Court Opinion

ID: 821185
Source: CourtListenerOpinion
Date Created: 2013-02-23 00:26:09.543678+00
Date Added: 2024-06-11T09:03:11.830634
License: Public Domain

Case: 12-40209       Document: 00512152751         Page: 1     Date Filed: 02/22/2013

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                                            FILED
                                                                         February 22, 2013

                                     No. 12-40209                          Lyle W. Cayce
                                   Summary Calendar                             Clerk

CANAL INDEMNITY COMPANY,

                                                  Plaintiff - Appellee
v.

RAPID LOGISTICS, INCORPORATED, doing business as Rapid Transport,

                                                  Defendant - Appellant

                   Appeal from the United States District Court
                        for the Southern District of Texas
                              USDC No. 10-CV-431

Before JOLLY, BENAVIDES, and DENNIS, Circuit Judges.
PER CURIAM:*
       This is an appeal from a declaratory judgment action involving an
insurance coverage dispute. Plaintiff-Appellee, Canal Indemnity Company
(“Canal”), filed suit against its insured, Defendant-Appellant, Rapid Logistics,
Inc. (“Rapid Logistics”), a trucking company. Canal argued that it did not owe
a duty to defend or indemnify Rapid Logistics in a state court negligence lawsuit
that stemmed from a tractor-trailer accident. The district court granted Canal’s

       *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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                                   No. 12-40209

motion for summary judgment, ruling that Canal had no duty to defend or
indemnify Rapid Logistics with respect to the state court action. Finding no
reversible error, we AFFIRM.
      I.     FACTUAL AND PROCEDURAL HISTORY
      On December 9, 2007, Rafael Olivas (“Olivas”) was driving a tractor-trailer
truck to make a delivery in Corsicana, Texas. The truck was owned by Oralia
Sanchez (“Sanchez”), who had an independent contractor operating agreement
with Rapid Logistics. Before arriving at the destination, the truck began to
“jackknife” and struck another truck. Subsequently, Olivas filed suit in state
court against Rapid Logistics and Sanchez, raising claims of negligence and
seeking damages for injuries incurred during the accident.
      Prior to the accident, Canal had issued an insurance policy to Rapid
Logistics, and the policy was in effect at the time of the accident in question.
Canal filed the instant declaratory judgment action in the court below, seeking
a judgment declaring that there was no coverage for Olivas under the insurance
policy issued to Rapid Logistics. Canal moved for summary judgment, arguing
that the policy excluded coverage for Olivas because he was an employee of
Rapid Logistics. The district court granted the motion, holding that Canal had
no duty to defend or indemnify Rapid Logistics in the state court action. Rapid
Logistics now appeals.
      II.    ANALYSIS
             A.    Standard of Review
      “We review a grant of summary judgment de novo, applying the same legal
standard as the district court.” Croft v. Governor of Tex., 562 F.3d 735, 742 (5th
Cir. 2009) (citation and internal quotation marks omitted). Summary judgment
should be rendered if the record demonstrates 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). “An issue is material if its resolution could affect the

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outcome of the action.” Daniels v. City of Arlington, Tex., 246 F.3d 500, 502 (5th
Cir. 2001). “In deciding whether a fact issue has been created, the court must
view the facts and the inferences to be drawn therefrom in the light most
favorable to the nonmoving party.” Id. This Court may affirm summary
judgment “on any grounds supported by the record.” Lifecare Hosps., Inc. v.
Health Plus of La., Inc., 418 F.3d 436, 439 (5th Cir. 2005). It is undisputed that
Texas law applies to this declaratory judgment action that is based on diversity
jurisdiction. See Canutillo Ind. Sch. Dist. v. Nat’l Union Fire Ins. Co., 99 F.3d
695, 700 (5th Cir. 1996). Pursuant to Texas law, the general rules of contract
construction apply to the interpretation of insurance policies. Progressive Cnty.
Mut. Ins. Co. v. Sink, 107 S.W.3d 547, 551 (Tex. 2003).
            B.     Duty to Defend
      Rapid Logistics argues that the district court erred in ruling that Canal
had no duty to defend it in the underlying state court action. “An insurer’s duty
to defend is determined solely by the allegations in the pleadings and the
language of the insurance policy.” King v. Dallas Fire Ins. Co., 85 S.W.3d 185,
187 (Tex. 2002).
      Rapid Logistics’ insurance policy is a “public-liability policy designed
specifically for use by motor carriers in the interstate trucking industry.”
Consumers Cnty. Mut. Ins. v. P.W. & Sons Trucking, 307 F.3d 362, 366 (5th Cir.
2002).   To obtain an operating permit, motor carriers must obtain a certain
amount of public-liability insurance. Id. (citing Motor Carrier Safety Act of
1984, 49 U.S.C. § 13906 (2000); 49 C.F.R. § 387.1 et seq.). Congress enacted this
insurance requirement “to ensure that a financially responsible party will be
available to compensate members of the public injured in a collision with a
commercial motor vehicle.” Id. Although Congress required motor carriers to
obtain public-liability insurance, it did not require carriers to obtain insurance
for their employees. The regulations expressly provide that this public-liability

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insurance “does not apply to injury to or death of the insured’s employees while
engaged in the course of their employment.” 49 C.F.R. § 387.15.
       The district court held that the policy contains an exclusion for employees
of the insured and that because Olivas was an employee, there was no coverage
for his injuries. Under the heading of “Exclusions,” the policy provision states
that there is no coverage for “‘Bodily Injury’ to: a. An ‘employee’ of the ‘insured’
arising out of and in the course of: (1) Employment by the ‘insured;’ or (2)
Performing the duties related to the conduct of the ‘insured’s’ business . . . .”1
       Thus, if Olivas is deemed an “employee” of the insured, Rapid Logistics,
the policy expressly excludes coverage for Olivas’s injuries. Rapid Logistics
argues that the district court erred when it interpreted the insurance policy by
applying the definition of “employee” contained in the federal regulations instead
of the definition set forth in the insurance policy. The Transportation Code
defines “employee” as “any individual, other than an employer, who is employed
by an employer and who in the course of his or her employment directly affects
commercial motor vehicle safety.” 49 C.F.R. § 390.5. It further explains that
“[s]uch term includes a driver of a commercial motor vehicle (including an
independent contractor while in the course of operating a commercial motor
vehicle).” Id. The district court reasoned that because Olivas admitted that he
was operating a commercial motor vehicle and making a delivery at the time of
the accident, he was an “employee” under § 390.5.
       In another case involving a public-liability insurance policy, this Court
rejected a motor carrier’s contention that the definition of “employee” contained
in § 390.5 should not be used to interpret this type of insurance policy.
Consumers Cnty., 307 F.3d at 367. In that case, the motor carrier argued that

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          The policy also provides that “[t]his exclusion applies: (1) Whether the ‘insured’ may
be liable as an employer or in any other capacity; and (2) To any obligation to share damages
with or repay someone else who must pay damages because of the injury.”

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the common law definition of employee should be used instead of the definition
in § 390.5. Id. at 365. It further argued that because the injured person was an
independent contractor, the person was not an “employee” under the common
law definition; and thus, the “employee” exclusion did not apply. Id. This Court
recognized that § 390.5 “eliminates the traditional common law distinction
between employees and independent contractors.” Id. “By eliminating the
common law employee/independent contractor distinction, the definition serves
to discourage motor carriers from using the independent contractor relationship
to avoid liability exposure at the expense of the public.” Id. at 366. This Court
explained that “[a]bsent some indication in the policy,” it would not assume that
the parties intended to use a different definition than the one set forth in the
applicable federal regulations. Id. at 367. In that case, the policy did not define
the term “employee.” Id. at 364 n.2. However, the instant policy does contain
a definition of the word “employee.” The policy provides that: “‘Employee’
includes a ‘leased worker.’ ‘Employee’ does not include a ‘temporary worker.’”
The policy further provides that: “‘Temporary worker’ means a person who is
furnished to you to substitute for a permanent ‘employee’ on leave or to meet
seasonal or short-term workload conditions.” Rapid Logistics’ brief does not
explain how the policy’s definition would not include Olivas as its employee.
Instead, Rapid Logistics simply argues that it hired Sanchez, the owner of the
truck, as an independent contractor and that Sanchez hired Olivas as an
employee driver. Under those circumstances, Rapid Logistics contends that
Olivas is not its employee.
      We need not decide the question of which definition of “employee” should
be used to interpret the policy because even assuming arguendo that Olivas is
not an “employee” of Rapid Logistics under either definition, there is another
provision in the insurance policy that excludes coverage for Olivas based on the
facts admitted by Rapid Logistics. Rapid Logistics’ policy states that it provides

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coverage for “Anyone else while using with your permission a covered ‘auto’ you
own, hire or borrow except: (1) The owner, or any ‘employee,’ agent or driver of
the owner, or anyone else from whom you hire or borrow a covered ‘auto.’” Here,
Rapid Logistics admits that Sanchez owned the truck that it had hired and that
Olivas was Sanchez’s employee driver. Accordingly, on its face, this provision
applies to exclude coverage for Olivas. Here, Rapid Logistics’ version of the facts
shows that the policy does not provide coverage for Olivas. Accordingly, under
either the provisions of the code or the policy, Canal did not have a duty to
defend. Thus, the district court did not err in ruling that Canal did not have a
duty to defend Rapid Logistics in the state court suit.
             C.    Public Policy
      Alternatively, Rapid Logistics argues that if the policy does not provide
coverage for Olivas, it violates public policy in Texas because “it would never be
able to insure itself against the risk of exposure occasioned by the independent
contractor’s injuries or death while in the course and scope of his statutory
employment.”
      The Texas Supreme Court has opined as follows with respect to allegations
of public policy violations:
      Public policy, some courts have said, is a term of vague and
      uncertain meaning, which it pertains to the law-making power to
      define, and courts are apt to encroach upon the domain of that
      branch of the government if they characterize a transaction as
      invalid because it is contrary to public policy, unless the transaction
      contravenes some positive statute or some well-established rule of
      law.

Lawrence v. CDB Servs., Inc., 44 S.W.3d 544, 553 (Tex. 2001) (citations and
quotations marks omitted), superseded by TEX. LAB. CODE ANN . § 406.033(e)
(Vernon Supp. 2005). Here, Rapid Logistics wholly fails to cite a statute or case
in support of its argument that the district court’s holding violates public policy

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in Texas. We therefore conclude that its failure to adequately brief the issue
renders it abandoned on appeal. Yohey v. Collins, 985 F.2d 222, 224-25 (5th Cir.
1993); see also FED. R. APP. P. 28(a)(9)(A) (requiring appellant’s brief to provide
citations to authorities in support of argument).
            D.     Justiciability of Duty to Indemnify
      Rapid Logistics contends that the district court erred in ruling that the
issue of whether Canal has a duty to indemnify is justiciable. Rapid Logistics
argues that because Canal has a duty to defend it in the underlying state court
action, the issue is non-justiciable. As set forth above, we find no error in the
district court’s holding that Canal had no duty to defend Rapid Logistics. Thus,
this argument is without merit.
      In the alternative, Rapid Logistics argues that because the duty to
indemnify is dependent upon facts proven in the underlying suit, the issue of
Canal’s duty to indemnify Rapid Logistics is non-justiciable and should be
deferred until after the underlying state court suit is resolved. Under Texas law,
the duty to defend and the duty to indemnify are distinct and separate duties.
Gilbane Bldg. Co. v. Admiral Ins. Co., 664 F.3d 589, 601 (5th Cir. 2011). In
contrast to a duty to defend, “[i]t may sometimes be necessary to defer resolution
of indemnity issues until the liability litigation is resolved. In some cases,
coverage may turn on facts actually proven in the underlying lawsuit.” Farmers
Tex. Cnty. Mut. Ins. v. Griffin, 955 S.W.2d 81, 84 (Tex. 1997). The Texas
Supreme Court has concluded that the “duty to indemnify is justiciable before
the insured’s liability is determined in the liability lawsuit when the insurer has
no duty to defend and the same reasons that negate the duty to defend likewise
negate any possibility the insurer will ever have a duty to indemnify.” Id.
(emphasis in original). In a subsequent case, the Court explained that its
“conclusion [in Griffin] was grounded on the impossibility that the [intentional]
drive-by shooting in that case could be transformed by proof of any conceivable

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set of facts into an auto accident covered by the insurance policy.”           D.R.
Horton–Texas, Ltd v. Markel Intern. Ins. Co., 300 S.W.3d 740, 745 (Tex. 2009).
Likewise, in the instant case, Canal has no duty to defend and the same reasons
that negate the duty to defend also negate the possibility that Canal will have
a duty to indemnify. More specifically, as previously explained, Rapid Logistics
has conceded that Olivas was Sanchez’s employee driver, and that fact excludes
coverage of the accident. Thus, in light of this concession, there is no conceivable
proof that could be developed in the state court action that would transform the
accident into one that is covered by the policy. Because the material facts
(Olivas was Sanchez’s driver employee) are not in dispute, the district court did
not err in holding the issue of duty to indemnify was justiciable. Accordingly,
Rapid Logistics has not shown that the district court erred in granting summary
judgment in favor of Canal.
            E.     Conclusion
      For the above reasons, we affirm the judgment of the district court.
AFFIRMED.

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