Minter v. Great American Ins. Co. of New York

• Decision Date: 23 August 2005
• Docket Number: No. 04-10324.,No. 04-10834.,04-10324.,04-10834.
• Citation: 423 F.3d 460
• Parties: Darrell D. MINTER, as Receiver, Plaintiff-Counter Defendant-Appellant, v. GREAT AMERICAN INSURANCE COMPANY OF NEW YORK, formerly known as American National Fire Insurance Company, Defendant-Counter Claimant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 460

423 F.3d 460

Darrell D. MINTER, as Receiver, Plaintiff-Counter Defendant-Appellant, v. GREAT AMERICAN INSURANCE COMPANY OF NEW YORK, formerly known as American National Fire Insurance Company, Defendant-Counter Claimant-Appellee.

No. 04-10324.

No. 04-10834.

United States Court of Appeals, Fifth Circuit.

August 23, 2005.

Michael Kevin Queenan (argued), Queenan Law Firm, DeSoto, TX, W. Allyn Hoaglund, Law Offices of W. Allyn Hoaglund, Houston, TX, for Darrell D. Minter.

Frank M. Kennedy (argued), Thompson, Coe, Cousins & Irons, Dallas, TX, for Great American Ins. Co. of New York.

Appeals from the United States District Court for the Northern District of Texas.

Before KING, Chief Judge, and BARKSDALE and STEWART, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

In this diversity action, at issue is the summary judgment awarded Great American Insurance Company of New York. As Receiver for Grant Morris (judgment creditor of Jerry Lee Largent), Darrell Minter claims Great American is liable for Morris' state court judgment against Largent and his employer, Hammer Trucking, Inc. arising out of a collision between Morris and Largent's vehicles. Largent was intoxicated at the time. Hammer Trucking had leased to JTM Materials, Inc., the vehicle being driven by Largent, which was used exclusively for JTM's benefit. Primarily at issue is whether Largent's intoxication at the time of the collision precludes his being a permissive user under the omnibus clause of JTM's primary commercial automobile liability policy, issued by St. Paul Fire and Marine Insurance Co., and, therefore, precludes his being an insured under the Great American excess policy. A genuine issue of material fact exists for that issue. Accordingly, we VACATE the judgment in favor of Great American; REVERSE the district court's rulings against coverage under the omnibus clause and Minter's extra-contractual tort claims; AFFIRM its rulings for all other coverage issues; and REMAND for further proceedings consistent with this opinion.

I.

On Saturday, 9 November 1996, the tractor-trailer (the truck) driven by Largent collided with a vehicle driven by Morris, who sustained significant injuries. Largent pleaded guilty to driving while intoxicated.

The truck was owned by Largent's employer, Hammer Trucking. On 27 June 1996, approximately four months before the collision, Hammer Trucking leased the truck to JTM, a federal and state-regulated motor carrier. Under the lease, Hammer Trucking, inter alia: was to maintain control of the truck and use it for the exclusive benefit of JTM; had a duty to properly maintain the truck; and was to bear all maintenance and operating expenses (including Largent's salary).

Originally, the truck was parked overnight at Hammer Trucking. Because Largent's wife needed their car to drive to her new job, Hammer Trucking allowed Largent to drive the truck to and from work and park it overnight at his apartment.

On the day of the collision, Largent, who lived in Bridgeport, Texas, was in the process of delivering the truck to a facility near Decatur, Texas, for scheduled maintenance (consistent with Hammer Trucking's duties under its lease with JTM). That day, Largent had been instructed by Don Hammer, Hammer Trucking's owner and president, to deliver the truck by 9:00 a.m. the next day (Sunday, 10 November). At approximately 11:00 p.m. Saturday, 9 November, Largent drove the truck to his sister's house, also located in Bridgeport, in order for her to give him a ride back from the maintenance facility in Decatur. Because his sister could not give him a ride, Largent then decided to return to his house and take the truck to the maintenance facility the next morning. The collision occurred while he was returning home.

Largent had an extensive criminal record, including convictions for DWI, reckless conduct (for which Largent was originally charged with DWI), and felony possession of methamphetamine (for which he served three years in prison); he also had five citations for driving without liability insurance. Morris v. JTM Materials, Inc., 78 S.W.3d 28, 51 (Tex.App.-Fort Worth 2002, no pet. h.). When Hammer Trucking entered into its lease agreement with JTM several months before the collision, JTM's safety director conducted a background check on Largent, consisting of an "AMS Driver Report for Texas"; that background check, however, covered only the three years preceding 12 September 1996 and did not reveal Largent's previous offenses for DWI, reckless conduct, methamphetamine possession, or any of his citations for driving without liability insurance. Id. It appears that this report and a drug screening test were the extent of JTM's investigation to qualify Largent as a truck driver. On the other hand, a driving report from the Texas Department of Public Safety would have revealed the full extent of Largent's driving and criminal record. Id.

JTM's primary commercial automobile liability insurance policy was issued by St. Paul; its excess policy, by Great American. The St. Paul policy has a $1 million coverage limit for each accident caused by a covered automobile; Great American's excess coverage became effective upon that limit's being exhausted.

In May 1997, in Texas state court, Morris filed an action against Largent, Hammer Trucking, and (by an amended petition) JTM, claiming, inter alia: (1) negligence and negligence per se by Largent; (2) negligent hiring, retention, and supervision of Largent, negligent entrustment, and vicarious liability against Hammer Trucking and JTM based on respondent superior; (3) joint enterprise, joint venture, and civil conspiracy against JTM; and (4) Largent's being JTM's statutory, actual, constructive, or borrowed employee, and JTM's being liable under the Federal Motor Carrier Safety Regulations. The claims against JTM were severed from those against Largent and Hammer Trucking.

Upon JTM's being added as a defendant, it notified AON Risk Services of Texas, Inc. AON was Great American's agent, inter alia, for "all usual and customary services of an insurance agent". In September 1998, AON forwarded a copy of Morris' first amended petition and a corresponding summons to St. Paul; however, AON did not forward notice of Morris' action to Great American. St. Paul provided JTM a defense against Morris' claims but did not do so for Hammer Trucking or Largent.

JTM was awarded summary judgment shortly before the claims against Largent and Hammer Trucking were tried. For their jury trial in August 2000, Largent and Hammer Trucking proceeded pro se. During trial, Morris was awarded a directed verdict on liability, with the court ruling: at the time of the accident, Largent was acting within the scope of his employment with Hammer Trucking and was a permissive user of the truck. The following questions were submitted to the jury: (1) the amount of Morris' compensatory damages; (2) whether Largent and Hammer Trucking acted with malice; and (3) if so, the amount of exemplary damages. The jury awarded damages jointly and severally against Hammer Trucking and Largent for approximately $2.6 million, with very substantial pre- and post-judgment interest; it also found they had acted with malice and assessed exemplary damages of $1,650,000 against Largent and $300,000 against Hammer Trucking.

The judgment against Largent and Hammer Trucking was not appealed. As for the summary judgment awarded JTM, the Fort Worth court of appeals: (1) vacated that judgment for part of the vicarious liability claims and for the claims for negligent hiring, retention, supervision, and entrustment, and remanded for trial on those issues, Morris, 78 S.W.3d at 43, 52-53; and (2) affirmed for respondeat superior, civil conspiracy, joint venture and joint enterprise, id. at 57. In vacating the summary judgment awarded JTM for part of Morris' vicarious liability claims, the court held: if JTM was a federally regulated motor carrier, it was liable, as a matter of law, under the Federal Motor Carrier Safety Regulations. Id. at 43. Importantly, in affirming JTM's summary judgment against Morris' respondeat superior claim the court held: Largent was acting outside the scope of his employment at the time of the collision. Id. at 48. (The record is silent concerning the disposition of this matter on remand.)

In May 2001 (prior to the decision rendered in 2002 by the Fort Worth court of appeals for the claims against JTM), in order to satisfy Morris' judgment against Largent, the state court ordered Largent to turn over assets to Minter, who had been appointed Receiver. Those assets included Largent's claims against St. Paul and Great American that they: (1) failed to provide a defense; (2) failed to indemnify under their policies issued to JTM; (3) acted in bad faith; (4) engaged in unfair insurance practices, in violation of TEX.INS.CODE ANN. art. 21.21 (Vernon 1981 & Supp. 2004-2005); and (5) violated the Texas Deceptive Trade Practices Act, see TEX. BUS. & COM.CODE ANN. §§ 17.46, 17.50 (Vernon 2002 & Supp. 2004-2005).

Minter filed a state court action against St. Paul, which settled for $1.9 million (including all claims against JTM and Hammer Trucking). (The $1 million coverage limit for JTM's policy was reached; apparently, the additional $900,000 was for settlement of extra-contractual tort claims.)

In September 2002, Minter filed this diversity action against Great American, seeking recovery of that part of Morris' state court judgment against Largent which had not been satisfied by the settlement with St. Paul. Great American filed a third-party action against AON for breach of contract and tort claims for failure to give timely notice of Morris' action. Great American and Minter moved for summary judgment.

The district court awarded summary judgment to Great American, holding: (1) based on the ruling of the Fort Worth court of appeals concerning the summary judgment that had been awarded JTM,...