Republic Western Insurance v. Williams

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-1045
REPUBLIC WESTERN INSURANCE COMPANY,
Plaintiff - Appellant,
versus
LATHADDEUS WILLIAMS; ELIZABETH NICHOLS;
CAROLINA CASUALTY INSURANCE COMPANY; HAROLD
NICHOLS; P.B. EXPRESS, INCORPORATED,
Defendants - Appellees,
and
MORGAN TREVATHAN & GUNN, INCORPORATED,
Defendant.
No. 06-1046
REPUBLIC WESTERN INSURANCE COMPANY,
Plaintiff - Appellee,
versus
ELIZABETH NICHOLS; HAROLD NICHOLS,
Defendants - Appellants,
and
LATHADDEUS WILLIAMS; CAROLINA CASUALTY
INSURANCE COMPANY; P.B. EXPRESS, INCORPORATED;
MORGAN TREVATHAN & GUNN, INCORPORATED,
Defendants.
Appeals from the United States District Court for the District of
South Carolina, at Charleston. Patrick Michael Duffy, District
Judge. (CA-04-449-2)
Argued: September 19, 2006 Decided: January 10, 2007
Before SHEDD and DUNCAN, Circuit Judges, and Richard L. VOORHEES,
United States District Judge for the Western District of North
Carolina, sitting by designation.
Reversed by unpublished per curiam opinion.
ARGUED: Richard C. Foster, HICKS, CASEY & FOSTER, P.C., Marietta,
Georgia, for Appellant/Cross-Appellee. John Robert Murphy, MURPHY
& GRANTLAND, P.A., Columbia, South Carolina; Daniel Roy Settana,
Jr., MCKAY, CAUTHEN, SETTANA & STUBLEY, P.A., Columbia, South
Carolina, for Appellees/Cross-Appellants. ON BRIEF: Weston Adams,
III, MCANGUS, GOUDELOCK & COURIE, L.L.P., Columbia, South Carolina,
for Appellant/Cross-Appellee. Stephen L. Hall, MCKAY, CAUTHEN,
SETTANA & STUBLEY, P.A., Columbia, South Carolina, for Appellees
Carolina Casualty Insurance Company and P.B. Express, Incorporated.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
Lathaddeus Williams is an independent owner-operator of a 1991
Freightliner tractor (“the Freightliner”). Republic Western
Insurance Company (“Republic”) issued an insurance policy to
Williams providing coverage for his vehicles that are not used for
commercial purposes. Carolina Casualty Insurance Company
(“Carolina”) issued an insurance policy to P.B. Express, Inc.
(“PBX”), which leased the Freightliner from Williams. The Carolina
policy provided PBX coverage for the company’s vehicles used in
commercial transportation. After a vehicle accident involving
Williams (who was then driving the Freightliner) and Elizabeth
Nichols, Williams filed a tort action against Nichols in state
court, and she filed a counterclaim against him. Republic
thereafter filed this declaratory judgment action against Williams,
Nichols, Carolina, and PBX seeking a determination of the parties’
respective rights and obligations arising from the state-court
litigation.1
On cross-motions for summary judgment, the district court
originally granted summary judgment in favor of Republic and
against Carolina. However, on motion for reconsideration, the
district court reversed its prior ruling and granted summary
1
In its amended complaint, Republic also named Harold Nichols
and Morgan Trevathan & Gunn, Inc. (“MTG”) as defendants. Although
Harold Nichols is a party to this appeal, MTG is not. For our
purposes, Harold Nichols’ interest is identical to Elizabeth
Nichols’ interest.
3
judgment in favor of Carolina, holding inter alia that Williams is
covered under the Republic policy but not under the Carolina
policy. Republic and Nichols now appeal. Because we conclude that
Williams’ accident is covered under the Carolina policy but not the
Republic policy, we reverse the summary judgment and remand with
instructions for the district court to enter judgment in a manner
consistent with this opinion.
I
Summary judgment is appropriate “if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). “We
review the district court’s order granting summary judgment de
novo, viewing the facts in the light most favorable to, and drawing
all reasonable inferences in favor of, the nonmoving party.”
Garofolo v. Donald B. Heslep Assocs., Inc., 405 F.3d 194, 198 (4th
Cir. 2005). When faced with cross-motions for summary judgment, we
review “each motion separately on its own merits to determine
whether either of the parties deserves judgment as a matter of
law.” Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003).
“Although an order denying summary judgment is not independently
appealable, we may review such an order when it is appealed along
4
with an order granting a cross-motion for summary judgment.”
National Coalition for Students with Disabilities Educ. and Legal
Defense Fund v. Allen, 152 F.3d 283, 293 (4th Cir. 1998).
A.
The material facts of this case are undisputed. In January
2002, Williams and PBX entered into a written agreement for
services and a permanent lease of the Freightliner. The lease
provided that PBX would have exclusive control of, and would assume
complete responsibility for the operation of, the Freightliner when
it was in use for PBX. PBX maintained a policy with Carolina to
cover the company’s commercial transportation, and Williams
maintained a policy with Republic to cover his vehicles when in
non-commercial use.
At the inception of the lease, Williams completed an
employment application with PBX and a pre-employment drug screen.
PBX provided Williams with placards containing the PBX logo that
were affixed to the sides of the Freightliner. PBX’s placards and
all of its identifying numbers remained on the Freightliner
throughout the lease. PBX also supplied Williams with an accident
kit to be kept in the Freightliner at all times. The accident kit
contained a disposable camera, a Carolina accident information
form, and an insurance card indicating proof of PBX’s insurance
with Carolina.
5
Pursuant to the lease, Williams would operate the Freightliner
as a local driver for PBX. Under this arrangement, Williams used
the Freightliner to haul containers between the PBX terminal and
three Charleston, South Carolina, shipyards. PBX typically
employed four local drivers at any given time, and it required
these drivers to come to its terminal and obtain their assignments
personally from the city dispatcher. PBX gave its drivers one
assignment at a time, and when a driver was sent to a shipyard, he
had to return to the PBX terminal to get the next assignment.
Williams, like all PBX local drivers, was paid only for time
spent hauling containers. Although PBX did not require Williams to
arrive at the terminal at any specific time for his first
assignment of each day, he normally went to the PBX terminal with
the expectation that work was immediately available. PBX permitted
Williams to drive the Freightliner to and from work everyday and to
park it overnight in a lot on a side street about one mile from his
home. PBX did not direct Williams’ route between his home and the
PBX terminal, and it did not direct the routes he took while
hauling containers.
PBX required its local drivers to perform a pre-trip
inspection before starting and driving a truck. Williams performed
his daily pre-trip inspection every morning in the lot near his
home where he parked the Freightliner. Williams testified that the
Freightliner was “for business, not for pleasure,” J.A. 272, and
6
that he only drove it for business; when he was not conducting
business, he parked the truck.
B.
On April 30, 2003, Williams was driving the Freightliner from
the overnight parking lot to the PBX terminal when he was involved
in an accident with Elizabeth Nichols. At the time of the
accident, Williams was on his way to work, expecting to receive
his first assignment for the day. That morning, Williams acted in
his usual course by walking to the lot near his home, performing
the required pre-trip inspections, and driving to the PBX terminal,
with the Carolina placards affixed to the Freightliner, to obtain
his assignments for the day. Because Williams had not yet arrived
at the PBX terminal, he was not hauling a container (i.e., he was
“bobtailing”).
Immediately following the accident, Williams gave the
investigating officer his license, vehicle registration, and the
Carolina insurance card contained in the PBX accident kit.
Williams then called PBX as required by PBX procedures. Williams
spoke to James Floyd, the PBX southeast regional manager, who
advised him to get the disposable camera from the accident kit and
take pictures. Floyd also advised Williams to fill out the
Carolina accident information form contained in the accident kit.
Shortly after Williams called PBX, Patrick Crowell of PBX prepared
a “First Report of Accident” on a PBX form. In describing the
7
accident on the form, Crowell wrote that the driver was pulling
onto the interstate when a lady pulled into his lane. Crowell also
noted that the driver was coming from home to work.
Floyd met Williams at the hospital. Upon arriving at the
hospital, Floyd secured the camera and the Carolina accident
information form completed by Williams. Floyd also instructed
Williams to undergo drug and alcohol testing, which Williams did.
Crowell later collected the information obtained from Williams and
had it sent to PBX’s corporate office.
Williams’ employment with PBX was terminated in January 2004,
at which time a Termination Record Form was prepared. This form
contained an “Accident Detail” showing that Williams was involved
in one accident while with PBX, namely, the April 30, 2003,
accident. The form stated that this accident was “DOT recordable.”
PBX acknowledged that an accident is not “DOT recordable” if the
PBX driver was on his own time and in his own vehicle.
C.
Williams sued Nichols in state court alleging that her
negligence caused the accident, and Nichols filed a counterclaim
alleging that the accident resulted from his negligence. Upon
receipt of a demand letter from Williams, Republic defended him
under a reservation of rights.
8
Thereafter, Republic filed this declaratory judgment action in
the district court against Williams, Elizabeth and Harold Nichols,
Carolina, PBX, and MTG seeking a determination of the parties’
respective rights and obligations arising from the state-court
litigation. Subsequently, each party moved for summary judgment.
Carolina and PBX argued that Republic’s non-commercial policy
applied because Williams was not operating the Freightliner in the
“actual use of, or in the business of,” PBX at the time of the
accident. Conversely, Republic maintained that it was not
obligated to provide coverage because Williams was operating in the
business of PBX at the time of the accident, and therefore the
exclusionary language of Republic’s policy applied. Republic also
asserted that PBX is not an insured under Republic’s policy and
therefore lacked standing to assert claims for coverage, defense,
or bad faith against Republic.2 Nichols asserted that both the
Republic and Carolina policies provide coverage to Williams because
under the Carolina policy, the Freightliner was a hired auto and
Williams was using the Freightliner with PBX’s permission, and
under Republic’s policy the business exclusion does not apply
because the Freightliner was not being used in the business of PBX
at the time of the accident.
2
PBX had filed a counterclaim against Republic asserting that
it was an insured under the Republic policy, that Republic had a
duty to defend any lawsuit under the policy, and that Republic was
acting in bad faith by not providing coverage or a defense.
9
On cross-motions for summary judgment, the district court held
(1) Williams was not owed coverage under the Republic policy
because of that policy’s business exclusion; (2) Williams was owed
coverage as a permissive user under PBX’s policy with Carolina; and
(3) PBX was not an insured under Republic’s policy. Carolina and
PBX then moved for reconsideration, which the district court
granted. On reconsideration, the district court reversed its prior
order and held that Williams was not acting in the business of PBX
at the time of the accident and that coverage for Williams applied
under Republic’s policy. The district court further held that
Williams was not covered under the Carolina policy because he was
not a permissive user as defined by that policy. Upon
reconsideration, the district court did not address whether or not
PBX was an insured under the Republic policy; however, by granting
summary judgment in favor of PBX, the district court effectively
held that PBX was an insured under the Republic policy.
II
On appeal, Republic contends that the district court erred in
holding that the business exclusion of its policy does not apply.
Republic also contends that the district court erred in holding
that Williams was not covered under the permissive use provisions
of the Carolina policy. On cross appeal, Nichols contends that
10
both policies apply.3 For the reasons stated below, we agree with
Republic.
A.
We first address Republic’s argument that coverage for
Williams is excluded under the Republic policy because Williams was
acting “in the business of” PBX at the time of the accident. The
Republic policy reads in relevant part:
No Liability Coverage is afforded when described vehicles
. . . [are] used to carry property in any business or in
route for such purpose.
J.A. 664.4 Although at the time of the accident Williams was not
carrying a load and did not have a specified load to pick up, the
parties do not dispute that he was on his way to the PBX terminal
with the purpose of obtaining a work assignment. As such, Williams
was acting in accordance with his usual course of business, which
was to drive to the PBX terminal to obtain his work assignments for
the day. We conclude that these undisputed facts establish that
Williams was “in route . . . to carry property” for PBX’s business
at the time of the accident. Accordingly, we hold that the
3
Republic also contends that the district court abused its
discretion by granting the motion for reconsideration. We find no
merit to this contention.
4
Nichols contends that the exclusion is not part of the
insurance contract because it is contained in the certificate of
insurance and not in the contract. We have reviewed this issue and
find that Williams’ certificate of insurance was expressly
incorporated into the policy.
11
Republic policy excludes coverage for Williams regarding the
underlying accident.5
B.
We now turn to the question of whether Williams is covered
under the Carolina policy based on the permissive use provision of
that policy. The Carolina policy reads in relevant part:
We will pay all sums an “insured” legally must pay as
damages because of “bodily injury” . . . to which this
insurance applies caused by an “accident” resulting from
the ownership, maintenance, or use of a covered “auto.”
J.A. 585. The Carolina policy defines “insureds” as being:
a. You for any covered “auto.”
b. Anyone else while using with your permission a
covered “auto” you own, hire, or borrow.
J.A. 585. PBX is the named insured in the Carolina policy. This
provision thus requires two elements in order for someone other
than PBX to qualify as an additional insured: (1) use of an owned,
hired, or borrowed auto; and (2) permission from PBX. Carolina
5
Although the actions taken by PBX immediately following the
accident do not independently establish that Williams was “in route
to carry property” for PBX, the following facts provide further
support for such a finding. After the accident, PBX conducted a
thorough investigation. PBX acknowledged that this investigation
would not have been necessary if Williams had not been either on
the job, under dispatch, or acting in the business of PBX at the
time of the accident. Furthermore, PBX listed the accident as DOT
recordable on Williams’ termination form, and it admitted that an
accident is not DOT recordable if the PBX driver is on his own time
and in his own vehicle. J.A. 368-69. Finally, Williams testified
that the Freightliner was “for business, not for pleasure” and that
he only drove the truck for business. J.A. 272.
12
does not contend that the Freightliner is not a “hired auto.”
Therefore, for our purposes the only question is whether Williams
was using the Freightliner with permission from PBX.
Carolina contends that the permissive use provision is
inapplicable because Williams operated as an independent
contractor; as such, he had the right to use the Freightliner
without permission from PBX. Carolina further asserts that
pursuant to the lease, PBX had no authority to grant permission to
Williams to operate the Freightliner at the time of the accident or
at any other time the Freightliner was not in “actual use” for PBX.
We disagree with Carolina.
The lease reads in relevant part:
Carrier shall have Exclusive possession, control, and use
of the equipment and shall assume complete responsibility
for the operation of the equipment while in actual use
for the Carrier. Whenever the equipment is not in actual
use for Carrier, the equipment shall bear no placard or
other reference of any kind to Carrier.
J.A. 444 (emphasis added). The lease defines PBX as the “carrier”
and the Freightliner as “equipment.” The Department of
Transportation has issued the following regulation with respect to
equipment leases between motor carriers and owner/operators (such
as the lease in this case):
(c) Exclusive possession and responsibilities:
(1) The lease shall provide that the authorized carrier
lessee shall have exclusive possession, control, and use
of the equipment for the duration of the lease. The
13
lease shall further provide that the authorized carrier
lessee shall assume complete responsibility for the
operation of the equipment for the duration of the lease.
49 C.F.R § 376.12(c)(1) (emphasis added).
Although the lease specifies that PBX (the lessee) will assume
responsibility for the operation of the Freightliner only “while in
actual use” for PBX, this regulation requires that PBX have
exclusive possession and assume complete responsibility for the
Freightliner “for the duration of the lease.” The lease, which was
in effect at the time of the underlying accident, thus fails to
meet the requirements of the regulation. Because parties may not
enter into a contract that violates the law,6 PBX -- by operation
of the regulation -- had exclusive possession and control of the
Freightliner throughout the term of the lease. Therefore, because
PBX allowed Williams to drive the Freightliner to and from work,
his use of the Freightliner was necessarily permissive.
Accordingly, Williams was a permissive user at the time of the
accident, and coverage for Williams is provided under the Carolina
policy.7
6
Ohio law governs interpretation of the Carolina policy. “It
is elementary that no valid contract may be made contrary to
statute, and that valid, applicable statutory provisions are parts
of every contract.” Bell v. Northern Ohio Tel. Co., 78 N.E.2d 42,
43 (Ohio 1948).
7
Like other federal trucking regulations, § 376.12(c)(1) was
“intended to safeguard the public by preventing authorized carriers
from circumventing applicable regulations by leasing the equipment
and services of independent contractors exempt from federal
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III
For the reasons stated above, the judgment of the district
court is reversed and the case is remanded to the district court
with instructions to enter judgment in a manner consistent with
this opinion.8
REVERSED
regulation.” Hartford Ins. Co. of the Southeast v. Occidental Fire
& Cas. Co. of N.C., 908 F.2d 235, 238 (7th Cir. 1990).
8
Because we conclude that the Republic policy does not provide
coverage for Williams, we hold that PBX does not have a claim for
bad faith against Republic.
15