NOT RECOMMENDED FOR PUBLICATION
                                File Name: 04a0083n.06
                               Filed: November 12, 2004

                                            No. 03-1714

                           UNITED STATES COURT OF APPEALS
                                FOR THE SIXTH CIRCUIT


Landmark American Insurance Company,                )
                                                    )
       Plaintiff-Appellant,                         )
                                                    )
v.                                                  )   ON APPEAL FROM THE UNITED
                                                    )   STATES DISTRICT COURT FOR THE
United States Fidelity & Guaranty Company,          )   EASTERN DISTRICT OF MICHIGAN
                                                    )
       Defendant-Appellee,                          )
                                                    )
                                                    )
Valley Personnel, Inc.,                             )
                                                    )
       Intervenor-Appellee.                         )



BEFORE:        Merritt, Moore and Gilman, Circuit Judges.


       MERRITT, Circuit Judge. A trucking company (Great American Lines) leased a trailer

truck from a truck supplier (Valley Transportation) and used a driver for the truck supplied by an

affiliate company (Valley Personnel) of the truck supplier. Early in 1995, the leased truck jack-

knifed, struck a nearby pickup truck and killed the pickup truck’s driver. The deceased’s estate filed

suit against the trucking company, the two affiliated companies who supplied the leased truck and

the borrowed driver, and the driver of the leased truck.

       The parties settled the action with the estate for $2.5 million with no admissions of

negligence by any of the four defendants and without settling the insurance indemnity issues
No. 03-1714
Landmark Am. Ins. Co. v. United States Fidelity & Guar. Co.

concerning the allocation of liability among various insurance companies. After several related

actions in the state courts of Pennsylvania and the federal courts in Michigan, we now have before

us a declaratory judgment action between two insurance companies arguing over which company

must supply the remaining funds (a little less than $1 million) of the $2.5 million settlement. Both

companies have policies covering Valley Personnel. United States Fidelity & Guaranty issued two

policies to Valley Personnel, a trucker’s policy and a comprehensive liability policy. Landmark

American Insurance has an excess policy covering Valley Personnel.

       In a thoughtful, well-crafted opinion, the district court concluded that USF&G had paid out

the limit ($1,000,000) of its trucker’s policy issued to Valley Personnel and that USF&G’s

comprehensive liability policy covering Valley Personnel excluded from coverage injuries arising

from truck accidents like this one. Thus, the district court concluded that the excess policy issued

by Landmark to Valley Personnel would provide the indemnity coverage for the remaining disputed

amount of the settlement. The only question before us turns on whether USF&G’s comprehensive

liability policy provides coverage for bodily injury arising from truck accidents like the one here.

We agree with the district court that Valley Personnel bought the trucker’s policy from USF&G with

a limit of $1,000,000 to cover accidents of this type and that such truck accidents are excluded from

coverage of USF&G’s comprehensive liability policy for Valley Personnel. Therefore, we agree that

the excess insurance policy provided by Landmark covering Valley personnel must make up the

balance.

       The comprehensive general liability policy issued to Valley Personnel by USF&G contains

several exclusions to coverage, two of which are at issue in this case. They read as follows:

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Landmark Am. Ins. Co. v. United States Fidelity & Guar. Co.

2. Exclusions

       This insurance does not apply to:

       ...

       b.       “Bodily injury” or “property damage” for which the insured is obligated to pay
                damages by reason of the assumption of liability in a contract or agreement. This
                exclusion does not apply to liability for damages:

                (1)    Assumed in a contract or agreement that is an “insured
                       contract,” provided the “bodily injury” or “property damage”
                       occurs subsequent to the execution of the contract or
                       agreement . . . .
       ...

       g.       “Bodily injury” or “property damage” arising out of the ownership,
                maintenance, use or entrustment to others of any aircraft, “auto” [which
                definition specifically includes the type of truck involved in the accident] or
                watercraft owned or operated by or rented or loaned to [Valley Personnel] .
                . . . This exclusion does not apply to:

                ...

                (4)    Liability assumed under any “insured contract” for the
                       ownership, maintenance or use of aircraft or watercraft
                       [“auto” specifically not mentioned] . . . .

Looking first to the plain language of the policy, the parties agree that the plain language of the

subsection (g) exclusion from liability applies to the accident because it involved “‘bodily injury’

or ‘property damage’ arising out of the ownership, maintenance, use or entrustment to others of any

. . . ‘auto.’” The parties further agree that the indemnity agreement between Valley Personnel and

the trucking company, Great American, is an “insured contract,” thereby arguably triggering the

exception to the exclusion for “insured contracts” in subsection (b)(1). The parties do not agree on

how these two provisions of the policy should be interpreted in the situation here.

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Landmark Am. Ins. Co. v. United States Fidelity & Guar. Co.

       Landmark makes essentially two arguments as to why the comprehensive policy should

cover the accident despite the exclusion for auto accidents in subparagraph (g). First, it argues that

the conflict between the exclusion for auto accidents under (g) and the exception to the exclusion

for “insured contracts” found in (b)(1) creates an ambiguity that requires us to find under established

insurance law that the policy should provide coverage. Second, Landmark argues that the auto

exclusion in (g) is not applicable because the claim against Valley Personnel should not be

characterized as arising out of the negligence of the driver at the time of the accident, but instead

as arising out of Valley Personnel’s own “active negligence.” Landmark’s claim is that Valley

Personnel is guilty of “active negligence” in failing to provide a qualified driver, in breach of its

contractual obligations, because the truck driver did not meet Valley Personnel’s stated hiring

requirement that drivers have at least two years of experience. In other words, Landmark contends

that the proximate cause of the accident was Valley Personnel’s negligence and breach of contract

in providing an unqualified driver, not the truck driver’s negligence, thereby rendering the auto

exclusion in (g) inapplicable and leaving the exception to the exclusion for insured contracts in

(b)(1) as the only applicable subsection.

       District Judge Edmunds did not agree with Landmark’s arguments, and neither do we. The

plain language of the policy, read as a whole, unambiguously excludes coverage for any injury

arising out of an auto accident, regardless of what the other exclusions might provide. To bolster

this interpretation of the plain meaning of the policy, USF&G points out that Valley Personnel

purchased a separate $1 million truckers policy to fill this “gap” in the comprehensive policy.

Generally, comprehensive policies containing an auto exclusion, when provided in conjunction with

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Landmark Am. Ins. Co. v. United States Fidelity & Guar. Co.

a separate auto policy, are deemed to be complementary rather than overlapping. We agree with the

district court that the comprehensive policy is unambiguous in its exclusion of coverage for auto

accidents, regardless of what other exclusions may apply.

       Even if the exception to the exclusion for “insured contracts” found in subparagraph 2(b)(1),

applied, as argued by Landmark, we would still find coverage barred when we view the policy as

a whole. Subsection (g)(4), which is an exception to the auto exclusion for certain insured contracts,

specifically omits insured contracts for the use of autos. The exception to the exclusion states “This

exclusion does not apply to: . . . Liability assumed under any ‘insured contract’ for the ownership,

maintenance or use of aircraft or watercraft . . . .” (Emphasis added.) Trucks, cars and similar

vehicles are specifically not mentioned in the exception, so liability arising from an insured contract

relating to the use of an auto is still excepted from coverage under the plain language of the policy.

When the policy is read as a whole, the plain language clearly excludes coverage for an auto

accident, even when an insured contract is involved.

       Because Landmark realized that the plain language of the policy barred coverage for auto

accidents, it turned to another argument: that the indemnity order against Valley Personnel was

based on Valley Personnel’s negligence in the breach of its contractual obligation to hire qualified

drivers, not on the negligence of Valley Personnel’s driver. Hence, goes Landmark’s argument, the

proximate cause of the accident was a breach of contract, not a tort, bringing the exclusion for

insured contracts back into play and making the exception for auto accidents immaterial. This

argument is without merit.




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Landmark Am. Ins. Co. v. United States Fidelity & Guar. Co.

       Generally, comprehensive policies with an automobile exclusion like the one herein do not

cover indemnification obligations pursuant to “insured contract” clauses where the underlying action

arises from the use of an auto. Although the facts are not identical, a recent Sixth Circuit case is

particularly relevant to the legal theory here. In Stevens v. Fireman’s Fund Ins. Co., 

(6th Cir. 2004), a declaratory judgment action brought as a result of a train-truck collision sought

determination as to whether an auto exclusion to a comprehensive policy applied where there was

a claim that the accident resulted in part from negligence in the dispatching of a driver who should

not have been permitted to drive because he had exceeded the hours-in-service limitation under

federal safety regulations. The district court rejected that proposition and a panel of this Court

affirmed. The court, interpreting Florida law, determined that the bodily injuries and property

damage sustained in the collision arose out of use of a vehicle, even if they also arose out of

negligence in the dispatch of the driver. Although the court was interpreting Florida law, core

insurance principles were relied upon in reaching the conclusion. Generally, comprehensive or

general liability policies with auto exclusion clauses like the one here provide no coverage for

injuries that would not have occurred but for the use of an auto, regardless of other contributing

factors. Barge v. Jaber, Nos. 93-4064/4146, 1994 WL. 601400 (6th Cir. Nov. 2, 1994).

       When Stevens is applied to the facts here, we must reject Landmark’s claim that we should

look to the failure of the company to provide a qualified driver instead of the accident itself as the

proximate cause. Under Stevens, even if the exception for an “insured contract” brought the

comprehensive policy back into play, the liability assumed by the clause is still subject to the

explicit auto exclusion because it is both a liability resulting from “bodily injury” arising out of an

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auto accident, and a liability arising out of Valley Personnel’s negligence and breach of contract in

hiring. Under Stevens, the specific exclusion overrides the general exception.

       The two state cases cited by the district court in its opinion are also instructive and support

the conclusion that where the bodily injury arises from an auto accident, the auto exclusion applies

to bar coverage under the comprehensive policy even where an “insured contract” exception may

also be applicable. One of them is from Michigan, where the accident in the instant diversity case

occurred. In American States Ins. Co. v. Home Indemnity Co., No. 213834, 

(Mich. Ct. App. Oct. 24, 2000), the comprehensive insurance policy contained an “insured contract”

exception and an “auto exclusion” clause that were almost identical to those in the United States

Fidelity & Guaranty policy at issue here. An employee was injured when he slipped on ice while

making a delivery from his trailer truck and injured himself on the truck’s cranking mechanism.

Because the negligent maintenance of the icy surface contributed to the driver’s injury, it was argued

that the “insured contract” clause of the comprehensive policy governed, not the “auto exclusion”

clause. The court held that the comprehensive policy “plainly and unambiguously” excludes

coverage arising from use of an auto, which included injury while unloading the trailer truck. 

The court examined the causal connection between the use of the truck and the injury, and

also discussed the tort concept of proximate cause. Although the ice “contributed” to the injury, it

was not the sole cause and the auto exclusion applied to bar coverage under the comprehensive

policy. Although not directly on point, the case indicates the general tendency of the Michigan

courts in interpreting the auto exclusion in policies like the one now before us.




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No. 03-1714
Landmark Am. Ins. Co. v. United States Fidelity & Guar. Co.

       In Capital Alliance Ins. Co. v. Cartwright, 

(Ga. Ct. App. 1999), a

commercial general liability insurer sought a declaratory judgment that the automobile exclusion

in the comprehensive policy barred coverage where the injury to a passing motorist was caused by

a shock absorber that fell from the trailer truck, even if there was negligence by the trailer owner.

The auto exclusion and “insured contract” clauses are the same as the clauses in this case. The

Georgia Court of Appeals held the auto exclusion to be unambiguous, thereby barring coverage

under the comprehensive policy. 

       Applying the holdings from these cases to the facts here, the automobile exclusion is

unambiguous and operates to bar coverage of the underlying claim. The automobile exclusion in

United States Fidelity & Guaranty’s comprehensive policy unambiguously excludes risks associated

with Valley Personnel’s use of tractor trailers. Even if Landmark’s claim against Valley Personnel

is construed as a contractual indemnity action arising from Valley Personnel’s negligence, the fact

remains that the driver of the pickup was killed by the use of a tractor trailer, a risk excluded by the

comprehensive policy.

       For the foregoing reasons, we affirm the judgment of the district court.




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