Property v. United Specialty Ins. Co.
| Decision Date | 31 December 2014 |
| Docket Number | No. 12-2178,12-2178 |
| Parties | AMERICAN NATIONAL PROPERTY AND CASUALTY COMPANY, a Missouri corporation, Plaintiff-Counter-Defendant - Appellant, v. UNITED SPECIALTY INSURANCE COMPANY, a Delaware corporation, Defendant-Counter-Claimant - Appellee. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Before HARTZ, HOLLOWAY** and HOLMES, Circuit Judges.
American National Property and Casualty Company ("American") and United Specialty Insurance Company ("United") dispute their respective obligations flowing from a wrongful-death settlement. On summary judgment, the district court ruled that United had no obligation to pay. We conclude that United has not made the showing to warrant that result. Accordingly, we use the jurisdiction granted to us by 28 U.S.C. § 1291 to reverse and remand for further proceedings.
"In reviewing the district court's grant of summary judgment, we recite the facts in the light most favorable to [American], the nonmoving party." Debord v. Mercy Health Sys. of Kan., Inc., 737 F.3d 642, 647 n.2 (10th Cir. 2013), cert. denied, --- U.S. ----, 134 S. Ct. 2664 (2014).
At the time of the underlying events, Endeavor Services, Inc. ("Endeavor") was in the business of transporting water to oil fields. Jimmy Cooper financed the company at its inception and served as its director while his children jointly owned 51% of its shares and Virgil Woods owned the other 49%.
To assist the company, Mr. Cooper provided it the use of his Lincoln Navigator ("the Navigator"). The Coopers used the Navigator as a family vehicle from 2004 until 2010. At that time, Mr. Woods informed Mr. Cooper that EdwardDe La Paz, an Endeavor salesman, needed a vehicle to perform his duties, and Mr. Cooper offered the Navigator. There was no discussion of Endeavor purchasing the vehicle when Mr. Cooper first provided it, but approximately a month later Messrs. Woods and Cooper agreed that Endeavor would buy the Navigator at fair market value as soon as the company had the funds to do so. While it had possession of the Navigator, Endeavor paid for all gas and maintenance. Mr. Cooper continued to pay the premiums on the car's insurance and retained title to the vehicle, but he and his wife never used it.
On June 11, 2010, Mr. De La Paz was driving the Navigator to pick up a check that would have allowed Endeavor to pay Mr. Cooper for the vehicle.1 Mr. De La Paz crashed into a truck, killing both himself and Roland Judson, the truck driver. The accident occurred approximately fifty miles from Mr. De La Paz's house—where he began his drive—during daylight, with clear conditions, on a dry, straight, level road. A police report characterized "[d]river inattention" as "a contributing factor in the crash." Aplt. App. at 78 (Crash Report, dated July 8, 2010). An autopsy of Mr. De La Paz found methamphetamine in his system in an amount sufficient to cause death by overdose. In the opinion of Dr. Richard Morrisett, a neuropharmacologist retained by American, drugs "rendered [Mr. De La Paz] incapable of safe operation of a motor vehicle [and] substantiallycontributed to the motor vehicle accident." Id. at 152 ().
There are three different insurance policies relevant to the appeal: (1) a family auto policy issued by American to Mr. Cooper; (2) a commercial umbrella policy issued by American to Mr. Cooper; and (3) a commercial auto policy issued by Great West Casualty Company ("Great West") to Endeavor. The most important aspect of Mr. Cooper's family policy with American, for our purposes, is that it excluded coverage for damages incurred "while any insured vehicle is rented, leased, or subleased or under any purchase agreement or conditional sale to others." Id. at 102 (Family Auto Policy, filed June 5, 2012). As for the commercial umbrella policy American issued to Mr. Cooper, its pertinent provision excluded coverage for damages "[a]rising out of the use . . . or possession by any person of a controlled substance." Id. at 105 (Commercial Umbrella Policy, filed June 5, 2012). Finally, the commercial auto policy Great West issued to Endeavor indicated, notably, that it applied only to "covered autos," which included "hired autos" and "nonowned autos." Id. at 126-27 (Commercial Auto Policy, filed June 5, 2012).
Mr. Judson's estate sued Mr. De La Paz's for wrongful death. A settlement was reached between the insurance companies, Mr. Judson's estate, and Mr. De La Paz's estate, whereby Mr. Judson's estate would be paid $1,650,000 to resolveits wrongful-death claim. Of this amount, American paid $650,000, Great West paid $1,000,000, and United—which issued an excess-liability policy to Endeavor—paid nothing. The insurance companies each reserved their right to contest the claims amongst themselves.
American exercised that right, seeking a declaratory judgment and equitable subrogation on the ground that United owed it $650,000 ("the loss") for the money it paid to settle the wrongful-death lawsuit based on the excess-liability policy it issued to Endeavor.2 Both parties filed motions for summary judgment. In its motion, American argued that neither its own family auto policy nor its umbrella policy covered the loss. It sought a declaration that the Great West policy provided primary coverage, that United provided excess coverage, and that United therefore owed American $650,000 for the amount American paid to settle the claim over and above the $1,000,000 that Great West paid. For its part, United argued in its own motion for summary judgment that American's family auto and umbrella policies covered the loss.
Ruling on the dueling motions for summary judgment, the district court granted United's, denied American's, and dismissed the complaint with prejudice. In so doing, it declared that American's auto and umbrella policies covered theloss and that Great West's and United's policies did not. The district court reasoned as follows. With respect to American's family policy, the district court found the conditional-sale exclusion ambiguous and thus properly construed against American, the insurer. The district court explained that "[a]t most," the arrangement "amounted to an expression of a plan for Endeavor to purchase the vehicle at some undefined time and for an unstated sales price, rather than a contractual agreement." Id. at 372 (Mem. Op. & Order, filed Sept. 24, 2012). As such, the terms were insufficiently definite to constitute a contract, and the conditional-sale exclusion was not implicated.
Turning to American's commercial umbrella policy, the district court concluded that its exclusion for damages arising out of the use of controlled substances was, like the conditional-sale exclusion, ambiguous, and the court accordingly resolved its ambiguities in United's favor. As the district court read the record, the summary-judgment evidence indicated at most that Mr. "De La Paz's methamphetamine use might have caused the accident." Id. at 378. That did not satisfy the district court, as "a number of other factors leading to De La [Paz's] inattentive and dangerous driving could have caused the collision." Id. at 379.
As for the Great West policy, the district court found that Great West was not obligated to cover the loss because the Navigator was borrowed, and was therefore not a "hired auto" or a "nonowned auto" within the meaning of thepolicy. In view of those findings, the district court granted United's motion for summary judgment, denied American's motion for summary judgment, and dismissed the complaint with prejudice. This timely appeal followed.
Because this case is here on summary judgment, we apply a de novo standard of review, using the same methodology as the district court. See Water Pik, Inc. v. Med-Systems, Inc., 726 F.3d 1136, 1143 (10th Cir. 2013). A party is entitled to summary judgment only where the summary-judgment record shows no genuine issue of material fact. Id. In making that determination, we consider the facts in the light most favorable to the nonmovant and draw all reasonable inferences in its favor. See Talavera ex rel. Gonzalez v. Wiley, 725 F.3d 1262, 1267 (10th Cir. 2013).
With diversity cases such as this, substantive questions are governed by state law. See, e.g., Jones v. United Parcel Serv., Inc., 674 F.3d 1187, 1203 (10th Cir.), cert. denied, --- U.S. ----, 133 S. Ct. 413 (2012). The parties agree that state law controls each of the issues presented, and they are correct. See Cohen-Esrey Real Estate Servs., Inc. v. Twin City Fire Ins. Co., 636 F.3d 1300, 1303 (10th Cir. 2011) (). The parties further agree, as did the district court, that New Mexico law controls, so we can safely apply that law. See N. Am. Specialty Ins. Co. v. Corr. Med. Servs., Inc., 527 F.3d 1033, 1040 n.5 (10th Cir. 2008) (). "[O]ur task in diversity cases is to predict how the state supreme court would rule." Valley Forge Ins. Co. v. Health Care Mgmt. Partners, Ltd., 616 F.3d 1086, 1093 (10th Cir. 2010).
As we have indicated, at the center of the case are three different insurance policies: (1) the family auto policy issued by American to Mr. Cooper; (2) the commercial umbrella policy issued by American to Mr. Cooper; and (3) the commercial auto policy issued by Great West to Endeavor. The district court ruled on summary judgment that: (1) American's family auto policy covered the loss; (2) American's umbrella policy covered the loss; and (3) Great West's policy did not cover the loss. We reach a different outcome from the district court's on each policy....
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