Court Opinion

ID: 4655187
Source: CourtListenerOpinion
Date Created: 2021-01-28 01:00:27.329383+00
Date Added: 2024-06-11T07:59:20.330757
License: Public Domain

Case: 20-60188    Document: 00515722480       Page: 1    Date Filed: 01/27/2021

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

                                                                         FILED
                                                                  January 27, 2021
                              No. 20-60188                          Lyle W. Cayce
                          consolidated with                              Clerk
                              No. 20-60263

   Big Binder Express, L.L.C.; Raymond Goodlin,

                                                        Plaintiffs—Appellees,

                                    versus

   Liberty Mutual Fire Insurance Company,

                                                     Defendant—Appellant,

                                    versus

   Darling Ingredients, Incorporated,

                                                        Intervenor—Appellee.

                 Appeal from the United States District Court
                   for the Northern District of Mississippi
                           USDC No. 3:19-CV-22

   Before Haynes, Duncan, and Engelhardt, Circuit Judges.
Case: 20-60188     Document: 00515722480         Page: 2     Date Filed: 01/27/2021

                                    No. 20-60188
                                  c/w No. 20-60263

   Per Curiam:*
          In this insurance coverage case, the district court granted summary
   judgment in favor of the insureds—Big Binder Express, L.L.C. (“Big
   Binder”), Raymond Goodlin (a Big Binder employee), and Darling
   Ingredients, Inc. (“Darling”). For the reasons below, we VACATE and
   REMAND for the district court to enter a judgment consistent herewith.

                                     Background

          This lawsuit stems from an automobile accident on May 14, 2018,
   between a vehicle driven by Goodlin, acting within the course and scope of
   his employment at Big Binder, and another vehicle carrying five individuals.
   Goodlin was driving a tractor with an attached trailer; the tractor was owned
   by Tri-State Idealease, Inc. and leased to Big Binder, and the trailer was
   owned by Darling and leased to Big Binder. Later that year, two of the five
   passengers in the other vehicle filed personal injury lawsuits (the
   “Underlying Lawsuits”).       Both lawsuits alleged that Goodlin acted
   negligently and that Big Binder and Darling were also negligent because
   Goodlin was acting as their employee when the accident occurred.
          At the time of the accident, Big Binder had commercial auto and
   commercial general liability coverage from Northland Insurance Company
   (“Northland”) and Darling had coverage from Liberty Mutual Fire
   Insurance Company (“Liberty Mutual”). Northland’s insurance policy (the
   “Northland Policy”) provided auto liability coverage of $1 million per
   accident. Liberty Mutual’s insurance policy (the “Liberty Mutual Policy”),
   bearing Policy No. AS2-681-025265-017, included three documents relevant
   to this appeal: (1) the Policy Declarations, which limited auto liability
   coverage to $2 million per accident; (2) a Business Auto Coverage Form,

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.

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                                    No. 20-60188
                                  c/w No. 20-60263

   which explained the coverage for automobiles under the Liberty Mutual
   Policy; and (3) a Deductible Endorsement.
          In resolving the Underlying Lawsuit, Northland provided a defense to
   Big Binder and Goodlin. Liberty Mutual provided coverage to Darling and
   to Big Binder and Goodlin as additional insureds to the Liberty Mutual
   Policy. In providing coverage, Liberty Mutual contended that the Liberty
   Mutual Policy limited liability coverage to $2 million, Big Binder and Goodlin
   were responsible for the $1 million deductible in the Deductible
   Endorsement, and tender of Northland’s liability limit of $1 million would
   not satisfy the deductible.     Liberty Mutual’s assertions regarding its
   Deductible Endorsement resulted in this lawsuit. The relevant portion of the
   Deductible Endorsement provides:

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                                         No. 20-60188
                                       c/w No. 20-60263

           In February 2019, Big Binder and Goodlin (collectively, in the context
   of this lawsuit, “Big Binder”) sued Liberty Mutual 1 in federal district court,
   seeking a declaratory judgment that the Deductible Endorsement is
   unenforceable because it left the “Applicable Policies” section of the
   endorsement blank, such that the plain and unambiguous language of the
   endorsement provided for no applicable deductible. Alternatively, if the
   Deductible Endorsement were enforceable, Big Binder sought a declaratory
   judgment that the Deductible Endorsement did not apply to them because
   they were not named insureds or, in any event, that Northland’s payment of
   $1 million would satisfy Liberty Mutual’s deductible requirement.
           Darling intervened, agreeing with Big Binder that the Deductible
   Endorsement provides for no applicable deductible. Each party then moved
   for summary judgment. At the same time, the parties in the Underlying
   Lawsuits settled. Northland agreed to contribute its $1 million limit to settle
   the claims in the Underlying Lawsuit, and Liberty Mutual agreed to front the
   $1 million deductible on behalf of the insureds. The district court granted
   summary judgment in favor of the insureds, holding that the Deductible
   Endorsement was not enforceable as written. Therefore, the district court
   held that Liberty Mutual could not recoup the $1 million deductible that
   Liberty Mutual advanced and that the alternate arguments advanced by the
   insureds were moot. Liberty Mutual timely appealed.

           1
            Big Binder also sued the Underlying Lawsuit plaintiffs but its claims against those
   individuals were dismissed with prejudice.

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                                         No. 20-60188
                                       c/w No. 20-60263

                             Jurisdiction & Standard of Review

           The district court had diversity jurisdiction under 28 U.S.C. § 1332.
   We have jurisdiction over the district court’s final decision under 28 U.S.C.
   § 1291. 2
           We review de novo the interpretation of an insurance contract and a
   district court’s rulings on cross motions for summary judgment. Evanston
   Ins. Co. v. Mid-Continent Cas. Co., 909 F.3d 143, 146 (5th Cir. 2018).
   Summary judgment is appropriate only “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).

                                           Discussion

           The central issue on appeal is the proper interpretation of the
   Deductible Endorsement: namely, whether the Deductible Endorsement
   (which contains a blank after “Applicable Policies”) applies to the Liberty
   Mutual Policy. Concluding that it does, we are then presented with alternate
   arguments for why Liberty Mutual is not entitled to recover the $1 million
   deductible from the insureds. Considering those alternate arguments, we
   hold that Liberty Mutual is not entitled to recoup the deductible from Big
   Binder but is entitled to recoup it from Darling.
           In addressing these issues, we apply Texas substantive law of contract
   interpretation, which the parties agree governs this diversity action. Under
   Texas law, courts use ordinary rules of contract interpretation to construe
   insurance policies. Nassar v. Liberty Mut. Fire Ins. Co., 508 S.W.3d 254, 257

           2
             The only remaining issue before the district court in this case is Darling’s claim
   for attorney’s fees, but that issue does not prevent the merits judgment from becoming final
   for purposes of appeal. Ray Haluch Gravel Co. v. Cent. Pension Fund of Int’l Union of
   Operating Eng’rs & Participating Emps., 571 U.S. 177, 179 (2014).

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                                    No. 20-60188
                                  c/w No. 20-60263

   (Tex. 2017) (per curiam). In doing so, courts “examine the entire agreement
   and seek to harmonize and give effect to all provisions so that none will be
   meaningless.” Id. at 258 (quotation omitted). Therefore, “no one phrase,
   sentence, or section of a contract should be isolated from its setting and
   considered apart from the other provisions.” Id. (internal brackets and
   quotation omitted). In other words, if a policy includes an endorsement, that
   “endorsement cannot be read apart from the main policy, and the added
   provisions will supersede the previous policy terms to the extent they are
   truly in conflict.” Primrose Operating Co. v. Nat’l Am. Ins. Co., 382 F.3d 546,
   558 (5th Cir. 2004) (internal quotation marks and citation omitted); accord
   Mesa Operating Co. v. Cal. Union Ins. Co., 986 S.W.2d 749, 754 (Tex. App.—
   Dallas 1999, pet. denied).
          All words and phrases are given their “ordinary and generally
   accepted meaning,” unless the policy dictates otherwise.          Nassar, 508
   S.W.3d at 258 (internal quotation marks and citation omitted). If only one
   party’s interpretation of the insurance policy is reasonable, then the policy is
   deemed unambiguous and that reasonable interpretation is adopted. Id.
   Accordingly, a policy is not ambiguous simply because the parties advance
   conflicting interpretations—the policy must “genuinely” be susceptible to
   “more than one meaning.” Id. Only then is the policy ambiguous such that
   a court must adopt the interpretation that most favors the insured. Id.
   Applying these rules of contract interpretation, we address the merits.

          Interpretation of the Deductible Endorsement

          Liberty Mutual argues that, despite the blank after the “Applicable
   Policies” header in the Deductible Endorsement, the endorsement
   unambiguously applies to the Liberty Mutual Policy. We agree. The text of
   the Deductible Endorsement and the Liberty Mutual Policy unambiguously

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                                     No. 20-60188
                                   c/w No. 20-60263

   establish that the Deductible Endorsement applies to the Liberty Mutual
   Policy.
             When an insurance policy leaves a provision blank, Texas courts
   generally look to other parts of the policy to determine the provision’s
   applicability. See U.S. Fire Ins. Co. v. Scottsdale Ins. Co., 264 S.W.3d 160, 173
   (Tex. App.—Dallas 2008, no pet.) (consulting a different page of an
   insurance policy to determine an endorsement’s application where the
   endorsement form stated, “This endorsement modifies insurance provided
   under the following:” but left ‘the following’ blank); Austin Road Co. v. Hous.
   Gen. Ins. Co., No. 05-91-00153-CV, 1992 WL 94595, at *4 (Tex. App.—
   Dallas May 7, 1992, writ denied) (not designated for publication) (referring
   to other parts of the insurance policy to determine the operations to which an
   endorsement applied, where the endorsement left blank the applicable
   operations section); Woods v. Am. Nat’l Ins. Co., No. 01-11-00378-CV, 2012
   WL 5295298, at *3 (Tex. App.—Houston [1st Dist.] Oct. 25, 2012, no pet.)
   (holding that the termination date of an insurance policy, which was left
   blank, could be determined from the policy’s effective date and its term);
   3109 Props, L.L.C. v. Truck Ins. Exch., No. 03-13-00350-CV, 2015 WL
   3827580, at *2 (Tex. App.—Austin June 18, 2015, pet. denied) (holding that
   the “Location of Premises,” left blank in an insurance policy, could
   nonetheless be determined from a separate page of the policy providing an
   address in the “Description of Premises”).
             Here, the Deductible Endorsement left the space following the
   “Applicable Policies” section blank. Even so, the endorsement includes the
   Liberty Mutual Policy’s identifying number and issuer (at the top of the
   page), as well as the deductible amount and the coverage (the “BUSINESS
   AUTO COVERAGE FORM”) that it modifies.                    The Business Auto
   Coverage Form states that bodily injury liability is limited to the amount
   listed in the Policy Declarations. In turn, the Policy Declarations (which

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                                         No. 20-60188
                                       c/w No. 20-60263

   include the same policy number identified in the Deductible Endorsement
   and state that it applies to the Business Auto Coverage Form) limit liability
   to $2 million. Taken altogether, the $1 million deductible in the Deductible
   Endorsement unambiguously modifies the $2 million liability limit of the
   Policy Declarations that applies to the Business Auto Coverage Form.
           The insureds’ position—that the Deductible Endorsement does not
   apply to the Liberty Mutual Policy—contravenes two of Texas’s cardinal
   rules of insurance contract interpretation: that (1) “an endorsement cannot
   be read apart from the main policy,” Mesa Operating, 986 S.W.2d at 754; and
   (2) policies should be interpreted to “give effect to all provisions so that none
   will be meaningless,” Nassar, 508 S.W.3d at 258 (internal quotation marks
   and citation omitted). By refusing to look at anything besides the blank space
   in the Deductible Endorsement, the insureds ignore the first rule. 3 More
   significantly, the insureds’ interpretation would render the entire Deductible
   Endorsement meaningless (disregarding the second rule) because the only
   thing that the Deductible Endorsement does is add a deductible. It is thus
   unreasonable for an insured that agreed to an endorsement to think that the

           3
             Darling makes two arguments for why we should not consider other parts of the
   Deductible Endorsement. Both lack merit. First, Darling contends that the policy number
   at the top of the Deductible Endorsement is simply a “stamp[]” intended to confirm that
   the endorsement is part of the Liberty Mutual Policy. Even if that were true, Darling
   neglects the fact that the Deductible Endorsement states that it modifies the Business Auto
   Coverage Form, to which the Policy Declarations’ auto liability limit applies. Second,
   Darling argues that the Deductible Endorsement’s statements that “this endorsement
   changes the policy” and “modifies insurance” are state-law-required disclaimers that did
   not substantively change coverage. See TEX. INS. CODE ANN. § 2002.001. Texas case
   law holds to the contrary. See, e.g., Primrose Operating, 382 F.3d at 558–59 (recognizing
   that an endorsement which provided that it “modifies insurance provided under the
   following: COMMERCIAL GENERAL LIABILITY COVERAGE FORM” modified that
   form of the policy); RSUI Indem. Co. v. Lynd Co., 466 S.W.3d 113, 121–22 (Tex. 2015)
   (holding that an endorsement that included the required language changed the policy).

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                                         No. 20-60188
                                       c/w No. 20-60263

   endorsement has no effect; it begs the question of why an insurer would
   include an endorsement in the first place.
             We hold that the Deductible Endorsement unambiguously applies to
   the Liberty Mutual Policy. 4 Having addressed that issue, we turn to address
   the insureds’ alternate arguments for why the endorsement does not apply to
   them. 5

             Alternate Arguments

             Big Binder argues that the Deductible Endorsement cannot be
   enforced against Big Binder and Goodlin because they are merely “additional
   insureds.” 6 It contends that the reference to “You” in the Deductible
   Endorsement refers to the Named Insured (that is, Darling) and therefore
   cannot apply to any other party. We agree.
             The Deductible Endorsement imposes obligations on only “you,”
   which is defined on the first page of the Business Auto Coverage Form: “the
   words ‘you’ and ‘your’ refer to the Named Insured shown in the
   Declarations.” The Policy Declarations, in turn, identify the Named Insured

             4
            Because we hold in favor of Liberty Mutual’s interpretation on the face of the
   Deductible Endorsement and Liberty Mutual Policy, we need not address whether it is
   appropriate to consider Liberty Mutual’s proffered extrinsic evidence when interpreting
   the Deductible Endorsement.
             5
             Although the district court held that the insureds’ alternate arguments were moot
   and did not consider them, we may address the merits of these arguments in the first
   instance because the questions are purely legal and “the proper resolution is beyond any
   doubt.” Singleton v. Wulff, 428 U.S. 106, 121 (1976); see also Callejo v. Bancomer, S.A., 764
   F.2d 1101, 1112 n.11 (5th Cir. 1985) (addressing an issue in the first instance when it was
   fully argued by both sides in district court and on appeal and its resolution did not depend
   on any disputed issue of fact).
             6
             An “additional insured” is “a party protected under an insurance policy, but who
   is not named within the policy.” W. Indem. Ins. Co. v. Am. Physicians Ins. Exch., 950 S.W.2d
   185, 188 (Tex. App.—Austin 1997, no writ).

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                                         No. 20-60188
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   as Darling. Therefore, under Texas’s rules of contract interpretation, “you”
   refers to only Darling. See Nassar, 508 S.W.3d at 258 (stating that Texas’s
   rules of contract interpretation give words in an insurance policy their
   “ordinary and generally accepted meaning,” unless the policy dictates
   otherwise (internal quotation marks and citation omitted)); Verhoev v.
   Progressive Cnty. Mut. Ins. Co., 300 S.W.3d 803, 809 (Tex. App.—Fort Worth
   2009, no pet.) (noting that because an insurance policy defined “you” as
   “the ‘named insured,’” “you” in the policy referred to either of the two
   individuals identified as “named insured” in the policy). We thus hold that
   the Deductible Endorsement does not apply to Big Binder or Goodlin. 7
           That leaves only Darling subject to the Deductible Endorsement.
   Darling nonetheless argues that the Deductible Endorsement does not
   obligate it to pay the $1 million deductible that Liberty Mutual fronted in the
   settlement agreement because the deductible’s application to “damages”
   excludes payments made under a settlement agreement. In so arguing,
   Darling contends that “damages” refers only to the judicial award of money
   following a liability determination—a definition that would exclude
   settlement payments.          But Darling provides no support for its narrow
   definition. Nor do we find any. Black’s Law Dictionary broadly defines
   “damages” as the “sum of money adjudged to be paid . . . as compensation”
   or to “which a person wronged is entitled to receive.” Damages, BLACK’S
   LAW DICTIONARY (11th ed. 2019). Further, courts routinely describe
   settlements as including money for “damages.” 8 More importantly, the

           7
              Because we hold in favor of Big Binder on this issue, we need not, and do not,
   address Big Binder’s other alternate argument that Northland’s payment of $1 million
   satisfied Liberty Mutual’s deductible.
           8
            See, e.g., Certain Underwriters at Lloyd’s, London v. Oryx Energy Co., 203 F.3d 898,
   901 (5th Cir. 2000) (per curiam) (resolving whether a settlement included punitive as well
   as compensatory damages); Am. Guarantee & Liab. Ins. Co. v. U.S. Fire Ins. Co., 255 F.

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                                        No. 20-60188
                                      c/w No. 20-60263

   Liberty Mutual Policy itself anticipates it will apply to settlement payments;
   it affirmatively states that Liberty Mutual “may . . . settle any claim or
   ‘suit’” that “seek[s] damages for ‘bodily injury’ or ‘property damage’” to
   which the Liberty Mutual Policy applies. Darling’s argument that the
   Deductible Endorsement’s application to “damages” excludes settlement
   payments thus lacks merit. We hold that Darling is obligated to pay the $1
   million deductible that Liberty Mutual fronted in the settlement agreement. 9

                                          Conclusion

           We hold that the Deductible Endorsement unambiguously applies to
   the Liberty Mutual Policy. Although we hold that Big Binder and Goodlin—
   as added insureds—are not subject to the Deductible Endorsement and
   therefore not obligated to pay the $1 million deductible, we hold that Darling
   is obligated to pay it. Accordingly, we VACATE the district court’s
   judgment and REMAND to enter a judgment consistent with this opinion.

   Supp. 3d 677, 689–90 (S.D. Tex. 2017) (noting that a settlement included money for mold
   damages); Ortiz v. Great S. Fire & Cas. Ins. Co., 597 S.W.2d 342, 344 (Tex. 1980)
   (acknowledging that a settlement agreement may compensate for damages).
           9
             Because we hold that the settlement payment was one for “damages,” we need
   not, and do not, address Darling’s argument that the settlement payment was not one for a
   “loss” under the Deductible Endorsement.

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