McGirt v. Gulf, - Central Analysis Bureau

McGirt v. Gulf Ins. Co.

C.A.4 (Md.),2006.This case was not selected for publication in the Federal Reporter.UNPUBLISHEDPlease use FIND to look at the applicable circuit court rule before citing this opinion. Fourth Circuit Rule 36(c). (FIND CTA4 Rule 36(c).)

United States Court of Appeals,Fourth Circuit.

GULF INSURANCE COMPANY, Defendant-Appellant,

andRoyal Insurance Company of America, Defendant.

Gulf Insurance Company; Royal Insurance Company of America, Defendants-Appellees.

Argued Oct. 26, 2006.

Decided Nov. 30, 2006.

Appeals from the United States District Court for the District of Maryland, at Greenbelt. Roger W. Titus, District Judge. (CA-02-3455).

Before WILKINS, Chief Judge, and WIDENER and MOTZ, Circuit Judges.

Affirmed in part and reversed in part by unpublished PER CURIAM opinion.

Unpublished opinions are not binding precedent in this circuit. See Local Rule 36(c).PER CURIAM.

The injured driver of a passenger car, Dat Tan Le, and the driver of the tractor trailer that injured him, Joe Lee McGirt brought this declaratory judgment action. They sought a declaration that, upon the insolvency of the self-insured owner of the tractor trailer and its primary supplemental insurer, the owner’s two excess insurers must pay any judgment in favor of Le in an underlying tort suit from the first dollar of the judgment. Le and McGirt also ask that the excess insurers defend McGirt in the underlying tort suit and pay his attorneys’ fees here. They argue that both the language of the excess insurance policies and the MCS-90 endorsement attached to one of those policies require this coverage.

On cross-motions for summary judgment, the district court held that the language of the underlying policies did not require drop-down coverage, defense of McGirt in a tort suit, or payment of his attorneys’ fees. McGirt v. Royal Ins. Co. of Am., 399 F.Supp.2d 655, 669 (D.Md.2005). However, the district court also held that the MCS-90 endorsement attached to one excess policy required that excess insurer to pay the first $1 million of any judgment in favor of Le. Id. at 667. The parties cross-appeal. After having had the benefit of oral argument and briefing from the parties, and after carefully reviewing the legal authorities and record, we conclude that the district court did not err in any respect as to its decision on the attachment point of the underlying insurance policies, the insurers’ duty to defend McGirt, or the payment of McGirt’s attorneys’ fees. As to these issues, we affirm on the basis of the district court’s well-reasoned opinion. We reverse, however, with respect the effect of the MCS-90.

On or about March 24, 1997, a passenger car driven by Keith Blocker hit Le while he was driving in Prince George’s County, Maryland, immobilizing Le’s car on the highway. A tractor trailer owned by Builders Transport and driven by McGirt then hit Le from behind. The collision killed a passenger in Le’s vehicle and severely injured Le. On or about January 15, 1999, Le sued McGirt, Builders, Family Dollar Trucking (the owner of the trailer being hauled by McGirt), and Blocker.

This case concerns Builders’ insurance status. Federal law mandates evidence of financial responsibility for motor carriers engaged in interstate commerce. 49 U.S.C.A. § 31139(f) (2006). At the time of the accident, Builders satisfied these federal regulatory requirements through approval by the Interstate Commerce Commission (ICC) and Department of Transportation (DOT) as a qualified self-insurer for the regulatory minimum of $1 million of coverage. In addition, Builders carried supplemental primary insurance with Reliance National Indemnity Company for $1 million of coverage above the $1 million self-insurance, subject to a $1.65 million annual deductible. Builders also purchased excess coverage from Gulf Insurance Company for $13 million, and further excess coverage of $10 million above the Gulf policy from Royal Insurance Company of America.

The parties agree that all of these policies were in effect at the time of the accident. Thus, if Builders and its various insurers had all remained solvent, a party like Le seeking to recover a judgment from Builders would be paid in the following order: (1) $1 million from Builders, through its self-insurance; (2) $1.65 million, also from Builders, as its deductible under the Reliance policy; (3) $1 million from Reliance; (4) $13 million from Gulf; (5) $10 million from Royal.

This case arises because both Builders and Reliance have become insolvent, and so unable to pay any judgment obtained by Le. Because these primary insurers-responsible for the first $3.65 million of coverage-cannot pay, Le and McGirt argue that Gulf and Royal are required to drop down and pay first dollar coverage for Le’s injuries. That is, even though Gulf and Royal would not have had to pay any part of a judgment for Le until an award exceeded $3.65 million if Builders and Reliance remained solvent, Le and McGirt contend that, given the insolvency of Builders and Reliance, Gulf and Royal must pay the judgment from its first dollar.

In May 1998, Builders filed for Chapter 11 Bankruptcy, and in October 2001, Reliance declared itself insolvent and liquidated its assets.

Le and McGirt base their intentions on the language of the Gulf and Royal policies and the MCS-90 endorsement attached to Gulf’s policy. As noted above, we believe the district court properly rejected the arguments based on the main body of the Gulf and Royal policies. Accordingly, we turn to the effect of the MCS90 endorsement attached to the Gulf policy.

II.

The district court found, and Gulf now concedes, that a one-page form-the federally prescribed MCS-90 endorsement-was attached to and thus a part of Gulf’s policy with Builders. Noting the provision in federal law for an MCS-90 in certain circumstances, the district court accepted Le and McGirt’s argument that this public policy purpose requires Gulf to provide the first $1 million of coverage when, as here, there is no other protection available for an injured member of the public.

Sections 29 and 30 of the Motor Carrier Act of 1980 mandate that motor carriers hauling general commodities in interstate commerce, like Builders, demonstrate proof of financial responsibility in one of four ways: (1) insurance; (2) a guarantee; (3) a surety bond; or (4) qualification as a self-insurer. 49 U.S.C.A. § 31139(f) (2006). Federal regulations provide that if a registrant opts to pursue the first option and demonstrate its financial responsibility through proof of insurance, the insurer must maintain a “Form MCS-90 Endorsement” as part of the policy. 49 C.F.R. § 387.15 (2006). In these circumstances, the parties must also file a separate certification of excess financial security (Form BMC-91 or BMC-91X) with the regulators to create a public record of the insurance. 49 C.F.R. § 387.313 (2006).

Certainly the district court was correct in recognizing the public purpose served by an MCS-90 endorsement when a motor carrier uses it to satisfy the obligations of the Motor Carrier Act of 1980. As the Department of Transportation explained in promulgating the rule creating the MCS-90, “[t] he purpose of the financial responsibility provisions of the Motor Carrier Act of 1980 is … to assure the general public that a motor carrier maintains an adequate level of financial responsibility sufficient to satisfy claims covering public liability.” Minimum Levels of Financial Responsibility for Motor Carriers, 46 Fed.Reg. 30,974 (June 11, 1981).

In the case at hand, however, Builders satisfied the requirements of the Motor Carrier Act of 1980 through its certification as a qualified self-insurer, not throug