Insurance for Independent Contractor Who Entered into Owner Operator Contract with a Common Carrier

In Argonaut Midwest Ins. Co. v. Morales, Gabriel Morales (“Morales”) entered into an “Owner Operator Contract” with Land Truck in April 2007. The contract described Land Truck as a common carrier by the Motor Vehicle Holding Authority from the Federal Highway Administration. The contract identifies Morales as an independent contractor and the owner of a motor vehicle who is engaged in an independently established business of hauling commodities by motor vehicle pursuant to contract or common carriers.  Land Truck agreed to pay Morales a flat rate of gross revenue. Regarding insurance, the contract provides that unless required by statute or ordinance, Land Truck will not provide any insurance to Morales. Moreover, the contract required Morales to carry his own insurance, including Bobtail Insurance, naming Land Truck Inc. as an Additional Named Insured and Certificate Holder. Argonaut Midwest Insurance Company (“Argonaut”) issued a $1 million insurance policy to Morales. Under the policy, Argonaut agreed to pay all sums an insured legally must pay as damages because of bodily injury or property damage to which this insurance applies, caused by an accident and resulting from the ownership, maintenance, or use of a covered auto. Argonaut agreed to defend any insured against a suit asking for these damages. However, it had no duty to defend any insured against a suit seeking damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply.

The court reviewed whether Argonaut must defend Morales.

Argonaut asserts that its “Truckers – Insurance for Non-Trucking Use” endorsement provides only limited coverage “during those times when possession of the vehicle, and any liability for its operation, remain with the owner-insured itself.” Argonaut reasons that because Land Truck remains responsible for damages resulting from Morales’ operation of the truck, Morales did not need insurance while traveling to pick up a load for Land Truck.

Under Illinois law, if the insurer had a desire to restrict coverage to only those suits seeking legal, compensatory damages, it could have easily included among its exclusionary provisions an exclusion pertaining to the costs of complying with mandatory injunctions. In this case, Argonaut could have drafted an exclusion that limited its insuring agreement in the manner it urges on appeal that the exclusion included in Morales’ policy does not accomplish this result.

Argonaut Midwest Ins. Co. v. Morales, 2014 IL App (1st) 130745.