Lopez v. Canal Insurance Company

Filing 36

ORDER DENYING 29 Motion for Summary Judgment. 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. Signed by Judge Kathleen Cardone. (mn)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
EL PASO DIVISION
JESSICA LOPEZ,
Plaintiff,
v.
CANAL INSURANCE COMPANY,
Defendant.

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EP-14-CV-372-KC

ORDER
On this day, the Court considered Defendant Canal Insurance Company’s (“Canal”)
Motion for Summary Judgment on the Duty to Indemnify (“Motion”), ECF No. 29. For the
following reasons, the Motion is DENIED.
I.

BACKGROUND
Unless otherwise noted, the following facts are undisputed.
Canal issued auto insurance policy number PIA05359601 to Moore Freight Services, Inc.

(“Moore Freight”). See Ins. Policy Number PIA05359601 (the “Policy”), Pl.’s Mot. for Summ.
J. Regarding Canal Ins. Co.’s Duty to Defend Ex. A, ECF No. 11-1.1 The Policy was in effect
from January 1, 2010, to January 1, 2011. See id. at 1.2 On August 17, 2010, a 2007

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Though Canal has attached a copy of the Policy to its Motion, the Court notes that the attached copy is divided
among three separate electronic attachments. See Ins. Policy Number PIA05359601, Canal Mot. App. Part 1 1-70,
ECF No. 29-1; Ins. Policy Number PIA05359601, Canal Mot. App. Part 2 1-70, ECF No. 29-2; Ins. Policy Number
PIA05359601, Canal Mot. App. Part 3 1-28, ECF No. 29-3. Accordingly, for ease of reference the Court cites to the
undivided copy of the Policy provided with Plaintiff’s prior filed motion regarding the duty to defend. See Pl.’s
Mot. for Summ. J. Regarding Canal Ins. Co.’s Duty to Defend Ex. A, ECF No. 11-1.
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Unless otherwise noted, 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.

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International tractor with VIN number 2HSCNSCR57C432781 (the “Truck”) was involved in a
single-vehicle accident resulting in the deaths of both Roger Franceware (“Franceware”) and
Lorenzo Munoz (“Munoz”). See Proposed Undisputed Facts ¶ 2 (“Proposed Facts”), Canal Mot.
Attach. 5, ECF No. 29-5; Jessica Lopez’s Resp. to Canal Ins. Co.’s Proposed Undisputed Facts ¶
2 (“Response to Proposed Facts”), Jessica Lopez’s Resp. to Canal Ins. Co.’s Mot. for Summ. J.
on the Duty to Indemnify Attach. 2, ECF No. 34-2.
Following the accident, on October 25, 2010, 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 the “Munoz Claimants”) 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 Claimants’ Original Pet., Mot. for Summ. J. of Canal Ins. Co. on the
Duty to Defend Ex. C at 88-94, ECF No. 10-2. The Munoz Claimants listed the Estate of Roger
Franceware as a defendant in their October 25, 2010, petition. See id. at 1. Jessica Lopez
(“Lopez”) subsequently intervened in the Underlying Suit as administratrix of the Estate of
Roger Franceware.
The Underlying Suit subsequently resulted in a Texas state court verdict. See Charge of
the Ct. (“Jury Verdict”), Canal Mot. App. Part 3 at 53-60, ECF No. 29-3; Charge of the Ct.
(“Jury Verdict”), Canal Mot. App. Part 4 at 1-24, ECF No. 29-4;3 Corrective J. Signed June 3,
2014 (“Underlying Judgment”), Canal Mot. App. Part 3 at 29-52, ECF No. 29-3. 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 for [Moore Freight].” See Jury
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Because the version of the Jury Verdict filed in the Court’s docketing system is divided between two separate
electronic documents, see Charge of the Ct. (“Jury Verdict”), Canal Mot. App. Part 3 at 53-60, ECF No. 29-3;
Charge of the Ct. (“Jury Verdict”), Canal Mot. App. Part 4 at 1-24, ECF No. 29-4, the Court’s references to the Jury
Verdict will cite to the “Canal Lopez Appendix” numbers on the bottom right corner of each page of the documents.

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Verdict 203. On June 9, 2014, the state court entered its judgment, ordering that the Estate of
Roger Franceware and its related claimants, including Lopez, recover damages against Moore
Freight and the Estate of Lorenzo Munoz. See Underlying J. 45-46, 51.
On October 9, 2014, Lopez initiated the instant Case, asserting numerous causes of action
against Canal, including: (1) breach of contract, (2) breach of the common law duty of good faith
and fair dealing, (3) violations of Chapters 541 and 542 of the Texas Insurance Code, (4)
violations of the Texas Deceptive Trade Practices Act (“DTPA”), and (5) gross negligence. See
Pl.’s Original Compl. 3-6, ECF No. 1. In response, Canal filed a counterclaim seeking a
declaration that “coverage does not exist under the [Policy] for the claims for defense [or] for
indemnity now made by Lopez.” See Original Answer and Countercl. of Canal Ins. Co. 7
(“Original Answer”), ECF No. 4.
Canal filed its Motion on August 3, 2015, praying for the Court to declare that “no duty
to indemnify Moore Freight exists for the judgment rendered for [Lopez].” Mot. 4. Moreover,
Canal seeks a declaration that “Canal owes nothing under the MCS-90 endorsement for Lopez’s
claims.” Id. at 4-5. Lopez filed her response to the Motion on August 17, 2015. See Jessica
Lopez’s Resp. to Canal Ins. Co.’s Mot. for Summ. J. on the Duty to Indemnify (“Response”),
ECF No. 34. Canal filed its reply to the Response on August 24, 2015. See Reply of Canal Ins.
Co. to the Resp. of Jessica Lopez to Canal’s Mot. for Summ. J. on the Duty to Indemnify
(“Reply”), ECF No. 35.

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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
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).

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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.

The Court stays determination of Canal’s liability under the Policy’s
indemnification clause pending resolution of the state court appeal

Canal argues that it has no duty to indemnify Moore Freight for the damages awarded to
Lopez in the Underlying Judgment “[b]ecause Franceware was either an employee[] or statutory
employee of Moore Freight.” Mot. 4. Lopez responds that “Canal’s duty to indemnify is not
even ripe for adjudication because the [Underlying Judgment] is still on appeal.” Resp. 2.
“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). The duty to indemnify
is, therefore, “controlled by the facts proven in the underlying suit.” See Gilbane Bldg. Co. v.

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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)).4
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 36. The parties do not appear to dispute that the Truck was a “covered
auto,” that Moore Freight was an “insured,” or that the damages awarded to the Estate of Roger
Franceware and Lopez were for “bodily injury” caused by an “accident” involving the use of the
Truck. See Mot.; Resp. Accordingly, the parties do not dispute that, if coverage is not otherwise
excluded under the Policy, Canal would have a duty to indemnify any damages Moore Freight
must pay as a result of Franceware’s injuries in the underlying accident. Nonetheless, the parties
dispute whether the Policy’s Employee Exclusion precludes coverage under the Policy. See Mot.
5-16; Resp. 3-8.
The Policy’s Employee Exclusion precludes coverage for “‘[b]odily injury’ to . . . [a]n
‘employee’ of the ‘insured’ arising out of and in the course of . . . [e]mployment by the
‘[insured]’ [or while] [p]erforming the duties related to the conduct of the ‘insured’s’ business.”
Policy 37. Canal argues that “[b]ecause the jury found that Roger Franceware was an employee
of Moore Freight, the Employee Exclusion in the [Policy] precludes coverage for [Franceware]

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The Court notes that where the underlying case does not resolve all the factual issues necessary to determine
coverage, a district court may also 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). Nonetheless, both the Underlying Judgment and the Jury Verdict addressed
Franceware’s employment status, which is highly relevant to the applicability of both the indemnification clause and
the MCS-90 endorsement. See Underlying J. 31; Jury Verdict 203. Accordingly, because Canal’s duty to
indemnify under both the indemnification clause and 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 declines to consider outside evidence and stays consideration of Canal’s
liability under the duty to indemnify until resolution of the state court appeals.

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and anyone claiming by, through or under [Franceware].” Mot. 5. As stated above, the parties
do not dispute that Moore Freight is a covered “insured” under the Policy. The Employee
Exclusion would, therefore, preclude Canal’s duty to indemnify Moore Freight if Franceware
was acting in the course and scope of his employment with Moore Freight at the time of the
accident. See Policy 37.
Canal’s obligations under the Policy’s indemnification clause are controlled by the facts
proven in the Underlying Suit. See Gilbane Bldg. Co., 664 F.3d at 601. Though the state court
jury found that “[i]n connection with the events giving rise to [the Underlying Suit] . . .
Franceware [was] acting as an employee in the scope of his employment for [Moore Freight],”
Jury Verdict 203, at least one party has appealed the Underlying Judgment on the ground that
“[t]here is no evidence to support the jury’s finding that [Franceware] was in the course and
scope of his employment with [Moore Freight] at the time of the accident.” See Docketing
Statement 16, Resp. Ex. A, ECF No. 34-1. As a result, though the jury found that Franceware
was Moore Freight’s employee, it is entirely possible that the jury’s finding on that issue may be
overturned on appeal. The Court therefore finds that the facts established in the Underlying Suit
are not sufficiently determined at this time to rule on Canal’s duty to indemnify.
Nor does Canal’s reliance on the definition of “employee,” as defined for the purposes of
the Federal Motor Carrier Act, necessitate a finding that Franceware was Moore Freight’s
“statutory employee” at the time of the accident. See Mot. 13-16. “The Motor Carrier Safety
Act and its attendant regulations govern the meaning of terms under insurance policies designed
to comply with federal requirements for motor carriers.” See Ooida Risk Retention Grp., Inc. v.
Williams, 579 F.3d 469, 473 (5th Cir. 2009); see also Consumers Cnty. Mut. Ins. Co. v. P.W. &

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Sons Trucking, Inc., 307 F.3d 362, 366 (5th Cir. 2002). As the Court has previously stated, the
terms of the Policy strongly indicate that the parties intended the Policy to conform to federal
insurance regulations. See July 7, 2015, Order 21, ECF No. 22. Accordingly, the Policy must be
analyzed in light of 49 C.F.R. § 390.5’s definition of “employee,”5 which has “eliminat[ed] the
common law employee/independent contractor distinction.” See, e.g., Consumers Cnty., 307
F.3d at 366. Under § 390.5’s definition, courts have held, as Canal correctly asserts, that a
passenger in a covered vehicle need not be driving at the time of an accident in order to qualify
as an “employee” of the insured. See Ooida Risk, 579 F.3d at 475-76; Consumers Cnty., 307
F.3d 362 at 367 n.8; see also United Fin. Cas. Co. v. Abe Hershberger & Sons Trucking Ltd.,
No. 11AP-629, 2012 WL 457715, at *5-7 (Ohio Ct. App. 2012).
Nonetheless, Canal has cited to no case holding that any passenger in a covered motor
vehicle, simply by virtue of their physical presence in the vehicle, qualifies as an employee under
§ 390.5. Indeed, in United Financial Casualty Company v. Abe Hershberger & Sons Trucking
Ltd., No. 11AP-629, 2012 WL 457715 (Ohio Ct. App. 2012), on which Canal relies, though the
passenger in the vehicle alleged he was not driving at the time of the accident, the Court noted
the he was in the vehicle in order to train the driver of the truck and was “paid a daily rate while
he was riding” in the vehicle. Id. at *7. As a result, the Ohio Court of Appeals held that “[e]ven
if [the passenger] were an independent contractor under Ohio common law . . . for purposes of
[§] 390.5, he was employed by [the insured].” Id.

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49 C.F.R. § 390.5 defines “employee,” in pertinent part, 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).
See 49 C.F.R. § 390.5.

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Likewise, in Ooida Risk Retention Group, Inc. v. Williams, 579 F.3d 469 (5th Cir. 2009),
the Fifth Circuit held that a passenger in a commercial motor vehicle was an “employee” for the
purposes of an insurance policy’s exclusions where the evidence indicated that the passenger was
“tandem driving” with the vehicle’s driver at the time of the accident. Id. at 475-76. Thus,
though the Fifth Circuit found that a passenger in a vehicle can be an employee of the insured, it
did so only where the evidence indicated that the passenger was in the vehicle for the purpose of
operating that vehicle, even if not doing so at the time of the accident. Id.; see also Consumers
Cnty., 307 F.3d 362 at 367 n.8 (same).
Here, Lopez argues that her “position has consistently been that Franceware was a mere
passenger at the time of the wreck and not ‘in the course and scope of employment’ for Moore
Freight.” Resp. 7. Though Lopez does not expand further on this position, it is possible that, on
appeal, the state court may reverse or vacate the trial court’s finding regarding Franceware’s
employment status. If the state court were to do so, nothing in § 390.5, or relevant case law,
would mandate that Franceware was a Moore Freight employee by his mere physical presence in
the Truck. See 49 C.F.R. § 390.5; Ooida Risk, 579 F.3d at 475-76; Consumers Cnty., 307 F.3d
362 at 367 n.8; Abe Hershberger, 2012 WL 457715, at *5-7.
Accordingly, the Court finds that Franceware’s employment status is not sufficiently
definite at this time for the Court to rule on Canal’s liability under the Policy’s indemnification
clause. The Court accordingly denies the Motion in so far as it seeks a determination of Canal’s
liability under the Policy’s indemnification clause, without prejudice to re-file after resolution of
the state court appeals, if a live controversy still remains at that time.

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2.

The Court stays determination of Canal’s liability under the MCS-90
endorsement pending resolution of the state court appeal

Canal further argues that “because Franceware was found to be an employee, and because
he is also a statutory employee, Canal does not owe under the MCS-90 for those persons
claiming by or through or under Franceware in the Underlying [Suit].” Mot. 18. Lopez responds
that the state court “appeal means the findings regarding Franceware’s employment state are not
yet final for purposes of the duty to indemnify under Texas law.” Resp. 3.
“[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.” T.H.E. Ins.
Co. v. Larsen Intermodal Servs., Inc., 242 F.3d 667, 671 (5th Cir. 2001). 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 Carolina Cas. Ins. Co. v.
Yeates, 584 F.3d 868, 882 (10th Cir. 2009). Nonetheless, the Fifth Circuit has stated that an
analysis of an insurer’s duty under an MCS-90 endorsement, like its duty to indemnify under an
indemnification clause, is “determined by all the facts and circumstances that result in the
insured’s potential liability.” See Ooida Risk, 579 F.3d at 477 (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

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“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 [Moore Freight’s] employees while engaged in the course of their employment.” See
Policy 61. The federal definition of “employee” found in § 390.5 “clearly applie[s]” to a
determination of coverage under the MCS-90 endorsement. See Consumers Cnty., 307 F.3d at
367 n.7. As stated above, Canal argues that the jury’s determination that Franceware was a
Moore Freight employee at the time of the accident establishes that Canal has no duty to pay
under the MCS-90 endorsement. See Mot. 18. However, as with Canal’s duty to indemnify
under the Policy’s indemnification clause, Canal’s duty under the MCS-90 endorsement is
controlled by the “facts proven in the underlying suit.” See Gilbane Bldg. Co., 664 F.3d at 601.
Therefore, because, as noted above, the jury’s findings regarding Franceware’s employment
status are currently on appeal in state court, see Docketing Statement 16, the Court again finds
that Franceware’s employment status is not sufficiently determined at this time for the Court to
rule on Canal’s liability under the MCS-90 endorsement. The Court accordingly denies the
Motion in so far as it seeks a determination of Canal’s liability under the MCS-90 endorsement,
without prejudice to re-file after resolution of the state court appeals, if there remains a live
controversy at that time.
III.

CONCLUSION
For the reasons set forth above, it is hereby ORDERED that the Motion, ECF No. 29, is

DENIED, without prejudice to re-file upon resolution of the state court appeal.

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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 27th day of August, 2015.

KATHLEEN CARDONE
UNITED STATES DISTRICT JUDGE

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