Insurance Lawyer And Policy Interpretation

Fort Worth insurance lawyers need to read this opinion issued by the United States Court of Appeals for the Fifth Circuit issued on February 2013. The style of the case is, Canal Indemnity Company v. Rapid Logistics, Incorporated.
Here is some relevant information:
This is an appeal from a declaratory judgment action involving an insurance coverage dispute. Canal Indemnity Company filed suit against its insured, Rapid Logistics, Inc. 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 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, this court affirmed.
In December 2007, Rafael Olivas was driving a tractor-trailer truck to make a delivery. The truck was owned by Oralia 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, 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.
Rapid Logistics’ insurance policy is a “public-liability policy designed specifically for use by motor carriers in the interstate trucking industry.” To obtain an operating permit, motor carriers must obtain a certain amount of public-liability insurance. 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.” 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 insurance “does not apply to injury to or death of the insured’s employees while engaged in the course of their employment.” This is found in 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 . . . .”
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 “such term includes a driver of a commercial motor vehicle. 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.
The court did not need to 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 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.
This case serves as a good example for why an insurance lawyer needs to be providing counsel in these types of cases.