Wesco Insurance Company v. Rich ( 2023 )

Case: 22-60283 Document: 00516608476 Page: 1 Date Filed: 01/12/2023
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
January 12, 2023
No. 22-60283 Lyle W. Cayce
Clerk
Wesco Insurance Company,
Plaintiff—Appellee,
versus
Edward Eugene Rich, as wrongful death beneficiary of LaDonna C.
Rich, Deceased; Edward Shayne Rich, as wrongful death
beneficiary of LaDonna C. Rich, Deceased,
Defendants—Appellants.
Appeal from the United States District Court
for the Southern District of Mississippi
USDC No. 1:20-CV-305
Before Stewart, Willett, and Oldham, Circuit Judges.
Per Curiam:*
The parties here—an insurer and tort claimants—dispute the
insurer’s maximum theoretical liability under a surety agreement. By
separate agreement, the insurer has committed that it “will pay” whatever
*
This opinion is not designated for publication. See 5th Cir. R. 47.5.
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No. 22-60283
amount we identify as the surety agreement’s upper limit. We conclude that
the surety agreement caps liability at $750,000, and we therefore AFFIRM.
I
This appeal concerns an “MCS-90” surety endorsement that Wesco
Insurance Company included with a liability-insurance policy that it issued
to Sam Freight Solutions, LLC. The policy provides up to $1,000,000 in
insurance coverage for a specific “covered auto,” a 2012 Volvo Tractor (and
certain trailers attached thereto). The MCS-90 surety endorsement, on the
other hand, is a policy endorsement by which Wesco assumed up to
“$750,000” in liability for “any final judgment recovered against [Sam
Freight] for public liability resulting from negligence in the operation” of any
vehicle. The MCS-90 endorsement is not insurance. Instead, it “creates a
suretyship, which obligates an insurer to pay certain judgments against the
insured . . . , even though the insurance contract would have otherwise
excluded coverage.” Canal Ins. Co. v. Coleman, 625 F.3d 244, 247 (5th Cir.
2010); see 49 C.F.R. §§ 387.3; 387.7.
On July 29, 2018, LaDonna Rich died in an automobile collision
involving a 2010 Freightliner. The Defendants–Appellants are her
beneficiaries, and they filed a wrongful-death suit against Sam Freight in
Mississippi state court. The insurance policy (as distinct from the MCS-90
surety endorsement) that Sam Freight purchased from Wesco does not name
the 2010 Freightliner as a covered auto. Therefore, that policy does not
independently offer coverage for the collision.
While the state-court action was pending, Wesco filed this federal
diversity suit seeking declaratory relief against the Beneficiaries (and others).
The parties and issues in the federal proceeding narrowed until only Wesco
and the Beneficiaries remained, with just one dispute between them: “the
amount of coverage that the MCS-90 endorsement would provide in the
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event of a judgment against Sam Freight.” The Beneficiaries argued that the
MCS-90 endorsement would provide up to $1,000,000 in coverage, while
Wesco argued that $750,000 would be the maximum available amount. Both
parties sought summary judgment on that sole remaining issue.
The district court granted summary judgment for Wesco, declaring
that “[t]he MCS-90 endorsement unambiguously provides that Wesco shall
not be liable for amounts in excess of $750,000.” The district court denied
the Beneficiaries’ motions for reconsideration. This appeal timely followed.
While this appeal was pending, the parties reached a settlement agreement
under which Wesco agreed that it “will pay” whichever of the two amounts
we determine the surety agreement to require.
II
A
As an initial matter, we have jurisdiction only if this case presents an
actual “case or controversy.” U.S. Const. art. III; see DaimlerChrysler
Corp. v. Cuno, 547 U.S. 332, 340 (2006). The “case or controversy”
requirement prevents us from “advising what the law would be upon a
hypothetical state of facts.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118,
127 (2007) (internal quotation marks omitted). Ripeness is one aspect of this
requirement. See generally Abbott Labs. v. Gardner, 387 U.S. 136 (1967). A
declaratory action is ripe if “there is a substantial controversy, between
parties having adverse legal interests, of sufficient immediacy and reality to
warrant the issuance of a declaratory judgment.” MedImmune, 549 U.S. at
127 (internal quotation marks omitted). “Whether particular facts are
sufficiently immediate to establish an actual controversy is a question that
must be addressed on a case-by-case basis.” Orix Credit All., Inc. v. Wolfe,
212 F.3d 891, 896 (5th Cir. 2000).
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Wesco and the Beneficiaries have adverse legal interests in a
substantial controversy that amounts to $250,000 (the difference between
$750,000 and $1,000,000). Resolving that controversy involves only the
“purely legal” interpretation of the policy and the endorsement; no “further
factual development is required.” New Orleans Pub. Serv., Inc. v. Council of
New Orleans, 833 F.2d 583, 587 (5th Cir. 1987). The controversy is real and
immediate because Wesco has agreed to pay whatever sum we determine that
the surety endorsement requires. At present, then, this case is ripe. That
being true, we need not consider whether the case was ripe when the district
court issued its judgment. See DM Arbor Court, Ltd. v. City of Houston, 988
F.3d 215, 219–20 (5th Cir. 2021).
B
The MCS-90 is a “federally mandated” endorsement. Canal Ins. Co.,
625 F.3d at 246. “The operation and effect of a federally mandated
endorsement is a matter of federal law.” Lincoln Gen. Ins. Co. v. De La Luz
Garcia, 501 F.3d 436, 439 (5th Cir. 2007); see Minter v. Great Am. Ins. Co. of
New York, 423 F.3d 460, 470 (5th Cir. 2005) (“Interpretation of th[e MCS-
90] endorsement is governed by federal law.”). Our analysis focuses on “the
plain language of the endorsement.” Canal Ins. Co., 625 F.3d at 250. To the
extent that Mississippi substantive law governs any residual questions, such
as those regarding only the policy, “construction of an insurance policy [is] a
question of law, which we review de novo.” State Farm Mut. Auto. Ins. Co. v.
LogistiCare Sols., LLC, 751 F.3d 684, 688 (5th Cir. 2014) (emphasis omitted)
(quoting Farmland Mut. Ins. Co. v. Scruggs, 886 So.2d 714, 717 (Miss. 2004)).
The insurance policy offers “coverage” of up to “$1,000,000 per
accident,” but only for “covered autos.” The parties agree that the 2010
Freightliner is not a “covered auto” under the insurance policy’s definition
of that term.
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By contrast, the MCS-90 endorsement makes Wesco “liable,” as a
surety, for up to “$750,000 for each accident.” The endorsement applies
“regardless of whether or not each motor vehicle is specifically described in
the policy.” The MCS-90 consists of a fill-in-the-blank form that provides
spaces for the parties to identify, among other things: the insurer’s name, the
insuree for whom the insurer is acting as surety, and the policy number that
the endorsement supplements. There is also a blank space for filling in the
insurer’s maximum suretyship liability. In this case, the following amount
appears in that blank space: “[T]he company shall not be liable for amounts
in excess of $750,000 for each accident.” Thus, according to the district
court’s summary, Wesco agreed to provide $1 million in insurance coverage
for Sam Freight’s covered autos, but only $750,000 in public liability
coverage for all other vehicles.
The Beneficiaries disagree. According to them: “[T]he blank space is
supposed to be filled in to reflect the amount of coverage that was purchased
by the insured”—that is, $1,000,000, not $750,000. The Beneficiaries offer
several overlapping arguments to establish that crucial premise. None
succeed. The Beneficiaries begin by urging that “the $750,000.00 is a fiction
that never existed” because “[t]he insurance company did not have the
authority to unilaterally change the coverage.” This isn’t so much an
argument as it is a restatement of the crucial premise. The number that
appears in the blank space ($750,000) is a “change” only if the Beneficiaries
are otherwise correct that the MCS-90 and the insurance policy must have
identical coverage limits. The “unilateral[] change” argument might have
force if that premise were correct, but the argument itself cannot prove the
underlying premise.
The Beneficiaries next posit a proof in our precedent. We have noted,
for example, that the MCS-90 “accomplishes its purpose by reading out [of
the insurance policy] only those clauses in the policy that would limit the
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ability of a third party victim to recover for his loss.” T.H.E. Ins. Co. v. Larsen
Intermodal Servs., Inc., 242 F.3d 667, 673 (5th Cir. 2001). According to the
Beneficiaries, this means that Wesco cannot “read[] out”—that is,
replace—the policy limit with the surety limit. This argument, too, fails for
circularity. If the surety endorsement is a separate agreement with a separate
monetary limit, then both limits can coexist in separate amounts. The
Beneficiaries’ offer a contrary premise—that the two limits must be in
matching amounts. But once again, while the Beneficiaries’ argument does
depend on that premise, it does not prove the premise.
At root, the Beneficiaries’ real argument is that the district court erred
by “treat[ing] the insurance policy and the endorsement as if they were
separate standalone documents.” We disagree. The MCS-90, for instance,
contains the following language: “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 [Sam Freight] . . . .” This language sets up an unambiguous
distinction between the policy (on one hand) and the endorsement (on the
other). Likewise, the words “this endorsement” show that the liability limit
described “herein” is the limit that appears in the endorsement, not the
policy. Neither the policy nor the endorsement requires Wesco to provide
suretyship liability in the exact same amount that it offers insurance coverage.
III
The MCS-90’s plain text limits Wesco’s suretyship liability to
$750,000. We therefore AFFIRM.
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