Toops v. Gulf Coast Marine Inc.
| Decision Date | 15 January 1996 |
| Docket Number | No. 95-40017,95-40017 |
| Citation | 72 F.3d 483 |
| Parties | Richard TOOPS; Eloisa Toops, individually and as surviving parents of Jeremy Brian Toops, deceased; Larry D. Hurst, as administrator of the estate of Jeremy Brian Toops, deceased; Thomas William Holm, Plaintiffs-Appellees, v. GULF COAST MARINE INC.; Stonewall Surplus Lines Insurance Company; Technical Risks, Inc.; Technical Risks Corporate Insurance, Defendants, and United States Fidelity and Guaranty Company, Defendant-Appellant. UNITED STATES FIDELITY AND GUARANTY COMPANY, Plaintiff-Appellant, v. Richard TOOPS, Individually and a/n/f of Jeremy Brian Toops; Eloisa Toops, Individually and a/n/f of Jeremy Brian Toops; Larry D. Hurst, Administrator of the Estate of Jeremy Brian Toops, Deceased; Thomas Holm, Individually and as assignees of Rig Runner Express Inc.; Rig Runner Express Inc.; Eric Allen Davidson, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Otto D. Hewitt, III, Alvin, TX, for appellees.
Parker C. Folse, III, Seattle, WA, Gregory Scott Coleman, Scott D. Lassetter, Weil, Gotshal and Manges, Houston, TX, for U.S. Fidelity & Guaranty Co.
Ryan Grant Anderson, Ball & Weed, Ruth Greenfield Malinas, San Antonio, TX, for American Insurance Association amicus curiae.
Appeals from the United States District Court for the Southern District of Texas.
Before DAVIS and PARKER, Circuit Judges, and BUNTON *, District Judge.
Dayton-Scott Equipment Company is a Houston based company that rents heavy cranes to large contractors and industrial companies throughout the United States. In 1990, Union Carbide Chemicals and Plastic Company approached Dayton-Scott to lease a ringer attachment 1 for a crane to be used on a construction project at Union Carbide's Point Comfort plant in Seadrift, Texas.
The ringer attachment was located on a construction site in Sulphur, Louisiana and needed to be transported to the Union Carbide On the night of August 28, 1990, Jeremy Brian Toops ("Toops") was riding in a car towed by another car which was driven by Thomas Holm. While Toops' car was being towed down Highway 288 near Angleton in Brazoria County, Texas, it was struck from behind by the tractor-trailer driven by Davidson. The accident resulted in Toops suffering severe injuries and burns from which he later died.
construction site in South Texas. Dayton-Scott solicited for transportation service from several shippers and ultimately awarded the bid to Rig Runner, a licensed intrastate and interstate common carrier. Rig Runner in turn hired two drivers, Williams and Davidson, to transport the crane parts from Louisiana to Texas. Williams and Davidson were independent contractors who owned and operated their own trucks.
Toops' parents filed suit in Brazoria County against, inter alia, Davidson, Rig Runner, and Dayton-Scott. During the litigation, it became apparent to Rig Runner that its $750,000.00 insurance policy would be insufficient to cover any potential liability in the Texas tort suit. Consequently, Rig Runner and Davidson demanded that Dayton-Scott's insurers, which included Appellant United States Fidelity and Guaranty Company ("USF & G"), defend them and pay any judgment rendered against them up to policy limits. USF & G and the other insurers denied that coverage existed and refused to defend them or pay any judgment.
Two jury interrogatories were submitted to the Brazoria County jury regarding Dayton-Scott's relationship with Rig Runner. The first interrogatory asked whether Dayton-Scott and Rig Runner were engaged in a joint venture to which the jury answered "no." The second interrogatory asked whether Rig Runner and Davidson were agents of Dayton-Scott to which the jury answered "no." Dayton-Scott was not found liable, but Davidson and Rig Runner were found to be negligent and Toops was awarded $12 million in damages. Rig Runner paid its policy limits, did not appeal the decision, and in May of 1994 Davidson and Rig Runner assigned to Toops all causes of action in contract or torts that they might have against USF & G and the other insurers.
Toops once again filed in state court against USF & G and the other insurers claiming breach of contract and seeking declaratory judgment under the Texas Declaratory Judgment Act. USF & G removed the case to federal court and also filed a declaratory judgment. The District Court granted summary judgment for all of the insurers except USF & G. Finally, USF & G's motion for summary judgment was denied and Toops' motion for summary judgment was granted.
This entire appeal centers around the District Court's interpretation of USF & G's insurance policy which states in pertinent part:
(1) WHO IS AN INSURED
The following are insureds:
(a) You for any covered auto.
(b) Anyone else while using with your permission a covered auto you own, hire or borrow except:
....
(c) Anyone liable for the conduct of an insured specified above but only to the extent of that liability. However, the owner or anyone else from whom you hire or borrow a covered auto is an insured only if that auto is a trailer connected to a covered auto you own.
The District Court found that the coverage of Rig Runner was expressed in clear and unambiguous language. The Court then found that Dayton-Scott "hired" Rig Runner and therefore Rig Runner was an insured under subsection (1)(b) above. The Court also rejected USF & G's argument that subsection (1)(c) provides an exemption by stating that the exemption was limited to subsection (c) and thus could not be used to defeat coverage under subsection (b).
The United States District Court ultimately reduced the principal amount of the judgment from $12 to $1 million. However, immediately after the order on cross-motions for summary judgment was filed, USF & G fired its counsel, retained other counsel, and Nevertheless, the Court takes genuine pause in the face of caselaw that presents an entirely new line of analysis from what was earlier given to the Court. Having read the cases mentioned by Defendant, the Court now believes that, if these cases had been presented at the appropriate time, the Court might have reached a different conclusion in this matter. 2
within 10 days filed a FED.R.CIV.P. 59 motion for new trial. The District Court, in another order denied the Rule 59 motion, even though the brief seemingly argued Fifth Circuit case law directly on point, which may have mandated a different interpretation from the one the District Court decided. The District Court stated:
Toops v. USF & G, 871 F.Supp. 284, 294-95 (S.D.Tex.1994). We now proceed with a review of this appeal.
We first address whether the District Court below erred when it strictly applied the insurance policy at issue against USF & G and liberally in favor of Rig Runner. USF & G takes issue with the fact that the District Court refused to follow the case of McBroome-Bennett Plumbing, Inc. v. Villa France, Inc., 515 S.W.2d 32 (Tex.Ct.App.1974). The McBroome-Bennett doctrine states that there can be no coverage presumption against an insurer until the claimant has established that it is an insured under the policy. Although USF & G failed to argue the McBroome-Bennett doctrine in its summary judgment motion, the District Court nevertheless addressed the doctrine in a footnote. The McBroome-Bennett doctrine is only applicable, however, when the insurance policy is found to be ambiguous. The Court specifically found that the policy was unambiguous and therefore refused to apply it. Toops, 871 F.Supp. at 292.
USF & G also argues that there was an alternative finding by the Court that if the policy was ambiguous, then the policy should be construed strictly against the insurer and liberally against the insured. It is arguable that this was an alternative holding by the Court; however, even if it was an alternative holding, the District Court properly excluded any analysis under the McBroome-Bennett doctrine. The doctrine has been drawn into question by courts both in Texas and across the nation. Id. at 291 n. 4. The law in the Fifth Circuit expressed in the District Court case of Adams v. John Hancock Mutual Life Ins. Co., states:
Under Texas law, the words and clauses of insurance contracts are strictly construed against the insurer. If a word or clause has more than one meaning, then the meaning favoring the insured must be applied. If the clause may be interpreted as a limiting term or as an exclusionary clause, the insured's reasonable construction of the clause must be adopted, even if the insurer's construction is more reasonable.
797 F.Supp. 563, 567 (W.D.Tex.1992) (internal citation omitted). Therefore, it was proper for the District Court to strictly construe the insurance policy against USF & G.
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