Evanston Ins. Co. v. Mid-Continent Cas. Co.

• Decision Date: 19 November 2018
• Docket Number: No. 17-20812,17-20812
• Citation: 909 F.3d 143
• Parties: EVANSTON INSURANCE COMPANY, Plaintiff-Appellee v. MID-CONTINENT CASUALTY COMPANY, Defendant-Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

909 F.3d 143

EVANSTON INSURANCE COMPANY, Plaintiff-Appellee

v.MID-CONTINENT CASUALTY COMPANY, Defendant-Appellant

No. 17-20812

United States Court of Appeals, Fifth Circuit.

FILED November 19, 2018

Jason K. Fagelman, Esq., Norton Rose Fulbright US, L.L.P., Dallas, TX, Warren S. Huang, Megan Roberts, Norton Rose Fulbright US, L.L.P., Houston, TX, for Plaintiff-Appellee.

Richard Brent Cooper, Esq., Diana L. Faust, Robert J. Witmeyer, Cooper & Scully, P.C., Dallas, TX, for Defendant-Appellant.

Before JONES, CLEMENT, and SOUTHWICK, Circuit Judges.

EDITH B. CLEMENT, Circuit Judge:

This is a dispute between a primary liability insurer and an excess liability insurer over the number of "accidents" that took place under an insurance policy. Over a ten-minute period on November 15, 2013, the insured's Mack truck struck (1) a Dodge Ram, (2) a Ford F150, (3) a Honda Accord, (4) a toll plaza, and (5) a Dodge Charger. The insurers' disagreement focuses on the final three collisions. In previous state court litigation, multi-million-dollar settlements were reached between the various claimants and the insurance companies. But the Mack truck's primary insurer refused to contribute more than $1 million toward the settlements of the final three collisions, claiming that they were part of a single "accident" under its policy and that $1 million was the primary insurer's limit of liability per accident. The excess insurer sued the primary insurer in federal district court. The parties stipulated to the facts and filed cross motions for summary judgment as to whether the final three impacts constituted a single "accident" or separate "accidents" under the policy and Texas law. Although the district court held that two accidents occurred, we reverse because there was only one.

I.

Since the case was submitted below on a stipulation, there is no dispute as to the material facts. Mid-Continent Casualty Company issued a commercial auto insurance policy to Global Waste Services, LLC. The policy had a $1 million per-accident limit of insurance and required Mid-Continent to defend Global until the policy limit was exhausted. The policy provides in relevant part:

SECTION II—LIABILITY COVERAGE

A. Coverage

We 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".

...

C. Limit of Insurance

Regardless of the number of covered "autos", "insureds", premiums paid, claims made or vehicles involved in the "accident", the most we will pay for the total of all damages and "covered pollution cost or expense" combined resulting from any one "accident" is the Limit of Insurance for Liability Coverage shown in the Declarations.

All "bodily injury", "property damage" and "coverage pollution cost or expense" resulting from continuous or repeated exposure to substantially the same conditions will be considered as resulting from one "accident".

...

SECTION V—DEFINITIONS

A. "Accident" includes continuous or repeated exposure to the same conditions resulting in "bodily injury" or "property damage".

In addition to the primary insurance policy, Global held an excess liability policy from Evanston Insurance Company with a $5 million per-accident liability limit. We are concerned with the terms of the primary insurance policy.

On November 15, 2013, a Global employee named Marlon Diggs lost control of his Mack truck on North Beltway 8 in Houston. Witnesses say that Diggs was driving the truck erratically. At approximately 11:04 a.m., the Mack truck hit a Dodge Ram in the 800 block of North Beltway 8. Three minutes later, the Mack truck struck a Ford F150 in the 2500 block of North Beltway 8. Two minutes after that, the Mack truck approached a toll plaza and caused the series of collisions which are at issue.

At approximately 11:09 a.m., the Mack truck struck a Honda Accord that was waiting in line at the toll plaza in the 3300 block of North Beltway 8. Joseph Williams was driving the Accord and his wife, Laurie Williams, was the only passenger. The Mack truck pushed the Accord forward more than one hundred feet into the crash attenuator barrels separating two toll lanes, where the Accord came to rest perpendicular to the road. Although Joseph Williams was not seriously injured in the collision, Laurie Williams sustained severe injuries.

Once separated from the Accord, the Mack truck continued to travel through the automatic toll lane for approximately sixty-six feet before striking a Dodge Charger driven by Gwenetta Powell. While travelling through the lane, the Mack truck struck the tollbooth, causing significant damage. After impacting the Charger, the Mack truck continued pushing the Charger until it crashed into the right-side retaining wall, pinning the Charger between the Mack truck and the wall. At some point between the Mack truck's impact with the Charger and the vehicles coming to rest against the wall, Diggs fell out of the truck. Diggs did not apply the brakes at any time from first striking the Accord until the Mack truck crashed into the retaining wall. Powell and Diggs both died in the accident.

Relatives of Powell sued Global in state court, and the Williams family intervened. Additionally, Harris County made demands on Global for the cleanup and repair of the toll plaza. All the claims ultimately settled. The Williams family received $4.5 million—approximately $1 million from Mid-Continent and the remaining $3.5 million from Evanston. Mid-Continent withdrew from the litigation after settling with the Williams family, claiming exhaustion of its policy limit. Evanston then settled with the Powells and Harris County for $2.1 million and $75,000, respectively. Mid-Continent did not contribute to either settlement.

Evanston filed suit in federal court in Texas seeking reimbursement from Mid-Continent for a portion of the payments Evanston made on behalf of Global. Evanston also sought to recover the entirety of its defense costs. The parties stipulated to the relevant facts and filed cross motions for summary judgment. Evanston argued that Mid-Continent incorrectly construed all the collisions occurring after the Mack truck's impact with the Accord to be a single "accident."¹ According to Evanston, each separate impact between the Mack truck and another vehicle or object constituted a separate accident subject to separate liability limits. Mid-Continent asserted that under Texas law, there was only one accident because the only event that gave rise to the various injuries was Diggs's negligence.

The district court referred the motions to a magistrate judge, who concluded that under the policy language two accidents occurred. According to the magistrate, "[t]he collisions between the Mack truck and the Honda Accord and between the Mack truck and the Dodge Charger were separate accidents because they occurred independently, the former did not lead to the occurrence of the latter." The district court adopted the magistrate's recommendation over Mid-Continent's objection. The court entered judgment in favor of Evanston. The court concluded that Mid-Continent should have paid out a total of about $2,045,000 under the various settlements. Because Mid-Continent only paid $1 million in the underlying state litigation, the district court ordered it to pay Evanston about $1,045,000 plus the costs of Evanston's defense. Mid-Continent appeals that ruling.

II.

Because this case is before the court on cross motions for summary judgment, we review the district court's rulings de novo and construe all evidence and inferences in favor of the non-moving parties. LCS Corr. Servs., Inc. v. Lexington Ins. Co. , 800 F.3d 664, 669 (5th Cir. 2015). The parties agreed below that the only question was whether the Mack truck's collisions near the toll plaza constituted one "accident" or multiple "accidents" under the language of the policy. The interpretation of the word "accident" as used in the insurance contract is a question of law, which the court reviews de novo. Ran-Nan Inc. v. Gen. Accident Ins. Co. of Am. , 252 F.3d 738, 739 (5th Cir. 2001) (per curiam).

III.

The parties agree that Texas law governs this diversity action and informs the interpretation of the Mid-Continent insurance policy. Under Texas law, the court must construe the policy according to the general rules of contract construction to give effect to the parties' intent. Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd's London , 327 S.W.3d 118, 126 (Tex. 2010). Courts begin with the language of the contract "because we presume parties intend what the words of their contract say." Id. "The policy's terms are given their ordinary and generally-accepted meaning unless the policy shows the words were meant in a technical or different sense." Id. "If the court is uncertain as to which of two or more meanings was intended, a provision is ambiguous." H.E. Butt Grocery Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh (HEB) , 150 F.3d 526, 529 (5th Cir. 1998).

A.

The policy defines "accident" to include "continuous or repeated exposure to the same conditions resulting in ‘bodily injury’ or ‘property damage.’ " Under the "Limit of Insurance" provision, the policy states that "[r]egardless of the number of covered ‘autos,’ ‘insureds,’ premiums paid, claims made or vehicles involved in the ‘accident,’ " the most Mid-Continent would pay for "the total of all damages ... resulting from any one ‘accident’ " was the policy limit of $1 million. Although the parties disagree on its meaning, neither Mid-Continent nor Evanston argues the policy is ambiguous. And Texas courts routinely interpret the term "accident" or its equivalent without finding ambiguity. HEB , 150 F.3d at 529.

In fact, the policy's definition of "accident" is virtually identical to the definitions in other commercial liability policies. See id. at 529. Some insurance policies use the term "occurrenc...