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Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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In the

United States Court of Appeals

For the Seventh Circuit

No. 09-3427

AUTO-OWNERS INSURANCE COMPANY,

Plaintiff-Appellee,

v.

JOSHUA M. MUNROE, et al.,

Defendants-Appellants.

Appeal from the United States District Court 

for the Central District of Illinois.

No. 08 CV 02181—Harold A. Baker, Judge.

ARGUED FEBRUARY 17, 2010—DECIDED JULY 22, 2010

Before RIPPLE, MANION, and SYKES, Circuit Judges.

MANION, Circuit Judge. After Joshua Munroe and his

wife entered a settlement agreement that released those

who allegedly caused a severe tractor-trailer accident

from any individual liability above their liability

insurance coverage, Auto-Owners Insurance Company

brought a declaratory judgment action to establish that

the insurance policy limited coverage to $1,000,000. The

district court agreed with Auto-Owners and granted its

Case: 09-3427 Document: 16 Filed: 07/22/2010 Pages: 12
2 No. 09-3427

motion for summary judgment. The Munroes appeal,

arguing that the coverage limit was higher either under

the terms of the policy or under minimum limits

required by the Motor Carriers Act. Because the policy

unambiguously limits coverage to $1,000,000 and the

federal minimum limits are inapplicable here, we affirm.

I.

On November 6, 2006, Joshua Munroe sustained significant injuries when the tractor-trailer he was driving in

the northbound lane of Illinois Route 1 in Edgar County,

Illinois, struck the rear of a southbound tractor-trailer

driven by Monty Murphy, and then careened into a fiery

head-on collision with Roger Snyder’s tractor-trailer,

which was following close behind. Murphy had been

attempting to pass yet another tractor-trailer, this one

operated by Gerald Sturgeon. When he saw Munroe

approaching, Murphy attempted to pull back into his

own lane but could not completely clear Munroe’s lane.

Munroe was air-lifted from the scene. He suffered

severe burns and broken bones throughout his body

and incurred medical expenses in excess of $474,000.

All three southbound trucks were owned and operated

by Wayne Wilkens Trucking and had been traveling in

convoy. All were covered under a single insurance

policy issued by Auto-Owners. The policy declarations

listed each of the tractor-trailers (and many others), and

each declaration specified a limit of $1,000,000 for each

occurrence. The policy also contained a Combined Limit

of Liability provision, which stated that the maximum

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No. 09-3427 3

total coverage was the $1,000,000 limit stated in the

declarations, regardless of how many automobiles were

listed in the declarations or involved in the accident.

Munroe and his wife sued Wilkens and the drivers of the

tractor-trailers. They alleged that all three drivers acted

negligently: Sturgeon by failing to yield and letting the

second pass at a safe time and place, Murphy by passing

when unsafe, and Snyder for following too closely and

failing to avoid the head-on collision. All three tractortrailers were allegedly exceeding the posted speed limit.

Wilkens was allegedly negligent in hiring and training

the drivers.

The Munroes entered a partial settlement agreement in

which they agreed to release Wilkens and the drivers

from any individual liability above their liability

insurance coverage in exchange for $903,449.48, the

remainder of the $1,000,000 coverage limit after property

damage was paid to the owner of Munroe’s tractor-trailer.

The agreement acknowledged that Auto-Owners would

seek a declaratory judgment that the limit of the

liability insurance coverage under the policy was in fact

$1,000,000. The Munroes reserved the right to proceed

with their case if the court determined the coverage

limit was greater than $1,000,000.

As anticipated, Auto-Owners brought the present suit

for declaratory judgment against the Munroes. Both sides

moved for summary judgment. The district court granted

summary judgment to Auto-Owners, holding that the

insurance policy unambiguously limited coverage to

$1,000,000 for each occurrence and dismissing the

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4 No. 09-3427

Munroes’ additional argument that federal law mandated

at least $2.25 million insurance. The Munroes appeal.

II.

The Munroes advance two arguments. First, they argue

that the Auto-Owners policy provided at least $3 million

of coverage, either because each vehicle was subject to

a separate $1,000,000 limit or because the accident constituted three separate occurrences, with a $1,000,000 limit

each, due to the separate negligent acts of each of the

drivers. Second, they argue that even if the policy is

construed against them, federal law mandates at least

$750,000 worth of insurance coverage for each vehicle

and that we should read the policy as providing a minimum of $2.25 million coverage for this accident. We

consider each argument in turn.

A.

We review the district court’s grant of summary judgment, and its construction of the insurance policy,

de novo. Ace Am. Ins. Co. v. RC2 Corp., 600 F.3d 763, 766

(7th Cir. 2010). The parties agree that Illinois law governs

the interpretation of the insurance policy in dispute.

Like any contract, an insurance policy is construed according to the plain and ordinary meaning of its unambiguous terms. Nicor, Inc. v. Associated Elec. & Gas, 860 N.E.2d

280, 286 (Ill. 2006). Ambiguity exists only where a

term is susceptible to more than one reasonable interpretation. Id.

Case: 09-3427 Document: 16 Filed: 07/22/2010 Pages: 12
No. 09-3427 5

The insurance policy at issue in this case is not ambiguous. It provides up to $1,000,000 of coverage per occurrence for each insured vehicle. The policy contains a

severability clause, which provides that the coverage

applies separately to each person against whom a

claim is made “except as to our limit of liability.” The

“Combined Limit of Liability” provision, which replaces the limit of liability provision referenced in

the severability clause, provides that the per-occurrence

limit—$1,000,000—is the most that Auto-Owners will

pay, “regardless of the number of automobiles shown

in the Declarations . . . or automobiles involved in

the occurrence.” While the Munroes attempt to find

ambiguity, including in the terms “automobiles” and

“combined,” these contortions merit little discussion

here: applied to the facts of this case, the unambiguous

terms of the policy limit the coverage to $1,000,000 for

each occurrence, notwithstanding the involvement of

three Wilkens tractor-trailers.

Thus, the only question of any real substance is whether

there was more than one “occurrence” here. The policy

defines an occurrence using the same language that the

Illinois courts have interpreted many times in the past:

“an accident that results in bodily injury or property

damage and includes, as one occurrence, all continuous or

repeated exposure to substantially the same generally

harmful conditions.”

The parties agree that Illinois has adopted the “cause

theory” to determine the number of occurrences under

an insurance policy for purposes of coverage limitations

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6 No. 09-3427

of deductibles. Under the cause theory, the number of

occurrences is determined according to the number of

“separate and intervening human acts” giving rise to

the claims under the policy. Nicor, 860 N.E.2d at 294.

But the cause theory (like the opposing effect theory)

answers a question that presupposes there are several

discrete events. All of the Illinois cases applying the

cause theory involve multiple discrete events rather

than an uninterrupted continuum: the only question is

whether all of the discrete events should be attributed to

a common cause. Most recently, for instance, the

Illinois Supreme Court concluded that the deaths of

two boys due to negligently maintained property constituted two occurrences despite a common cause under

an exception to the cause theory. Addison Ins. Co. v. Fay,

905 N.E.2d 747, 756 (Ill. 2009). Previously, in Nicor, the

court found that there were multiple occurrences when

separate negligent acts of various employees caused

nearly two hundred discrete exposures to mercury contamination. 860 N.E.2d at 286. Before Nicor, the Illinois

Appellate Court’s relevant decisions all involved multiple claims or injuries. For example, the negligent manufacture and sale of asbestos building materials gave rise

to a single occurrence despite many claims of exposure.

U.S. Gypsum Co. v. Admiral Ins. Co., 643 N.E.2d 1226, 1259

(Ill. App. Ct. 1994). And a single trucker caused

two “occurrences” when his separate act of negligence

following an initial collision with his tractor-trailer

caused a second collision five minutes later. Illinois

Nat’l. Ins. Co. v. Szczepkowicz, 542 N.E.2d 90, 91 (Ill. App.

Ct. 1989).

Case: 09-3427 Document: 16 Filed: 07/22/2010 Pages: 12
No. 09-3427 7

Whether there is a single continuous event or several

discrete events will not always be obvious, but in this

case we have a helpful guidance from Illinois Appellate Court precedent. In Szczepkowicz, a truck driver

stopped his tractor-trailer in the middle of a state

highway, blocking both northbound lanes. 542 N.E.2d

at 91. An automobile struck the rear wheels of the tractortrailer, and the driver then moved his vehicle forward

enough to free up most of one lane, but failed to completely remove the vehicle from the travel lanes. Id.

Five minutes later, a second vehicle traveling northbound smashed into the side of the tractor-trailer. Id.

Lawsuits arose from both collisions and the truck’s

insurer sued for a declaratory judgment to establish its

maximum liability. Id. The insurer argued that both

collisions constituted a single accident, but the appellate

court, applying the cause theory, held that the two collisions resulted from two separate causes: when the

driver moved the tractor-trailer after the first collision,

he negligently failed to clear all lanes, and this separate

and intervening act caused a second accident five

minutes later. Id. at 92. The two collisions were not the

result of a “single force, nor an unbroken or uninterrupted

continuum that, once set in motion, caused multiple

injuries.” Id.

None of these cases implies, as the Munroes claim, that

the cause theory can be used to turn a single discrete event

into multiple occurrences. Unlike Szczepkowicz, this case

does involve a single force and an uninterrupted chainreaction involving several vehicles, and thus a single

continuous occurrence. Although there may have been

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8 No. 09-3427

several causes for the uninterrupted events, none of

these causes occurred after the force that caused the

injury had been set in motion. In other words, even if the

causes could properly be called separate, none were

intervening causes. All of them came together at the

same time to produce a single set of circumstances that

caused a single accident: Munroe’s truck collided with

one Wilkens truck and then, out of control, hit the following truck head-on. He has one claim against the

trucking company and the drivers, allegedly caused by

three separate acts of negligence. This single claim gives

rise to a single occurrence under the insurance policy,

with a $1,000,000 limit.

In sum, no Illinois court has held that a single claim

or injury can give rise to multiple occurrences merely

because several acts of negligence combined to produce

a single result. There is no indication that the Illinois

Supreme Court would reach such a result, contrary to

common sense and the Illinois courts’ own interpretation of the cause theory.

B.

The Munroes also argue that the federal Motor Carriers

Act, 49 U.S.C. § 13906(f), and its implementing regulations, requires that the three Wilkens tractor-trailers

involved in the accident have a combined coverage of at

least $2.25 million. This is so, according to the Munroes,

because Wilkens satisfied its obligation under federal law

to ensure a minimum amount of funds is available to

pay damages caused to the public by its trucks by inCase: 09-3427 Document: 16 Filed: 07/22/2010 Pages: 12
No. 09-3427 9

cluding an MCS-90 endorsement in the insurance policy.

The MCS-90 endorsement, they argue, requires a minimum of $750,000 coverage for each vehicle involved in

the accident.

The MCS-90 provides that Auto-Owners “[a]grees

to pay, within the limits of liability described [in the

endorsement], any final judgment recovered against the

insured for public liability resulting from negligence in

the operation, maintenance or use of motor vehicles.” The

form also clearly states that “the limits of [Auto-Owner’s]

liability for the amounts prescribed in this endorsement

apply separately, to each accident.” While the endorsement in the record has not been filled in with a specific

amount of coverage, the minimum coverage scheduled

on the second page of the endorsement is $750,000 for a

for-hire vehicle with a gross weight of 10,000 pounds or

more carrying nonhazardous property.

No court, to our knowledge, has discussed how the MCS90 applies when more than one insured vehicle under

the same endorsement is involved in the same accident—a rather unusual set of facts, especially in this case.

We are skeptical of the Munroes’ argument that the MCS90 applies per-vehicle as well as per-accident, in light of

our precedent applying the MCS-90 on a strictly peraccident basis even when an accident involves more than

one injured party. See Carolina Cas. Ins. Co. v. Estate of

Karpov, 559 F.3d 621, 625 (7th Cir. 2009).

But we need not answer this question here because the

MCS-90 is inapplicable for a more fundamental reason:

there is no final judgment in this case, so Auto-Owners’

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10 No. 09-3427

payment obligation under the MCS-90 has not been

triggered. Moreover, because the Munroes have agreed

to release Wilkens from any liability beyond what the

insurance policy provides, there will never be an unpaid

final judgment in this case: the parties have settled and

the underlying case will presumably be dismissed once

this declaratory judgment action is complete. Under its

terms, the MCS-90 simply requires an insurance company to pay “any final judgment recovered against the

insured for public liability resulting from negligence in

the operation . . . of motor vehicles subject to the financial responsibility provisions of [the Motor Carrier Act].”

The Munroes attempt to escape the impossibility of a

triggering final judgment in this case by arguing that the

MCS-90 requirements are relevant because they set the

minimum insurance amounts, and that we should effectively amend the policy to provide that amount. But this

is not how the MCS-90 works. The insurer guarantees

payment of a final judgment against the insured, but “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 payment obligation is broader than the

policy itself and applies regardless of “whether or not

each motor vehicle is specifically described in the policy,” and despite any “condition, provision, stipulation,

or limitation contained in the policy.” Thus, an insurer

is required to pay even if, for example, the insured operates a leased vehicle not shown in the declarations or

the accident is caused by a type of event excluded by

the policy. In other words, the MCS-90 does not modify

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No. 09-3427 11

the terms of the policy, but instead obliges the insurer

to pay up to $750,000 of a final judgment regardless of

the terms of the policy.

Rather than modify the policy to which it is attached, the

MCS-90 creates a suretyship among the injured public, the

insured, and the insurer, under which the insurer agrees

to guarantee a minimum payment to the injured public,

regardless of whether the injury would, in fact, be

covered by the policy. See Carolina Cas. Ins. Co. v. Yeates,

584 F.3d 868, 881 (10th Cir. 2009). Under this suretyship, the insurer is only obliged to pay what the insured

actually owes, and then only if that debt arises from a

final judgment. See id. at 881 (“The essence of suretyship

is the undertaking to answer for the debt of another.

The surety’s liability is coextensive with that of the

debtor and arises only when the debtor fails to discharge

his duties or to respond in damages for that failure.”

(quoting Peter A. Alces, The Law of Suretyship and

Guaranty § 1:1 (2009))). And, ultimately, the insured is

liable for any payment beyond the policy limits: the MCS90 expressly provides that “the insured agrees to reimburse the company for any payment made by the

company . . . 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.”

Because of this, when an injured claimant releases a

motor carrier from liability beyond the coverage limits of

its insurance policy, there can be no liability that the

insurer is responsible for under the MCS-90. This is true

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12 No. 09-3427

regardless of whether the settlement amount is greater

or less than the liability limits mandated by the MCS-90.

The MCS-90 guarantees payment of a final judgment up

to a certain amount; it does not guarantee a minimum

settlement amount.

Otherwise, the release would be ineffective: because the

motor carrier would ultimately be responsible for the

payment in excess of the policy limits, a finding of additional liability against the insurer would be tantamount

to additional liability against the insured. Here, the

Munroes released Wilkens from any liability above the

coverage provided by the insurance policy, and AutoOwners has agreed to pay its coverage limit under the

policy, which we have determined to be $1,000,000

and which is unaffected by the MCS-90. Therefore, there

never will be an unpaid final judgment for more than

$1,000,000 in this case.

III.

Accordingly, we hold that the insurance policy unambiguously limits coverage to $1,000,000 per occurrence and

that there was a single occurrence in this case because

there was a single continuous event. Further, the MCS-90

endorsement does not affect Auto-Owners’ liability

because it applies only if triggered by an unpaid final

judgment against Wilkens. Therefore, we AFFIRM the

judgment of the district court.

7-22-10

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