Strategies, Challenges, and Answers

Bobtail Insurer Did Not Wait Too Long To Disclaim Coverage

Bobtail InsuranceIn a POST earlier this year, we recited the general rule that when a truck is pulling a load for a motor carrier, the motor carrier’s policy is responsible to provide insurance.  The inverse of that general rule is that when the truck is not in the business of a motor carrier, normally the non-trucking (otherwise known as bobtail insurance) is the responsible insurance carrier.

The case of United Fin. Cas. Co. v. Country Wide Ins. Co., No. 18-3022, 2019 U.S. App. LEXIS 19581 (2d Cir. July 1, 2019) involves a trucking insurer vs. a non-trucking insurer.

At the time of the accident, the driver and truck were leased to International Trucking Group. (ITG) and they were hauling its freight.  However, when the suit was filed, the driver and his employer turned the case over to their non-trucking insurer, United Financial Casualty Company (UFCC).  On July 18, 2016, UFCC immediately took up the defense and started looking for ITG’s policy.  By searching the U.S. Department of Transportation’s Licensing and Insurance database, UFCC learned that at the time of the accident, ITG had an insurance policy with Country Wide Insurance Company.  (CWIC).

UFCC continued the defense as it tried to get more information regarding the scope of CWIC’s coverage.  UFCC tendered the defense of the driver and the truck to CWIC.  Through the months of July, August September and October 2016, UFCC communicated with CWIC seeking a response to its tender.

CWIC did not respond to UFCC’s inquiries until January 13, 2017, rejecting UFCC’s tender and denying coverage for the driver.  On March 6, 2017, 52 days later, UFCC filed a declaratory relief action attempting to shift the duty to defend and indemnify to CWIC.

CWIC filed a Motion for Summary Judgment arguing that UFCC had waited too long to disclaim coverage.  The trial court agreed saying that UFCC had failed to comply with N.Y. Ins. Law §3420(d)(2) which requires an insurance company to disclaim coverage as soon as is reasonably possible.  The 52-day delay between when the CWIC denial arrived and the declaratory relief action was filed was just too long.

UFCC, the non-trucking insurance company, appealed.  Overruling the trial court, the Second Circuit Court of Appeals reminded the parties that under New York law, gaps in auto coverage were not allowed and the non-trucking carrier could not decline coverage until there was other coverage available to step in.  Furthermore, N.Y. Ins. Law §3420(d)(2) did not apply when the dispute was between two insurance companies.  The court said that even if the law did apply, the non-trucking insurer had not violated the law.  UFCC has disclaimed coverage by filing its declaratory relief action in March 2017.  UFCC could not confirm CWIC’s coverage until it got a copy of the CWIC policy in July 2017.  Therefore, the law had not been violated.

The Second Circuit remanded the case back to the trial court to decide the case based on the provisions of the policy and the facts.  The general rule may well be applied to relieve the non-trucking policy and implicate the trucking policy.

So if you have questions about trucking law, feel free to contact Mike Mills at 702.240.6060×114 and speak with him.

Speak Your Mind

*