Avalos v. Duron

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
JUN 11 2002
TENTH CIRCUIT
PATRICK FISHER
Clerk
JAVIER AVALOS, SR., and ROSALBA
AVALOS-PORRAS, individually and as
next friends of their minor children Javier
Avalos, Jr. and Alejandro Avalos,
Plaintiffs,
and
LIBERTY MUTUAL FIRE
INSURANCE COMPANY,
Plaintiff - Intervenor - Appellant,
v. No. 00-2419
EDMUNDO DURON, JR.; EDMUNDO (D.C. No. CIV-97-521-JP)
H. DURON, SR.; UNITED PARCEL (D. New Mexico)
SERVICE,
Defendants,
and
WILSHIRE INSURANCE COMPANY,
Defendant - Appellee.
ORDER AND JUDGMENT*
*
This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. The court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
Before BRISCOE, Circuit Judge, BRORBY, Senior Circuit Judge, and LUCERO,
Circuit Judge.
Liberty Mutual Fire Insurance Company (Liberty Mutual) appeals the district
court's entry of summary judgment in favor of Wilshire Insurance Company (Wilshire).
We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and affirm.
I.
On July 26, 1996, Rosalba Avalos-Porras was driving her van north on Interstate
25 in Sierra County, New Mexico. A tractor-trailer rig collided with the van, injuring
Avalos-Porras and her passengers (her husband and two children). Avalos-Porras and her
family filed the underlying diversity action against (1) Edmundo Duron, Sr., d/b/a ED
Trucking (EDT), the owner of the tractor, (2) Edmundo Duron, Jr., the driver of the
tractor, (3) United Parcel Service of America, Inc. (UPS), the owner of the trailer, and (4)
Citywide Carriers (Citywide), the entity that arranged for EDT to haul the UPS trailer.
At the time of the accident, Citywide had a contract with UPS whereby Citywide
agreed to “provide drivers with equipment for the movement of UPS cargo between UPS
locations.” App. at 157. Under the contract, UPS agreed to pay Citywide $1.10 per mile
for its services. Citywide also had a “Common Carrier/Contract Agent Contract” with
EDT. Id. at 165. The purpose of the EDT agreement was for EDT to transport UPS
shipments for Citywide “in situations where Citywide did not have enough tractors or
drivers of its own to transport all UPS . . . loads.” Id. at 260. Under the agreement,
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Citywide was required to offer to EDT “a minimum quantity of five (5) shipments per
year,” and EDT in turn was required “to transport those shipments tendered.” Id. at 167.
In exchange for EDT’s services, Citywide agreed to pay EDT a “basic transportation rate”
of “$.95/mile between all points in the continental United States.” Id. As a result of
these two contracts, EDT was transporting the UPS trailer involved in the accident.
Each of the three business entities named as defendants in the underlying action
was covered by a commercial insurance policy at the time of the accident. EDT was
covered by a policy issued through Progressive County Mutual Insurance Company
(Progressive) that provided approximately $750,000 in liability coverage for EDT’s
tractor. Citywide was covered by a policy issued through Wilshire that provided
$1,000,000 in liability coverage. UPS was covered by a policy issued through Liberty
Mutual that provided $5,000,000 in liability coverage.
During the pendency of the underlying action, Liberty Mutual filed this action-in-
intervention for declaratory judgment, naming Progressive and Wilshire as defendants.
The purpose of Liberty Mutual’s action-in-intervention was to obtain a determination of
each insurance company’s obligation, if any, to the plaintiffs in the underlying action for
loss sustained in the accident. It was undisputed that Progressive, the company that
provided liability coverage to EDT, owed the first level of coverage. Accordingly,
Progressive tendered its policy limits, leaving the district court to decide what coverage, if
any, was owed by Liberty Mutual and Wilshire.
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Liberty Mutual filed a motion for summary judgment arguing that Wilshire owed
the second level of coverage and that Liberty Mutual owed the third and final level of
coverage. Wilshire filed a counter-motion for summary judgment arguing that it was not
obligated to provide any coverage. The district court denied Liberty Mutual’s motion and
granted Wilshire’s motion, concluding that EDT was an “insured” under the policy issued
by Liberty Mutual to UPS, but was not an “insured” under the policy issued by Wilshire
to Citywide.
II.
Liberty Mutual contends the district court erred in concluding that EDT was not an
“insured” under the policy issued by Wilshire to Citywide. We review the district court’s
ruling de novo. See Old Republic Ins. Co. v. Durango Air Serv., Inc., 283 F.3d 1222,
1225 (10th Cir. 2002) (applying de novo standard of review to district court’s
interpretation of insurance policies); VBF, Inc. v. Chubb Group of Ins. Co., 263 F.3d
1226, 1230 (10th Cir. 2001) (applying de novo standard of review to district court’s
summary judgment ruling).
To resolve this appeal, we begin by reviewing the relevant provisions of the
Wilshire policy. The Wilshire policy defined “WHO IS INSURED” as follows:
1. You [Citywide] are an insured for any covered auto.
2. Anyone else is an insured while using with your permission a
covered auto you own, hire or borrow . . . .
3. Anyone liable for the conduct of an insured described above is an
insured but only to the extent of that liability. However, the owner
or anyone else from whom you hire or borrow a covered auto is an
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insured only if that auto is a trailer connected to a covered auto you
own.
App. at 149. The Wilshire policy further defined the term “auto” to include “a land motor
vehicle, trailer or semi-trailer designed for travel on public roads.” Id. at 148.
Notwithstanding the above-quoted language of the policy referring to autos
“own[ed], hire[d] or borrow[ed]” by Citywide, Citywide purchased coverage only for
autos specifically described in a schedule attached to the policy. Id. at 143 (referring to
the type of autos covered under the policy), 145 (describing the “COVERED AUTO
DESIGNATION SYMBOLS” used in the policy), 147 (schedule of covered autos which
lists only two items). Thus, Citywide did not purchase coverage for “hired autos.” See
id. at 146 (indicating that no “Hired Auto” coverage was purchased).
The Wilshire policy also included a Form MCS-90 endorsement mandated by the
Interstate Commerce Commission (ICC) pursuant to 49 C.F.R. §§ 387.3(a) and 387.15.
The MCS-90 “endorsement was required to ensure that all ICC-certified carriers maintain
certain minimum coverage to protect the public in the event of accident or injury.”
Adams v. Royal Indem. Co., 99 F.3d 964, 966 (10th Cir. 1996). The MCS-90
endorsement read, in pertinent part, as follows:
In consideration of the premium stated in the policy to which this
endorsement is attached, the insurer . . . 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 subject to the financial responsibility requirements
of Sections 29 and 30 of the Motor Carrier Act of 1980 regardless of
whether or not each motor vehicle is specifically described in the policy
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and whether or not such negligence occurs on any route or in any territory
authorized to be served by the insured or elsewhere. * * * It is understood
and agreed that no 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 . . . . However, all terms, conditions, and limitations in the policy
to which the endorsement is attached shall remain in full force and effect as
binding between the insured and the company. The insured agrees to
reimburse the company for any payment made by the company on account
of any accident, claim, or suit involving a breach of the terms of the policy,
and for any payment that the company would not have been obligated to
make under the provisions of the policy except for the agreement contained
in this endorsement.
App. at 155 (emphasis added); see 49 C.F.R. § 387.15. The endorsement defined the
term “motor vehicle” as “a land vehicle, machine, truck, tractor, trailer, or semitrailer
propelled or drawn by mechanical power and used on a highway for transporting
property, or any combination thereof.” App. at 155.
It is undisputed that if we were applying the Wilshire policy without an MCS-90
endorsement, EDT would not be an “insured.” As set forth above, the terms of the policy
define an “insured” in terms of specifically described vehicles. Because the tractor
owned and operated by EDT at the time of the accident was not a vehicle specifically
described in the Wilshire policy, EDT itself was not an insured under the policy when
read without the MCS-90 endorsement.
As the Wilshire policy had an MCS-90 endorsement, the question for us is whether
the MCS-90 endorsement modifies the policy in such a manner as to result in EDT being
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an “insured” for purposes of the accident at issue.1 In Adams, we addressed a
substantially similar insurance policy and described the effect of the MCS-90
endorsement on that policy:
[T]he ICC endorsement does not explicitly define “insured,” [but] indirectly
modifies “insured” as defined in the basic policies by providing that the
insurer must pay any final judgment against the insured for public liability
resulting from operation of a regulated motor vehicle “regardless of
whether or not each motor vehicle is specifically described in the policy.”
That is, this endorsement precludes a policy from limiting the definition of
an insured to one who owns, hires or borrows only specifically described
motor vehicles because such a limited definition would subvert the purpose
of the ICC endorsement of requiring coverage on all regulated vehicles
regardless of whether or not they are listed in the policy specifically. A
policy with this ICC endorsement cannot explicitly limit liability to those
vehicles specifically described therein, nor can it indirectly so limit
coverage by attempting to define who is insured in terms of specifically
described vehicles.
99 F.3d at 970. We therefore held in Adams that the MCS-90 endorsement “must be read
1
Some courts have held the MCS-90 endorsement is not triggered if there are no
gaps in coverage, i.e., when there is no risk that the injured party will be unable to recover
for injuries. E.g., T.H.E. Insurance Co. v. Larsen Intermodal Serv., Inc., 242 F.3d 667,
673 (5th Cir. 2001) (concluding that “when the protection of injured members of the
public is not at stake, the MCS-90 and the relevant federal regulations do not address
coverage for the purpose of disputes between the insured and the insurer”); John Deere
Ins. Co. v. Nueva, 229 F.3d 853, 858 (9th Cir. 2000) (concluding “that the integral
purpose of the MCS-90, to protect third party members of the public, is not implicated in
a dispute between two insurers”), cert. denied, 122 S. Ct. 1063 (2002); John Deere Ins.
Co. v. Truckin’ USA, 122 F.3d 270, 275 (5th Cir. 1997) (“Where an insurance policy
does not provide coverage for non-listed vehicles except to third-party members of the
public through operation of the endorsement, the policy provides no coverage for
purposes of disputes among insurers over ultimate liability.”). We find it unnecessary to
reach this issue because we conclude that even if the MCS-90 endorsement was triggered
in this situation, it did not result in EDT becoming an “insured” under the Wilshire policy.
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to eliminate the limiting clause that coverage applie[d] only to covered autos described”
in the policy, and thus effectively modified the policy to read: “‘Anyone else is an insured
while using with your permission an auto you own, hire or borrow.’” Id. at 971.
Applying the same reasoning here, the Wilshire policy is effectively modified by the
MCS-90 endorsement in the same manner. In other words, the Wilshire policy no longer
defines an “insured” in terms of autos specifically listed in the schedule attached to the
policy, but instead is modified to read: “Anyone else is an insured while using with your
permission an auto you own, hire or borrow.”
The more narrow question presented is whether, at the time of the accident, EDT
was using with Citywide’s permission an auto (i.e., the tractor involved in the accident)
that Citywide had “hired” (since it is undisputed that the tractor involved in the accident
was neither owned nor borrowed by Citywide). Because the Wilshire policy does not
define the term “hire,” the term must be “given [its] plain and ordinary meaning if that
can reasonably be ascertained.”2 Grisham v. Allstate Ins. Co., 992 P.2d 891, 893 (N.M.
2
Liberty Mutual argues that “the federal legislation which mandates inclusion of
the MCS-90 endorsement in every insurance policy issued to a motor carrier itself sets
forth a definition [of] ‘for hire,’” Aplt. Br. at 15, but fails to cite any authority that would
authorize us to interpret the Wilshire policy in light of that federal legislation. Even if we
were to refer to the federal regulations cited by Liberty Mutual in its appellate brief, the
result would be the same since those regulations define the phrase “[f]or hire carriage” as
“the business of transporting, for compensation, the goods or property of another.” 49
C.F.R. § 387.5.
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Ct. App. 1999).3 The Oxford English Dictionary defines the term in the following
manner: “[t]o procure the temporary use of (any thing) for stipulated payment.” Oxford
English Dictionary (2d ed. 1989) (on-line version, http://dictionary.oed.com). Webster’s
similarly defines the term: “to engage the temporary use of for a fixed sum.” Webster’s
Third New Int’l Dictionary 1072 (1993). Likewise, Black’s Law Dictionary defines the
term to mean: “[t]o purchase the temporary use of a thing.” Black’s Law Dictionary 729
(6th ed. 1990). Given the agreement of these sources, we conclude that the term “hire” is
“capable of a plain and ordinary meaning.” Grisham, 992 P.2d at 893.
Applying this plain and ordinary meaning to the circumstances here, we conclude
that Citywide did not “hire” EDT’s tractor. More specifically, Citywide did not procure,
engage or purchase the temporary use of EDT’s tractor. See Liberty Mut. Fire Ins. Co. v.
Canal Ins. Co., 177 F.3d 326, 333-34 (5th Cir. 1999) (construing policy term “contract of
hire” as referring to a contract or agreement relating to a particular vehicle, and not
3
Although “[f]ederal law applies to the operation and effect of ICC-mandated
endorsements,” Harco Nat’l Ins. Co. v. Bobac Trucking, Inc., 107 F.3d 733, 735 (9th Cir.
1997), the term “hire” derives from the Wilshire policy and presumably must be
construed in accordance with New Mexico law (i.e., the law of the forum state). See
generally Cooper v. Central & Southwest Serv., 271 F.3d 1247, 1251 (10th Cir. 2001)
(holding that, in diversity action, court must ascertain and apply the law of the forum
state). Even if federal law were controlling as to the meaning of the term “hire,” it
appears to be consistent with New Mexico law and would produce the same result. E.g.,
Santaella v. Metropolitan Life Ins. Co., 123 F.3d 456, 461 (7th Cir. 1997) (holding that,
under federal common law, the terms of an insurance policy must be interpreted “in an
ordinary and popular sense, as would a person of average intelligence and experience”)
(internal quotations omitted).
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including contract for performance of a specific service which encompassed the use of
such a vehicle). Rather, Citywide effectively subcontracted with EDT to perform work
that it had contracted with UPS to perform. In other words, Citywide engaged EDT to
perform a service, i.e., “the transportation of the commodities” from one location to
another. App. at 167 (quoting from terms of contract between Citywide and EDT).
Significantly, Citywide had no right under its contract with EDT to specify the use of a
particular vehicle, nor did it have the right to specify a particular driver or route (even
though the start and destination were obviously controlled by UPS). In fulfilling its
contractual obligation to Citywide, EDT had complete control over the vehicle, driver,
and route chosen to complete the task. Moreover, EDT had the right under the contract to
“decline any load with or without giving reason to” Citywide. Id. at 166. Thus, the EDT
tractor was not “hired” by Citywide (and, in turn, EDT did not need or receive
“permission” from Citywide to use the tractor).
We conclude the district court properly granted summary judgment in favor of
Wilshire and against Liberty Mutual. The judgment of the district court is AFFIRMED.
Entered for the Court
Mary Beck Briscoe
Circuit Judge
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