Bits & Pieces

Airborne Freight Corp. v. St. Paul Fire & Marine Insurance Co.

Airborne Freight Corp v. St. Paul Fire & Marine Ins. Co.

C.A.9 (Wash.),2006.

United States Court of Appeals, Ninth Circuit.

AIRBORNE FREIGHT CORPORATION, a Delaware corporation dba Airborne Express Inc, Plaintiff-Appellant,


ST. PAUL FIRE & MARINE INSURANCE COMPANY, a corporation, Defendant-Appellee.


Argued and Submitted July 24, 2006.




Appeal from the United States District Court for the Western District of Washington; Robert S. Lasnik, District Judge, Presiding. D.C. No. CV-03-02390-RSL.





WARDLAW, Circuit Judge.

Airborne Freight Corporation (Airborne) appeals from the district court’s grant of summary judgment to Airborne’s insurer, St. Paul Fire & Marine Insurance Company (St.Paul), in a breach of contract case. Airborne sought indemnification from St. Paul after it settled lawsuits with National Fulfillment, Inc. (NFI) and Sur La Table for lost and damaged packages; St. Paul refused, citing the deductible and scope of coverage provisions of the contract. We review the district court’s contract interpretation de novo, applying Washington law. Assurance Co. of Am. v. Wall & Assocs. LLC of Olympia, 379 F.3d 557, 560 (9th Cir.2004). We reverse.



1. Care, Custody and Control


On review of a grant of summary judgment, “[w]e are not to weigh the evidence or determine the truth of the matter, but only to determine whether there is a genuine issue for trial.” Moran v. Selig, 447 F.3d 748, 753 (9th Cir.2006) (internal quotation marks omitted). There are material facts in dispute as to whether the United States Postal Service (USPS) was a covered agent of Airborne and whether Airborne retained responsibility and liability for packages once they were handed off to the USPS for delivery to the final consignee.


The interpretation of the “care, custody, and control” exclusion in Olds-Olympic, Inc. v. Commercial Union Insurance Co., 918 P.2d 923, 931 (Wash.1996), a case involving a comprehensive general liability policy, provides no assistance in interpreting cargo liability policies, which protect primary carriers for the entire time the cargo is within their physical or legal custody. See Koury v. Providence-Washington Ins. Co., 145 A. 448, 449-50 (R.I.1929); Nat’l Fire Ins. Co. v. Davis, 179 S.W.2d 316, 319(Tex.Civ.App.1944); see also 11 Couch on Ins. §  154.44 (2006). When the Washington Supreme Court interpreted “care, custody, and control” in Olds-Olympic to require that the damaged property be “under the supervision of the insured and[ ] a necessary element of the work involved,” it was interpreting a policy exclusion, which Washington courts construe narrowly against the insurer. Olds-Olympic, 918 P.2d at 927(“CGL policies are marketed by insurers as comprehensive and should be strictly construed when the insurer attempts to subtract from the comprehensive scope of its undertaking.”); see also Quadrant Corp. v. Am. States Ins. Co., 110 P.3d 733, 737 (Wash.2005). Here, the term “care, custody, and control” is found in the “scope of coverage” statement, a part of the policy which is construed liberally in favor of the insured. Phil Schroeder, Inc. v. Royal Globe Ins. Co., 659 P.2d 509, 511 (Wash.1983). St. Paul’s proposed interpretation that “care, custody, and control” requires “supervision” would be inconsistent with the basic purpose and intent of cargo liability insurance, namely to protect the carrier for the entire time it remains liable to the shipper. See Koury, 145 A. at 450. Moreover, it would render illusory the specific insurance contract between St. Paul and Airborne, which on its face covers loss or damage by independent third parties in the shipment process.


Nor is “care, custody, and control” dependent on a formal agency relationship between the primary carrier and any independent contractors. A third party carrier serving under contract can function as an “agent” of the primary carrier, even where the primary carrier does not control the manner of the agent’s performance and would not be liable for the agent’s independent torts on a respondeat superior theory. See O’Brien v. Haffer, 93 P.3d 930, 934 n. 36 (Wash.Ct.App.2004) (explaining difference between servant and non-servant agents); Restatement 2d of Agency §  1, cmt. e (1958) (same). St. Paul concedes that the insurance policy covered Airborne’s legal liability while packages were being processed or delivered by third-party contract agents and common carriers. The record fails to demonstrate that USPS was in a fundamentally different position with respect to Airborne from those whose loss or damage St. Paul concedes would be covered.


Finally, the policy notes that”[i]nsurance is to attach from the moment the Assured becomes responsible and/or liable and continues until such responsibility or liability ceases,” a statement consistent with the common understanding of “care, custody and control” in a cargo liability policy. Cf. Koury, 145 A. at 450 . Although the contract between Airborne and USPS is not part of the record, the language of the @Home Service Agreement between Airborne and its shippers, the Airborne Express United States Service Guide, and the deposition testimony could allow a reasonable jury to find that Airborne remained financially and legally liable while the USPS was in physical possession of the packages during the final leg of delivery. Construing these facts in the light most favorable to the non-moving party, Moran, 447 F.3d at 753, there was a genuine issue of material fact for trial and summary judgment was improvidently granted.



This legal liability test appears to have been embraced, at least on one occasion, by St. Paul. In response to a question from Airborne’s insurance broker as to whether Airborne could file a claim if there was no bill of lading but by contract, Airborne assumed responsibility, a St. Paul employee responded via facsimile that “there is not a claims problem if no Bill of Lading is issued, but by contract they are liable.”


2. Per-Claim Deductible


St. Paul asks us to affirm summary judgment on an alternative ground, arguing that the $2,500 deductible in the policy must be applied on a per-package basis. As a matter of law, Airborne’s claim for indemnification for its settlement is not precluded by the policy deductible. The policy states that St. Paul will “pay all claims in excess of … $2,500 on Section 2 Cargo Legal Liability” after the $500,000 aggregate deductible is reached. The term “claim” is undefined in the policy, but in analogous contract disputes, Washington state courts have followed standard dictionary definitions and held that “the plain, ordinary meaning of claim is a demand for compensation.”  Safeco Title Ins. Co. v. Gannon, 774 P.2d 30, 33 (Wash.Ct.App.1989); see also Windham Solid Waste Mgmt. Dist. v. Nat’l Cas. Co., 146 F.3d 131, 134(2d Cir.1998) (reviewing the interpretation of the term “claim” in insurance case law across numerous states and holding that “[a] claim may be something other than a formal lawsuit” and requires simply “a specific demand for relief”); Nat’l Bank of Ariz. v. St. Paul Fire & Marine Ins. Co., 975 P.2d 711, 714 (Ariz.Ct.App.1999) (“A claim is a demand for relief, payment, or something as a right, or as due.”). This broad definition of “claim,” untethered to a single event or occurrence, is also consistent with insurance industry definitions. See, e.g., Harvey W. Rubin, Dictionary of Insurance Terms 85(4th ed.2000) (defining “claim” as a “request by an insured for indemnification by an insurance company for loss incurred from an insured peril”); Wash. State Office of the Ins. Comm’r, A Consumer’s Insurance Glossary, www.insurance. wa.gov/consumers/glossary.asp (defining “claim” as a “demand for benefits as provided by the policy”). The claims for breach of contract in the NFI and Sur La Table lawsuits, settled for $255,000 and $25,000 respectively, were clearly demands for compensation that derived from the sort of loss envisioned in the contract. As a result, each lawsuit was properly subject to a single deductible.



Both parties agree that the $500,000 annual deductible was reached in the relevant policy year.


Nothing in the insurance contract indicates that the deductible was intended to apply on a per-package basis, and we will not re-write the policy to accord with one party’s unexpressed intentions. See Transcon. Ins. Co. v. Wash. Pub. Utils. Dists.’ Util. Sys., 760 P.2d 337, 340 (Wash.1988) (“If the language in an insurance contract is clear and unambiguous, the court must enforce it as written….”); State Farm Fire & Cas. Co. v. English Cove Ass’n, 88 P.3d 986, 989 (Wash.Ct.App.2004). St. Paul’s emphasis on the definition of “occurrence” in the policy is entirely beside the point, because the deductible in the St. Paul/Airborne policy applies to “all claims,” rather than to individual occurrences causing damage. Given the guidance of the Washington courts that we read exclusion language narrowly, Phil Schroeder, 659 P.2d at 511, we agree with the district court that “claim” is unambiguous and affirm its denial of summary judgment on that ground.



Were we to conclude that the word “claim” in the policy was in fact ambiguous because it could refer to either each individual lost package or, as Washington law appears to hold, to any demand for compensation by NFI and Sur La Table, then we would attempt to discern and enforce the parties’ intent, and could consider their historical practices under the policy. See Transcon. Ins. Co., 760 P.2d at 340. However, while St. Paul proffers evidence of Airborne’s historical behavior when charged with individual lost package claims, this would be only marginally relevant to determining whether the parties understood the term “claim” also to incorporate a single lawsuit alleging many lost packages, as well as “lost profits, lost opportunities, and cancellation of existing client accounts.” Because this extrinsic evidence would not resolve the ambiguity, we would construe the deductible language against the insurer, as we must, Witherspoon v. St. Paul Fire & Marine Ins. Co ., 548 P.2d 302, 308 (Wash.1976), and we would reach the same result.




WALLACE, Circuit Judge, dissenting:

The majority makes a strong argument that there are material facts in dispute as to whether USPS was a covered agent of Airborne, and whether Airborne retained responsibility and liability for packages once they had been handed off to the USPS. However, I would not reach the issue. Even though ambiguities in deductible clauses are construed in favor of the insured, see Witherspoon v. St. Paul Fire & Marine Ins. Co., 548 P.2d 302, 308 (Wash.1976), I am persuaded that under Washington law the deductible in the policy should have been applied on a per-package basis. I would therefore affirm the summary judgment.


“To determine the parties’ intent, the court first will view the contract as a whole, examining its subject matter and objective, the circumstances of its making, the subsequent conduct of the parties, and the reasonableness of their respective interpretations.” Transcon. Ins. Co. v. Wash. Pub. Utilities Dist. Utility Sys., 760 P.2d 337, 340 (Wash.1988) (en banc). The consistent four-year historical practice of the parties was to apply a deductible to each individual claim of a cargo loss. An individual loss was never treated as anything but a separate claim involving a separate deductible. A former representative of Airborne conceded during a deposition that if each of the individual claims had been filed rather than as lumped together in a lawsuit, they would “absolutely” have been subject to individual deductibles.


Similarly, each of the 3,538 NFI lost claims was submitted individually to Airborne. NFI created a 98-page document listing all of the lost or damaged packages. There was no “common cause” involving all of the damaged or missing packages. Under Washington law, there were multiple occurrences, each giving rise to its own claim. See Greengo v. Pub. Employees Mut. Ins. Co., 959 P.2d 657, 663-64 (Wash.1998) (en banc) (“Where there were two collisions, we look to see if each has its own proximate cause. If so then there are two accidents”); Transcon., 760 P.2d at 345 (“We are persuaded by [the] contention that the number of triggering events depends on the number of causes underlying the alleged damage and resulting liability”).


The majority concludes that the plain meaning of “claim” is a “demand for compensation,” and accordingly that each lawsuit, which combined thousands of individual claims, was a single “claim” for the purposes of the insurance policy. This leads to absurd results. A company in Airborne’s position, under the majority’s approach, may simply refuse to pay any individual claims that are under the deductible amount until a comprehensive lawsuit is filed, thereby triggering insurance coverage that it would not have secured otherwise. I do not think that this is what the Washington law or the parties intended. I respectfully dissent.


C.A.9 (Wash.),2006.

Airborne Freight Corp v. St. Paul Fire & Marine Ins. Co.


McGirt v. Gulf,

McGirt v. Gulf Ins. Co.

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

United States Court of Appeals,Fourth Circuit.


GULF INSURANCE COMPANY, Defendant-Appellant,

andRoyal Insurance Company of America, Defendant.


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


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


Argued Oct. 26, 2006.

Decided Nov. 30, 2006.



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



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


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

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

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


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





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


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


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


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



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


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





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


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


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


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

© 2024 Central Analysis Bureau