State Farm Mut. Auto. Ins. Co. v. Logisticare Solutions, LLC

• Decision Date: 23 May 2014
• Docket Number: No. 13–60287.,13–60287.
• Citation: 751 F.3d 684
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff–Appellee, v. LOGISTICARE SOLUTIONS, LLC; Albert Graham, Defendants–Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

751 F.3d 684

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff–Appellee,

v.LOGISTICARE SOLUTIONS, LLC; Albert Graham, Defendants–Appellants.

No. 13–60287.

United States Court of Appeals, Fifth Circuit.

May 23, 2014.

Hal Scot Spragins, Esq., Hickman, Goza & Spragins, P.L.L.C., Oxford, MS, for Plaintiff–Appellee.

Jay Marshall Atkins, Leitner, Harry Case Embry, Williams, Dooley, & Napolitan, P.L.L.C., Oxford, MS, Albert Graham, Jackson, MS, for Defendant–Appellant.

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

Before JONES, SMITH, and OWEN, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

As a volunteer driver for LogistiCare Solutions, LLC (“LogistiCare”), Elizabeth Mosley provided non-emergency medical transportation services for Medicaid patients (“members”) using an automobile insured by State Farm Mutual Automobile Insurance Company (“State Farm”). While transporting Pearlie Graham, a member, Mosley was involved in an accident in which Graham was injured.

Graham's heirs sued Mosley and LogistiCare in Mississippi state court. Based on the “for a charge” exclusion contained in the insurance policy, State Farm sued in federal court seeking a declaration that it has no duty to defend or indemnify Mosley or LogistiCare in the underlying action. The district court granted summary judgment for State Farm, and denied summary judgment for the heirs and LogistiCare, as to both duties. Concluding that State Farm has a duty to defend but no duty to indemnify, we affirm in part and reverse in part and remand.

I.

Mosley registered to become a “volunteer driver” for LogistiCare, agreeing to provide non-emergency medical transportation services for members in exchange for reimbursed mileage expenses.¹ The reimbursement for a particular ride depended on the applicable mileage rate,² the miles driven, ³ and the number of members driven.⁴ LogistiCare did not allow Mosley to accept payment directly from members.

Pursuant to the Policy issued to Mosley, State Farm agreed “to pay damages an insured becomes legally liable to pay because of: bodily injury to others ... caused by an accident that involves a vehicle for which that insured is provided Liability Coverage by this policy.” The Policy contained the following exclusion that is the focus of this appeal: “THERE IS NO COVERAGE FOR AN INSURED: ... FOR DAMAGES ARISING OUT OF THE OWNERSHIP, MAINTENANCE, OR USE OF A VEHICLE WHILE IT IS BEING USED TO CARRY PERSONS FOR A CHARGE. This does not apply to the use of a private passenger car on a share-the-expense basis.” On appeal, LogistiCare challenges the summary judgment on five theories: (1) Collateral estoppel precludes State Farm from re-litigating the applicability of the exclusion; (2) the underlying complaint does not allege facts showing that the “for a charge” exclusion applies; (3) facts beyond the underlying complaint demonstrate that the exclusion does not apply; (4) even if the exclusion applies, the “share-the-expense” exception to the exclusion reinstates coverage; and (5) alternatively, both the “for a charge” exclusion and the “share-the-expense” exception are ambiguous.⁵

II.

We review a summary judgment de novo, “using the same standard as that employed by the district court under Rule 56.” Kerstetter v. Pac. Scientific Co., 210 F.3d 431, 435 (5th Cir.2000). Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).

Newman v. Guedry, 703 F.3d 757, 761 (5th Cir.2012), cert. denied,––– U.S. ––––, 134 S.Ct. 162, 187 L.Ed.2d 40 (2013). We consider “all facts and inferences in the light most favorable to the nonmoving party when reviewing grants of motions for summary judgment.” Murray v. Earle, 405 F.3d 278, 284 (5th Cir.2005) (citation omitted).

In diversity cases, this court applies the substantive law of the forum state, Mississippi. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Under Mississippi law, construction of an insurance policy presents a question of law, which we review de novo. Farmland Mut. Ins. Co. v. Scruggs, 886 So.2d 714, 717 (Miss.2004).

Mississippi treats insurance policies as contracts, which “are to be enforced according to their provisions.” Noxubee Cnty. Sch. Dist. v. United Nat'l Ins. Co., 883 So.2d 1159, 1166 (Miss.2004). “If a contract contains ambiguous or unclear language, then ambiguities must be resolved in favor of the non-drafting party.” U.S. Fid. & Guar. Co. of Miss. v. Martin, 998 So.2d 956, 963 (Miss.2008) (citation omitted). “Ambiguities exist when a policy can be logically interpreted in two or more ways, where one logical interpretation provides for coverage. However, ambiguities do not exist simply because two parties disagree over the interpretation of a policy.” Id. (citations omitted). If a provision is ambiguous, Mississippi courts “will apply the interpretation favoring the insured, and will determine the intent of the parties to the insurance contract with reference to what a reasonable person in the insured's position would have understood the terms to mean.” Progressive Gulf Ins. Co. v. We Care Day Care Ctr., Inc., 953 So.2d 250, 253 (Miss.Ct.App.2006). Courts give words “their plain, ordinary, and popular meaning, not a philosophical or scientific meaning.” Id.

“[P]rovisions that limit or exclude coverage are to be construed liberally in favor of the insured and most strongly against the insurer.” Lewis v. Allstate Ins. Co., 730 So.2d 65, 68 (Miss.1998). But “if a contract is clear and unambiguous, then it must be interpreted as written.” U.S. Fid. & Guar. Co., 998 So.2d at 963. “[A] court must refrain from altering or changing a policy where terms are unambiguous, despite resulting hardship on the insured.” Titan Indem. Co. v. Estes, 825 So.2d 651, 656 (Miss.2002).

III.

In a prior case involving State Farm and LogistiCare, a Georgia trial court concluded that the same “for a charge” exclusion did not prohibit coverage. See State Farm Mut. Auto. Ins. Co. v. Myers, No. 2010CV188726, slip op. at 10–11 (Super. Ct., Fulton Cnty., Ga., Aug. 15, 2011). In light of that decision, LogistiCare contends that collateral estoppel prevents State Farm from re-litigating the “for a charge” exclusion in the present case.

In the earlier case, a different Medicaid recipient sued a different LogistiCare volunteer driver for sexual assault. See id. at 1–2. Although State Farm argued that the “for a charge” exclusion precluded coverage, the trial court concluded otherwise.⁶ The court consequently denied summary judgment in favor of State Farm and granted summary judgment in favor of the insured parties. See id. at 12. The Georgia Court of Appeals reversed, concluding that “the damages [ ] alleged in the underlying suit did not result from the use of the car.” State Farm Mut. Auto. Ins. Co. v. Myers, 316 Ga.App. 152, 728 S.E.2d 787, 789 (2012).

“[I]ssue preclusion prohibits a party from seeking another determination of the litigated issue in the subsequent action.” United States v. Shanbaum, 10 F.3d 305, 311 (5th Cir.1994). We apply issue preclusion only if four conditions are met:

First, the issue under consideration in a subsequent action must be identical to the issue litigated in a prior action. Second, the issue must have been fully and vigorously litigated in the prior action. Third, the issue must have been necessary to support the judgment in the prior case. Fourth, there must be no special circumstance that would render preclusion inappropriate or unfair.

Id.

Even assuming Mississippi and Georgia courts would interpret a “for a charge” exclusion identically, the trial court's determination that the “for a charge” exclusion did not apply was not “necessary to support the judgment in the prior case.” The appellate court's determination that any injuries alleged did not arise out of the use of the car mooted its need to decide the exclusion issue. Cf. Sport Supply Grp., Inc. v. Columbia Cas. Co., 335 F.3d 453, 458 n. 4 (5th Cir.2003). Collateral estoppel poses no obstacle for State Farm.

IV.

“In Mississippi, an insurance company's duty to defend its insureds derives neither from common law nor statute, but rather from the provisions of its policy, that is, its insurance contract with its insured.” Baker Donelson Bearman & Caldwell, P.C. v. Muirhead, 920 So.2d 440, 450 (Miss.2006). “An insurance company's duty to defend its insured is triggered when it becomes aware that a complaint has been filed which contains reasonable, plausible allegations of conduct covered by the policy.” Id. at 451.⁷ “[T]he duty to defend is broader than the insurer's duty to indemnify under its policy of insurance: the insurer has a duty to defend when there is any basis for potential liability under the policy.” Titan Indem. Co. v. Pope, 876 So.2d 1096, 1101 (Miss.App.2004) (quoting Merchants Co. v. Am. Motorists Ins. Co., 794 F.Supp. 611, 617 (S.D.Miss.1992)). “However, no duty to defend arises when the claims fall outside the policy's coverage.” Baker, 920 So.2d at 451.

LogistiCare contends that the underlying complaint does not allege facts showing that the “for a charge” exclusion applies. In support of that position, LogistiCare notes that the “complaint does not allege, in any form or fashion, what the financial arrangement was between Mosley and LogistiCare for transporting Pearlie Graham.” State Farm offers two alternative responses: (1) “Without an allegation stating the transportation was for free, there is no other implication to be derived other than a charge being levied for the service.”; and (2) “The [underlying] complaint provides a clear indication that the plaintiffs alleged Mosley was using the vehicle in a manner akin to a taxi (i.e. d/b/a Mosley's Transportation), and acting in furtherance of this business.” State Farm also maintains that no extrinsic facts...