Emcasco Ins. Co. v. Bonilla

• Decision Date: 29 July 2010
• Docket Number: No. 09-10476.,09-10476.
• Citation: 613 F.3d 512
• Parties: EMPLOYERS MUTUAL CASUALTY COMPANY; Emcasco Insurance Company, Plaintiffs-Appellees, v. Juan Miguel BONILLA, also known as Mike; Isabel Molina, Individually, and as next friend of J.Y.L.M., a minor, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

613 F.3d 512

EMPLOYERS MUTUAL CASUALTY COMPANY; Emcasco Insurance Company, Plaintiffs-Appellees,

v.Juan Miguel BONILLA, also known as Mike; Isabel Molina, Individually, and as next friend of J.Y.L.M., a minor, Defendants-Appellants.

No. 09-10476.

United States Court of Appeals,Fifth Circuit.

July 29, 2010.

COPYRIGHT MATERIAL OMITTED.

Aaron Linzy Mitchell (argued), Stephen Andrew Melendi, Tollefson, Bradley, Ball & Mitchell, L.L.P., Dallas, TX, for Plaintiffs-Appellees.

Michael Forest Nelson (argued), Leonard Howard Plog, II, Burt Barr & Associates, L.L.P., Dallas, TX, for Bonilla.

Charles Martin Noteboom, Joseph Mark Sudderth (argued), Noteboom Law Firm, Hurst, TX, for Molina.

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

Before DAVIS, WIENER, and SOUTHWICK, Circuit Judges.

LESLIE H. SOUTHWICK, Circuit Judge:

This is an insurance coverage dispute. It arose after a state court judgment established liability for a serious accident. The district court granted a Motion for Summary Judgment in favor of the insurance companies, finding there to be no coverage. We hold that the district court erred in denying coverage based on the argument that the injury did not arise from “use” of the vehicle. Another exclusion under the relevant policies remains to be considered, however, that was not addressed because of the district court's initial ruling. We REVERSE and REMAND for further proceedings.

I. FACTS

Juan Miguel Bonilla leased Truck 219, a mobile catering truck, from Jolly Chef Express, Inc., in Dallas, Texas. He also leased a space on Jolly Chef's commissary and parking lot. Daily, Bonilla hired a driver and cook for each of his trucks. At the end of each day the driver and cook would return to the commissary to clean the truck and prepare for the next day's route.

On February 13, 2002, Bonilla hired Fabricio Fernandez to drive and Isabel Molina to serve as a cook on Truck 219. Molina and Fernandez completed their route and returned Truck 219 to Jolly Chef's lot. While Truck 219 was parked, Fernandez poured a flammable substance, likely gasoline, on the floor of the truck to loosen the grease. Fernandez then left the truck in order to turn in the money they had earned for the day. As Molina began washing the dishes and trays for the day, she heard an explosion and was suddenly in flames. A pilot light from the stove had ignited the substance that Fernandez had poured on the floor. Molina was severely injured.

Molina sued Bonilla and Jolly Chef in Texas state court. Bonilla did not have insurance of his own. Truck 219 was listed, though, on Jolly Chef's three insurance policies. Jolly Chef's trucks were insured by Employers Mutual Casualty Company under a Commercial General Liability (“CGL”) Policy and a Commercial Umbrella Policy. Jolly Chef had also purchased a Commercial Auto Liability Policy from Emcasco Insurance Company. The Auto Policy covered all of Jolly Chef's trucks. Emcasco and Employers Mutual are jointly represented. They will be referred to as EMC except where a distinction is needed.

EMC defended both Jolly Chef and Bonilla under a reservation of rights. Molina won a judgment against Bonilla in the amount of $1,832,933.58. Molina took nothing against Jolly Chef.

EMC filed the present declaratory judgment action in the United States District Court for the Northern District of Texas. Both Bonilla and Molina were named as defendants, and they are separately represented. EMC denied any liability under any policy for the claims asserted in the state court suit.

In due course, each of the parties filed motions for summary judgment. The district court granted EMC's motion, finding no coverage under any of the policies. (1) There was no coverage under the CGL policy because neither Bonilla nor Molina was an “insured.” No issues are raised on appeal about the CGL Policy. (2) There was no coverage under the Auto Policy because the fire did not arise out of the “use” of the vehicle as a vehicle or the maintenance of it. (3) There was no coverage under the Umbrella Policy because the meaning of “use” in that policy was the same as under the Auto Policy.

Bonilla and Molina appealed.

II. DISCUSSION

We review each of the rulings on cross-motions for summary judgment de novo. Ford Motor Co. v. Tex. Dep't of Transp., 264 F.3d 493, 498 (5th Cir.2001); Fed. R. Civ. Pro. 56(c)(2). We independently examine the evidence and inferences from the perspective favoring the non-moving party, in order to determine if there are any disputes of material fact. Id.

The district court concluded that none of the three policies purchased by Jolly Chef provided coverage for Molina's claims. We start our analysis with a description of each of these policies.

A. Overview of the Policies

Jolly Chef purchased an Auto Policy, a CGL Policy, and an Umbrella Policy. The Umbrella Policy gave coverage “arising out of the ownership, maintenance, operation, use (including loading or unloading), or entrustment to others” of an automobile, if there was coverage provided under a primary policy. “The coverage provided by this policy will not be broader than the coverage provided by the ‘primary’ insurance policy.” Therefore, the Umbrella Policy supplemented the liability limits of the Auto Policy. The Umbrella Policy also provided coverage in the absence of coverage under a primary policy provided one was using the vehicle with the permission of a named insured. The reach of this additional coverage is contested, a contest we need not resolve.

Under the Auto Policy, the insurer “will pay all sums an insured legally must pay as damages because of bodily injury or property damage to which this insurance applies, caused by an accident and resulting from the ownership, maintenance or use of a covered auto.”

The CGL Policy covered “bodily injury” and “property damage” arising from “occurrences” (defined as “accidents”) taking place in the “coverage territory.” The CGL Policy synchronized with the Auto Policy by excluding coverage for bodily injury and property damage “arising out of the ownership, maintenance, use or entrustment to others of any ... auto ... owned or operated by or rented or loaned to any insured.” There may have been additional exclusions under the CGL Policy, but the general manner in which the two policies dovetailed is clear.

We look to Texas law to determine the effect that the existence of multiple policies might have on our issues. In the principal case cited to us by both parties, the Texas Supreme Court relied extensively on two treatises. See Mid-Century Ins. Co. of Tex. v. Lindsey, 997 S.W.2d 153, 156 (Tex.1999). One of the treatises embraced by the court, in a section not quoted, explained the interplay of two insurance policies that use the phrase “arising out of ownership, maintenance, or use” of a motor vehicle:

The term “arising out of the operation, maintenance, or use” of a vehicle typically arises in two distinct contexts: first, in the context of an inclusory provision as to coverage in an automobile liability policy; and second, in connection with an exclusionary provision in general liability or homeowners' insurance policies. In keeping with the general rules of construction, the term may be construed differently in each context, as the coverage provision is generally entitled to liberal construction in favor of coverage, while the exclusion is subject to a narrow construction against the insurer.

8A Couch on Insurance § 119:26 (3d ed.2009) (footnotes omitted) [hereinafter Couch].

The author states that both the language of exclusion and of inclusion should be read to favor coverage. We interpret that language in light of the Texas Supreme Court's identification of what it calls the fundamental point, namely, to determine “what coverage is intended to be provided by insurers and acquired and shared by premium-payers.” Lindsey, 997 S.W.2d at 158. Jolly Chef's intent is relevant, along with that of the insurers, in determining the reasons for the use of different policies.

The CGL Policy that Jolly Chef purchased was found not to apply because Bonilla was not an “insured.” That decision is not challenged on appeal. Though coverage by the CGL Policy is not an issue, the policy itself is relevant. Had an insured under both the CGL and the Auto Policy been the claimant (Jolly Chef, for example), the dispute would have had a much different form. If the Auto Policy did not cover the occurrence because the injury did not arise from the use of a covered auto, then the CGL Policy exclusion of injuries arising from the use would not have applied and the claim would have been covered-absent another exclusion. The two policies together created a range of coverage for Jolly Chef.

EMC has argued that the accident is covered by the CGL Policy, thereby excluding coverage by the Auto Policy. When language of coverage in a business auto policy is virtually identical to language of exclusion in a CGL policy, “[s]ome accidents would be covered by the auto policy, others by the CGL. A single accident could not be covered by both.” Travelers Indem. Co. v. Citgo Petroleum Corp., 166 F.3d 761, 769 (5th Cir.1999).

In addition, even with a liberal reading of insurance policies, it is doubtful that dovetailed policy terms such as this should be interpreted a certain way if the named insured were seeking coverage but differently if someone else such as those who are not the purchasers seek coverage. Had Jolly Chef been found liable in the state court suit, would this claim have been considered outside the coverage of the Auto Policy and within the coverage of the CGL Policy? If so, should the opposite result obtain here just because Bonilla is the claimant and is not an insured under the CGL Policy?

As a final general word about interpretation, we note that “many insurers actually intended the usages [of this policy term about ‘use’ of an automobile] to be a device for coordinating...