It Started With A Blast

Buffalo, New York
April 23, 1979
(c) Buffalo Evening News

A truck loaded with dynamite caught fire and exploded this morning at a Town of Lancaster stone quarry, injuring nine workers, leveling nearby buildings and vehicles, and sending shock waves that blew out windows of home several miles away.

Miraculously, Leonard Rinker, a truck driver from Lancaster Stone Products Corp. on Barton Road, was able to run to safety when the cab of his truck caught fire just after 7 a.m. and he called to other workers to take cover. * * *

The explosion flattened buildings, destroyed 26 trucks and cars, and tore down power lines at the quarry site.

The force of the blast cracked foundations of nearby homes, police said, and residents of the villages of Lancaster and Depew reported their windows were blown out and cupboards rattled. Windows were also blown out at police headquarters on Main Street in Clarence. * * *

Mr. Rinker told the Buffalo Evening News that he ran from his truck when the cab filled with smoke. He said he was about 1,500 feet away when the truck exploded. * * *

A hole 6 feet deep and 20 feet across was left where the truck had been, officials said, and parts of the vehicle were found 200 yards away.

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In commemoration of Independence Day, I thought I'd share a report of some local fireworks that formed the basis of what is known in New York as the "antisubrogation rule".

In Pennsylvania General Ins. Co. v. Austin Powder Co., 68 NY2d 465 (1986), the New York Court of Appeals ruled:

An insurer has no right of subrogation against its own insured for a claim arising from the very risk for which the insured was covered. This rule applies even where the insured has expressly agreed to indemnify the party from whom the insurer's rights are derived and has procured separate insurance covering the same risk.

Bison Ford Truck Sales rented a truck Austin Powder Company under a rental agreement that required Bison Ford to obtain primary liability insurance and Austin Powder to indemnify Bison Ford for liability arising out of Austin Powder's use of the vehicle. Liberty Mutual issued auto policies to Bison Ford under which Austin Powder and Rinker were found to be "additional insureds". Austin Powder used the truck to transport dynamite and blasting caps to a stone quarry in Lancaster, New York, a northeastern suburb of Buffalo. The driver, Leonard Rinker, overloaded the truck, causing the rear wheels and wheel wells to overheat from friction. Did I mention that the truck was loaded with dynamite and blasting caps?

A 6 x 20 foot crater and 1 million in 1979 dollars in property damage later, Pennsylvania General commenced this subrogation action for $2,252.35 in auto physical damage it had paid to its insured (a new AMC Pacer cost $3,100 in 1979). On behalf of Bison Ford, Liberty Mutual settled and paid that claim, and crossclaimed as Bison Ford's subrogee against Austin Powder under the rental agreement, which presented the courts with this opportunity to address and impose the antisubrogation rule.

This case did not create the antisubrogation rule, but refined it somewhat to provide for its application even where the insured has expressly agreed to indemnify the subrogor and procured separate insurance covering the same risk. Liberty Mutual unsuccessfully argued that the indemnification provision of the rental agreement between Bison Ford and Austin Powder, coupled with the fact that Austin Powder had procured its own liability insurance, should permit recovery from Austin Powder. The Court of Appeals disagreed, finding no reason to create an exception to the antisubrogation rule since Austin Powder and Rinker clearly were covered as additional insureds under Liberty Mutual's primary insurance policy with Bison Ford.

Austin Powder has been cited 215 times since being decided in 1986 and remains one of the seminal antisubrogation cases in New York. It has been followed, explained and distinguished, but not overruled. Although leasing and rental companies and their insurers have learned to limit or circumvent its holding in relation to mandatory liability insurance coverages owed to lessees, renters and customers, New York judges continue to apply its holding to prevent insurers from subrogating against parties to whom or which they owed defense and indemnification coverage for the same risk, as in the recent decision in ELRAC, Inc. d/b/a Enterprise Rent a Car v. Russo (Dist. Ct., Nassau Co., decided 6/10/2008).