Opinion ID: 170978
Heading Depth: 1
Heading Rank: 3

Heading: Empire Fire & Marine Insurance Co. v. Guaranty National Insurance Co., 868 F.2d 357 (10th Cir.1989)

Text: In Empire Fire, we resolved the conflict created when multiple insurance carriers with MCS-90 endorsements provided coverage for a trucker's accident. There, the dispute involved two insurance companies, Guaranty Insurance Company and Empire Fire Insurance Company, and concerned their respective insurance-policy-based responsibilities for a motor carrier's accident involving a truck and driver it had leased from another company. Empire Fire, 868 F.2d at 357. Notably, both insurance policies provided coverage for the accident at issue, and the dispute centered on which insurer was responsible for primary coverage i.e., who would pay first. Id. at 359. The Guaranty Insurance policy, issued to the motor carrier, contained a clause limiting liability to excess coverage for accidents involving vehicles not owned by the carrier. Id. at 360. The leasing company, which owned the truck and had leased the vehicle and the driver to the motor carrier, was insured under the Empire Fire policy. Id. at 359. By its own terms the Empire Fire policy provided primary coverage. Id. at 360. Only the Guaranty Insurance policy, however, contained an MCS-90 endorsement. Id. at 360-61. Based on the MCS-90 endorsement, the district court concluded Guaranty Insurance was the primary insurer as a matter of law over any other insurer. Empire Fire, 868 F.2d at 359. We reversed, finding the MCS-90 endorsement made Guaranty Insurance's coverage co-primaryi.e., Guaranty was a primary insurer, but not necessarily the only primary insurer. Id. at 361. In reaching this conclusion, we considered three competing interpretations of the scope of the MCS-90 endorsement: (1) The ... endorsement makes the insurance policy to which it is attached primary as a matter of law over all other insurance policies that lack similar provisions. (2) [T]he endorsement only negates limiting provisions in the policy to which it is attached, such as an excess coverage clause, but does not establish primary liability over other policies that are also primary by their own terms. (3) [T]he endorsement applies only to situations in which a claim is being asserted by a shipper or a member of the public, and that the endorsement does not apply when allocating liability among insurance carriers. Id. [7] We adopted the second approach, determining that both Guaranty Insurance's policy and Empire Fire's policy were available to cover a liability judgment arising from the accident. Id. at 365. We did not, however, decide how the liability would be distributed between the two insurance policies. Id. at 366. Instead, we determined that once limiting language is read out ... the two policies then must be compared pursuant to traditional state insurance and contract law principles to determine how liability should be allocated among the insurers. Id. at 368. We have applied the Empire Fire reasoning in several later cases. See Campbell v. Bartlett, 975 F.2d 1569, 1581 (10th Cir.1992); Budd v. Am. Excess Ins. Co., 928 F.2d 344, 347 (10th Cir.1991); Railhead Freight Sys. v. U.S. Fire Ins. Co., 924 F.2d 994, 995 (10th Cir.1991). More recently, in Adams v. Royal Indemnity Co., we addressed circumstances where no insurance policy, solely by its terms, extended to provide liability insurance coverage for a motor carrier's negligence. 99 F.3d 964 (10th Cir.1996). The injured party, Adams, was unsuccessful in collecting a judgment of approximately $1 million against the driver. Id. at 965. He then sued Royal Indemnity, which had issued two insurance policies: one to the lessee of the trailer involved in the accident and one to the partnership that owned the trailer. Id. Both policies contained MCS-90 endorsements. Id. We concluded that although neither policy provided insurance coverage for the accident, the lessee's policyby operation of the MCS-90 endorsementextended to make Royal liable for Adams's unsatisfied judgment. Id. at 970-71. Several insights regarding the MCS-90's purpose and operation were key to this conclusion. First, we noted that the ICC endorsement is designed to require ICC-certified carriers to insure against public liability for all their motor vehicles and that [b]y requiring ... this ICC endorsement, the ICC prevents the possibility that, through inadvertence or otherwise, some vehicles may be left off a policy to the detriment of the public. Id. at 968. Second, while the MCS-90 endorsement does not explicitly define insured, we concluded it indirectly modified the lessee's policy with Royal so the term extended to the trailer and driver involved in Adams's accident. Adams, 99 F.3d at 970. Finally, we acknowledged the endorsement is not intended to preclude insurers and carriers or multiple insurers from contractually apportioning ultimate liability among themselves, id. at 969, and most importantly, [i]n situations where the policy absent the endorsement did not insure the vehicle which caused the injuries, the endorsement explicitly requires that the insured reimburse the insurer because the insurer's payment to the injured motorist is a `payment the company would not have been obligated to make under the provisions of the policy except for the agreement contained in this endorsement,' id. at 972 (quoting the mandatory language of the endorsement). Thus, we concluded the public is protected by insurance and ultimate responsibility rests on the truckers, all as mandated by Congress and the [FMCSA]. Id. (emphasis added). As noted below, our Adams approach is in accord with the majority view. But, our analysis under Empire Fire  which, as discussed above, involved a slightly different factual scenariohas fallen into disfavor. Specifically, other courts have disagreed with our conclusion in Empire Fire that if an insurance policy with an attached MCS-90 endorsement provides coverage for a motor carrier's accident, the MCS-90 endorsement operates to read out any limiting provisions to make such an insurer a primary insurer, although not necessarily the only one. Under this approach, an insurer may be forced to indemnify the motor carrier for its negligence to a greater extent than it bargained for and without a right to reimbursement from another primary insurer.