A federal court sitting in Illinois recently held that neither a motor carrier which leased a tractor and driver to haul its customer’s property, nor the carrier’s lessor were entitled to insurance coverage under the lessor’s trucking policy for injuries occurring during use of the leased equipment.   In Northland Ins. Co. v. Barnhart Crane & Rigging Co., 2013 WL 685979 (N.D. Ill), the court considered federal and Illinois trucking statutes and regulations as well as case law, in rejecting all claims for coverage under the policy and under the federally-required MCS-90 endorsement on the policy.

Barnhart Crane & Rigging Co (“BCR”), the lessee, entered into a long-term lease with Diamond Ring Specialized, LLC, (“Diamond”), the lessor, for BCR’s use of Diamond’s tractor and driver. Diamond promptly removed the truck as a scheduled vehicle from its trucking policy issued by Northland Ins. Co (“NIC”), while BCR added the truck and its driver to BCR’s policy issued by Amerisure.  Kern, an independent contractor for BCR, was injured during BCR’s use of the tractor and driver, under its operating authority, to haul a customer’s crane girder which was mounted on BCR’s dolly/transport system and attached to the leased tractor.  Kern filed an action for damages against BCR and Diamond. NIC filed an action seeking a declaration that it had no duty to defend BCR or Diamond in connection with Kern’s suit.

BCR claimed that under Illinois law and the terms of the lease which stated that the driver remained Diamond’s employee, Diamond had “borrowed” BCR’s dolly such that BCR was entitled to coverage under NIC’s policy.  The court rejected this argument stating that all of federal and Illinois law as well as the lease itself require BCR to maintain “exclusive possession” and “control” over the leased vehicle and its driver, such that Diamond could not have controlled or possessed the dolly.  The court rejected BCR’s reciprocal coverage argument because even though Diamond had agreed in the lease to indemnify BCR, such indemnity agreements are void and unenforceable under Illinois law. The court further held that BCR was not entitled to notice of the deletion of the tractor from NIC’s policy under Illinois’ motor carrier insurance regulations or case law.  In a supplemental order, the court further rejected BCR’s and Diamond’s claims under the federally-required MCS-90 endorsement.

(The prevailing insurer, Northland, was represented by Cray Huber attorneys Jeanne Zeiger and James Horstman.)