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Progressive Cnty. Mut. Ins. Co. v. Caltzonsing

Court of Appeals of Texas, Thirteenth District, Corpus Christi – Edinburg

November 17, 2022, Delivered; November 17, 2022, Filed

NUMBER 13-21-00209-CV

Reporter

2022 Tex. App. LEXIS 8484 *; 2022 WL 16984245

PROGRESSIVE COUNTY MUTUAL INSURANCE COMPANY, Appellant, v. ANSELMO M. CALTZONSING, Appellee.

Prior History:  [*1] On appeal from the 377th District Court of Victoria County, Texas.

Core Terms

self-insurer, insured, coverage, uninsured, damages, public policy, ambiguous, motorist, tortfeasor, certificate, insurance policy, motor vehicle, irresponsible, underinsured, entity, insolvent, parties, legally entitled to recover, Dictionary, rental car company, immunity, driver, financial responsibility, family member, state law, benefits, summary judgment motion, uninsured motorist, policy language, federal law

Case Summary

Overview

HOLDINGS: [1]-The trial court did not err in denying the insurance company’s motion for summary judgment because the self-insurer exclusion did not foreclose the driver’s ability to recover as the exclusion as interpreted by  the insurance company frustrated the purpose of Texas’ uninsured/underinsured motorist statute in light of the Graves Amendment.

Outcome

Judgment affirmed.

LexisNexis® Headnotes

Civil Procedure > Judgments > Summary Judgment > Burdens of Proof

Civil Procedure > … > Summary Judgment > Appellate Review > Standards of Review

Civil Procedure > … > Summary Judgment > Entitlement as Matter of Law > Genuine Disputes

Civil Procedure > Judgments > Summary Judgment > Entitlement as Matter of Law

Civil Procedure > … > Summary Judgment > Burdens of Proof > Movant Persuasion & Proof

HN1  Summary Judgment, Burdens of Proof

An appellate court reviews a trial court’s decision to grant or deny a motion for summary judgment de novo. To be entitled to summary judgment, a movant must show that there is no genuine issue of material fact and that they are entitled to judgment as a matter of law. Courts indulge all reasonable inferences and resolve any doubts in favor of the non-movant.

Governments > Legislation > Interpretation

HN2  Legislation, Interpretation

When courts accept a permissive appeal, we must do what the Legislature has authorized and address the merits of the legal issues certified. This includes addressing all fairly included subsidiary issues and ancillary issues pertinent to resolving the controlling legal issue.

Contracts Law > Contract Interpretation > Parol Evidence > Custom & Usage

Insurance Law > … > Policy Interpretation > Parol Evidence > Customs & Trade Usage

Insurance Law > Claim, Contract & Practice Issues > Policy Interpretation > Technical Constructions & Meanings

Insurance Law > Claim, Contract & Practice Issues > Policy Interpretation > Ordinary & Usual Meanings

HN3  Parol Evidence, Custom & Usage

Courts interpret insurance policies in Texas according to the rules of contract interpretation. We must give an insurance policy’s undefined words their common, ordinary meaning unless the policy itself demonstrates that the parties intended a different or more technical meaning. Courts determine the meaning of an undefined term as used in an insurance policy by applying its ordinary and generally accepted meaning, as construed in context and in light of the rules of grammar and common usage. An interpretation that gives each word meaning is preferable to one that renders one surplusage. To determine a term’s common, ordinary meaning, courts typically look first to dictionary definitions and then consider the term’s usage in other authorities. But just as there are words that are so clear in meaning that they may never be altered by technical definitions or custom and usage, there may be words that simply do not have a nontechnical meaning.

Civil Procedure > Appeals > Standards of Review > De Novo Review

Insurance Law > Claim, Contract & Practice Issues > Policy Interpretation > Entire Contract

Insurance Law > Claim, Contract & Practice Issues > Policy Interpretation > Judicial Review

Insurance Law > Claim, Contract & Practice Issues > Policy Interpretation > Exclusions

Civil Procedure > Appeals > Standards of Review > Questions of Fact & Law

HN4  Standards of Review, De Novo Review

An intent to exclude coverage in an insurance policy must be expressed in clear and unambiguous language. Both the presence of an ambiguity and the interpretation of an unambiguous contract are questions of law that we review de novo. To determine whether a contract is ambiguous, courts look at the agreement as a whole in light of the circumstances present when the parties entered into the contract. If a written contract is so worded that it can be given a definite or certain legal meaning when so considered and as applied to the matter in dispute, then it is not ambiguous. If, however, the language of a policy or contract is subject to two or more reasonable interpretations, it is ambiguous. That the parties propose two different interpretations of the provision at issue does not make it ambiguous; ambiguity exists only if both parties’ interpretations are reasonable.

Contracts Law > … > Ambiguities & Contra Proferentem > Contract Ambiguities > Latent Ambiguities

Insurance Law > … > Policy Interpretation > Ambiguous Terms > Construction Against Insurers

Contracts Law > … > Ambiguities & Contra Proferentem > Contract Ambiguities > Patent Ambiguities

Insurance Law > Claim, Contract & Practice Issues > Policy Interpretation > Exclusions

Insurance Law > … > Policy Interpretation > Ambiguous Terms > Coverage Favored

HN5  Contract Ambiguities, Latent Ambiguities

Contract ambiguity comes in two flavors: patent or latent. A patent ambiguity is evident on the face of the contract. A latent ambiguity arises when a contract which is unambiguous on its face is applied to the subject matter with which it deals and an ambiguity appears by reason of some collateral matter. The language of the policy must be interpreted with reference to both the facts of the claim and the facts within the contemplation of the parties at the signing of the policy. If courts determine that only one party’s interpretation of the insurance policy is reasonable, then the policy is unambiguous and the reasonable interpretation should be adopted. If, however, more than one interpretation is reasonable, the language in the policy is ambiguous and it must be construed in favor of the insured. The court must adopt the construction of an exclusionary clause urged by the insured as long as that construction is not unreasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties’ intent.

Evidence > Burdens of Proof > Allocation

Insurance Law > … > Coverage > Uninsured Motorists > Mandatory Coverage

Insurance Law > … > Coverage > Compulsory Coverage > Proof of Financial Responsibility

Insurance Law > … > Coverage > Uninsured Motorists > Rejection of Coverage

Insurance Law > … > Coverage > Underinsured Motorists > Mandatory Coverage

HN6  Burdens of Proof, Allocation

Pursuant to the Texas Motor Vehicle Safety-Responsibility Act, every motorist on Texas roads must demonstrate proof of financial responsibility. Tex. Transp. Code Ann. § 601.051. To further this requirement, insurers must provide certain minimum amounts of coverage in the policies they issue. § 601.072; Tex. Ins. Code Ann. § 1952.0515. For instance, an insurer may not issue a policy without UIM coverage unless the consumer rejects such coverage in writing. Tex. Ins. Code Ann. § 1952.101. The purpose of the UIM statute is to protect conscientious motorists from financial loss caused by the negligence of financially irresponsible motorists. UIM coverage must provide for payment to the insured of all amounts that the insured is legally entitled to recover as damages from owners or operators of underinsured motor vehicles because of bodily injury or property damage, not to exceed the limit specified in the insurance policy. Tex. Ins. Code Ann. § 1952.106. The phrase legally entitled to recover simply means that the insured must be able to show fault on the part of the uninsured motorist and the extent of the resulting damages. In a dispute as to whether a vehicle is uninsured, the insurer bears the burden of proof. Tex. Ins. Code Ann. § 1952.109.

Civil Procedure > … > Federal & State Interrelationships > Federal Common Law > Preemption

Constitutional Law > Supremacy Clause > Federal Preemption

Constitutional Law > Supremacy Clause > Supreme Law of the Land

HN7  Federal Common Law, Preemption

Federal preemption derives from the Supremacy Clause of the United States Constitution. U.S. Const. art. VI, cl. 2. If a state law conflicts with federal law, it is preempted and has no effect. There are three recognized forms of federal preemption: (1) conflict, (2) express, and (3) field. But all of them work in the same way: Congress enacts a law that imposes restrictions or confers rights on private actors; a state law confers rights or imposes restrictions that conflict with the federal law; and therefore the federal law takes precedence and the state law is preempted.

Governments > Legislation > Effect & Operation > Operability

HN8  Effect & Operation, Operability

The general rule is that the laws which are in existence at the time of the making of the contract are impliedly incorporated into the contract.

Insurance Law > … > Policy Interpretation > Ambiguous Terms > Construction Against Insurers

Insurance Law > … > Policy Interpretation > Ambiguous Terms > Coverage Favored

HN9  Ambiguous Terms, Construction Against Insurers

When an insurance policy term is susceptible to two or more reasonable interpretations, the court must construe it in favor of the insured.

Insurance Law > Claim, Contract & Practice Issues > Relationship Between Clauses

HN10  Claim, Contract & Practice Issues, Relationship Between Clauses

When construing an insurance policy, courts are mindful of other courts’ interpretations of policy language that is identical or very similar to the policy language at issue. Uniformity amongst jurisdictions is important, especially where insurance provisions are identical throughout the country.

Civil Procedure > Pleading & Practice > Motion Practice > Content & Form

HN11  Motion Practice, Content & Form

A non-movant must expressly present to the trial court the reasons why the motion should not be granted. Courts determine whether grounds are expressly presented by looking at the written response itself.

Civil Procedure > Appeals > Standards of Review > De Novo Review

Contracts Law > Defenses > Public Policy Violations

Civil Procedure > Appeals > Standards of Review > Questions of Fact & Law

HN12  Standards of Review, De Novo Review

As a rule, parties have the right to contract as they see fit as long as their agreement does not violate the law or public policy. The Legislature determines public policy through the statutes it passes. Whether a contract violates public policy is a question of law, which an appellate court reviews de novo. To determine whether a contract is unenforceable on public policy grounds, the court must weigh the interest in enforcing agreements versus the public policy interest against such enforcement. On one side of the scale is Texas’ general policy favoring freedom of contract. In weighing this interest, the court should consider the reasonable expectations of the parties and the value of certainty in enforcement of contracts generally. On the other side of the scale is the extent to which the agreement frustrates important public policy. Courts consider whether the contract is injurious to the public good, not whether its application in a particular case results in actual injury.

Contracts Law > Defenses > Public Policy Violations

HN13  Defenses, Public Policy Violations

Texas has a strong public policy in favor of preserving the freedom of contract. But the freedom to contract is not limitless. Where a valid contract prescribes particular remedies or imposes particular obligations, equity generally must yield unless the contract violates positive law or offends public policy.

Governments > Legislation > Interpretation

HN14  Legislation, Interpretation

The strong underlying public policy behind the UIM statute is to protect conscientious motorists from financial loss caused by negligent financially irresponsible motorists. UIM coverage, therefore, is designed to place the injured claimant in a position as though a financially irresponsible motorist had been insured. Coruts construe the statute liberally to give effect to this public policy.

Insurance Law > … > Coverage > Uninsured Motorists > Notice Requirements

HN15  Uninsured Motorists, Notice Requirements

Any provision approved by the Board of Insurance that conflicts with the uninsured motorist statute will be held ineffective.

Insurance Law > … > Motor Vehicle Insurance > Coverage > Uninsured Motorists

HN16  Coverage, Uninsured Motorists

Litigation concerning UIM coverage is guided by tort law. Consistent with this principle is the requirement that recovery under UIM coverage depends on the liability of another party. An insured’s ability to recover through his UIM coverage depends on the liability and insurance of the tortfeasor, not the insurance status of the vehicle.

Insurance Law > … > Motor Vehicle Insurance > Exclusions > Family Members

HN17  Exclusions, Family Members

A family member exclusion for UIM coverage has been held to not violate the purposes of the UIM statute. This is because, typically, the family member would also be considered an insured through the applicable policy, and thus, not financially irresponsible.

Insurance Law > … > Motor Vehicle Insurance > Vehicle Ownership > Leases & Rental Vehicles

Torts > … > Liability > State Tort Claims Acts > Insurance Coverage

Insurance Law > … > Coverage > Compulsory Coverage > Rental Vehicles

HN18  Vehicle Ownership, Leases & Rental Vehicles

Under federal law, it is not possible to recover damages from a rental car company for the torts of its lessees unless the company is also directly liable. 49 U.S.C.S. § 30106(a). To deny UIM coverage, not because of a tortfeasor’s immunity, but because of an innocent third party’s immunity, is antithetical to the purpose of the UIM statute.

Insurance Law > … > Coverage > Compulsory Coverage > Proof of Financial Responsibility

Torts > Public Entity Liability > Immunities > Sovereign Immunity

HN19  Compulsory Coverage, Proof of Financial Responsibility

The self-insurer exclusion is also easily differentiated from the sovereign immunity and the family member exclusions. The doctrines of sovereign and official immunity protect both the driver and owner of the car. Thus, the tortfeasor is immune, not the vehicle. Further, the government is not required to comply with Texas’s statutory scheme concerning financial responsibility. Tex. Transp. Code Ann. § 601.007.

Counsel: For Caltzonsing, Anselmo M., Appellee: Hon. Rex Luther Easley.

For Progressive County Mutual Insurance Company, Appellant: Hon. Karla Huertas, Hon. Jeff Glass, Hon. David L. Plaut.

Judges: Before Chief Justice Contreras and Justices Benavides and Longoria. Opinion by Justice Benavides.

Opinion by: GINA M. BENAVIDES

Opinion

Opinion by Justice Benavides

This is an interlocutory appeal that stems from the trial court’s denial of appellant Progressive County Mutual Insurance Company’s (Progressive) motion for summary judgment against appellee Anselmo M. Caltzonsing. We granted Progressive’s petition for permissive appeal to address a matter of first impression: whether Caltzonsing is precluded from recovering under Progressive’s uninsured/underinsured motorist (UIM) coverage because the owner of the tortfeasor’s vehicle was issued a certificate of self-insurance. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(f); Tex. R. App. P. 28.3. We answer “no” and affirm the trial court’s judgment.


I. Background

The underlying facts of this case are not in dispute. On March 9, 2018, Caltzonsing was driving a vehicle owned by his employer, Gerado Lozada, and insured through Progressive. Janet Gaitan, the tortfeasor, “failed to control [*2]  her speed and struck the trailer towed by [Caltzonsing],” causing him “serious personal injury.” The car Gaitan drove was leased through EAN Holdings, LLC, d/b/a Enterprise Rent-A-Car (Enterprise). Caltzonsing recovered through Gaitan’s personal auto liability policy. However, the amount recovered was insufficient to cover the entirety of the damages Caltzonsing suffered.

On August 20, 2019, Caltzonsing filed suit against: (1) Progressive, his employer’s insurer; (2) Gaitan; and (3) Allstate, Caltzonsing’s own insurer.1 In his original petition, Caltzonsing sought, inter alia, a declaratory judgment that Gaitan was liable for the accident and that he had the right to receive UIM benefits under the Progressive policy. On September 20, 2019, Progressive filed an answer asserting in part that Caltzonsing had not established that he was legally entitled to recover through the policy’s UIM coverage.

On December 10, 2020, Progressive filed a combined motion for summary judgment, on both traditional and no-evidence grounds. Progressive asserted that Caltzonsing could not prove he was “‘legally entitled to recover’ from the underinsured motorist involved in the accident” because the “underinsured [*3]  motorist, [Gaitan], was operating a vehicle owned by [Enterprise], a self-insured entity.”

Attached as an exhibit to Progressive’s motion for summary judgment was the insurance policy setting forth the coverage afforded to Caltzonsing through his employer. The policy contained a “[UIM] coverage Endorsement” stating:

Subject to the Limits of Liability, if you pay the premium for this coverage, we will pay for the damages, other than punitive or exemplary damages, which an insured is legally entitled to recover from the owner or operator of an uninsured auto because of bodily injury:

1. sustained by an insured;

2. caused by an insured; and

3. arising out of the ownership, maintenance, or use of an uninsured auto.

The endorsement defined “[u]ninsured auto,” in part, to include an “underinsured auto,” which was in turn defined as:

[O]ne to which a liability bond or policy applies at the time of the accident, but its limit of liability either:

(i) is not enough to pay the full amount the insured is legally entitled to recover as damages; or

(ii) has been reduced by payment of claims to an amount which is not enough to pay the full amount the insured is legally entitled to recover as damages.

It also [*4]  excluded certain categories of vehicles from being considered uninsured. Relevant to this appeal, the endorsement excluded from the definition of an uninsured vehicle any vehicle that was “owned or operated by a self-insurer under any applicable vehicle law, except a self-insurer that is or becomes insolvent.” Progressive also attached as an exhibit a certificate of self-insurance issued to Enterprise by the Texas Department of Public Safety (TDPS).

The trial court ultimately denied Progressive’s motion for summary judgment but granted it permission to appeal. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(d). We accepted the appeal. See Tex. R. App. P. 28.3.


II. Standard Of Review

HN1 We review a trial court’s decision to grant or deny a motion for summary judgment de novo. See Tex. Mun. Power Agency v. Pub. Util. Comm’n of Tex., 253 S.W.3d 184, 192 (Tex. 2007); see also Mahoney v. Slaughter, No. 01-14-00471-CV, 2015 Tex. App. LEXIS 4668, 2015 WL 2159476, at *2 (Tex. App.—Houston [1st Dist.] May 7, 2015, no pet.) (mem. op.). To be entitled to summary judgment, a movant must show that there is no genuine issue of material fact and that they are entitled to judgment as a matter of law. Nixon v. Mr. Prop. Mgmt. Co., Inc., 690 S.W.2d 546, 548 (Tex. 1985). We indulge all reasonable inferences and resolve any doubts in favor of the non-movant. Id. at 549.


III. Analysis


A. Interpretation of Policy

HN2 When we accept a permissive appeal, we must “do what the Legislature has authorized and ‘address the merits of the legal issues certified.'” Elephant Ins., LLC v. Kenyon, 644 S.W.3d 137, 147 (Tex. 2022) (quoting Sabre Travel Int’l, Ltd. v. Deutsche Lufthansa AG, 567 S.W.3d 725, 733 (Tex. 2019)). This includes [*5]  “addressing all fairly included subsidiary issues and ancillary issues pertinent to resolving the controlling legal issue.” Id.

Here, the controlling question of law that was certified to us was “whether the ‘Self-Insured Exception’ provisions of [Caltzonsing]’s Auto Policy preclude uninsured/underinsured (“UM/UIM”) policy benefits when the tortfeasor’s vehicle is owned or operated by a self-insurer like Enterprise.” This question necessarily depends on an interpretation of the self-insurer exclusion in Caltzonsing’s policy, which is where we shall begin our analysis.


1. Standard of Review

HN3 “[W]e interpret insurance policies in Texas according to the rules of contract interpretation.” Kelley-Coppedge, Inc. v. Highlands Ins., 980 S.W.2d 462, 464 (Tex. 1998). “[W]e must give an insurance policy’s undefined words their common, ordinary meaning unless the policy itself demonstrates that the parties intended a ‘different’ or more ‘technical’ meaning.” Anadarko Petrol. Corp. v. Hous. Cas. Co., 573 S.W.3d 187, 193 (Tex. 2019). “[W]e determine the meaning of an undefined term as used in an insurance policy by applying its ‘ordinary and generally accepted meaning,’ as construed ‘in context and in light of the rules of grammar and common usage.'” Pharr-San Alamo Indep. Sch. Dist. v. Tex. Pol. Subdivisions Property/Casualty Joint Self Ins. Fund, 642 S.W.3d 466, 473-74 (Tex. 2022). “An interpretation that gives each word meaning is preferable to one that renders one surplusage.” [*6]  U.S. Metals, Inc. v. Liberty Mut. Grp., Inc., 490 S.W.3d 20, 23-24 (Tex. 2015). “To determine a term’s common, ordinary meaning, we typically look first to dictionary definitions and then consider the term’s usage in other authorities.” Anadarko Petrol., 573 S.W.3d at 192. “But just as there are words that are so clear in meaning that they may never be altered by technical definitions or custom and usage, there may be words that simply do not have a nontechnical meaning.” RPC, Inc. v. CTMI, LLC, 606 S.W.3d 469, 487 (Tex. App.—Fort Worth 2020, pet. denied).

HN4 An intent to exclude coverage in an insurance policy must be expressed in “clear and unambiguous language.” Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy, 811 S.W.2d 552, 555 (Tex. 1991). Both the presence of an ambiguity and the interpretation of an unambiguous contract are questions of law that we review de novo. URI, Inc. v. Kleberg County, 543 S.W.3d 755, 763 (Tex. 2018). “To determine whether a contract is ambiguous, we look at the agreement as a whole in light of the circumstances present when the parties entered into the contract.” Edascio, L.L.C. v. NextiraOne L.L.C., 264 S.W.3d 786, 796 (Tex. App.—Houston [1st Dist.] 2008, pet. denied). “If a written contract is so worded that it can be given a definite or certain legal meaning when so considered and as applied to the matter in dispute, then it is not ambiguous.” Id. at 765. “If, however, the language of a policy or contract is subject to two or more reasonable interpretations, it is ambiguous.” Kelley-Coppedge, Inc., 980 S.W.2d at 464 (quoting Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995)). That the parties propose two different interpretations of the provision at issue does not make it ambiguous; [*7]  “ambiguity exists only if both parties’ interpretations are reasonable.” Piranha Partners v. Neuhoff, 596 S.W.3d 740, 743-44 (Tex. 2020).

HN5 “Contract ambiguity comes in two flavors: patent or latent.” Kleberg County, 543 S.W.3d at 765. “A patent ambiguity is evident on the face of the contract.” Mescalero Energy, Inc. v. Underwriters Indem. Gen. Agency, 56 S.W.3d 313, 319 (Tex. App.— Houston [1st Dist.] 2001, pet. denied). “A latent ambiguity arises when a contract which is unambiguous on its face is applied to the subject matter with which it deals and an ambiguity appears by reason of some collateral matter.” CBI Indus., Inc., 907 S.W.2d at 520. “[T]he language of the polic[y] must be interpreted with reference to both the facts of the claim and the facts within the contemplation of the parties at the signing of the polic[y].” Id. “If we determine that only one party’s interpretation of the insurance policy is reasonable, then the policy is unambiguous and the reasonable interpretation should be adopted.” Nassar v. Liberty Mut. Fire Ins., 508 S.W.3d 254, 258 (Tex. 2017).

If, however, more than one interpretation is reasonable, the language in the policy is ambiguous and it must be construed in favor of the insured. Reyes v. Tex. All Risk Gen. Agency, 855 S.W.2d 191, 192 (Tex. App.—Corpus Christi—Edinburg 1993, no writ) (citing Hudson Energy, 811 S.W.2d at 555). “The court must adopt the construction of an exclusionary clause urged by the insured as long as that construction is not unreasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties’ intent.” Hudson Energy, 811 S.W.2d at 555.


2. Applicable [*8]  Law


a. Texas Law

In 1951, the Legislature enacted the Texas Motor Vehicle Safety-Responsibility Act, the name of which “is generally descriptive of its purpose.” Gillaspie v. Dep’t of Pub. Safety, 259 S.W.2d 177, 152 Tex. 459, 462-63 (Tex. 1953). HN6 Pursuant to this Act, every motorist on Texas roads must demonstrate proof of “financial responsibility.” Tex. Transp. Code Ann. § 601.051. To further this requirement, insurers must provide certain minimum amounts of coverage in the policies they issue. See id. § 601.072; Tex. Ins. Code Ann. § 1952.0515.

For instance, an insurer may not issue a policy without UIM coverage unless the consumer rejects such coverage in writing. Tex. Ins. Code Ann. § 1952.101. The purpose of the UIM statute is to protect conscientious motorists from financial loss caused by the negligence of financially irresponsible motorists. Stracener v. United Servs. Auto. Ass’n, 777 S.W.2d 378, 382 (Tex. 1989). UIM coverage “must provide for payment to the insured of all amounts that the insured is legally entitled to recover as damages from owners or operators of underinsured motor vehicles because of bodily injury or property damage, not to exceed the limit specified in the insurance policy.” Tex. Ins. Code Ann. § 1952.106. The phrase “legally entitled to recover” simply means “that the insured must be able to show fault on the part of the uninsured motorist and the extent of the resulting damages.” Franco v. Allstate Ins., 505 S.W.2d 789, 792 (Tex. 1974). In a dispute as to whether a vehicle is uninsured, the insurer bears the burden of proof. Tex. Ins. Code Ann. § 1952.109.


b. Federal [*9]  Law

On August 10, 2005, the United States Congress enacted the Graves Amendment which eliminated vicarious liability for rental car companies as follows:

An owner of a motor vehicle that rents or leases the vehicle to a person (or an affiliate of the owner) shall not be liable under the law of any State or political subdivision thereof, by reason of being the owner of the vehicle (or an affiliate of the owner), for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease, if—

(1) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and

(2) there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner).

49 U.S.C. § 30106(a).

HN7 Federal preemption derives from the Supremacy Clause of the United States Constitution. See U.S. CONST. art. VI, cl. 2; Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 1480, 200 L. Ed. 2d 854 (2018) (plurality op.). “If a state law conflicts with federal law, it is preempted and has no effect.” Great Dane Trailers, Inc v. Estate of Wells, 52 S.W.3d 737, 743 (Tex. 2001). There are three recognized forms of federal preemption: (1) conflict, (2) express, and (3) field. Murphy, 138 S.Ct. at 1479. “But all of them work in the same way: Congress enacts a law that imposes restrictions or confers rights on private actors; a state law confers rights or imposes [*10]  restrictions that conflict with the federal law; and therefore the federal law takes precedence and the state law is preempted.” Id. The Graves Amendment purports to preempt state law and eliminate vicarious liability for rental car companies whose lessees commit torts. 49 U.S.C. § 30106(a); see Cates v. Hertz Corp., 347 Fed. Appx. 2, 2009 WL 2447792, at *6 (5th Cir. 2009) (per curiam) (“The Graves Amendment preempted state law in the area of vicarious liability for owners engaged in the business of renting or leasing motor vehicles, absent a showing of negligence or criminal wrongdoing on the part of the owner.”).


3. Analysis

The portion of the insurance policy at issue is the exclusion that covers self-insurers. This exclusion states that uninsured vehicles do not include vehicles “owned or operated by a self-insurer under any applicable vehicle law, except a self-insurer that is or becomes insolvent.” Self-insurer is not defined in the policy, nor is the phrase “any applicable vehicle law.” But prepositional phrases are typically understood to modify the closest antecedent, unless such a construction is unreasonable. Certain Underwriters at Lloyd’s of London v. Cardtronics, Inc., 438 S.W.3d 770, 782 (Tex. App.—Houston [1st Dist.] 2014, no pet.). Thus, the phrase “under any applicable vehicle law” modifies the term “self-insurer,” not the phrase “owned or operated.” See id.

HN8 “The general rule is that the laws [*11]  which are in existence at the time of the making of the contract are impliedly incorporated into the contract.” Savin Corp. v. Copy Distrib. Co., 716 S.W.2d 690, 692 (Tex. App.—Corpus Christi—Edinburg 1986, no writ). To understand the meaning of the contract, we must therefore look to “any applicable vehicle law.”

Progressive urges that § 601.124(a) of the transportation code is an “applicable vehicle law” because it defines the term “self-insurer.” See Tex. Transp. Code Ann. § 601.124(a). This provision explains that one “may qualify as” a self-insurer if they are “[a] person in whose name more than 25 motor vehicles are registered,” and they “obtain[] a certificate of self-insurance issued by [TDPS] as provided by this section.” Id. But this tells us what the minimum qualifications of a self-insurer are, not necessarily what the meaning of the term is. The permissive use of the word “may” in the statute also indicates that even having a certificate of self-insurance and twenty-five vehicles registered in their name might not be sufficient for a person to become a self-insurer. See id.; Tex. Gov’T Code Ann. § 311.016 (“‘May’ creates discretionary authority or grants permission or a power.”). Indeed, the Texas Supreme Court has held that “to qualify as a self-insurer a person must meet two requirements: (1) have more than twenty-five motor vehicles registered in his name, and (2) be financially [*12]  responsible.” Tex. Dep’t of Pub. Safety v. Banks Transp. Co., 427 S.W.2d 593, 594 (Tex. 1968).

The transportation code defines financial responsibility as “the ability to respond in damages for liability for an accident that . . . occurs after the effective date of the document evidencing the establishment of the financial responsibility; and . . . arises out of the ownership, maintenance, or use of a motor vehicle.” Tex. Transp. Code Ann. § 601.002(3) (emphasis added). Thus, whether an entity is considered financially responsible in Texas will necessarily depend on its potential for being held liable for an accident. See id.; Banks Transp. Co., 427 S.W.2d at 594.

Neither party points to any other “applicable vehicle law” in Texas, and we are unable to find any. Progressive argues that the certificate of self-insurance issued by the Department of Public Safety which states that Enterprise “has been approved as a self-insurer under the Texas Motor Vehicle Safety Responsibility Act” is sufficient to prove its status as a self-insurer. But the parties did not contract around what the Department of Public Safety considers to be a self-insurer, and therefore, this extrinsic evidence does not help us determine the meaning of the term in the policy. See CBI Indus., Inc., 907 S.W.2d at 521.

In our interpretation of the term “self-insurer,” we cannot divorce it “from its setting and construe it without considering its [*13]  context.” Anadarko Petrol., 573 S.W.3d at 193. Here, the policy specifies that a self-insurer is not excluded from the policy’s UIM coverage if that entity “is or becomes insolvent.”

The term “insolvent” is not defined by the policy, so we must consider its “common, ordinary meaning.” See id. “The meaning of ‘insolvency’ is not definitely fixed and it is not always used in the same sense, but its definition depends rather on the business or fact situation to which the term applies.” Parkway/Lamar Partners, L.P. v. Tom Thumb Stores, Inc., 877 S.W.2d 848, 849 (Tex. App.—Fort Worth 1994, writ denied). Black’s Law Dictionary defines the term as “having liabilities that exceed the value of assets; having stopped paying debts in the ordinary course of business or being unable to pay them as they fall due.” Insolvent, Black’S Law Dictionary (11th ed. 2019). Webster’s Dictionary defines the term as “unable to pay debts as they fall due in the usual course of business,” “having liabilities in excess of a reasonable market value of assets held,” or “insufficient to pay all debts.” Merriam-Webster Dictionary https://www.merriam-webster.com/dictionary/insolvent (last visited Sept. 23, 2022).

The commonality amongst these definitions is that they hinge on the inability of an entity to pay the judgments that may be obtained against it. See Insolvent [*14] , Black’S Law Dictionary (11th ed. 2019); Merriam-Webster Dictionary https://www.merriam-webster.com/dictionary/insolvent (last visited Sept. 23, 2022). By extending UIM coverage to cars owned or operated by insolvent self-insurers, the clause necessarily contemplates that a self-insurer must be able to pay any judgment the insured may obtain against it. Otherwise, the self-insurer will be considered uninsured or underinsured, and the self-insurer exclusion will not apply. Which, we note, conforms to the purpose of UIM coverage—to protect an insured from a financially irresponsible tortfeasor. See Stracener, 777 S.W.2d at 382.

Having analyzed its surroundings, we now turn to the meaning of “self-insurer.” “The term ‘self-insurance’ is somewhat ambiguous.” 1A Couch On Insurance § 10:1; see Hertz Corp. v. Robineau, 6 S.W.3d 332, 336 (Tex. App.—Austin 1999, no pet.) (“The term ‘self-insurance’ is a misnomer . . . .”). This is because “a self-insurer does not provide insurance at all.” Robineau, 6 S.W.3d at 336. TDPS can issue a certificate of self-insurance to an entity if it “is satisfied that the person has and will continue to have the ability to pay judgments obtained against the person.” Tex. Transp. Code Ann. § 601.124(b)(2). But a certificate of self-insurance is not itself insurance. Rather, the certificate merely shows that the entity holding [*15]  it is so financially reliable that it can satisfy any judgment against it, and it need not shoulder the expense of purchasing liability insurance for each vehicle in its fleet. See id.; Robineau, 6 S.W.3d at 336.

In insurance parlance, “the essence of self-insurance, a term of colloquial currency rather than of precise legal meaning, is the retention of the risk of loss by the one upon whom it is directly imposed by law or contract.” 1A Couch On Insurance § 10:1. In other words, where an insurer shifts the risk of loss from the insured to itself, a self-insurer retains the risk. Id.

Thus, we conclude that a reasonable meaning of the term “self-insurer,” as used within the policy at issue, requires a lack of actual insurance, financial responsibility, and some form of risk retention. HN9 Even if Progressive’s interpretation is also reasonable, when an insurance policy term is susceptible to two or more reasonable interpretations, we must construe it in favor of the insured. See Progressive Cnty. Mut. Ins. v. Sink, 107 S.W.3d 547, 551 (Tex. 2003).

Because the phrase “any applicable vehicle law” is so broad, the policy may be referring to statutory law, common law, state law, or federal law. Thus, the Graves Amendment may also be an “applicable vehicle law,” as the vehicle in question [*16]  was owned by a rental car company. See 49 U.S.C. § 30106. And here, at the intersection between the meaning of the word “self-insurer” and the Graves Amendment, is where we find the dilemma in this case. Enterprise may have a certificate of self-insurance, but the risk has shifted away from it by law. See id. The parties do not contend that Enterprise was in any way negligent or committed a crime.2 Therefore, pursuant to the Graves Amendment, Enterprise cannot be held liable for Gaitan’s tort. See id. Because of this, we conclude that Enterprise is not a “self-insurer” under the terms of the policy.

Other jurisdictions have reached similar conclusions. HN10 “When construing an insurance policy, we are mindful of other courts’ interpretations of policy language that is identical or very similar to the policy language at issue.” RSUI Indem. Co., 466 S.W.3d 113, 118 (Tex. 2015). Uniformity amongst jurisdictions is important, especially where insurance provisions are identical throughout the country. Id.

In Bethke v. Auto-Owners Insurance Co., the policy at issue excluded from the definition of “underinsured automobile” an automobile “owned or operated by a self-insurer under any automobile law.” 2013 WI 16, 345 Wis. 2d 533, 825 N.W.2d 482, 485-86 (Wis. 2013). Wisconsin has a statute virtually indistinguishable from our [*17]  § 601.124, but also concluded that the term “self-insurer” “is not defined in Wisconsin’s statutes.” Id. at 488; compare Tex. Transp. Code Ann. § 601.124, with WIS. STAT. § 344.16.

The rental car company in Bethke, Avis, had obtained a certificate of self-insurance from the Wisconsin Department of Transportation. 825 N.W.2d 482 at 486. “The certificate state[d] that Avis ‘ha[d] qualified as a self-insurer under the Wisconsin ‘Motor Vehicle Safety Responsibility Act’ chapter 344 Wisconsin Statutes.'” Id. The insurance company argued “that because Avis self-insured the rental vehicle, there was no coverage under the policy.” Id. The Wisconsin Supreme Court analyzed the policy language to determine the “common and ordinary meaning” of “self-insurer” according to “what [a] reasonable person in the position of the insured would have understood the words to mean.” Id. at 488. The court concluded that “the policy term ‘self-insurer’ is ambiguous because it is unclear whether a reasonable insured would understand a car rental company . . . is a ‘self-insurer’ under the policy,” and interpreted the policy in favor of the insured. Id. at 493.

In Murray, the Eighth Circuit, applying Missouri law, examined a policy that excluded from the definition of an underinsured vehicle a vehicle “[o]wned or operated by a self-insurer as considered by any financial responsibility law, motor carrier law, [*18]  or similar law.” Murray v. Am. Fam. Mut. Ins., 429 F.3d 757, 761 (8th Cir. 2005). The appellants argued the policy was ambiguous because the tortfeasor’s vehicle “fits both the description of a vehicle that is underinsured and the description of a vehicle that is not underinsured.” Id. at 764. The court ultimately held that “interpreting the contract to nullify coverage in this situation would be an unreasonable interpretation.” Id. at 765.

In Martin v. Powers, the Tennessee Supreme Court analyzed the following policy exclusion: “Uninsured motor vehicle does not mean a vehicle . . . owned or operated by a self-insurer under any applicable motor vehicle law, except a self-insurer which is or becomes insolvent.” 505 S.W.3d 512, 518 (Tenn. 2016) (cleaned up). In that case, an individual drove a “[r]ental [c]ar into the [p]laintiff’s knee.” Id. at 515. The plaintiff brought a claim against his insurance provider to recover for his damages. Id. The insurer moved for summary judgment, arguing that the rental car company that owned the tortfeasor’s car was self-insured, and based on the policy language above, the plaintiff was barred from recovering as a matter of law. Id. at 516. As support for its motion for summary judgment, the insurance company provided a copy of the rental car company’s certificate of self-insurance [*19]  which “certifie[d] the company named herein ha[d] established self-insurance with the Tennessee Department of Safety for all owned or leased vehicles.” Id.; see Tenn. Code Ann. § 55-12-111 (detailing the process by which an entity in Tennessee “may qualify as a self-insurer by obtaining a certificate of self-insurance”).

The Tennessee Supreme Court concluded that “a reasonable person insured under an insurance policy containing the language at issue in this case would conclude that the term ‘self-insurer’ is a person or entity able to cover the risk of a liability through their own assets.” See id. at 519. The court “emphasize[d] . . . that the very concept of insurance, regardless of whether the insurance exists by way of owner assets or by way of an insurance policy, is inextricably tied to the risks of liability that are insured against.” Id. at 520. After determining that the policy language was ambiguous, the Tennessee Supreme Court concluded that “the [r]ental [c]ar was not owned ‘by a self-insurer under any applicable motor vehicle law’ and, therefore, meets the definition of an uninsured motor vehicle under the [p]olicy.” Id. at 525.

Although it is not dispositive to our analysis of the issue, our conclusion that Enterprise is not [*20]  a self-insurer as contemplated by the parties’ agreement is consistent with the holdings of other jurisdictions.


B. Violation of Public Policy 3

Further, even if we concluded that the unambiguous meaning of the term “self-insurer” in the policy was, as Progressive suggests, an entity that was approved as a self-insurer by the TDPS, the provision would be void as it violates public policy.


1. Standard of Review

HN12 “As a rule, parties have the right to contract as they see fit as long as their agreement does not violate the law or public policy.” In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 129 (Tex. 2004) (orig. proceeding). “The Legislature determines public policy through the statutes it passes.” Fairfield Ins. v. Stephens Martin Paving, LP, 246 S.W.3d 653, 665 (Tex. 2008).

“Whether a contract violates public policy is a question of law, which we review de novo.” Van Voris v. Team Chop Shop, LLC, 402 S.W.3d 915, 922 (Tex. App.—Dallas 2013, no pet.) (citing Barber v. Colo. I.S.D., 901 S.W.2d 447, 450 (Tex. 1995)). To determine whether a contract is unenforceable on public policy grounds, we must weigh “the interest in enforcing agreements versus the public policy interest against such enforcement.” Fairfield, 246 S.W.3d at 663. “On one side of the scale is Texas’ general policy favoring freedom of contract.” Id. In weighing this interest, we “should consider the reasonable expectations of the parties and the value of certainty in enforcement of contracts generally.” Id.

“On the other [*21]  side of the scale is the extent to which the agreement frustrates important public policy.” Fairfield, 246 S.W.3d at 663-64. We consider whether the contract is “injurious to the public good, not whether its application in a particular case results in actual injury.” Jankowiak v. Allstate Prop. & Cas. Ins., 201 S.W.3d 200, 210 (Tex. App.—Houston [14th Dist.] 2006, no pet.).


2. Analysis

HN13 Texas has a “strong public policy in favor of preserving the freedom of contract.” Fairfield, 246 S.W.3d at 664 (citing Tex. Const. art. I, § 16 (“No bill of attainder, ex post facto law, retroactive law, or any law impairing the obligation of contracts, shall be made.”)). But the freedom to contract is not limitless. Id. “Where a valid contract prescribes particular remedies or imposes particular obligations, equity generally must yield unless the contract violates positive law or offends public policy.” Fortis Benefits v. Cantu, 234 S.W.3d 642, 648-49 (Tex. 2007).

HN14 The “strong underlying public policy” behind the UIM statute is to protect conscientious motorists from financial loss caused by negligent financially irresponsible motorists. Stracener, 777 S.W.2d at 382. “U[I]M coverage, therefore, is designed to place the injured claimant in a position as though a financially irresponsible motorist had been insured.” Jankowiak, 201 S.W.3d at 210. We construe the statute liberally to give effect to this public policy. Old Am. Cnty. Mut. Fire Ins. v. Sanchez, 149 S.W.3d 111, 115 (Tex. 2004); Stracener, 777 S.W.2d at 382; McDonald v. S. Cnty. Mut. Ins., 176 S.W.3d 464, 476 (Tex. App.—Houston [1st Dist.] 2004, no pet.).

The Texas Board of Insurance may “define ‘uninsured motor vehicle,’ to exclude certain [*22]  motor vehicles whose operators are in fact uninsured.” TEX. INS. CODE ANN. § 1952.102(b). However,

[t]he Board must act consistently with and in furtherance of the purposes of the Act when it prescribes forms containing exclusions from the definition of ‘uninsured automobile.’ The validity of the exclusion here at issue, then, depends on what the purposes of the Act are and whether the Board, in promulgating the exclusion, acted consistently with and in furtherance of those purposes.

Francis v. Int’l Serv. Ins., 546 S.W.2d 57, 60 (Tex. 1976). HN15 “Any provision approved by the Board of Insurance that conflicts with the uninsured motorist statute will be held ineffective.” Kemp v. Fidelity Cas. Co. of N.Y., 512 S.W.2d 688, 690 (Tex. 1974).

Progressive relies on two cases to urge that its exclusion does not violate Texas public policy. See McQuinnie v. Am. Home Assur. Co., 400 Fed. Appx. 801, 2010 WL 3937387, at *4 (5th Cir. 2010) (per curiam); Nat. Gen. Ins. v. Parnham, 182 Ga. App. 823, 357 S.E.2d 139 (Ga. Ct. App. 1987). In National General Insurance Co. v. Parnham, a Georgia court of appeals applied Texas law to the facts of the case. 357 S.E.2d at 140. A Texas resident, Parnham, “was injured when his right knee was pinned between the Safari taxi and another taxi at the Atlanta International Airport.” Id. The Safari taxi was self-insured, and Parnham’s insurance policy included UIM coverage. Id. However, there existed a self-insurer exclusion in Parnham’s policy that was similar to the one at issue in this case. Id. The Georgia [*23]  court of appeals held that the self-insurer exclusion did not contravene Texas public policy because a “self-insurer does not become financially irresponsible just because it chooses the state-permitted option not to insure above the minimum.” Id. at 141. However, we note that in Parnham, the insured had the ability to recover from the self-insured entity. See id. at 140. Because of the Graves Amendment, the same is not true here. See 49 U.S.C. § 30106.

In McQuinnie, the insured sustained damages caused by the driver of a rental car. 400 Fed. Appx. 801, 2010 WL 3937387, at *1. The parties did not dispute that the tortfeasor’s vehicle was owned by a self-insured entity. 400 Fed. Appx. 801, Id. at *2. The Fifth Circuit concluded the policy language did not violate Texas public policy, holding that Texas law prioritizes “the insured nature of the motor vehicle rather than the tortfeasor.” 400 Fed. Appx. 801, Id. at *4. We disagree with the Fifth Circuit’s Erie guess, and as an unpublished federal decision, we are not obligated to follow it. See Westchester Fire Ins. v. Admiral Ins., 152 S.W.3d 172, 183 (Tex. App.—Fort Worth 2004, pet. denied).

HN16 Litigation concerning UIM coverage is guided by tort law. Brainard v. Trinity Universal Ins., 216 S.W.3d 809, 818 (Tex. 2006). Consistent with this principle is the requirement that recovery under UIM coverage depends on the liability of another party. See id. The Texas Supreme Court has stated numerous times that an insured’s ability to recover through his UIM [*24]  coverage depends on the liability and insurance of the tortfeasor, not the insurance status of the vehicle. See In re USAA Gen. Indem. Co., 624 S.W.3d 782, 788 (Tex. 2021) (orig. proceeding) (“If the liable motorist’s insurance coverage is insufficient to compensate the insured for those damages, the contractual duty to pay UIM benefits arises.”); Allstate Ins. v. Irwin, 627 S.W.3d 263, 265 (Tex. 2021) (“[UIM] coverage is insurance designed to fill the gap between the insured’s damages from an accident and the other driver’s ability to pay.”); In re USAA Gen. Indem. Co., 629 S.W.3d 878, 884 (Tex. 2021) (orig. proceeding) (“‘Legally entitled to recover,’ a term of art in the UIM context, ‘means the UIM insurer is under no contractual duty to pay benefits until the insured obtains a judgment establishing the liability and underinsured status of the other motorist.'”); In re State Farm Mut. Auto. Ins., 629 S.W.3d 866, 875 (Tex. 2021) (orig. proceeding) (“Thus, in order to establish State Farm’s liability to them under their UIM policies—as they must to recover on their Insurance Code claims—[the insured parties] must first obtain determinations of the third-party drivers’ liability and the amount of damages.”); Brainard, 216 S.W.3d at 818 (“Consequently, the insurer’s contractual obligation to pay benefits does not arise until liability and damages are determined.”); Sink, 107 S.W.3d at 554 (“We also note that the purpose of [UIM] coverage is to cover just these kinds [*25]  of situations in which a third party is legally entitled to recover from the person responsible for the accident but is unable to do so.” (footnote omitted)); Stracener, 777 S.W.2d at 382 (“The Legislature had as its initial objective the protection of conscientious motorists from ‘financial loss caused by negligent financially irresponsible motorists.'”).

Our sister courts have held similarly, focusing on the purpose of the UIM statute, which is to protect insured motorists who opted for UIM coverage from financially irresponsible tortfeasors. See Loncar v. Progressive Cnty. Mut. Ins., 553 S.W.3d 586, 590 (Tex. App.—Dallas 2018, no pet.) (“[UIM] coverage exists here if the facts supported the [insured’s] legal ability to overcome official immunity in a claim against [the tortfeasor]. That is, . . . [UIM] coverage exists if the insured has a legally enforceable right to recover judgment from the uninsured motor vehicle’s owner or operator.” (emphasis added)); Farmers Tex. Cnty. Mut. Ins. v. Okelberry, 525 S.W.3d 786, 790 (Tex. App.—Houston [14th Dist.] 2017, pet. denied) (“A negligent party is underinsured whenever the available proceeds of his liability insurance are insufficient to compensate for the injured party’s actual damages.”); Farmers Tex. Cnty. Mut. Ins. v. Griffin, 868 S.W.2d 861, 868 (Tex. App.—Dallas 1993, no writ) (holding that the purpose of UIM coverage is to protect an insured from “negligent, financially irresponsible drivers in other automobiles”).

The cases that have upheld exclusions [*26]  in Texas have also been guided by the principle that UIM coverage is ultimately designed to protect a responsible driver from financially irresponsible tortfeasors. For instance, in Francis v. International Service Insurance Co., the supreme court held that a sovereign immunity exclusion did not frustrate the purpose of the UIM statute because the governmental actor was not considered “financially irresponsible.” 546 S.W.2d 57, 61 (Tex. 1976) (plurality op.) (“If the plaintiff could not recover for her injuries from the City of Grand Prairie, it would not be because the City was ‘financially irresponsible’ in not insuring the fire truck. The reason would be because the . . . doctrine of sovereign immunity protected the city in the performance of the governmental function of providing fire protection.”).

HN17 Similarly, a family member exclusion for UIM coverage has been held to not violate the purposes of the UIM statute. See Griffin, 868 S.W.2d at 868. This is because, typically, the family member would also be considered an insured through the applicable policy, and thus, not financially irresponsible. See Charida v. Allstate Indem. Co., 259 S.W.3d 870, 876 (Tex. App.—Houston [1st Dist.] 2008, no pet.) (discussing family member exclusion to UIM coverage and holding that “[i]n a suit between insureds on the same policy, the need to protect [*27]  UIM coverage from becoming liability insurance remains”); see also Anderson v. Tex. Farm Bureau Mut. Ins., No. 11-13-00004-CV, 2014 Tex. App. LEXIS 8020, 2014 WL 3698313, at *3 (Tex. App.—Eastland July 24, 2014, no pet.) (mem. op.) (“The main purpose of UM/UIM motorist coverage is to protect the insured, his family members, and guests from the ‘negligence of others,’ meaning strangers to the policyholder, and not to protect against the negligence of the insured’s own family members. A second rationale is that UM/UIM motorist coverage is not meant to protect others from the insured; therefore, allowing an occupant to recover under both the liability and the UM/UIM portion of the same policy on the family car would effectively convert the UM/UIM coverage into a second layer of liability coverage.”) (internal citations omitted).

We turn to the exclusion at issue. Progressive argues that the self-insurer exclusion applies regardless of Enterprise’s liability, and further contends that this does not violate public policy. To determine whether the policy violates the exclusion, we must ask ourselves—Did the Board, “in promulgating the exclusion, act[] consistently with and in furtherance of” the Texas Motor Vehicle Safety-Responsibility Act? See Francis, 546 S.W.2d at 60. Simply put, no.

Applying the exclusion the way Progressive prays we do would be injurious to the public good. See Jankowiak, 201 S.W.3d at 210. HN18 Under federal law, it [*28]  is not possible to recover damages from a rental car company for the torts of its lessees unless the company is also directly liable. See 49 U.S.C. § 30106(a). Under Progressive’s interpretation of the policy, a conscientious Texan who obtains UIM coverage would be thwarted from recovering if the at-fault driver in an accident was an uninsured or underinsured motorist in a rental car. To deny UIM coverage, not because of a tortfeasor’s immunity, but because of an innocent third party’s immunity, is antithetical to the purpose of the UIM statute. See Stracener, 777 S.W.2d at 382.

HN19 The self-insurer exclusion is also easily differentiated from the sovereign immunity and the family member exclusions. The doctrines of sovereign and official immunity protect both the driver and owner of the car. See Cameron County v. Carrillo, 7 S.W.3d 706, 709 (Tex. App.—Corpus Christi—Edinburg 1999, no pet.). Thus, the tortfeasor is immune, not the vehicle. Further, the government is not required to comply with Texas’s statutory scheme concerning financial responsibility. See Tex. Transp. Code Ann. § 601.007. The Legislature has not afforded the same protections to rental car companies. Additionally, the family member exclusion involves two insureds on the same policy—thus, neither is uninsured. See Charida, 259 S.W.3d at 876.

This case is most similar to Fontanez v. Texas Farm Bureau Insurance Cos., 840 S.W.2d 647 (Tex. App.—Tyler 1992, no writ). In Fontanez, an uninsured thief stole an insured person’s [*29]  vehicle and killed the insured person with it. Id. at 649. A representative of the decedent’s estate brought a suit to recover benefits after the insurance company denied benefits. See id. The decedent’s policy included UIM coverage, but the insurance company argued that the insured person’s car, by definition, was not an uninsured vehicle. Id. The Tyler court reasoned that “[i]t is unlikely that [the decedent] realized her [UIM] coverage would not apply when an uninsured thief operating her car without permission struck and killed her.” Id. Thus, the Tyler court held that “to deny the Appellant recovery under [the insured’s] policy would frustrate the purpose behind and defeat the intent of the Uninsured Motorist Act as well as conflict with the Supreme Court’s reasoning in Stracener.” Id. at 650.

Similarly, it is unreasonable here to assume that Caltzonsing’s employer believed that by purchasing UIM coverage, it would not be covered any time the lessee of a rental car was at-fault. See id. at 649. To the contrary, this is one of the exact scenarios a lay person would likely presume to be covered when paying for UIM coverage—an accident with a rental car where the driver declined supplemental coverage. Were we to enforce [*30]  the contract provision as interpreted by Progressive, it would be virtually impossible for an innocent party to recover the full extent of their damages if the operator of a rental car was uninsured or underinsured.

We decline to hold that, as a matter of law, vehicles owned by self-insured entities will never be excluded from UIM coverage. Rather, such a determination is properly made on a case-by-case basis. See id. at 650; Briones v. State Farm Mut. Auto Ins., 790 S.W.2d 70, 74 (Tex. App.—San Antonio 1990, writ denied).

We simply hold that the self-insurer exclusion in this case does not foreclose Caltzonsing’s ability to recover because the exclusion as interpreted by Progressive frustrates the purpose of Texas’ UIM statute in light of the Graves Amendment. See Stracener, 777 S.W.2d at 382; cf. Young v. Progressive Se. Ins., 753 So.2d 80, 87 (Fla. 2000) (“[A] self-insured motorist exclusion is contrary to the statutory scheme set forth in the uninsured motorist statute, and . . . the provision in the Progressive uninsured motorist policy refusing to treat a self-insured motorist as either an underinsured or uninsured motorist is void.”); Tannone v. Amica Mut. Ins., 329 Conn. 665, 189 A.3d 99, 110 (Conn. 2018) (“Taking into account the Graves Amendment, the uninsured and underinsured motorist statutes, related state regulations, and underlying public policy, we therefore conclude that rental car companies may not be deemed self-insurers as to [*31]  the negligence of their lessees.”).


IV. Conclusion

Because Progressive did not establish it was entitled to judgment as a matter of law, the trial court did not err in denying its motion for summary judgment. See Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002). We affirm the trial court’s judgment.

GINA M. BENAVIDES

Justice

Delivered and filed on the

17th day of November, 2022.


End of Document


Neither Gaitan nor Allstate is a party to this permissive appeal.

Progressive acknowledges in its brief that Gaitan was the tortfeasor in this case. However, we do not express an opinion as to the ultimate issue of liability.

In its reply brief, Progressive argued that this Court was barred from considering Caltzonsing’s public policy argument, as it believed he failed to raise it below. HN11[] A non-movant must expressly present to the trial court the reasons why the motion should not be granted. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979). “We determine whether grounds are expressly presented by looking at the written response itself.” Garrod Invs., Inc. v. Schlegel, 139 S.W.3d 759, 765 (Tex. App.— Corpus Christi—Edinburg 2004, no pet.). Caltzonsing argued in his summary judgment response that Progressive’s interpretation of the policy was “based on absurd misreading of the UIM contract and violated Texas law,” that Progressive’s “bizarre interpretation makes no sense, because the purpose of UIM insurance is to protect responsible drivers from damages incurred as a result of drivers without sufficient insurance or self-insurance,” and that “[t]o the extent that [Progressive’s] definitions are inconsistent with the statutory definitions, the statutory definitions control.”

Although Caltzonsing never used the magic words “public policy,” we conclude the issue was sufficiently raised in his response to Progressive’s motion for summary judgment. See Salas v. Fluor Daniel Servs. Corp., 616 S.W.3d 137, 148 (Tex. App.—Houston [14th Dist.] 2020, pet. denied) (construing summary judgment response liberally); Richmond v. L.D. Brinkman & Co. (Tex.) Inc., 36 S.W.3d 903, 905 n.2 (Tex. App.—Dallas 2020, pet. denied) (same); cf. Perry v. Cohen, 272 S.W.3d 585, 588 (Tex. 2008) (noting that “disposing of appeals for harmless procedural defects is disfavored” and that “appellate courts should reach the merits of an appeal whenever possible”); McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 343 (Tex. 1993) (“Any confusion regarding what issues are expressly presented by the non-movant can . . . be resolved by exception.”).

Additionally, during argument before this Court, Progressive conceded that we could consider Caltzonsing’s public policy argument. We therefore will address the merits of this issue.

Progressive Express Ins. Co. v. Tate Transp. Corp.

United States District Court for the Middle District of Florida, Fort Myers Division

November 16, 2022, Decided; November 16, 2022, Filed

Case No: 2:21-cv-198-JES-KCD

Reporter

2022 U.S. Dist. LEXIS 208183 *; 2022 WL 16963815

PROGRESSIVE EXPRESS INSURANCE COMPANY, an Ohio Corporation, Plaintiff, v. TATE TRANSPORT CORPORATION, a Florida Corporation, RENEE NIENOW, ISLARY MARTINEZ, ISLAMARTI LLC, a Florida Limited Liability Company, DENNIS NIENOW, and ALBERTO DANIEL HERRERA MARTINEZ, Defendants.

Core Terms

Trucking, insured, duty to defend, Transport, coverage, default, state court, dump truck, summary judgment, allegations, duty to indemnify, business purpose, Drive, bicycle, construction site, drivers, loaded, terms, sand, summary judgment motion, policy exclusion, alleged facts, bodily injury, pleadings

Counsel:  [*1] For Progressive Express Insurance Company, an Ohio Corporation, Plaintiff: Stuart J. Freeman, Freeman, Goldis & Cash, P.A., ST. Petersburg, FL.

For Tate Transport Corporation, a Florida Corporation, Defendant: Jeffrey Alan Blaker, Jeffrey A. Blaker, ESQ., West Palm Beach, FL.

For Renee Nienow, Defendant: Michael G. Heilmann, Michael G. Heilmann, PC, Taylor, MI.

Islary Martinez, Defendant, Pro se, Naples, FL.

Islamarti LLC, a Florida Limited Liability Company, Defendant, Pro se, Naples, FL.

For Dennis Nienow, Defendant: Michael G. Heilmann, Michael G. Heilmann, PC, Taylor, MI.

Alberto Daniel Herrera Martinez, Defendant, Pro se, Naples, FL.

Judges: JOHN E. STEELE, SENIOR UNITED STATES DISTRICT JUDGE.

Opinion by: JOHN E. STEELE

Opinion


OPINION AND ORDER

This matter comes before the Court on the plaintiff’s Motion for Final Summary Judgment/Motion for Default Judgment (Doc. #72). Defendant Tate Transport Corporation (Tate Transport) filed a Response (Doc. #80), and Plaintiff filed a Reply (Doc. #81). Defendants Dennis Nienow and Renee Nienow have not responded to the motion, and the remaining defendants are in default.

Progressive Express Insurance Company (Progressive or plaintiff) filed its Amended Complaint for Declaratory [*2]  Judgment (Doc. #49) seeking a declaration that it did not owe a duty to defend or a duty to indemnify in a particular motor vehicle versus bicycle accident case filed in state court. Defendant Tate Transport filed an Answer and Affirmative Defenses (Doc. #51); defendants Islamarti, LLC, Alberto Daniel Herrera Martinez (Alberto Martinez), and Islary Martinez filed Answers and Affirmative Defenses (Doc. #52); and defendants Dennis Nienow and Renee Nienow filed an Answer (Doc. #53). Ultimately, a Clerk’s Default was issued as to Alberto Martinez, Islamarti LLC, and Islary Martinez. (Docs. ## 69-71.)

Progressive now seeks summary judgment and/or default judgment against all defendants. Progressive argues that the Commercial Auto Policy it issued does not provide bodily injury or property damage liability coverage to any of the defendants in connection with the March 25, 2020, accident. Progressive maintains that the Policy provides only non-trucking liability coverage and contains a trucking-use exclusion. Progressive asserts the undisputed facts establish that all three insured vehicles were being utilized to deliver building materials (sand) to a construction site, and therefore fall [*3]  squarely within the terms of the exclusion. Therefore, Progressive argues, it has no duty to defend or indemnify.


I.

Summary judgment is appropriate only when the Court is satisfied that “there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “An issue of fact is ‘genuine’ if the record taken as a whole could lead a rational trier of fact to find for the nonmoving party.” Baby Buddies, Inc. v. Toys “R” Us, Inc., 611 F.3d 1308, 1314 (11th Cir. 2010). A fact is “material” if it may affect the outcome of the suit under governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). “A court must decide ‘whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'” Hickson Corp. v. N. Crossarm Co., Inc., 357 F.3d 1256, 1260 (11th Cir. 2004) (quoting Anderson, 477 U.S. at 251).

In ruling on a motion for summary judgment, the Court views all evidence and draws all reasonable inferences in favor of the non-moving party. Scott v. Harris, 550 U.S. 372, 380, 127 S. Ct. 1769, 167 L. Ed. 2d 686 (2007); Tana v. Dantanna’s, 611 F.3d 767, 772 (11th Cir. 2010). However, “if reasonable minds might differ on the inferences arising from undisputed facts, then the court should deny summary judgment.” St. Charles Foods, Inc. v. America’s Favorite Chicken Co., 198 F.3d 815, 819 (11th Cir. 1999) (quoting Warrior Tombigbee Transp. Co. v. M/V Nan Fung, 695 F.2d 1294, 1296-97 (11th Cir. 1983) (finding summary judgment “may be inappropriate even where the parties agree on the basic facts, but disagree about the factual inferences that should be drawn from these facts”)). [*4]  “If a reasonable fact finder evaluating the evidence could draw more than one inference from the facts, and if that inference introduces a genuine issue of material fact, then the court should not grant summary judgment.” Allen v. Bd. of Pub. Educ., 495 F.3d 1306, 1315 (11th Cir. 2007).

“The defendant, by his default, admits the plaintiff’s well-pleaded allegations of fact, is concluded on those facts by the judgment, and is barred from contesting on appeal the facts thus established.” Nishimatsu Constr. Co. v. Houston Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975) (citations omitted). “While a defaulted defendant is deemed to admit the plaintiff’s well-pleaded allegations of fact, he is not held to admit facts that are not well-pleaded or to admit conclusions of law.” Surtain v. Hamlin Terrace Found., 789 F.3d 1239, 1245 (11th Cir. 2015) (quotation marks and citation omitted). “The mere entry of a default by the clerk does not in itself warrant the entry of default by the Court. Rather the Court must find that there is sufficient basis in the pleadings for the judgment to be entered.” GMAC Commercial Mortg. Corp. v. Maitland Hotel Assocs., Ltd., 218 F. Supp. 2d 1355, 1359 (M.D. Fla. 2002) (citing Nishimatsu, 515 F.2d at 1206).


II.

Progressive issued a Commercial Automobile Insurance Policy (the Policy) (Doc. #73-1) to Islamarti, LLC for the policy period July 31, 2019, to July 31, 2020. The “Coverage Summary” for the Policy states that the Policy includes provisions for “Non-Trucking Liability to Others.” (Doc. #73-1, p. 4.) [*5]  Part I of the Policy, the “Insuring Agreement – Liability To Others” portion, committed Progressive to “pay damages, other than punitive or exemplary damages, for bodily injury, property damage . . . for which an insured becomes legally responsible because of an accident arising out of its ownership, maintenance or use of that insured auto.” (Id. at 22) (bold in the original, indicating terms defined in the Policy). An Endorsement to the Policy provides that the Policy was modified to add the following exclusion:

15. Trucking Use

Coverage under this Part I, including our duty to defend, does not apply to an insured auto or any attached trailer while operated, maintained, or used:

a. To carry property or while such property is being loaded and unloaded from the insured auto or an attached trailer; or

b. In any business or for any business purpose.

(Id. at 53-54.) The Policy provides this coverage for three dump trucks – a 2006 Volvo Vhd, a 2006 Volvo Vhd, and a 2004 Peterbilt 379. (Id. at 5.) Tate Transport (and others) was an additional named insured on the Policy. (Id. at 7.)

During the term of the Policy, Islamarti had a business relationship with Tate Transport. Islamarti would provide [*6]  drivers and trucks to Tate Transport to carry dirt to sites selected by Tate Transport along routes selected by Tate Transport. Tate Transport would make weekly payments to Islamarti for the loads transported during the prior week. On March 25, 2020, the Policy was in full force and effect, and all three insured trucks were hauling fill sand from the Youngquist Brothers Mine to Tate Transport’s Siena Lakes construction project.

On March 25, 2020, 74-year-old Dennis Nienow (Mr. Nienow) went for a bicycle ride and was struck by a dump truck, causing very serious bodily injury. The police accident report described the events, which occurred at approximately 7:19 a.m., as follows:

[A bicycle] was traveling westbound on the sidewalk on Orange Blossom Drive approaching the intersection of Siena Lakes drive. [A vehicle] was traveling southbound on Siena Lakes Drive approaching the intersection of Orange Blossom Drive. As [the bicycle] entered the intersection, [the vehicle] proceeded to turn left onto Orange Blossom Drive. The front right of [the vehicle] struck [the bicycle] causing the rider to become separate from the bicycle. The rider and the bicycle came to final rest in the westbound [*7]  lane on Orange Blossom Drive. [Vehicle] continued eastbound on Orange Blossom Drive.

(Doc. #80-1, p. 2.) No vehicle owner was identified, and the accident was labelled a hit and run. (Id.) Mr. Nienow did not see the driver of the dump truck, did not recognize any marks on the dump truck or any writing on it, and does not recall what part of the truck hit him.

Mr. Nienow and his wife filed a First Amended Complaint (Doc. #49-2) in Lee County Circuit Court against Tate Transport, Alberto Daniel Herrera Martinez (Alberto Martinez), Islary Martinez, and Islamarti, LLC seeking in excess of one million dollars. The Nienows claim that Alberto Martinez “mowed down” Mr. Nienow on March 25, 2020, while driving a dump truck owned by Islamarti and acting as Tate Transport’s agent in connection with pick-up and deliveries of sand for the Siena Lakes construction site.


III.

Progressive filed suit under the federal Declaratory Judgment Act, 28 U.S.C. § 2201, seeking to take advantage of the valuable role a declaratory judgment plays in clarifying an insurance companies’ liability quickly and directly. James River Ins. Co. v. Rich Bon Corp., 34 F.4th 1054, 1058 (11th Cir. 2022). Progressive’s Amended Complaint For Declaratory Judgment asserts that if the dump truck involved in the accident was one of the three trucks [*8]  covered by the Policy, coverage is excluded by the “Trucking Use” exclusion because the truck “was being used to carry property or for was [sic] being used in the business of ISLAMARTI or was being used for a business purpose of ISLAMARTI.” (Doc. #49, ¶ 22.) As a result, the Amended Complaint asserts, Progressive has no duty to defend or indemnify. (Id. at ¶ 23.)

Progressive’s summary judgment motion focuses on only one component of the Trucking Use exclusion. Progressive assumes for purposes of the motion that one of the three insured dump trucks was the truck involved in the accident. Nonetheless, Progressive argues that the Policy does not provide coverage because the truck was being used in a commercial context to carry dirt to Tate Transport’s Sienna Lakes construction site, and thus was being operated “in any business or for any business purpose” within the meaning of the Policy’s “Trucking Use” exclusion. All three insured trucks would be subject to the same exclusion.


A. Duty to Defend

(1) Florida Law Applies

Because federal jurisdiction in this case is premised on diversity of citizenship (Doc. #49, ¶ 2), the Court applies Florida’s substantive law. Westchester Gen. Hosp., Inc. v. Evanston Ins. Co., 48 F.4th 1298, 1302 (11th Cir. 2022). All responding parties also [*9]  rely on Florida law. (Doc. #72, P. 6; Doc. #80, p.4.)

(2) Florida Duty to Defend Principles

The Court starts with Progressive’s duty to defend because “[u]nder Florida law, an insurer’s duty to defend is separate and distinct from its duty to indemnify, and it is more extensive.” Advanced Sys., Inc. v. Gotham Ins. Co., 272 So. 3d 523, 526-27 (Fla. 3d DCA 2019) (citation omitted). As the Eleventh Circuit has recently summarized:

Under Florida law, “an insurer’s duty to defend its insured against a legal action arises when the complaint alleges facts that fairly and potentially bring the suit within policy coverage.” Jones v. Fla. Ins. Guar. Ass’n, 908 So. 2d 435, 442-43 (Fla. 2005). The duty to defend is a broad one, broader than the duty to indemnify, and “[t]he merits of the underlying suit are irrelevant.” Mid-Continent Cas. Co. v. Royal Crane, LLC, 169 So. 3d 174, 181 (Fla. 4th DCA 2015). We determine whether an insurer has a duty to defend its insured based only on “the eight corners of the complaint and the policy,” id. at 182, and only as the complaint’s alleged facts are “fairly read,” Fun Spree Vacations, Inc., 659 So. 2d at 421. The “facts” we consider in evaluating the duty to defend come solely from the complaint, regardless of the actual facts of the case and regardless of any later developed and contradictory factual record. Jones, 908 So. 2d at 442-43. “Any doubts regarding the duty to defend must be resolved in favor of the insured,” id. at 443, and “where a complaint alleges facts that [*10]  are partially within and partially outside the coverage of an insured’s policy, the insurer is not only obligated to defend, but must defend that entire suit,” Sunshine Birds & Supplies, Inc. v. U.S. Fid. & Guar. Co., 696 So. 2d 907, 910 (Fla. 3d DCA 1997). But of course, because the lawsuit must be for something covered by the insurance policy, “the insurer has no duty to defend” when “the pleadings show the applicability of a policy exclusion.” State Farm Fire & Cas. Co. v. Tippett, 864 So. 2d 31, 35 (Fla. 4th DCA 2003).

Travelers Indem. Co. of Connecticut v. Richard Mckenzie & Sons, Inc., 10 F.4th 1255, 1261 (11th Cir. 2021). See also Westchester Gen. Hosp., Inc., 48 F.4th at 1302 (“However, an insurer does not need to defend an insured if a policy exclusion applies,” citing Keen v. Fla. Sheriffs’ Self-Ins. Fund, 962 So. 2d 1021, 1024 (4th Fla. DCA 2007)).

An insurance policy can, without creating a conflict or ambiguity, both provide coverage and exclude some things that might otherwise fall within that coverage. Cynergy, LLC v. First Am. Title Ins. Co., 706 F.3d 1321, 1327 (11th Cir. 2013). On the other hand, an insurance policy’s coverage becomes illusory if it grants coverage in one provision and completely takes it away in another provision. Richard Mckenzie & Sons, Inc., 10 F.4th at 1265-66.

Because Progressive relies on an exclusion to deny coverage, “it has the burden of demonstrating that the allegations of the complaint are cast solely and entirely within the policy exclusion and are subject to no other reasonable interpretation.” Advanced Sys., Inc. v. Gotham Ins. Co., 272 So. 3d 523, 527 (Fla. 3d DCA 2019) (citation omitted). The Court focuses on the specifics of the state court pleading and the Policy’s terms of coverage and exclusion from coverage. Richard Mckenzie & Sons, Inc., 10 F.4th at 1261. If the state court [*11]  pleadings show the applicability of a policy exclusion, Progressive has no duty to defend or indemnify. Id. at 1262.

(3) Application of Duty to Defend Principles

As discussed earlier, Part I of the Policy committed Progressive to “pay damages, other than punitive or exemplary damages, for bodily injury, property damage . . . for which an insured becomes legally responsible because of an accident arising out of its ownership, maintenance or use of that insured auto.” (Doc. #73-1, p. 22) (emphasis in original). The “arising out of” language provides a broad coverage. Richard Mckenzie & Sons, Inc., 10 F.4th at 1263. The Trucking Use Endorsement to the Policy excluded some of this coverage under certain circumstances:

15. Trucking Use

Coverage under this Part I, including our duty to defend, does not apply to an insured auto or any attached trailer while operated, maintained, or used:

a. To carry property or while such property is being loaded and unloaded from the insured auto or an attached trailer; or

b. In any business or for any business purpose.

(Id. at 53-54) (emphasis in original).

Progressive’s summary judgment motion only relies upon the “in any business or for any business purpose” portion of the Trucking Use Exclusion. (Doc. #72, p. 8.) Thus, [*12]  for the exclusion to apply in this case, the state court pleadings must show that all claims involve an accident which occurred while an “insured auto” was “operated, maintained, or used” “in any business or for any business purpose.”

The state court Amended Complaint (Doc. #49-2) alleges that Tate Transport is a trucking company whose drivers perform ultra-hazardous activities, including using dump trucks to deliver sand from Youngquist Brothers Mine to a construction site. (Id. at ¶ 4.) On or about February 4, 2020, Tate Transport entered into a profit-making agreement with South Florida Excavation to deliver white fill sand from Youngquist Brothers Rock Mine and other mines to a construction project at Siena Lakes. (Id. at ¶¶ 12-13.) Alberto Martinez was one of the dump truck drivers in Tate Transport business operations and is alleged to be the driver who hit Mr. Nienow on March 25, 2020. (Id. at ¶¶ 15-19.) The Amended Complaint sets forth five counts: (1) Negligence by Tate Transportation in the operation of the dump truck on March 25, 2020 (Count I); (2) breach of duty on March 25, 2020, as owner of a dangerous instrumentality (Count II); (3) negligent selection of sub-contractors [*13]  on and before March 25, 2020 (Count III); (4) Strict Liability against Islamarti for the accident on March 25, 2020, as owner of the dump truck (Count IV); and (5) active negligence against Tate Transport as a broker by breaching various duties on and before March 25, 2020 (Count V).

There is no dispute that all three of the dump trucks were “insured autos” within the meaning of the Policy. The state court Amended Complaint alleges facts showing that the dump truck was being “operated, maintained, or used” within the meaning of the Policy’s Trucking Use exclusion. Finally, the state court Amended Complaint alleges facts showing that the truck was being operated, maintained or used “in any business or for any business purpose.” Indeed, Tate Transport agrees that on March 25, 2020, all three trucks listed on the Policy “were involved in hauling fill sand to and from the Siena Lakes construction project.” (Doc. #80, p. 2, ¶ 1.)

Tate Transport suggests that if one of the three vehicles was involved in the accident it would not have been under load, since it was leaving the construction site. (Id. at p. 4.) While this may be true, the summary judgment motion does not rely on “loaded and unloaded” [*14]  portion of the Trucking Use Exclusion.

Additionally, Tate Transport argues that

[t]he minimal evidence that exists at this time shows that the accident occurred at a time when the subject trucks were not being operated, maintained, or used in business – they were either traveling without any load at the construction site or somewhere else. The evidence simply does not show, to the extent required for summary judgment, what the trucks were actually doing at the time of the accident. The drivers could have been taking a personal break. The trucks could have been turned off waiting for someone at the quarry to do something. Many possibilities exist that would bring this accident within Progressive’s coverage, i.e., where the subject exclusion would be inapplicable factually.

(Doc. #80, p. 5.) But, as discussed earlier, the Court is limited to the allegations in the state court Amended Complaint to determine the duty to defend. Those factual allegations are sufficient to establish what the truck was doing at the time of the accident, and by any reasonable definition of the undefined terms showed that the truck was being operated, maintained or used “in any business” or “for any business purpose.” [*15] 

The difficulty with Progressive’s duty to defend position is not that allegations of the state court Amended Complaint do not fall within the terms of the Trucking Use exclusion. Rather, there is a duty to defend in this case because the state court Amended Complaint is not confined to the March 25, 2020 accident. Count III and V of the Amended Complaint include negligent conduct allegedly occurring before the March 25, 2020 accident, which falls within the broad scope of coverage and is not within the terms of the Trucking Use exclusion. Thus, Count III alleges that Tate Transport is liable for negligent selection of sub-contractors for breaching several its duties prior to March 25, 2020. Count V alleges that Tate Transport is liable for active negligence as a broker, breaching several duties prior to March 25, 2020. Both claims seek damages for bodily injury because of an accident arising out of its ownership, maintenance or use of an insured vehicle, but are not limited to the circumstances required by the Trucking Use Exclusion.

An insurer’s duty to defend an insured in a legal action under Florida law “arises when the complaint alleges facts that fairly and potentially bring the [*16]  suit within policy coverage.” Jones v. Fla. Ins. Guar. Ass’n, 908 So. 2d 435, 442-43 (Fla. 2005). Even if the allegations in the complaint are meritless, the duty to defend nonetheless arises. All doubts about whether the duty to defend applies are resolved in favor of the insured. Id. at 443. “If an examination of the allegations of the complaint leaves any doubt regarding the insurer’s duty to defend, the issue is resolved in favor of the insured.” Laws. Title Ins. Corp. v. JDC (Am.) Corp., 52 F.3d 1575, 1580-81 (11th Cir. 1995). The allegations in the state court Amended Complaint in Counts III and V satisfy this requirement, and therefore Progressive is not entitled to summary judgment on its duty to defend position.


B. Duty to indemnify

“While the duty to defend is broad and based on the allegations in the complaint, the duty to indemnify is determined by the facts adduced at trial or during discovery.” Pa. Lumbermens Mut. Ins. Co. v. Ind. Lumbermens Mut. Ins. Co., 43 So. 3d 182, 188 (Fla. 4th DCA 2010). See also Pub. Risk Mgmt. of Florida v. Munich Reinsurance Am., Inc., 38 F.4th 1298, 1306 (11th Cir. 2022) (quoting Pa. Lumbermens).

Therefore, unlike the duty to defend, the trial court must look beyond the allegations in the underlying complaint to decide whether an insurer has a duty to indemnify. The duty to indemnify arguably may not become fully ripened until the merits of the underlying litigation are resolved. Aetna Ins. Co. v. Borrell-Bigby Elec. Co., 541 So.2d 139, 141 (Fla. 2d DCA 1989).

As of the filing of the summary judgment motion, the state court case was still ongoing. The material facts are not undisputed, [*17]  and therefore summary judgment on the duty to indemnify is not appropriate. This portion of the motion will be denied.


C. Default judgment

Rule 55 requires that “[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party’s default.” Fed. R. Civ. P. 55(a). Nevertheless, there is a “strong policy of determining cases on their merits” and, therefore, “default judgments are generally disfavored.” Surtain v. Hamlin Terrace Found., 789 F.3d 1239, 1244-45 (11th Cir. 2015) (quoting In re Worldwide Web Sys., Inc., 328 F.3d 1291, 1295 (11th Cir. 2003)). Here, the defaulted defendants turn out to be in the same essential situation as the other defendants. Progressive’s pleadings incorporate the state court Amended Complaint, Progressive has a duty to defend, and there are material disputed facts as to the duty to indemnify. Progressive’s motion for default judgment is denied.

Accordingly, it is now

ORDERED:

Plaintiff’s Motion for Final Summary Judgment/Motion for Default Judgment (Doc. #72) is DENIED.

DONE AND ORDERED at Fort Myers, Florida, this 16th day of November 2022.

/s/ John E. Steele

JOHN E. STEELE

SENIOR UNITED STATES DISTRICT JUDGE


End of Document

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