Mahaffey v. General Sec. Ins. Co.

• Decision Date: 26 September 2008
• Docket Number: No. 07-31132.,07-31132.
• Citation: 543 F.3d 738
• Parties: John MAHAFFEY, Plaintiff, v. GENERAL SECURITY INSURANCE CO.; et al., Defendants. Redland Insurance Co., Third-Party Defendant-Appellant, v. General Security Insurance Co., Defendant-Third-Party Plaintiff-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

543 F.3d 738

John MAHAFFEY, Plaintiff, v. GENERAL SECURITY INSURANCE CO.; et al., Defendants.

Redland Insurance Co., Third-Party Defendant-Appellant, v. General Security Insurance Co., Defendant-Third-Party Plaintiff-Appellee.

No. 07-31132.

United States Court of Appeals, Fifth Circuit.

September 26, 2008.

Tobin J. Eason, Weiss & Eason, Mendeville, LA, Kenneth Blake Givens, The Givens Law Firm, Houma, LA, for Redland Ins. Co.

Lance Read Rydberg, Peter Rosario Tafaro, Duncan, Courington & Rydberg, New Orleans, LA, for General Sec. Ins. Co.

Appeal from the United States District Court for the Middle District of Louisiana.

Before REAVLEY, STEWART and OWEN, Circuit Judges.

PER CURIAM:

Appellant Redland Insurance Company (Redland) appeals a grant of summary judgment in favor of appellee General Security Insurance Company (GSI). The district court ruled that Redland provided primary insurance coverage for a commercial truck accident, holding a "nontrucking use" endorsement in the Redland policy did not exclude coverage because the driver was not "in the business of" the trucking-company lessee at the time of the accident. Because we hold that the driver was in the business of the lessee as a matter of law, we reverse and render judgment for Redland.

I

In 1999, Farr Auto Sales (Farr) leased a truck and provided a driver, Arthur Wynn, to First Coast Intermodal Service (First Coast) to haul a load from Bowling Green, Kentucky, to New Orleans, Louisiana. Wynn dropped the load off in New Orleans at approximately 4 p.m. and called the First Coast dispatcher. The dispatcher told Wynn to "take the rest of the night off and call [First Coast dispatch] in the morning to see if they had a load." After speaking with the First Coast dispatcher, Wynn drove the truck without its trailer ("bobtailed"¹) to a truck stop where he ate dinner, watched television, took a shower, and played some slot machines. In total, Wynn stayed at the truck stop for between six and seven hours.

Although Wynn usually slept in the cab of his truck, a leak left the mattress in the main cabin wet, and Wynn decided to go to a motel for the night. On his way to the motel, Wynn was involved in an automobile accident with John Mahaffey. Mahaffey brought suit in Louisiana state court against Wynn, First Coast, and First Coast's insurance provider, GSI (collectively, Defendants). First Coast and GSI removed the case to the Middle District of Louisiana.

Following removal, Defendants filed a third-party complaint against Redland Insurance Company (Redland), alleging that because Wynn was bobtailing at the time of the accident, the Redland insurance policy provided primary coverage.

Redland provided an insurance policy on the truck that included liability, personal-injury, uninsured-motorist, and collision coverage, as well as coverage for other specified causes of loss. The coverage was subject to exclusions and endorsements, including a nontrucking use endorsement. Although insurance with a nontrucking use endorsement is often referred to as "bobtail insurance," the coverage is not described in terms of bobtailing. Rather, the endorsement provides that "the insurance does not apply to ... [a] covered `auto' while used to carry property in any business ... [or] a covered `auto' while used in the business of anyone to whom the `auto' is rented."

The terms of the lease agreement between Farr and First Coast required Farr to carry nontrucking use liability insurance and required First Coast to maintain its own public liability, property, and cargo insurance. Pursuant to a "deduction notice" Farr signed, First Coast paid the nontrucking liability insurance premiums and deducted the premiums from amounts paid to Farr under the lease agreement. At the time of the execution of the lease agreement between Farr and First Coast, the annual premium for the nontrucking use policy was $360.00 per year, payable in advance in $30.00 monthly installments. Although the deduction notice provided a fixed amount to be deducted for nontrucking use liability insurance, the lease agreement also gave First Coast the right to change the amount to be deducted for nontrucking use liability insurance to the amount established by the insurance company.

Although conceding that the GSI policy provided coverage to Mahaffey for his claim, Defendants filed a motion for partial summary judgment asking the court to hold that the Redland policy provides primary coverage and the GSI policy provides excess coverage. The magistrate judge recommended granting the motion, concluding that because Wynn had no "pending, definite assignment" and "no requirement from First Coast that he stay in New Orleans" the night of the accident, Wynn was not in the business of First Coast at the time of the accident and that, therefore, the Redland policy provided primary coverage. The district court adopted the magistrate's recommendation.

Redland first appealed the district court's grant of partial summary judgment in March 2002. This court held the appeal was premature. Redland then filed a motion to make the judgment final pursuant to Federal Rule of Civil Procedure 54(b). The district court granted the motion. Redland again appeals the district court's grant of summary judgment, arguing that Wynn was in the business of First Coast at the time of the accident.

II

We review a district court's grant of summary judgment de novo.² Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law.³ In determining whether there is a genuine issue of material fact, we view facts and inferences in the light most favorable to the nonmoving party.⁴

GSI contends that certain deposition testimony of the corporate representative of First Coast and of Farr was inadmissible lay opinion testimony, lacks foundation, and has no basis other than hearsay. It is not clear whether the magistrate judge or the district court relied on this testimony in any way. Because the case does not turn on this testimony, we do not consider it or its admissibility.

III

The parties agree Louisiana law applies. Under Louisiana law, "[i]nterpretation of an insurance contract generally involves a question of law."⁵ The words of the insurance contract "must be given their generally prevailing meaning."⁶ If the language in the insurance policy is clear and unambiguous, the insurance contract must be enforced as it is written.⁷

We have held that the phrase "in the business of" in a nontrucking use endorsement is unambiguous.⁸ "That `contractual language may, on occasion, pose difficult factual applications ...' and that the parties disagree as to coverage, does not create ambiguity."⁹ Although the application of the endorsement to these facts may pose difficult questions, the difficulty of the questions does not create an ambiguity. Because "in the business of" as used in the nontrucking use endorsement is unambiguous, the issue is properly resolved as a matter of law on a motion for summary judgment.

The Louisiana Supreme Court has not yet considered when an independent trucker is acting in the business of a lessee. In the absence of a decision interpreting a particular insurance clause, we must ascertain how the Louisiana Supreme Court would rule if faced with interpreting the insurance provision¹⁰ by looking to guidance from the constitution, codes, and statutes of the state of Louisiana;¹¹ decisions from Louisiana intermediate appellate courts and federal courts applying Louisiana law;¹² and decisions from other jurisdictions.¹³

No constitutional provision, code, or statute defines when a trucker is acting in the business of a lessee. The only Louisiana Court of Appeal case considering whether a driver is in the business of a lessee is LeBlanc v. Bailey.¹⁴ In LeBlanc, a trucker was involved in an accident while en route to his home after finishing deliveries that day.¹⁵ The lessee carried commercial automobile insurance and the driver carried a bobtail policy that contained an endorsement for nontrucking use, which provided that the bobtail insurance did not apply to "a covered `auto' while used in the business of anyone to whom the `auto' is rented."¹⁶ The language of this endorsement for nontrucking use is identical to the language in the endorsement for nontrucking use in the Redland policy.

The Louisiana Court of Appeal affirmed the trial court's holding that the bobtail insurance was primary for the accident as a matter of law.¹⁷ Noting that there was not a bright-line rule to determine whether an independent trucker is acting in the business of the lessee, the court emphasized that the driver was "free to go where he pleased [and] ... was not subject to [the lessee's] control or paid for his time or mileage. [The driver] was not under dispatch or standby for further deliveries, and his drive home was more of a personal nature rather than a work-related function."¹⁸

Although the LeBlanc court did not specifically enumerate factors to be considered in determining whether a driver is in the business of another for the purpose of Louisiana insurance law, the decision indicated that relevant considerations include: whether the driver was free to go where he pleased; whether the driver was paid for time or mileage; whether the driver was under dispatch or standby for further deliveries; and whether the activity was more of a personal or work-related function.¹⁹ There is, however, no indication from LeBlanc that these considerations are exclusive. The LeBlanc court also expressed concern that construing the bobtail policy to exclude coverage when the driver was driving home would "render the non-trucking use endorsement meaningless and would defeat [the insured's] very purpose in securing this type of coverage."²⁰

Applying the reasoning of LeBlanc leads us to conclude that Wynn was acting in the business of First Coast. One of the important considerations in L...