CAROLINA CASUALTY INSURANCE COMPANY, Plaintiff,

v.

Tymer YEATES, an individual, Shari Yeates, an individual, Defendants.

 

 

Dec. 21, 2006.

 

 

 

ORDER DISMISSING DUTY TO DEFEND CLAIMS, AND ON THE REMAINING CLAIMS OF LIABILITY, DENYING PLAINTIFF’S MOTION AND GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

PAUL G. CASSELL, United States District Judge.

This case requires the court to determine whether an insurance carrier may be liable under an insurance policy where the policy excludes the vehicle involved in the accident but contains an MCS-90 Endorsement, and where another insurance provider has already paid out an amount that represents the statutory minimum level of financial responsibility required of the transportation company. The current dispute arises out of an automobile collision between a Bingham Livestock Transportation, Inc. tractor-trailer and an automobile driven by Shari Yeates in which Tymer Yeates was a passenger, causing injuries. State Farm Insurance Company has already paid the Yeates’ $750,000-the policy limit and the statutory minimum required of Bingham. Plaintiff Carolina Casualty Insurance Company argues that it has no liability because the tractor-trailer is not listed in its policy with Bingham and the MCS-90 Endorsement attached to the Carolina Policy is not “triggered” due to the $750,000 payment by State Farm. The Yeates’ assert that policy factors of the MCS-90 Endorsement support coverage in this case, and the fact that State Farm has paid out the “statutory minimum” does not alleviate Carolina Casualty of its obligation. The court finds that Tenth Circuit law dictates that a court first look at an insurance policy with the attached endorsement independent of other applicable insurance policies. In this case, the plain language of the MCS-90 Endorsement obligates Carolina Casualty to pay for any judgment recovered against Bingham “regardless of whether or not each motor vehicle is specifically described in the policy.” The court finds that the MCS-90 Endorsement operates to remove the language in the Carolina Policy that limits liability to only listed vehicles. Consequently, Carolina Casualty may be liable for a judgment recovered against Bingham as a result of this accident.

 

The court notes that it appears to be contrary to public policy and the intent of Congress to relieve an insurance carrier of liability simply because another insurance carrier has paid an amount that equals the statutory minimum level of financial responsibility required of the insured. However, whether and how fault might be allocated between Carolina Casualty and State Farm is not an issue currently before the court.

 

The current parties also dispute whether Carolina Casualty has a duty to defend Bingham and/or its driver in a state action filed by the Yeates. As more fully discussed below, the court finds that this issue is not properly before the court. Accordingly, the court DISMISSES the parties’ respective claims on this issue without prejudice.

 

The court DENIES Carolina Casualty’s motion for summary judgment on its remaining claim of liability (# 31). As discussed herein, the court GRANTS Yeates’ motion for summary judgment on its liability claim in so much as the court finds that Carolina Casualty may be liable under the policy for a judgment obtained by Yeates against Bingham (# 27). The court’s dismissal of the duty to defend claim, and granting of Yeates’ motion for summary judgment effectively closes this case. All claims having been resolved, the court directs the Clerk’s Office to close this case.

 

 

FACTS

 

The underlying facts are not in dispute. Bingham Livestock Transportation, Inc. employs Jason D. Jackman. On May 4, 2003, in Box Elder County, Utah, a tractor-trailer driven by Jackman collided with a vehicle driven by Shari Yeates in which Tymer Yeates was a passenger, causing injuries. The tractor-trailer was owned by Bingham. The Yeates filed a lawsuit in the First Judicial District Court of Utah against Jackman and Bingham.

 

Bingham is insured by two different companies, State Farm Insurance Company, and Carolina Casualty Insurance Company. The State Farm policy is for primary coverage and specifically lists as a covered vehicle the tractor-trailer involved in the accident. State Farm has already paid the Yeates $750,000-the policy limit and the statutory minimum level of financial responsibility required of Bingham. The Carolina Policy is also for primary coverage, but does not specifically list the tractor-trailer as one of the vehicles covered by the Carolina Policy. However, the Carolina Policy has an MCS-90 Endorsement, which Bingham is required to carry under federal law. An MCS-90 Endorsement provides a safeguard to the public by requiring the insurance company to pay any judgment against the insured arising out of an accident involving vehicles operating under applicable Interstate Commerce Commission regulations.

 

The questions raised in this action for declaratory relief are: 1) whether Carolina Casualty has a duty to defend Bingham Livestock and/or Jackman in the state action filed by the Yeates; and, 2) whether Carolina Casualty would be liable under the Carolina Policy with the attached MCS-90 Endorsement for a judgment against Bingham for damages incurred in the accident. Both sides have moved for summary judgment on both issues.

 

 

STANDARD OF REVIEW

 

Summary judgment is appropriate only where there are no disputed material issues of fact, and where one party is entitled to judgment as a matter of law.  To apply this standard, the court must view the evidence in the light most favorable to the nonmoving party . However, the court finds that there are no factual disputes, and that the remaining issues are questions of law.

 

 

Fed. R. Civ. Pro. 56(c).

 

Green v. New Mexico, 420 F.3d 1189, 1192 (10th Cir.2005).

 

DISCUSSION

 

A. Duty to Defend

 

 

When Carolina Casualty originally brought this action for declaratory relief, Bingham and Jackman were parties to this action. However, Bingham and Jackman have since been dismissed. Due to this dismissal, the court finds that the issue of whether Carolina Casualty has a duty to defend Bingham and/or Jackman in the state court action is not properly before the court. Consequently, the court dismisses these claims without prejudice.

 

 

Order, May 19, 2006 (Docket No. 24).

 

Although the court declines to address the merits of these claims, the court notes the Ninth Circuit (among others) has directly addressed this question. In Harco National Insurance Co. v. Bobac Trucking Inc., the court held that an MCS-90 Endorsement did not “create[ ] a duty to defend the insured in an underlying tort action involving a vehicle not covered under the main policy.”   The court found that “the reimbursement provision of the MCS-90 is inconsistent with implying a duty to defend.”  While the court finds this analysis persuasive, the court does not decide whether to apply the Ninth Circuit’s reasoning because it does not have the proper parties before it to address this issue.

 

 

107 F.3d 733, 734 (9th Cir.1997).

 

Id. at 736.

 

B. Liability Under the Carolina Policy and Attached MCS-90 Endorsement

 

The court does find that the issue of liability under the MCS-90 Endorsement is properly before the court. The Yeates are currently suing Bingham in state court-an action that will directly effect Carolina Casualty. The possibility of liability for damages under the Endorsement will likely influence Carolina Casualty’s involvement in the state court action and possible settlement negotiations.

 

Before analyzing the issue of liability under the Carolina Policy, the court finds it useful to briefly discuss the Interstate Commerce Commission and the history behind the MCS-90 Endorsement.

 

 

1. The Interstate Commerce Commission

 

The Interstate Commerce Commission regulates interstate motor carriers. Historically, regulations were avoided by carriers who leased rather than owned vehicles. This led to problems when such vehicles were in accidents because members of the public were confused as to who was financially responsible for damages caused in the accident. To address this situation, “Congress amended the Interstate Commerce Act to allow the ICC to prescribe regulations to insure that motor carriers would be fully responsible for the operation of vehicles certified to them.”  The ICC did so by creating regulations to “assure that motor carriers maintain an appropriate level of financial responsibility for motor vehicles operated on public highways.”  The ICC then set minimum levels of financial responsibility, which can be proven by motor carriers with “[p]olicies of insurance, surety bonds, and endorsements.” 0 The ICC has adopted a “form endorsement to be included in insurance policies of carriers who use leased vehicles to transport property under ICC certificate.” 1 In the instant case, the minimum level of financial responsibility required of Bingham is $750,000, and the proof required of Bingham that it has met this level includes the MCS-90 Endorsement.2 There appears to be a split of legal authority as to how to interpret and apply these endorsements.

 

 

Empire Fire & Marine Ins. Co. v. Guar. Nat’l Ins. Co., 868 F.2d 357, 362 (10th Cir.1989).

 

Id.

 

Id.

 

49 C.F.R. §  387.1 (2006).

 

0. Id. §  387.7.

 

1. Empire Fire, 868 F.2d at 362.

 

2. 49 C.F.R. §  387.9.

 

2. The MCS-90 Endorsement

 

The Tenth Circuit’s leading case on the interpretation of the MCS-90 Endorsement-which uses the form language from the ICC-is Empire Fire & Marine Insurance Co. v. Guaranty National Insurance Co. The court specifically addressed the issue of the “effect of an ICC endorsement on the allocation of risk among multiple insurers .” 3 To begin, the court established that “the endorsement only negates limiting provisions in the policy to which it is attached … but does not establish primary liability over other policies that are also primary by their own terms.” 4 In applying this to the case before it, the court found that the endorsement negated limiting language in the underlying policy, making the policy primary in nature. The court stated that the modified policy “must then be compared with the relevant provisions in [the other applicable] policy to determine the ultimate allocation of liability.” 5 Thus the court appears to look first only to the policy at issue, determine the effect of an endorsement on that policy, and only after the underlying policy is accordingly modified, compare it with other applicable policies. Perhaps most important to the current case before this court, the Empire Fire court noted that “federal law, as interpreted by the Tenth Circuit, imposes liability on all insurers who are obligated to provide some type of coverage for damage pursuant to the terms of their policies and any endorsements thereto.” 6

 

 

3. Empire Fire, 868 F.2d at 364.

 

4. Id. at 361.

 

5. Id. at 364.

 

6. Id. at 368.

 

Other courts have interpreted endorsements in a way that conflicts with the Tenth Circuit’s approach. In Canal Insurance Co. v. Distribution Services, Inc., the Fourth Circuit framed the issue as “whether the MCS-90 endorsement controls the allocation of loss among insurers as opposed to operating only when necessary to protect injured members of the public.” 7 In that case, there was an accident between a tractor-trailer and another vehicle. 8 The tractor-trailer was operated by an employee of a company providing shipping and trucking services, but the vehicle was owned by a leasing company.9 The trucking company had insurance which provided $1 million in liability insurance and contained an MCS-90 Endorsement.0 The leasing company also had liability insurance for $1 million with an MCS-90 Endorsement.1 However, the leasing company’s policy was conditioned on the trucking company providing a certificate of insurance, which the trucking company did not provide.2 In the dispute between the insurance companies of the leasing company and trucking company, the Fourth Circuit found that the “MCS-90 endorsement operates to protect the public but does not alter the relationship between the insured and the insurer as otherwise provided in the policy” and does not “alter the terms of the policy for the benefit of other insurers.” 3 Because the trucking company’s policy covered the incident, and met the statutory minimum requirement, the court held “the public protection purpose of the MCS-90 endorsement has been served. Therefore, the MCS-90 endorsement in the [leasing company’s insurance policy] does not come into play.” 4

 

 

7. 320 F.3d 488, 492 (4th Cir.2003).

 

8. Id. at 490.

 

9. Id.

 

0. Id.

 

1. Id.

 

2. Id. at 491.

 

3. Id. at 493.

 

4. Id.

 

In Minter v. Great American Insurance Co., a case heavily relied on by Carolina Casualty, the Fifth Circuit also appears to take a different approach than the Tenth Circuit. The Minter court described the MCS-90 endorsement as a “suretyship by the insurance carrier to protect the public-a safety net.”  5 Carolina Casualty stresses that the Minter court refused to find an insurance company liable under an MCS-90 endorsement because a primary policy “not only provided coverage but provided the maximum amount under the policy.”  6 What Carolina Casualty failed to note was that the primary policy that paid out the maximum amount was the same policy to which the MCS-90 Endorsement was attached. In other words, the Minter court refused to find another insurance carrier liable under the MCS-90 Endorsement because the “coverage limit under the St. Paul primary insurance, to which the endorsement was attached, ha[d] been exhausted….” 7 Carolina Casualty’s reliance on Kline v. Gulf Insurance Co . is misplaced for the same reason-the policy to which the endorsement was attached had already paid out in accordance with its own terms.8 This common fact clearly distinguishes these two cases from the current case before the court.

 

 

5. 423 F.3d 460, 470 (5th Cir.2005).

 

6. Id.

 

7. Id. (emphasis added).

 

8. 2005 WL 2206458, at *1-5 (W.D.Mich.2005).

 

The court is persuaded by the Tenth Circuit’s approach to MCS-90 Endorsements, and not just because Empire Fire is arguably controlling on the court. The Tenth Circuit’s approach is more sound than the Fourth Circuit’s approach for at least two reasons. First, it is a fundamental tenet of contract law that a “contract will be so interpreted as to give effect to its general purpose as revealed within its four corners or in its entirety.” 9 In Empire Fire the court looked first only to the policy at issue and the attached endorsement, with any comparison between policies or allocation of fault to take place after limiting language is read out of the underlying policy. 0 Second, Empire Fire, by avoiding the strange result of relieving an insurance carrier of liability simply because another insurance carrier had paid an amount that equals the statutory minimum level of financial responsibility required of the insured, appears to be more in line with Congressional intent and sound public policy. Although the current case before the court contains facts that arguably create a matter of first impression for the Tenth Circuit, the court finds that Empire Fire, if not controlling on this case, provides more than sufficient guidance. Consequently, the court will look at Carolina Casualty’s insurance policy with the attached endorsement independent of other applicable insurance policies.

 

 

9. 11 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts §  32:5 (4th ed.1993).

 

0. 868 F.2d at 362, 367-68.

 

3. The Carolina Policy and attached MCS-90 Endorsement

 

As discussed above, Bingham has an insurance policy with Carolina Casualty that specifically lists thirteen tractors and twenty-one trailers. Neither the tractor nor the trailer involved in the accident are listed in the policy and the terms of the policy state that only listed vehicles are covered. However, attached to the policy is an MCS-90 Endorsement. The Endorsement indicates that the policy to which it is attached is primary insurance with a liability limit of $1,000,000. The Endorsement obligates Carolina Casualty to

pay, within the limits of liability described herein, any final judgment recovered against [Bingham] for public liability resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980 regardless of whether or not each motor vehicle is specifically described in the policy …. It is understood and agreed that no condition, provision, stipulation, or limitation contained in the policy, this endorsement, or any other endorsement thereon, or violation thereof, shall relieve [Carolina Casualty] from liability or from the payment of any final judgement.1

 

 

 

1. MCS-90 Endorsement (emphasis added), Def.’s Mot. Summ. J., Ex. 1 (Docket No. 27).

 

The plain language of the Endorsement obligates Carolina Casualty to pay a final judgment against Bingham “regardless of whether or not each motor vehicle is specifically described in the policy….” 2

 

 

2. Id.

 

Carolina Casualty argues that the Endorsement is not “triggered” because other insurance exists and fulfills the statutory minimum of $750,000.3 It further argues that the Endorsement is merely a surety and does not create a separate or umbrella insurance policy, and only applies when other insurance is not available. Carolina Casualty quotes from the First Circuit case Canal Insurance Co. v. Carolina Casualty Insurance Co., which states that an endorsement “simply covers the public when other coverage is lacking.”  4 The interpretation that Carolina Casualty would have this court adopt is that coverage is “lacking” only where the statutory minimum ($750,000 in this case) has not been met. The court rejects Carolina Casualty’s interpretation of the case law.

 

 

3. Pl.’s Mem. Supp. Summ. J. (Docket No. 32).

 

4. 59 F.3d 281, 283 (1st Cir.1995).

 

The Tenth Circuit has already established that the endorsement and attached policy must, like other contracts, be interpreted consistent with the plain meaning of its terms. The effect of the endorsement is to remove limiting language contained in the underlying policy. In Empire Fire, the Tenth Circuit found that the endorsement removed the language in the underlying policy limiting coverage to “excess.” 5 The court held that “[a]n excess coverage clause is a condition or limitation that would relieve the company of liability. Thus an excess coverage clause is the kind of limitation that the ICC endorsement is designed to render ineffective.” 6 Following this guidance, the court finds that the provision in Carolina Casualty’s underlying policy limiting coverage to listed vehicles is removed by the Endorsement. Therefore, the underlying policy will apply to the vehicles involved in the accident with the Yeates whenever the Endorsement is applicable (i.e. there is a judgment against Bingham, the insured).

 

 

5. 868 F.2d at 363.

 

6. Id. (internal quotation marks omitted).

 

Because the underlying policy is primary insurance, the coverage under the Endorsement will also be primary. As stated in Empire Fire, this does not mean that the endorsement makes the attached policy primary over other primary insurance policies.7 Nevertheless, the court agrees with the Yeates’ position that it would not only be inconsistent with the terms of the policy, but be contrary to public policy to hold that liability is relieved when another insurance company has paid the statutory minimum amount of $750,000. The purpose of the regulations is to protect the public. The regulations set “minimum levels of financial responsibility”; 8 they do not relieve an insurance carrier of liability once that minimum level is met. The court finds it counter-intuitive that Congress would have intended that the minimum level of financial responsibility would preclude a member of the public from collecting more than that amount.

 

 

7. Id.

 

8. 49 C.F.R. §  387.1.

 

Carolina Casualty tries to avoid liability by arguing that coverage is not “lacking” because the statutory minimum level has already been paid to Bingham by State Farm. The court disagrees on two levels. First, there is nothing in the Endorsement itself (not to mention the regulations or Tenth Circuit case law) which indicates the Endorsement only applies when other coverage is “lacking.” And second, the court finds that coverage may indeed be “lacking” if the Yeates’ damages are greater than the $750,000 already paid by State Farm. The plain language of the MCS-90 Endorsement, and the policy considerations behind such endorsements, support the court’s holding that Carolina Casualty may be liable for any judgment against Bingham as a result of this accident.

 

By holding that the MCS-90 Endorsement applies in this case, the court has essentially resolved the issue of liability. Counsel for Carolina Casualty conceded at the summary judgment hearing that if the MCS-90 Endorsement applies, the “defenses that Carolina Casualty has that it doesn’t cover these trucks and so forth, go by the wayside and that is an issue between Carolina and Bingham Livestock at some point in the future-they may have to get reimbursement.” 9 The court finds that the Endorsement modifies the underlying policy, making it applicable to the vehicles involved in the accident with the Yeates. Carolina Casualty is not somehow relieved of liability under the policy because Bingham had another primary insurance policy that specifically covered the vehicles and paid $750,000, which is the statutory minimum level.

 

 

9. Summ. J. Hr’g Tr. 10:18-21, Dec. 6, 2006.

 

CONCLUSION

 

The court dismisses without prejudice the parties’ claims regarding Carolina Casualty’s duty to defend. As outlined above, the court GRANTS Yeates’ motion for summary judgment on its remaining claim (# 27), holding that Carolina Casualty may indeed be liable for Yeates’ damages under the Carolina Policy and attached MCS-90 Endorsement. Accordingly, the court DENIES Carolina Casualty’s motion for summary judgment on its liability claim (# 31). All claims having been resolved, the Clerk’s Office is directed to close this case.

 

SO ORDERED.

CAROLINA CASUALTY INSURANCE COMPANY, Plaintiff,

v.

ESTATE OF Beverly ZINSMASTER, Deceased, et al., Defendants.

Parkview Hospital, Inc., Counter-Claimant,

v.

Carolina Casualty Insurance Company, Counter-Defendant.

Parkview Hospital, Inc., Cross-Claimant,

v.

Nationwide Insurance Company, Margarita R. Karpov, The Estate of Dimitry Karpov, Net Trucking, Inc., and Stanislaw Gill, Cross-Defendants.

 

Jan. 30, 2007.

 

 

 

OPINION AND ORDER

THERESA L. SPRINGMANN, United States District Court.

On August 21, 2005, Stanislaw W. Gill, the driver of a Net Trucking tractor-trailer unit, caused a chain reaction collision on Interstate 80/90, the Indiana toll road. At the time of the accident, Net Trucking and Gill were insured by Carolina Casualty Insurance Company. The accident has given rise to four wrongful death claims and numerous injury and property damage claims against the motor carrier and its insurer.

 

The Intervenor Plaintiff, Carolina Casualty, brings this statutory interpleader claim against the Defendants pursuant to 28 U .S.C. §  1335 and Federal Rule of Civil Procedure 22. All the Defendants, with the exception of Net Trucking and Gill, have made claims arising out of the accident against Carolina Casualty’s insurance coverage. On March 6, 2006, Carolina Casualty deposited $1 million with the Clerk of Court’s registry as the maximum amount due under the terms and provisions of the insurance policy.

 

 

This matter is before the Court on motions for partial summary judgment regarding the amount of coverage provided by Carolina Casualty’s insurance policy. Certain of the Defendants request that the Court enter an order that the insurance policy provides the federally required minimum amount of $750,000 to satisfy “each final judgment” for injury or death due to motor carrier negligence. (DE 193 at 1; DE 199 at 1-2; DE 200 at 1; DE 201 at 1). Carolina Casualty contends in its cross motion for partial summary judgment that it is undisputed that the limit of its liability for the accident, under policy number CTP343015, is $1 million.

 

 

BACKGROUND

 

On February 1, 2006, the Plaintiff, Carolina Casualty Insurance Company, filed a statutory interpleader action against the Defendants: Estate of Beverly Zinsmaster, deceased; Tammy Luce, Personal Representative of the Estate of Beverly Zinsmaster; Estate of Phillip Eugene Zinsmaster, deceased; Tammy Luce, Personal Representative of the Estate of Phillip Eugene Zinsmaster; Estate of Joan Aubut, deceased; Dana Tidwell, Independent Administrator of the Estate of Joan Aubut; Estate of Dimitry Karpov, deceased; Margarita R. Karpov, as Administratrix of the Estate of Dimitry Karpov; Margarita R. Karpov, Individually; Judith Ann Flis; Stells Flis; Melinda Jacob; Marcy Rae Leone; Angela Butler; Melissa Anne Boehler; Lori Anne Stolisov; Lindsey Williams; Kenneth Williams; AAA Auto Insurance of Michigan; Indiana Department of Transportation (IDOT Toll Road District Granger, Indiana); Parkview Hospital Fort Wayne Indiana; Nationwide Insurance Company; The St. Paul Travelers Insurance Companies, Inc.; Sate Farm Insurance Company; USAA (United Services Automobile Association); Sunpro; Net Trucking, Inc.; and Stanislaw Gill. In its Complaint, Carolina Casualty alleged that the maximum amount due under the terms and provisions of the insurance policy for the August 21, 2005, accident was $1 million.

 

On April 24, 2006, Carolina Casualty moved to amend its Complaint to add defendants who had filed suit against Stanislaw Gill and Net Trucking in Illinois for injuries and damages sustained as a result of the August 21, 2005, accident and to properly identify Patricia Phelps, instead of Tammy Luce, as the personal representative of the Thomas and Phillip Eugene Zinsmaster Estates. The Amended Complaint added Defendants Patricia Phelps, individually and as personal representative of the Estate of Phillip E. Zinsmaster, deceased; Thomas Zinsmaster; Wendalyn Huckendubler; and Jackie Baker. A Second Amended Complaint, filed on June 28, 2006, added Moore’s Service and Towing and Per-Se Technologies Incorporated Insurance Benefit Plan as defendants.

 

The Defendants answered and Defendant Parkview Hospital filed a crossclaim against the Estate of Dimitry Karpov, Margarita R. Karpov as Administratrix and Individually, Nationwide Insurance, Net Trucking, and Gill, and filed a counterclaim against Carolina Casualty. On May 5, 2006, Carolina Casualty answered Parkview’s counterclaim. On May 8, Nationwide answered Parkview’s crossclaim. On May 11, the Estate of Dimitry Karpov and Margarita Karpov answered the crossclaim and on May 23, Net Trucking answered the crossclaim. On June 28, Gill answered Parkview’s crossclaim.

 

On August 7, 2006, Carolina Casualty moved to dismiss the Indiana Department of Transportation without prejudice, which the Court granted on August 8.

 

On August 23, 2006, Defendants Phelps, Huckendubler, Baker, Thomas Zinsmaster, and Phillip Eugene Zinsmaster filed a motion for partial summary judgment as to the amount of coverage provided by the Carolina Casualty insurance policy. They requested that the Court enter an order that $750,000, which was the federally required minimum amount of coverage, was available under the insurance policy to satisfy “each final judgment” for injury or death due to motor carrier negligence. (DE 193 at 1.) On September 28, Defendants Aubut, Tidwell, Beverly Zinsmaster, and Tammy Luce filed a Notice of joinder in the pending motion for partial summary judgment. On September 29, Defendants Karpov and Flis filed a motion for partial summary judgment on the same insurance coverage issue.

 

On October 16, Carolina Casualty responded in opposition and filed its own motion for partial summary judgment arguing that the limit of its liability under the insurance policy at issue is $1 million. (DE 205 at 1.)

 

On November 3 and 6, the Defendants who moved for partial summary judgment filed briefs in opposition to Carolina Casualty’s Motion for Partial Summary Judgment. These briefs were also considered replies to their own Motions. On November 13, Carolina Casualty filed a reply to the Defendants’ opposition and the matter became ripe for this Court’s ruling on the cross motions for partial summary judgment.

 

 

SUMMARY JUDGMENT STANDARD

 

Summary judgment is appropriate where “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). When there are no genuine issues of material fact and the dispute primarily concerns a question of interpreting a statute and applying it to a specific set of facts, the issue is properly resolved on a motion for summary judgment.  LTV Steel Co., Inc. v. Northwest Engineering & Constr., Inc., 41 F.3d 332, 334 (7th Cir.1994).

 

 

STATEMENT OF FACTS

 

On August 21, 2005, Stanislaw Gill was driving a tractor-trailer unit for Net Trucking. The tractor-trailer and five private automobiles were involved in an accident on Interstate 80/90 in Indiana. The accident resulted in four deaths, numerous personal injuries, and property damage to the privately-owned automobiles and to the Indiana Toll Road.

 

Net Trucking and Gill were insured by Carolina Casualty under policy number CTP343015. The policy had a $1 million cap on liability, regardless of the number of claims or vehicles involved in an accident. The policy included an “Endorsement for Motor Carrier Policies of Insurance for Public Liability Under Sections 29 and 30 of the Motor Carrier Act of 1980,” known as a Form MCS-90 Endorsement. The endorsement indicated that policy number CTP343015 was Net Trucking’s primary insurance and stated that Carolina Casualty “shall not be liable for amounts in excess of $1,000,000 for each accident.” (Cplt., Ex. A at 24). An accident was defined as including “continuous or repeated exposure to conditions which results in bodily injury, property damage, or environmental damage which the insured neither expected nor intended.” (Cplt., Ex. A at 24). The MCS-90 also provided:

In consideration of the premium stated in the policy to which this endorsement is attached, the insurer (the company) agrees to pay, within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of Section 29 and 30 of the Motor Carrier Act of 1980 regardless of whether or not each motor vehicle is specifically described in the policy.

 

(Id.)

 

 

DISCUSSION

 

An MCS-90 Endorsement is a federally mandated endorsement to motor carrier insurance policies. See 49 C.F.R. §  387.7(a) (directing that “[n]o motor carrier shall operate a motor vehicle until the motor carrier has obtained and has in effect the minimum levels of financial responsibility as set forth in §  387.9 of this subpart.”); 49 C.F.R. §  387.7(d) (stating that proof of the required financial responsibility consists of a Form MCS-90 issued by an insurer); 49 C.F.R. §  387.15 (providing an example of an approved Form MCS-90). Every insurer must use this endorsement or equivalent language. Am. Inter-Fidelity Ex. v. Am. Re-Ins. Co., 17 F.3d 1018, 1021 (7th Cir.1994). Submitting the endorsement indicates that a commercial motor carriers is in compliance with the federal financial responsibility requirements issued by the Secretary under the Motor Carrier Act of 1980. The minimum level of financial responsibility for interstate carriers of nonhazardous property is $750,000. 49 C.F.R. §  387.9 (containing the Schedule of Limits for Public Liability); 49 U.S.C. §  31139(b) (setting the minimum level of financial responsibility that the Secretary must prescribe in its regulations at $750,000).

 

By this endorsement the insurer promises to pay the full judgment up to the regulatory minimum. Am. Inter-Fidelity Ex., 17 F.3d at 1021 (citing Empire Fire & Marine Ins. Co. v. Guaranty Nat’l Ins. Co., 868 F.2d 357 (10th Cir.1989)). However, the insurer’s obligation under the MCS-90 is one of “suretyship” which is triggered when the policy to which it is attached provides no coverage to the insured. See T.H.E. Ins. Co. v. Larsen Intermodal Servs., Inc., 242 F.3d 667, 672 (5th Cir.2001); see also Canal Ins. Co. v. Carolina Cas. Ins. Co., 59 F.3d 281, 283 (1st Cir.1995) (considering the endorsement “to be, in effect, suretyship by the insurance carrier to protect the public-a safety net [that] covers the public when other coverage is lacking”). “A contract providing $700,000 of insurance after the client pays a deductible of $50,000, but (because of the endorsement) requiring the carrier to pay as much as $750,000 to an injured person, is best understood as $700,000 of insurance plus a surety bond of $50,000.” Am. Inter-Fidelity Ex., 17 F.3d at 1022.

 

The Defendants’ position is that the MCS-90 endorsement attached to the Carolina Casualty policy setting a $1 million limit for “each accident” is not controlling because it is contrary to the statutory requirement that security must be at least $750,000 “for each final judgment.” See, e.g., DE 210 at 2 (“Regardless of how clear a policy’s stated coverage limits are, any limit that contradicts statutorily mandated minimums is unenforceable and void in favor of the statutory requirement.”) That is, each of the injured parties may receive up to the statutory minimum of $750,000, despite the fact that the policy limit is $1 million. The Defendants rely on the following section of the Motor Carrier Act in support of their claim.

(1) Liability insurance requirement.-The Secretary may register a motor carrier under section 13902 only if the registrant files with the Secretary a bond, insurance policy, or other type of security approved by the Secretary, in an amount not less than such amount as the Secretary prescribes pursuant to, or as is required by, sections 31138 and 31139, and the laws of the State or States in which the registrant is operating, to the extent applicable. The security must be sufficient to pay, not more than the amount of the security, for each final judgment against the registrant for bodily injury to, or death of, an individual resulting from the negligent operation, maintenance, or use of motor vehicles, or for loss or damage to property (except property referred to in paragraph (3) of this subsection), or both.

 

49 U.S.C. §  13906(a)(1) (emphasis added).

 

This same argument was made, unsuccessfully, by the plaintiffs in a multiple car, multiple victim accident in Hamm v. Canal Insurance Co., 10 F.Supp.2d 539 (M.D.N.C.1998). The plaintiffs in Hamm emphasized the same portion of the statute that the Defendants do here: “The security must be sufficient to pay, not more than the amount of the security, for each final judgment and against the registrant for bodily injury to, or death of, an individual resulting from the negligent operation … of motor vehicles.” 49 U.S.C. §  13906(a)(1). The plaintiffs argued that the reference to “each final judgment” (as well as reference to “any final judgment” in the MCS-90 Endorsement) obligated the defendant to pay at least the statutory minimum for any judgment that arose out of the separate claims asserted by any of the nine plaintiffs involved in the underlying accident. 10 F.Supp.2d at 543. The court considered the language of both the statute and the MCS-90 endorsement separately and concluded that the defendant’s potential liability was limited to $1 million as set forth in the policy regardless of the number of victims involved. The court addressed the statutory language first:

With respect to the statute, it provides that “the security must be sufficient to pay, not more than the amount of the security.” 49 U.S.C. §  13906(a)(1) (emphasis added). The clear meaning of this statement is that whatever amount is to be paid will not exceed the amount of the security which has been established by the statute or by the policy itself. This would mean that if the actual amount of the security is the minimum required by the statute, then the limit of potential liability for an insurer would be $750,000. However, if as in this case, the insured voluntarily elects to obtain security in a larger amount, such as $1 million, then that amount becomes the limits of potential liability for the insurer for claims resulting from a single accident.

 

Hamm, 10 F.Supp.2d at 544.

 

The bottom line is that the MCS-90 endorsement “does not create additional liability limits under the policy. Thus, when the declarations page provides for limits of liability of $1 million per occurrence and the MCS-90 endorsement states that the limit of liability is $1 million per accident, the policy limits are for only $1 million.” Recent Developments in Commercial Transportation Litigation, 34 Tort & Ins. L.J. 283, 293-94 (Winter 1999) (citing Hamm). This Court agrees with the summary of Hamm that appears in the cumulative supplement of the Federal Procedure, Lawyer’s Edition:

[The] Provision of Motor Carrier Act requiring security sufficient to pay, not more than the amount of the security, for each final judgment means that amount to be paid by motor carrier’s liability insurer will not exceed the amount of the security which has been established by the statute or by the policy itself; [the] statute does not require payment of at least the minimum statutory security for each final judgment.

 

32 Fed. Proc., L.Ed. §  76:505 (Cum.Supp.2006). Put another way, an insurance company issuing an endorsement is liable for each final judgment arising out of the motor carrier’s negligence, but only to the extent those judgments do not exceed the amount of the security. The amount of the security, in turn, cannot be below $750,000. The Secretary of Transportation will not register a motor carrier that has insufficient security. 49 U.S.C. §  13902(a)(4).

 

The Defendants maintain that there has not been a court opinion that has construed the language of the statute “separately from the language of the policies or from language of the endorsement.” (DE 211 at 2.) Although no court has undertaken a dictionary dissection of “each final judgment,” it is not accurate to say that the Hamm court did not construe the language of the statute. That court concluded that, according to 49 U.S.C. §  13906(a)(1), an insurance company providing an endorsement will not be liable for more than the security that is established by statute or by its insurance policy, if it provides for coverage above the statutory requirement. In contrast, the Defendants have not pointed to a single case that supports their interpretation of the statute.

 

The Court must now look to the endorsement and the policy to determine the limits of liability. In this case, there is no dispute that Carolina Casualty’s liability is capped at $1 million for each accident, regardless of the number of claims or vehicles involved in the accident. (DE 207, Ex. A, Ex. B, Ex. C.) Defendants Phelps, Thomas Zinsmaster, Huckendubler, and Baker “admit that the language of the policy and the language of the endorsement provide for coverage of only $1,000,000 per occurrence.” (DE 211 at 2). Because the Defendants rely on an erroneous interpretation of the statute, their arguments that the policy and the endorsement conflict with statutory requirements, and that the Secretary exceeded its statutory authority when it issued regulations requiring $750,000 of insurance coverage per accident rather than for each final judgment, both fail.

 

 

Even if the Court did not construe the statute as it has, it would not use a statute governing registration of motor carriers by the Secretary of Transportation to rewrite Carolina Casualty’s insurance policy or the attached endorsement to provide more coverage that was bargained for. See Ill. Cent. R. Co.v. Dupont, 326 F.3d 665, 668 (5th Cir.2003) (declining to automatically include endorsement in insurance policy just because it was required by statute). The statute and the regulations requiring the endorsement are directed at the motor carrier.  Id. (“The regulations requiring the endorsement are directed at the motor carrier, not its insurer.”). The Motor Carrier Act is not an insurance statute, and it is not Carolina Casualty’s duty to make sure that the companies it insures comply with its provisions. Id. at 669. Likewise, if the Secretary erroneously registered Net Trucking (because the endorsement should not have been limited to per accident coverage) its mistake would not obligate Carolina Casualty to pay monies it did not contract to pay.

 

The MCS-90 endorsement makes an insurance company liable for final judgments recovered against the insured for public liability resulting from negligent operation of the insured’s motor vehicle, whether or not that vehicle is named in an insurance policy. In this case, that level of liability is $1 million.

 

 

CONCLUSION

 

For the foregoing reasons, the Motions for Partial Summary Judgment [DE 193, 199, 200, 201] filed by the Defendants are DENIED and the Motion for Partial Summary Judgment filed by the Plaintiff [DE 205] is GRANTED. Carolina Casualty’s liability under policy number CTP343015, for the accident involving its insured on August 21, 2005, is $1 million.

 

SO ORDERED.