Court Opinion

ID: 9349325
Source: CourtListenerOpinion
Date Created: 2022-12-21 19:00:49.419398+00
Date Added: 2024-06-11T16:46:36.043328
License: Public Domain

Case: 21-40846     Document: 00516585720         Page: 1     Date Filed: 12/21/2022

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

                                                                               FILED
                                                                       December 21, 2022
                                  No. 21-40846                            Lyle W. Cayce
                                                                               Clerk

   National Liability & Fire Insurance Company,

                                                             Plaintiff—Appellee,

                                       versus

   Riata Cattle Company, Incorporated, also known as
   Riata Cattle Co.,

                                                         Defendant—Appellant.

                  Appeal from the United States District Court
                      for the Southern District of Texas
                            USDC No. 7:20-CV-234

   Before Graves, Willett, and Engelhardt, Circuit Judges.
   James E. Graves, Jr., Circuit Judge:
          This insurance coverage dispute arises from underlying litigation in a
   single vehicle accident that led to a lawsuit by Joshua Ochoa against his
   employer, Riata Cattle Company, Inc. (“Riata”). Ochoa sued Riata in Texas
   state court alleging that he suffered bodily injury when Riata’s truck, which
   he was driving, malfunctioned and crashed due to Riata’s failure to repair and
   maintain it. Ochoa also alleged that Riata committed negligence and gross
   negligence by failing to provide him with safe equipment, failing to warn him
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   of any dangers, failing to inspect or repair the equipment, and other
   negligence theories.
          Riata sought coverage defense from its auto liability insurer, National
   Liability & Fire Insurance Company (“National Liability”), which is
   currently defending Riata in the underlying litigation under a reservation of
   rights letter. National Liability subsequently filed a declaratory judgment
   action in federal court, seeking a determination that it owes Riata neither a
   defense nor indemnity under the insurance policy (the “Policy”). National
   Liability contends it is entitled to a declaratory judgment because the Policy
   excludes coverage for employees of Riata. Riata seems to concede this
   argument but contends that the “Form F” endorsement on the Policy
   compels National Liability to defend and indemnify Riata. Because it does
   not, we AFFIRM.
                          Procedural Background
          On August 5, 2021, the district court judge conducted a hearing during
   which he expressed agreement with National Liability’s summary judgment
   arguments. The court, however, encouraged the parties to settle the case,
   stating that he had “indicated what I thought if I had to rule on a Motion for
   Summary [Judgment], where I would go[,]” but made clear that this
   statement was not a ruling. Specifically, the district court judge stated that if
   the parties fail to have successful settlement discussions “we’ll just set it for
   a hearing for me to rule on this, okay?”
          When the parties did not reach a settlement, the district court held a
   status conference on October 7, 2021, and granted National Liability’s
   summary judgment motion. Ruling from the bench, the court stated:
                 it would appear to the Court that the Plaintiff is
                 entitled to judgment in this matter. It would
                 appear to the Court, because there is the

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                 exclusion with regards to employees, it would
                 also be unclear to me that there would be
                 anything in Form F that would change that.
                 Therefore, the Court is going to grant judgment
                 for the Plaintiff in this case.
   Six days later, the district court issued a one-page judgment granting National
   Liability’s Motion for Summary Judgment, deciding that National Liability
   “owes no duty to defend or indemnify [Riata], or duty to pay any judgment
   to Defendant Joshua Ochoa in, or for any claims related to [the pending state
   court claim].” The district court did not further articulate its reasoning in
   writing but stated that the Motion for Summary Judgment “should be
   GRANTED for the reasons stated on the record.”
                            Standard of Review
          We review de novo a district court’s grant of summary judgment.
   Aguirre v. City of San Antonio, 995 F.3d 395, 405 (5th Cir. 2021). Summary
   judgment is proper “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). “Only disputes over facts that might affect
   the outcome of the suit under the governing law will properly preclude the
   entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
   248 (1986). We may affirm on any grounds supported by the record and
   presented to the district court. Hernandez v. Velasquez, 522 F.3d 556, 560 (5th
   Cir. 2008).
                                  Discussion
          The district court made two rulings: (1) the Policy provides an
   exclusion with regard to the lawsuit brought by Riata’s employee, Ochoa; and
   (2) the Form F endorsement does not change that exclusion. The district
   court came to this conclusion because “it couldn’t be clearer in the insurance
   policy . . . [that the employee is] not covered.” As for Form F, the district

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   court rested its decision on the fact that “Form F’s supposed to protect the
   public from injuries caused by - - and is this really the public that is doing
   business with them? No, it’s their employee.”
          Under the exclusion section of the Policy, coverage does not apply to
   an “‘[e]mployee’ of the ‘insured’ arising out of any course of: (1)
   employment by the ‘insured’ or (2) performing the duties related to the
   conduct of the ‘insured’s’ business.” An “‘[e]mployee’ includes a ‘leased
   worker,’ but does not include a ‘temporary worker.’” A leased worker is not
   relevant for this case, and a “temporary worker” is defined as “a person who
   is furnished to you to substitute for a permanent ‘employee’ on leave or to
   meet seasonal or short-term workload conditions.” During oral argument,
   Riata’s counsel referenced the “temporary worker” exclusion to the
   employee exclusion but could not explain whether Ochoa was a temporary
   employee or not. More importantly, Riata did not allege that Ochoa was a
   temporary employee in the district court or in its appellate brief. In the
   underlying litigation, Ochoa alleged that he “was working in the course and
   scope of his employment with Defendant when he sustained serious and
   permanent injuries when the tractor trailer rig Defendant owned and
   provided to Plaintiff to drive, malfunctioned and caused a crash.” Therefore,
   it is undisputed that Ochoa is Riata’s employee and Riata is excluded from
   coverage under the Policy.
          Riata contends that the finding that Ochoa is its employee is not the
   end of the analysis. Specifically, Riata claims that the Form F endorsement
   “overrides exclusions in the underlying policy to provide an independent
   duty to defend[.]” Form F provides, in part,
                 [t]he certification of the policy, as proof of
                 financial responsibility under the provisions of
                 any state motor carrier law or regulation
                 promulgated by any state commission having

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                 jurisdiction with respect thereto, amends the
                 policy to provide insurance for automobile bodily
                 injury and property damage liability in
                 accordance with the provisions of such law or
                 regulations to the extent of the coverage and
                 limits of liability required thereby; provided only
                 that the insured agrees to reimburse the
                 company for any payment made by the company
                 which it would not have been obligated to make
                 under the terms of this policy except by reason of
                 the obligation assumed in making such
                 certification.
   Like other boilerplate insurance endorsements, Form F is included in many
   insurance policies. In this case, however, “[o]ne must refer to Texas law to
   know what Form F means; otherwise, the form does nothing. The form is the
   product of Texas’ regulation of motor carriers.” Canal Indem. Co. v. Williams
   Logging & Tree Servs., Inc., 714 F. Supp. 2d 654, 656 (S.D. Tex. 2010).
          Form F is a statutorily required proof of insurance. Tex. Transp.
   Code § 643.103. On its face, Form F does not guarantee anything. It exists
   to certify the policy as required by applicable regulations. Texas
   Transportation Code § 643.103 provides that “[a] motor carrier that is
   required to register under Subchapter B must file with the [Texas
   Department of Motor Vehicles (“TxDMV”)] evidence of insurance . . . or
   evidence of financial responsibility . . . in a form prescribed by the
   [TxDMV].” The form prescribed by the TxDMV refers to Texas
   Transportation Code § 643.051, which provides, in part, that “a motor
   carrier may not operate a commercial motor vehicle . . . on a road or highway
   of this state unless the carrier registers with the [TxDMV] under this
   subchapter.” These regulations require insurers to file Form F with the
   TxDMV. Under Texas law, Form F “protects third parties against the
   possibility that a motor carrier will be underinsured with regard to the

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   requirements of state or federal law.” Lancer Ins. Co. v. Shelton, 245 F. App’x
   355, 357 (5th Cir. 2007). And these regulations—which are designed to
   protect the public—are different and distinct from regulations that protect
   employees. As the district court noted, “[t]here is a difference between the
   public as opposed to -- that would be somebody who’s not working for them
   who feels that they did something and that’s the format coverage but, in this
   case, it is not a member of the public, it is an employee. Who are excluded
   already in the insurance contract, to begin with.”
          In Scottsdale Ins. Co. v. Oklahoma Transit Auth., Inc., No. 06-CV-359-
   CVE-SAJ, 2008 WL 896639 (N.D. Okla. Mar. 28, 2008), the district court
   recognized Form F as “a uniform document used by many insurance
   companies across the country to comply with state law compulsory insurance
   requirements for motor carriers.” Id. at *6. “The purpose of state
   compulsory insurance laws and Form F is to protect members of the public
   who have been injured by the negligent acts of a motor carrier even if the
   vehicle involved in an accident is not covered under the motor carrier’s
   insurance policy.” Id.; see also John Deere Ins. Co. v. Bachicha, No. CV 98-111
   WWD/DJS, 1998 WL 36030436, at *1 (D.N.M. Aug. 26, 1998) (“Form F
   has no effect on the validity of the employee exclusions in the policy” where
   the employer was not required by state law to obtain workers’ compensation
   insurance or where workers’ compensation was otherwise not available).
          Insurance contract endorsements frequently modify the terms of an
   insurance policy. But this is not the scenario here. Rather, Form F is a
   boilerplate endorsement filed with the Texas Department of Motor Vehicles
   and it serves as a “guaranty to the public that the insurer will be liable for any
   damages awarded if the insured is unable to pay.” Scottsdale Ins., 2008 WL
   896639, at *5; Lancer Ins. Co., 245 F. App’x at 358 (Form F exists “to ensure
   that liability insurance is always available for the protection of motorists
   injured by commercial motor carriers” (quoting Nat’l Cas. Co. v. Lane

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   Express, Inc., 998 S.W.2d 256, 263 (Tex. App. 1999))). Employees are not
   considered members of the public for the purposes of Form F. Therefore,
   Form F does not save Riata’s claims for coverage under the Policy.
                                       Conclusion
           Ochoa is an employee of Riata, and according to the applicable Policy,
   National Liability is excluded from providing insurance coverage to Riata for
   the underlying litigation. And Form F does not change the employee
   exclusion in the Policy. The district court is AFFIRMED. 1

           1
            Appellant also argues that a decision regarding a duty to defend might be
   premature. However, a declaratory judgment is the proper avenue to challenge this issue.
   Eng. v. BGP Int’l, Inc., 174 S.W.3d 366, 371 (Tex. App. 2005) (“Because the duty to defend
   may be decided in an action for declaratory judgment, the trial court incorrectly determined
   that English’s claim was premature.”).

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