Case Information
*1 Bеfore: ROGERS and COOK, Circuit Judges; BERTELSMAN, District Judge. [*] _________________
COUNSEL ARGUED: David M. Dark, JAMES, DARK & BRILL, Kalamazoo, Michigan, for Appellant. James R. Case, KERR, RUSSELL AND WEBER, Detroit, Michigan, for Appellees. ON BRIEF: David M. Dark, JAMES, DARK & BRILL, Kalamazoo, Michigan, for Appellant. James R. Case, Joanne Geha Swanson, KERR, RUSSELL AND WEBER, Detroit, Michigan, for Appellees.
_________________
OPINION
_________________
ROGERS, Circuit Judge. This case involves the legal question of whether a federally- рrescribed form endorsement attached to a trucking company’s insurance contract modifies the attachment point of an umbrella policy when the endorsement was not legally required in the first place. The trucking company in this case purchased liability insurance beyond what was required under federаl regulations and allegedly attached to the policy an endorsement in the nature of a form prescribed by the United States Department of Transportation for the purpose, not applicable in this case, of meeting those federal requirements. The content of the filled-out form is ambiguous in the context of the umbrella policy to which it was allegedly attached, and the form is best interpreted in light of the policies for which it was created. So interpreted, the form did not require that the defendant insurance company pay more than what was required under the original umbrella insurance contract. We therеfore affirm the judgment of the district court, which held that the insurance company defendant was not liable beyond the terms of its original insurance contract.
On November 3, 1997, Joy Kline’s husband, Jeffrey Lyle Kline, died as a result of injuries
that he sustained in a collision with a truck owned by Builders Transport Inc., an interstate trucking
business.
See Kline v. Gulf Ins. Co.
,
Joy Kline obtained a $3.2 million judgment against Builders Transport. Were it solvent, Builders Transport would have had to pay Kline $2 million, including the $1 million that it self- insured and the $1 million “loss corridor” deductible under the Reliance policy, there being no prior claims against Reliance under the excess policy for that year. Reliance would then have had to pay $1 million and Gulf would have had to pay the remaining $200,000. However, because Builders Transport filed for bankruptcy in May 1998, Kline only received $1 million from Reliаnce and $200,000 from Gulf. She recovered nothing from Builders Transport.
This appeal arises because Gulf, for reasons unclear to this court, may have attached to its insurance policy an “Endorsement for Motor Carrier Policies of Insurance for Public Liability under Sections 29 and 30 of the Motor Carrier Act of 1990.” The endоrsement form, called an MCS-90, purports to amend Gulf’s original insurance policy and require Gulf to pay injured members of the public up to the minimum that federal law required. [1] As mentioned above, Builders Transport self- that, if it did attach the MCS-90, doing so was a mistake. [2] insured up to the minimum coverage, and Gulf did not need to make such a promise. Gulf concedes
Kline sued Gulf, arguing among other things that Gulf attached the MCS-90 and that the
MCS-90 increased Gulf’s liability by amending its Builders Transport insurance policy. The district
court initially held that no rational juror could find that Gulf attached an MCS-90 endorsement and
dismissed Kline’s claim.
See Kline
,
On remand, the district court declined to hold a trial to determine whether Gulf in fact attached an MCS-90 endorsement to its policy. See Kline v. Gulf Ins. Co. , No. 1:01-cv-213, 2005 U.S. Dist. LEXIS 30809, at *13-16 (W.D. Mich. Sept. 12, 2005). Instead, the district court held that an MCS-90 form, even if attached, did not require Gulf to pay Kline any mоre than the $200,000 that Gulf had already paid. See id. First, the district court reasoned that an MCS-90 form in this case at most required Gulf to act as a surety for Builders Transport’s self-insurance scheme. See id. at *10-13. Moreover, a surety’s MCS-90-based obligation to pay is triggered only when the principal (here Builders Transport) denies coverage. See id. at *13. Because Builders Transport “made no effort to deny coverage,” Gulf’s obligation to act as a surety was not triggered. Id. at *14. Second, the district court reasoned that the public policy goals behind the MCS-90 form did not require Gulf to pay the second $1 million of liability. See id. at *14-15. While acknowledging that the MCS-90 form may negate limiting clauses in a policy that calls for denial of coverage to an injured member of the public, the district court nevertheless held that an MCS-90 form’s “public policy is not implicated when coverage is provided but not paid by a primary insurer.” Id. at *15- 16. [4]
We affirm, although our reasoning is not entirely the same as that of the district court. [5] The language at issue in this case is not clear because the MCS-90 is a form ill-suited for the parties to express a clear intention regarding how the issue in this case is to be resolved. The MCS- 90 is a form that the Department of Transportation developed and the Office of Management and Budget approved. Gulf filled out the relеvant section of the form as follows:
The policy to which this endorsement is attached provides primary or excess insurance, as indicated by “X” for the limits shown: ___ This insurance is primary and the company shall not be liable for amounts in excess of $___________ for each accident.
X This insurance is excess and the company shall not be liable for amounts in excess of $ 1,000,000 for each accident in excess of the underlying limit of $ 1,000,000 for each accident. The form also contained the following language:
The insurance policy to which this endorsement is attached provides automobile liability insurance and is amended to assure compliance by the insured within the limits stated herein . . . . 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 the insured for public liability. . . . (Emphasis added.)
At first glance, it appears from the terms of the MCS-90 that Gulf must pay up to $1 million for “еach accident in excess of the underlying limit of $1,000,000 for each accident” because Gulf wrote “$1,000,000” instead of “$3,000,000” into the form. See 62 Fed. Reg. 16370, 16403 (Apr. 4, 1997) (describing how a company in Gulf’s position might have completed the MCS-90). In this case, Kline received a judgment for $3.2 million but only recovered $1 million from Reliance. The terms of the MCS-90 can be read to provide that Kline should receive $1 million from Gulf, not $200,000. Kline’s appeal hinges on this construction of the MSC-90.
The language of MCS-90 as a whole, interpreted in light of the surrounding circumstances,
however, leads to the conclusion that Gulf did not change its coverage when filling out the
government-prepared form. Two аspects of the very language upon which Kline relies caution
against Kline’s interpretation. First, the check-marked part of the form—upon which Kline’s brief
places primary reliance—is by its terms a limit on Gulf’s obligation rather than an expansion of
Gulf’s obligation.
Cf. Weston v. McWilliams & Assocs., Inc.
,
Second, the phrase “underlying limit of $1,000,000” is ambiguous in light of the complex
insurance scheme that Builders Transport, Reliance, and Gulf created. As discussed above, Gulf
provided an umbrella policy to cover liability above Reliance’s policy, which, in turn, covered
liability above Builders Transport’s self-insurance. The reference to “the underlying limit of
$1,000,000,” therefore, could have referred to any accident resulting in liability over $1 million (as
Kline argues) or any accident that resulted in liability exceeding Reliance’s “underlying limit of
$1,000,000.” Under the latter reading, Gulf would not be liable because, as we previously held,
Reliance’s policy attached at $2 million and “excess of the underlying limit” would be the $200,000
in liability above $3 million.
Kline
,
The ambiguity arises in large part because the MCS-90 form does not really permit Gulf to
reflect the limits contained in the original excess insurance contract. As discussed above, Builders
Transport’s poliсy with Reliance included an annual “loss corridor” deductible. For this reason,
Reliance’s attachment point could have varied from $2,000,000 (if Builders Transport paid the
deductible) to $1,000,000 (if Builders Transport had exhausted its annual deductible earlier that year
on other claims). Because Reliance’s attachment pоint was a moving target and Gulf’s attachment
point depended on Reliance’s attachment point, there was no single value that Gulf could have
entered into the blanks of the MCS-90 to reflect accurately Gulf’s attachment point. Were Gulf the
drafter of the MSC-90 language, we would construe the language against it.
See Old Life Ins. Co.
of Am. v. Garcia,
The only language that can be read on its face to provide the additional coverage that Kline claims is ambiguous. Both the “within the limits stated herein” and “limits of liability described herein” language could refer to the MCS-90, which, Kline argues, changed the limits of liability. On the other hand, the “herein” language could also refer to the original policy to which Gulf attached the MCS-90. If the latter, the MCS-90 did not adjust the terms contained in the original policy.
Read as a whole, the MCS-90 incorporated the limits of liability in the original insurance policy; it did not replace them. Language surrounding the “herein” clause suggests that the form did not change Gulf’s liability. The form provides, “The insurance policy to which this endorsement is attached . . . is amended to assure compliance by the insured, within the limits stated herein, as a motor carrier of property within Sections 29 and 30 of the Motor Carrier Act of 1980 and the rules and regulations of the Federal Highway Administration (FHWA) and the Interstate Commerce Commission (ICC).” The disputed language, when read in light of this purpose, suggests that Gulf intended to offer $1 million in coverage only if the law required such coverage. Indeed, the purpose of the MCS-90 is to verify to the federal government and the public that a given motor carrier meets minimum security requirements. See 65 Fed. Reg. 25020, 25021 (Apr. 28, 2000). In this case, Builders Transport self-insured to the minimum regulatory amount, and the federal regulations did not require coverage. However, had additional coverage been neсessary (e.g., had Builders Transport stopped self-insuring), the MCS-90 would have required Gulf to increase its coverage. Thus, language regarding the purpose of the MCS-90 suggests that Gulf is not liable in this case because Builders Transport did not fail to insure up to the minimum.
Moreover, public policy considerations do not warrant additional compensation, as Kline
already received $200,000 more than the minimum federal requirement. The “purpose of the [MCS-
90] endorsement is to give full security for the protection of the public
up to the limits prescribed
.”
46 Fed. Reg. 30974 (emphasis added). In this case, Kline’s recovery exceeded the $1 million limit
prescribed, a fact that every court to have considered the scope of MCS-90 forms found important. In
Wells v. Gulf Insurance Co.
and in
McGirt v. Royal Insurance Co. of America
, the district courts
for the Eastern District of Texas and the District of Maryland, respectively, distinguished the facts
of this case from the facts before them.
As all of Kline’s claims are dependent on her interpretation of the MCS-90, the district court properly dismissed those claims. The judgment below is AFFIRMED.
Notes
[*] The Honorable William O. Bertelsman, United States District Judge for the Eastern District of Kentucky, sitting by designation.
[1] Under Gulf’s original insurance policy, Builders Transport’s bankruptcy did not increase Gulf’s liability.
[2]
Gulf argues that, as a factual matter, it did not attach the MCS-90. For purposes of resolving Gulf’s motion
for summary judgment, we will resolve this disputed fact in favor of Kline, the non-moving party.
See Matsushita Elec.
Indus. Co. v. Zenith Radio Corp.
,
[3] In its opinion, this court refrained from adopting Gulf’s argument that an MCS-90 form could not amend the umbrella policy merely because the form in this case was “not filed with the Department of Transportation.” Kline , 98 F. App’x at 475. The court held that no authority supported the position that the failure of a party to “submit endorsements to the government vitiates any coverage so provided.” Id. In addition, this court rejected as unsupported by case law Gulf’s argument that the “MCS-90 endorsement is not triggered because both [Gulf] and Reliance provided some, albeit inadequate, coverage.” Id. at 476. As to the issue of first impression involved in this appeal, this court held that “the effect of the attachment of an MCS-90 endorsement to an umbrella policy is a difficult issue [that] we decline to reach where the district court has not ruled on the issue.” Id.
[4]
The district court dismissed Kline’s related claims because the MCS-90 endorsement did not have an impact
on Gulf’s status as an umbrella insurer.
Kline
,
[5]
It is not necessary for us to resolve whether federal or state law controls the issue presented in this case, as
we have been presented no basis for distinguishing between federal and Michigan law as to how thе legal issue in this
case should be resolved. Several courts have held that an MCS-90 is to be interpreted under federal law.
Minter v. Great
Am. Ins. Co.
,
[6]
Kline’s reliance on
Lynch v. Yob
,