Court Opinion

ID: 9353766
Source: CourtListenerOpinion
Date Created: 2023-01-12 19:01:09.074687+00
Date Added: 2024-06-11T17:11:40.038135
License: Public Domain

Case: 22-60283        Document: 00516608476             Page: 1      Date Filed: 01/12/2023

             United States Court of Appeals
                  for the Fifth Circuit
                                                                                United States Court of Appeals
                                                                                         Fifth Circuit

                                                                                       FILED
                                                                                 January 12, 2023
                                       No. 22-60283                                  Lyle W. Cayce
                                                                                          Clerk

   Wesco Insurance Company,

                                                                     Plaintiff—Appellee,

                                            versus

   Edward Eugene Rich, as wrongful death beneficiary of LaDonna C.
   Rich, Deceased; Edward Shayne Rich, as wrongful death
   beneficiary of LaDonna C. Rich, Deceased,

                                                               Defendants—Appellants.

                     Appeal from the United States District Court
                       for the Southern District of Mississippi
                               USDC No. 1:20-CV-305

   Before Stewart, Willett, and Oldham, Circuit Judges.
   Per Curiam:*
         The parties here—an insurer and tort claimants—dispute the
   insurer’s maximum theoretical liability under a surety agreement. By
   separate agreement, the insurer has committed that it “will pay” whatever

         *
             This opinion is not designated for publication. See 5th Cir. R. 47.5.
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                                     No. 22-60283

   amount we identify as the surety agreement’s upper limit. We conclude that
   the surety agreement caps liability at $750,000, and we therefore AFFIRM.
                                           I
          This appeal concerns an “MCS-90” surety endorsement that Wesco
   Insurance Company included with a liability-insurance policy that it issued
   to Sam Freight Solutions, LLC. The policy provides up to $1,000,000 in
   insurance coverage for a specific “covered auto,” a 2012 Volvo Tractor (and
   certain trailers attached thereto). The MCS-90 surety endorsement, on the
   other hand, is a policy endorsement by which Wesco assumed up to
   “$750,000” in liability for “any final judgment recovered against [Sam
   Freight] for public liability resulting from negligence in the operation” of any
   vehicle. The MCS-90 endorsement is not insurance. Instead, it “creates a
   suretyship, which obligates an insurer to pay certain judgments against the
   insured . . . , even though the insurance contract would have otherwise
   excluded coverage.” Canal Ins. Co. v. Coleman, 625 F.3d 244, 247 (5th Cir.
   2010); see 49 C.F.R. §§ 387.3; 387.7.
          On July 29, 2018, LaDonna Rich died in an automobile collision
   involving a 2010 Freightliner. The Defendants–Appellants are her
   beneficiaries, and they filed a wrongful-death suit against Sam Freight in
   Mississippi state court. The insurance policy (as distinct from the MCS-90
   surety endorsement) that Sam Freight purchased from Wesco does not name
   the 2010 Freightliner as a covered auto. Therefore, that policy does not
   independently offer coverage for the collision.
          While the state-court action was pending, Wesco filed this federal
   diversity suit seeking declaratory relief against the Beneficiaries (and others).
   The parties and issues in the federal proceeding narrowed until only Wesco
   and the Beneficiaries remained, with just one dispute between them: “the
   amount of coverage that the MCS-90 endorsement would provide in the

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                                    No. 22-60283

   event of a judgment against Sam Freight.” The Beneficiaries argued that the
   MCS-90 endorsement would provide up to $1,000,000 in coverage, while
   Wesco argued that $750,000 would be the maximum available amount. Both
   parties sought summary judgment on that sole remaining issue.
          The district court granted summary judgment for Wesco, declaring
   that “[t]he MCS-90 endorsement unambiguously provides that Wesco shall
   not be liable for amounts in excess of $750,000.” The district court denied
   the Beneficiaries’ motions for reconsideration. This appeal timely followed.
   While this appeal was pending, the parties reached a settlement agreement
   under which Wesco agreed that it “will pay” whichever of the two amounts
   we determine the surety agreement to require.
                                         II
                                         A
          As an initial matter, we have jurisdiction only if this case presents an
   actual “case or controversy.” U.S. Const. art. III; see DaimlerChrysler
   Corp. v. Cuno, 547 U.S. 332, 340 (2006). The “case or controversy”
   requirement prevents us from “advising what the law would be upon a
   hypothetical state of facts.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118,
   127 (2007) (internal quotation marks omitted). Ripeness is one aspect of this
   requirement. See generally Abbott Labs. v. Gardner, 387 U.S. 136 (1967). A
   declaratory action is ripe if “there is a substantial controversy, between
   parties having adverse legal interests, of sufficient immediacy and reality to
   warrant the issuance of a declaratory judgment.” MedImmune, 549 U.S. at
   127 (internal quotation marks omitted). “Whether particular facts are
   sufficiently immediate to establish an actual controversy is a question that
   must be addressed on a case-by-case basis.” Orix Credit All., Inc. v. Wolfe,
   212 F.3d 891, 896 (5th Cir. 2000).

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                                    No. 22-60283

          Wesco and the Beneficiaries have adverse legal interests in a
   substantial controversy that amounts to $250,000 (the difference between
   $750,000 and $1,000,000). Resolving that controversy involves only the
   “purely legal” interpretation of the policy and the endorsement; no “further
   factual development is required.” New Orleans Pub. Serv., Inc. v. Council of
   New Orleans, 833 F.2d 583, 587 (5th Cir. 1987). The controversy is real and
   immediate because Wesco has agreed to pay whatever sum we determine that
   the surety endorsement requires. At present, then, this case is ripe. That
   being true, we need not consider whether the case was ripe when the district
   court issued its judgment. See DM Arbor Court, Ltd. v. City of Houston, 988
   F.3d 215, 219–20 (5th Cir. 2021).
                                         B
          The MCS-90 is a “federally mandated” endorsement. Canal Ins. Co.,
   625 F.3d at 246. “The operation and effect of a federally mandated
   endorsement is a matter of federal law.” Lincoln Gen. Ins. Co. v. De La Luz
   Garcia, 501 F.3d 436, 439 (5th Cir. 2007); see Minter v. Great Am. Ins. Co. of
   New York, 423 F.3d 460, 470 (5th Cir. 2005) (“Interpretation of th[e MCS-
   90] endorsement is governed by federal law.”). Our analysis focuses on “the
   plain language of the endorsement.” Canal Ins. Co., 625 F.3d at 250. To the
   extent that Mississippi substantive law governs any residual questions, such
   as those regarding only the policy, “construction of an insurance policy [is] a
   question of law, which we review de novo.” State Farm Mut. Auto. Ins. Co. v.
   LogistiCare Sols., LLC, 751 F.3d 684, 688 (5th Cir. 2014) (emphasis omitted)
   (quoting Farmland Mut. Ins. Co. v. Scruggs, 886 So.2d 714, 717 (Miss. 2004)).
          The insurance policy offers “coverage” of up to “$1,000,000 per
   accident,” but only for “covered autos.” The parties agree that the 2010
   Freightliner is not a “covered auto” under the insurance policy’s definition
   of that term.

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                                      No. 22-60283

          By contrast, the MCS-90 endorsement makes Wesco “liable,” as a
   surety, for up to “$750,000 for each accident.” The endorsement applies
   “regardless of whether or not each motor vehicle is specifically described in
   the policy.” The MCS-90 consists of a fill-in-the-blank form that provides
   spaces for the parties to identify, among other things: the insurer’s name, the
   insuree for whom the insurer is acting as surety, and the policy number that
   the endorsement supplements. There is also a blank space for filling in the
   insurer’s maximum suretyship liability. In this case, the following amount
   appears in that blank space: “[T]he company shall not be liable for amounts
   in excess of $750,000 for each accident.” Thus, according to the district
   court’s summary, Wesco agreed to provide $1 million in insurance coverage
   for Sam Freight’s covered autos, but only $750,000 in public liability
   coverage for all other vehicles.
          The Beneficiaries disagree. According to them: “[T]he blank space is
   supposed to be filled in to reflect the amount of coverage that was purchased
   by the insured”—that is, $1,000,000, not $750,000. The Beneficiaries offer
   several overlapping arguments to establish that crucial premise. None
   succeed. The Beneficiaries begin by urging that “the $750,000.00 is a fiction
   that never existed” because “[t]he insurance company did not have the
   authority to unilaterally change the coverage.” This isn’t so much an
   argument as it is a restatement of the crucial premise. The number that
   appears in the blank space ($750,000) is a “change” only if the Beneficiaries
   are otherwise correct that the MCS-90 and the insurance policy must have
   identical coverage limits. The “unilateral[] change” argument might have
   force if that premise were correct, but the argument itself cannot prove the
   underlying premise.
          The Beneficiaries next posit a proof in our precedent. We have noted,
   for example, that the MCS-90 “accomplishes its purpose by reading out [of
   the insurance policy] only those clauses in the policy that would limit the

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                                      No. 22-60283

   ability of a third party victim to recover for his loss.” T.H.E. Ins. Co. v. Larsen
   Intermodal Servs., Inc., 242 F.3d 667, 673 (5th Cir. 2001). According to the
   Beneficiaries, this means that Wesco cannot “read[] out”—that is,
   replace—the policy limit with the surety limit. This argument, too, fails for
   circularity. If the surety endorsement is a separate agreement with a separate
   monetary limit, then both limits can coexist in separate amounts. The
   Beneficiaries’ offer a contrary premise—that the two limits must be in
   matching amounts. But once again, while the Beneficiaries’ argument does
   depend on that premise, it does not prove the premise.
          At root, the Beneficiaries’ real argument is that the district court erred
   by “treat[ing] the insurance policy and the endorsement as if they were
   separate standalone documents.” We disagree. The MCS-90, for instance,
   contains the following language: “In consideration of the premium stated in
   the policy to which this endorsement is attached, the insurer (the company)
   agrees to pay, within the limits of liability described herein, any final judgment
   recovered against [Sam Freight] . . . .” This language sets up an unambiguous
   distinction between the policy (on one hand) and the endorsement (on the
   other). Likewise, the words “this endorsement” show that the liability limit
   described “herein” is the limit that appears in the endorsement, not the
   policy. Neither the policy nor the endorsement requires Wesco to provide
   suretyship liability in the exact same amount that it offers insurance coverage.
                                          III
          The MCS-90’s plain text limits Wesco’s suretyship liability to
   $750,000. We therefore AFFIRM.

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