Iowa Supreme Court Holds Driver Hired by Lessor Trucking Company is An Insured Under Lessee’s Insurance Policy

Posted on: March 11th, 2016

In 2010, United Suppliers entered into a lease agreement with Hanson Trucking for Hanson to provide a semi-tractor and driver for delivery of United Suppliers’ product.  The owner of Hanson Trucking originally did the deliveries, but then hired a separate driver.  On one occasion, the hired driver lost control of the truck resulting in a chemical spill requiring costly remediation.  United Suppliers’ insurer paid the loss.  United Suppliers, on behalf of itself and its insurer, then brought suit against Hanson Trucking and the driver.  The suit required interpretation of an Iowa statute, the insurance policy, and the lease agreement containing an indemnification provision.  For the first time, the Court had to interpret Iowa Code section 325B.1, which provides that a motor carrier transportation contract shall not contain an indemnification provision.  This provision also applies to agreements that are “collateral to or affecting motor carrier transportation contracts” and contracts relating to the “transportation for hire of property by a motor carrier.”  The Court applied the primary business test and concluded United Suppliers was a private carrier and not a motor carrier, therefore the prohibitions against indemnification in Iowa Code section 325B.1 did not apply to the lease agreement.  The Court then considered the lease agreement and determined that the indemnification provision was enforceable based on a federal regulation and case law supporting the use of this provision in this type of lease.  Finally, the Court considered whether Hanson Trucking and the driver were insureds under United Suppliers’ insurance policy.  It concluded they were under the Business Auto Coverage as the insured was defined, in part, as “[a]nyone else while using with your permission a covered ‘auto’ you own, hire or borrow except: (1) The owner or anyone else from whom you hire or borrow a covered ‘auto.'”  The Court relied on other insurance policies with the same exception that had additionally excluded “any agent or employee of such owner.”  The Court determined that if the insurer had wanted to exclude coverage for employees or agents or vehicle lessors, it could have done so.  For these reasons, the district court’s decision was reversed and the case remanded for further proceedings.

 United Suppliers, Inc. v. Hanson, No. 14-1553 (Iowa Mar. 11, 2016).


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