KLLM TRANSPORT SERVICES, Appellant v. HALLMARK COUNTY MUTUAL INSURANCE COMPANY, Appellee

 

No. 04-16-00066-CV

 

COURT OF APPEALS OF TEXAS, FOURTH DISTRICT, SAN ANTONIO

 

2016 Tex. App. LEXIS 10089

 

 

September 14, 2016, Delivered

September 14, 2016, Filed

 

 

MEMORANDUM OPINION

AFFIRMED

KLLM Transport Services filed the underlying lawsuit against Hallmark County Mutual Insurance Company seeking to compel Hallmark to pay a default judgment KLLM obtained against Total Transport Logistics, Inc. (the “Company”). KLLM alleged the Company was an insured under an insurance policy issued by Hallmark. Hallmark filed a motion to dismiss for lack of jurisdiction, asserting it was not liable because its insured was Edwin A. Rodriguez d/b/a Total Transport, an individual, not the Company. The trial court granted Hallmark’s motion. The sole issue KLLM presents on appeal is whether the trial court erred in granting the motion to dismiss because the MCS-90 endorsement attached to the insurance policy issued by Hallmark [*2]  expressly authorized KLLM to file suit against Hallmark to compel payment of the default judgment. We affirm the trial court’s order.

 

BACKGROUND

Hallmark issued a business auto insurance policy to Edwin A. Rodriguez d/b/a Total Transport as the named insured with a policy period from July 30, 2013, to July 30, 2014. The policy has the following boxes to be checked for form of business: corporation, partnership, individual, other. The box was checked for individual.

The policy contained an MCS-90 endorsement which also identified the named insured as Edwin A. Rodriguez d/b/a Total Transport. This endorsement provided:

 

It is further understood and agreed that, upon failure of [Hallmark] to pay any final judgment recovered against the insured as provided herein, the judgment creditor may maintain an action in any court of competent jurisdiction against [Hallmark] to compel such payment.

 

 

In December of 2013, Terrance Chapman was driving a tractor-trailer when he struck a parked tractor owned by KLLM. In 2014, KLLM sued Chapman and the Company in McClennan County asserting a negligence claim seeking damages.1 KLLM alleged the tractor-trailer Chapman was operating had the Company’s Department [*3]  of Transportation number. The Company never filed an answer, so KLLM filed a motion for default judgment. In a document entitled Affidavit of Non-Military filed in connection with the motion, KLLM’s attorney stated the Company is a Texas corporation. On November 14, 2014, the trial court signed a final default judgment awarding KLLM $8,778.65 in damages plus costs and attorney’s fees.

 

1   The lawsuit was actually filed by KLLM’s insurer as a subrogation claim.

On June 23, 2015, KLLM sued Hallmark asserting the Company was insured by Hallmark at the time of the 2013 collision. The petition alleged KLLM “is a judgment creditor, who recovered a Judgment for property damage, and Defendant Hallmark, an insurance company, has failed to within thirty (30) days of said Judgment to satisfy the Judgment.”

On October 23, 2015, Hallmark filed a motion to dismiss for lack of jurisdiction, asserting KLLM had not obtained a final judgment against any person or entity insured by Hallmark because Hallmark’s insured was not the Company but was Edwin A. Rodriguez, an individual. Because Rodriguez was the named insured in both the policy and the MCS-90 endorsement attached to that policy, Hallmark contended [*4]  KLLM lacked standing to bring a direct action against Hallmark. KLLM filed a response to Hallmark’s motion attaching various documents in support of its argument that the Company was Hallmark’s insured, including the printed result from a business organizations inquiry to the Texas Secretary of State and an insurance history from the Federal Motor Carrier Safety Administration. Hallmark filed a reply asserting courts must look to the language of the insurance policy in assessing coverage and cannot consider extrinsic documents. After a hearing on Hallmark’s motion, the trial court signed an order granting Hallmark’s motion to dismiss. KLLM appeals.

 

STANDARD OF REVIEW

[HN1] Because Texas is not a direct action state, a third party claimant cannot enforce an insurance policy directly against an insurer until it has been established, by judgment or agreement, that the insured has a legal obligation to pay damages to the injured party. Angus Chem. Co. v. IMC Fertilizer, Inc., 939 S.W.2d 138, 138 (Tex. 1997); Ohio Cas. Ins. Co. v. Time Warner Entm’t Co., L.P., 244 S.W.3d 885, 888 (Tex. App.–Dallas 2008, pet. denied). Whether the absence of a direct claim is characterized as a challenge to standing or ripeness, the absence of a direct claim implicates a trial court’s subject matter jurisdiction. See In re First Mercury Ins. Co., 437 S.W.3d 34, 39-40 (Tex. App.–Corpus Christi 2014, orig. proceeding); United Fire Lloyds v. Tippin, 396 S.W.3d 733, 735-36 (Tex. App.–Houston [14th Dist.] 2013, no pet.); Ohio Cas. Ins. Co., 244 S.W.3d at 889. [HN2] We review a trial court’s ruling on a motion challenging its subject [*5]  matter jurisdiction de novo. Houston Belt & Terminal Ry. Co. v. City of Houston, 487 S.W.3d 154, 160 (Tex. 2016). If the motion challenges pleadings, we liberally construe the pleadings to determine if the plaintiff has “alleged facts that affirmatively demonstrate the court’s jurisdiction to hear the cause.” Id. (internal citations omitted). If jurisdictional facts are challenged, “we consider relevant evidence submitted by the parties to determine if a fact issue exists.” Suarez v. City of Tex. City, 465 S.W.3d 623, 632-33 (Tex. 2015). “We take as true all evidence favorable to the nonmovant, indulge every reasonable inference, and resolve any doubts in the nonmovant’s favor.” Id. at 633. “If the evidence creates a fact question regarding jurisdiction, the [motion] must be denied pending resolution of the fact issue by the fact finder.” Id. “If the evidence fails to raise a question of fact, however, the [motion] must be granted as a matter of law.” Id.

 

MCS-90 ENDORSEMENT

[HN3] Unless a motor carrier has a surety bond or authorization to self-insure, an MCS-90 endorsement must be attached to any liability policy issued to for-hire registered motor carriers operating motor vehicles transporting property in interstate commerce.2 49 C.F.R. § 387.7(d); see also Canal Ins. Co. v. Coleman, 625 F.3d 244, 247 (5th Cir. 2010); S. Cty. Mut. Ins. Co. v. Great West Cas. Co., 436 S.W.3d 348, 350 (Tex. App.–Waco 2014, no pet.). The public policy underlying the MCS-90 endorsement “was to assure that injured members of the public [*6]  would be able to obtain judgments collectible against negligent authorized carriers.” T.H.E. Ins. Co. v. Larsen Intermodal Servs., Inc., 242 F.3d 667, 672 (5th Cir. 2001) (internal citations omitted). Under the MCS-90 endorsement, an insurer is liable to a third party judgment creditor for any liability resulting from the negligent use of any motor vehicle by the insured, even if the vehicle is not covered under the insurance policy. See T.H.E. Ins. Co., 242 F.3d at 671; S. Cty. Mut. Ins. Co., 436 S.W.3d at 350. For this reason, the MCS-90 endorsement simultaneously grants the insurer the right to demand reimbursement from the insured for claims paid to a third party judgment creditor for which the insurer would not otherwise have been obligated to pay under the provisions of the policy. See Travelers Indem. Co. of Ill. v. W. Am. Specialized Transp. Servs., Inc., 409 F.3d 256, 260 (5th Cir. 2005).

 

2   Motor carriers are required to have minimum levels of financial responsibility in effect through one of the following: (1) an MCS-90 “Endorsement(s) for Motor Carrier Policies of Insurance for Public Liability Under Sections 29 and 30 of the Motor Carrier Act of 1980” issued by an insurer(s); (2) an MCS-82 “Motor Carrier Surety Bond for Public Liability Under Section 30 of the Motor Carrier Act of 1980” issued by a surety; or (3) a written decision, order, or authorization of the Federal Motor Carrier Safety Administration authorizing a motor carrier to self-insure. 49 C.F.R. § 387.7(a), [*7]  (d).

 

DISCUSSION

In the instant case, Hallmark challenged whether KLLM had recovered a final judgment against its insured. In the absence of a final judgment against Hallmark’s insured, KLLM could not assert a direct claim against Hallmark by maintaining an action under the MCS-90 endorsement. See Angus Chem. Co., 939 S.W.2d at 138; Ohio Cas. Ins. Co., 244 S.W.3d at 888.

The federal regulation authorizing the MCS-90 endorsement defines “insured” as “the motor carrier named in the policy of insurance.” 49 C.F.R. § 387.5. Guidance from the Federal Motor Carrier Safety Administration, “issued in response to a request for clarification of the meaning of ‘insured’ in Form MCS-90, defined ‘insured and principal’ as ‘the motor carrier named in the policy of insurance . . . and emphasized that ‘Form MCS-90 … [is] not intended, and do[es] not purport, to require a motor carrier’s insurer … to satisfy a judgment against any party other than the carrier named in the endorsement ….'” Ill. Nat’l Ins. Co. v. Temian, 779 F. Supp. 2d 921, 927 (N.D. Ind. 2011) (quoting Federal Motor Carrier Safety Administration, Regulatory Guidance for Forms Used to Establish Minimum Levels of Financial Responsibility of Motor Carriers, 70 FR 58065-01 (October 5, 2005)).[HN4]  “Courts addressing the meaning of ‘insured’ in the MCS-90 endorsement since the FMCSA guidance have consistently held that the endorsement’s coverage does not extend beyond the named insured.” Id. (citing Ooida Risk Retention Group, Inc. v. Williams, 579 F.3d 469, 477-78 (5th Cir. 2009); Lancer Ins. Co. v. Hitts, No. 5:09cv302, 2010 U.S. Dist. LEXIS 134881, 2010 WL 5351842, at *6-7 (M.D. Ga. Dec. 21, 2010); [*8]  Sentry Select Ins. Co. v. Thompson, 665 F. Supp. 2d 561, 565-68 (E.D. Va. 2009); Armstrong v. United States Fire Ins. Co., 606 F. Supp. 2d 794, 808-26 (E.D. Tenn. 2009)).

[HN5] “An insurance policy is a contract, generally governed by the same rules of construction as all other contracts.” RSUI Indem. Co. v. The Lynd Co., 466 S.W.3d 113, 118 (Tex. 2015). “Interpretation of an unambiguous contract is an issue of law.” Gallagher Headquarters Ranch Dev., Ltd. v. City of San Antonio, 303 S.W.3d 700, 702 (Tex. 2010). Extrinsic evidence can only be considered when a contract is ambiguous. Id.

In the instant case, both the policy and the MCS-90 endorsement issued by Hallmark unambiguously identify the named insured as Edwin A. Rodriguez d/b/a Total Transport.3 The policy lists the form of business as individual. See Dillard v. Smith, 146 Tex. 227, 205 S.W.2d 366, 367 (Tex. 1947) (noting assumed name is not a separate entity from the individuals using the assumed name); Plotkin v. Joekel, 304 S.W.3d 455, 473 (Tex. App.–Houston [1st Dist.] 2009, pet. denied) (noting a d/b/a is not a separate corporate entity). Because the policy established as a matter of law that Hallmark’s insured was not the Company, KLLM did not have a direct claim against Hallmark. Angus Chem. Co., 939 S.W.2d at 138; Ohio Cas. Ins. Co., 244 S.W.3d at 888. Accordingly, the trial court did not err in granting Hallmark’s motion to dismiss.

 

3   Because the policy is unambiguous, we cannot consider KLLM’s extrinsic evidence, including the FMCSA’s insurance history showing Hallmark as an insurance carrier for the Company. See id.

 

CONCLUSION

The trial court’s order is affirmed.

Karen Angelini, Justice