Canal Insurance Company v. Xmex Transport, LLC et al
Filing
138
ORDER GRANTING IN PART AND DENYING IN PART 107 Motion for Summary Judgment; DENYING 109 Motion for Judgment as a Matter of Law; IT IS FURTHER ORDERED that the Clerk shall ADMINISTRATIVELY CLOSE the Case pending resolution of the state court appeal. Signed by Judge Kathleen Cardone. (vm1)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
EL PASO DIVISION
CANAL INSURANCE COMPANY,
Plaintiff,
v.
XMEX TRANSPORT, LLC, et al.,
Defendants.
§
§
§
§
§
§
§
§
§
EP-13-CV-156-KC
ORDER
On this day, the Court considered Plaintiff Canal Insurance Company’s (“Canal”) Motion
for Summary Judgment of Canal Insurance Company on the Duty to Indemnify and All
Counterclaims of Jessica Lopez as Administratrix of the Estate of Roger Franceware and as Next
Friend of A.F. and J.F. (“Canal Motion”), ECF No. 107, and the Munoz Defendants’1 Motion for
Summary Judgment on Plaintiff Canal Insurance Company’s Duty to Pay Based on the MCS-90
Endorsement (“Munoz Motion”), ECF No. 109, in the above-captioned case (the “Case”). For
the following reasons, the Canal Motion is GRANTED in part and DENIED in part, and the
Munoz Motion is DENIED in its entirety.
I.
BACKGROUND
Unless otherwise noted, the following facts are undisputed.
1
Throughout this Order, the Court refers to Lorena Munoz, individually and on behalf of the Estate of Lorenzo
Munoz, and as next friend of L.M. and C.M., minor children, and Virginia Munoz, collectively as the “Munoz
Defendants.”
1
Canal issued auto insurance policy number PIA0603370 to XMEX Transport LLC
(“XMEX”). See Ins. Policy Number PIA0603370 (the “Policy”), Compl. Ex. A, ECF No. 1-10.2
The Policy was in effect from August 6, 2010, to “Until Cancelled.” See id. at 1. On August 17,
2010, a 2007 International tractor with VIN number 2HSCNSCR57C432761 (the “Truck”) was
involved in a single-vehicle accident resulting in the deaths of both Roger Franceware
(“Franceware”) and Lorenzo Munoz (“Munoz”) (collectively the “Decedents”). See Proposed
Undisputed Facts ¶ 2 (“Canal Proposed Facts”), Canal Mot. Attach. 5, ECF No. 107-5; Def.
Lopez’s Resp. to Canal’s Proposed Undisputed Facts in Connection with its Mot. for Summ. J.
on the Duty to Indemnify and All Countercls. of Jessica Lopez as Administratrix of the Estate of
Roger Franceware and as Next Friend of A.F. and J.F. ¶ 2 (“Lopez Response to Proposed
Facts”), Def. Lopez’s Resp. to Canal’s Mot. for Summ. J. on the Duty to Indemnify and All
Countercls. of Jessica Lopez as Administratrix of the Estate of Roger Franceware and as Next
Friend of A.F. and J.O. Attach. 6, ECF No. 116-6; Munoz Defs.’ Resp. to Canal’s Proposed
Undisputed Facts and Additional Proposed Facts ¶ 2 (“Munoz Response to Proposed Facts”),
Munoz Defs.’ Resp. in Opp’n to Canal’s Mot. for Summ. J. on the Duty to Indemnify Ex. A,
ECF No. 118-1.
Following the accident, on October 25, 2010, the Munoz Defendants filed Cause No.
2010-4169 in the 168th District Court of El Paso County, Texas (the “Underlying Suit”), seeking
damages arising from Munoz’s death. See Munoz Defs.’ Original Pet., Canal Mot. Ex. C, ECF
No. 107-2. The Munoz Defendants specifically listed the Estate of Roger Franceware as a
2
Though Canal has attached a copy of the Policy to its motion, the Court notes that the attached copy is divided into
two separate electronic attachments. See Ins. Policy Number PIA0603370, Canal Mot. Ex. A, Attach. 1 4-51, ECF
No. 107-1; Ins. Policy Number PIA0603370, Canal Mot. Ex. A, Attach. 2 1-22, ECF No. 107-2. Accordingly, for
ease of reference the Court cites to the undivided copy of the Policy provided with Canal’s original Complaint. See
Compl. for Declaratory J. Ex. J, ECF No. 1-10.
2
defendant in their October 25, 2010, petition. See id. at 36. Lopez subsequently intervened in
the Underlying Suit as administratrix of the Estate of Roger Franceware. Nearly three years
later, on May 7, 2013, Canal initiated the instant Case, seeking a declaratory judgment that it had
no duty to defend or indemnify Defendants in relation to the Underlying Suit, and that the MCS90 endorsement found in the Policy is not applicable to any of Defendants’ demands for
payment. See Compl. for Declaratory J. 12 (“Complaint”), ECF No. 1.3
While the instant Case remained pending, the Underlying Suit proceeded to trial in Texas
state court, resulting in a verdict. Canal Proposed Facts ¶ 11; Lopez Resp. to Proposed Facts ¶
11; Munoz Resp. to Proposed Facts ¶ 11. See also Charge of the Ct. (“Jury Verdict”), Canal
Mot. Ex. P, ECF No. 107-4; Corrective J. Signed June 3, 2014 (“Underlying Judgment”), Canal
Mot. Ex. N, ECF No. 107-4. By their verdict, the jury found that “[i]n connection with the
events giving rise to this suit” Franceware was “acting as an employee in the scope of his
employment [with XMEX].” See Jury Verdict 100. The jury found, however, that Munoz was
not acting as an employee in the scope of his employment with XMEX at the time of the
accident. See id. at 101. On June 9, 2014, the state court entered its judgment, ordering that both
Franceware and Munoz recover damages against XMEX. See Underlying J. 82-83. Neither the
Underlying Judgment nor the Jury Verdict addressed the issue of whether the Truck was a
covered auto under the Policy. See generally Underlying J.; Jury Verdict.
Subsequently, on September 4, 2014, this Court found that Canal had a duty to defend
Franceware in the Underlying Suit. See Sept. 4, 2014, Order 34-35, ECF No. 77. As a result, on
October 31, 2014, Lopez, as administratrix of the Franceware estate, filed her First Amended
3
The Court’s citations to documents filed in the Case refer to the page numbers superimposed upon them by the
Court’s electronic docketing system.
3
Answer and Counterclaim (“Lopez Counterclaims”), ECF No. 90, asserting causes of action
against Canal for (1) breach of contract, (2) breach of the common law duty of good faith and
fair dealing, (3) breach of the Texas Insurance Code, (4) breach of the Texas Deceptive Trade
Practices Act, (5) gross negligence, and (6) claims based upon Lopez being a third-party
beneficiary of the Policy. Id. at 6-10.
Canal filed the Canal Motion on April 17, 2015, praying for the Court to declare that “no
duty to indemnify exists” under either the Policy’s indemnification clause or the Policy’s MCS90 endorsement. Canal Mot. 21.4 Lopez filed her response to the Canal Motion on May 1, 2015.
See Def. Lopez’s Resp. to Canal’s Mot. for Summ. J. on the Duty to Indemnify and All
Countercls. of Jessica Lopez as Administratrix of the Estate of Roger Franceware and as Next
Friend of A.F. and J.O. (“Lopez Response”), ECF No. 116. On May 4, 2015, the Munoz
Defendants also filed a response to the Canal Motion. See Munoz Defs.’ Resp. in Opp’n to
Canal’s Mot. for Summ. J. on the Duty to Indemnify (“Munoz Response”), ECF No. 118. Canal
filed its replies to both the Lopez and Munoz Responses on May 12, 2015. See Reply of Canal
Ins. Co. to the Resp. of Jessica Lopez as Administratrix of the Estate of Roger Franceware and as
Next Friend of A.F. and J.F. and the Adoption of Rosa Franceware to the Mot. for Summ. J. of
Canal Ins. Co. (“Canal Reply to Lopez”), ECF No. 123; Reply of Canal Ins. Co. to the Resp. of
the Munoz Defs. to the Mot. for Summ. J. of Canal Ins. Co. (“Canal Reply to Munoz”), ECF No.
124.
The Munoz Defendants filed the Munoz Motion on April 18, 2015, seeking summary
judgment that “Canal has a duty to pay the [Underlying Judgment] against XMEX based on the
4
Canal and Lopez later requested that the Court dismiss the Lopez Counterclaims. Mot. 21. However, for the
reasons set forth in Canal’s and Lopez’s sealed Notice, ECF No. 137, the Court need not address Canal’s requests in
relation to the Lopez Counterclaims.
4
MCS-90 endorsement contained in the [P]olicy.” Munoz Mot. 21. Canal filed its response to the
Munoz Motion on April 27, 2015. See Resp. of Canal Ins. Co. to the Mot. for Summ. J. of the
Munoz Defs. (“Canal Response to Munoz”), ECF No. 111. Lopez did not respond to the Munoz
Motion.
II.
DISCUSSION
A.
Standard
A court must enter summary judgment “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Weaver v. CCA Indus.,
Inc., 529 F.3d 335, 339 (5th Cir. 2008). “A fact is ‘material’ if its resolution in favor of one
party might affect the outcome of the lawsuit under governing law.” Sossamon v. Lone Star
State of Tex., 560 F.3d 316, 326 (5th Cir. 2009) (quoting Hamilton v. Segue Software, Inc., 232
F.3d 473, 477 (5th Cir. 2000) (per curiam)). A dispute about a material fact is genuine only “if
the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Ellison v. Software Spectrum, Inc.,
85 F.3d 187, 189 (5th Cir. 1996).
“[The] party seeking summary judgment always bears the initial responsibility of
informing the district court of the basis for its motion, and identifying those portions of [the
record] which it believes demonstrate the absence of a genuine issue of material fact.” Celotex,
477 U.S. at 323; Wallace v. Tex. Tech. Univ., 80 F.3d 1042, 1046-47 (5th Cir. 1996). To show
the existence of a genuine dispute, the nonmoving party must support its position with citations
to “particular parts of materials in the record, including depositions, documents, electronically
5
stored information, affidavits or declarations, stipulations . . . , admissions, interrogatory
answers, or other materials[,]” or show “that the materials cited [by the movant] do not establish
the absence . . . of a genuine dispute, or that [the moving party] cannot produce admissible
evidence to support the fact.” Fed. R. Civ. P. 56(c).
The court resolves factual controversies in favor of the nonmoving party; however,
factual controversies require more than “conclusory allegations,” “unsubstantiated assertions,” or
“a ‘scintilla’ of evidence.” Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en
banc). Further, when reviewing the evidence, the court must draw all reasonable inferences in
favor of the nonmoving party, and may not make credibility determinations or weigh evidence.
Man Roland, Inc. v. Kreitz Motor Express, Inc., 438 F.3d 476, 478-79 (5th Cir. 2006) (citing
Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000)). Thus, the ultimate
inquiry in a summary judgment motion is “whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is so one-sided that one party must
prevail as a matter of law.” Anderson, 477 U.S. at 251-52.
B.
Analysis
1.
Canal has no duty to indemnify under the Policy’s indemnification
clause
Canal argues that it has no duty to indemnify under the Policy’s indemnification clause
because neither Lopez nor the Munoz Defendants have presented evidence establishing that the
Truck was a “covered auto” under the Policy. See Canal Mot. 5. Specifically, Canal asserts that
“[t]here is no evidence the [Truck] was being acquired by [XMEX] or had been acquired by
[XMEX],” nor that the Truck “was being used with the permission of the owner of the vehicle
. . . as a temporary replacement vehicle.” Id. Lopez responds that whether the Truck was
6
covered under the Policy “is not dispositive [because] the [Policy’s] MCS-90 endorsement . . .
may still require Canal to pay [the Underlying Judgment].” Lopez Resp. 2. The Munoz
Defendants agree with Lopez that “pursuant to the MCS-90 endorsement . . . Canal has a duty to
pay . . . the [Underlying Judgment].” Munoz Resp. 6. The Munoz Defendants further assert that
“fact issues exist as to whether the [Truck] was ‘acquired’ by XMEX and therefore a covered
vehicle under the Policy.” Id. at 8, 24.
“The insurer’s duty to indemnify depends on the facts proven and whether the damages
caused by the actions or omissions proven are covered by the terms of the policy.” D.R. HortonTex., Ltd. v. Markel Int’l Ins. Co., Ltd., 300 S.W.3d 740, 744 (Tex. 2009). Generally, the duty to
indemnify is “controlled by the facts proven in the underlying suit.” See Gilbane Bldg. Co. v.
Admiral Ins. Co., 664 F.3d 589, 601 (5th Cir. 2011) (citing Pine Oak Builders, Inc. v. Great Am.
Lloyds Ins. Co., 279 S.W.3d 650, 656 (Tex. 2009)). However, where the underlying case does
not resolve all the factual issues necessary to determine coverage, a district court may consider
other evidence “regarding facts necessary to determine coverage that were not adjudicated in the
underlying case.” See Nat’l Union Fire Ins. Co. of Pitts., Pa. v. Puget Plastics Corp., 532 F.3d
398, 404 (5th Cir. 2008).
Under the Policy’s indemnification clause, Canal has a duty to “pay all sums an ‘insured’
legally must pay as damages because of ‘bodily injury’ or ‘property damage’ to which [the
Policy] applies, caused by an ‘accident’ and resulting from the ownership, maintenance or use of
a covered ‘auto.’” Policy 29. The Policy defines “covered autos” as “[o]nly those ‘autos’
described in Item Three of the Declarations for which a premium charge is shown.” See id. at
23, 28. Section I.C.3 of the Policy, however, creates an exception to the rule that only listed
7
autos are covered. Specifically, “[a]ny ‘auto’ [XMEX]5 do[es] not own while used with the
permission of its owner as a temporary substitute for a covered ‘auto’ [XMEX] own[s] that is out
of service” is also a “covered auto” under the Policy.6 Id. at 29.
Here, the parties do not dispute that the Truck is not one of the specifically listed vehicles
in Item Three. See Canal Proposed Facts ¶ 15; Lopez Resp. to Proposed Facts ¶ 15; Munoz
Resp. to Proposed Facts ¶ 15. As a result, in order to establish that the Truck was a covered auto,
Lopez and the Munoz Defendants must show that XMEX borrowed the Truck as a temporary
substitute vehicle and that XMEX was using the Truck “with the permission of its owner.” See
Policy 29; Nat’l Union, 532 F.3d at 401 (“In Texas, the insured carries the burden to establish the
insurer’s duty to indemnify by presenting facts sufficient to demonstrate coverage.”).
Before turning to the parties’ summary judgment arguments, the Court first notes that
though “[t]he insurer’s duty to indemnify depends on the facts proven [at trial],” see D.R.
Horton-Tex., 300 S.W.3d at 744, neither the Jury Verdict nor the Underlying Judgment address
or resolve the factual issues pertinent to determining whether the Truck was a temporary
substitute vehicle. As a result, the Court considers, as it may, the evidence provided by the
parties in determining whether an issue of fact exists as to coverage. See Nat’l Union, 532 F.3d
at 404.
5
The exact language of the Policy states that “[a]ny ‘auto’ you do not own while used with the permission of its
owner as a temporary substitute for a covered ‘auto’ you own that is out of service” is also a “covered auto” under
the Policy. Id. at 29 (emphasis added). Throughout the Policy, the words “you” and “your” refer “to the Named
Insured shown in the Declarations.” See id. at 28. XMEX is the named insured shown in the Declarations. See id.
at 1.
6
The Policy also provides that “‘[t]railers’ with a load capacity of 2,000 pounds or less designed primarily for travel
on public roads [and] ‘[m]obile equipment’ while being carried or towed by a covered ‘auto’” also qualify as
“covered autos” under the Policy. See Policy 29. However, because none of the parties argue that these provisions
are applicable, the Court does not address them in this Order.
8
In support of its position that “[t]here is no evidence the [Truck] was being used with
the permission of [its] owner,” see Canal Mot. 5, Canal has provided a Certificate of Title for the
Truck which lists Moore Freight Services, Inc. (“Moore Freight”) as the Truck’s owner. See
Certificate of Title (“Truck Title”), Canal Mot. Ex. O, Attach. 4, ECF No. 107-4. Canal has
further provided excerpts of Charles Strader’s (“Strader”) sworn testimony from the Underlying
Suit in which Strader, the owner of XMEX, admitted that XMEX did not “have even implied [or]
remotely implied authority” to use Moore Freight equipment. See Mar. 21, 2014, Tr. of Oral
Arg. 42 (“Strader Testimony”), Canal Reply to Lopez Attach. 3, ECF No. 123-3. Accordingly,
Canal has presented evidence that Moore Freight owned the Truck, and that Moore Freight had
not given XMEX permission to use the Truck. By presenting evidence that XMEX could not
have used the Truck with the Truck’s owner’s permission, Canal has met its initial burden on
summary judgment of “identifying those portions of [the record] which it believes demonstrate
the absence of a genuine issue of material fact” as to whether the Truck was a “covered auto”
under the Policy. See Celotex, 477 U.S. at 323; see also Policy 29 (stating that a temporary
substitute vehicle must be “used with the permission of its owner”). Accordingly, the burden
shifts to Lopez and the Munoz Defendants, as the non-moving parties, to “designate specific
facts showing that there is a genuine issue for trial.” See Nola Spice Designs, L.L.C. v. Haydel
Enters., Inc., 783 F.3d 527, 536 (5th Cir. 2015).
To rebut Canal’s argument, Lopez relies entirely on her assertion that Canal’s duty to
indemnify arises from the MCS-90 endorsement “regardless [of] whether or not [the Truck] is
specifically described in the [P]olicy.” Lopez Resp. 2. Lopez’s argument fails. An insurer’s
obligations under a policy’s indemnification clause and those under an MCS-90 endorsement,
9
“while linked, impose different obligations based on different requirements.” Carolina Cas. Ins.
Co. v. Yeates, 584 F.3d 868, 882 (10th Cir. 2009). “[T]he obligation placed upon the insurer by
the MCS-90 [is] one of suretyship,” which is “triggered when the policy to which it is attached
provides no coverage to the insured.” T.H.E. Ins. Co. v. Larsen Intermodal Servs., Inc., 242 F.3d
667, 672 (5th Cir. 2001). As a result, “[t]he fact that [Canal] may ultimately have to satisfy a
final judgment against [XMEX] in the [Underlying Suit], pursuant to the MCS-90 endorsement,
does not preclude the court from holding as a matter of law that [Canal] has no duty to indemnify
[XMEX] under the [Policy’s indemnification clause].” See John Deere Ins. Co. v. Truckin’ USA,
Civ.A. No. 3:95-CV-1556-D, 1996 WL 734952, at *5 (N.D. Tex. Dec. 10, 1996); see also
Travelers Indem. Co. of Ill. v. W. Am. Specialized Transp. Co., Inc., 317 F. Supp. 2d 693, 698-99
(W.D. La. 2004) (collecting cases). In relying entirely on Canal’s potential liability under the
MCS-90 endorsement, Lopez has made no attempt to present any evidence, or even argument,
showing that the vehicle was a covered auto for the purposes of the Policy’s separate
indemnification clause. See generally Lopez Resp.
Though the Munoz Defendants also rely heavily on the MCS-90 endorsement, they
additionally argue that “fact issues exist as to whether the [Truck] was ‘acquired’ by XMEX and
therefore was a covered vehicle under the Policy.” Munoz Resp. 8, 24. In support of that
position, the Munoz Defendants cite to portions of a June 20, 2011, deposition of Strader. See id.
at 14-16; see also June 20, 2011, Dep. of Charles Strader (“Strader Deposition”), Munoz Defs.’
Supplemental App. of Evidence in Supp. of their Mot. for Summ. J. on Pl. Canal Ins. Co.’s Duty
to Pay Based on the MCS-90 Endorsement and Resp. to Canal’s Mot. for Summ. J. on the Duty
to Indemnify Ex. E, ECF No. 119. The excerpt of the Strader Deposition does not raise a
10
genuine issue that the Truck was a covered temporary substitute vehicle. At his deposition,
Strader stated that by August 17, 2010, he had “started securing trucks” for XMEX, but did not
indicate in any way that XMEX secured, or even attempted to secure, either a Moore Freight
automobile or the Truck specifically. See Strader Dep. 15. Moreover, nothing in the Strader
Deposition even hints that XMEX sought to acquire any vehicle as a temporary substitute for a
covered auto XMEX owned that was out of service. Nor do any facts in the Strader Deposition
either address or contradict Strader’s testimony that Moore Freight never granted XMEX
permission to use Moore Freight’s equipment. See Strader Test. 42. Accordingly, the Strader
Deposition falls far short of showing a genuine issue of fact as to whether XMEX had obtained
the Truck with the permission of Moore Freight as a temporary substitute vehicle for a covered
auto XMEX owned – as the Munoz Defendants must show to survive summary judgment. See
Policy 29.
Therefore, the Court finds that both Lopez and the Munoz Defendants have failed,
despite having nearly two years to conduct discovery, to “designate [any] specific facts showing
that there is a genuine issue” that the Truck was a “covered auto” under the Policy. See Nola
Spice, 783 F.3d at 536. As a result, Canal “has shown the absence of a genuine issue of material
fact concerning” the Truck’s coverage under the Policy, and is entitled to summary judgment
that it owes no duty to indemnify under the Policy’s indemnification clause.7 See Dilworth v.
Box, No. 94-41088, 53 F.3d 1281, at *3 (5th Cir. Apr. 20, 1995); see also Celotex, 477 U.S. at
322.
7
Canal argues that “because Franceware and Munoz were either employees or statutory employees of [XMEX], no
duty to indemnify either [XMEX] or Strader or Munoz or Franceware exists for the judgments rendered for the
claimants seeking recovery through them or against them.” Canal Mot. 8. Because the Court has resolved the issue
of Canal’s duty to indemnify based on the lack of evidence establishing that the Truck was a covered auto, the Court
need not address Canal’s additional argument.
11
2.
The Court stays determination of Canal’s liability under the MCS-90
endorsement pending resolution of the state court appeals
The Munoz Defendants argue that the MCS-90 endorsement obligates Canal to pay the
Underlying Judgment against XMEX because, inter alia, the Jury Verdict “established that
Munoz was not an XMEX employee” and therefore the endorsement’s employee exclusion does
not negate coverage. Munoz Mot. 7. Canal responds that the Jury Verdict is not determinative
of Munoz’s employment status because the definition of “employee” submitted to the jury did
not comport with the federal definition of “employee” that is relevant in interpreting MCS-90
endorsements. Canal Resp. to Munoz 6. Lopez asserts that, though “the [Underlying Suit]
developed and adjudicated [the Decedents’] employment status with XMEX[,] . . . that
adjudication is incomplete, because multiple parties appealed the trial court’s judgment.” Lopez
Resp. 5.
“[An] MCS-90 endorsement must be attached to any liability policy issued to for-hire
motor carriers operating motor vehicles transporting property in interstate commerce.” See
Canal Ins. Co. v. Coleman, 625 F.3d 244, 247 (5th Cir. 2010) (citing 49 C.F.R. §§ 387.3, 387.7).
“The purpose of [an] MCS-90 endorsement is to ‘assure compliance’ with federal minimum
levels of financial responsibility for motor carriers.” Id. “Basically, the MCS-90 makes the
insurer liable to third parties for any liability resulting from the negligent use of any motor
vehicle by the insured, even if the vehicle is not covered under the insurance policy.” Larsen
Intermodal, 242 F.3d at 671. An insurer’s obligations under an MCS-90 endorsement “impose
different obligations based on different requirements” from those under a policy’s
indemnification clause. See Yeates, 584 F.3d at 882. Nonetheless, the Fifth Circuit has stated
that an analysis of an insurer’s duty under an MCS-90 endorsement, like its duty to indemnify
12
under an indemnification clause, is “determined by all the facts and circumstances that result in
the insured’s potential liability.” See Ooida Risk Retention Grp., Inc. v. Williams, 579 F.3d 469,
477 (5th Cir. 2009) (citing Farmers Tex. Cnty. Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 82 (Tex.
1997)). Accordingly, the Court, as it did in analyzing Canal’s duty to indemnify under the
Policy’s indemnification clause, looks first to the “facts proven in the underlying suit” to
determine Canal’s obligations under the MCS-90 endorsement. See Gilbane Bldg. Co., 664 F.3d
at 601.
Here, coverage under the Policy’s MCS-90 endorsement “does not apply to injury to or
death of [XMEX’s] employees while engaged in the course of their employment.” See Policy
54. The Munoz Defendants argue that this employee exclusion does not bar coverage because
“the [Jury Verdict] established that Munoz was not an XMEX employee.” See Munoz Resp. 7.
Interpretation of the MCS-90 endorsement is governed by federal law. See Minter v. Great Am.
Ins. Co. of N.Y., 423 F.3d 460, 470 (5th Cir. 2005). Therefore, the federal definition of
“employee” found in 49 C.F.R. § 390.5 “clearly applie[s]” to a determination of coverage under
the MCS-90 endorsement. See Consumers Cnty. Mut. Ins. Co. v. P.W. & Sons Trucking, Inc.,
307 F.3d 362, 367 n.7 (5th Cir. 2002). Section 390.5 defines “employee” as:
[A]ny individual, other than an employer, who is employed by an
employer and who in the course of his or her employment directly
affects commercial motor vehicle safety. Such term includes a
driver of a commercial motor vehicle (including an independent
contractor while in the course of operating a commercial motor
vehicle).
49 C.F.R. § 390.5 (emphasis added); see also Ooida Risk, 579 F.3d at 473; Consumers Cnty.,
307 F.3d at 365.
13
The Munoz Defendants are correct that the jury found that Munoz was not “an employee
in the scope of his employment for [XMEX]” at the time of the accident. See Jury Verdict 101.
However, § 390.5 has “eliminat[ed] the common law employee/independent contractor
distinction” for the purposes of coverage under MCS-90 endorsements. See Consumers Cnty.,
307 F.3d at 366. “Both the modern common law . . . and the law of Texas make the distinction
between [a common law employee] and that of independent contractor turn on the absence of
authority in the principal to control the physical conduct of the contractor in performance of the
contract.” See Logue v. United States, 412 U.S. 521, 527 (1973); see also Schievink v. Wendylou
Ranch, Inc., 227 S.W.3d 862, 866 (Tex. App. 2007) (“An independent contractor has been
defined as ‘any person who, in the pursuit of an independent business, undertakes to do a specific
piece of work for other persons, using his own means and methods, without submitting himself
to their control in respect to all its details.’” (quoting Indus. Indem. Exch. v. Southard, 160
S.W.2d 905, 907 (Tex. 1942))); Restatement (Second) of Agency § 2(3) (1958). Here, as
charged to the state jury, Munoz was XMEX’s “employee” only if he was “in the service of
[XMEX] under a contract of hire . . . with the understanding that [XMEX] ha[d] the right to
direct the details of the work and not merely the result to be accomplished.” See Jury Verdict 96.
Accordingly, by requiring a finding that XMEX had the right to control the details of Munoz’s
work, the state court’s jury charge precluded a finding that Munoz was an XMEX “employee”
for the purposes of the MCS-90 endorsement based on an independent contractor relationship.
As a result, the Jury Verdict does not fully determine Munoz’s employment status as defined
under federal law.
14
Further, the MCS-90 endorsement obligates Canal to pay any “final judgment” recovered
against XMEX. See Policy 54. The parties dispute whether the Underlying Judgment, which is
currently on appeal, is a “final judgment” under the MCS-90. Relying on a state law
interpretation of “final judgment,” the Munoz Defendants argue that the state trial court’s
judgment is final because under Texas law “although enforcement of a final judgment may be
suspended (superseded) during the pendency of an appeal . . . the pendency of an appeal does not
affect its finality.” See Munoz Mot. 15. Both Canal and Lopez, on the other hand, relying on
United States v. Lemaire, 826 F.2d 387 (5th Cir. 1987), argue that the “federal definition [of
‘final judgment’] refers to a judgment after all appeals have been exhausted.” See Lopez Resp.
6; see also Canal Resp. to Munoz 13-16. After review of the parties’ authorities, and upon the
Court’s independent research, the Court has found no authority directly addressing the meaning
of “final judgment” under federally mandated MCS-90 endorsements. Nonetheless, because, as
discussed below, the subject of the parties’ pending state court appeals counsels against ruling on
the MCS-90 at this time, the Court does not reach the issue of whether the Underlying Judgment
is a “final judgment” within the meaning of the MCS-90.
Canal’s obligations under the MCS-90 endorsement are controlled by the facts proven in
the Underlying Suit. See Gilbane Bldg. Co., 664 F.3d at 601; Ooida Risk, 579 F.3d at 477.
Though the Court has found that the Underlying Judgment does not fully determine the
Decedents’ employment statuses under § 390.5’s definition of “employee,” at least one party has
appealed the Underlying Judgment on the ground that an “additional element [in the definition of
‘employee’] materially changed the definition [of ‘employee’] and materially affected the jury’s
assessment of course and scope of employment.” See Docketing Statement 16, Lopez Resp. Ex.
15
C, ECF No. 116-3. Accordingly, though it is not clear what “additional element” is at issue on
appeal, the Court finds that the Decedents’ employment status is not sufficiently developed at
this time for the Court to rule on Canal’s liability under the MCS-90 endorsement. The Court
accordingly denies both the Canal Motion and the Munoz Motion in so far as they seek a
determination of Canal’s liability under the MCS-90, without prejudice to re-file after resolution
of the state court appeals.8
III.
CONCLUSION
For the reasons set forth above, it is hereby ORDERED that the Canal Motion, ECF No.
107, is GRANTED in part and DENIED in part. The Canal Motion is GRANTED to the extent
it seeks a declaration that Canal has no duty to indemnify under the indemnification clause found
at page 29 of the Policy. The Canal Motion is DENIED to the extent that it seeks a declaration
that Canal has no duty under the federally mandated MCS-90 endorsement found at page 54 of
the Policy.
IT IS FURTHER ORDERED that the Munoz Motion, ECF No. 109, is DENIED in its
entirety.
8
Though the Court considered evidence outside the Underlying Judgment and Jury Verdict in determining Canal’s
liability under the Policy’s indemnification clause, the Court did so because whether the Truck was a covered
vehicle under the Policy, a factual determination necessary to Canal’s duty under the indemnification clause, was
not adjudicated, or even addressed, by the Underlying Suit. See Policy 29; Underlying J.; Jury Verdict. In relation
to coverage under the MCS-90 endorsement, however, both the Underlying Judgment and the Jury Verdict
addressed the Decedents’ employment status, which is highly relevant to the applicability of the MCS-90
endorsement. See Underlying J. 66-67; Jury Verdict 100-101. Accordingly, because Canal’s obligations under the
MCS-90 endorsement are determined by the facts proven in the Underlying Suit, see Gilbane Bldg. Co., 664 F.3d at
601; Ooida Risk, 579 F.3d at 477, and because those issues are currently on appeal, the Court stays consideration of
Canal’s liability under the MCS-90 until resolution of the state court appeals.
Further, both Canal and Lopez agree that Munoz is not now entitled to summary judgment because the MCS-90
issue is not ripe due to the state court appeal. Canal Resp. to Munoz 16; Lopez Resp. 6.
16
IT IS FURTHER ORDERED that the Clerk shall ADMINISTRATIVELY CLOSE
the Case pending resolution of the state court appeal. Any party may file a petition with the
Court to re-open the Case upon final resolution of all state court appeals, or upon settlement.
SO ORDERED.
SIGNED this 21st day of August, 2015.
KATHLEEN CARDONE
UNITED STATES DISTRICT JUDGE
17
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?