Centennial Ins Co v. Ryder Truck Rental

Revised September 14, 1998
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
No. 97-60489
_______________
CENTENNIAL INSURANCE COMPANY,
Plaintiff - Counter Defendant - Appellee
v.
RYDER TRUCK RENTAL, INC.,
Defendant - Counter Claimant - Appellant
____________________________________
Appeal from the United States District Court
for the Northern District of Mississippi
____________________________________
July 31, 1998
Before KING, DAVIS, Circuit Judges, and HEARTFIELD, District Judge.1
HEARTFIELD, District Judge:
We consider whether, under Mississippi law, a business auto insurance policy’s separation of
insureds provision stating that “the coverage afforded applies separately to each insured who is
seeking coverage or against whom a claim or ‘suit’ is brought” limits the applicability of other
provisions excluding from coverage potential obligations arising under worker’s compensation or
similar law and employee injuries to the insured claiming coverage. The Magistrate Judge below
held that it does not. We disagree and reverse.
1
District Judge of the Eastern District of Texas, sitting by designation.
1
I
Scholastic Book Fairs, Inc. (Scholastic), leased a truck from appellant, Ryder Truck Rental,
Inc. (Ryder). Fulfilling a promise in the truck lease and service agreement to purchase liability
insurance and to hold Ryder harmless for injuries to it, as well as to its employees, drivers and
agents, it procured business auto and commercial general liability insurance policies from appellee,
Centennial Insurance Company (Centennial), and listed Ryder in the certificate of insurance as an
additional insured under both policies.
The commercial general liability insurance policy excluded from coverage “[a]ny obligation of
the insured under a workers’ compensation, disability benefits or unemployment compensation
law or any similar law” and “‘[b]odily injury’ to . . . [a]n employee of the insured arising out of
and in the course of employment by the insured.”2 It also placed outside of coverage “[b]odily
injury’ or ‘property damage’ arising out of the ownership, maintenance, use or entrustment to
others of any aircraft, ‘auto’ or watercraft owned or operated by or rented or loaned to any
insured.”3 Finally, it contained the following separation of insureds provision:4
2
The exclusion concerning employee injury applied “[w]hether the insured may be liable
as an employer or in any other capacity” and “[t]o any obligation to share damages with or repay
someone else who must pay damages because of the injury.” It did not apply “to liability assumed
by the insured under an ‘insured contract.’”
3
The policy defined “use” as “includ[ing] operation and ‘loading or unloading.’” (The
exclusion was deemed to be beyond certain situations, none of which is pertinent here.)
4
For background on separation of insureds provisions, which are more commonly known
as severability of interest clauses, see United States Fire & Casualty Company v. Reeder, 9 F.3d
15, 18 (5th Cir. 1993), Utica Mutual Insurance Company v. Emmco Insurance Company, 243
N.W.2d 134, 140-41 (Minn. 1976), Liberty Mutual Insurance Company v. Iowa National Mutual
Insurance Company, 181 N.W.2d 247, 249 (Neb. 1970), and Shelby Mutual Insurance Company
v. Schuiltema, 183 So. 2d 571, 573 (Fla. Dist. Ct. App. 1966), aff’d and cert. discharged, 193
So. 2d 435 (Fla. 1967).
2
Except with respect to the Limits of Insurance, and any rights or duties specifically assigned in
this Coverage Part to the first Named Insured, this Insurance applies:
a. As if each Named Insured were the only Named Insured; and
b. Separately to each Insured against whom claim is made or “suit” is brought.
The business auto insurance policy excluded from coverage “[a]ny obligation for which the
‘insured’ or the ‘insured’s’ insurer may be held liable under any workers compensation disability
benefits or unemployment compensation law or any similar law” and “bodily injury to . . . [a]n
employee of the ‘insured’ arising out of and in the course of employment by the ‘insured.’” It
also included the following separation of insureds provision:
E. “Insured” means any person or organization qualifying as an insured in the Who Is An
Insured provision of the applicable coverage. Except with respect to the Limit of
Insurance, the coverage afforded applies separately to each insured who is seeking
coverage or against whom a claim or “suit” is brought.
A disagreement between Centennial and Ryder over the extent of the Scholastic policies’
coverage arose when Guy Williams, a Scholastic employee, sued Ryder for injuries suffered when
he fell down the ramp of the truck Scholastic had leased from Ryder.5 Ryder responded to
Williams’ action by seeking defense and indemnity from Centennial. Centennial refused coverage,
citing the exclusions in the Scholastic policies relating to workers compensation and employee
injury. It then filed the present suit, in which it sought a declaratory judgment absolving it of any
duty to defend or to indemnify Ryder. Ryder counterclaimed for legal fees and expenses incurred
in litigating both this case and Williams’ action. The parties agreed to proceed before a United
States Magistrate Judge. See generally 28 U.S.C. § 636(c).
5
Williams also filed a worker’s compensation claim and collected over $80,000. See
Centennial Ins. Co. v. Ryder Truck Rental, Inc., 971 F. Supp. 1066, 1067 (N.D. Miss. 1997).
3
Centennial and Ryder each eventually moved for summary judgment based on an undisputed
set of facts.6 The Magistrate Judge granted Centennial summary judgment and denied Ryder
summary judgment based on the exclusions in the Scholastic policies pertaining to workers
compensation and employee injury. See Centennial, 971 F. Supp. at 1067-70. In doing so, he
also rejected Ryder’s contention that a cross-liability endorsement brought Williams’ suit within
the coverage. See id. at 1070.
After the entry of a final judgment in Centennial’s favor, see id. at 1071, Ryder filed a timely
appeal contesting the Magistrate Judge’s disposition. It, however, subsequently decided against
challenging his reading of Scholastic’s commercial general liability insurance policy as imposing
no obligation on Centennial to defend and indemnify or his rebuff of its interpretation of the cross-
liability endorsement’s scope.7
II
We, sua sponte, consider our jurisdiction at the outset. See, e.g. Gaar v. Quirk, 86 F.3d 451,
453 (5th Cir. 1996); General Motors Corp. v. Envtl. Protection Agency, 871 F.2d 495, 497 (5th
Cir. 1989). Centennial sues under the Federal Declaratory Judgment Act, 28 U.S.C. §§ 2201-02.
Each claim under this measure must rest on an independent jurisdictional ground--in other words,
6
Most of the undisputed facts appeared in a stipulation accompanying Centennial’s
summary judgment motion. The rest were established by Ryder admitting to certain allegations.
7
Ryder withdrew its appeal on Scholastic’s commercial general liability insurance policy
after determining that it fell within the provision excluding bodily injury arising out of ownership,
maintenance, use or entrustment of certain property “to any insured.” See generally Chacon v.
American Family Mut. Ins. Co., 788 P.2d 748, 750-52 (Colo. 1990) (en banc). It chose not to
brief the question of the cross-liability endorsement’s effect. See generally Webb v.
Cardiothoracic Surgery Assocs. of N. Tex., P.A., 139 F.3d 532, 536 n.3 (5th Cir. 1998).
4
a ground other than the Act itself--and present a justiciable question. See Federal Kemper Ins.
Co. v. Rauscher, 807 F.2d 345, 351 (3d Cir. 1986).
Both jurisdictional conditions prevail here. Centennial properly alleges an independent ground
for federal jurisdiction, diversity,8 and its claim is justiciable, despite the absence of a judgment in
Williams’ suit against Ryder.9 See Standard Accident Ins. Co. v. Meadows, 125 F.2d 422, 423-
24 (5th Cir. 1942); see also GTE Directories Pub. Corp. v. Trimen Am., Inc., 67 F.3d 1563,
1569-70 (11th Cir. 1995); American States Ins. Co. v. Kearns, 15 F.3d 142, 144-45 (9th Cir.
1994); Capitol Index. Corp. v. Miles, 978 F.2d 437, 438 (8th Cir. 1992). Given these
circumstances, we may exercise jurisdiction and address the merits of Ryder’s appeal.
III
A
We review a grant of summary judgment de novo. Urbano v. Continental Airlines, 138 F.3d
204, 205 (5th Cir. 1998). Summary judgment proves proper when “there is no genuine issue of
material fact and . . . the moving party is entitled to a judgment as matter of law.” Fed. R. Civ. P.
56(c). Factual stipulations and admissions in pleadings can provide the basis for resolving a case
at the summary judgment stage. See Munoz v. International Alliance of Theatrical Stage
Employees & Moving Picture Mach. Operators of U.S. and Canada, 563 F.2d 205, 213 (5th Cir.
1977); 11 James Wm. Moore et al., Moore’s Federal Practice § 56.14[2][d][iii] (3d ed. 1998).
8
Since 1996, when Centennial commenced this action, the amount in controversy
threshold for diversity jurisdiction has risen from $50,000 to $75,000. This change has no
retroactive effect. See Gilman v. BHC Secs., Inc., 104 F.3d 1418, 1421 n.3 (2d Cir. 1997).
9
Neither Centennial nor Ryder has reported a judgment in Williams’ suit.
5
B
We, as a federal court sitting in diversity, look to Mississippi substantive law to resolve this
case. See Erie R.R. v. Tompkins, 304 U.S. 64, 78-80, 58 S. Ct. 817, 822-23, 82 L. Ed. 2d 1188,
____ (1938). We start by determining whether or not any final decisions of the Mississippi
Supreme Court are dispositive. See Transcontinental Gas Pipe Line Corp. v. Transportation Ins.
Co., 953 F.2d 985, 988 (5th Cir. 1992). If no such holdings exist, we predict how that tribunal
would rule. See Lawrence v. Virginia Ins. Reciprocal, 979 F.2d 1053, 1055 (5th Cir. 1992). We
base our forecast on (1) decisions of the Mississippi Supreme Court in analogous cases, (2) the
rationales and analyses underlying Mississippi Supreme Court decisions on related issues, (3) dicta
by the Mississippi Supreme Court, (4) lower state court decisions, (5) the general rule on the
question, (6) the rulings of courts of other states to which Mississippi courts look when
formulating substantive law and (7) other available sources, such as treatises and legal
commentaries.10 See Ladue v. Chevron U.S.A., Inc., 920 F.2d 272, 275-78 (5th Cir. 1991);
Browning Seed, Inc. v. Bayles, 812 F.2d 999, 1002-03 (5th Cir. 1987); Jackson, 781 F.2d at 397;
Putnam v. Erie City Mfg. Co., 338 F.2d 911, 913-23 (5th Cir. 1964). “[A]bsent evidence to the
10
Although we once identified the lower federal court’s ruling as an aid in discerning how
the Mississippi Supreme Court would adjudicate, see Jackson v. Johns-Manville Sales Corp., 781
F.2d 394, 397 (5th Cir.) (en banc), cert. denied, 478 U.S. 1022, 106 S. Ct. 3339, 92 L. Ed. 2d
743 (1986), an intervening United States Supreme Court decision, Salve Regina College v.
Russell, 499 U.S. 225, 111 S. Ct. 1217, 113 L. Ed. 2d 190 (1991), repudiated our reliance on that
source, see American Waste & Pollution Control Co. v. Browning-Ferris, Inc., 949 F.2d 1384,
1386 n.2 (5th Cir. 1991). See generally Culver v. Slater Boat Co., 644 F.2d 460, 464 (5th Cir.
Unit A May 1981) (“‘[a]n en banc decision of our court may be overruled only by subsequent en
banc consideration or by the United States Supreme Court” (internal quotations omitted)), aff’d
as modified, 722 F.2d 114 (5th Cir. 1983) (en banc), cert. denied, 467 U.S. 1252, 104 S. Ct.
3537, 82 L. Ed. 2d 842 (1984), and cert. denied, 469 U.S. 819, 105 S. Ct. 90, 83 L. Ed. 2d 37
(1984).
6
contrary, we presume that the Mississippi courts would adopt the prevailing rule if called upon to
do so.” Jackson, 781 F.2d at 398 (internal quotations omitted) (punctuation modified). We must
never forget that “[w]e are emphatically not permitted to do merely what we think best; we must
do that which we think the Mississippi Supreme Court would deem best.” Jackson, 781 F.2d at
397; see also Mississippi Power Co. v. Roubicek, 462 F.2d 412, 416-17 (5th Cir. 1972) (quoting
American Agricultural Chem. Co. v. Tampa Armature Works, 315 F.2d 856, 863 (5th Cir. 1963)
(Brown, J., concurring)).
C
The controversy here implicates Mississippi’s rules for construction of insurance policies,
which are as follows. First, where an insurance policy is plain and unambiguous, a court must
construe that instrument, like other contracts, exactly as written.11 See George v. Mississippi
Farm Bur. Mut. Ins. Co., 168 So. 2d 530, 531 (Miss. 1964). Second, it reads the policy as a
whole, thereby giving effect to all provisions. See Brown v. Hartford Ins. Co., 606 So. 2d 122,
126 (Miss. 1992). Third, it must read an insurance policy more strongly against the party drafting
the policy and most favorably to the policyholder. See Canal Ins. Co. v. Howell, 160 So. 2d 218,
221 (Miss. 1964). Fourth, where it deems the terms of an insurance policy ambiguous or
doubtful, it must interpret them most favorably to the insured and against the insurer. See
Mississippi Ben. Ass’n v. Majeure, 29 So. 2d 110, 112 (Miss. 1947). Fifth, when an insurance
policy is subject to two equally reasonable interpretations, a court must adopt the one giving the
11
We have held that, in Mississippi, an insurance policy’s plain meaning controls unless an
affirmative expression of an overriding public policy by the legislature or judiciary allows us to
reach a different result. See Aero Intel, Inc. v. United States Fire Ins. Co., 713 F.2d 1106, 1109
(5th Cir. 1983).
7
greater indemnity to the insured. See Caldwell v. Hartford Accident & Indem. Co., 160 So. 2d
209, 213 (Miss. 1964). Sixth, where it discerns no practical difficulty in making the language of
an insurance policy free from doubt, it must read any doubtful provision against the insurer. See
State Farm Mut. Auto. Ins. Co. v. Scitz, 394 So. 2d 1371, 1372 (Miss. 1981). Seventh, it must
interpret terms of insurance policies, particularly exclusion clauses, favorably to the insured
wherever reasonably possible. See id. at 1373. Finally, although ambiguities of an insurance
policy are construed against the insurer, a court must refrain from altering or changing a policy
where terms are unambiguous, despite resulting hardship on the insured. See id. This delineation
of Mississippi’s rules for construction of insurance policies complete, we turn to the interpretive
issue before us.
IV
A
Ryder and Centennial differ over how the separation of insureds provision in Scholastic’s
business auto policy (Scholastic policy) impacts that instrument’s exclusions relating to workers
compensation and bodily injury to employees (workers compensation and employee injury
exclusions). Ryder maintains that the provision limits the exclusions’ reach to the insured seeking
coverage. According to it, the exclusions, when the relevant part of the provision’s language is
substituted for word “insured,” remove the following from coverage:
Any obligation for which [the insured who is seeking coverage or against whom a claim or
“suit” is brought] or [the insured who is seeking coverage or against whom a claim or “suit” is
brought]’s insurer may be liable under any workers compensation disability benefits or
unemployment compensation law or any similar law.
...
8
“Bodily injury” to . . . [a]n employee of [the insured who is seeking coverage or against
whom a claim or ‘suit’ is brought] arising out of and in the course of employment by [the
insured who is seeking coverage or against whom a claim or “suit” is brought].
Put another way, Ryder considers the workers compensation and employee injury exclusions
triggered only when the insured claiming coverage is being sued by one of its employees.
Centennial counters that the separation of insureds provision in no way precludes the workers
compensation and employee injury exclusions from controlling when, as in this case, an employee
of one insured sues another insured for injuries. We must decide which of these competing
constructions is correct under Mississippi law.
B
We begin by determining whether or not a final decision of the Mississippi Supreme Court
settles the dispute. One ruling by that body, Benton v. Canal Insurance Company, 130 So. 2d 840
(Miss. 1961), may possibly do so.
Benton arose when Emmett Benton, an employee of Stubbs & Stubbs (Stubbs), sued
Mississippi Steel Corporation (Mississippi Steel) and one of its employees, Howard M. Polk, for
injuries he suffered when a steel plate or rail being loaded by Polk onto a Stubbs truck hit him on
the head. See id. at 841. After receiving a favorable judgment,12 Benton secured an execution
against Polk and filed a suggestion of garnishment against Canal Insurance Company (Canal)
based on an automobile insurance policy that Canal had issued to Stubbs covering third persons
(Stubbs policy). See id. at 841, 842. Canal denied any indebtedness to Polk, relying on
provisions in the Stubbs policy excluding from coverage “bodily injury to or sickness, disease, or
12
Polk was found negligent, while Mississippi Steel was held liable under the doctrine of
respondeat superior. Benton, 130 So. 2d at 842.
9
death of any employee of the insured arising out of and in the course of (1) domestic employment
by the insured, if benefits therefor are in whole or in part either payable or required to be provided
under any workmen’s compensation law, or (2) other employment by the insured” and “any
obligation for which the insured or any carrier as his insurer may be held liable under any
workmen’s compensation, unemployment compensation or disability benefits law, or under any
similar law” (Stubbs policy exclusions). Id. at 843-44. Polk and Western Casualty & Surety
Company (Western Casualty), which had purchased and taken assignment of Benton’s judgment
against Mississippi Steel, asserted that Canal was bound to defend and indemnify Polk because the
Stubbs policy’s severability of interests clause, which stated that “[t]he term ‘the insured’ is used
severally and not collectively,” established “the phrase ‘any employee of the insured’, as used in
the Exclusion Clause . . . , to mean ‘any employee of the insured against whom a claim is made or
suit is brought.’” Id. at 844. Canal, in contrast, contended that the decision in Continental
Casualty Company v. Pierce, 154 So. 2d 279, 281 (Miss. 1934), called for the Stubbs policy to be
construed as failing to cover Benton’s action. Benton, 130 So. 2d at 844.
The Mississippi Supreme Court sided with Canal. See id. at 845, 847. Following Continental
Casualty, it initially lodged the following criticism of the view that the Stubbs policy exclusions be
read as extending only to instances where the insured seeks protection against a suit by one of its
workers:
. . . [T]he policy issued here by Canal to Stubbs was written for the benefit of Stubbs to
protect him from liability for injuries to third parties. The policy excluded coverage for
injuries to Benton, an employee of Stubbs, the named insured. Western Casualty and Polk
were not parties to the contract of insurance and had nothing to do with the writing of the
policy. Polk was not a named insured. Polk was an employee of [Mississippi] Steel . . . . He
claims under the Canal policy only as an additional insured under the general language of
Insuring Agreement III. Under these circumstances it seems strange indeed that Polk should
10
claim, or that there should be claimed for him, more protection under the policy of Stubbs
than Stubbs, the named insured, who paid for the policy, could claim for himself.
Id. at 846. The court then held that it could not accept the construction advanced by Polk and
Western Casualty because the Stubbs policy exclusions’ language unambiguously encompassed
suits by employees of the named insured against additional insureds. See id. at 846-47, 848. It
was unpersuaded that the severability of interests clause called for a contrary reading. See id. at
844, 847. Agreeing with Transport Insurance Company v. Standard Oil Company of Texas, 337
S.W.2d 284, 288-90 (Tex. 1960), in which the Texas Supreme Court had confronted the same
situation, its members declared:
We also think that the addition of the “severability of interests” clause does not indicate that
the drafters of the policy form by the addition of that clause intended that the words “any
employee of the insured”, as they appear in the exclusion clauses, should mean “any employee
of the insured against whom liability is sought to be imposed.”
Benton, 130 So. 2d at 847. This determination led the court to hold that the Stubbs policy
afforded no coverage for Benton’s suit against Polk. See id.
We find the final decision in Benton failing to settle this case because the language of the
Stubbs policy’s severability of interests clause differs from that of Scholastic policy’s separation of
insureds provision. We, therefore, must resolve the dispute between Ryder and Centennial based
on a forecast of what the Mississippi Supreme Court would do if confronted with it.
C
We start with the reasoning underlying Benton’s holding. Ryder maintains that, in contrast to
the severability of interests clause in the Stubbs policy, the separation of insureds provision in the
Scholastic policy expressly states that the policy applies “separately to each insured who is
seeking coverage or against whom a claim or ‘suit’ is brought.” The decision in Benton, it asserts
11
“clear[ly] indicat[ed] . . . that if a policy[, such as that of Scholastic,] . . . had excluded claims of
any employee of an insured against whom liability is sought to be imposed, there would have been
coverage as to one who was not the employee of the insured seeking coverage under the policy.”
Centennial counters that Benton explicitly rejected the result Ryder advocates. “There may be
variation in the language between the provisions considered in Benton . . . and those in this case,
but as the [Magistrate Judge] . . . properly noted those variations do not effect [sic] the
substance of the severability of interest clauses or the substance of the exclusions at issue,” it
argues.
We agree with Ryder. Declining to read the severability of interests clause as limiting the
Stubbs policy exclusions to “any employee of the insured against whom a claim is made or suit is
brought” or “any employee of the insured against whom liability is sought to be imposed”
manifests a refusal to inject either the phrase “against whom a claim is made or suit is brought” or
the phrase “against whom liability is sought to be imposed” into the Stubbs’ policy. It thereby
makes the suggestion that Stubbs and Canal could have restricted the applicability of the Stubbs
policy exclusions had they included the phrase “against whom a claim is made or suit is brought”
or the phrase “against whom liability is sought to be imposed” in the severability of interests
clause.13 See id. at 844, 847.
13
We observe that Transport, the reasoning in which the Mississippi Supreme Court
adopted as its own in Benton, expressly limited its focus to the insurance policy at issue. “[T]he
‘severability of interests’ clause in the present policy cannot alter the holdings in the cases relied
upon by Transport,” it remarked. Transport, 337 S.W.2d at 290 (emphasis added). It also
declared, “In the policy involved here there is no ambiguity in the exclusion clauses and no
inconsistency is shown between the exclusionary clauses and the ‘severability of interests’ clause
in the policy.” Id. (emphasis added). This narrow orientation further bolsters our belief that
Benton’s holding reaches only insurance policies with severability of interests clauses like that in
the Stubbs policy.
12
We expect the Mississippi Supreme Court would recognize this situation and deem Ryder’s
construction of the Scholastic policy availing. The separation of insureds provision in the
Scholastic policy includes the verbiage absent from the severability of interests clause in the
Stubbs policy. It states, “[T]he coverage afforded applies separately to each insured who is
seeking coverage or against whom a claim or ‘suit’ is brought.” This language, when read along
with the workers compensation and employee injury exclusions, plainly and clearly achieves what
Benton indicated was necessary for a severability of interests clause to circumscribe exclusions
pertaining to worker’s compensation laws and employee injury to instances where the insured
seeking coverage is being sued by its employee. See Ryder Truck Rental, Inc. v. St. Paul Fire &
Marine Ins. Co., 540 F. Supp. 66, 67-73 (N.D. Ga. 1982) (construing severability of interests
clause virtually identical to the Scholastic policy’s separation of insureds provision).
Benton’s criticism of the construction now advanced by Ryder fails to dissuade us. It is
dictum, while the analysis of the Stubbs policy’s language provides the basis for the court’s
holding. See City of Jackson v. Wallace, 196 So. 223, 225 (Miss. 1940) (defining dictum); State
v. Tingle, 60 So. 728, 729 (Miss. 1913) (defining dicta); Summary of Mississippi Law § 1057
(1969) (defining “dictum” and “obiter dictum”). We consider the latter a stronger indicator of
how the Mississippi Supreme Court would conceive the relationship of the separation of insureds
provision to the workers compensation and employee injury exclusions. See Darr v. Burford, 339
U.S. 200, 225-26, 70 S. Ct. 587, 601, 94 L. Ed. 761, ___ (1950) (Frankfurter, J., dissenting)
(“The disclosure of the reasoning by which a conclusion is reached cannot remotely be deemed
dictum. A decision implies the process of reasoning which requires it.”); Eisner v. Macomber,
252 U.S. 189, 205, 40 S. Ct. 189, 192, 64 L. Ed. 521, ___ (1920) (“And what we have quoted
13
from the opinion in that case cannot be regarded as obiter dictum, it having furnished the entire
basis for the conclusion reached.”); Charles W. Collier, Precedent and Legal Authority, 1988 Wis.
L. Rev. 771, 772 (“That which is ‘obiter dictum’ is stated only ‘by the way’ to the holding of a
case and does not constitute an essential or integral part of the legal reasoning behind a
decision.”). But cf. St. Paul Fire and Marine Ins. Co. v. Schilling, 520 N.W.2d 884, 888-89 (S.D.
1994) (rejecting interpretation of severability of interests clause that “would provide more
coverage to a permitee than to the named insured” because it “would directly contravene our
reasoning in Birrenkott[ v. McNanamay, 276 N.W.2d 725 (S.D. 1937)]”).
Despite the strong implication Benton’s reasoning provides, we must refrain from relying on it
exclusively to divine how this case would fare in the Mississippi Supreme Court. Other
authorities might provide an abundance of contrary signs that, when combined with Benton’s
dictum, calls for us to deliver a forecast contrary to that which Benton’s analysis suggests. Cf.
Grey v. Hayes-Sammons Chem. Co., 310 F.2d 291, 294-97 (5th Cir. 1962) (predicting that
Mississippi Supreme Court would reject the rule it had announced thirty-four years earlier based
on “pure dicta” in a recent decision approving of the contrary doctrine). We, therefore, proceed
to examine other sources before making a prediction.
D
A number of authorities address the question of whether or not a separation of insureds
provisions (or a severability of interests clause) in an automobile insurance policy constricts the
reach of exclusions in the policy relating to worker’s compensation and employee injury. Ryder
and Centennial both cite cases, none of which comes from Mississippi, sustaining their respective
views on it. Centennial especially considers an action litigated in federal court in Mississippi,
14
Preferred Risk Mutual Insurance Company v. Poole, 411 F. Supp. 429, 433-34 (N.D. Miss.
1976), aff’d, 539 F.2d 574 (5th Cir. 1976), significant. It maintains that this case, along with
Benton, “mandate[s] affirmance” of the Magistrate Judge’s ruling.14
The preponderance of pertinent cases favors Ryder’s construction of the Scholastic policy. A
majority of courts asked to determine the effect of an automobile insurance policy’s severability of
interests clause worded like the separation of insureds provision (i.e., a severability of interests
clause containing the phrase “against whom a claim or ‘suit’ is brought” or very similar language)
on policy exclusions relating to worker’s compensation and employee injury like those in the
Scholastic policy have, for various reasons, construed the clause to limit the exclusions to
instances where the insured claiming coverage is being sued by its employee.15 Compare Ryder
Truck Rental, 540 F. Supp. at 67-73 (applying Georgia and Kansas law) and Lumberman’s Mut.
Cas. Co. v. Hanover Ins. Co., 645 N.E.2d 35, 53-60 (Mass. App. Ct. 1995) and Michigan Mut.
Cas. Liab. Co. v. Ohio Cas. Ins. Co., 333 N.W.2d 327, 331-32 (Mich. Ct. App. 1983) and Short
v. Safeco Ins. Co. of Am., 864 S.W.2d 361, 362 (Mo. Ct. App. 1993) (following Baker v.
DePew, 860 S.W.2d 318, 322-23 (Mo. 1993) (en banc)) and United States Fidelity & Guar. Co.
v. Globe Indem. Co., 327 N.E.2d 321, 322-23 (Ill. 1975) with Hancock v. Tri-State Ins. Co., 858
S.W.2d 152, 154 (Ark. 1993) (en banc). This circumstance strongly signals that the Mississippi
14
We have located cases besides those to which the parties point, as well as some other
sources, that speak to the issue before us.
15
Although the relevant policy language in some of these cases differs from that in the
Scholastic policy, we find all such divergences too slight to be truly distinguishable.
15
Supreme Court would adopt Ryder’s understanding of how the separation of insureds provision
interacts with the workers compensation and employee injury exclusions.16
Preferred Risk, the decision on which Centennial places great emphasis, fails to support the
insurer’s interpretation of the Scholastic policy. While it noted that Benton had held an employee
injury exclusion to preclude coverage when an insured was being sued by another insured’s
worker, it nowhere disclosed whether the policy at issue contained a severability of interests
clause. See Preferred Risk, 411 F. Supp. at 433-34. That silence makes it uninformative. See
Ryder Truck Rental, 540 F. Supp. at 72, 73.
16
We note that the weight of judicial authority as to the specific question arising here
represents a microcosm of a larger division. According to a recent commentary:
In most cases where an automobile liability policy has contained a severability of
interests clause, the court, in finding that an employee exclusion did not apply where the
injured person was not an employee of the particular insured seeking protection under
the policy, has based its position in whole or in part upon the fact that the policy
contained a severability clause, or has recognized that the presence of such a clause
would have that effect.
Charles W. Benton, Annotation, Validity, Construction, and Application of Provision in
Automobile Liability Policy Excluding From Coverage Injury to, or Death of, Employee of
Insured, 43 A.L.R. 5th 149, 161 (1996); cf. Craddock Int’l Inc. v. W.K.P. Wilson & Son, Inc., 116
F.3d 1095, 1103 (5th Cir. 1997) (interpreting a hull insurance policy) (“But the courts have
addressed an analogous dilemma: whether a clause excluding coverage for injuries suffered by an
‘employee of the insured’ excludes coverage of one insured’s liability for the injury to an
employee of another insured. Most courts addressing the issue have concluded that the employee
exclusion should be construed to exclude coverage only if the claimant is the employee of the
insured who is asserting coverage under the policy.”). This situation presumably explains one
treatise’s comment that “[s]everability of interests clauses limit the exclusion [for employee injury]
and allow more complete recovery under the policy.” 6C Appleman’s Insurance Law
and Practice § 4413 (1979 & Supp. 1998) (discussing automobile liability insurance) (citing
cases). (Two other sources we have reviewed, American Jurisprudence 2d and Couch on
Insurance, just describe the conflicting perspectives on how a severability of interests clause
interacts with exclusions concerning worker’s compensation and employee injury. See 7 Am. Jur.
2d Automobile Insurance § 285 (1980 & Supp. 1997); 8 Lee R Russ, Couch on Insurance
§ 115.22 (3d ed. 1997).)
16
Authorities beyond Benton further encourage us to conclude that the Mississippi Supreme
Court would adopt Ryder’s reading of the Scholastic policy. Indeed, what seems like a fairly
close call when Benton alone receives consideration becomes a much clearer when they are added
to the mix. These sources, along with the most telling aspect of Benton, cause us to predict that
the Mississippi Supreme Court would construe the separation of insureds provision in the
Scholastic policy as rendering the workers compensation and employee injury exclusions in that
instrument applicable only to the insured seeking coverage.
V
We hold, as a consequence of our forecast that the Mississippi Supreme Court would arrive at
such an outcome, that Williams’ suit against Ryder comes within the Scholastic policy’s coverage.
Because of this disposition, we REVERSE the grant of summary judgment to Centennial and
REMAND with instructions to grant summary judgment to Ryder and to enter an appropriate
judgment. Costs shall be borne by Centennial.
17