NOT RECOMMENDED FOR PUBLICATION
File Name: 14a0014n.06
No. 13-3610
FILED
UNITED STATES COURT OF APPEALS Jan 14, 2014
FOR THE SIXTH CIRCUIT DEBORAH S. HUNT, Clerk
CAROLINA CASUALTY INSURANCE )
COMPANY, )
) ON APPEAL FROM THE UNITED
Plaintiff-Appellant, ) STATES DISTRICT COURT FOR THE
) SOUTHERN DISTRICT OF OHIO
v. )
)
CANAL INSURANCE COMPANY and ) OPINION
GREEN LINE TRUCKING, INC., )
)
Defendants-Appellees. )
_____________________________________ )
Before: COLE, GILMAN, and DONALD, Circuit Judges.
RONALD LEE GILMAN, Circuit Judge. This appeal involves a dispute
between two insurers, Carolina Casualty Insurance Company and Canal Insurance Company,
over whether a policy issued by Canal provides primary coverage for personal injuries incurred
in a collision between a tractor-trailer and a bus. When Canal refused to provide any coverage
following the accident, Carolina filed a declaratory judgment action under 28 U.S.C. § 2201(a)
against Canal and Green Line Trucking, Inc., seeking a declaration that the Canal policy is
primary. After both insurance companies moved for summary judgment, the district court
denied Carolina’s motion and entered judgment in favor of Canal. Carolina now appeals from
that judgment. For the reasons set forth below, we REVERSE the judgment of the district court
and REMAND the case for further proceedings consistent with this opinion.
Carolina Cas. Ins. Co. v. Canal Ins. Co. et al., No. 13-3610
I. BACKGROUND
Jama Farah was involved in an accident in December 2007 when the tractor-
trailer that he was driving jackknifed during snowy weather on an interstate highway in New
Jersey. Soon afterward, a bus hit the disabled tractor-trailer, injuring a number of the bus
passengers. Several of them sued Farah and the company for whom he was driving, Give Me the
Freight, LLC (GMTF), in New York state court.
At the time of the accident, Farah was working under a contract with GMTF to
haul mail from Alabama to New Jersey. The truck involved in the accident was a 2001
Freightliner tractor that was co-owned by Farah and Mohammed Yussuf. Yussuf also owned
Green Line, a trucking company insured by Canal.
Farah was unable to obtain insurance coverage from GMTF when the mail-
hauling contract commenced, so he turned to Green Line to procure coverage for the
Freightliner. Green Line, through Yussuf, agreed to add the Freightliner to its commercial
insurance policy with Canal in exchange for $800 to $1000 from Farah (the exact amount is
unspecified in the record). An endorsement to the Canal policy lists the Freightliner as a
“Covered Auto.”
Farah filed a claim with Canal after the December 2007 accident, but Canal
denied coverage. Canal also refused to defend and indemnify Farah and GMTF in the New York
lawsuits. Carolina, for its part, undertook Farah’s defense pursuant to a federally mandated
endorsement (known as an “MCS-90”) contained in the insurance policy that Carolina had issued
to GMTF. In situations where no other insurance coverage is available, the MCS-90 obligates an
insurer (here, Carolina) to pay any final judgment against an insured for liability arising from the
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insured’s contractual operation of a commercial vehicle irrespective of whether the commercial
vehicle is specifically described in the insurance policy. Canal concedes that if its policy is
deemed to provide primary coverage, then Carolina’s MCS-90 is not triggered and Carolina has
no obligation to Farah or GMTF.
Dissatisfied with Canal’s denial of coverage, Carolina filed a declaratory
judgment action against Canal in the United States District Court for the Southern District of
Ohio in August 2011. Carolina sought a declaration that Canal, and not Carolina, is required to
defend and indemnify Farah and GMTF in the underlying personal-injury actions. The parties
filed cross-motions for summary judgment following discovery. In its summary-judgment order,
the district court concluded that Farah did not qualify as a “permissive user” of a “Covered
Auto” within the meaning of the Canal policy. Because Farah was not deemed a permissive
user, the district court reasoned, Canal is not required to defend and indemnify Farah and GMTF.
The court accordingly entered final judgment in favor of Canal. This timely appeal by Carolina
followed.
II. ANALYSIS
A. Standard of review
We review the district court’s grant of summary judgment de novo. Martin Cnty.
Coal Corp. v. Universal Underwriters Ins. Co., 727 F.3d 589, 593 (6th Cir. 2013). Summary
judgment is proper where there is no genuine dispute of material fact and the moving party is
entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). In considering a motion for
summary judgment, the district court must construe the evidence and draw all reasonable
inferences in favor of the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
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475 U.S. 574, 587 (1986). The central issue is “whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is so one-sided that one party must
prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52 (1986).
B. Canal’s policy provides primary coverage
Carolina offers several arguments regarding the alleged errors of the district court,
but its appeal ultimately rises or falls on the single question of whether Farah qualifies as a
“permissive user” under the terms of the Canal policy issued to Green Line. If Farah is a
permissive user, then Canal must defend and indemnify Farah and GMTF in the underlying
personal-injury actions. On the other hand, if Farah does not qualify as a permissive user, then
Canal has no such duty. The answer to the permissive-user question in turn depends on whether
Green Line “own[ed], hire[d] or borrow[ed]” the Freightliner. Carolina contends that Green
Line should be considered the owner of the Freightliner under the terms of Canal’s policy.
In response, Canal argues as a threshold matter that Carolina’s argument
regarding ownership is not properly before us because Carolina allegedly waived this argument
by failing to present it to the district court. But the district court granted Canal’s motion for
summary judgment when it concluded, among other things, that the Canal policy does not
provide coverage for “an accident in which Green Line gave permission for someone to drive a
covered vehicle that it did not own, hire or borrow.” Carolina Cas. Ins. Co. v. Canal Ins. Co.,
940 F. Supp. 2d 753, 760 (S.D. Ohio 2013) (emphasis added).
Furthermore, even if the ownership issue was not squarely presented to the district
court by Carolina, there was no unfair surprise to Canal. See Rice v. Jefferson Pilot Fin. Ins. Co.,
578 F.3d 450, 454 (6th Cir. 2009) (explaining that one of the purposes of the doctrine is to
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prevent unfair surprise). Nor is waiver an absolute rule. See Friendly Farms v. Reliance Ins.
Co., 79 F.3d 541, 545 (6th Cir. 1996) (holding that “this Court has discretion to entertain novel
questions”). Because the interpretation of an insurance contract is a purely legal inquiry, 21st
Century Ins. Co. v. Estate of Doubrava, No. 97903, 2012 WL 3041178, at *1 (Ohio Ct. App.
July 26, 2012), we see no reason for us not to decide the issue of ownership on appeal.
Turning to the merits of the case, we now examine whether the Freightliner is a
vehicle that Green Line owned within the meaning of Canal’s policy. The parties do not dispute
that Ohio law governs the interpretation of the policy in question. Under Ohio law, an insurance
policy “is a contract and . . . is to be given a reasonable construction in conformity with the
intention of the parties as gathered from the ordinary and commonly understood meaning of the
language employed.” Dealers Dairy Prods. Co. v. Royal Ins. Co., 164 N.E.2d 745, 747 (Ohio
1960); see also Bennett v. State Farm Mut. Auto. Ins. Co., 731 F.3d 584, 585 (6th Cir. 2013)
(explaining that Ohio courts “construe insurance agreements in accordance with the same rules
as other written contracts”) (internal quotation marks omitted). Terms that are not defined in an
insurance policy “must be given their natural and commonly accepted meaning.” Fed. Ins. Co. v.
Exec. Coach Luxury Travel, Inc., 944 N.E.2d 215, 216 (Ohio 2010).
The Canal policy, in relevant part, expressly defines an “insured” as “[a]nyone
else while using with your permission a covered ‘auto’ you own, hire, or borrow . . . .” Canal
does not dispute that Farah had Green Line’s permission to use the Freightliner to haul mail for
GMTF. Farah co-owned the truck, after all, with Green Line’s owner (Yussuf), and Green Line
had requested that the truck be insured. Nor is there any question that the Freightliner was a
“Covered Auto” under Green Line’s policy with Canal. Moreover, Canal concedes that “as a
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truck added as a scheduled vehicle to the Canal Policy by endorsement, Farah’s truck qualified
as a covered ‘auto’ under the terms of the Policy.” The only remaining question, then, is whether
Green Line owned the Freightliner within the meaning of the Canal policy.
Carolina argues that because the Freightliner is listed by endorsement on Canal’s
form titled “SCHEDULE OF COVERED AUTOS YOU OWN,” the truck is by definition one
that Green Line owned. The backbone of Carolina’s argument is that the listing of a vehicle on
the form obviates any need to look outside the policy for the meaning of the term “own.” Put
another way, Carolina contends that legal ownership of the Freightliner is irrelevant because the
Canal policy expressly refers to the truck as a “COVERED AUTO[ ] YOU OWN,” thereby
trumping legal ownership.
Canal responds that ownership in the insurance-policy context is determined by
the Ohio Uniform Commercial Code (UCC). That assertion is correct as a general proposition,
but it is not applicable under the present circumstances. Ohio courts have applied § 2-401 of the
Ohio UCC to determine whether a person owned a vehicle and, as a consequence, whether an
insurance policy provided coverage for an accident. See Artisan & Truckers Cas. Co. v. JMK
Transp., LLC, 994 N.E.2d 528, 531–32 (Ohio Ct. App. 2013) (applying § 2-401 of the Ohio
UCC to identify the owner for purposes of determining insurance coverage in an accident where
the phrase “autos owned by you” was not defined in the policy).
Here, in contrast, Canal’s policy “marks out its . . . coverage” using plain
language, so there is no need to refer to the Ohio UCC. See Bennett, 731 F.3d at 585–86
(holding that the definition of the term “occupant” was broad enough to include a person on a
vehicle’s hood because the “policy . . . define[d] the term” that way). If the plain language of the
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policy did not refer to the Freightliner as a “COVERED AUTO[ ] YOU OWN,” then we would
indeed look to the Ohio UCC to construe the term “own.” See Artisan & Truckers Cas. Co., 994
N.E.2d at 531–32. Green Line, to be sure, did not own the Freightliner in the ordinary sense of
the term because Green Line’s name does not appear on the certificate of title or the registration.
Accordingly, absent the specific contractual language, we would apply the definition contained
in the Ohio UCC.
But Canal’s policy lists the Freightliner as a “COVERED AUTO[ ] YOU OWN”
and defines an “insured” as “[a]nyone else while using with your permission a covered ‘auto’
you own, hire, or borrow . . . .” (emphasis added). The same phrase—“covered auto you
own”—appears in both definitions. If we adopted Canal’s view, which would define “own”
differently depending on where the term appears in the policy, the “COVERED AUTO[ ] YOU
OWN” language would give rise to an internal ambiguity. This is an impermissible result under
Ohio law. See Cincinnati Ins. Co. v. CPS Holdings, Inc., 875 N.E.2d 31, 35 (Ohio 2007)
(explaining that insurance contracts must be “read as a whole”); see also Talbert v. Cont’l Cas.
Co., 811 N.E.2d 1169, 1172 (Ohio Ct. App. 2004) (cautioning courts to avoid “contract
interpretations which render contracts illusory or unenforceable”) (internal quotation marks
omitted). We therefore conclude that Green Line owned the Freightliner within the meaning of
Canal’s policy.
Seeking to avoid this result, Canal first argues that Carolina is attempting to
manufacture coverage through estoppel. As explained above, however, the policy language that
Canal itself drafted—and not equitable principles—gives rise to coverage. So Canal’s estoppel
argument is without merit.
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Canal next argues that the “Trucker’s Endorsement” contained in its policy bars
coverage. This endorsement excludes from coverage “any person, firm or organization using the
described ‘auto’ pursuant to any lease, contract of hire, bailment, rental agreement, or any similar
contract or agreement either written or oral, expressed or implied.” Canal asserts that because
Farah was using the Freightliner pursuant to an oral lease with GMTF, he and GMTF are
ineligible for coverage under the Canal policy.
We are not persuaded by Canal’s argument. For one thing, Farah was obviously
not a lessee of the very truck he co-owned. And, as previously discussed, GMTF could not be
the lessor of the truck because GMTF never had title to the same. We have, moreover, rejected a
similar argument by Canal in a recent case. See LM Ins. Corp. v. Canal Ins. Co., 523 F. App’x
329, 336 (6th Cir. 2013) (holding that the truck in question was “not being used pursuant to a
contract of hire” as described in an identically phrased Trucker’s Endorsement because the
contract at issue was primarily a personal services contract and the truck was merely an
incidental component of that service) (internal quotation marks omitted). Farah’s deposition
testimony also makes clear that GMTF hired him primarily for his services (i.e., to haul mail
from Alabama to New Jersey), and that “his truck was incidental to [providing] that service.”
See id.; see also Liberty Mut. Fire Ins. Co. v. Canal Ins. Co., No. A.1:96CV261-D-D, 1997 WL
786760, at *6 (N.D. Miss. Nov. 13, 1997) (holding that Canal could not deny primary coverage
pursuant to the Trucker’s Endorsement where the contract was primarily one for personal
services). At bottom, the record compels the conclusion that the contract between Farah and
GMTF was a contract for personal services. For these reasons, the Trucker’s Endorsement does
not preclude coverage in this case.
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Finally, we note that construing the Canal policy in favor of coverage fits with
Ohio law and the parties’ expectations. Ohio law strongly disfavors illusory coverage. See
Talbert, 811 N.E.2d at 1172 (explaining that courts should avoid “contract interpretations which
render contracts illusory or unenforceable”) (internal quotation marks omitted). Canal offers no
serious argument that Farah or Green Line procured coverage for the Freightliner through fraud
or misrepresentation. See United States v. Corrado, 304 F.3d 593, 611 n.12 (6th Cir. 2002)
(explaining that “issues adverted to in a perfunctory manner, unaccompanied by some effort at
developed argumentation, are deemed waived”) (internal quotation marks omitted). Moreover, if
actual ownership were as important to Canal as it now claims, Canal could have required Green
Line to submit proof of actual ownership before adding any vehicles to its policy. Alternatively,
Canal could have defined the word “own” in UCC terms in its policy. But Canal did neither. It
instead accepted a premium payment from Green Line that added the Freightliner as an owned
vehicle without imposing any condition of actual ownership. Canal in effect merged the
potentially separate concepts of (1) being a covered auto, and (2) being a covered auto owned by
Green Line into a single category by its own choice of language, and it must now live with that
choice. Otherwise, Green Line’s premium payment would be for naught, and the policy
language listing the Freightliner as a “COVERED AUTO[ ] YOU OWN” would be rendered
meaningless.
In sum, we hold that the Canal policy provides primary coverage for Farah and
GMTF. And because the Canal policy is primary, the MCS-90 endorsement in Carolina’s policy
is not triggered. Canal, not Carolina, must defend and indemnify Farah and GMTF. We leave to
the district court the task of determining the amount that Canal must reimburse Carolina for the
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expenditures that Carolina has incurred in connection with the New York lawsuits.
III. CONCLUSION
For all of the reasons set forth above, we REVERSE the judgment of the district
court and REMAND the case for further proceedings consistent with this opinion.
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