Assicurazioni Generali, S.p.A. v. Ranger Ins. Co. ( 1995 )

2 United States Court of Appeals,
Fifth Circuit.
No. 94-20404.
ASSICURAZIONI GENERALI, S.P.A., Plaintiff-Appellee,
v.
RANGER INSURANCE CO., et al., Defendants,
Ranger Insurance Co., ETL Corp., and Empire Truck Lines, Inc.,
Defendants-Appellants.
Sept. 21, 1995.
Appeal from the United States District Court for the Southern
District of Texas.
Before WISDOM, DUHÉ and BENAVIDES, Circuit Judges.
BENAVIDES, Circuit Judge:
The central issue of this appeal involves the interpretation
of an exclusion attached to a "non-trucking" insurance policy. The
case stems from a motor vehicle collision. A dispute arose
regarding coverage between the insurance carrier for the truck
owner and the insurance carrier for the lessee of the truck.
Determining that the language of the exclusion in the owner's
policy is ambiguous, we find that the truck owner's insurance
policy provided coverage. We therefore reverse.
I. FACTS AND PROCEDURAL HISTORY
Lillie Hooker owned the truck involved in the accident, a 1978
Peterbuilt Tractor. She leased the truck to ETL Corporation, who
then leased it to a related company, Empire Trucking Lines. The
lease agreements were in effect on the date in question. Pursuant
to the lease agreement, Hooker was responsible for carrying
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insurance on the truck covering accidents occurring when the truck
was operating "not under dispatch to Empire." Appellee
Assicurazioni Generali S.p.A. (Generali) provided "non-trucking"
insurance to Hooker, and Appellant Ranger Insurance Company
(Ranger) provided commercial auto insurance to Empire. Both
policies were in effect on the date of the accident.
Hooker's son, Jeffrey Mitchell, was Hooker's designated driver
on February 4, 1992. On that date, Mitchell stated that he was
having problems with the brakes. He declined to be dispatched and
was not transporting property. The dispatcher for Empire
understood that after Mitchell declined to be dispatched, Mitchell
took the truck out of service. Empire, however, did not mark the
truck out of service. He was "bobtailing"1 in route to the repair
shop when the accident occurred. Kelley Barnes and Derrick Bundage
were injured in the accident. Barnes and Bundage filed a state
court action against Hooker. Thereafter, Generali filed this
action, requesting that the district court enter a declaratory
judgment that Generali does not provide coverage to Hooker,
Mitchell, Empire, or ETL for the claims arising from the vehicular
collision. Generali also requested that the district court enter
a judgment declaring that Ranger did provide coverage for the
accident. Ranger counterclaimed, requesting the district court to
enter a declaratory judgment that Generali provided primary
coverage to ETL, Empire, Hooker, and Mitchell. The district court
1
"Bobtailing" means driving a tractor without a trailer
attached.
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entered a declaratory judgment that Ranger provided primary
coverage and that the endorsements attached to Generali's policy
excluded coverage. Ranger appeals.
II. STANDARD OF REVIEW
This is an appeal from a declaratory judgment, and we have
jurisdiction based on the diversity of citizenship. We therefore
apply Texas law. Ranger Ins. Co. v. Estate of Mijne, 991 F.2d 240,
243 n. 9 (5th Cir.1993). Texas courts construe insurance policies
like contracts. National Union Fire Ins. Co. v. Hudson Energy Co.,
811 S.W.2d 552, 555 (Tex.1991). The interpretation of a contract
is a question of law, and thus, we review it de novo. D.E.W., Inc.
v. Local 93, Laborers' International Union of N. Am., 957 F.2d 196,
199 (5th Cir.1992).
III. WHETHER THE EXCLUSIONS APPLY
Ranger contends that the magistrate judge erred in finding
that the "in the business of" endorsements attached to Generali's
policy excluded coverage for the accident, arguing that, at the
time of the accident, the truck was not engaged in the business of
transporting property, and, thus, the exclusions in Generali's
policy did not apply. The endorsements at issue provided as
follows:
INSURANCE FOR NON-TRUCKING USE (LIMITED)
(BOBTAIL/DEADHEAD)
* * * * * *
WE agree with you that such insurance as is afforded by
the policy for Bodily Injury, Property Damage, Uninsured
Motorist Coverage and/or Personal Injury Protection does not
apply:
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(a) To any person or organization or any agent or employee
thereof, other than YOU,2 engaged in the business of
transporting property by auto for others;
(b) While the auto is being used to carry property in any
business;
(c) While a trailer, semi-trailers, or another truck or
tractor unit, whether owned or non-owned, is attached to
any truck or tractor described above.
(emphasis in original) (footnote added).
In support of its contention that the truck was not "engaged
in the business of transporting property"3 at the time of the
accident, Ranger relies on the following stipulated facts:
Mitchell was in route to repair the tractor's brakes; Mitchell was
not transporting property; Mitchell was not under dispatch;
Mitchell was bobtailing and had taken the tractor out of service.
Although the court below acknowledged the preceding facts, it
found that, as a matter of Texas law, Mitchell was engaged in the
business of transporting property for Empire at the time of the
accident, citing Greyhound Van Lines, Inc. v. Bellamy, 502 S.W.2d
586 (Tex.App.—Waco 1973); Rainbow Express, Inc. v. Unkenholz, 780
S.W.2d 427 (Tex.App.—Texarkana 1989, writ denied).4
2
For purposes of this appeal, we do not decide whether "YOU"
includes Mitchell.
3
See endorsement section (a).
4
The district court also relied on Hartford Ins. Co. v.
Occidental Fire & Cas. Co., 908 F.2d 235, 238 (7th Cir.1990), in
which the Seventh Circuit, construing Wisconsin law, determined
that the driver was using his truck "in the business of" the
lessee while having the trailer repaired. While the opinion in
Hartford contains language arguably indicating that any time that
a vehicle is being repaired it is in the business of the lessee,
it is distinguishable from the instant case on its facts. In
that case, the truck was carrying refrigerated cargo in a trailer
4
In Greyhound, the plaintiff sued the lessee of the truck,
Greyhound, for personal injuries caused by the negligence of the
truck driver. 502 S.W.2d at 587. The jury found that the truck
driver negligently injured the plaintiff while attempting to assist
the plaintiff, a mechanic, repair the brakes. Greyhound's defense
was that the driver was not its employee, but instead was an
employee of the owner of the truck or an independent contractor.
Rejecting Greyhound's defense, the Texas court of appeals
explained that "Article 6701c-1, Vernon's Texas Civil Statutes,
prohibits the lessee of a commercial motor vehicle or truck-tractor
that leaked freon. The buyer rejected the cargo. The truck
lessee instructed the driver to unload the cargo into cold
storage and await further instructions because the lessee needed
that truck to carry the cargo. In the interim, the driver left
his trailer to be repaired. The truck, while bobtailing, was
involved in an accident returning to the repair shop. The
Seventh Circuit held that the truck was operating in the business
of the truck lessee at the time of the accident. 908 F.2d at
238. In the instant case, the driver had declined dispatch
because he needed to have his truck's brakes repaired and was not
supervising any cargo.
Recently, in Liberty Mutual Insurance Co. v.
Connecticut Indem. Co., 55 F.3d 1333, 1338 (7th Cir.1995),
the Seventh Circuit, applying Indiana law, determined that
the endorsement in the truck driver's indemnity policy
applied to exclude coverage because the truck driver, who
owned the truck, was "in the business of" the truck lessee
at the time of the accident. Liberty, however, can be
distinguished from the instant case for the same reasons as
Hartford, supra. In Liberty, the truck driver was
responsible for cargo left at a truck stop and under orders
to deliver the cargo. The Liberty court, relying on
Hartford, emphasized that the inquiry depends on: whether
the accident occurred while the truck driver was under
dispatch orders; whether the lessee could control his
actions; and whether the driver was responsible for the
cargo. Liberty, like Hartford, is distinguishable from the
case at bar because Mitchell was not under dispatch and was
not responsible for any cargo.
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from operating such vehicle over the public highways of this state
unless the lease provides that the lessee shall have "full and
complete control and supervision' over the operation of the
vehicle." Id. at 588.5 Additionally, the Court stated that, in
accordance with the leases's provisions, the owner furnished the
driver with the truck subject to Greyhound's approval. Under those
circumstances, the Court held that Greyhound's claim that its right
to exclusive control of the truck did not include the right of
supervision of the driver's undertaking to repair the truck was
unpersuasive. Id.
The Court further opined that "article 6701c-1 was obviously
enacted to eliminate any uncertainty that might otherwise exist as
to who is responsible for wrongs inflicted upon the public at large
through the operation on our state highways by lessees of the
vehicles named in the statute." Id. Notwithstanding any other
rule, the Court found that Greyhound was prohibited from claiming
that the driver was not under its exclusive control and supervision
at the time the plaintiff was injured. Id. The overriding force
behind the decision in Greyhound was to give effect to the public
policy embodied in article 6701c-1, i.e., to make certain that a
member of the public injured by such a leased vehicle would have
certainty in determining who is held responsible.
In Rainbow, supra, a tire on the truck leased to Rainbow blew
5
Although Greyhound's lease contained the language in
article 6701c-1, the Court stated that if the clause had not been
in the lease, it "would have been a part of their lease contract
as a matter of law." Greyhound, 502 S.W.2d at 588.
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out, causing the driver to lose control of the truck and strike the
plaintiff's vehicle. 780 S.W.2d at 429. The truck was hauling
goods to Illinois at the time of the accident. Joe Dixon owned the
truck, and, pursuant to the lease to Rainbow, Dixon was to maintain
the trucks. There was testimony that Dixon instructed the trucker
to drive to Illinois without purchasing new tires. The jury found
Dixon negligent, a finding that was not appealed. The Court stated
that "the duty of maintenance and repair is a nondelegable function
that is required to be under the control of the lessee." 780
S.W.2d at 432 (citing, inter alia, Greyhound ). The Court then
reasoned that because Dixon was performing the nondelegable duty of
keeping the truck properly maintained, he was a vice-principal of
Rainbow, the lessee, as a matter of law. Id.
Neither Greyhound nor Rainbow are controlling in that they do
not dispose of the issue at bar—whether the language "engaged in
the business of transporting property" clearly and unambiguously
excludes the repair of the truck in the context of an endorsement
to an insurance policy. Both cases are distinguishable in that
they involve the liability of the lessee. The Greyhound court,
looking to the lease provisions and article 6701c-1, held that the
lessee's right to exclusive control of the truck included the
supervision of the driver's repair of the truck, and, thus, the
court found the lessee liable for the driver's negligent acts under
the doctrine of respondeat superior. Similarly, the Rainbow court
held that because the owner of the truck was performing the
lessee's nondelegable duty of maintaining the truck, he was a
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vice-principal of the lessee, and, thus, the lessee was liable. In
both of the above Texas cases, the courts were mindful of the
important policy of protecting an injured member of the public in
accordance with article 6701c-1.
Neither party has cited (nor has our research revealed) a
Texas case involving a coverage dispute between two insurers in
which the court has defined the scope of an endorsement that
excludes coverage when a truck is engaged in the business of
transporting property. The issue presented in this case is not
whether there is any insurance coverage of the accident. Instead,
the issue is whether the lessor's policy provides coverage
additional to that of the lessee's policy. Specifically, Ranger,
the insurer for the lessee, does not contest its coverage of the
accident but contends that Generali's policy also provides
coverage. The court below relied on cases that involved an
important public policy that is not present in the case at bar.
Analogously, in Industrial Indemnity Company v. Truax Truck
Line, Inc., 45 F.3d 986 (5th Cir.1995), a Mississippi case
involving a coverage dispute over a trucking accident between two
insurers, the district court found that one insurer provided
coverage based in part on the fact that certain federal regulations
required the lessee to have exclusive use of the truck. We found
that the district court erred in looking to the effect of the
federal regulations on the risk allocation between insurers,
because the policy behind the federal regulations (protecting
injured members of the public) had no application to coverage
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disputes among insurers. Id. at 991-92 & n. 7 (citing Canal
Insurance Co. v. First General Insurance Co., 889 F.2d 604 (5th
Cir.1989)); see also Hartford Ins. Co. v. Occidental Fire & Cas.
Co., 908 F.2d 235 238 (7th Cir.1990) ("The existence of additional
insurance funds affects only the ultimate distribution of
liability, a subject on which the regulations are indifferent.").
If a provision in an insurance policy is subject to more than
one reasonable interpretation, such uncertainty should be resolved
against the drafter of the policy. Barnett v. Aetna Life Insurance
Company, 723 S.W.2d 663, 666 (Tex.1987). "An intent to exclude
coverage must be expressed in clear and unambiguous terms." State
Farm Fire & Cas. Co. v. Reed, 873 S.W.2d 698, 699 (Tex.1993).
At the time of the accident, Mitchell was neither under
dispatch nor transporting property. He was bobtailing and in route
to a repair shop to have the brakes repaired. Further, Empire's
dispatcher understood that Mitchell had taken Hooker's truck out of
service. We find that, under those circumstances, Ranger's
assertion that the truck was not engaged in the business of
transporting property a reasonable interpretation of the exclusion
provision. We also find reasonable Generali's interpretation that
activities undertaken to enable the repair of the brakes
constitutes engaging in the business of transporting property
because it furthers the commercial interests of the lessee.
Accordingly, because we conclude that the "in the business of"
endorsement is vague and subject to more than one reasonable
interpretation, we resolve the doubt against the drafter and find
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that the exclusion does not apply. We find that the district court
erred in finding that Generali's policy did not provide coverage
for the accident.
IV. PRIMARY VERSUS EXCESS COVERAGE
Finally, the district court found Ranger's coverage primary
because Ranger's policy provided "that its coverage is "primary for
any covered auto while hired or borrowed by [Empire] and used
exclusively in [Empire's] business.' " Ranger does not
specifically challenge the basis for that holding. We therefore
will not disturb the court's holding that Ranger's policy provided
primary coverage. Nonetheless, Ranger contends that Generali's
policy provides primary coverage because the insured, Hooker, owned
the truck.6 We agree. The Generali policy expressly provides that
"[f]or any covered "auto' you own, this policy provides primary
insurance." Accordingly, we hold that both Ranger and Generali
provide primary coverage of the accident. In the court below, the
parties stipulated as follows:
The parties agree that if the Court finds that the
Generali policy was triggered, and that both the Ranger policy
and the Generali policy provide primary coverage for the
incident in question, the responsibility for coverage shall be
shared on a pro rata basis between Ranger and Generali, based
on the amount of coverage provided for under each policy. In
effect, Ranger would bear two-thirds (2/3) of the proven loss,
and Generali would bear one-third (1/3) of the proven loss.
In accordance with the above stipulation, we find that the Ranger
policy covers two-thirds of the proven loss, and the Generali
policy covers one-third of the proven loss.
6
It is undisputed that Hooker owned the truck.
10
For the reasons expressed herein, the judgment of the district
court is REVERSED and RENDERED against Generali in accordance with
this opinion.
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