In this DJ action, defendants New Jersey Manufacturers Insurance Company and McCarthy appealed from a Supreme Court order declaring, in effect, that plaintiff insurers obligation to indemnify the defendants in the underlying personal injury action was limited to the statutory minimum. The Appellate Division affirmed.

The plaintiff insurer, Connecticut Indemnity Company, issued a policy of insurance to the defendant Livon Hines, the owner and operator of a tractor-trailer leased to the defendant David P. McCarthy, Inc., for use in its business. The policy contained a Non-Trucking Use endorsement, which excluded coverage for the vehicle while used in the business of a lessee. The policy also contained Endorsement #2 (hereinafter the savings clause), which stated:

We agree with YOU that if any of the provisions of the endorsement, Truckers Insurance for Non-Trucking Use CA2309 are held to be void or unenforceable under the law of any jurisdiction, for reasons of public policy, violation of statute, or otherwise, WE will not pay any sums in excess of the minimum amounts required by the Financial Responsibility Laws of such jurisdiction, and then only after all other valid and collectible insurance available to the Named Insured, or which would be available to the Named Insured in the absence of this policy, has been exhausted.

Hines was involved in an accident while driving the tractor-trailer in furtherance of the lessees business. The persons injured in the accident commenced an action against, among others, Hines and the lessee. Connecticut disclaimed coverage based upon the Non-Trucking Use endorsement, and the lessees insurance company undertook to defend the action.

Connecticut then commenced this DJ action seeking a judgment declaring that it had no obligation to defend or indemnify Hines in the underlying action, or, in the alternative, that its indemnification obligation was limited, by the savings clause, to the minimum liability insurance requirements mandated by New York statutory law. The Supreme Court held that the Non-Trucking Use endorsement was void as against public policy, but that the savings clause was valid and enforceable. It thus limited Connecticuts obligation to the statutory minimum liability insurance requirements.

The parties concede on appeal that the Non-Trucking Use endorsement is void as against New Yorks public policy (see Royal Indem. Co. v Providence Washington Ins. Co., 92 NY2d 653; Randazzo v Cunningham, 56 AD2d 702, affd on opn below 43 NY2d 937). Accordingly, the only issue on appeal is whether or not the savings clause may be enforced.

In Royal Indem. Co. v Providence Washington Ins. Co., a bobtail policy, i.e., an insurance policy that covered any miles operated by the lessor during the terms of a truck lease when the tractor portion of the truck was not in actual service for the lessee, had a Non-Trucking Use endorsement, but no savings clause. Upon a certified question from the United States Court of Appeals for the Second Circuit, the New York State Court of Appeals held that the exclusion was void as against public policy. The second certified question inquired as to whether the endorsement was nonetheless valid to limit liability to the financial security minima required by New York law.

The court answered in the negative, stating, Since the non-trucking use exclusion is void as against public policy, the policy must be read as if the exclusion did not exist. Where, as here, the policy does not contain a term stating that coverage is limited to the statutory minima, if a non-trucking-use exclusion is found to be invalid, no such limitation will be read into the policy.

The Supreme Court correctly held that this language implies that where a policy does contain such a provision limiting coverage to the minima, the provision will be upheld where it is not part of a voided exclusion. Such is the case here.

The Non-Trucking Use endorsement is void because its enforcement might result in a gap in coverage required by Vehicle & Traffic Law 388 (see Royal Indem. Co. v Providence Washington Ins. Co., supra at 657-658; Randazzo v Cunningham, supra). However, enforcement of the savings clause will not have the same effect. Since the savings clause provides for coverage up to the minimum amounts required by the financial responsibility law. Insofar as the cases cited by the appellant hold otherwise (see R.E. Turner Inc. v Connecticut Indem. Co., 925 F Supp 139; Planet Ins. Co. v Gunther, 160 Misc 2d 67), we decline to follow them.

Comment: The Royal Indemnity decision by the Court of Appeals, cited here by the Second Department, is one of the leading decisions in the area of trucking insurance.

Connecticut Indem. Co. v. Hines et al., 2007 NY Slip Op 04435, Appellate Division, Second Department