Grange Indem. Ins. Co. v. Burns

• Decision Date: 23 June 2016
• Docket Number: A16A0057
• Citation: 337 Ga.App. 532,788 S.E.2d 138
• Parties: Grange Indemnity Insurance Company v. Burns
• Court: Georgia Court of Appeals

337 Ga.App. 532

788 S.E.2d 138

Grange Indemnity Insurance Company

v.Burns

A16A0057

Court of Appeals of Georgia.

June 23, 2016

William E. Gray II, Atlanta, Scott Wayne McMickle, Jonathan Jay Kandel, McMickle, Kurey & Branch, Atlanta, for Appellant.

Brandon Lee Peak, Columbus, Mary Kathleen Weeks, Atlanta, Morgan Elizabeth Duncan, Butler, Wooten, Cheeley & Peak, for Appellee.

Ray, Judge.

Angela Burns sued J.B. Trucking, Inc. and Grange Indemnity Insurance Company (“Grange”), among others, for injuries she sustained when J.B. Trucking's employee, Chadwick Franks, crashed the box truck he was driving into her vehicle. After a trial, the jury found in favor of Burns and the trial court entered a final judgment in her favor. Grange appeals from that judgment and from the trial court's summary judgment determination, prior to trial, that the MCS–90 endorsement to Grange's insurance policy provided coverage to the accident. Grange argues that the MCS–90 endorsement should not provide coverage for an accident that occurred while Franks was engaged in a purely intrastate trip involving nonhazardous commodities at the time of the accident. Grange also contends that the trial court erred in reforming the MCS–90 endorsement to increase the liability limit. For the following reasons, we reverse.

This Court reviews “the denial or grant of summary judgment de novo to determine ... whether the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law.” (Citation omitted.) American Strategic Ins. Corp. v. Helm , 327 Ga.App. 482, 483, 759 S.E.2d 563 (2014).

On the day of the accident, Franks was driving a box truck in the course of his employment with J.B. Trucking when he collided with a vehicle driven by Burns. It is undisputed that Franks was engaged in a trip involving purely intrastate commerce and that he was transporting nonhazardous commodities. Franks picked up a box truck in Monroe, Georgia, and drove the truck to Norcross, Georgia, where he picked up a load of “sales papers” and delivered them to a paper company in Newnan, Georgia. The sales papers were manufactured in Georgia and were destined for end users located in Georgia. While he was on his way from Newnan to Monroe to return the empty box truck, Franks struck the vehicle Burns was driving.

On the day of the accident, J.B. Trucking was insured under a commercial auto insurance policy issued by Grange (the “Grange policy”). The Grange policy has a liability limit of $350,000 per accident. The Grange policy also contains a MCS–90 endorsement, in accordance with the Federal Motor Carrier Safety Regulations (“FMCSR”), 49 CFR § 387.15.

An MCS–90 endorsement to an automotive insurance policy obligates an insurer to cover an insured's negligence involving “vehicles subject to the financial responsibility requirements of ... the Motor Carrier Act.” The Motor Carrier Act, in turn, creates minimum levels of financial responsibility “for the transportation of property by motor carrier within the United States.”

(Punctuation omitted.)

Canal Ins. Co. v. Coleman , 625 F.3d 244, 245 (5th Cir. 2010). The purpose of a MCS–90 endorsement is

to assure compliance with federal minimum levels of financial responsibility for motor carriers. The MCS–90 endorsement must be attached to any liability policy issued to for-hire motor carriers operating motor vehicles transporting property in interstate commerce.... The endorsement creates a suretyship, which obligates an insurer to pay certain judgments against the insured arising from interstate commerce activities, even though the insurance contract would have otherwise excluded coverage.

(Citations and punctuation omitted.) Coleman , supra at 247(I).

The MCS–90 endorsement attached to the Grange Policy pertinently provides as follows:

The insurance policy to which this endorsement is attached provides automobile liability insurance and is amended to assure compliance by the insured, within the limits stated herein, as a motor carrier of property, with Sections 29 and 30 of the Motor Carrier Act of 1980 and the rules and regulations of the Federal Highway Administration (FHWA) and the Interstate Commerce Commission (ICC).

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 and whether or not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere. Such insurance as is afforded, for public liability, does not apply to injury to or death of the insured's employees while engaged in the course of their employment, or property transported by the insured, designated as cargo. It is understood and agreed that no condition, provision, stipulation, or limitation 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 supplied.)

The MCS–90 endorsement specifically states that the Grange policy is “primary and the company shall not be liable for amounts in excess of $350,000 per accident.” The MCS–90 endorsement has an attached “Schedule of Limits” that notes that a “For-hire (In interstate or foreign commerce)” vehicle carrying “nonhazardous” property carries minimum coverage of $750,000. It also provides that a “For-hire and Private (in interstate, foreign, or intrastate commerce)” vehicle carrying “hazardous materials” carries a minimum insurance of $5,000,000. The Schedule of Limits does not assign coverage for an intrastate carrier that is not carrying hazardous materials.

On motion for summary judgment prior to trial, Grange sought to confirm that its obligation for this accident was the policy limit of $350,000. The trial court ruled that, although it was undisputed that J.B. Trucking was engaged in intrastate commerce involving nonhazardous commodities at the time of the accident, the MCS–90 applied because J.B. Trucking was registered as an interstate carrier. The trial court also concluded that the MCS–90 should be reformed to change its liability limits to $750,000. The case then proceeded to a jury trial, where the jury issued a verdict in favor of Burns and awarded almost $3.3 million in compensatory damages, punitive damages, and litigation expenses. The trial court reduced the award to $2,035,000 to conform with the statutory punitive damages cap and entered a final judgment. Grange appeals from the final judgment and the order denying its motion for summary judgment.

1. Grange argues that the trial court erred in concluding that the MCS-90 endorsement applied to the instant accident when it is undisputed that the accident occurred while Franks was engaged in intrastate commerce and was transporting nonhazardous materials. Burns argues that this Court should conclude that the MCS–90 endorsement applied to all of J.B. Trucking's trips because it was registered as an interstate motor carrier¹ and had, on other occasions, been involved in interstate commerce. Although there is no binding precedent regarding this issue from Georgia courts,² it is an issue that has been litigated and decided in federal courts. As explained below, we follow the approach adopted by the majority of federal courts and hold that the determination of whether the MCS–90 endorsement provides coverage hinges upon an analysis of the trip route and the goods being transported at the time of the subject accident. See, e.g., Coleman , supra at 251(III)(B) (providing a summary of state and federal decisions adopting this “trip specific” approach).

(a) Federal Law. At the outset, we note that “[t]he operation and effect of a federally mandated endorsement is a matter of federal law.” (Citations omitted.) Lincoln Gen. Ins. Co. v. De La Luz Garcia, 501 F.3d 436, 439(II) (5th Cir. 2007). By its plain language, the MCS–90 endorsement amends the Grange policy only to the extent necessary to assure that insurers of for-hire motor carriers comply with the Motor Carrier Act of 1980 and the rules of the Federal Highway Association and the Interstate Commerce Commission. The MCS–90 endorsement also obligates Grange to pay for any judgments “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...” Accordingly, to understand the scope of the MCS–90 endorsement, we must determine whether J.B. Trucking's vehicle was subject to its financial-responsibility requirements set forth in Section 30 of the Motor Carrier Act of 1980.³ See Coleman , supra at 248(III)(A).

Section 30 of the Motor Carrier Act of 1980 provides, in pertinent part:

[t]he Secretary of Transportation shall prescribe regulations to require minimum levels of financial responsibility sufficient to satisfy

...