John Deere Ins. Co. v. Nueva

• Decision Date: 20 September 2000
• Docket Number: No. 98-56464,98-56464
• Citation: 229 F.3d 853
• Parties: (9th Cir. 2000) JOHN DEERE INSURANCE COMPANY, an Illinois corporation, Plaintiff-cross-defendant-Appellee, v. GUILLERMO NUEVA, Defendant-Appellant, LOS ANGELES COUNTY METROPOLITAN TRANSPORTATION AUTHORITY, Defendant-cross-claimant-Appellant, and JOO SANG LEE, DEDRIC MANGUM, RASHPAL SINGH, GURMUKH SINGH GARCHA, BLUE STAR TRUCKING, aka Blue Star Transportation, INDERJIT SINGH, SOUTHWESTERN CARRIERS, BALJIT SAHOTA, PROGRESSIVE NORTHWESTERN INSURANCE COMPANY, TARSEM SINGH, Defendants-Cross-defendants
• Court: U.S. Court of Appeals — Ninth Circuit

Page 853

229 F.3d 853 (9th Cir. 2000)

JOHN DEERE INSURANCE COMPANY, an Illinois corporation, Plaintiff-cross-defendant-Appellee, v. GUILLERMO NUEVA, Defendant-Appellant, LOS ANGELES COUNTY METROPOLITAN TRANSPORTATION AUTHORITY, Defendant-cross-claimant-Appellant, and JOO SANG LEE, DEDRIC MANGUM, RASHPAL SINGH, GURMUKH SINGH GARCHA, BLUE STAR TRUCKING, aka Blue Star Transportation, INDERJIT SINGH, SOUTHWESTERN CARRIERS, BALJIT SAHOTA, PROGRESSIVE NORTHWESTERN INSURANCE COMPANY, TARSEM SINGH, Defendants-Cross-defendants.

No. 98-56464

U.S. Court of Appeals for the Ninth Circuit

Argued and Submitted April 4, 2000

Filed September 20, 2000

Jacqueline Jordan Leung, Boornazian, Jensen & Garthe, Oakland, California, for the appellants.

Garth Goldberg, Wilson, Kenna & Borys LLP, Los Angeles, California, for the appellee.

Appeal from the United States District Court for the Central District of California. Lourdes G. Baird, District Judge, Presiding. D.C. No.CV-98-00036-LGB

Before: Procter Hug, Jr., Chief Judge, Warren J. Ferguson, Circuit Judge, and Jane A. Restani,¹ Court of International Trade Judge.

HUG, Chief Judge:

We are asked to decide whether a federally mandated endorsement to an insurance policy creates a duty on the part of an insurer to indemnify a permissive user of an auto not covered by the underlying policy for injuries he negligently caused to members of the public. The district court found that the endorsement did not modify the policy to require indemnification and granted summary judgment for the insurer. This is an issue of first impression for this circuit. We have jurisdiction pursuant to 28 U.S.C 1291, and for the following reasons, we reverse the district court judgment.

BACKGROUND

This appeal arises out of an underlying personal injury action entitled Nueva v. Garcha, et. al., Los Angeles County Superior Court Case No. TC 009762 ("underlying action"). The underlying facts, which are not in dispute, are that a tractor/semi-trailer operated by Gurmukh Singh Garcha ("Garcha") and Blue Star transportation ("Blue Star") rearended a Los Angeles County Metropolitan Transit Authority ("LACMTA") bus operated by Guillermo Nueva ("Nueva") (collectively "Appellants"). The collision resulted in a total loss to the bus and personal injuries to Nueva.

The tractor/semi-trailer unit was being driven by Garcha. The tractor was owned by Inderjit Singh ("Singh") and Garcha dba Blue Star, who are uninsured and not involved in this appeal. This appeal revolves around the liability associated with the other vehicle, the Great Dane semi-trailer ("trailer"), which was owned by Baljit Singh Sahota dba Sahota Trucking ("Sahota"). Sahota is John Deere's named insured. Prior to the accident, Sahota had agreed to sell the trailer to Blue Star, but the title had not yet transferred because the final payment had not been made. Sahota's policy with John Deere included a federally mandated MCS-90 endorsement, whose scope is the subject of this appeal.

On January 5, 1998, John Deere filed a complaint against several parties, including LACMTA and Nueva, seeking a declaration that John Deere had no duty, pursuant to a policy of insurance it issued to Sahota, to indemnify Sahota, Garcha,and Blue Star, among other parties, with respect to any liability arising out of the underlying action filed by Nueva. On March 20, 1998, LACMTA filed an answer to the complaint and a cross claim for declaratory relief against John Deere. LACMTA asked for a declaration that, with respect to the John Deere policy, Garcha and Blue Star are `insureds' pursuant to the MCS-90 endorsement to the policy and the California permissive user statute, thus requiring John Deere to pay judgment against Sahota, Garcha, and Blue Star, subject to a limit of $750,000.

The parties both made motions for summary judgment. On July 6, 1998, the district court issued an order granting John Deere's motion for summary judgment, denying LACMTA and Nueva's motion for summary judgment and dismissing Sahota and Sahota Trucking for lack of prosecution. The district court found that the insurance policy did not cover the operators of the tractor/trailer combination vehicle as "insureds" because the MCS-90 endorsement created merely a "reimbursable obligation" with respect to payments on behalf of its insured, Sahota, but did not create "coverage" for Garcha and Blue Star, who it classified as users of non-scheduled vehicles. The judgment was entered October 15, 1998. LACMTA and Nueva appeal.

STANDARD OF REVIEW

We review a grant of summary judgment de novo. Robi v. Reed, 173 F.3d 736, 739 (9th Cir. 1999).

THE JOHN DEERE POLICY

We begin with an examination of the relevant terms and provisions of the policy itself. The John Deere Policy was issued to Sahota on or about August 21, 1995 and was in force at the time of the accident. The policy obligated John Deere to pay all sums that an "insured" is legally obligated to pay for bodily injury or property damage caused by an accident and resulting from the use of a covered automobile under the policy.

The policy's relevant definition of "WHO IS AN INSURED" is as follows:

(a) You for any covered auto;

(b) Anyone else while using with your permission a covered "auto" you own, hire or borrow . . ."

The focus of our inquiry is John Deere's obligation to indemnify Garcha and Blue Star, who were permissive users of Sahota's trailer. We will therefore focus on the definitionof "insured" contained in part (b), which limits permissive user coverage to "covered autos".

We thus turn to the question of what is a "covered auto". Section I of the policy entitled COVERED AUTOS defines SPECIFICALLY DESCRIBED "AUTOS" as follows:

Only those "autos" described in ITEM THREE of the Declarations for which a premium charge is shown (and for Liability Coverage any "trailers " you don't own while attached to any power unit described in ITEM THREE).

Neither the trailer nor any other vehicle or portion of any vehicle involved in this accident was listed in ITEM THREE of Sahota's policy.²

Therefore, as a threshold matter, we note that the trailer is not a covered auto. Consequently, since Garcha and Blue Star were permissive users of a non-covered auto, they are not "insureds" per the underlying policy's express terms. However, our inquiry does not end here. The John Deere Policy was amended and supplemented by form MCS-90 endorsement for Motor Carrier Policies of Insurance For Public Liability Under Sections 29 and 30 of the Motor Carrier Act of 1980,³("MCS-90") as required at the time by 49 US.C.S 10927. The endorsement stated, in pertinent part:

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 resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980 regardless of whether or not each motor vehicle is specifically described in the policy . . . It is understood and agreed that no condition, provision, stipulation, or limitations contained in the policy, this endorsement, or any other endorsement thereon, or violation thereof, shall relieve the company from liability or from the payment of any final judgment, within the limits of liability herein described, irrespective of the financial condition, insolvency or bankruptcy of the insured. However, all terms, conditions, and limitations in the policy to which the endorsement is attached shall remain in full force and effect as binding between the insured and the company. The insured agrees to reimburse the company for any payment made by the company on account of any accident, claim, or suit involving a breach of the terms of the policy, and for any payment that the company would not have been obligated to make under the provisions of the policy except for the agreement contained in this endorsement.

(Emphasis added).⁴

DISCUSSION

Federal law applies to the operation and effect of ICC mandated endorsements. See Planet Ins. Co. v. Transport Indem. Co., 823 F.2d 285, 288 (9th Cir. 1987); see also Canal Ins. Co. v. First General Ins. Co., 889 F.2d 604, 610 (5th Cir. 1989), modified on other grounds, 901 F.2d 45 (5th Cir. 1990); Ford Motor Co. v. Transport Indem. Co. , 795 F.2d 538, 545 (6th Cir. 1986); In re Yale Express Sys., Inc., 362 F.2d 111, 114 (2d Cir. 1966).

The question before us is whether the MCS-90 endorsement to Sahota's policy obligates John Deere to indemnify Garcha and Blue Star in the underlying action. The Appellants argue that the MCS-90 endorsement to Sahota's policy negates the limiting definition of "covered auto " in part (b) of the policy. By extension, they argue that part (b)'s definition of "WHO IS AN INSURED" is thus modified to include permissive users of non-covered autos. Accordingly, they contend that John Deere cannot rely on these limiting provisions of the underlying policy to avoid the indemnification duties invoked by the endorsement. John Deere disagrees and argues that it is not legally liable for judgments against parties other than its named insured and that the definition of "insured" is not altered by the MCS-90 endorsement. John Deere maintains that while the MCS-90 may negate the "covered auto" limitation in part (a) of the "WHO IS AN INSURED " section, it does not negate the "covered auto" limitation for permissive users in part (b).

The district court relied heavily on our decision in Harco Nat. Ins. Co., v. Bobac Trucking, Inc., 107 F.3d 733 (9th Cir. 1997) in finding for John Deere. The court read Harco as creating a dichotomy between the inclusive "coverage " provided under an insurance policy and the distinct and separate "reimbursable obligation" imposed by an MCS-90. The court reasoned that because...