the
position that the other's policy is primary, valid and collectible insurance. In the
alternative, both companies contend that each policy should apply to the claim of the
Babcocks, with each insurance company being obliged to contribute to the

satisfaction of any judgment obtained or settlement achieved in the same ratio as

their respective limits bear to each other."
11

The district court entered summary judgment in favor of plaintiffs on February

13, 1978, declaring that Refrigerated and INA, "to the extent of coverage and
within the limits of liability contained in the insurance contract, are primarily
responsible for defending" the Babcocks' underlying tort case, "and for paying
any settlement or judgment recovered by the Babcocks in that suit" (80a-81a).
The court's accompanying memorandum opinion (82a-89a) stated that these
primary responsibilities fell to Refrigerated and its insurer, because, under
federal motor carrier regulations, "liability for damages to the Babcocks is
imputed to, and imposed by law on, Refrigerated . . . ." (85a). The court held
that a purported "hold harmless" agreement, executed by the driver on behalf of
the lessor and in favor of the lessee, could not shift primary responsibility to
Stanford and his insurer. In addition, the court declined to rule on other issues
relating to possible common law rights to indemnity from Stanford and
Carolina on the ground that "these issues would require advisory opinions . . .
because the underlying Babcock case has not yet been resolved" (89a).

12

Refrigerated moved for reargument under Local Rule 16 (109a-110a); the

district court denied this motion (114a-115a). Thereupon Refrigerated filed
notice of this appeal (116a).8 INA has not appealed from the declaratory
judgment.

13

After the filing of briefs in this appeal, but before oral argument, the underlying
Babcock case went to trial. The claims which were presented to the jury in that
case included: (1) common law negligence of the driver Wicker; (2) vicarious
liability of both Refrigerated and Stanford for the negligent acts of Wicker as
employee of both Refrigerated and Stanford; (3) per se negligence of Wicker,
Stanford and Refrigerated for failure to maintain operative brakes and inability
to stop within a specified distance, as required by Department of Transportation
regulations, 49 C.F.R. 393.489 and 393.52;10 (4) per se negligence of
Refrigerated for failure to inspect or for negligent inspection of the tractortrailer before commencement of the trip lease, in violation of 49 C.F.R.
1057.4(c);11 and (5) strict liability of Stanford, as the lessor of defective
equipment. 12 In addition, Refrigerated and Stanford had each filed cross-claims
against the other for contribution and indemnification in the event that
Babcock's claims should prove successful. 13

14

The findings of fact in Babcock were made by the jury's answers to a series of
special interrogatories and a subsequent questionnaire, which the trial court
submitted to the jury after the charge. This court granted the motion of the

parties to supplement the record on appeal with copies of the special

interrogatories and subsequent questionnaire and the jury's answers thereto. In
the answers to the special interrogatories the jury awarded damages of $34,000.
to Courtland Babcock. It allocated 20% Of the fault for the accident to
Stanford, lessor of the tractor-trailer, and 80% To the lessee, Refrigerated,
while finding no fault on the part of the driver, Wicker. In its answers to the
subsequent questionnaire, the jury found: (1) that it had not been adequately
proved that the tractor-trailer involved had at the time of leasing a defective
braking system which proximately caused the accident and injuries; (2) that
Refrigerated, the lessee of the rig, had failed to perform, or negligently
performed, its non-delegable duty to inspect the tractor-trailer as required by 49
C.F.R. 1057.4(c), and that this failure or negligence proximately caused the
accident and injuries; (3) that Refrigerated, but not Stanford, was independently
negligent in violating 49 C.F.R. 393.48 by not having operative brakes on the
rig, which failure or negligence proximately caused the accident and injuries;
(4) that both Refrigerated and Stanford were independently negligent in
violating 49 C.F.R. 393.52 by reason of the fact that the rig was incapable of
being stopped in time to avoid the collision, and that this failure or negligence
was a proximate cause of the accident and injuries; and (5) that there was no
valid hold-harmless agreement entitling Refrigerated to indemnity from
Stanford. The special interrogatories (Exhibit A) and subsequent questionnaire
(Exhibit B) are annexed to this opinion.
15

On November 30, 1978, the trial court in Babcock entered judgment on the
jury's verdict, providing in part:

16 is Ordered and Adjudged that the judgment be entered in favor of the plaintiff
"It
Courtland T. Babcock, II, and against defendant Charles Stanford and defendant
Refrigerated Transport Co., Inc., Jointly and severally in the amount of $34,000 with
the primary responsibility for paying said judgment being that of Refrigerated
Transport Co., Inc., and allocation of fault for contribution being as follows:
defendant Charles Stanford 20%; defendant Refrigerated Transport Co., Inc. 80%.
17 Is Further Ordered and Adjudged that the judgment be entered in favor of the
"It
defendant Hugh F. Wicker and against plaintiff Courtland T. Babcock, II."
(Emphasis added.)
18
II. ISSUES ON APPEAL
19

The handing down of a verdict and entry of judgment in the underlying tort
case have narrowed the issues which were originally before this court on appeal
of the declaratory judgment.

20

Refrigerated in its briefs on this appeal contended (1) that the question of duty
to pay any judgment recovered in the Babcock case was not justiciable; (2) that
the district court erred in imposing the primary duty to defend upon
Refrigerated; and (3) that even if the issue of duty to pay was justiciable, the
district court's order was ambiguous and overly broad in imposing on
Refrigerated the primary duty to defend and to pay as to all causes of action
asserted in Babcock.14

21

Refrigerated now concedes that the jury verdict in Babcock has mooted certain
of its contentions. First, it concedes that there is no longer any question about
the justiciability of the duty to pay issue.15 Motion of the Parties to Supplement
the Record at 2. Further, it is conceded that the jury's findings of fact narrowed
the controversy relating to Refrigerated's duty to pay by rendering moot that
issue as affected by Stanford's potential liability for (a) Respondeat superior,
and (b) strict liability.16 Id. Finally, Refrigerated concedes that this court need
no longer consider the effect of the district court's declaratory judgment order
upon its right to indemnification.17 Id.

22

The questions which remain in this appeal are the following:

23 Does the district court's declaratory judgment order erroneously destroy

(1)
Refrigerated's rights to contribution from Stanford or his insurer for payment of the
Babcock judgment?
24 Does Refrigerated have the "primary" duty to pay the judgment entered in favor
(2)
of Babcock and against Refrigerated and Stanford?
25 Does Refrigerated have the "primary" duty to defend the Babcock case on behalf
(3)
of Stanford and Wicker?
26

We conclude (1) that nothing in the federal motor carrier laws or in the private
agreements in this record affects Refrigerated's contribution rights; (2) that
those laws do not impose upon Refrigerated, nor absolve Carolina of, the duty
to pay judgments entered against Stanford, Carolina's named insured; and (3)
that nothing in the federal requirements places on Refrigerated, nor frees
Carolina of, a duty to defend on behalf of Stanford and Wicker.18

III. SOURCES OF DUTIES TO PAY AND TO DEFEND

27

The threads comprising the knot of disputed duties in this case originate in three
sources: (1) federal law, including the statutes and regulations governing use of
nonowned vehicles by motor carriers; (2) state law, including the body of

common and statutory law governing duties of care to third parties and duties
and rights between master and servant, between insurer and insured, between
co-insurers, and between joint tortfeasors; and (3) private contracts (as
governed by applicable law), including the trip lease agreement between
Stanford (the lessor) and Refrigerated (the lessee), Stanford's insurance contract
with Carolina, and Refrigerated's contract with INA.
1. The role of federal law
28

The federal regulations applicable to the use of leased motor vehicles by motor
carriers have their statutory source in 204(e) of the Interstate Commerce Act,
49 U.S.C. 304(e) (1977), which authorizes the Interstate Commerce
Commission (ICC) to prescribe regulations "with respect to the use by motor
carriers (under leases, contracts, or other arrangements) of motor vehicles not
owned by them, in the furnishing of transportation of property . . . ." The Act
also authorizes the ICC to make regulations assuring that lessees of motor
vehicles have full direction and control of, and full responsibility for such
vehicles, "as if they were the owners of such vehicles." Id., subsection (2).

29

Pursuant to this statutory mandate, the ICC regulation governing vehicle leases
requires that the lessee undertake in the lease "exclusive possession, control and
use of the equipment," and assume complete "responsibility in respect thereto."
49 C.F.R. 1057.4 (1977).19 In compliance with this regulation, Refrigerated,
as lessee, agreed to assume "all liability to . . . the public, and responsibility to
the (ICC) . . ." in paragraph 3 of the trip lease in this case.20

30

The lease also provides that Refrigerated, the lessee, certifies that its authorized
representative has inspected the leased equipment (8a). This certification is
required by 49 C.F.R. 1057.4. 21

31

In addition, as a condition of obtaining and retaining an ICC permit, a motor

carrier such as Refrigerated, whether renting or owning its vehicles, must
comply with 215 of the Interstate Commerce Act, 49 U.S.C. 315 (1977),22
to provide "security for the protection of the public." That provision, through
the ICC regulations implementing its mandate,23 requires ICC permit
applicants to file "surety bonds, policies of insurance, qualifications as a selfinsurer, or other securities or agreements . . ." with the ICC. Such assurances of
the motor carrier's financial responsibility are to be conditioned to pay, within
the limits of coverage, "any final judgment recovered against such motor carrier
for (personal injury or property damage) resulting from the negligent operation,
maintenance or use" of vehicles operating under the carrier's ICC permit.

32

Pursuant to these regulations, Refrigerated registered with the ICC as a selfinsurer,24 and INA, its insurer, certified its policy to the ICC. ICC rules also
prescribe a uniform "Endorsement for Motor Carrier Policies" ("ICC
endorsement").25 The endorsement provides that neither other contractual
limitations nor violations of the insurance agreement by the insured "shall
relieve the (insurance) company from liability hereunder or from the payment
of any such final judgment (against the motor carrier-insured), irrespective of
the financial responsibility or lack thereof . . . of the insured;" however, the
insurer may subsequently proceed against its insured for any payments which
the insurer makes under the endorsement, but which it would not otherwise
have been required to make. Although the ICC endorsement does not appear in
the record in this case, other language in the policy26 may be read as
incorporating the endorsement by reference, and the district court so construed
the policy (86a-87a).27

33

The Supreme Court upheld these ICC "responsibility-and-control" regulations

governing the operation of nonowned vehicles in American Trucking
Associations v. United States, 344 U.S. 298, 73 S.Ct. 307, 97 L.Ed. 337 (1953).
There the Court discussed at length the background of abuses which the
regulations were designed to remedy, including not only the sharing of limited
operating authority under the guise of equipment leases but also the evasion of
safety requirements and of financial responsibility for harm to the public. Id. at
303-11, 73 S.Ct. 307.28 In Transamerican Freight Lines, Inc. v. Brada Miller
Freight Systems, Inc., 423 U.S. 28, 96 S.Ct. 229, 46 L.Ed.2d 169 (1975), the
Court reaffirmed this "basic responsibility of the lessee to the public," Id. at 39,
96 S.Ct. at 234, and cited the elimination of "difficulties . . . of fixing financial
responsibility for damage and injuries to . . . members of the public" as one of
the "significant aims" of the federal rules, Id. at 37, 96 S.Ct. at 234.

34

We may assume, without deciding, that if Refrigerated, as the holder of the

ICC permit, were the only available defendant in this case, it could not escape
these significant duties of care and financial accountability To the public which
the federal rules, and the contractual undertakings pursuant thereto, impose
upon lessees.29 We may also assume, without deciding, that INA, as
Refrigerated's certified liability insurer, could not absolve itself of a duty to
make the initial payment of compensation to an injured member of the public,
in the event that neither Refrigerated nor any other party involved could answer
financially for the damage. The district court in this action may have intended
to state nothing more than the above two propositions when it declared that
"Refrigerated and INA . . . are in that order primarily responsible for defending
the Babcocks' suit and for paying any damages the Babcocks might recover"
(87a). We agree that these two principles are in accordance with the policy of

this court. See Mellon National Bank & Trust Co. v. Sophie Lines, Inc., supra
At note 29.
35

However, the pleadings in this declaratory action do not seek a determination of

the duty owed by a motor-carrier lessee and its insurer to the injured public.
Rather, we view this case in its present posture as an action to determine where
the ultimate financial responsibility for the injury rests, after the injured
plaintiff has obtained a judgment against two parties held responsible in fact
and in law. In this situation, the pertinent question is whether the federal policy
of assuring compensation for loss to the public prevents courts from examining
the manner in which private agreements or state laws would otherwise allocate
the ultimate financial burden of the injury.

36

Carolina and Stanford appear to argue in this appeal that a court's analysis
should stop with consideration of the ICC regulations and the public policies
served thereby.30 We disagree. While a lessee cannot free itself of its federally
imposed duties when protection of the public is at stake, the federal
requirements are not so radically intrusive as to absolve lessors or their insurers
of otherwise existing obligations under applicable state tort law doctrines31 or
under contracts allocating financial risk among private parties. Thus, in a
declaratory action similar to this one, determining which of two insurers owed
primary coverage for liability arising from a leased vehicle's accident, this court
rejected the reasoning of a district court which had relied solely upon the
"responsibility-and-control" regulations to impose liability exclusively upon the
lessee's insurer. Allstate Insurance Co. v. Liberty Mutual Insurance Co., 368
F.2d 121 (3d Cir. 1976). That decision held that where the case is "concerned
with responsibility as between insurance carriers," and not with the federal
policy of protecting the public, "I.C.C. considerations are not determinative"
and a court should consider the express terms of the parties' contracts. Id. at
125.32

37

In the case before us, we find in particular that neither the federal motor carrier
laws nor the (imputed) ICC endorsement nor paragraph 3 of Refrigerated's trip
lease transfer to Refrigerated the duties to defend claims properly brought
against others or to pay judgments entered against others. 49 U.S.C. 31533 and
49 C.F.R. 1043.1(a),34 governing insurance and other assurances of motor
carriers' financial responsibility, require only that the carrier give security "to
Pay any final judgment recovered Against such motor carrier . . ."; they
mention nothing about defense of actions and nothing about payment of
judgments recovered against other parties such as lessors. The regulation
governing qualification as a self-insurer, 49 C.F.R. 1043.5,35 requires only
that the self-insuring motor carrier establish its ability "to satisfy Its obligations

for bodily injury liability . . .," not any other party's obligations. Nor does the
ICC endorsement operate to relieve the lessor or its insurer of any ultimate
financial responsibility for claims or judgments against them. 36
38

Similarly, 49 U.S.C. 304(e) 37 and 49 C.F.R. 1057.4,38 requiring

"supervision and control" by lessees, are silent on the issues of defense and
payment on behalf of other parties. The lease provision in which Refrigerated,
as lessee, assumes such supervision and control likewise makes no mention of
an undertaking to defend and pay actions against others. In particular, nowhere
in the lease does the lessee assume the responsibility to insure the lessor, or to
hold the lessor harmless against claims brought against it.39

39

In sum, since it is not sufficient to look solely to the federal motor carrier
requirements or to the lease and insurance provisions pursuant thereto for a
determination of the respective duties of insurer and a partially self-insured
lessee, it is necessary to examine the allocation of legal obligations which state
law imposes, and to examine the insurance contracts to see whether they
effectively provide a different allocation of Financial responsibility.

2. The role of state law

40

While Delaware law in part governed the duties of care owed to the plaintiff by
the alleged tortfeasors in Babcock's diversity suit, Erie Railroad Co. v.
Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), at this stage of
proceedings we are primarily concerned with the effect upon the parties to this
appeal of the judgment entered "jointly and severally" against Refrigerated and
Stanford.40 As discussed above, under the circumstances of this case, we find
nothing in the federal motor carrier laws that would displace any apportionment
of legal obligations which Delaware law would otherwise impose upon joint
tortfeasors. Specifically, these federal laws and regulations do not affect rights
and duties of contribution.41 Thus Delaware's Uniform Contribution Among
Joint Tort-Feasors Law42 would apply to the ultimate apportionment of the
legal obligation to pay the judgment, as between Refrigerated and Stanford,
provided that neither of these parties had relinquished its rights under that
statute. However, rights of contribution under the Delaware statute, and
insurers' rights of subrogation thereto, may be conditioned upon factual matters
not on this record. See, e. g., 6302(b) and (c); 16 G. Couch, Cyclopedia of
Insurance Law 62:171 p. 577 n.20 (1966). Therefore, the district court on
remand should make appropriate findings of fact and any determinations of
state law necessary to ascertain how the state law of contribution allocates the
legal obligations which arise from the accident.43

41

We hold only that we find nothing in the federal motor carrier requirements,
and nothing in this record on appeal, that would defeat Refrigerated's rights of
contribution against Stanford or its insurer.44 Conversely, nothing in our present
disposition should be construed to affect the latter parties' contribution rights
against Refrigerated or its insurer.3. Terms of the insurance policies under
applicable law

42

The district court's mode of analysis in this declaratory action did not require
close examination of the terms of the insurance contracts.45 Nor, of course, was
the district court able to analyze the effect upon these parties' obligations of a
judgment entered jointly and severally against the lessor and lessee of the
tractor-trailer, but not against the driver. Since we have concluded that in a case
such as this one the federal motor carrier requirements do not displace rights
and duties which the insurance contracts and state law would otherwise create,
the next step in resolving this dispute would be an analysis of the terms of the
contracts in light of the Babcock judgment and other events which have
intervened since the entry of the declaratory judgment in this action.

43

This court is hampered in construing the terms of the insurance contracts by the
lack of any indication in this record or in prior proceedings as to what state law
should govern such construction.46 Further, the circumstances of this case are
somewhat unusual in that the jury found that the driver (Wicker) was not
negligent, but that both lessee (Refrigerated) and lessor (Stanford) were
independently negligent. The briefs on appeal do not address the subtler
questions that arise in the construction of the policy terms in light of these jury
findings. While neither Refrigerated nor Stanford claims to be an insured within
the coverage of the other's insurance policy,47 this court has received little
guidance for construing the effect of the exclusion clause of the "Truckmen's
Endorsement" in the Carolina policy,48 especially as to the driver;49 nor for
determining the parties' duties of defense under the terms of the policies50 and
under governing state law. Complex questions relating to the "other insurance"
clauses51 in the policies also may arise: particularly with regard to other
insurance covering a different tortfeasor but the same joint liability,52 to partial
self-insurance,53 and to other insurance policies with identical "other insurance"
clauses.54

44

Under these circumstances, in this diversity case, this court will not indulge in
the pre-Erie fallacy of looking to some "brooding omnipresence in the sky"55
for a general law governing the interpretation of these insurance contracts. See
Black & White Taxicab & Transfer Co. v. Brown & Yellow Taxicab & Transfer
Co., 276 U.S. 518, 532, 47 S.Ct. 472, 71 L.Ed. 842 (1928) (Holmes, J.,

dissenting). See also Mutual Life Insurance Co. v. Johnson, 293 U.S. 335, 33940, 55 S.Ct. 86, 79 L.Ed. 646 (1934). Nor should we risk adding yet another
inconsistent judicial interpretation of the terms of art on which insurers rely,
See Insurance Co. of North America v. Continental Casualty Co., 575 F.2d at
1072, by plunging into a detailed exegesis of these contracts with only
schematic indications of the parties' own understanding thereof. Therefore, we
think it appropriate that the district court on remand make the determinations of
fact and law necessary to ascertain what law applies to the analysis of these
contracts, and to construe, under applicable law, ambiguous or mutually
exclusive provisions to the extent necessary to determine what duties of
payment and defense the parties to this action undertook by contract.56
IV. SUMMARY OF CONCLUSIONS
A. Contribution
45

We conclude that nothing in the federal motor carrier requirements, the trip
lease, or the imputed ICC endorsement to Refrigerated's insurance policy would
alter any party's rights or duties of contribution. In particular, we make clear
that those provisions do not impose on Refrigerated, as lessee, the status of an
insurer with respect to Stanford, the lessor.57 Since rights and duties of
contribution may rest upon facts outside this record and upon issues of local
law, we leave such determinations to the district court on remand.

B. Duty to pay
46

We conclude that nothing in the federal motor carrier requirements, the trip
lease, or the imputed ICC endorsement absolves Stanford and Carolina of any
duty they might otherwise have to pay judgments entered against Stanford.
Therefore, we will affirm the judgment of the district court insofar as it
imposed a duty upon Refrigerated and INA to pay judgments entered against
Refrigerated, but will remand for a determination whether the terms of the
Carolina policy, in conjunction with the terms of the INA-Refrigerated
contract, succeed in converting Carolina to a mere excess insurer.58 If the
district court should determine that Carolina is in fact a primary insurer as to
Stanford's liability under the Babcock judgment, it will also have to determine
how payment of that judgment shall be allocated among the parties to this
action. In this event, if the Delaware contribution statute is operative, it appears
likely that the eminently sensible outcome of this action would be that Carolina
pay 20% Of the $34,000. Babcock judgment for which its insured was found
culpable, while INA and Refrigerated pay the 80% For which Refrigerated was
found culpable.59 However, the district court may determine that a different
apportionment of payment is required by the contracts or by governing law in

light of any factual determinations it makes and after ascertaining the positions
of counsel.60
C. Duty to defend
47

We conclude that nothing in the federal laws, the trip lease, or the imputed ICC
endorsement alters otherwise existing duties to defend. Therefore, we leave for
further determination on remand, or to agreement among the parties, the
question of what duties the insurance contracts or governing state law imposed
for defending claims against the driver, Wicker, and against the lessor,
Stanford.

48

The judgment of the district court is vacated and the case is remanded for
further proceedings in accordance with this opinion, 61 each party to bear its
own costs in this court.

ANNEX TO OPINION
EXHIBIT A
SPECIAL INTERROGATORIES TO THE JURY
49

I have prepared a set of questions that should assist you in rendering your
verdict. The original or official copy of the questions will be handed to the
Foreman who by tradition of this Court is Juror number 1. It is the original and
official copy merely because it is the Foreman's copy. This copy should be
signed by each of you after you have unanimously agreed upon the answer to
each question which requires an answer. An extra copy of the questions will be
handed to each juror and is merely for your convenience in considering your
verdict.

50

I shall now read the first set of questions, adding a note of explanation
wherever I think it will be useful to you. The questionnaire instructs you to
"Answer the following questions in the order in which they are hereby
presented." It is important to follow the order in which the questions are
presented because some of the questions later on the questionnaire need not be
answered if certain questions are answered in certain ways earlier in the
questionnaire. So, although you should certainly read clear through the
questionnaire before you start to answer any of the questions, I strongly urge
that you take up the questions in the order in which they are presented. The
questions are as follows:

51

1. Based upon the evidence and the instructions of law as given to you by the
Court, do you find that plaintiff is entitled to damages from defendants or any
of them?

Yes __x___ _____ No

52 your answer is no, proceed no further. If your answer is yes, proceed to answer
(If
the following questions.)
53

2. How much damages do you award to plaintiff?

$34000
54
55

3. How do you allocate the fault as among defendant Wicker, the truck driver,
defendant Stanford, the truck owner and lessor, and defendant Refrigerated
Transport Inc., the lessee? In answering this question, you should not consider
any claim for indemnification as between Stanford and Refrigerated Transport,
Inc.

Wicker
56
Stanford
Refrigerated Transport Inc.
Total

0 %
----20 %
----80 %
----100 %
-----

57 will now return to the jury room to begin your deliberations. When you reach
You
agreement, you are to fill out and sign the question sheet. The questions will be read
in open court when you return with your verdict and the Foreman will read your
answers aloud. Depending upon your answers to these questions, you may be asked
to answer additional questions.
EXHIBIT B
QUESTIONNAIRE
58

4. Has the plaintiff, Courtland T. Babcock, II, and/or the defendant,

Refrigerated Transport Co., Inc., proven by a preponderance of the evidence
that (a) the involved tractor-trailer had a defect in the braking system at the
time the individual defendant, Charles Stanford, leased it to Refrigerated, and
(b) the accident and plaintiff's claimed injuries were proximately caused by that
defective condition?

Answer: No
(Yes or No)
59
60

5. Has the plaintiff, Courtland T. Babcock, II and/or Charles Stanford proven

by a preponderance of the evidence that Refrigerated failed to perform its nondelegable duty to inspect the tractor-trailer as required by 40 CFR 1057.4(c),
or negligently performed that inspection, and that Refrigerated's failure or
negligence was a proximate cause of the accident and the plaintiff's claimed
injuries?

Answer: Yes
(Yes or No)
61
62

6. Has the plaintiff, Courtland T. Babcock, II, proven by a preponderance of the

evidence that Refrigerated, Hugh Wicker, or Charles Stanford was
independently negligent in violating a federal regulation (49 CFR 393.48) by
not having operative brakes on the tractor-trailer and that that failure or
negligence was a proximate cause of the accident and plaintiff's claimed
injuries?

Answer:
63
-------

Refrigerated:
Stanford:
Wicker:

64

Yes
----------(Yes or No)
No
----------(Yes or No)
No
----------(Yes or No)

7. Has the plaintiff, Courtland T. Babcock, II, proven by a preponderance of the

evidence that Refrigerated, Hugh Wicker or Charles Stanford was
independently negligent in violating the federal regulations (49 CFR 393.52)
by reason of the fact that the tractor-trailer was not capable to being stopped in
time to avoid the collision, and that that failure or negligence was a proximate
cause of the accident and plaintiff's claimed injuries?

Answer:
65
-------

Refrigerated:
Stanford:
Wicker:

Yes
----------(Yes or No)
Yes
----------(Yes or No)
No

----------(Yes or No)

66Has the plaintiff, Courtland T. Babcock, II, proven by a preponderance of the

8.
evidence that the individual defendant, Hugh F. Wicker, was guilty of negligence in
failing to maintain proper control of the tractor-trailer or in driving carelessly and
that such negligence proximately contributed to the cause of the accident and
plaintiff's claimed injuries?
Answer: No
(Yes or No)
67
68

9. The Court has already ruled that Refrigerated is responsible for any
negligence of Mr. Wicker. If your answer to Question 8 is "yes," do you find
that Mr. Wicker was also acting as the servant or employee of Charles Stanford
at the time of the accident?

Answer: Not Applicable

(Yes or No)
69
70

10. Do you find that there was a valid hold harmless agreement such that
Refrigerated is entitled to indemnity or reimbursement from Stanford:

Answer: No
(Yes or No)
71

It should be noted that plaintiffs have failed to state in their complaint the
principal place of business of defendant Refrigerated. Thus the jurisdictional
allegations in the pleadings are inadequate to establish jurisdiction under 28
U.S.C. 1332(c), which provides that "a corporation shall be deemed a citizen
of any State by which it has been incorporated And of the State where it has its
principal place of business . . ." (emphasis added). Upon remand, the district
court should bring this inadequacy of pleading to the attention of counsel. Once
it has ascertained from the parties in what state Refrigerated has its principal
place of business, the court should allow amendment of the pleadings pursuant
to 28 U.S.C. 1653, unless the court finds that diversity is in fact lacking. Cf.
Transport Indemnity Co. v. Home Indemnity Co., 535 F.2d 232, 233 n.1 (3d
Cir. 1976) (amendment permitted by court of appeals, where proof of diversity
was available to that court)

Also named as defendants in the district court declaratory judgment action were
Courtland T. Babcock, II and Barbara Babcock, who, as plaintiffs in the
underlying tort action, were joined pursuant to F.R.Civ.P. 19

The INA policy refers to Refrigerated's liability for the first $25,000. of loss as
"Insured's Retained Limit" (11a). Refrigerated emphasizes in its briefs that the
retained limit is not a deductible but, rather, self-insurance, Reply Brief of
Appellant at 7-8, and that its certificate of self-insurance has been approved by
the ICC, Brief at 18. Refrigerated also warranted in its INA policy that it was a
qualified self-insurer (18a), and that it had "engaged the services of Employers
Self-Insurance Service Company . . ." (25a)

The policy with INA is denominated a "Truckman Excess Liability Policy"

(11a, emphasis added). The policy sets out limits of liability as follows (11a):
"Limits of Liability:
Insured's Retained Limit:
Item 1. $25,000 as the result of any one occurrence, Personal Injury,
Property Damage & Cargo
INA's Limit:
Item 2. $975,000 as the result of any one occurrence, Personal Injury,
Property Damage & Cargo"
Elsewhere the policy states (14a):
"RETAINED LIMIT INA's Limit of Liability
". . . INA's liability shall be only for the ultimate net loss in excess of the
Insured's retained limit for an amount not exceeding the amount specified in the
limits of liability section of the declarations as the result of any one
occurrence."

The trip lease is reproduced in full in the appendix of appellant at 9a-9aa and
pertinent provisions are described and reproduced at page 13 and in note 20
below

Provisions of the INA policy most pertinent to this appeal are reproduced in
note 4 above and notes 26, 47, 50 and 51 below; the policy is reproduced in full
at 10a-39a

Provisions of the Carolina policy most pertinent to this appeal are reproduced
in notes 47, 48, 50 and 51 below; the policy is reproduced in full at 57a-79a

Subsequent motions to the district court and to this court requesting stays of the
district court order were both denied (117a-119a; Brief of Appellees at 3)

49 C.F.R. 393.48 provides in pertinent part:

"Brakes to be Operative.
"All brakes with which motor vehicles are equipped shall be operative at all
times . . . ."

10

49 C.F.R. 393.52 provides in pertinent part:

"Brake performance.
"(a) Upon application of its service brakes, a motor vehicle or combination of
motor vehicles must under any condition of loading in which it is found on a
public highway, be capable of
"(3) Stopping from 20 miles per hour in a distance, measured from the point at
which movement of the service brake pedal or control begins, that is not greater
than (40 feet)."

11

49 C.F.R. 1057.4(c) provides in pertinent part:

"Safety inspection of equipment by the authorized carrier. It shall be the duty of
the authorized carrier, before taking possession of equipment, to inspect the
same or to have the same inspected by a person who is competent and qualified
to make such inspection and has been duly authorized by such carrier to make
such inspection as a representative of the carrier in order to insure that the said
equipment complies with the Motor Carrier Safety Regulations of the Federal
Highway Administration of the Department of Transportation. . . . The person
making the inspection shall certify the results thereof on a report . . . and if his
inspection discloses that the equipment does not comply with the requirements
of the said safety regulations, possession thereof shall not be taken. When such
an inspection has been made, the authorized carrier or an officer or partner
thereof, or a safety director or other supervisory employee responsible for
safety compliance, shall certify on the inspection report that the person who
made the inspection, whether an employee or person other than an employee, is
competent and qualified to make such inspection and has been duly authorized
to do so by such carrier as its representative."

12

The Restatement (Second) of Torts 402A (1965) provides in part that "(o)ne
who sells any product in a defective condition unreasonably dangerous to the
user or consumer . . . is subject to liability for physical harm thereby caused to
the ultimate user or consumer . . . ." The Delaware Supreme Court appears to
recognize a twofold extension of 402A, permitting (1) actions against Lessors
as well as sellers of products, and (2) actions by injured third parties as well as
by users or consumers of products. See Martin v. Ryder Truck Rental, Inc., 353
A.2d 581 (Del.1976). See generally Henszey, Application of Strict Liability to
the Leasing Industry, 33 Bus.L. 631 (1978). But see Windle v. Clark
Equipment Co., 373 A.2d 571 (Del.1977) ("(w)hether 402A and all of its
elements are appropriate for Delaware has been deliberately left open

13

In particular, Refrigerated claimed that Stanford had executed a hold harmless

agreement, to indemnify or reimburse Refrigerated for any amounts the latter
was required to pay to Babcock. The trial court in Babcock instructed the jury
to find as a matter of fact whether the purported agreement was validly
executed. It also charged the jury to apportion relative degrees of fault, if any,
among the defendants, pursuant to Delaware's Uniform Contribution Among
Joint Tort-Feasors Law Del.Code tit. 10 6301-6308

14

Specifically, Refrigerated argued that under the language of the order, no

burden for any judgment recovered by Babcock would be likely to fall on
Stanford, Wicker or Carolina, thus shielding those parties from liability that
could otherwise be imposed on them under applicable state law. Refrigerated
argued further that the use of the word "primary" in the order could be
interpreted to destroy Refrigerated's possible rights to indemnification and
contribution against Stanford or Wicker by, in effect, declaring that
Refrigerated was a primary insurer for those parties while Carolina was an
excess insurer

15

In Nationwide Mut. Ins. Co. v. Fidelity & Cas. Co. of N. Y., 286 F.2d 91, (3d
Cir. 1961), this court declined to rule on a question of primary duty to pay
because "(t)he number of possible verdicts which could be reached in the
pending suit . . . is huge. . . . To attempt to sift out all the potential verdicts and
place the liability of the insurers in each event is not only beyond our powers it
would be a fruitless task." 286 F.2d at 92 n.6; See Aetna Life Ins. Co. v.
Haworth, 300 U.S. 227, 241, 57 S.Ct. 461, 81 L.Ed. 617 (1937). In the present
posture of this appeal, the Nationwide problem has disappeared: many
"potential verdicts" have given way to one actual verdict. Cf. Allstate Ins. Co.
v. Liberty Mut. Ins. Co., 368 F.2d 121, 122 n.1 (3d Cir. 1966) (settlement of
underlying tort action by date of trial). See generally Transport Indem. Co. v.
Home Indem. Co., 535 F.2d 232, 234 n.2 (3d Cir. 1976)

16

The jury found the driver non-negligent, eliminating the possibility that
Stanford should be held vicariously liable for the driver's negligence. The jury
also found that it had not been proven that the involved vehicle had a defect at
the time Stanford leased it to the lessee (Refrigerated), thus making 402A
inapplicable

17

The jury found that there was not a valid hold-harmless agreement entitling
Refrigerated to indemnity or reimbursement from Stanford

18

Our conclusions are summarized in more detail in part IV of this opinion

19

49 C.F.R. 1057.4 provides in pertinent part:

"(a) Contract requirements. The contract, lease, or other arrangement for the
use of such equipment:
"(4) Exclusive possession and responsibilities. Shall provide for the exclusive
possession, control, and use of the equipment, and for the complete assumption
of responsibility in respect thereto, by the lessee for the duration of said
contract, lease or other arrangement. . . ."

20

Paragraph 3, though partially illegible in the record, may be assumed to read as

follows (9aa):
"Lessee (Refrigerated) shall have dominion, supervision and control of the
equipment during said trip, and assumes all liability to the shipper, the
consignee, and the public, and responsibility to the interstate commerce
commission for compliance with its rules and regulations."
Similar clauses are a standard feature of vehicle leases. See, e. g.,
Transamerican Freight Lines, Inc. v. Brada Miller Freight Systems, Inc., 423
U.S. 28, 31, 96 S.Ct. 229, 46 L.Ed.2d 169 (1975); Carolina Cas. Ins. Co. v.
Underwriters Ins. Co., 569 F.2d 304, 307 n.7 (5th Cir. 1978).

21

See note 11 above

22

49 U.S.C. 315 reads in part:

"Security for protection of public
"No certificate or permit shall be issued to a motor carrier or remain in force,
unless such carrier complies with such reasonable rules and regulations as the
Commission shall prescribe governing the filing and approval of surety bonds,
policies of insurance, qualifications as a self-insurer or other securities or

agreements, in such reasonable amount as the Commission may require,

Conditioned to pay, within the amount of such surety bonds, policies of
insurance, qualifications as a self-insurer or other securities or agreements, Any
final judgment recovered against such motor carrier for bodily injuries To . . .
any person resulting from the negligent operation, maintenance, or use of motor
vehicles under such certificate or permit, or for loss or damage to property of
others."
(Emphasis added.)
23

49 C.F.R. 1043.1(a) (1977), which substantially tracks the language of the

statute, provides:
"Property damage; public liability.
"(N)o common or contract carrier . . . shall engage in interstate or foreign
commerce, and no certificate or permit shall be issued to such a carrier or
remain in force unless and until there shall have been filed with and accepted by
the Commission a surety bond, certificate of insurance, proof of qualifications
as a self-insurer, or other securities or agreements, . . . Conditioned to pay any
final judgment recovered against such motor carrier for bodily injuries to or the
death of any person resulting from the negligent operation, maintenance or use
of motor vehicles . . . ."
(Emphasis added.)
Id. 1043.2 prescribes minimum amounts of coverage.
Id. 1043.5 provides that the ICC
". . . will approve the application of a motor carrier to qualify as a self-insurer if
such carrier furnishes a true and accurate statement of its financial condition
and other evidence which will establish to the satisfaction of the Commission
the Ability of such motor carrier to satisfy its obligations for bodily injury
liability, property damage liability, or cargo liability without affecting the
stability or permanency of the business of such motor carrier."
(Emphasis added.)
Id. 1043.7(a) provides:
"Endorsements for policies of insurance, and surety bonds, certificates of
insurance, applications to qualify as a self-insurer, or for approval of other
securities or agreements, and notices of cancellation must be in the form

prescribed and approved by the Commission. Surety bonds and certificates of

insurance shall specify that coverage thereunder will remain in effect
continuously until terminated . . . ."
24

See note 3 above

25

That endorsement, ICC Form BMC 90, reads in part:

"Within the limits of liability hereinafter provided it is further understood and
agreed that no condition, provision, stipulation, or limitation contained in the
policy, or any other endorsement thereon or violation thereof, or of this
endorsement, by the insured, shall relieve the Company from liability
hereunder or from the payment of any such final judgment, irrespective of the
financial responsibility or lack thereof or insolvency or bankruptcy of the
insured. However, all terms, conditions, and limitations in the policy To which
this endorsement is attached Are to remain in full force and effect as binding
between the insured and the Company, and the insured agrees to reimburse the
Company for any payment made by the Company on account of any accident,
claim, or suit involving a breach of the terms of the policy, and for any
payment that the Company would not have been obligated to make under the
provisions of the policy except for the agreement contained in this
endorsement."
(Emphasis added.)

26

Condition 11 of the INA policy reads as follows:

"Reimbursement
"It is agreed that such insurance as is afforded by the policy for Personal Injury
(and) Property Damage . . . Liability Shall conform to the provisions of any
state or federal motor carrier law which shall be applicable with respect to any
such liability arising from the use of the automobile During the policy period,
to the extent of the coverage and limits of liability required by such law, but in
no event in excess of the limits of liability stated in this policy. The Insured
agrees to reimburse INA for any payment made by INA on account of any
accident, claim or suit involving a breach of the terms of this policy and for any
payment INA would not have been obligated to make under the provisions of
this policy except for the agreement contained herein."
(21a-22a; emphasis added.)

27

The Tenth Circuit appears to have adopted a rule that even where the ICC
endorsement is lacking, the court will read it into the policy, as if it were

stamped thereon by operation of ICC regulations. See Hagans v. Glens Falls

Ins. Co. v. National Indem. Co., 465 F.2d 1249, 1252 (10th Cir. 1972). For
reasons discussed above, we may assume that the language of the ICC
endorsement is part of the INA policy, without adopting such a rule. See
Carolina Cas. Ins. Co. v. Underwriters Ins. Co., 569 F.2d 304, 312 (5th Cir.
1978)
28

The background of the regulations on vehicle leases is also discussed in

Simmons v. King, 478 F.2d 857, 866-67 (5th Cir. 1973); Agricultural
Transportation Ass'n of Texas v. King, 349 F.2d 873, 881-82 (5th Cir. 1965);
Mellon National Bank & Trust Co. v. Sophie Lines, Inc., 289 F.2d 473, 477 (3d
Cir. 1961)

29

Thus, in Mellon National Bank & Trust Co. v. Sophie Lines, Inc., 289 F.2d 473
(3d Cir. 1961), an action against a lessee by a person injured by the leased truck
during the lease term, this court held that the lessee was responsible as a matter
of law for the driver's negligence, even though the lessor had supplied the
driver and even though the vehicle at the time of injury was engaged on the
business of a third party without the lessee's knowledge
In furtherance of the policy of protecting the public and providing it with an
identifiable and financially accountable source of compensation for injuries
caused by leased tractor-trailers, federal law in effect creates an irrebuttable
presumption of an employment relationship between a driver and the lessee
whose placards identify the vehicle. However, this statutory source of vicarious
liability may represent only a minor extension of well-established common law
principles. See Restatement (Second) of Torts 428 (1965). Thus, in Venuto v.
Robinson, 118 F.2d 679 (3d Cir.), Cert. denied, 314 U.S. 627, 62 S.Ct. 58, 86
L.Ed. 504 (1941), this court found that the state law theory of vicarious liability
for the negligence of an independent contractor was sufficient to subject a
motor carrier to liability for a hired driver's negligence, even absent a federal
statutory source for such liability.

30

They cite the following reasoning from an intermediate Maryland appellate

court in support of their position:
"In our view the intent of Congress and the ICC was that the insurance
company which wrote the ICC endorsement (i. e., the lessee's insurer) would be
responsible for primary coverage, both as a matter of law and of public policy."
Allstate Ins. Co. v. Federal Ins. Co., 23 Md.App. 105, 326 A.2d 29, Aff'd and
modified, 275 Md. 460, 341 A.2d 399 (1974).

31

We are not concerned here with the preemption of state regulations of motor

carriers engaged in interstate commerce. See e. g., Bailey v. Bruneau's Truck

Service, Inc., 149 Conn. 46, 175 A.2d 372, 376 (1961). Whatever preemptive
effect the ICC regulations may have in that limited field cannot form a basis for
arguing that federal law also displaces state law doctrines governing masterservant relationships, Respondeat superior, contribution among tortfeasors, or
even ordinary negligence. See, e. g., Simmons v. King, 478 F.2d 857, 867 (5th
Cir. 1973); Continental Casualty Co. v. American Fidelity & Casualty Co., 275
F.2d 381, 383-84 (7th Cir. 1960); Vance Trucking Co. v. Canal Insurance Co.,
249 F.Supp. 33, 39 (D.S.C.1966), Aff'd 395 F.2d 391 (4th Cir.), Cert. denied,
393 U.S. 845, 89 S.Ct. 129, 21 L.Ed.2d 116 (1968). Indeed, so massive a
disruption of the tissue of state law would be extraordinary in the American
legal framework. See P. Bator, P. Mishkin, D. Shapiro & H. Wechsler, Hart &
Wechsler's The Federal Courts and the Federal System 470-71 (2d ed. 1973)
32

Accordingly, even though the tractor-trailer accident there occurred during the
term of the lease, analysis of the insurance contracts led to the conclusion that
the lessor's insurer expressly extended coverage to the loss and thus should bear
financial responsibility for it. Accord, Wellman v. Liberty Mutual Insurance
Co., 496 F.2d 131, 139 (8th Cir. 1974) (ICC regulations may not be read into
insurance contract to require lessee's insurer to pay judgment against lessor,
whom the contract had expressly excluded from coverage); See Consolidated
Systems, Inc. v. Allstate Insurance Co., 411 F.2d 157 (5th Cir. 1969) (lessee's
insurer not estopped by federal regulations to deny primary coverage as against
lessor's insurer); Cf. Carolina Casualty Insurance Co. v. Pennsylvania
Thresherman's & Farmers Mutual Casualty Insurance Co., 327 F.2d 324, 326
(3d Cir. 1964) (State motor carrier financial responsibility law not controlling in
action between two insurers). The general principle upon which these cases rest
that a court may give effect to otherwise existing allocations of financial
responsibility where the goal of protecting the injured public has already been
fulfilled appears to find affirmance in Transamerican. There the Supreme Court
held that "(a)lthough one party is required by law to . . . bear the consequences
of any negligence, the party responsible in law may seek indemnity from the
party responsible in fact," pursuant to a hold-harmless agreement. 423 U.S. at
40, 96 S.Ct. at 235

33

See note 22 above

34

See note 23, 1st paragraph above

35

See Id., 3rd paragraph

36

See note 25 above. In the recent decision of Carolina Cas. Ins. Co. v.
Underwriters Ins. Co., 569 F.2d 304, 312 (5th Cir. 1978), the court stated the

following about the ICC endorsement:

"The purpose of 215 of the Interstate Commerce Act and regulations is to
assure to members of the public and shippers that a certificated carrier has
independent financial responsibility, with the dollar limits prescribed, to pay for
losses created by its carrier operations. On the face of the endorsement this is
accomplished by reading out 'other insurance,' 'excess,' or similar clauses
insofar as the amount available to a third party victim would be reduced. But
there is no need for or purpose to be served by this supposed automatic
extinguishment of the clause insofar as it affects the insured or other insurers
who clamor for part or all of the coverage." (Emphasis added.)
Accord, Nat'l Mut. Ins. Co. v. Liberty Mut. Ins. Co., 90 U.S.App.D.C. 362, 196
F.2d 597, Cert. denied, 344 U.S. 819, 73 S.Ct. 15, 97 L.Ed. 638 (1952).
37

See pages 134-135 above

38

See note 19 above

39

It is not uncommon for one party to a vehicle lease to undertake to obtain

insurance coverage for the other. See, e. g., Carolina Cas. Ins. Co. v.
Underwriters Ins. Co., 569 F.2d at 307 n.5, for an example of such a clause.
Refrigerated made no such undertaking in this case. On the contrary, it
attempted to extract from Stanford an undertaking to indemnify Refrigerated for
liabilities incurred by the latter, even for its own negligence. See note 13 above.
(The jury found this purported "hold-harmless" agreement invalid in the
Babcock case. See page 133 above.)

40

Under elementary principles of common law and under the Delaware law
governing Babcock's diversity case, joint tortfeasors held jointly and severally
liable are each potentially accountable To the plaintiff for the entire judgment.
See Diamond State Tel. Co. v. University of Delaware, 269 A.2d 52, 56
(Del.1970); Lutz v. Boltz, 9 Terry 197, 100 A.2d 647 (Del.Super.1953);
Leishman v. Brady, 9 W.W.Harr. 559, 3 A.2d 118, 120-21 (Del.Super.1938);
86 C.J.S. Torts 35, at 951 n.20 (1954) ("where independent acts of several
tort-feasors, especially where such acts are negligent, combine to produce
directly a single injury, each is responsible for the entire result"); 49 Id.,
Judgments 36b, at 88 n.54; 48 Id., Joint at 798

41

Such rights and duties are governed by the law of the forum in diversity cases.
Smith v. Whitmore, 270 F.2d 741 (3d Cir. 1959); Fehlhaber v. Indian Trails,
Inc., 45 F.R.D. 285 (D.Del.1968)

42

Del.Code tit. 10 6301-6308. Section 6302 provides:

"(a) The right of contribution exists among joint tort-feasors.

"(b) A joint tort-feasor is not entitled to a money judgment for contribution
until he has by payment discharged the common liability or has paid more than
his pro rata share thereof.
"(c) A joint tort-feasor who enters into a settlement with the injured person is
not entitled to recover contribution from another joint tort-feasor whose liability
to the injured person is not extinguished by the settlement.
"(d) When there is such a disproportion of fault among joint tort-feasors as to
render inequitable an equal distribution among them of the common liability by
contribution, the relative degrees of fault of the joint tort-feasors shall be
considered in determining their pro rata shares." (Emphasis added.)
43

In light of the jury's finding, apportioning fault between Refrigerated and

Stanford in the Babcock case, 6302(d) provided that it applies would impose
on Refrigerated an ultimate liability for 80%, or $27,200., of the $34,000.
Babcock judgment, while Stanford would have ultimate liability for 20%, or
$7,800., of that judgment
For another recent decision involving insurers of two joint tortfeasors under a
state contribution statute, see Johnson v. United States Fire Ins. Co., 586 F.2d
1291 (8th Cir. 1978).

44

The district court's declaratory judgment order declared that Both Refrigerated
and INA are "primarily responsible" for defense and payment in the underlying
Babcock case. This language might have been construed, in the context of the
pleadings in the declaratory action, to mean that Refrigerated was an insurer
extending coverage to Stanford (the lessor) and Wicker (the driver), while
Carolina's obligation under the terms of its policy was only that of an excess
insurer. (An excess or secondary insurer "is not liable for any part of the loss or
damage which is covered by other insurance. It is liable only for the amount of
loss or damage in excess of the coverage provided by the other policy or
policies of insurance." 16 Couch, Supra, 62:49.) If Stanford were deemed to
be Refrigerated's insured, the latter's contribution rights might be affected, since
in general an insurer cannot subrogate against its own insured. Id. 61:133. Nor
could Refrigerated recover from Carolina since a primary insurer cannot
recover contribution from an excess insurer. Id. 62:48, 62:143

45

The district court indicated in its order denying reargument (114a-115a) that it
looked solely to the federal motor carrier requirements for the source of the
duties to pay and defend:

"The primary responsibility to defend the Babcock action by Refrigerated is

clearly spelled out in the Court's opinion as the duty imposed By the ICC
statute and regulations issued thereunder referred to in the Opinion." (Emphasis
added.)
46

Delaware conflict-of-law rules would govern the choice of state law applicable
to the non-Delaware insurance contracts involved in this dispute. Klaxon Co. v.
Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 734, 85 L.Ed. 115 (1941). It
is not clear from this record where those contracts were executed, See
Restatement of Conflict of Laws 311 Et seq. (1934), or where the principal
location of the insured risk was understood to be, See Restatement (Second) of
Conflict of Laws 193 (1971)

47

The INA policy's "omnibus" or "Definition of Insured" clause provides as

follows (14a):
"PERSONS OR ENTITIES INSURED
"(a) The Named Insured;
"(b) Each of the following is an Insured under this policy to the extent set forth
below:
The Insured, as referred to herein, shall include: all subsidiaries and affiliates
and shall also include officers and directors of said companies, subsidiaries and
affiliates, while acting within the scope of their duties as such officers and
directors."
In addition, various endorsements name specific parties as additional insureds
(E. g., 24a, 29a, 30a), but Stanford does not appear on any of these
endorsements. Further, the (imputed) ICC endorsement says nothing about
additional insureds. See Nat'l Mut. Ins. Co. v. Liberty Mut. Ins. Co., 90
U.S.App.D.C. 362, 196 F.2d 597, Cert. denied, 344 U.S. 819, 73 S.Ct. 15, 97
L.Ed. 638 (1952).
Carolina's policy contains the following "omnibus" clause (58a):
"Definition of Insured:
"With respect to the insurance for bodily injury liability and for property
damage liability the unqualified word 'insured' includes the named insured
(Stanford) . . . and also includes any person while using the automobile and any
person or organization legally responsible for the use thereof, provided the
actual use of the automobile is . . . with the permission of (the named insured). .

. ."
That clause would include not only the driver (Wicker) but also Refrigerated, as
lessee, were it not for the Truckmen's endorsement, Infra at note 48.
48

The exclusion clause provides (61a):

"Except with respect to the named insured or an employee thereof, but subject
otherwise to the provisions of Insuring Agreement III, Definition of Insured,
the insurance does not apply to any person or organization, or any agent or
employee thereof, engaged in the business of transporting property by
automobile for the named insured or for others (1) unless the accident occurs
while such automobile is being used exclusively in the business of the named
insured and over a route the named insured is authorized to serve by federal or
public authority, or (2) if such person or organization so engaged is subject to
the security requirements of any motor carrier law and satisfies any such
requirements by any means other than automobile liability insurance, or (3) if
such person or organization so engaged is insured under an automobile liability
insurance policy which affords coverage for automobiles hired by such person
or organization but which does not insure on a direct primary basis the owners
of such automobiles and the agents and employees of such owners, while such
automobiles are being used exclusively in the business of such person or
organization and over a route such person or organization is authorized to serve
by federal or public authority;
"provided, however, a driver or other person furnished to the named insured
with an automobile hired by the named insured shall not be deemed an
employee of the named insured."
Although the vexatious language in this endorsement is difficult to
comprehend, See Transport Indem. Co. v. Home Indem. Co., 535 F.2d 232,
237-38 (3d Cir. 1976) ("subject to" clause); Compare Carolina Cas. Ins. Co. v.
Underwriters Ins. Co., 569 F.2d at 308 n.8, With Wellman v. Liberty Mut. Ins.
Co., 496 F.2d 131, 137-39 (8th Cir. 1974), and Pacific Intermountain Express
Co. v. Liberty Mut. Ins. Co., 359 F.2d 735 (7th Cir. 1966) (effect of provisions
(2) and (3) on coverage), in the fact situation here it appears to us that Carolina
did not extend coverage to Refrigerated on a primary basis. Transport Indem.
Co. v. Home Indem. Co., supra.

49

The driver is deemed by law to be, in effect, an "employee" of Refrigerated, the

lessee and holder of the ICC permit, as discussed above at note 29. See, e. g.,
Simmons v. King, 478 F.2d 857, 867 (5th Cir. 1973); Mellon National Bank &
Trust Co. v. Sophie Lines, Inc., 289 F.2d 473 (3d Cir. 1961). In this case it has
not been found as a fact whether Wicker (the driver) also remained an

"employee" of Stanford (the lessor and the named insured under the Carolina
policy) within the contemplation of the "except" clause in the exclusion
provision reproduced at note 48. See, e. g., Carolina Cas. Ins. Co. v.
Underwriters Ins. Co., 569 F.2d at 309; Carolina Cas. Ins. Co. v. Pa.
Thresherman's & Farmer's Mut. Cas. Ins. Co., 327 F.2d 324, 327 (3d Cir. 1964)
50

The INA policy provides (13a-14a):

"DEFENSE, SETTLEMENT AND SUPPLEMENTARY PAYMENTS
"This policy does not apply to defense, investigation, settlement or legal
expenses arising out of any occurrence, but INA shall have the right and
opportunity to associate with the Insured in the defense and control of any
claim or proceeding arising out of such occurrence reasonably likely to involve
INA. In such event the Insured and INA shall cooperate fully.
"Should any occurrence appear likely to exceed the retained limit, no loss
expenses or legal expenses shall be incurred on behalf of INA without its prior
consent. Should any claim arising from such occurrence be adjusted prior to
trial court judgment for a total amount not more than the retained limit, then no
loss expenses or legal expenses shall be payable by INA. However, should the
total amount for which such claim might be adjusted prior to such judgment
exceed the retained limit, then, if INA consents to further trial court
proceedings, it shall contribute to loss expenses and legal expenses in the ratio
which its proportion of the liability for the judgment rendered, or settlement
made, bears to the whole amount of paid judgment or settlement.
"In the event that the limits of liability of underlying insurance are exhausted
by an occurrence, INA shall be obligated to assume charge of the settlement or
defense of any claim or proceeding against the insured resulting from the same
occurrence, but only where this policy applies and is immediately in excess of
such underlying insurance without intervening self-insurance or excess
insurance with another insuror."
(Emphasis added.)
The Carolina defense clause provides in part (58a):
"Defense, Settlement, Supplementary Payments: With respect to such insurance
as is afforded by this policy for bodily injury liability and for property damage
liability, the company shall:
(a) Defend any suit against the insured alleging such injury, sickness, disease or
destruction and seeking damages on account thereof, Even if such suit is

groundless, false or fraudulent ; but the company may make such investigation,
negotiation and settlement of any claim or suit as it deems expedient . . . ."
(Emphasis added.)
51

The INA policy provides in part (20a-21a):

"Other Insurance not with INA
"If collectible insurance with any other insurer is available to the Insured
covering a loss also covered hereunder, the insurance hereunder shall be in
excess of, and not contribute with, such other insurance, provided, however,
this does not apply to insurance which is written as excess insurance over the
limit provided in this policy."
Carolina's policy provides in part (61a):
"Other Insurance. With respect to any automobile of the commercial type while
leased or loaned to any person or organization, other than the named insured,
engaged in the business of transporting property by automobile for others, or
any hired private passenger automobile insured on the 'cost of hire' basis, or any
non-owned automobile, the insurance shall be excess insurance over any other
valid and collectible insurance."

52

The general rule appears to be that "other valid and collectible insurance" must
be insurance which can be collected By the person who is an insured under the
policy with the "other insurance" clause. See, e. g., Consolidated Systems, Inc.
v. Allstate Ins. Co., 411 F.2d 157, 159 (5th Cir. 1969); Aetna Cas. & Sur. Co.
v. Security Ins. Co. of Hartford, 267 A.2d 582, 586 (Del.1970); 16 Couch,
Supra 62:95, 62:96 and cases cited therein. Jurisdictions vary as to whether
an overlap of Named insureds is required to trigger the operation of the "other
insurance" clause, Id. 62:95, or whether an overlap of Additional insureds is
sufficient, Id. 62:96

53

The general rule appears to be that qualification as a "self-insurer," to satisfy

motor vehicle security requirements, does not constitute "other valid insurance"
sufficient to bring an "other insurance" clause into play. See, e. g., Southeast
Title & Ins. Co. v. Collins, 226 So.2d 247, 248 (Fla.App.1969); United
National Ins. Co. v. Philadelphia Gas Works, 221 Pa.Super. 161, 289 A.2d 179,
181 (1972); Cf. Universal Underwriters Ins. Co. v. Marriott Homes, Inc., 286
Ala. 231, 238 So.2d 730, 732 (1970) (workmen's compensation)

54

The general rule is that identical "excess insurance" clauses are considered to
cancel each other out. E. g., Note, Concurrent Coverage in Automobile Liability

Insurance, 65 Col.L.Rev. 319, 324 (1965). However, courts in different

jurisdictions vary in their subsequent apportionment of duties between insurers.
Compare Consolidated Systems, Inc., 411 F.2d at 162-63 (Florida law); 16
Couch, 62:79 (insurers prorate according to limits of liability), With State
Farm Fire & Cas. Co. v. Holton, 131 Ga.App. 247, 205 S.E.2d 872, 874 (1974);
16 Couch, 62:80 (insurers share equally), And with 16 Couch, 62:81
(owner's insurer primary). See also Risjord, Other Insurance, 29 Ins.Counsel J.
612 (1962)
55

S. Pac. Co. v. Jensen, 244 U.S. 205, 222, 37 S.Ct. 524, 61 L.Ed. 1086 (1917)
(Holmes, J., dissenting)

56

The district court's excursion through the terms of the insurance policies might
find a useful guide in Judge Brown's thorough opinion in Carolina Casualty
Insurance Co. v. Underwriters Insurance Co., 569 F.2d 304 (5th Cir. 1978), a
case which involved similar facts and a lessor's form policy substantially
identical to that in the case before us. Although it involved Carolina, the
plaintiff in the case before us, that decision, filed in March 1978, mysteriously
eluded the attention of Carolina's counsel in this appeal until a date
immediately before oral argument. Carolina's brief was filed in this court on
July 7, 1978

57

See note 44 above

58

See especially notes 51 and 52 above

59

Both insurance policies measure the duty to pay by what "the insured shall
become legally obligated to pay as damages" (13a, 58a)

60

We note that both insurers' pleadings in this action sought, as an alternative

remedy, a prorating of payment according to the upper limits of the policies

61

See particularly the last paragraph of part II and part IV of this opinion