New York Law Review

Tag: Federal Insurance Co. v. Employers Mutual

  • Federal Insurance Co. v. Employers Mutual Liability Insurance Co., 28 N.Y.2d 460 (1971): Apportioning Liability Between Insurers of Tractor-Trailer Combinations

    Federal Insurance Co. v. Employers Mutual Liability Insurance Co., 28 N.Y.2d 460 (1971)

    When separate insurance policies cover a tractor and trailer involved in an accident, and each policy excludes coverage for the other unless insured by the same insurer, contribution between the insurers should be proportionate to the respective accident limits of the policies.

    Summary

    This case addresses the apportionment of liability between the insurers of a tractor and trailer involved in an accident. The tractor’s insurer settled claims from injured bus passengers and sought contribution from the trailer’s insurer. The policies had clauses excluding coverage for each other under certain conditions, precluding concurrent insurance. The court held that contribution should be proportionate to the accident limits of each policy (tractor: $750,000, trailer: $300,000), resulting in the trailer’s insurer paying two-sevenths of the settlement, reflecting the ratio of its accident limit to the total accident coverage. The court reasoned that this approach aligns with precedents regarding contribution in the absence of specific policy provisions or statutes and provides certainty for insurers.

    Facts

    Jersey Truck Renters, Inc. owned a tractor, and B & B Truck Renters owned a semitrailer. Both were rented to Grand City, whose employee operated them as a unit. The tractor-trailer collided with a bus, injuring passengers. The tractor’s insurer, Federal Insurance, settled nine claims totaling $44,976.16. The tractor policy had limits of $500,000 per claim and $750,000 per accident. The trailer’s insurer, Employers Mutual, had policy limits of $100,000 per claim and $300,000 per accident. Employers Mutual conceded its obligation to contribute, but disputed the apportionment method.

    Procedural History

    The parties submitted the case on agreed facts to the trial court. The trial court initially ordered Employers Mutual to pay half of the settlement. The Appellate Division affirmed this decision. Employers Mutual appealed to the New York Court of Appeals, contesting the apportionment.

    Issue(s)

    Whether, in the absence of concurrent insurance and specific policy provisions, the contribution between the insurers of a tractor and trailer involved in an accident should be divided equally, proportionately to the single claim limits, or proportionately to the accident limits of their respective policies.

    Holding

    No, contribution should be proportionate to the respective accident limits of the policies because this approach aligns with precedents and provides certainty for insurers in similar situations.

    Court’s Reasoning

    The court found that the Vehicle and Traffic Law imposes joint and several liability on the tractor and trailer owners. However, the insurance policies contained exclusions that prevented concurrent coverage. The court relied on the principle that in the absence of statute or contrary policy provisions, insurers sharing a risk are entitled to contribution in proportion to the policy limits. The court reasoned that the stipulation by the insurers that they were “concurrently” liable suggested a preference for proportionate sharing. The court found that, “[n]otably, the insurers under the policies in suit show a preference for proportionate sharing in the ‘ ‘ other insurance ’ ’ clause applicable to concurrent insurance.” The court rejected equal sharing, stating: “Since there is no predominance of authority or analysis one way or the other it would seem better to follow precedents and principles most analogous.” The court emphasized the importance of certainty for insurers, noting that the apportionment method’s ultimate impact is reflected in premiums. They also noted that insurers are free to modify their policies to specify different apportionment methods. Because the settlements arose from a single accident, the court found that the relevant limits were the accident limits, not the per-claim limits. The court modified the Appellate Division’s order, directing contribution based on the ratio of the accident limits, resulting in Employers Mutual paying two-sevenths of the total settlement ($300,000/$1,050,000).