Richard TOOPS; Eloisa Toops, individually and as surviving
parents of Jeremy Brian Toops, deceased; Larry D. Hurst, as
administrator of the estate of Jeremy Brian Toops, deceased;
Thomas William Holm, Plaintiffs-Appellees,
v.
GULF COAST MARINE INC.; Stonewall Surplus Lines Insurance
Company; Technical Risks, Inc.; Technical Risks
Corporate Insurance, Defendants,
and
United States Fidelity and Guaranty Company, Defendant-Appellant.
UNITED STATES FIDELITY AND GUARANTY COMPANY, Plaintiff-Appellant,
v.
Richard TOOPS, Individually and a/n/f of Jeremy Brian Toops;
Eloisa Toops, Individually and a/n/f of Jeremy Brian Toops;
Larry D. Hurst, Administrator of the Estate of Jeremy Brian
Toops, Deceased; Thomas Holm, Individually and as assignees
of Rig Runner Express Inc.; Rig Runner Express Inc.; Eric
Allen Davidson, Defendants-Appellees.
No. 95-40017.
United States Court of Appeals,
Fifth Circuit.
Jan. 15, 1996.
Rehearing Denied March 1, 1996.
Otto D. Hewitt, III, Alvin, TX, for appellees.
Parker C. Folse, III, Seattle, WA, Gregory Scott Coleman, Scott D. Lassetter, Weil, Gotshal and Manges, Houston, TX, for U.S. Fidelity & Guaranty Co.
Ryan Grant Anderson, Ball & Weed, Ruth Greenfield Malinas, San Antonio, TX, for American Insurance Association amicus curiae.
Appeals from the United States District Court for the Southern District of Texas.
Before DAVIS and PARKER, Circuit Judges, and BUNTON*, District Judge.
BUNTON, Senior District Judge.
FACTUAL BACKGROUND
Dayton-Scott Equipment Company is a Houston based comрany that rents heavy cranes to large contractors and industrial companies throughout the United States. In 1990, Union Carbide Chemicals and Plastic Company approached Dayton-Scott to lease a ringer attachment1 for a crane to be used on a construction project at Union Carbide's Point Comfort plаnt in Seadrift, Texas.
The ringer attachment was located on a construction site in Sulphur, Louisiana and needed to be transported to the Union Carbide construction site in South Texas. Dayton-Scott solicited for transportation service from several shippers and ultimately awarded the bid to Rig Runner, a licensed intrastate аnd interstate common carrier. Rig Runner in turn hired two drivers, Williams and Davidson, to transport the crane parts from Louisiana to Texas. Williams and Davidson were independent contractors who owned and operated their own trucks.
On the night of August 28, 1990, Jeremy Brian Toops ("Toops") was riding in a car towed by another car which was driven by Thomas Holm. While Toops' car was being towed down Highway 288 near Angleton in Brazoria County, Texas, it was struck from behind by the tractor-trailer driven by Davidson. The accident resulted in Toops suffering severe injuries and burns from which he later died.
PROCEDURAL BACKGROUND
Toops' parents filed suit in Brazoria County against, inter alia, Davidson, Rig Runner, and Dayton-Scott. During the litigation, it became аpparent to Rig Runner that its $750,000.00 insurance policy would be insufficient to cover any potential liability in the Texas tort suit. Consequently, Rig Runner and Davidson demanded that Dayton-Scott's insurers, which included Appellant United States Fidelity and Guaranty Company ("USF & G"), defend them and pay any judgment rendered against them up to policy limits. USF & G and the other insurers dеnied that coverage existed and refused to defend them or pay any judgment.
Two jury interrogatories were submitted to the Brazoria County jury regarding Dayton-Scott's relationship with Rig Runner. The first interrogatory asked whether Dayton-Scott and Rig Runner were engaged in a joint venture to which the jury answered "no." The second interrogatory asked whether Rig Runner and Davidson were agents of Dayton-Scott to which the jury answered "no." Dayton-Scott was not found liable, but Davidson and Rig Runner were found to be negligent and Toops was awarded $12 million in damages. Rig Runner paid its policy limits, did not appeal the decision, and in May of 1994 Davidson and Rig Runner assigned to Toops all causes of aсtion in contract or torts that they might have against USF & G and the other insurers.
Toops once again filed in state court against USF & G and the other insurers claiming breach of contract and seeking declaratory judgment under the Texas Declaratory Judgment Act. USF & G removed the case to federal court and also filed a declaratory judgment. The District Court granted summary judgment for all of the insurers except USF & G. Finally, USF & G's mоtion for summary judgment was denied and Toops' motion for summary judgment was granted.
This entire appeal centers around the District Court's interpretation of USF & G's insurance policy which states in pertinent part:
(1) WHO IS AN INSURED
The following are insureds:
(a) You for any covered auto.
(b) Anyone else while using with your permission a covered auto you own, hire or borrow except:
....
(c) Anyone liable for the conduct of an insured specified above but only to thе extent of that liability. However, the owner or anyone else from whom you hire or borrow a covered auto is an insured only if that auto is a trailer connected to a covered auto you own.
The District Court found that the coverage of Rig Runner was expressed in clear and unambiguous language. The Court then found that Dayton-Scott "hired" Rig Runner and therefore Rig Runner was an insured under subsection (1)(b) above. The Court also rejected USF & G's argument that subsection (1)(c) provides an exemption by stating that the exemption was limited to subsection (c) and thus could not be used to defeat coverage under subsection (b).
The United States District Court ultimately reduced the рrincipal amount of the judgment from $12 to $1 million. However, immediately after the order on cross-motions for summary judgment was filed, USF & G fired its counsel, retained other counsel, and within 10 days filed a FED.R.CIV.P. 59 motion for new trial. The District Court, in another order denied the Rule 59 motion, even though the brief seemingly argued Fifth Circuit case law directly on point, which may hаve mandated a different interpretation from the one the District Court decided. The District Court stated:
Nevertheless, the Court takes genuine pause in the face of caselaw that presents an entirely new line of analysis from what was earlier given to the Court. Having read the cases mentioned by Defendant, the Court now believes that, if these cases had been presented at the appropriate time, the Court might have reached a different conclusion in this matter.2
Toops v. USF & G,
DISCUSSION
I. McBroome-Bennett Doctrine
We first address whether the District Court below erred when it strictly applied the insurance policy at issue against USF & G and liberally in favor of Rig Runner. USF & G takеs issue with the fact that the District Court refused to follow the case of McBroome-Bennett Plumbing, Inc. v. Villa France, Inc.,
USF & G also argues that there was an alternative finding by the Court that if the policy was ambiguous, then the policy should be construed strictly against the insurer and liberally against the insured. It is arguable that this was an alternative holding by the Court; however, even if it was an alternative holding, the District Court properly excluded any analysis undеr the McBroome-Bennett doctrine. The doctrine has been drawn into question by courts both in Texas and across the nation. "Neither the Texas Supreme Court nor any other Texas appellate court has ever endorsed this specific provision of McBroome-Bennett, which itself relied on no Texas or other cаse authority for its pronouncement. Instead, it pointed to recent statements of then--President Gerald Ford and a comment in 44 C.J.S. Insurance ... itself almost twenty years old at the time." Id. at 291 n. 4. The law in the Fifth Circuit expressed in the District Court case of Adams v. John Hancock Mutual Life Ins. Co., states:
Under Texas law, the words and clauses of insurance contracts are strictly construed against the insurer. If a word or clause has more than one meaning, then the meaning favoring the insured must be applied. If the clause may be interpreted as a limiting term or as an exclusionary clause, the insured's reasonable construction of the clause must be adopted, even if the insurer's сonstruction is more reasonable.
II. Motion for New Trial
We next address whether or not to analyze the District Court's denial of USF & G's motion for new trial pursuant to FED.R.CIV.P. 59 on the grounds that trial counsel did not present timely dispositive cаse law supporting USF & G's prior motion for summary judgment. Rather than undertake this analysis, the Fifth Circuit advises that such endeavor is wholly unproductive because, "[o]rdinarily, a district court's decision not to grant a new trial under Rule 59(a) is not appealable." Youmans v. Simon,
STANDARD OF REVIEW
The Court of Appeals reviews a District Court's grant of summary judgment de novo and in the light mоst favorable to USF & G. Thomas v. Price,
III. Hired Auto Clause
According to the insurance policy at issue, Toops was required to prove that Dayton-Scott not only hired a "covered auto," in this case the tractor trailers driven by Williams and Davidson, but that the drivers of the hired autos were under the control of Dayton-Scott. The facts show that Dayton-Scott hired a licensed commоn carrier to provide transportation services and relied on the carrier to select and arrange for vehicles and drivers. Thus, Toops never made the connection between Rig Runner (the entity "hired") and Williams/Davidson (the drivers who drove the "auto"). Without such connection, the policy can not be enforced and USF & G can not be held liable for coverage.
Moreover, the facts show that Davidson was not even a Rig Runner employee driving a Rig Runner truck, but was an independent contractor who owned his own truck and was paid on commission. The District Court failed to make this distinction between hiring a company that provides transportation and hiring a truck. "[F]or a vehicle to constitute а hired automobile, there must be a separate contract by which the vehicle is hired or leased to the named insured for his exclusive use or control." Sprow v. Hartford Ins. Co.,
The Fifth Circuit has also addressed the breadth of "hired auto" clauses and provided inquiries to determine whether a truck was under the possession or control of the insured. In Johnson v. Royal Indem. Cо.,
1) Did not furnish gas or oil for the trucks and did not otherwise maintain the trucks;
2) Did not require the trucks to be a particular size or require a certain number of loads per day;
3) Did not select individual truck drivers;
4) Could not fire the truck drivers;
5) Was "interested only in the results" of transporting from Point A tо Point B; and
6) Did not assume "control" of the independent contractor's truck or driver by directly loading and unloading operations.
Id. at 563-64; see also Chicago Ins. Co. v. Farm Bureau Mutual Ins. Co.,
Lastly, numerous courts have held that hiring an independent contractor will not create insurance coverage under a "hired auto" clause. Chicago Ins. Co.,
IV. Issue Preclusion
In the state court jury trial that preceded the federal action, a jury was asked whether Rig Runner and Dayton-Scott were engaged in a joint enterprise. The jury was instructed that a "joint enterprise" exists if there is:
1) An agreement, either express or implied, with respect to the enterprise or endeavor;
2) A common purpose;
3) A common business or pecuniary interest; and
4) An equal right to direct and control the enterprise.
(emphasis supplied). The jury answered "no." The jury was next asked whether Rig Runner and its drivers were agents of Dayton-Scott at the time of thе collision with Toops. The jury was instructed that:
An AGENT, as applied to the factual scenario of this case, is a person in the service of another with the understanding, express or implied, that such other person has a right of control as to the details of performance during the trip, which details you have found caused the injury.
(emphasis supplied). Once again the jury answered "no."
Whеn presented with the question of issue preclusion, the District Court in its summary judgment order dismissed such argument by stating, "[w]hether or not Rig Runner is found to be an insured under USF & G's policy with Dayton-Scott is a wholly independent issue from the question of whether Rig Runner was involved in an agency or joint venture relationship with Dayton-Scott." Toops,
V. District Court's Interpretation of Hired Auto Clause
We finally addrеss whether the District Court erred when it adopted the construction of the insurance policy that Rig Runner was covered by the policy. USF & G argues that the District Court unreasonably interpreted the insurance policy to cover Rig Runner. In cases dealing with insurance policies, certain rules of construction may be used to interpret the policy; however, if an insurance policy's provisions are expressed in clear and unambiguous language, the court may not use the rules of construction. Adams,
USF & G argues that based on public policy, no reasonable corporation would pay premiums to insure third-parties against risks for which the corporation could not be liable. This argument is somewhat correct, although a plain reading of this allegedly unambiguous insurance policy that USF & G wrote, seems to say the contrary. The policy explicitly sets forth "who is an insured" and under (1)(b) states: "[a]nyone else while using with your permission a covered auto you own, hire or borrow ..." Such a reading, of course, is constrained by the case law in Sprow which requires a showing of a separate contract and that the hired automobile was under the named insured's exclusive use or control.
CONCLUSION
Based upon the discussion above, we hold the Sprow case to be controlling. The District Court erroneously granted summary judgment for the Appellees and denied summary judgment for thе Appellant. The essential elements required by Sprow are lacking and therefore we REVERSE the order on cross-motions for summary judgment and RENDER judgment for Appellant USF & G.
Notes
District Judge of the Western District of Texas, sitting by designation
A ringer attachment is installed on a crane to substantially increase its lifting capacity
Supreme Court Justice Frankfurter once said, "Wisdom too often never comes, and so one ought not to reject it merely because it comes late." Henslee v. Union Planters Nat'l Bank and Trust Co.,