Permanent Stay of Uninsured Motorists Coverage Claim Arbitration Granted -- Liability Coverage for Leased Trailer Found to Apply to Tractor

UM – AUTO – GRAVES AMENDMENT – TRACTOR TRAILER LIABILITY – VEHICLE & TRAFFIC LAW § 388
Matter of State Farm Mut. Auto. Ins. Co. v. Morales
(Sup. Ct., Nassau Co., decided 10/22/2009)

State Farm's insured, Jose Morales, claimed injuries from an accident in which his vehicle was struck in the rear by a tractor trailer.  An accident report indicated that the offending vehicle was owned by Tuscan Lehigh Dairies and insured by Ace American Insurance Company.  Morales made a claim to State Farm for uninsured motorists (UM) coverage benefits after Ace presumably disclaimed or denied coverage. State Farm commenced this special proceeding pursuant to CPLR Article 75 for a permanent stay of the UM claim arbitration, contending that there was liability coverage for the tractor trailer, and naming both Tuscan and Ace as proposed additional respondents.

In an opposing attorney's affirmation, Tuscan alleged that it owned only the trailer, and not the tractor.  The tractor allegedly was owned by Action Transport and being driven by one of Action's employees at the time of the accident.  Tuscan also submitted an opposing affidavit of a Kathy Weaver, the human resources manager of Dean NE, LLC, which purportedly was associated with Tuscan.  Weaver's affidavit stated that Tuscan was in the business of renting or leasing trailers to haulers under hauling agreements for the purpose of moving its products from on point to another and, as such, was exempt from vicarious liability under New York's Vehicle & Traffic Law § 388 by operation of the Graves Amendment. Her affidavit also stated there was an agreement between Dean NE, LLC and Action Transport for the purpose of hauling products of Tuscan, and that agreement required Action Transport to assume full responsibility for the trailer including any claims by third parties.

A hearing was conducted at which the parties stipulated that: (1) the trailer owned by Tuscan was insured on the accident date; (2) State Farm could not prove any policy of insurance was issued to Action Transport for the operation of its tractor on the accident date; (3) the trailer itself did not come into contact with Morales' vehicle; and (4) the only issued to be determined in this proceeding was whether the insurance policy on Tuscan's trailer would provide coverage for and negligence on the part of the tractor pulling the trailer.

Although Suffolk Supreme had previously held in Zawatsky v Barker Materials, Ltd., that the Graves Amendment does apply to leased trailers, Nassau County Supreme Court Justice Antonio Brandveen rejected Tuscan's Graves Amendment argument and granted State Farm's petition to permanently stay Morales' UM coverage claim arbitration:

The affidavit of Kathy Weaver stating she is the Human Resources Manager of DEAN NE, LLC which is associated with TUSCAN and Garelick Farms was not notarized and can not be considered by this court. Further, the purported affidavit asserting that Dean NE, LLC is "associated" with TUSCAN is vague and imprecise, that standing alone, is insufficient to establish a connection between the two entities to give TUSCAN standing to assert the application of the Graves Amendment in this action.

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It is clear that the provisions of VTL § 388(1) provide that when a tractor and trailer are being operated in combination the owners shall be jointly and severally liable.  VTL § 388(2) clearly defines a vehicle for purposes of this statute to include a semitrailer and a trailer.

In MOUNT VERNON FIRE INSURANCE COMPANY v. THE TRAVELERS INDEMNITY COMPANY, 63 A.D.2d 254, 255 the court held:

Section 388 of the Vehicle and Traffic Law imposes joint and several liability on owners of tractors and trailers used in combination with one another, for injuries occasioned by such vehicles. Subdivision 4 thereof mandates "All... policies of insurance issued to the owners of any vehicle subject to the provisions of this section shall contain a provision for indemnity or security against the liability and responsibility provided in this section . This statute, which has as its objective the protection of injured plaintiffs, does not differentiate between primary and excess policies but directs that "All" policies of insurance are to provide the required coverage. (Emphasis added).  See, also (Employers Mut. Liability Ins. Co. Of Wis. v Indemnity Ins. Co. Of North America 37 Misc.2d 839)

Accordingly, the court finds that pursuant to VTL § 388 the insurance policy covering the trailer owned by TUSCAN is required to provide coverage for any negligence on the part of the tractor operated in combination with trailer. The petition by STATE FARM is granted.

Justice Brandveen was correct in rejecting the unnotarized affidavit submitted in support of Tuscan's Graves Amendment argument.  But even if that affidavit been notarized (and certificated pursuant to CPLR § 2309(c) if executed outside of New York State), would the result have been different?  A motor vehicle lessor's coverage responsibility is not always congruent with its liability exposure. 

In Antwi v. HVT, Inc., 24 Misc 3d 1250(A) (Sup. Ct., Bronx Co., decided 9/11/2009), the court allowed HVT to renew its Graves Amendment-based motion for summary jugdment with a new affidavit that could have been but was not submitted in support of HVT's original motion.  If Tuscan were to try the same thing here -- to move to renew based on a properly executed and notarized affidavit of Kathy Weaver -- would the result be any different?  Probably not.  A fair reading of the Graves Amendment is that while it exempts motor vehicle lessors from the vicarious liability imposed by subsection 1 of Vehicle & Traffic Law § 388, it does nothing to affect or excuse lessors from their coverage responsibilities under subsection 4 of that statute.  

In other words, the fact that Tuscan may not be held liable under VTL § 388(1) to Morales for his injuries by operation of the Graves Amendment does not necessarily mean its trailer's liability policy with Ace does not cover the tractor's operation.  Liability exposure?  No.  Coverage responsibility?  Yes.  New York personal auto insurers facing UM claims stemming from accidents with leased tractors or trailers should bear this in mind.

To read most posts about New York cases involving the Graves Amendment, click here.