MICHAEL J. DAVIS, Chief Judge.
This matter is before the Court on Plaintiff Great West Casualty Company's
This case involves an insurance coverage dispute related to a 2005 vehicle accident.
On June 30, 2005, Defendant Nathan Peterson was driving a 1997 Freightliner semi-tractor, which he owned, and was hauling freight in an attached 1998 East dump trailer owned by Defendant Holicky Bros., Inc. ("Holicky"). (Stip.¶¶ 3-4.) On that day, Nathan Peterson was involved in a single-vehicle roll-over accident in Carlton County, Minnesota (the "Accident"). (Id. ¶ 3.) His passenger, Defendant Ann Hill Peterson, was injured and her left hand was amputated. (Id. ¶ 5.)
Before the Accident, Nathan Peterson and Holicky had entered into an Independent Contractor Agreement, effective April 22, 2005. (Stip. ¶ 1; Stip., Ex. A.) Under the Independent Contractor Agreement, Nathan Peterson agreed to provide a truck "of sufficient size and capacity" to haul Holicky's trailers, as directed by Holicky. (Stip., Ex. A ¶ 1.) Additionally, Nathan Peterson agreed to be responsible for payment of casualty and liability insurance covering the truck that he used to pull Holicky's trailer, with minimum liability limits of $1 million. (Id.)
The Independent Contractor Agreement provided that Nathan Peterson agreed to hold Holicky "harmless and free and clear in connection with any and all liability in connection with the operation of [Nathan Peterson's] truck and pulling of [Holicky's] trailers during the term of this Contract and shall indemnify [Holicky] for any loss occasioned thereby including reasonable attorneys fees and costs." (Id.) The parties agree that the Accident occurred while Nathan Peterson was transporting freight in interstate commerce pursuant to the Independent Contractor Agreement. (Stip.¶ 3.)
At the time Nathan Peterson entered into the Independent Contractor Agreement, he was insured under a Commercial Auto Policy issued by Progressive Classic Insurance Company ("Progressive Policy"). (Stip. ¶ 6; Stip., Ex. 2.) The Progressive Policy requires Progressive to "pay damages ... for which an insured is legally liable because of an accident." (Stip., Ex. 2 at 13 of 33.) It has a liability limit of $1 million. (Id. at 1 of 33.)
The Progressive Policy defines the "insured" to mean the named insured—Nathan Peterson—and, among others, "any other person or organization, but only with respect to the legal liability of that person or organization for the acts or omissions of any person otherwise covered under [the liability provisions of the policy] while driving your insured auto." (Stip., Ex. 2 at 13 of 33.)
The term "your insured auto" is defined to include, among other things, "[a]ny auto described in the Declarations." (Id. at 10 of 33.) It further is defined to include trailers, even if not listed in the declarations, "but only while upon a public road and connected to your insured auto." (Id. at 11 of 33.) The 1997 Freightliner tractor is specifically listed in the policy declarations, as are all nonowned attached trailers. (Stip., Ex. 2 at 3 of 33.) Nathan Peterson's 1997 Freightliner tractor is listed as the only scheduled vehicle, and a liability premium of $3,497.00 was charged for the Freightliner. (Id.) The Progressive
Nathan Peterson obtained an endorsement naming Holicky as an additional insured, effective April 29, 2005. (Form No. 1198 (8-93), Stip., Ex. 2 at 2, 4 of 33.) The endorsement provides that the insurance applies only to the extent that Holicky is liable for the conduct of another insured. (Id.) The endorsement further provides: "We also agree with you that insurance provided by this agreement will be excess insurance over any other valid and collectible insurance." (Id.)
On the other hand, the Progressive Policy's "other insurance" provision provides that "[t]his coverage is primary when your insured auto which is a trailer is attached to an insured auto you [Nathan Peterson] own." (Stip., Ex. 2 at 17 of 33.) It further provides that, if there is other applicable liability insurance for a covered accident, Progressive will pay the proportionate share that its limit of liability bears to the total of all applicable liability limits. (Id.)
At the time of the Accident, Holicky was insured under a Commercial Auto Policy issued by Defendant General Casualty Company of Wisconsin ("General Casualty") ("General Casualty Auto Policy"). (Stip. ¶ 8; Stip., Ex. 3.) The policy provides a schedule of covered vehicles owned by Holicky and insured under the General Casualty Auto Policy, which lists multiple tractors and trailers, including the 1998 East end dump trailer Nathan Peterson was hauling at the time of the Accident. (Stip. ¶ 10; Declarations and End. No. 001, Stip., Ex. 3 at 3, 6 of 53.)
The General Casualty Auto Policy requires General Casualty to "pay all sums an `insured' legally must pay as damages because of `bodily injury' or `property damage' to which this insurance applies, caused by an `accident' and resulting from the ownership, maintenance or use of a covered `auto.'" (Stip., Ex. 3 at 14 of 53.) With regard to liability coverage, the phrase "Covered Autos" is defined by symbol "01." (Id. at 2 of 53.) The Business Auto Coverage Form states that "01" corresponds to "Any `Auto.'" (Id. at 13 of 53.) "`Auto' means a land motor vehicle, `trailer' or semitrailer designed for travel on public roads, but does not include' mobile equipment.'" (Id. at 21 of 53.)
The General Casualty Auto Policy includes statutorily required liability, personal injury protection ("PIP") and UM/ UIM coverages. (Declarations, Stip., Ex. 3 at 31-42 of 53.) The policy includes a liability limit of $1 million. (Id. at 2 and 6 of 53.) Holicky paid $3,941.00 in liability premiums for the General Casualty policy. (Id. at 2 of 53.) Overall, including premiums for PIP, UM/UIM, physical damage, etc., it paid $7,810.00 in premiums. (Id.)
The General Casualty Auto Policy "other insurance" clause states that it "provides primary insurance" for "any covered `auto' you own." (Id. at 20 of 53.) It also states:
(Id.)
The "other insurance" section further provides:
(Id. at 21 of 53.)
Effective during the time of the Accident, Holicky also purchased a Commercial Umbrella Policy from General Casualty ("General Casualty Umbrella Policy"), which provided an additional $1 million in liability coverage. (Stip. ¶ 11; Stip., Ex. 4 at 4 of 36.) Holicky paid a premium of $1,500 for the umbrella policy. (Stip., Ex. 4 at 4 of 36.)
Holicky also purchased a policy from Defendant Great West Casualty Company ("Great West"), effective March 11, 2005, the same effective date as the General Casualty Auto Policy and General Casualty Umbrella Policy, through March 11, 2006. (Stip. ¶ 12; Stip., Ex. 5; Gilreath Aff. ¶ 2.) Great West characterizes this policy as a "filings only" policy and this designation appears throughout the policy. (See, e.g., Policy, Stip., Ex. 5 at 9 of 52 (listing, under "Special Provisions:" "Motor Carrier—Filings Only"); Gilreath Aff. ¶ 4.)
According to Great West, filings only policies are issued for motor carriers, such as Holicky, to comply with the United States Department of Transportation ("DOT") proof of minimum financial security requirements, so that the insured can maintain operating authority. (Gilreath Aff. ¶ 4.) Filings only policies are intended to act as sureties and are to be used as a last resort when no other coverage is available, for the protection of the public. (Id. ¶ 5.)
Great West avers that the intent of the policy is only to ensure the availability of a minimum level of protection for the public rather than to provide true insurance coverage, as demonstrated by the terms of the policy; the lack of a premium; the lack of no-fault and UM/UIM coverage, which is required by state law; the inclusion of an endorsement requiring Holicky to reimburse Great West for any claims paid; and the absence of any underwriting. (Gilreath Aff. ¶¶ 5-9; Gilreath Aff., Ex. A.)
Holicky's application to Great West was made by MacKenzie Agency, the same agency that procured the General Casualty policies for Holicky. (Gilreath Aff., Ex. A.) The application requests a "filings only" policy and provides minimal information regarding Holicky such as its name, address, telephone number, DOT number, and its permit numbers for the two additional states (Minnesota and Iowa) in which filings were to be made on its behalf. (Gilreath Aff. ¶ 6; Gilreath Aff., Ex. A.) Throughout the application, when additional information is requested, such as information regarding vehicles to be covered, drivers, revenue, mileage driven, number of power units, commodities transported, or past losses, the application states "Filings Only." (Gilreath Aff., Ex. A.)
Holicky paid $250.00 for the liability portion of the Great West Policy. (Gilreath Aff. ¶ 7.) Great West characterizes this amount as an administrative fee, not a premium. (Id.) The coverage is listed as having a liability limit of $1 million. (Stip., Ex. 5 at 6 of 52.) The Policy Declarations list no scheduled autos and indicate a premium of zero dollars. (Id. at 5 of 52.)
The Great West Policy includes a Minnesota Truckers Coverage Form, liability section, which states that Great West is required to "pay all sums an `insured' legally must pay as damages because of `bodily injury' or `property damage' to which this insurance applies, caused by an `accident' and resulting from the ownership, maintenance or use of a covered `auto.'" (Stip., Ex. 5 at 26 of 52.) Holicky was a named insured "for any covered `auto.'" (Id.) An "insured" also includes "[a]nyone else while using with your permission a covered `auto' you own, hire or borrow." (Id.)
The Great West Minnesota Truckers Coverage Form provides that "covered `autos'" are only those designated by "[t]he symbols entered next to a coverage on the Declarations." (Stip., Ex. 5 at 24 of 52.) The Minnesota Truckers Coverage Form further defines "55" by directing the reader to the Declarations. (Id. at 25 of 52.) The Declarations state that, as to liability, "covered autos" are "55." (Id. at 6 of 52.) In turn, the Declarations define "55" as follows:
(Stip., Ex. 5, Declarations at 7 of 52.) The Motor Carrier Filings Only Endorsement states:
(Id., Form GU 40 05 07 03, at 12 of 52.)
The endorsement further states that Great West has made filings for Holicky in the District of Columbia, Iowa, and Minnesota. (Id. at 11-12 of 52.)
Dean Holicky, on behalf of Holicky Bros., signed and returned the endorsement to Great West. (Gilreath Aff. ¶ 9; Stip., Ex. 5 at 13 of 52.)
Great West filed Form BMC 91X Motor Carrier Automobile Bodily Injury and Property Damage Liability Certificate of Insurance with the Federal Highway Administration certifying that it issued insurance to Holicky under the terms described on the back of the form, effective March 11, 2005, and continuing until cancelled as provided by federal statute. (Gilreath Aff., Ex. B.) The front of the form states, "This insurance is primary and the company shall not be liable for amounts in excess of $750,000.00 for each accident." (Id.)
The back of Form BMC 91X states:
(Id.)
The Great West Policy "other insurance" clause states:
(Stip., Ex. 5 at 35 of 52.) It further states, except as provided above, "this Coverage Form provides primary insurance for any covered `auto' you own and excess insurance for any covered `auto' you do not own." (Id.) The final paragraph of the "other insurance" section states:
(Id. at 36 of 52.)
On January 25, 2007, Ann Hill Peterson entered into a Settlement Agreement and Partial Release with "Nathan Peterson d/b/a Holicky Brothers, Inc." and Progressive Classic Insurance Company ("Settlement Agreement"). (Stip. ¶ 15; Stip., Ex. 6.) Under the Settlement Agreement, Progressive paid $961,103.53 to Ann Hill Peterson in an agreement "governed and construed in accordance with the principles and rules established in the case of Drake v. Ryan."
In 2009, Ann Hill Peterson sued Nathan Peterson and Holicky in Minnesota State Court, Carlton County, for the injuries sustained in the Accident. (Stip. ¶ 17; Stip., Ex. 7.) She alleges that Nathan Peterson was negligent in the operation of his vehicle and that Holicky Brothers is vicariously liable for such negligence. (Stip., Ex. 7.)
On March 10, 2009, Great West filed a Complaint against General Casualty, Holicky, Nathan Peterson, and Ann Hill Peterson in this Court. The Complaint seeks declaratory judgment regarding Great West's and General Casualty's legal obligations under their policies issues to Holicky. Specifically, Great West seeks a declaration that
(Compl. ¶ 25.)
(Compl. ¶ 26.)
General Casualty has asserted a counterclaim against Great West and a crossclaim against Holicky, Nathan Peterson, and Ann Hill Peterson seeking a declaration that the General Casualty policies are tertiary to the Progressive Policy and the Great West Policy.
Holicky has asserted a crossclaim against General Casualty and a counterclaim against Great West seeking a declaration determining the respective obligations of General Casualty and Great West regarding their duties to defend and indemnify and with regard to priority of coverage. Holicky also seeks a declaration regarding the legal effect of the Settlement Agreement. Holicky further asserts a crossclaim against Nathan Peterson and Ann Hill Peterson seeking a declaration that Holicky is entitled to indemnity from Nathan Peterson and that Holicky has no liability to Ann Hill Peterson.
Summary judgment is appropriate if, viewing all facts in the light most favorable to the non-moving party, there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The party seeking summary judgment bears the burden of showing that there is no disputed issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. Summary judgment is only appropriate when "there is no dispute of fact and where there exists only one conclusion." Crawford v. Runyon, 37 F.3d 1338, 1341 (8th Cir.1994) (citation omitted).
The interpretation of the language of an insurance contract is usually a legal question for the court to decide. Murray v. Greenwich Ins. Co., 533 F.3d 644, 648 (8th Cir.2008); Jenoff, Inc. v. N.H. Ins. Co., 558 N.W.2d 260, 262 (Minn. 1997). In this diversity case, generally, the interpretation of Minnesota-issued insurance policies is a matter of Minnesota law. See Murray, 533 F.3d at 648. Under
However, if the policy language is ambiguous, the ambiguity must be resolved in favor of the insured by "interpreting the ambiguity in accordance with the reasonable expectations of the insured." Westchester Fire Ins. Co. v. Wallerich, 563 F.3d 707, 712 (8th Cir.2009) (quoting SECURA Supreme Ins. Co. v. M.S.M., 755 N.W.2d 320, 323 (Minn.Ct. App.2008)).
Mutual Serv. Cas. Ins. Co. v. Wilson Twp., 603 N.W.2d 151, 153 (Minn.Ct.App.1999) (citations omitted). "Construction of an insurance policy which entirely neutralizes one provision should not be adopted if the contract is susceptible of another construction which gives effect to all of its provisions and is consistent with the general intent." West Bend Mut. Ins. Co. v. Armstrong, 419 N.W.2d 848, 850 (Minn.Ct.App. 1988) (citation omitted). "When provisions of a policy conflict with an endorsement or rider, the provisions of the endorsement govern." Steele v. Great W. Cas. Co., 540 N.W.2d 886, 888 (Minn.Ct.App.1995). Reasonable doubts as to the meaning of the language of the policy should be construed against the insurer, but courts may not read ambiguity into the plain language of the policy in order to construe it against the insurer. State Farm Ins. Cos. v. Seefeld, 481 N.W.2d 62, 64 (Minn.1992).
In this case, while Minnesota law governs the general interpretation of the policies at issue, federal law governs the interpretation of the legal effect of Great West's federal filings. Because Holicky is a motor carrier that transports property in interstate commerce, it is subject to federal regulations requiring it to obtain and maintain minimum levels of insurance or surety coverage and to furnish proof of such coverage in order to maintain operating authority. 49 C.F.R. §§ 387.7, 387.301(a). Great West filed a Motor Carrier Automobile Bodily Injury and Property Damage Liability Certificate of Insurance with the Federal Highway Administration, certifying the issuance of its policy subject to limits of $750,000. Although not physically attached to the policy, as shown by the submitted exhibits, Great West concedes that federal law requires that, based on the Form BMC 91X filing, another endorsement, the MCS-90 endorsement, is deemed to be read into the Great West Policy. See, e.g., Prestige Cas. Co. v. Mich. Mut. Ins. Co., 99 F.3d 1340, 1348 n. 6 (6th Cir.1996).
Because the filing and endorsement are required by federal law, federal law governs the operation and effect of the insurance filings and related insurance policy endorsements. See, e.g., Planet Ins. Co. v. Transp. Indem., 823 F.2d 285, 288 (9th Cir.1987) ("We rely on the federal statutory and regulatory scheme to decide the issue of authorized carrier responsibility. The special interstate character of the authorized carrier insurance industry underscores the need to refer to the federal scheme to determine when mandatory coverage comes into effect.") (citations omitted); Am. Alternative Ins. Co. v. Sentry Select Ins. Co., 176 F.Supp.2d 550, 554
General Casualty states that, for the purposes of its motion, it will assume that the General Casualty Auto Policy provides liability coverage for the accident. ( [Docket No. 35] at 17.) Regardless of General Casualty's admission, it is clear that, based on the policy language and the stipulated facts, the General Casualty Auto Policy does apply.
The General Casualty Umbrella Policy is excess, as it states, "If other valid and collectible insurance is available to the insured for a loss we cover under this Coverage part.... This insurance is excess over any of the other insurance, expect for other insurance bought specifically to apply in excess of the Limits of Insurance shown in the Declarations of this Coverage Part." (Stip., Ex. 4 at 18 of 36.) There are three other insurance policies at issue, each with a $1 million limit. The parties agree that, given Ann Hill Peterson's injuries, no matter how the Court rules on priority of coverage, the Court will not need to reach the General Casualty Umbrella Policy.
The parties agree that the Progressive Policy applies. As noted previously, Nathan Peterson and Holicky are both named as insureds under the Progressive Policy, and the policy obligates Progressive to "pay damages ... for which an insured is legally liable because of an accident." Also, the policy defines "insured" to mean anyone driving "your insured auto," and "your insured auto" is defined to include the tractor being driven by Nathan Peterson at the time of the Accident.
An insurance policy, its endorsements, and its declarations must be read together in order to determine the scope of coverage. Steele, 540 N.W.2d at 888. "It is well established that the declarations pages of an insurance policy are a crucial part of the policy, and interpretation of the declarations is important to determine the scope of the policy." Reinsurance Ass'n of Minn. v. Johannessen, 516 N.W.2d 562, 564 (Minn.Ct.App.1994) (citation omitted).
The Great West Policy, by its terms, only provides coverage for damages resulting from the ownership, maintenance or use of a "covered `auto.'" The Minnesota Truckers Coverage Form, in "SECTION I—COVERED AUTOS," defines what types of autos are "covered autos" for each of the coverages actually purchased by the insured by referring back to the policy Declarations:
(Great West Policy at 24 of 52.) The Declarations state that, as to liability, "covered autos" are "55." (Id. at 6 of 52.) The Minnesota Truckers Coverage Form further explains that, for the symbol "55," "[s]ee the Declarations for the description of this symbol." (Id. at 25 of 52.) The Declarations state:
(Id. at 7 of 52.)
The types of autos that could have been, but were not, designated in the Declarations as covered autos include commercial autos, including trailers, owned by Holicky (symbol 43), autos leased by Holicky (symbols 51, 52), autos specifically listed and described in the Policy Declarations (symbol 46), or, as in the General Casualty Auto Policy, "any auto" (symbol 41).
The Motor Carrier Filings Only endorsement to the policy does not confer any additional coverage. Instead, the Motor Carrier Filings Only endorsement is exclusionary:
(Great West Policy at 11-13 of 52.) This provision provides that covered autos cannot include any vehicle being operated under federal authority in interstate commerce, or under authority granted by the states of Minnesota and Iowa, the state and federal entities for which Great West made filings on behalf of Holicky Brothers. Holicky's operations in both Minnesota and Iowa, where the trip culminating in the Accident began, are, therefore, excluded. This endorsement eliminates coverage by 1) stating that Holicky must not have any motor carrier operations in a state in which Great West made a filing for Holicky; and 2) providing that Holicky will reimburse Great West for any loss it is liable for based on the filing. Requiring the insured to reimburse the insurer for a covered loss would defeat the purpose of traditional insurance; however, it would fulfill the purpose of the federal motor carrier insurance requirement to protect the public. Holicky signed this specific endorsement. The plain language of the Great West Policy does not confer coverage for the Accident.
Much of the parties' argument revolves around the effect, if any, of Great West's federal filings and federal MCS-90 endorsement. "The operation and effect of the MCS-90 endorsement is a matter of federal law." Canal Ins. Co. v. Distrib. Servs., Inc., 320 F.3d 488, 492 (4th Cir. 2003) (citations omitted).
In order to engage in the interstate transportation of property, a motor carrier must maintain insurance or other financial security with the minimum limits of coverage prescribed by the DOT: "No motor carrier shall operate a motor vehicle until the motor carrier has obtained and has in effect the minimum levels of financial responsibility as set forth in § 387.9 subpart." 49 C.F.R. § 387.7(a). See also 49 U.S.C. § 13906(a)(1) (providing that motor carriers must file "with the Secretary a
Under the Federal Motor Carrier Safety Regulation, a motor carrier may demonstrate proof of financial responsibility in one of three manners:
49 C.F.R. § 387.7(d). See also 49 U.S.C. § 31139(f)(1). Therefore, a motor carrier can meet its financial responsibility requirements through insurance, a surety bond, or authorized self-insurance. Additionally, 49 U.S.C. § 31139(f)(1)(B) permits a fourth method of proof—a guarantee, if that is acceptable to the Secretary of Transportation.
A motor carrier must also file proof that it has met the financial responsibility requirements in order to maintain its operating authority:
49 C.F.R. § 387.301(a)(1).
When a motor carrier meets its financial responsibility obligations by obtaining insurance, it must file a Form BMC 91X Certificate of Liability Insurance with the Federal Highway Administration and use an MCS-90 endorsement with the certified policy. See 49 U.S.C. § 13906(f); 49 C.F.R. §§ 387.7(d)(1), 387.15, 387.313(a)(3), (4). See also Distrib. Servs., Inc., 320 F.3d at 489. The MCS-90 endorsement is usually attached to the policy certified to the Department of Transportation; however, even if it is not, the endorsement is read into and deemed a part of the policy as a matter of law. See, e.g., Prestige Cas. Co., 99 F.3d at 1348 n. 6.
The main purpose of the MCS-90 endorsement and the underlying financial responsibility regulations is to ensure that the public is adequately protected from the risks created by a motor carrier's operations and to ensure the collectibility of a judgment against the motor carrier. See, e.g., Carolina Cas. Ins. Co. v. Yeates, 584 F.3d 868, 875 (10th Cir.2009) (en banc) ("[T]he financial responsibility provisions
In order to achieve this goal of protecting the public, "the MCS-90 endorsement creates a suretyship by the insurer to protect the public when the insurance policy to which the MCS-90 endorsement is attached otherwise provides no coverage to the insured." Distrib. Servs., Inc., 320 F.3d at 490 (citations omitted). See also Yeates, 584 F.3d at 878 (gathering federal decisions from 1st, 3d, 4th, 5th, 6th, 7th, and 9th Circuits holding that insurer's obligation under MCS-90 and federal regulatory scheme is that of a surety when other insurance coverage is lacking, not that of a provider of traditional insurance coverage, and adopting holding for 10th Circuit); Am. Alternative Ins. Co., 176 F.Supp.2d at 557 ("[T]he MCS-90 endorsement should be construed and applied only to protect members of the public injured by interstate motor carriers from uncompensated losses—by mandating coverage where there would otherwise be no coverage. Where there is other adequate coverage, this purpose is not implicated and the MCS-90 endorsement should not operate to amend a policy. Precisely this result has been reached by a majority of the circuits that have squarely addressed this issue.") (footnotes omitted). An insurer's obligation under MCS-90 and the federal regulatory scheme is that of a surety, providing a safety net to protect the public in the event other insurance coverage is lacking, and not as true insurance coverage.
These goals are achieved through an MCS-90 provision stating that the insurer agrees to pay, within the limits of liability, any final judgment recovered against the motor carrier insured for public liability and resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements "regardless of whether or not each motor vehicle is specifically described in the policy." 49 C.F.R. § 387.15, at Illustration I. Further, the insurer agrees:
Id.
Although the Great West Policy does not apply by its terms, there are situations in which Great West could still have liability by operation of law, based upon the federal regulatory scheme. However, that liability only arises in the event that other insurance available to Holicky is either non-existent or insufficient to meet federally-mandated minimum limits of insurance. In other words, if no insurance coverage or other source of recovery were available, Great West would be obligated to respond to any judgment obtained by Ann Hill Peterson against Holicky. Here, Ann Hill Peterson has recovered an amount in excess of the $750,000 level of financial responsibility deemed necessary by the Federal Motor Carrier Safety Administration for the protection of the public. See 49 U.S.C. § 31139(b)(2); 49 C.F.R. § 387.9. Great
Yeates, 584 F.3d at 879. Great West's obligation under the MCS-90 and DOT filings are not triggered here because the Great West Policy, by its terms, does not provide coverage for the Accident since neither the tractor nor the trailer are covered autos. Also, the public policy purposes of the regulations have already been met by Progressive's payment and the availability of the General Casualty Auto and Umbrella Policies. Great West's surety obligations are not implicated.
Furthermore, the DOT filings and the MCS-90 endorsement do not protect the insurer or other insurers; therefore, they do not affect the relationship among joint insurers, alter the terms of the policy for the benefits of other insurers, or control the allocation of loss among insurers. See Grinnell Mut. Reinsurance Co. v. Empire Marine Ins. Co., 722 F.2d 1400, 1404 (8th Cir.1983) (holding that regulations do not fix liability between insureds or insurance companies); see also Distrib. Servs., Inc., 320 F.3d at 488-89 ("This appeal presents the question of first impression in our circuit: Whether ... the MCS-90 endorsement, determines the allocation of loss among insurers. Consistent with the majority view of our sister circuits, we answer this question in the negative.") (footnotes omitted); Carolina Cas. Ins. Co. v. Underwriters Ins. Co., 569 F.2d 304, 313 (5th Cir.1978) ("ICC policy factors are frequently determinative where protection of the public or a shipper is at stake, but those factors cannot be invoked by another insurance company which contracted to insure a specific risk and which needs no equivalent protection.") (footnote omitted).
While, in certain situations, the MCS-90 endorsement requires Great West to pay final judgments against an insured that are not otherwise covered by the policy, the endorsement does not create a duty to defend those claims. See, e.g., Harco Nat'l Ins. Co. v. Bobac Trucking, Inc., 107 F.3d 733, 735-36 (9th Cir.1997) (holding and gathering cases holding that "federal courts have consistently stated that the MCS-90 endorsement does not create a duty to defend claims which are not covered by the policy but only by the endorsement"). See also 49 C.F.R. § 387.15, at Illustration I (providing that, as between the certifying insurer and the insured, "all terms, conditions, and limitations in the policy to which the endorsement is attached shall remain in full force and effect as binding."). Furthermore, the endorsement grants the insurer a right of reimbursement from the motor carrier:
Id.
The MCS-90 and the federal regulations are intended to ensure the collectibility of judgments against the insured motor carrier only; the certifying insurer's obligations do not extend to the satisfaction of judgments against owner-operators such as Nathan Peterson. In the regulations, the DOT defines the MCS-90 "insured" as "the motor carrier named in the policy of insurance, surety bond, endorsement, or notice of cancellation, and also the fiduciary of such motor carrier." 49 C.F.R. § 387.5.
The Federal Motor Carrier Safety Administration has also issued regulatory guidance interpreting who is the "insured" under the regulatory scheme:
Federal Motor Carrier Safety Administration ("FMCSA"), Regulatory Guidance for Forms Used To Establish Minimum Levels of Financial Responsibility of Motor Carriers, 70 Fed.Reg. 58065-01, 58066, 2005 WL 2438280 (Oct. 5, 2005).
The Eighth Circuit has held that, under the predecessor to the MCS-90, without judgment of liability against the carrier, ICC regulations and filings "may not be read into the insurance policy to impose liability upon the insurer of the motor carrier in contravention of the precise, express terms of the policy." Wellman v. Liberty Mut. Ins. Co., 496 F.2d 131, 139 (8th Cir.1974). See also Armstrong v. U.S. Fire Ins. Co., 606 F.Supp.2d 794, 814-26 (E.D.Tenn.2009) (analyzing Wellman, other federal case law, applicable regulations, and agency guidance and holding that MCS-90 creates coverage for the liability of the motor carrier only).
General Casualty argues that insertion of a requirement that the Great West Policy coverage is contingent upon lack of other available insurance, based on defining "covered auto" based on the filings only endorsement to the commercial auto policy issued to Holicky, is unenforceable under the reasonable expectations doctrine set forth in Atwater Creamery Co. v. Western National Mutual Insurance Co., 366 N.W.2d 271 (Minn.1985). In Atwater, the insured bought an insurance policy that included burglary coverage. However, when the insured made a claim for a burglary, the insurance company denied coverage based on a policy provision defining burglary as requiring visible marks of physical damage at the point of entry or exit. Id. at 274. The Minnesota Supreme Court concluded that, although the policy definition was unambiguous, it could not be enforced based on the insured's reasonable expectations. Id. at 279. The court noted that there is a great disparity in bargaining power between insureds and insurance companies. Id. at 277. It further noted that, "no one purchasing something called burglary insurance would expect coverage to exclude skilled burglaries that leave no visible marks of forcible entry or exit." Id. at 276.
Since Atwater, the Minnesota Supreme Court has refined the reasonable expectations
Moreover, General Casualty lacks standing to assert such a reliance—based doctrine because it was a stranger to the transaction. See, e.g., Malakowsky v. Johannsen, 374 N.W.2d 816, 818 (Minn.Ct. App.1985) (holding that stranger to an insurance contract cannot assert estoppel to keep insurer from denying coverage to the insured). Holicky has not submitted any evidence to this Court asserting its expectations regarding the Great West Policy. General Casualty offers no evidence that it somehow relied on Great West's actions. The reasonable expectations doctrine does not apply in this case.
General Casualty also argues that the Court should find coverage under the Great West Policy based on the doctrine of illusory coverage.
Jostens, Inc. v. Northfield Ins. Co., 527 N.W.2d 116, 118 (Minn.Ct.App.1995) (citation omitted). This doctrine "is best applied... where part of the premium is specifically allocated to a particular type or period of coverage and that coverage turns out to be functionally nonexistent." Id. at 119. See also H & R Block, Inc. v. Am. Int'l Specialty Lines Ins. Co., 546 F.3d 937, 942 (8th Cir.2008) (noting that coverage is not illusory when "insurance premium is correspondingly small") (citation omitted); United Fire & Cas. Co. v. Fidelity Title Ins. Co., 258 F.3d 714, 719 (8th Cir.2001) ("The doctrine of illusory coverage applies only when `part of the premium is specifically allocated to a particular type or period of coverage and that coverage turns out to be functionally nonexistent.'") (quoting Jostens, 527 N.W.2d at 119).
General Casualty asserts that, if the "covered auto" section of the Great West Policy is not interpreted to include all autos operated under Holicky's interstate authority, the Great West Policy is illusory.
The illusory coverage doctrine examines the specific allocation of the premium. Here, the Great West Policy states that the premium is zero. Additionally, Holicky has submitted no evidence to this Court regarding its expectations of the Great West Policy. Even if the Court considered the $250 fee to be a "premium," it is still a fraction of the cost of the liability portion of the commercial auto policy issued by General Casualty. Finally, Holicky did receive a benefit from the $250 administrative fee: Great West certified
As noted with regard to the reasonable expectations doctrine, as a stranger to the transaction, it is questionable whether General Casualty has standing to assert this reliance—based doctrine.
General Casualty also asserts that the Court should find coverage under the Great West Policy because Minnesota courts will not permit an insurer to escape a statutory obligation to provide adequate insurance coverage by offering contingent liability coverage. See Hertz Corp. v. State Farm Mut. Ins. Co., 573 N.W.2d 686, 688-89 (Minn.1998). General Casualty argues that, here, the DOT required Holicky to have certain insurance coverage in order to operate in interstate commerce. General Casualty asserts that Great West issued a policy and filed a certificate with the DOT representing that an insurance policy had been issued. It concludes that Great West cannot now claim that its policy was contingent on the lack of other available insurance coverage.
The Hertz case has no application here. In Hertz, the Minnesota court addressed an auto owner's obligation to provide insurance coverage under the Minnesota No-Fault Act and concluded that an owner could not fulfill that obligation through a contingent liability policy. Here, there is no allegation that Holicky violated the No-Fault Act. The General Casualty Auto Policy provides no-fault coverage.
In this case, the contingency aspect of the Great West Policy does not arise out of a contingency clause within the insurance policy or other terms within the policy. Rather, the concept of contingent coverage arises by operation of federal law and the MCS 90 Endorsement.
Because the Court finds that the Great West Policy does not provide coverage for the Accident, the priority of coverage analysis requested by General Casualty does not affect Great West. However, for the sake of completeness, the Court will include a priority analysis including Great West to demonstrate that, even under either permutation of Minnesota's priority of coverage analysis, the Great West Policy would still apply after the Progressive and General Casualty Auto policies.
U.S. Fidelity & Guarantee Ins. Co. v. Commercial Union Midwest Ins. Co., 430 F.3d 929, 933 (8th Cir.2005) (citations omitted). "Other insurance" provisions contained in two different policies conflict if "`the apportionment among the companies cannot be made without violating the other insurance clause of at least one company.'" Christensen v. Milbank Ins. Co., 658 N.W.2d 580, 587 (Minn.2003) (quotation omitted). Here, the parties agree that the "other insurance" clauses in the three relevant
When the other insurance clauses of two applicable policies are in conflict, courts apply the closest-to-the-risk or total policy insuring intent test to determine which policy is primary. Garrick v. Northland Ins. Co., 469 N.W.2d 709, 712 (Minn.1991). Under the total insuring intent test, courts determine coverage by examining "the primary policy risks and the primary function of each policy." Id. (citation omitted). Under the closest-to-the-risk test, courts ask
Auto Owners Ins. Co. v. Northstar Mut. Ins. Co., 281 N.W.2d 700, 704 (Minn.1979); Redeemer Covenant Church of Brooklyn Park v. Church Mut. Ins. Co., 567 N.W.2d 71, 80-81 (Minn.Ct.App.1997). Additionally, courts may first ask which insurer "by its policy, intended to cover `business operations.'" U.S. Fire Ins. Co. v. Fireman's Fund Ins. Co., 461 N.W.2d 230, 234 (Minn. Ct.App.1990) (citation omitted).
Great West argues that the Court should rely upon the total policy insuring intent test. The Court determines "the total policy insuring intent, as determined by the primary policy risks upon which each policy's premiums were based and as determined by the primary function of each policy." Integrity Mut. Ins. Co. v. State Auto. & Cas. Underwriters Ins. Co., 239 N.W.2d 445, 446 (Minn.1976).
Under the total policy insuring intent test, based upon the size of the premiums and the scheduled covered vehicles, the Progressive Policy is primary; the General Casualty Auto Policy is secondary; and, if it applied, the Great West Policy would be tertiary.
As to Progressive, Nathan Peterson purchased the policy to comply with his obligations under the Independent Contractor Agreement with Holicky, including obligations to insure his tractor, to hold Holicky harmless with respect to any liability in connection with the operation of the tractor while pulling Holicky's trailers, and to indemnify Holicky for any such loss. See Sathre v. Brewer, 289 Minn. 424, 184 N.W.2d 668, 671 (1971) (describing truck lease agreement as a "significant insurable circumstance" in prioritizing coverage). Additionally, the policy explicitly was based upon the risk of an accident occurring while Peterson was driving his tractor with Holicky's trailer, hauling for Holicky: the policy was bought specifically for Peterson's tractor, and an additional premium was paid for liability coverage for non-owned trailers; and Holicky was explicitly named as an additional insured for its liability arising from Nathan Peterson's conduct. Finally, when the liability premiums paid for the tractor and trailers are added, the Progressive Policy collected the highest premiums.
As to General Casualty, based on the size of its premium, its commercial nature, its specific listing of the trailer at issue, its provision of such state-mandated coverage as UI/UIM coverage, and its insured— Holicky—the General Casualty Auto Policy was also created to insure Holicky and permissive users of its trailers and tractors doing its commercial hauling, which is the context in which this Accident occurred. It applies on a secondary basis.
General Casualty asserts that the Court should apply the closest to the risk test to determine priority. The Court concludes that the result is the same under this four-part test.
This factor is neutral as to all three relevant policies because all three policies are commercial policies.
This factor looks at which insurers specifically described the accident-involved vehicle in their policies. Auto Owners, 281 N.W.2d at 704. In an accident involving a tractor-trailer combination, such as this case, the involved trailer is relevant. See Nat'l Indemnity Co. of Minn. v. Ness, 457 N.W.2d 755, 759 (Minn.Ct.App.1990) ("Under the facts of this case, any attempt to separate damages caused by the tractor from those caused by the trailer would be futile. The trailer was dependent on a tractor for movement. The two must be viewed as a unit.") (citation omitted); see also Northland Ins. Co. v. W. Nat'l Mut. Ins. Co., No. C5-92-324, 1992 WL 153094, at *2 (Minn.Ct.App. July 7, 1992) (rejecting General Casualty's argument that Ness should be reversed and holding, in its closest to the risk analysis, that "there is a unitary risk involved in driving a tractor-trailer different from the risk involved when a tractor is driven without a trailer because, when driven in tandem, it presents such a myriad of physical effects, one on another, as to defy analysis").
Here, this factor weighs in favor of primary coverage by Progressive, as its policy explicitly is based on the tractor at issue and included a separate premium for non-owned trailers. This factor weighs in favor of secondary coverage by General Casualty, as its policy explicitly lists the involved trailer. This factor weighs in favor of tertiary coverage by Great West, because its policy did not provide coverage for any specifically named vehicles at all, let alone those involved in the Accident.
In this case, unlike in the U.S. Fire case relied upon by General Casualty, the Court has detailed information on how the various premiums were allocated. Cf. U.S. Fire, 461 N.W.2d at 235 ("Without additional [premium] information, the third factor is of little help in determining which carrier should be primarily responsible..."). Here, all three policies list the same $1 million liability limit. Progressive charged a $3,497.00 liability premium for the tractor and an additional liability premium of $798.00 for non-owned attached trailer liability coverage. In total, including
Holicky paid $3,941.00 in liability premiums for the General Casualty Auto Policy, which covered multiple tractors and trailers, including the trailer involved in the accident. Overall, including premiums for PIP, UM/UIM, physical damage, etc., Holicky paid $7,810.00 in premiums for the policy.
The Great West Policy lists a premium of $0. Holicky paid $250 administrative fee for the liability portion of the Great West Policy.
For this factor, the larger the premium, the larger the contemplated exposure. See Goeman v. Allstate Ins. Co., 725 N.W.2d 375, 379 (Minn.Ct.App.2006) (analyzing second factor by examining whether any insurer "contemplated greater exposure by an increased premium"); CPT Corp. v. St. Paul Fire & Marine Ins. Co., 515 N.W.2d 747, 751 (Minn.Ct.App.1994) ("Aetna's "Fiduciary Responsibility" premium was $3,776 whereas St. Paul's "Administration Liability" premium was only $339. The difference between the premiums indicates that St. Paul's policy covers the losses only incidentally, if at all.").
This factor weighs in favor of Progressive as primary, because Progressive accepted $3,497 in liability premiums to insure just the 1997 Freightliner and then also accepted an additional $798 to insure any non-owned attached trailers. The Accident involved both the Freightliner and the trailer. This factor weighs in favor of General Casualty being secondary because it charged $3,941 for liability coverage with the specific trailer at issue being a basis for part of the premium computation, along with a number of other tractors and trailers. Finally, this factor weighs in favor of Great West as tertiary, because Great West only charged a $250 administrative fee in exchange for certification on behalf of Holicky, and none of that $250 was allocated to a named vehicle.
This fourth factor does not definitively weigh in favor of one policy over another. All three policies are commercial auto policies. All three named Holicky as an insured and intended to cover its business operations. Progressive more specifically named and contemplated Nathan Peterson using his tractor with Holicky's trailer while hauling for Holicky. General Casualty did not name Nathan Peterson; however, it did provide the state-mandated coverage necessary for Holicky to do trucking business in Minnesota, such as PIP and UM/UIM coverage. The Great West Policy did not specifically name the trailer or the tractor involved, but it provided the DOT filings necessary for Holicky to engage in interstate trucking, which was precisely what was occurring when the accident happened. Both the Great West Policy and the General Casualty Auto Policy were necessary for Holicky's operation on the day of the Accident.
Based on the Court's analysis and weighing of the above four factors, if the Great West Policy were to provide coverage, that coverage would be tertiary. The Progressive Policy would be primary, and the General Casualty Auto Policy would be secondary.
General Casualty relies heavily upon the U.S. Fire case to argue that, under the closest to the risk test, the Great West Policy should be primary. The Court has
In U.S. Fire, the Minnesota Court of Appeals did find the federal filings by the trucking company's insurer to be important in determining the closest to the risk analysis. However, it reached that conclusion because it held that the ICC filings and the Minnesota No-Fault Act and state regulations dictated that the trucking company, "U.S. Salt[,] be treated as the owner of the vehicles, and, therefore, that the insurer of its business operations was primarily obligated to insure the loss." U.S. Fire, 461 N.W.2d at 232-33. In other words, the import of the ICC filings, in combination with Minnesota law, was that U.S. Salt should be treated as the "owner" of the involved vehicles. Then, the owner's insurer should be primary. Under this reasoning, without examining the other relevant factors, one might conclude that Progressive was tertiary to Great West and General Casualty, which both insured Holicky's trucking operations. However, this reasoning has no implication as between Great West and General Casualty—both were insurers for Holicky, the trucking company. In fact, many of Holicky's Minnesota statutory requirements were satisfied by the General Casualty Auto Policy, not by the Great West Policy. When the closest to the risk analysis is applied as between Great West and General Casualty, General Casualty is primary.
Moreover, other relevant factors of the closest to the risk test were not at issue in U.S. Fire. For example, the U.S. Fire court held that the third factor—which premium reflected a greater contemplated exposure—was neutral because the court did not have sufficient information to analyze the various premiums. In this case, the Court does have information on the premiums and, under any variety of mathematical calculation, it is clear that the $250 payment to Great West reflects less exposure than the thousands of dollars in liability payments for the specific vehicles involved in the Accident that were paid to Progressive and General Casualty.
The Court will not enter judgment in this case at this time, as requested by Great West, because some of Holicky's claims, such as its indemnity claim, have not been addressed in the pending motions and, therefore, remain unresolved.
Accordingly, based upon the files, records, and proceedings herein,
