United States Court of Appeals,

Seventh Circuit.

CAROLINA CASUALTY INSURANCE COMPANY, Intervenor / Plaintiff-Appellant,

v.

E.C. TRUCKING et al., Defendants-Appellees.

Submitted Sept. 18, 2003.

Decided Jan. 31, 2005.

Before COFFEY, ROVNER, and WILLIAMS, Circuit Judges.

WILLIAMS, Circuit Judge.

Carolina Casualty intervened in Vanesse Fort’s wrongful death action, seeking a declaratory judgment that it had no duty to provide coverage for any judgment rendered against its insured, C.W. Keller Trucking, Inc., in the wrongful death case. The district court denied Carolina Casualty the requested relief, finding that the federally-mandated MCS-90 endorsement attached to its policy was applicable. We agree and, therefore, affirm.

I. BACKGROUND

This appeal arises from a tragic accident on March 15, 2000 in Peru, Indiana, in which a tractor-trailer driven by Jacob Nance struck Eric Fort’s vehicle, killing Fort. E.C. Trucking, Inc. owned the tractor, which it leased to Ryder Integrated Logistics. Ryder owned the trailer.

When the accident took place, Ryder and E.C. Trucking were parties to a lease agreement. Under this agreement, Ryder leased three tractors from E.C. Trucking and provided to E.C. Trucking its Interstate Common Carrier (ICC) authority, enabling E.C. Trucking to haul automobile parts in certain runs specified by Ryder. E.C. Trucking did not have its own ICC authority. Ryder also had an agreement with C.W. Keller Trucking, Inc. under which Keller acted as a subcontractor for Ryder, hauling automobile parts on runs designated by Ryder using Keller’s own ICC authority. At the time of the accident, E.C. Trucking owned Keller and was legally entitled to use the name “E.C. Trucking d/b/a C.W. Keller Trucking.”

On the day of the collision, Nance was scheduled to do a run pursuant to Ryder’s agreement with Keller. As dictated by that agreement, Nance was to use a tractor bearing Keller’s placards and ICC authority. The scheduled tractor experienced mechanical difficulty so Nance instead used a tractor owned by E.C. Trucking and leased to Ryder bearing Ryder’s placards and ICC authority. A dispatcher employed by the owner of both E.C. Trucking and Keller made the switch, but did not get Ryder’s permission to do so.

Vanesse Fort, Eric Fort’s widow, brought a wrongful death action against Ryder, Nance, E.C. Trucking, and Keller. Carolina Casualty Insurance Company, Keller’s insurer at the time of the accident, intervened in the lawsuit, seeking a declaration that its policy with Keller did not afford coverage for the dispute. The district court bifurcated the coverage dispute and the wrongful death action.

Before trial in the wrongful death suit, Fort entered into a loan receipt agreement with Ryder, agreeing to dismiss her suit against all defendants except Keller. Under the agreement, Fort received $2.25 million from Ryder and agreed that she would repay Ryder one-third of the amount she recovered from Keller, but no more than $2.25 million. Ultimately, a jury found Keller liable in the wrongful death action and awarded Fort $1,042,234.75. Keller requested that the district court reduce the judgment against it by the amount Keller would retain from the loan receipt agreement with Ryder (which would reduce Keller’s payment to zero). The district court denied the request and this court affirmed in Fort v. C.W. Keller Trucking, 330 F.3d 1006 (7th Cir.2003).

In the coverage dispute, the district court found that, although the general provisions *841 of Carolina Casualty’s policy with Keller did not afford coverage, Fort was entitled to recover pursuant to a federally-mandated endorsement attached to Carolina Casualty’s policy with Keller, the MCS-90 endorsement. The district court further found that Ryder’s insurance policy with Old Republic Insurance Company (which was not a party to the action) did not afford coverage. Carolina Casualty appeals the district court’s judgment in favor of Fort and its finding that the Old Republic policy did not provide coverage.

II. ANALYSIS

A. MCS-90 Endorsement

We first consider Carolina Casualty’s argument that the district court erred by finding that the policy’s MCS-90 endorsement entitled Fort to recover from the insurer. Regulations promulgated pursuant to the Motor Carrier Act, 49 U.S.C. § 13906(f), mandate that liability insurance policies providing coverage for motor carriers include a MCS-90 endorsement. 49 C.F.R. § § 387.7(a), 387.9, 387.15. “Federal law applies to the operation and effect of [such] endorsements.” John Deere Ins. Co. v. Nueva, 229 F.3d 853, 856 (9th Cir.2000). The MCS-90 endorsement provides, in pertinent part, as follows:

In consideration of the premium stated in the policy to which this endorsement is attached, the insurer (the company) agrees to pay, within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles … regardless of whether or not each motor vehicle is specifically described in the policy …. [N]o condition, provision, stipulation, or limitation contained in the policy, this endorsement, or any other endorsement thereon, or violation thereof, shall relieve the company from liability or from the payment of any final judgment, within the limits of liability herein described, irrespective of financial condition, insolvency or bankruptcy of the insured.

Thus, “whatever limitation a policy expresses regarding coverage extending only to ‘covered’ or ‘specified’ autos, this limitation ceases to operate when an injured member of the public seeks indemnification on behalf of the insured.” John Deere, 229 F.3d at 859.

We agree with the district court that the endorsement was intended to compensate members of the public such as Fort. See id. at 857 (“It is well-established that the primary purpose of the MCS-90 is to assure that injured members of the public are able to obtain judgments from negligent authorized interstate carriers.”); see also Travelers Ins. Co. v. Transport Ins. Co., 787 F.2d 1133, 1140 (7th Cir.1986) (noting that ICC regulations are intended “to ensure that an ICC carrier has independent financial responsibility to pay for losses sustained by the general public arising out of its trucking operations”). Indeed, in this case the endorsement is particularly applicable, as a jury rendered a final judgment against Keller, Carolina Casualty’s insured, for liability arising from the negligent injury of a member of the public, namely Eric Fort.

Carolina Casualty argues that, despite the endorsement’s language which plainly suggests that Fort is entitled to recover, the MCS-90 endorsement is not applicable to Fort, as she was already compensated when she received $2.25 million from Ryder pursuant to the aforementioned loan receipt agreement. We disagree. Our prior decision in Fort v. C.W. Keller Trucking held that the payment Fort received from Ryder was a loan, which under Indiana law is not considered *842 satisfaction of a judgment. 330 F.3d at 1009- 13. See American Transport Co. v. Central Indiana Ry. Co., 255 Ind. 319, 264 N.E.2d 64, 67 (1970) (finding that funds received via loan receipt agreement in no way constitutes a partial payment or partial satisfaction of the judgment); Sanders v. Cole Mun. Fin., 489 N.E.2d 117, 120 (Ind.Ct.App.1986) (same). Further, Carolina Casualty cites no authority (and we know of none) supporting the proposition that a member of the public is not entitled to recover pursuant to the MCS-90 endorsement if she receives funds pursuant to a loan receipt agreement. Therefore, in this case, we decline to find that the loan receipt agreement relieved the insurer, Carolina Casualty, of its obligation under the MCS-90 endorsement to pay Fort, a member of the public, for the final judgment rendered against its insured, Keller.

Carolina Casualty’s remaining arguments warrant little discussion. Carolina Casualty contends that Fort should not be able to recover under the MCS-90 endorsement because portions of the money Fort recovers will flow to Ryder, as the loan receipt agreement provides that Ryder is entitled to one-third of the amount Fort recovers from Keller. This argument is of no avail; what Fort does with the money she receives from Carolina Casualty has no bearing on the applicability of the MCS-90 endorsement. Carolina Casualty also asserts that because E.C. Trucking owns Keller and the loan receipt agreement provided that Fort would not attempt to recover from E.C. Trucking, she should be barred from recovering against Keller, and, ultimately, its insurer Carolina Casualty. We reject this argument, as the loan receipt agreement itself contemplated that Fort would pursue its claims against Keller.

B. Old Republic Policy

In holding that the MCS-90 endorsement provided coverage, the district court also determined that a separate policy, which Old Republic Insurance Company issued Ryder insuring its trailers, did not provide coverage for the accident. Carolina Casualty challenges this conclusion on two fronts: first, it argues that the district court should not have sua sponte decided this issue and second, it argues that the district court was wrong to conclude that the Old Republic policy did not apply. We disagree with both arguments.

Although it is not favored, a district court may enter summary judgment sua sponte so long as the losing party is given notice and an opportunity to be heard on the underlying issues. Jones v. Union Pac. R.R. Co., 302 F.3d 735, 740 (7th Cir.2002). Here, Carolina Casualty was on notice and had a reasonable opportunity to present evidence regarding whether the Old Republic policy provided coverage for the accident. In fact, in its brief in support of its motion for summary judgment, Carolina Casualty specifically raised the issue of coverage under the Old Republic policy and attached a copy of the policy to its brief. The brief included a separate heading discussing the Old Republic policy and also specifically noted: “To the extent the Old Republic policy provides coverage, this Court should find that [Carolina Casualty] has no obligation to pay under the MCS-90.” Appellant’s Summary Judgment Brief at 18. Having placed this issue before the district court at a time when the court was actively considering summary judgment motions, Carolina Casualty cannot now complain that it was denied an opportunity to present evidence on the issue.

We now turn to the district court’s disposition of Carolina Casualty’s substantive claim on this issue. The relevant provision *843 of Ryder’s Old Republic policy provides:

The following are “insureds”:

a. You for any covered “auto.”

b. Anyone else while using with your permission a covered “auto” you own, hire or borrow ….

Indiana [FN1] follows the “liberal rule” on permissive use. See Vanliner Ins. Co. v. Sampat, 320 F.3d 709, 713 (7th Cir.2003); State Farm Mut. Auto. Ins. Co. v. Gonterman, 637 N.E.2d 811, 813 (Ind.Ct.App.1994). Pursuant to this rule:

FN1. The parties do not dispute that Indiana law governs this issue.

[O]ne who has permission of an insured owner to use his automobile continues as such a permittee while the car remains in his possession, even though that use may later prove to be for a purpose not contemplated by the insured owner when he entrusted the automobile to the use of such permittee.

Gonterman, 637 N.E.2d at 813. Nevertheless, when an owner has placed restrictions on the use of a vehicle, violations of such restrictions may terminate permission. Id. at 814. “In a coverage dispute, permissive use cannot be implied when an express restriction on the scope of permission prohibits the use at issue.” Id.

In the case at bar, Ryder did not authorize Keller to use its trailer with a tractor bearing Ryder’s placards and ICC authority. To the contrary, the Ryder/Keller subcontractor agreement, pursuant to which Nance was acting when he had the accident, provided that all runs done pursuant to the agreement would use E.C. Trucking owned tractors bearing Keller placards and ICC authority. Keller did not obtain permission to use the trailer involved in the accident and, because permissive use is a prerequisite for coverage under the Old Republic policy, the district court did not err by finding that the policy does not cover the accident.

Carolina Casualty contends that Ryder gave implied permission to use the trailer because, according to Carolina Casualty, the same trailer would have been used had the originally scheduled tractor not experienced mechanical difficulties. But permissive use cannot be implied when, as here, an express restriction prohibits that use. See Warner Trucking, Inc. v. Carolina Cas. Ins. Co., 686 N.E.2d 102, 107 (Ind.1997) (“[I]mplied permission is inadequate as a matter of law to overcome [an] express restriction upon permission”).

III. CONCLUSION

For the foregoing reasons, we AFFIRM.

District Court of Appeal of Florida,

Third District.

AIG URUGUAY COMPANIA DE SEGUROS, S.A., Appellant,

v.

LANDAIR TRANSPORT, et al., Appellees.

Jan. 26, 2005.

Before GREEN, RAMIREZ, and SHEPHERD, JJ.

GREEN, J.

AIG Uruguay Compania de Seguros, S.A. [“AIG”], as subrogee of its insured, Abiatar, S.A., appeals a final summary judgment and a final judgment awarding fees and costs to defendant Landair Transport, Inc. We affirm.

Abiatar purchased cellular phones from Motorola, Inc., at Motorola’s Illinois headquarters for $130,000. Abiatar insured the shipment with AIG. Abiatar contracted with Montevideo International Forwarders, a freight forwarder, to arrange to transport the phones from Illinois to Miami, Florida, and to ship the phones to Uruguay. Montevideo contracted with Sig M. Glukstad, Inc., d/b/a Miami International Freight Forwarders [“MIF”] to arrange for the transportation of the phones. MIF contracted with USA Trading Network, Inc., d/b/a USA Cargo and Courier [“USA Cargo”] to transport the phones to Miami.

USA Cargo issued bill of lading number 100238 to cover the shipment from Illinois to Miami. The bill of lading limited USA Cargo’s liability to “actual damages or $100.00, whichever is less,” unless the shipper paid for and declared a higher authorized value. The declared value was specified as “MF,” or “max free.” In other words, no declared value was indicated on the bill of lading.

USA Cargo contracted with Forward Air, Inc., a licensed property broker, to transport the phones to Miami. Forward Air issued airfreight waybill number 3416127 to cover the shipment. The waybill limits the value of the property to “50¢ per pound, subject to a $50 minimum.” No value was declared for the property on the waybill. The shipment weighed 3,122 pounds.

Forward Air subcontracted the shipment to Landair Transport, Inc., a contract carrier. Landair and Forward Air had an ongoing shipping relationship formalized in a transportation contract. That contract proscribed Landair’s liability to the same limits in Forward Air’s waybill: fifty cents per pound, unless the shipper declared a value for the property, and the appropriate increased shipping charges for that value were paid. Pursuant to the transportation contract terms, a separate bill of lading for Landair’s transport was not issued: Forward Air’s waybill governed the shipment. While on Landair’s route to Miami, the cargo was lost.

USA Cargo sent Forward Air a claim letter to recover for the lost cargo. Forward Air sent USA Cargo a check for $1,625, pursuant to the liability limitations on airfreight waybill number 3416127. USA Cargo released Forward Air from any further liability. USA Cargo and Forward Air assert that this release was intended to release Landair’s liability as well.

AIG paid Abiatar $139,230 pursuant to the marine insurance “all risk” policy it issued covering the shipment. Abiatar executed a subrogation agreement in AIG’s favor. AIG, as Abiatar’s subrogee, brought suit against all the carriers to recover for the value of the lost cargo. AIG asserted claims under the Carmack Amendment, [FN1] common law negligence, and bailment.

Landair and AIG filed cross-motions for summary judgment. The court denied AIG’s motion and entered a final summary judgment in Landair’s favor. The court found that the transportation agreement between Landair and Forward Air was valid and enforceable, and that AIG could not recover from Landair directly, but had to recover from Montevideo, the party with whom its subrogor had contracted. Thereafter, the court entered a final judgment awarding Landair fees and costs. AIG appeals both judgments.

On appeal, AIG asserts that the trial court erred in finding that it did not have standing to sue Landair, and that Landair cannot shelter itself from liability based on the transportation agreement with Forward Air. We address each argument in turn.

At the outset, we agree with AIG’s contention that it has standing to sue Landair. It is irrefutable that AIG has standing to sue Landair, and any other carrier, for loss of the shipment. Gulf & Western Indus., Inc. v. Old Dominion Freight Line, Inc., 633 F.Supp. 688 (M.D.N.C.1986). In Gulf & Western Industries, the dispositive issue was whether the customer of a freight forwarder had a direct action against a carrier hired by the forwarder, and whether the action was subject to the limitation in the contract. Relying on Chicago, Milwaukee, St. Paul & Pacific Railway Co. v. Acme Fast Freight, 336 U.S. 465, 69 S.Ct. 692, 93 L.Ed. 817 (1949), the court concluded that shippers are permitted to sue underlying carriers for loss or damage occasioned by the carrier. 633 F.Supp. at 692 (quoting Chicago, 336 U.S. at 487 n. 27, 69 S.Ct. 692). See also Boeing Co. v. U.S.A.C. Transp., Inc., 539 F.2d 1228 (9th Cir.1976)(owner sued carrier that lost cargo); Hughes v. United Van Lines, Inc., 829 F.2d 1407 (7th Cir.1987)(homeowners sued carrier and subsidiary with whom they had negotiated for damages to goods destroyed in transit); Feinberg v. Railway Express Agency, 163 F.2d 998 (7th Cir.1947)(owner sued the carrier directly for an item lost in transit); Banos v. Eckerd Corp., 997 F.Supp. 756, 762 (E.D.La.1998)(owner of photographs given to Eckerd, as person beneficially interested in the shipment, has standing to sue carrier under Carmack Amendment). Therefore, we hold the trial court erred in concluding that AIG had no standing to sue Landair.

Although AIG has established its standing to sue, we do not agree with AIG’s argument that it is entitled to recover the full value of the shipment from Landair. To so hold would contradict well-settled law that liability limitations in bills of lading and shipping agreements are enforceable. Banos, 997 F.Supp. 756; Boeing Co., 539 F.2d 1228; Hughes v. United Van Lines, Inc., 829 F.2d 1407 (7th Cir.1987); Feinberg v. Railway Express Agency, 163 F.2d 998 (7th Cir.1947).

In Banos v. Eckerd Corp., the court explained that

[t]he liability of a carrier for damage to an interstate shipment is controlled by the Interstate Commerce Act. The Carmack Amendment to the Interstate Commerce Act [49 U.S.C. § 14706] imposes liability on carriers for actual loss, damage, or injury to property they transport, and declares unlawful and void any contract, regulation, tariff, or other attempted means of limiting its liability….

After the adoption of the Carmack Amendment, shippers began to charge exorbitant rates for shipments insured at full value. In reaction, Congress enacted the Cummings Amendment …, which allowed carriers to limit their liability, but granting authority to the ICC to approve rates through tariffs….

Each rate in a tariff carries a corresponding level of liability per pound which is term[ed] a ‘released rate.’ A higher freight rate, therefore, secures a higher level of liability. When a tariff contains an inadvertence clause and a shipper fails to declare a value in the bill of lading, then the shipper is insured at the lowest rate permitted in the tariff. The inadvertence clause is usually incorporated into the bill of lading in the released rate clause by a sentence which states that if the shipper fails to state a released rate, the shipment is deemed released at the lowest rate or the rate listed. The shipper, therefore, is not compelled to accept the given released rate but may instead choose a higher rate by incorporating it into the bill of lading.

Banos, 997 F.Supp. at 760-61 (citations omitted).

The holdings in the cases AIG cites to support its standing argument also support a finding that AIG is bound by the limitation of liability in the Forward Air airfreight waybill. In Boeing Co. v. U.S.A.C. Transport, Inc., 539 F.2d at 1228, the court affirmed a summary judgment in the carrier’s favor enforcing the limitation of liability in the bill of lading. The court determined that the owner could not recover the full value of the shipment after accepting the benefit of the lower rate, and corresponding limitations in liability. Under this reasoning, although AIG has standing to sue, AIG stands in the shoes of its subrogor [FN2] who accepted the benefit of a lower shipment rate. Therefore, AIG may not recover the full value of the goods.

In Hughes v. United Van Lines, Inc., 829 F.2d 1407 (7th Cir.1987), the court found that the limitation of liability in the contract was binding on the shipper. Similarly, Feinberg v. Railway Express Agency, 163 F.2d 998 (7th Cir.1947), presents another instance where the limitation of liability in the receipt issued for goods was enforced to the shipper’s detriment. The Banos v. Eckerd Corp., 997 F.Supp. 756 (E.D.La.1998) court found that the limitation of liability encompassed in the Service Agreement between the store and the carrier governed liability for the loss. Hence, the limitations of liability in the airfreight waybill are enforceable.

AIG asserts that Landair is not covered by any bill of lading and not entitled to any liability limitations thereunder because the second bill of lading, issued by Forward Air, is invalid under Mexican Light & Power Co. v. Texas Mexican Railway Co., 331 U.S. 731, 67 S.Ct. 1440, 91 L.Ed. 1779 (1947). We cannot agree with this reading of Mexican Light & Power. Mexican Light & Power held that a connecting carrier is only responsible for damages on its own line of carriage. The Court explained that the issuance of a second bill of lading did not convert a connecting carrier into an initial carrier, and thereby expand the connecting carrier’s scope of liability for loss occurring outside of its line. The Mexican Light & Power Court held that the second bill of lading was invalid to circumscribe the initial carrier’s liability because the connecting carrier received no payment for transporting the goods on its line other than its share in the rate prepaid to the initial carrier. Hence, there was no consideration for expanding the connecting carrier’s liability. Mexican Light & Power does not stand, as AIG suggests, for the proposition that subsequent bills of lading for transportation of goods are void. Thus, we do not agree that the only bill of lading that can be considered in this case is the original USA Cargo bill of lading. The Forward Air airfreight waybill was a valid bill of lading setting the terms of the connecting carrier’s liability.

Additionally, the transportation agreement between Landair and Forward Air, establishing that Forward Air bills of lading could be incorporated into Landair’s agreement to transport goods, was also valid. Shipping agreements of this type are valid, see Boeing Co. v. U.S.A.C. Transport, 539 F.2d at 1229-30; Banos v. Eckerd Corp., 997 F.Supp. at 758- 59; American Home Assurance Co. v. Forward Air, Inc., No. 95-1639, 1996 WL 1480485 (S.D.Fla. Mar.5, 1996), and the value limitations in these agreements are enforced by the courts. Boeing Co.; Banos. A written contract like the one between Landair and Forward Air was construed by the court in Esprit de Corp v. Victory Express, Inc., No. C93-00350, 1999 WL 9939 (N.D.Cal. Jan.5, 1999). In Esprit de Corp, a transportation broker and a contract carrier had a long-standing written agreement that stipulated the terms and conditions of carriage. The agreement incorporated the carrier’s shipping tariffs and liability limitations. More importantly, the agreement provided that a bill of lading need not be issued for carriage under that agreement. The Esprit de Corp court held that the agreement was sufficient to limit the connecting carrier’s liability. Likewise, we hold that Landair’s liability is limited by the terms of the Forward Air airfreight waybill. Pursuant to the terms of the Landair-Forward Air agreement, that waybill controls the shipment and limits Landair’s liability.

Landair’s liability ran to Forward Air, the party with whom it contracted. Forward Air was released from its liability by the USA Cargo-Forward Air release. As the parties to that release have asserted, Landair was covered under this release; Landair was entitled to rely on this representation. An owner is bound by the terms of the carriage contract between the forwarder and the carrier; hence, the limitations of liability in that contract constrain the owner’s recovery. Gulf & Western Indus., Inc., 633 F.Supp. 688 (citing Chicago, Milwaukee, St. Paul & Pacific R. Co., 336 U.S. at 465, 69 S.Ct. 692). It follows logically that releases under those contracts are also binding on the owner.

Hence, based on the foregoing, although AIG had standing to sue Landair, we affirm the summary judgment because the trial court properly concluded that the Landair-Forward Air transportation agreement was valid. The liability under the airfreight waybill number 3416127 has been satisfied by Forward Air’s payment to USA Cargo. There can be no further recovery by AIG against Landair. As the trial court noted, AIG is free to recover from Montevideo International Forwarders, the party with whom their subrogee contracted.

The final summary judgment in Landair’s favor is therefore affirmed. The judgment awarding Landair fees and costs is also affirmed.

Affirmed.

FN1. The Carmack Amendment, 49 U.S.C. § 14706, imposes liability on carriers for loss or damage to the property that they transport. Banos v. Eckerd Corp., 997 F.Supp. 756, 762 (E.D.La.1998).

FN2. As subrogee of its insured, Abiatar, AIG stands in Abiatar’s shoes. Dade County School Bd. v. Radio Station WQBA, 731 So.2d 638, 646- 47 (Fla.1999).