United States Court of Appeals,

Eleventh Circuit.

I.T.N. CONSOLIDATORS, INC., I.T.N. of Miami, Inc., Plaintiffs–Appellants,

v.

NORTHERN MARINE UNDERWRITERS LTD, individually and as agents for Lloyds of London, Watkins Syndicate (WTK/457), Defendant–Appellee.

 

No. 10–15152.

Feb. 13, 2012.

 

Joel S. Perwin, Joel S. Perwin, PA, Michael S. Olin, Michael S. Olin, PA, Miami, FL, for Plaintiffs–Appellants.

 

Reginald M. Hayden, Jr., Patricia Leigh McMillan Minoux, Hayden Milliken & Boeringer, PA, Coral Gables, FL, Mitchell L. Shadowitz, Shadowitz Associates, Boca Raton, FL, for Defendant–Appellee.

 

Appeal from the United States District Court for the Southern District of Florida. D.C. Docket No. 1:09–cv–20762–JAL.

 

Before TJOFLAT and MARTIN, Circuit Judges, and DAWSON,FN* District Judge.

 

FN* Honorable Robert T. Dawson, United States District Judge for the Western District of Arkansas, sitting by designation.

 

PER CURIAM:

I.T.N. Consolidators, Inc. and I.T.N. of Miami, Inc. (collectively “ITN”) appeal the summary judgment the district court entered in favor of Northern Marine Underwriters Ltd., individually and as agents for Lloyd’s of London, Watkins Syndicate (WTK/457) (collectively “Northern”), denying ITN’s insurance claims. We find that genuine issues of material fact exist and therefore VACATE the summary judgment and REMAND the case for further proceedings.

 

I.

A.

ITN, freight forwarders, purchased an open cover policy (the “Policy”) from Northern for coverage of marine cargo for the period from August 16, 2007, through August 14, 2008. The Policy Schedule provides in part:

 

PERIOD: To cover all transits where risk commences on or after 16th August, 2007 for a period of twelve calendar months ending 14th August, 2008 both days inclusive[.]

 

….

 

SUBJECT–MATTER INSURED: All goods and / or merchandise of every description incidental to the business of the Assured or in connection therewith including duty if and as applicable. Duty sum insured should be separately shown and will be subject to conditions as per the Basis of Valuation Clause[.]

 

The Policy provided further still, in relevant part, as follows:

 

Basis of Valuation

It is agreed that the basis of valuation for the purpose of this Open Cover shall be the value declared for insurance, but in no case shall the valuation exceed CIF [i.e., Cost, Insurance, and Freight]  30% unless prior written consent of the Insurer is given. In the event of declaration after loss or arrival, the basis of valuation will be CIF  10% only.

 

….

 

Claims

11 11.1 In order to recover under this Insurance the Assured must have an assurable interest in the subject-matter insured at the time of the loss.

 

11.2 Subject to 11.1 above, the Assured shall be entitled to recover for insured losses occurring during the period covered by this Insurance, notwithstanding that the loss occurred before the contract of insurance was concluded, unless the Assured were aware of the loss and Underwriters were not.

 

The declaration mentioned in the “Basis of Valuation” provision refers to the Certificate of Marine Cargo Insurance (the “COI”), which ITN issues—and thereupon pays a premium—for each shipment. The COI outlines the particular risk of each shipment (e.g., cargo, value, destination)  and bears on its face the statement “WARRANTED: NO KNOWN OR REPORTED LOSSES.”

 

The open cover policy, in and of itself, does not mention the particularized risk of any given shipment.

 

B.

On or about October 22, 2007, ITN arranged for shipment of electronic goods belonging to Alfa Company, S.A. (“Alfa”) from Miami, Florida, to Ciudad del Este, Paraguay. On the afternoon of November 7, 2007, the truck carrying the cargo traveling to the Paraguay border was hijacked, and the cargo was lost. Alfa’s president learned of the loss on the evening of November 7, 2007, and reported the loss to ITN’s Vice President, Fadi Aftimos, the following morning. Aftimos spoke with insurance broker Edward Tafur, who, as the district court found, reported the loss to Northern on November 8, 2007. That same day, ITN generated a COI  from Northern’s website. The parties dispute whether Northern knew of the loss prior to the issuance of the COI; the court, however, found that all parties were aware of the loss when ITN generated the COI.

 

The COI described the date of shipment, its value, and the payee (Alfa), among other terms and conditions of insurance. The COI also contained the declaration “NO KNOWN OR REPORTED LOSSES at November 8, 2007.”

 

ITN submitted the COI to Northern, paid the designated premium, and submitted a claim for the loss. Northern denied coverage, so ITN brought this lawsuit. At some point after this suit was brought, Northern tendered a refund of the premium to ITN. ITN refused to accept it.

 

The parties filed cross-motions for summary judgment. Northern argued that the COI was necessary to effect coverage under the Policy and that ITN’s failure to issue a COI prior to the loss rendered the shipment uninsured. Northern also argued that it did not know about the loss before ITN issued the COI. Given this fact, Northern denied coverage on three grounds: (1) the Policy language did not cover the loss; (2) ITN breached the “No Known or Reported Losses” warranty; and (3) the uberrimae fidei  doctrine precluded coverage.  ITN, for its part, argued that the COI was irrelevant to the existence of insurance coverage on any shipment under the open cover policy. Essentially, ITN argued, based on the Basis of Valuation clause cited supra, that the policy contemplated post-loss COIs and, therefore, coverage, notwithstanding the statement of “NO KNOWN OR REPORTED LOSSES” on the COI. ITN argued the COI was not a condition for coverage as the Policy provided inchoate coverage and that the issuance of the COI only operated to trigger valuation of the coverage and premium.

 

Uberrimae fidei refers to the requirement of “utmost good faith” called for in marine insurance policies, whereby an insured must fully and voluntarily disclose to the insurer all facts material to calculating an insurance risk. “A misrepresentation is material if ‘it might have a bearing on the risk to be assumed by the insurer.’ “ HIH Marine Servs., Inc. v. Fraser, 211 F.3d 1359, 1363 (11th Cir.2000) (quoting Northfield Ins. Co. v. Barlow, 983 F.Supp. 1376, 1380 (N.D.Fla.1997)).

 

These arguments are effectively three ways of saying the same thing: there is no coverage because the shipment was lost before the COI issued, and any COI that did issue notwithstanding the loss was a material misrepresentation that vitiated coverage.

 

The district court found that no relevant material facts were in dispute and that the outcome of the case depended on insurance contract interpretation,  a question of law. See St. Paul Fire & Marine Ins. Co. v. ERA Oxford Realty Co. Greystone, LLC, 572 F.3d 893, 897 (11th Cir.2009). The court agreed with ITN that the Policy incorporated the COI neither expressly nor by reference. After discussing generally when coverage would attach in an open cover policy, the court concluded that the insurer’s agreement to bear the risk would be “ ‘inchoate and incomplete’ until a declaration was made by the assured.” I.T.N. Consolidators, Inc. v. N. Marine Underwriters Ltd., No. 09–20762–CIV–LENARD/GARBER, slip op. at 16 (S.D.Fla. Mar. 25, 2010) (quoting Orient Mut. Ins. Co. v. Wright, 64 U.S. (23 How.) 401, 406, 16 L.Ed. 524 (1860)). Nevertheless, the court found that ITN’s interpretation of the Policy, in which a COI could issue and trigger coverage after a loss, would undermine the notion of risk upon which the insurance industry is based, as well as the principle of uberrimae fidei. The court reasoned that under ITN’s reading of the open cover policy, ITN would be able to forgo the issuance of COIs and the payment of premiums for shipments that arrived safely but at the same time be permitted to issue COIs, pay the premium, and collect compensation for shipments when they were lost. The court found, “With the subject of insurance no longer in existence and the loss known to both parties, ITN’s subsequently-issued Certificate was without consideration and void. Thus, at the time of the hijacking, ITN’s shipment was not declared to [Northern], and, therefore, was not insured by the Policy.” I.T.N. Consolidators, slip op. at 19 (citations omitted). Northern was accordingly entitled to summary judgment.

 

Specifically, the district court stated:

 

Neither party disputes the existence of the Policy Wording, Policy Schedule, Special Projects Review, [Northern’s] website or the Certificate. Similarly, the Parties do not dispute that the Certificate was issued by ITN on November 8, 2007, after it knew of the loss of the shipment. Consequently, the first question this Court must answer is whether the Certificate was part of the Policy and a declaration of value was necessary for coverage to exist.

 

Should the Court answer the first question in the negative, the second issue the Court must decide is whether ITN’s method of overland shipment from Santos, Brazil[,] to Ciudad de Este, Paraguay, violated the convoy condition of the Special Projects Review and thus voided coverage. Again, the Parties do not dispute the facts regarding the shipment and its subsequent hijacking. Without any remaining material questions of fact, both dispositive issues in the Parties’ cross-motions for summary judgment are ripe for the Court’s determination as matters of law.

 

I.T.N. Consolidators, Inc. v. N. Marine Underwriters Ltd., No. 09–20762–CIV–LENARD/GARBER, slip op. at 10–11 (S.D.Fla. Mar. 25, 2010) (footnote omitted).

 

The district court did not reach the issue relating to the convoy condition, stating, “Having found that no coverage attached to ITN’s hijacked cargo at the time of its loss, the question of whether the convoy condition was satisfied is rendered moot and the Court declines to address it.” I.T.N. Consolidators, slip op. at 19.

 

II.

The district court was correct in stating that the particular shipment at issue in this case was “not insured by the Policy.” I.T.N. Consolidators, Inc. v. N. Marine Underwriters Ltd., No. 09–20762–CIV–LENARD/GARBER, slip op. at 19 (S.D.Fla. Mar. 25, 2010) (emphasis added). The court erred, however, when it concluded that no coverage attached to ITN’s cargo at the time of its loss because a COI could not issue after a loss. In short, the court failed to consider whether Northern and ITN had nevertheless contracted, outside the Policy’s conditions for automatic coverage, to insure a mutually known loss.

 

The district court’s conclusion conflicts with the Policy’s plain language. To illustrate this, we consider the mechanics of how a shipment comes to be insured under ITN’s open cover policy.

 

A.

In general, an open cover policy is a contract that sets out the terms that will govern future contracts; i.e., it is “merely a contract for insurance [,] and each time the underwriter agrees to accept a risk, a contract of insurance is formed in relation to that particular risk.” Baris Soyer, Warranties in Marine Insurance, ch. 5.43, at 150–51 (2d ed.2006); see also Greene v. Cheetham, 293 F.2d 933, 935 (2d Cir.1961) (“[In a] typical open-cover polic[y] …. [t]he assured binds the insurer by issuing a certificate of insurance for each specific shipment and inserting therein the valuation of the shipment, the name of the vessel, and the route for which coverage is to be had.”). An open cover policy, therefore, “is a prospective policy which requires notice from the insured to the insurer of the particulars concerning each shipment to be made so that they can be entered on the policy which is ‘open to receive them,’ and so that the premium can be fixed.” 5 Saul Sorkin, Goods in Transit § 42.08(footnote omitted) (quotations omitted).

 

By initiating the exchange of a premium for a promise to insure a shipment, the COI thus itself reflects the insurance contract as to any particular shipment, as Northern illustrated in its motion for summary judgment:

 

The [COI] subsequently written constitutes the contract or policy of insurance. The [COI] also contains the terms and conditions of coverage and incorporates into it all the terms and conditions of the insurance policy[.] …

 

The open cover set[s] forth the voyages covered …, the types of merchandise covered, the applicable rates, and the general terms of the conditions of insurance.

 

….

 

The actual insurance on specific shipments was obtained by the issuance of individual certificates under the open cover.

 

Def.’s Mot. for Summ. J. 5–6 (quoting Indus. Waxes, Inc. v. Brown, 258 F.2d 800, 801 (2d Cir.1958)) (internal quotation marks omitted) (emphasis omitted).

 

ITN argued to the district court and to this court that the COI is separate from the Policy in the sense that the COI has no bearing on whether a particular shipment is insured. See Pls.’ Mem. of Law in Opposition to Defs.’ Mot. for Summ. J. & in Support of Pls.’ Mot. for Summ. J. 9–10; Appellants’ Br. 27–28. The cases it cites for this proposition are entirely inapposite; each one deals with a “certificate” issued by an insurer as proof of insurance where the insured was required to furnish such proof to a third party. See U.S. Pipe & Foundry Co. v. U.S. Fid. & Guar. Co., 505 F.2d 88, 89 (5th Cir.1974) (certificate furnished by insurer to lessor as proof that lessee had procured liability insurance); Boseman v. Conn. Gen. Life. Ins. Co., 301 U.S. 196, 200, 57 S.Ct. 686, 688, 81 L.Ed. 1036 (1937) (employee furnished with certificate informing him of insurance to which he was entitled under group policy obtained through employer’s negotiation); Lezak & Levy Wholesale Meats, Inc. v. Ill. Emp’rs Ins. Co. of Wausau, 460 N.E.2d 475, 476–77 (Ill.App.Ct.1984) (insurer’s certificate provided to bailor showing bailee’s insurance coverage); Postlewait Constr., Inc. v. Great Am. Ins. Cos., 720 P.2d 805, 806 (Wash.1986) (insurer issued two certificates to crane lessor informing lessor that lessee had obtained insurance); Tribeca Broadway Assocs. v. Mount Vernon Fire Ins. Co., 774 N.Y.S.2d 11, 12 (N.Y.App.Div.2004) (property owner required contractor to carry liability insurance; contractor furnished property owner with certificate to that effect). Not one of the cases discusses an open cover policy, let alone a marine open cover policy. ITN’s rationale (which we reject) for why Industrial Waxes, Inc. v. Brown, 258 F.2d 800 (2d Cir.1958), does not reflect the relationship between the COI and a marine open cover insurance policy is that it is “more than 50 years old [and] from another circuit.” Pls.’ Mem. of Law in Opposition to Defs.’ Mot. for Summ. J. & in Support of Pls.’ Mot. for Summ. J. 9 n.4.

 

The plain terms of ITN’s open cover policy, however, seem to require that the loss of a shipment be unknown when the COI is issued and the premium accepted in order for coverage to attach under any given COI. Per the “Claims” provision of ITN’s policy, “[ITN] must have an assurable interest in the subject-matter insured at the time of the loss” to recover under the Policy. That provision also says, however, that “[ITN] shall be entitled to recover for insured losses occurring during the period covered by this Insurance, notwithstanding that the loss occurred before the contract of insurance was concluded, unless [ITN] were aware of the loss and Underwriters were not.”  In such a case, the lost—but nevertheless insured—shipment would be valued at CIF  10%, rather than up to CIF  30%, pursuant to the policy’s valuation clause.

 

The “contract of insurance” mentioned in this provision refers to the exchange of a premium based on the risk of loss associated with a particular shipment—as calculated from the shipper’s COI—and the promise to insure. See, e.g., Indus. Waxes, Inc. v. Brown, 160 F.Supp. 230, 232, 235 (S.D.N.Y.1957) (“The procedure followed was that [Insurer] furnished [Insured] with a number of forms of Lloyd’s Certificates of Insurance whereon [Insured] declared each shipment to be insured, the commodity shipped, its value, port of exit, destination and course of voyage. When so declared and signed by [Insured], the original of the declaration would go forward with the shipping documents and a copy would be sent to [Insurer] who would in turn bill [Insured] at rates scheduled in the open cover and collect the premium due…. The open cover was a contract to insure and it set forth (save where modified or extended by the subsequent certificate) the terms and conditions under which the insurance would attach to shipments; the certificate of insurance subsequently written constitutes the contract or policy of insurance.”), rev’d on other grounds, 258 F.2d 800 (2d Cir.1958).

 

So if a shipment were lost before a COI issued, automatic coverage under the policy would be possible—it would simply depend on whether ITN knew about the loss before it issued the COI for the shipment. This requirement is consistent with the policy’s reduced compensation level where a loss occurs before a COI issues; all a shipper needs do to avoid this reduction is issue a COI when the shipment departs for its destination. But the open cover policy leaves the door open for an alternate practice of issuing COIs on some regular basis, without regard to the specific timing of any one shipment. All that is required is that the shipper not know about a loss before any particular COI is issued. Else, the insurer is not required to automatically insure the lost shipment. It is thus logical that the COI would bear a warranty on its face that no known loss had occurred at the time of its issuance. That warranty does not contradict any part of the open cover policy, but rather serves to bring the shipment under the automatic coverage of the policy.

 

For example, ITN claims that it was the marine-insurance industry’s historical practice for shippers to issue batches of COIs on a monthly basis. See Appellants’ Br. 1–2.

 

To summarize, based on the Policy’s “Claims” provisions, and with specific terms that provide for different valuations for lost and arrived shipments, the plain language of the Policy provides that a COI could issue and coverage could attach after a loss. The district court’s holding to the contrary was in error. Our determination that the holding was erroneous, however, does not fully resolve this appeal.

 

B.

The loss here occurred before the COI issued; by reference to the “Claims” provisions in the Policy, there was thus no “insured loss[ ]” at the time ITN generated its COI. Both ITN and Northern knew about the loss before the COI issued—and, therefore, “before the contract of insurance was concluded.” As a result, the “Claims” provision’s exception allowing for insurance after a loss does not apply. This is thus not a case contemplated by the exception and by the no-known-loss warranty on the COI, whereby a COI is issued for a shipment not known to be lost and coverage attaches—per the Policy’s Claims clause—“notwithstanding that the loss occurred before the contract of insurance was concluded.” 0 Because all parties knew of the loss here, a misrepresentation that no known loss had occurred could not have led Northern to rely on that statement, and would in no way constitute a material misrepresentation in breach of uberrimae fidei. But even with this forthright exchange of information, the plain terms of the policy indicate that Northern was not required to insure this loss.

 

0. The phrase in the exception “unless the Assured were aware of the loss and Underwriters were not” should not be read to say that coverage is denied only if ITN knew of a loss and did not tell Northern about that loss before clicking “print” on a new COI. The exception merely states that there can be coverage if (1) a “contract of insurance”—i.e., a COI and a premium exchanged for a promise to insure—commences, (2) a loss occurs, (3) ITN notifies Northern of the loss, and (4) Northern nonetheless accepts the premium for the shipment and insures it under the Policy, effectively “conclud[ing]” the “contract of insurance.” Under such circumstances, there is inevitably some point in time when an “Assured [is] aware of [a] loss and Underwriters [are] not”; the clause says nothing of the exchange of knowledge about a loss as related to the timing of a COI’s issuance. The mechanics of the exception thus simply allow the possibility of issuing a COI after an unknown loss has occurred.

 

That coverage did not automatically arise for this lost shipment is not to say that Northern could not have voluntarily contracted to insure the lost shipment. Northern, knowing of the loss, could have nonetheless billed ITN the premium called for by the COI as if no loss had occurred. The consideration exchanged might have been, for instance, the furtherance of Northern’s relationship with ITN, or the encouragement of the practice ITN claims it followed: the invariable payment of premiums on every shipment. The question, then, becomes whether ITN and Northern contracted to insure the lost shipment.

 

C.

In sum, the issue in this case is thus not whether the COI conflicts with the terms of the open cover policy. Notwithstanding the mechanism for automatic coverage for a not-lost shipment under the open cover policy, it is entirely possible for Northern to insure a shipment that was lost before the COI issued—provided that both Northern and ITN knew about the loss before hand. ITN would inform Northern of the loss, then issue the COI and submit it along with the premium. If Northern wanted to insure the shipment, it would, at this point, accept the contract formed by the COI by keeping the premium payment. To be clear, Northern was not bound by the open cover policy to accept the risk because the contract would be nudum pactum if solely to insure an already-lost shipment.1 The post-loss COI—and the retention of the premium paid on it—would reflect instead a voluntary contractual agreement. Considering that both parties knew of the loss before the COI issued, any purported misrepresentation that no loss had occurred—and therefore any uberrimae fidei argument—would be irrelevant to the contract formation. 2

 

1. See, e.g., St. Paul Fire & Marine Ins. Co. v. Pure Oil Co., 63 F.2d 771, 772–73 (2d Cir.1933) (“[T]he [COI]s were issued after the losses were known to both parties, and a claim had been made, and thus at a time when they could not affect the parties’ rights except as an accord, to which the later payment might be a satisfaction…. They may indeed have been intended as a declaration or even a promise that the loss would be treated as ‘valued,’ but as promises they were without consideration, the loss being already known. They were nudum pactum.” (citations omitted)).

 

2. The gist of Northern’s uberrimae fidei argument is as follows:

 

Because federal maritime law is well-established with respect to an insured’s duty to make a full and complete disclosure on a marine insurance application, the Court must use federal maritime law to resolve an underwriter’s claim that an insured’s material misrepresentation voids the insurance contract.

 

Uberrimae fidei requires parties to a maritime insurance contract to deal in utmost good faith. The insurance applicant must voluntarily and accurately disclose to the insurance company all facts which might have a bearing on the insurer’s decision to accept or reject the risk.

 

….

 

Thus, applying uberrimae fidei, a misrepresentation on the insurance application at issue, if material, would void the contract. Here, Plaintiff is seeking to obtain insurance after it knew of the loss. This attempt defies public policy and the law of insurance.

 

Appellees’ Br. 21–23 (footnote omitted) (citing Certain Underwriters at Lloyd’s, London v. Giroire, 27 F.Supp.2d 1306, 1311–12 (S.D.Fla.1998); Northfield Ins. Co. v. Barlow, 983 F.Supp. 1376, 1379–80 (N.D.Fla.1997)) (internal quotation marks omitted). This uberrimae fidei argument is, in effect, simply a misrepresentation argument. There could have been no material misrepresentation in this case based on the district court’s finding that Northern knew about the loss before the COI issued.

 

The district court indicated that there is another potential uberrimae fidei defense to coverage here: ITN allegedly insured its shipments selectively by, for example, not issuing post-shipment COIs—and therefore not paying premiums—on shipments that had already arrived or that appeared low-risk. Northern does not raise this argument; it is ITN that argues the good-faith practice of insuring every shipment creates the uberrimae fidei basis for insuring shipments that are lost before the COI issues. Assuming that failure to conform to this practice presents Northern an uberrimae fidei defense, we are unpersuaded that ITN’s practices were relevant to this shipment. A shipper’s practice of insuring every shipment regardless of risk might be relevant to coverage for a shipment that was lost and for which the insured then issued a COI before learning of that loss. But where, as is the case here, both parties knew of the loss before the insured could issue the COI, the fact that the insured would have issued a COI in its typical course of business seems irrelevant to the issue of coverage. That is, the open cover policy itself bars coverage for a lost shipment unless the loss is unknown when the COI issues.

 

Insurance coverage in this case, then, turns on whether Northern in fact agreed to insure the lost shipment. That question in turn depends on whether Northern accepted ITN’s premium payment, thereby consummating the contract to insure the lost shipment. ITN claims it paid the premium at the time the COI issued, and that Northern initially kept the payment for some time. Apparently, Northern attempted to return the premium to ITN at some point after this litigation had commenced. Therefore, in addition to resolving the convoy-requirement issue it declined to address, the district court should determine whether Northern in fact accepted ITN’s premium payment such that a contract to insure the lost shipment was formed.3

 

3. To be clear, in so determining whether a contract was formed, the district court will necessarily determine whether there was consideration—such as that mentioned in part II.B, supra—underlying the agreement to insure the lost shipment, and therefore whether the premium—if it was accepted—backed a contract rather than simply an unenforceable promise to insure.

 

III.

For the foregoing reasons, the district court’s summary judgment is VACATED and the case is REMANDED for proceedings consistent with this opinion.

 

SO ORDERED.

United States District Court,

S.D. Mississippi,

Jackson Division.

CANAL INSURANCE COMPANY, Plaintiff

v.

Rebecca HERRINGTON, et al., Defendants.

 

Civil Action No. 3:10cv78–DPJ–FKB.

Feb. 13, 2012.

 

Claude Patrick Roberts, John B. MacNeill, MacNeill & Buffington, P.A., Flowood, MS, for Plaintiff.

 

Yancy B. Burns, Burns & Associates, PLLC, Samuel F. Creasey, The Crawley Law Offices, PLLC, William Wright Hill, Jr., Page, Kruger & Holland, P.A., Jackson, MS, for Defendants.

 

James C. Patton, Jr., Smith, Reeves & Yarborough, PLLC, Starkville, MS, for Plaintiff and Defendants.

 

ORDER

DANIEL P. JORDAN III, District Judge.

This declaratory-judgment action is before the Court on the Motion of Plaintiff Canal Insurance Company (“Canal”) for Summary Judgment [46] declaring that its Policy No. PIA03140902 (“the Policy”) provides no coverage for an accident that occurred on September 10, 2009. There is no dispute that the tractor and trailer involved in the accident were not listed as insured vehicles. But questions remain as to (1) whether the involved tractor and trailer were nevertheless covered as temporary substitute vehicles; (2) whether Canal’s agent accepted the substitute coverage; and (3) whether an MCS– 90 endorsement should be read into the policy. Having fully considered the issues and the parties’ submissions in light of the applicable standards, the Court concludes that no coverage existed. Plaintiff’s Motion for Summary Judgment should therefore be granted.

 

I. Facts and Procedural History

For the past six or seven years, Defendant Charles Herrington has operated Brier Branch Farms (“Brier Branch”), a contract trucking company, as a sole proprietorship out of his home in Louisville, Mississippi. Pl.’s Mot. Summ. J. [41], Ex. A, C. Herrington Dep. at 5, 8–10, 18. For the past two or three years, Herrington has also operated Thorn Creek trucking (“Thorn Creek”) as a sole proprietorship, although he forged his daughter Rebecca Herrington’s signatures on certain documents to make it appear that she was operating the company. Id. at 49. In reality, Rebecca was “nothing to Thorn Creek whatsoever other than she is the figurehead of it.” Id. at 15.

 

On December 31, 2008, Canal issued the subject Policy to Thorn Creek. Mot. Summ. J. [46], Ex. C. Herrington applied for the coverage but signed the name “Rebecca M. Herrington” as “owner” on the application. Id. Ex. A, C. Herrington Dep. 49 & Ex. 1. Nevertheless, the Policy lists “Thorn Creek” as the named insured on the Declarations Page. Significant to the coverage issues, the Policy is a scheduled vehicle policy that covers only vehicles described therein. Specifically, it states:

 

We will 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”.

 

Id. Ex. C. At the time of the accident, a total of six vehicles (four tractors and two trailers) were listed on the Policy as covered autos. Id. Herrington owned all of the Policy’s covered autos. Mot. Summ. J. [46], Ex. A, C. Herrington Dep. 36, 62.

 

There is no dispute that the tractor and trailer involved in this accident were not listed on the Policy. But, the Policy also provides coverage of additional “temporary substitute vehicle[s]” under limited circumstances. The Policy’s “temporary substitute vehicle” language reads in relevant part:

 

If Liability Coverage is provided by this Coverage Form, the following types of vehicles are also covered “autos” for Liability Coverage:

 

….

 

3. Any “auto” you do not own while used with the permission of its owner as a temporary substitute for a covered “auto” you own that is out of service because of its:

 

a. Breakdown;

 

b. Repair;

 

c. Servicing;

 

d. “Loss”; or

 

e. Destruction.

 

Mot. Summ. J. [46], Ex. C. The Policy further provides that it “contains all the agreements between you and us concerning the insurance afforded,” and that the Policy’s “terms can be amended or waived only by endorsement issued by [Canal] and made a part of” the Policy. Id.

 

On September 9, 2010, at approximately 10:30 a.m., Herrington’s wife called his local insurance agent to notify her that one of Thorn Creek’s covered vehicles was being repaired and that Herrington would be using a non-covered tractor in its place for a few days. Mot. Summ. J. [46], Ex. A, C. Herrington Dep. 39–40. Later that day, the substitute vehicle was involved in a motor vehicle accident that allegedly injured another driver, Amanda Harper. After the accident, the Herringtons’ local agent emailed Canal’s general agent Southern Cross regarding the proposed substitution. Mot. Summ. J. [46], Ex. G, Ferguson Dep. 20–22 & Ex. 3.

 

Approximately 5 months after the accident, Amanda Harper and her husband Michael sued Thorn Creek and its driver Jerry Pugh in the Circuit Court of Winston County, Mississippi. Pl.’s Mot. Summ. J. [41], Ex. B, Underlying Compl. Canal then brought this suit against Rebecca Herrington, individually and d/b/a Thorn Creek Trucking; Pugh; Harper; Michael Harper; Herrington, individually and d/b/a Brier Branch Farms; and Safeco Insurance Company of America (the Harpers’ liability and uninsured motorist coverage provider), seeking a declaration that it has no duty to defend or indemnify the Herrington defendants. Complaint . Defendants Rebecca Herrington, individually and d/b/a Thorn Creek, and Herrington, individually and d/b/a Brier Branch, filed a counterclaim against Canal for misrepresentation and inadequate agent training and supervision and post-claim underwriting. Answer and Countercl. [15]. Canal has moved for summary judgment on the claims asserted by and against it. Mot. Summ. J. [46]. The Court has personal and subject matter jurisdiction and is prepared to rule.

 

II. Standard of Review

Summary judgment is warranted under Rule 56(a) of the Federal Rules of Civil Procedure when evidence reveals no genuine dispute regarding any material fact and that the moving party is entitled to judgment as a matter of law. The rule “mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

 

The party moving for summary judgment “bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact .” Id. at 323. The nonmoving party must then “go beyond the pleadings” and “designate ‘specific facts showing that there is a genuine issue for trial.’ “ Id. at 324 (citation omitted). In reviewing the evidence, factual controversies are to be resolved in favor of the nonmovant, “but only when … both parties have submitted evidence of contradictory facts.” Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994). When such contradictory facts exist, the court may “not make credibility determinations or weigh the evidence.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000). Conclusory allegations, speculation, unsubstantiated assertions, and legalistic arguments have never constituted an adequate substitute for specific facts showing a genuine issue for trial.   TIG Ins. Co. v. Sedgwick James of Wash., 276 F.3d 754, 759 (5th Cir.2002); SEC v. Recile, 10 F.3d 1093, 1097 (5th Cir.1997); Little, 37 F.3d at 1075 (5th Cir .1994) (en banc).

 

III. Analysis

 

A. The Coverage Issue

 

In this diversity case, the substantive law of Mississippi and, in particular, Mississippi law on the construction of insurance policies applies. See Krieser v. Hobbs, 166 F.3d 736, 739 (5th Cir.1999). Under Mississippi law, the interpretation of an insurance policy’s language presents a question of law. Lewis v. Allstate Ins. Co., 730 So.2d 65, 68 (Miss.1998). When examining an insurance contract, the Court should “read the policy as a whole, considering all the relevant portions together and, whenever possible, should give operable effect to every provision in order to reach a reasonable overall result.” J & W Foods Corp. v. State Farm Mut. Auto. Ins. Co., 723 So.2d 550, 552 (Miss.1998). The Court must give effect to the plain meaning of an insurance policy’s clear and unambiguous language. Robley v. Blue Cross/Blue Shield of Miss., 935 So.2d 990, 996 (Miss.2006).

 

The parties agree that neither the tractor nor the trailer involved in the accident were among the Policy’s described covered autos, and the Court finds that the involved tractor-trailer was not a covered auto under the Policy. The parties disagree as to whether the involved tractor and trailer qualified for coverage under the Policy, either as “temporary substitute vehicle[s],” or through the actions of Herrington’s insurance agent. The Court will consider each basis for coverage in turn.

 

1. Temporary Substitute Vehicle

For the involved tractor and trailer to qualify as “temporary substitute vehicle[s],” they must not be owned by the Policy’s insured, because the Policy defines a “temporary substitute vehicle” as an auto “you do not own.”  Mot. Summ. J. [46], Ex. C. Canal asserts that the involved tractor and trailer cannot qualify as “temporary substitute vehicle[s]” because all the vehicles used by Herrington in both his trucking businesses were owned by him, and he is the de facto insured under the Policy. The Harper Defendants  counter that because Herrington, not Rebecca Herrington or Thorn Creek, owned the involved tractor and trailer, and because Rebecca Herrington is listed as the owner of Thorn Creek on the Policy, the involved tractor and trailer were eligible “temporary substitute vehicle[s]” under the Policy.

 

The reason for this requirement is plain: Canal assessed the bargained-for risk in covering the specifically listed vehicles and charged a premium sufficient to cover that risk. If the “temporary substitute vehicle[s]” provision was not limited to exclude vehicles owned by the insured, “an operator of more than one truck [could] insure only one vehicle and in the event of an accident with any of his vehicles[,] take the position that the policy covered the vehicle involved in the accident.” Utilities Ins. Co. v. Wilson, 251 P.2d 175, 177 (Okla.1952); see 8A Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 117:93 (“It is generally required that the substitute vehicle not be owned by the insured; if such coverage was ordinarily extended, the insurer would be covering an uninsured vehicle for a single premium in lieu of the insured taking out separate coverage for his or her automobiles. This enables the insurer to issue a policy upon a rate fair to both insured and insurer….”). This is exactly what Herrington attempted.

 

The Herrington Defendants seem to concede that the Policy did not cover the involved vehicles as “temporary substitute vehicle[s] .” Herrington Defs.’ Resp. [57], at 2 (“[T]he Thorn Creek vehicle was not listed in the declarations page nor was it otherwise covered by the insurance policy issued.”).

 

The Policy lists “Thorn Creek Trucking” as the named insured. To determine the effect of the ownership of the vehicles, the Court must answer a fundamental question: who is Thorn Creek? Despite the presence of Rebecca Herrington’s forged signature on certain Thorn Creek documents, Herrington’s testimony indicates that he is Thorn Creek. Specifically, Herrington testified that Brier Branch and Thorn Creek were “all pretty much the same operation,” and that both Thorn Creek and Brier Branch “are basically Mr. Herrington doing business as a trucking business.” Mot. Summ. J. [46], Ex. A, C. Herrington Dep. 30, 18. Herrington also admitted that he is “100 percent responsible for Thorn Creek,” id. at 15, that he operates the company as Charlie Herrington d/b/a Thorn Creek, id. at 55, and that his daughter is nothing but a “figurehead,” id. at 15. In fact, he admits using his daughter’s name and creating Thorn Creek to get better insurance rates on his trucks; a couple of previous accidents on his record as Brier Branch had apparently raised his rates. Id. at 17. Given Herrington’s candid admissions, no reasonable jury could view Thorn Creek as Rebecca’s d/b/a rather than Herrington’s d/b/a. Herrington owned all vehicles used by Thorn Creek, and, according to him, operated Thorn Creek as a sole proprietorship.

 

A sole proprietorship is “[a] business in which one person owns all the assets, owes all the liabilities, and operates in his or her personal capacity,” and has no separate legal existence distinct from the operator of the business. Black’s Law Dictionary (9th ed.2009); see Ball v. Steadfast–BLK, 126 Cal.Rptr.3d 743, 747 (Cal.Ct.App.2011) (“A sole owner is a sole proprietorship and a sole proprietorship is not a legal entity separate from its individual owner.”); Jefferson Parish Hosp. Serv. Dist. No. 2. v. K & W Diners, LLC, 65 So.3d 662, 667–68 (La.Ct.App.2011) (“[A] sole proprietorship … is merely a designation assigned to a manner of doing business by an individual who is solely responsible for all of the debts and obligations of the business [and n]o legal distinction exists between the individual and the business.”); Ideal Lease Serv., Inc. v. Amoco Prod. Co., Inc., 662 S.W.2d 951, 952 (Tex.1983) (“[A] sole proprietorship has a legal existence only in the identity of the sole proprietor.”). Thus, no legal distinction exists between the named insured Thorn Creek and Herrington.

 

Other courts and commentators have observed that “temporary-substitute-vehicle” provisions do not apply when either the owner of the vehicle loans it to his or her sole proprietorship or a sole proprietorship loans a vehicle titled in its name to its sole proprietor. See Edgley v. Lappe, 342 F.3d 884, 889–90 (8th Cir.2003) (construing insurance policy issued to “Harold and Benita Lappe d/b/a Lappes Express Cab” and holding that temporary-substitute-vehicle clause in policy precluded coverage for any vehicle owned by the Lappes “either individually or through their sole proprietorship”); Carolina Cas. Ins. Co. v. Williams, 945 So.2d 1030, 1035–36, 1040 (Ala.2006) (collecting cases) (construing policy issued to “W & W Trucking, Wendell Williams d/b/a” and holding that temporary-substitute-vehicle clause precluded coverage for vehicle owned by separate sole proprietorship operated by Williams); CU Lloyd’s of Texas v. Hatfield, 126 S.W.3d 679, 685–86 (Tex.Ct.App.2004) (construing policy issued to “Mays Younglandia, Benjamin F. May d/b/a” and holding that because the policy excluded coverage for vehicles owned by the insured, a vehicle owned by the individual proprietor was excluded from coverage); cf. 8A Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 117:99 (“Where an automobile is owned by or registered in the name or tradename of a sole proprietorship owned by the insured, the use of that automobile by the named insured or his spouse will not be covered under the temporary substitute clause.”). The involved tractor and trailer therefore cannot be “temporary substitute vehicle[s]” under the Policy because they were owned by the Policy’s named insured.

 

The Harper Defendants make much of the effect of a Lease Agreement entered into between Herrington, as Lessor, and Rebecca Herrington d/b/a Thorn Creek, as Lessee, on December 30, 2007. Harper Defs.’ Mem. [54], at 4–6; see Mot. Summ. J. [41], Ex. A, C. Herrington Dep., at Ex. 2, Lease Agreement. The Lease Agreement purports to lease several tractors and trailers owned by Herrington to Thorn Creek from December 31, 2007, through December 30, 2008, and provides that Herrington, as Lessor, would “be responsible [for] and pay all business expenses inclusive of but not limited to all insurance premiums … and maintain same in the name of THORN CREEK TRUCKING.” Id. The Lease Agreement bears the purported signatures of Herrington and Rebecca Herrington, although Rebecca Herrington does not believe she signed the document. Id.; Pl.’s Mot. Summ. J. [46], Ex. D, R. Herrington Dep. 14; see also id. Ex. A, C. Herrington Dep. 57–58. The Harpers argue that while Thorn Creek had a possessory, insurable interest in the leased vehicles, it had no such interest in the involved vehicles, making them eligible “temporary substitute vehicle[s].” However, the Lease Agreement does nothing to change the fact that, as sole proprietorships owned and operated by Herrington, neither Brier Branch nor Thorn Creek have any legal identity apart from his. Simply, Brier Branch and Thorn Creek are Herrington. Herrington is the named insured under the Policy. All the vehicles used by Brier Branch and Thorn Creek were owned by Herrington, so none of them can qualify as a “temporary substitute vehicle” under the Policy. Finally, even if Rebecca Herrington was doing business as Thorn Creek, the Policy provides coverage for a “temporary substitute vehicle” used in place of “a covered ‘auto’ you own that is out of service.” Mot. Summ. J. [46], Ex. C (emphasis added). Rebecca did not own any vehicle in dispute.

 

2. Whether Notice Created Coverage

The Harper Defendants argue that there was nevertheless coverage for the involved tractor-trailer because Herrington’s wife called Herrington’s insurance agent on the morning of the accident to notify her that Herrington would be using the involved tractor for a few days while a covered tractor was being repaired. Defs.’ Mem. [54], at 6–7. The Harper Defendants seem to suggest that the local agent was actually Canal’s agent and that notice to her was sufficient to create coverage. The Court cannot accept the argument.

 

As an initial point, the Harpers never adequately explain how mere notice would create coverage. As discussed above, substituting one vehicle owned by the insured for another does not trigger the automatic coverage afforded temporary replacement vehicles under the Policy. Thus, to bring the accident vehicles within the Policy’s coverage, the carrier would have to accept the change. As the Policy explains, changes to the Policy must be made “with [Canal’s] consent [and] only by endorsement issued by [Canal] and made a part of this policy.” Mot. Summ. J. [46], Ex. C. The Harpers have not produced an endorsement modifying the Policy to add coverage for the accident vehicles. By the terms of the Policy, a phone call to a local agent is not sufficient to create coverage where none otherwise exists.

 

Even if mere notice sufficed, the record fails to demonstrate that Canal had notice before the accident because the local agent exercised neither actual nor apparent authority. First, the record is clear that no actual authority existed. See Mot. Summ. J. [46], Ex. C (declaration page listing Herrington Insurance Agency as the “Agent of Insured” and Southern Cross Underwriters, Inc., as Canal’s “Authorized Representative”); id. Ex. H, Posner Aff. ¶ ¶ 6–9 (stating that local agent had no authority to bind coverage); Ex. G, Ferguson Dep. 11 (local agent’s testimony that she reported to general agent). Apparent authority is likewise missing because the record fails to reflect “(1) acts or conduct on the part of the principal indicating the agent’s authority, (2) reasonable reliance on those acts, and (3) detriment as a result of such reliance.” Thompson v. Chick–Fil -A, Inc., 923 So.2d 1049, 1054 (Miss.Ct.App.2006) (citing Am. Income Life Ins. Co. v. Hollins, 830 So.2d 1230, 1237 (Miss.2002)).

 

3. MCS– 90

The Herrington Defendants generically adopt the Harpers’ arguments but then concede that the subject tractor and trailer were “not listed in the declarations page nor [were they] otherwise covered by the insurance policy.” Herrington Defs.’ Resp. [57], at 2. They argue instead that the Policy mistakenly omitted a federally mandated policy endorsement that would have provided coverage for the accident. Specifically, the Herrington Defendants argue that an MCS– 90 endorsement should be read into the policy because Thorn Creek was engaged in transporting property in interstate commerce at the time of the accident.

 

Under a regulation promulgated pursuant to the Motor Carrier Act of 1980, for-hire motor carriers operating motor vehicles transporting property in interstate commerce must obtain an MCS– 90 endorsement to their liability policies. The MCS– 90 endorsement provides “that the insurer will pay within policy limits any judgment recovered against the insured motor carrier for liability resulting from the carrier’s negligence, whether or not the vehicle involved in the accident is specifically described in the policy.” Ill. Cent. R.R. Co. v. Dupont, 326 F.3d 665, 666 (5th Cir.2003); see 49 C.F.R. §§ 387.3, 387.7, 387.15 (2010).

 

Assuming that Thorn Creek was engaged in transporting property in interstate commerce such that the Policy should have included an MCS– 90 endorsement, the failure to include the endorsement to the Policy does not “give rise to the remedy [Defendants] seek[ ], namely a reformation of the [P]olicy deeming the endorsement to be a part of the [P]olicy.” Ill. Cent., 326 F.3d at 668. The regulations promulgated under the Motor Carrier Act place the burden on the insured, not the insurer, to obtain the necessary insurance coverage, including any mandated endorsements. Id. at 669. As such, the regulations do not “impos[e] a duty on the insurer to make sure that … motor carriers secure the required insurance,” and the Court cannot read the endorsement into the Policy to provide coverage for any judgment recovered against Thorn Creek in the underlying action. Id.

 

Therefore, because (1) the involved tractor and trailer were not described autos under the Policy, (2) they were not “temporary substitute vehicle[s]” under the Policy, (3) they were not afforded coverage by way of the phone call from Herrington’s wife, and (4) the Policy contained no MCS– 90 endorsement, the Court concludes that the there is no coverage for the subject accident under the Policy. Canal is entitled to a declaratory judgment that it has no duty to defend and no duty to indemnify under the Policy for the subject accident.

 

The Harper Defendants make one final argument on the coverage question: that Canal failed to join necessary parties under Federal Rule of Civil Procedure 19 and that this failure will somehow result in a judgment that is prejudicial to them. Harper Defs.’ Mem. [54], at 7. Their two paragraph argument on this issue contains no citations to authority and no explanation as to how the inclusion of either the Herrington Insurance Agency or Southern Cross could in any way impact the sole issue involved in Canal’s claim against Defendants—whether the Policy covers the accident and underlying litigation. The Court can conceive of no way in which the addition of any parties could affect the outcome on the coverage question, and Defendants’ Rule 19 argument is therefore without merit.

 

B. The Counterclaims

Canal has also moved for summary judgment on the Herrington Defendants’ Counterclaims against it for misrepresentation and inadequate agent training and supervision and post-claim underwriting. The Herrington Defendants’ sole reference to their counterclaims in their response is a single sentence: “The Herrington Defendants however submit that they detrimentally relied upon the advice of the producing agents … to secure coverage and their exhibition of apparent authority to bind coverage.” Herrington Defs.’ Resp. [57], at 2. This conclusory allegation fails to meet their burden under Rule 56. Faced with a motion for summary judgment, the Herringtons had the duty to “go beyond the pleadings” and “designate ‘specific facts showing that there is a genuine issue for trial.’ “ Celotex Corp., 477 U.S. at 324. Even if the Herringtons had not abandoned their counterclaims, however, the Court agrees that Canal is entitled to summary judgment on those claims for the reasons previously stated and the reasons stated in Canal’s memorandum.

 

IV. Conclusion

For the foregoing reasons, the Court finds that Plaintiff’s motion for summary judgment should be granted. A separate judgment will be entered in accordance with Federal Rule of Civil Procedure 58.

 

SO ORDERED AND ADJUDGED.