889 F.2d 604 (5th Cir. 1989), 89-4050, Canal Ins. Co. v. First General Ins. Co.

Docket Nº:89-4050.
Citation:889 F.2d 604
Party Name:CANAL INSURANCE COMPANY, Plaintiff-Appellant, v. FIRST GENERAL INSURANCE COMPANY, Defendant-Appellee.
Case Date:December 06, 1989
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 604

889 F.2d 604 (5th Cir. 1989)




No. 89-4050.

United States Court of Appeals, Fifth Circuit

December 6, 1989

Rehearing Denied Jan. 5, 1990.

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[Copyrighted Material Omitted]

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Thomas A. Wicker, Holland, Ray & Upchurch, Tupelo, Miss., for plaintiff-appellant.

Julie E. Chaffin, Thomas, Price, Alston, Jones & Davis, Thomas W. Tardy, III, Jackson, Miss., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Mississippi.

Before CLARK, Chief Judge, GEE and SMITH, Circuit Judges.

CLARK, Chief Judge:

Plaintiff Canal Insurance Company (Canal) appeals from a declaratory judgment in favor of defendant First General Insurance Company (First General). Canal sought a declaration that First General's policy provided coverage for a tractor-trailer involved in a highway accident while its own policy did not. After a bench trial the district court ruled that the policy written by First General provided no coverage and dismissed the action on the merits. Because we conclude that First General's policy provides coverage and that Canal's does not, we vacate the judgment of the district court and remand the cause with directions.


This is a dispute over whether a First General automobile liability policy or a Canal policy of the same type, or both, cover an accident between two tractor-trailer rigs which occurred near Meridian, Mississippi. First General's insured, Thomas English Trucking, Inc. (English), owned the tractor that was part of the subject rig. However, at the time of the accident Canal's insured, Custom Freight, Inc. (Custom), had leased the tractor and was using it to pull its own trailer. Reginald Brown, whom the district court found to be an employee of Custom, was driving the rig. His chauffer's license was suspended at the time of the accident. Brown and the driver and a passenger in the other rig were killed.

First General issued an automobile policy to English which was in effect at the time of the accident. In that policy First General agreed to insure English against liability for bodily injury or property damage arising out of the use of an "owned automobile" by English, its named insured, or by any other insured under the policy. The Definitions section of the policy defined, in pertinent part, "owned automobile" as "an automobile which is owned by the named insured and described in the declarations [Schedule of Vehicles]." "Persons insured" included the named insured and anyone using an owned automobile with English's permission. No distinctions were made among types of permissive users, such as between lessees and employees of English. The "PERSONS INSURED" section also contained the following "like insurance" clause:

None of the following is an insured:

* * *

iii) any person or organization other than the named insured, with respect to:

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1) a motor vehicle while used with any trailer owned or hired by such person and not covered by like insurance in the company....

The policy's declarations included the Schedule of Vehicles referenced by the "owned automobile" definition. The Schedule included eight specifically described tractors and trailers and contained two entries, numbers 9 and 10, for "[a]ny one non-owned undescribed semi-trailer but only while attached to an insured power unit [tractor]." The Schedule set out a premium for each of the ten entries and showed English was charged the same premium for each of the latter two entries as it was for each specifically described vehicle.

Several aspects of the application process for the First General policy bear mention. English applied for the policy through the Crawford Insurance Agency. The application was prepared by a Crawford employee and signed by English. In response to a question inquiring whether the equipment to be insured was "loaned or rented to others," English responded "no." The district court found to be a forgery a letter written on Crawford Agency letterhead requesting that Custom be added to the First General policy as a named insured. First General's issuing agent, Interstate Truck Underwriters, never received such a letter.

A policy written by Canal and issued to Custom was also in effect at the time of the accident. The policy covered only specifically described tractors and any "unnamed trailer" while attached to one of those tractors. The Canal policy did not list the tractor or trailer involved in the accident. Thus the parties do not dispute that the Canal policy did not provide coverage for the accident in the conventional sense. However, the Canal policy contained an endorsement required by the Interstate Commerce Commission which provided that Canal would pay any judgments in favor of members of the public rendered against Custom, regardless whether the vehicles involved were covered by the policy. Custom is required under the ICC endorsement to reimburse Canal for any payment made that Canal would not have been obligated to make under the provisions of the policy except for the terms of the endorsement.

After the accident, actions were commenced against Custom on behalf of the estates of the other driver, the guest passenger and the owner of the other tractor-trailer rig. Canal determined that its policy did not afford coverage but that it had a responsibility to pay third-party judgments under the ICC endorsement. Canal requested First General to assume coverage and provide Custom a defense. When First General refused, Canal defended Custom under a reservation of right. Canal either paid the judgments or settled the claims against Custom, but also initiated the instant action for a declaratory judgment...

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