Case: 09-10476 Document: 00511188664 Page: 1 Date Filed: 07/29/2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
July 29, 2010
No. 09-10476 Lyle W. Cayce
Clerk
EMPLOYERS MUTUAL CASUALTY COMPANY; EMCASCO INSURANCE
COMPANY,
Plaintiffs – Appellees
v.
JUAN MIGUEL BONILLA, also known as Mike; ISABEL MOLINA,
Individually, and as next friend of J.Y.L.M., a minor,
Defendants – Appellants
Appeal from the United States District Court
for the Northern District of Texas
Before DAVIS, WIENER, and SOUTHWICK, Circuit Judges.
LESLIE H. SOUTHWICK, Circuit Judge:
This is an insurance coverage dispute. It arose after a state court
judgment established liability for a serious accident. The district court granted
a Motion for Summary Judgment in favor of the insurance companies, finding
there to be no coverage. We hold that the district court erred in denying
coverage based on the argument that the injury did not arise from “use” of the
vehicle. Another exclusion under the relevant policies remains to be considered,
however, that was not addressed because of the district court’s initial ruling. We
REVERSE and REMAND for further proceedings.
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I. FACTS
Juan Miguel Bonilla leased Truck 219, a mobile catering truck, from Jolly
Chef Express, Inc., in Dallas, Texas. He also leased a space on Jolly Chef’s
commissary and parking lot. Daily, Bonilla hired a driver and cook for each of
his trucks. At the end of each day the driver and cook would return to the
commissary to clean the truck and prepare for the next day’s route.
On February 13, 2002, Bonilla hired Fabricio Fernandez to drive and
Isabel Molina to serve as a cook on Truck 219. Molina and Fernandez completed
their route and returned Truck 219 to Jolly Chef’s lot. While Truck 219 was
parked, Fernandez poured a flammable substance, likely gasoline, on the floor
of the truck to loosen the grease. Fernandez then left the truck in order to turn
in the money they had earned for the day. As Molina began washing the dishes
and trays for the day, she heard an explosion and was suddenly in flames. A
pilot light from the stove had ignited the substance that Fernandez had poured
on the floor. Molina was severely injured.
Molina sued Bonilla and Jolly Chef in Texas state court. Bonilla did not
have insurance of his own. Truck 219 was listed, though, on Jolly Chef’s three
insurance policies. Jolly Chef’s trucks were insured by Employers Mutual
Casualty Company under a Commercial General Liability (“CGL”) Policy and a
Commercial Umbrella Policy. Jolly Chef had also purchased a Commercial Auto
Liability Policy from Emcasco Insurance Company. The Auto Policy covered all
of Jolly Chef’s trucks. Emcasco and Employers Mutual are jointly represented.
They will be referred to as EMC except where a distinction is needed.
EMC defended both Jolly Chef and Bonilla under a reservation of rights.
Molina won a judgment against Bonilla in the amount of $1,832,933.58. Molina
took nothing against Jolly Chef.
EMC filed the present declaratory judgment action in the United States
District Court for the Northern District of Texas. Both Bonilla and Molina were
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named as defendants, and they are separately represented. EMC denied any
liability under any policy for the claims asserted in the state court suit.
In due course, each of the parties filed motions for summary judgment.
The district court granted EMC’s motion, finding no coverage under any of the
policies. (1) There was no coverage under the CGL policy because neither
Bonilla nor Molina was an “insured.” No issues are raised on appeal about the
CGL Policy. (2) There was no coverage under the Auto Policy because the fire
did not arise out of the “use” of the vehicle as a vehicle or the maintenance of it.
(3) There was no coverage under the Umbrella Policy because the meaning of
“use” in that policy was the same as under the Auto Policy.
Bonilla and Molina appealed.
II. DISCUSSION
We review each of the rulings on cross-motions for summary judgment de
novo. Ford Motor Co. v. Tex. Dep’t of Transp., 264 F.3d 493, 498 (5th Cir. 2001);
Fed. R. Civ. Pro. 56(c)(2). We independently examine the evidence and
inferences from the perspective favoring the non-moving party, in order to
determine if there are any disputes of material fact. Id.
The district court concluded that none of the three policies purchased by
Jolly Chef provided coverage for Molina’s claims. We start our analysis with a
description of each of these policies.
A. Overview of the Policies
Jolly Chef purchased an Auto Policy, a CGL Policy, and an Umbrella
Policy. The Umbrella Policy gave coverage “arising out of the ownership,
maintenance, operation, use (including loading or unloading), or entrustment to
others” of an automobile, if there was coverage provided under a primary policy.
“The coverage provided by this policy will not be broader than the coverage
provided by the ‘primary’ insurance policy.” Therefore, the Umbrella Policy
supplemented the liability limits of the Auto Policy. The Umbrella Policy also
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provided coverage in the absence of coverage under a primary policy provided
one was using the vehicle with the permission of a named insured. The reach
of this additional coverage is contested, a contest we need not resolve.
Under the Auto Policy, the insurer “will 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.”
The CGL Policy covered “bodily injury” and “property damage” arising
from “occurrences” (defined as “accidents”) taking place in the “coverage
territory.” The CGL Policy synchronized with the Auto Policy by excluding
coverage for bodily injury and property damage “arising out of the ownership,
maintenance, use or entrustment to others of any . . . auto . . . owned or operated
by or rented or loaned to any insured.” There may have been additional
exclusions under the CGL Policy, but the general manner in which the two
policies dovetailed is clear.
We look to Texas law to determine the effect that the existence of multiple
policies might have on our issues. In the principal case cited to us by both
parties, the Texas Supreme Court relied extensively on two treatises. See Mid-
Century Ins. Co. of Tex. v. Lindsey, 997 S.W.2d 153, 156 (Tex. 1999). One of the
treatises embraced by the court, in a section not quoted, explained the interplay
of two insurance policies that use the phrase “arising out of ownership,
maintenance, or use” of a motor vehicle:
The term “arising out of the operation, maintenance, or use”
of a vehicle typically arises in two distinct contexts: first, in the
context of an inclusory provision as to coverage in an automobile
liability policy; and second, in connection with an exclusionary
provision in general liability or homeowners’ insurance policies. In
keeping with the general rules of construction, the term may be
construed differently in each context, as the coverage provision is
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generally entitled to liberal construction in favor of coverage, while
the exclusion is subject to a narrow construction against the insurer.
8A C OUCH ON I NSURANCE § 119:26 (3d ed. 2009) (footnotes omitted) [hereinafter
C OUCH].
The author states that both the language of exclusion and of inclusion
should be read to favor coverage. We interpret that language in light of the
Texas Supreme Court’s identification of what it calls the fundamental point,
namely, to determine “what coverage is intended to be provided by insurers and
acquired and shared by premium-payers.” Lindsey, 997 S.W.2d at 158. Jolly
Chef’s intent is relevant, along with that of the insurers, in determining the
reasons for the use of different policies.
The CGL Policy that Jolly Chef purchased was found not to apply because
Bonilla was not an “insured.” That decision is not challenged on appeal. Though
coverage by the CGL Policy is not an issue, the policy itself is relevant. Had an
insured under both the CGL and the Auto Policy been the claimant (Jolly Chef,
for example), the dispute would have had a much different form. If the Auto
Policy did not cover the occurrence because the injury did not arise from the use
of a covered auto, then the CGL Policy exclusion of injuries arising from the use
would not have applied and the claim would have been covered – absent another
exclusion. The two policies together created a range of coverage for Jolly Chef.
EMC has argued that the accident is covered by the CGL Policy, thereby
excluding coverage by the Auto Policy. When language of coverage in a business
auto policy is virtually identical to language of exclusion in a CGL policy, “[s]ome
accidents would be covered by the auto policy, others by the CGL. A single
accident could not be covered by both.” Travelers Indem. Co. v. Citgo Petroleum
Corp., 166 F.3d 761, 769 (5th Cir. 1999).
In addition, even with a liberal reading of insurance policies, it is doubtful
that dovetailed policy terms such as this should be interpreted a certain way if
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the named insured were seeking coverage but differently if someone else such
as those who are not the purchasers seek coverage. Had Jolly Chef been found
liable in the state court suit, would this claim have been considered outside the
coverage of the Auto Policy and within the coverage of the CGL Policy? If so,
should the opposite result obtain here just because Bonilla is the claimant and
is not an insured under the CGL Policy?
As a final general word about interpretation, we note that “many insurers
actually intended the usages [of this policy term about “use” of an automobile]
to be a device for coordinating coverage between two concurrent policies, one
covering the insured’s automobile and the other covering the insured’s ‘general’
liability.” C OUCH § 119:26.
Our point in all of this is only that insurance policies are to be interpreted
as written, with assumptions favoring coverage when conditions for those
assumptions exist, and reliance upon the intent of the actual parties to the
policies when necessary.
We now examine the coverage under the Auto Policy.
B. The Auto Policy
The first page of the Auto Policy is captioned “Commercial Auto
Declarations – Business Auto Coverage.” That same page states that Jolly Chef
is the named insured, that the “form of business” is a corporation, and that the
“description” of the business is “mobile catering.” The policy, clearly, was not
intended to apply to a motor vehicle used by individuals simply in their daily
activities of traveling to and from work or school or otherwise. The policy was
issued specifically for vehicles involved in a mobile catering business.
The entities who were insured included all who were “using with [Jolly
Chef’s] permission a covered auto.” Since Bonilla leased Truck 219 from Jolly
Chef, the parties agree there was coverage for Bonilla. The disagreement is
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whether there was coverage for this accident. The accident must have been one
“resulting from the ownership, maintenance or use of a covered auto.”
The difficulty in the legal analysis arises from the need to determine the
significance of the fact that Truck 219 was a vehicle designed for a special use.
It had kitchen facilities built into it. Cleaning necessary from the use of that
equipment set in motion the events resulting in the accident, and a pilot light
that was part of the equipment was among the causes.
No definition of “use” appears in the Auto Policy. The district court held
that coverage under the Auto Policy was not affected by the special use that Jolly
Chef’s mobile catering trucks served. Instead, the district court required the use
of the vehicle to be one involving transportation. There is certainly caselaw from
which to draw that conclusion. We turn now to Texas law.
Under Texas law, liability for “use” under this policy language requires
that “a causal connection or relation . . . exist between the accident or injury and
the use of the motor vehicle.” Lindsey, 997 S.W.2d at 156. “The term ‘use’ is the
general catchall of the insuring clause, designed and construed to include all
proper uses of the vehicle not falling within other terms of definition such as
ownership an[d] maintenance.” State Farm Mut. Auto. Ins. Co. v. Pan Am. Ins.
Co., 437 S.W.2d 542, 545 (Tex. 1969). “[I]f a vehicle is only the locational setting
for an injury, the injury does not arise out of any use of the vehicle.” Lindsey,
997 S.W.2d at 156 (citing LeLeaux v. Hamshire-Fannett Indep. Sch. Dist., 835
S.W.2d 49, 51-52 (Tex. 1992)).
For additional understanding of the language, we look again at the two
insurance treatises that the Lindsey court relied upon. The Texas Supreme
Court said that these two treatises derived a helpful test from numerous judicial
opinions throughout the country:
For an injury to fall within the “use” coverage of an
automobile policy (1) the accident must have arisen out of the
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inherent nature of the automobile, as such, (2) the accident must
have arisen within the natural territorial limits of an automobile,
and the actual use must not have terminated, (3) the automobile
must not merely contribute to cause the condition which produces
the injury, but must itself produce the injury.
Id. at 157 (quoting C OUCH § 119:37; the court also cited 6B J OHN A. A PPLEMAN,
I NSURANCE L AW AND P RACTICE § 4317 (Buckley ed. 1979) [hereinafter
A PPLEMAN]) (footnoted citations converted to this parenthetical).
In a way, this language begs our question, one the Texas Supreme Court
did not need to answer. The Lindsey court said the inherent use was one “of the
vehicle qua vehicle, rather than simply as an article of property.” Id. at 156.
The court cited a treatise concluding that this provision in “an automobile
liability policy, means the use of a vehicle as such and does not include a use
which is foreign to a vehicle’s inherent purpose but to which a vehicle might
conceivably be put.” Id. at 156 n.12 (quoting A PPLEMAN § 4316). The “inherent
purpose” of a mobile catering truck certainly could be seen as including the use
and maintenance of its kitchen facilities, though the inherent purpose of a usual
vehicle would not include cooking.
Before trying to choose between generic and special purposes, we examine
Lindsey further. In its opinion, the court held that a nine-year-old boy’s act of
climbing through a truck’s sliding rear window to retrieve his coveralls
constituted “use” of the vehicle as contemplated within an automobile policy. Id.
at 154. While entering the truck, the boy accidentally touched a loaded shotgun
that rested on a mount in the truck, causing the gun to discharge. Id. The shot
struck Lindsey, who was sitting in a car parked next to the truck. Id.
The court applied the three factors we already noted and held that the
injury arose out of the use of the truck. Id. at 158. The boy’s entry may have
been unorthodox but “it was not an unexpected or unnatural use of the vehicle,
given his size, the fact that the vehicle was locked, and the nature of boys,” and
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it was his entry that caused the injury. Id. Though the third factor is
particularly difficult, the court found that because the use of the truck was not
unexpected or unnatural, the truck produced the injury. Id. at 159-60.
We need to choose between EMC’s position that a vehicle qua vehicle
refers to its simple, if broadly defined, transportation capabilities, and Bonilla
and Molina’s argument that coverage is for accidents arising from use of a
mobile catering truck qua mobile catering truck.
Though we have been referred to many opinions from Texas and
elsewhere, very few of them concern this specific issue. Almost none of them
involve special business purposes of a vehicle. Molina argued that we could find
coverage even if we view this explosion as resulting from the use of this vehicle
simply as a means of transportation. That argument starts with the reality that
Truck 219 was equipped with a kitchen. According to Dallas City Code
provisions, all licensed mobile food units were required daily to return to the
commissary to be cleaned and stocked for the next day’s route. Dallas City Code
§ 17-8.2(g)(1), (h)(2)(F)(v). The full scope of Truck 219’s purpose was to transport
food and personnel and also to prepare and sell the food. Molina could not safely
be transported with a greasy floor. Moreover, the food could not be prepared and
sold if the truck were not clean and sanitary. Id. § 17-8.2(j)(2).
The problem with this argument, i.e., that anyone riding in the truck
would be unsafe unless the floor were clean, is that it still relies on the special
purpose of the vehicle. That reliance does not change if we consider coverage for
“maintenance.” If this vehicle did not contain a mobile kitchen, this particular
need to clean or this particular need to stand in the service area would not have
existed. If the truck did not have a stove with a pilot light, this cause of the
explosion would not have been present. The cleaning of this food preparation
area does not undisputably reveal use or maintenance of a vehicle qua vehicle,
but it does show use or maintenance of the kitchen qua kitchen.
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To repeat our analytical goal in this discussion, we are seeking to apply
the first factor from Lindsey that “the accident must have arisen out of the
inherent nature of the automobile, as such . . . .” Lindsey, 997 S.W.2d at 157.
Each party argues that the answer does not turn on ambiguity. As we have
discussed, the intent of the parties is relevant, but no one alleges there is a fact
issue that requires us to remand.
We conclude that EMC’s argument demands an unnatural reading of the
policy language. There is nothing in the caselaw to suggest that Texas would
interpret “use” under a business auto policy, in which the stated purpose of the
vehicles being insured was for mobile catering, in a way that did not include the
hazards that arise from maintaining the mobile catering equipment. Cleaning
a mobile kitchen was not simply a speculative event that might conceivably
occur, nor was the cleaning foreign to the vehicle’s inherent purpose.
We acknowledge finding no published Texas caselaw so holding. We
conclude, though, that the Texas Supreme Court if presented with this precise
issue would take as a natural next step from Lindsey that this accident occurred
from “the inherent nature” of this mobile catering truck. The vehicle intended
is not some mystical, generic vehicle, but the one specifically insured by the
parties to the policy. The special nature of this vehicle was not hidden or
otherwise unknown – it literally was in black and white in the policy.
We also rely in part on one of the treatises seen as persuasive by the
Lindsey court. In discussing business use provisions generally, the author states
that the risks associated with the use of an automobile to be covered under an
automobile policy may be defined in terms of the insured’s business or some
other reference. C OUCH § 120:1. This is partly because of “the fact that many
business uses present significantly different risks than personal use.” Id.
“Accordingly, automobile liability policies frequently provide for coverage of the
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vehicle for business or commercial purposes only or for some specifically
described business use.” Id.
The policies at issue in this case defined the business as “mobile catering”
and expressly covered mobile catering trucks which were equipped with a
kitchen to prepare food. Though there was no express inclusion or exclusion of
uses relating to the business purpose, such purpose would be the intent of the
parties in contracting a “commercial automobile liability policy” for automobiles
engaged in the mobile catering business.
We go no further than to hold, in what is a slight Erie guess but relying on
substantial direction from the Texas courts, that a business vehicle policy covers
the intended and identified uses of that business vehicle. The “injury-producing
act” was cleaning the floor of the truck so that food could safely be prepared.
The cleaning was a natural, expected, and necessary use of mobile catering
Truck 219 and was covered by the Auto Policy.
We still need to consider two other factors mentioned in Lindsey. The next
factor is whether the accident occurred within the natural territorial limits of
the automobile. Lindsey, 997 S.W.2d at 157. Truck 219 was parked on Jolly
Chef’s lot at the time of the accident, and the injury occurred while Molina was
inside of the truck. That factor is satisfied.
The third factor is whether the vehicle produced the injury. Id. The
Lindsey court found this factor troublesome because it is difficult to decide what
role a vehicle plays in producing an injury. Id. at 157-58.
EMC argues this factor is not met because nothing about the truck
produced the injury. Rather, the injury was caused by the flammable substance
ignited by the pilot light. EMC supports this argument with language from
Lindsey that “a firearm discharge . . . does not arise out of the use of the vehicle
merely because the gun rack is permanently attached. Rather, the purpose and
circumstances of the injury-producing act are determinative.” Id. at 163
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There is a distinction between situations where the vehicle is only
incidentally involved – it is the “mere situs” of an accident that could have
occurred anywhere – and those “where the injury-producing act involved the use
of a vehicle as a vehicle.” Tex. Farm Bureau Mut. Ins. Co. v. Sturrock, 65 S.W.3d
763, 767 (Tex. App. – Beaumont 2002).
We are not persuaded by this reasoning. Most of the strength of EMC’s
argument is lost once we define “inherent nature” in the way that we have. This
policy provided coverage for the uses of this mobile catering truck as just such
a truck. The known and expected uses of this vehicle included activities relating
to cooking. The cleaning and pouring of the substance on the floor and the
resulting fire from the stove’s pilot light produced the injury.
Each of the Lindsey factors is satisfied. There was coverage under the
Auto Policy for injuries arising from use and maintenance of the vehicle.
Because vehicle use is an exclusion under the CGL Policy, it likely would not
have applied. Our holding gives a consistent reading to each policy.
C. The Umbrella Policy
The Commercial Umbrella Policy can apply in two instances. First, if
there is coverage under the Auto Policy, there is coverage under the Umbrella
Policy. Second, if there is no coverage under the Auto Policy, then there may be
excess coverage of the retained limit under the Umbrella Policy provided the
occurrence is “otherwise covered by” the Umbrella Policy.
There are substantial arguments made regarding this policy that
understandably focus on the harder question of coverage if the Auto Policy does
not apply. Because we have concluded that the Auto Policy provides coverage,
the Umbrella Policy does as well.
Bonilla was using Truck 219 with Jolly Chef’s permission. The Auto Policy
provides coverage, and so does the Umbrella Policy.
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D. The Employee Injury Exclusion
In the district court and now on appeal, EMC claimed that even if we find
there was “use” of Truck 219 as required under the Auto Policy, coverage is still
excluded under the Employee Injury Exclusion.
The referenced exclusion prevents coverage for bodily injury to “[a]n
employee of the insured arising out of and in the course of employment by the
insured.” The “insured” was Bonilla, and the potential “employee” was Molina.
There is certainly Texas law to apply on the issue. “The test to determine
whether a worker is an employee or an independent contractor is whether the
employer has the right to control the progress, details, and methods of
operations of the employee’s work.” Thompson v. Travelers Indem. Co. of R.I.,
789 S.W.2d 277, 278 (Tex. 1990) (citation omitted). “The employer must control
not merely the end sought to be accomplished, but also the means and details of
its accomplishment as well.” Id. (citation omitted). EMC claims that if there is
no coverage under the Auto Policy because of the Employee Injury Exclusion,
there is likewise no coverage under the Umbrella Policy.
Though EMC raised this issue in the district court, the court did not rule
on it because of its decision on issues regarding “use” of the vehicle. Issues that
were raised but not resolved in district court should be considered first by that
court. KSLA-TV, Inc. v. Radio Corp. of Am., 693 F.2d 544, 546 (5th Cir. 1982).
We confine our analysis to the issues that were evaluated by the district
court. This Employee Injury Exclusion can be considered by the district court
should the issue again be pressed.
We REVERSE and REMAND for proceedings consistent with this opinion.
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