IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
F I L E D
September 21, 2007
No. 05-20938
Charles R. Fulbruge III
Clerk
LINCOLN GENERAL INSURANCE CO
Plaintiff - Intervenor Defendant - Appellee
v.
MARIA DE LA LUZ GARCIA, doing business as Garcia’s Tours
Defendant
v.
CLAUDIA MORQUECHO, individually and as next friend of her minor child
Diana Morquecho and her minor child Veronica Hernandez Morquecho; JOSE
MORQUECHO; JUANA MORQUECHO, individually and as next friend of her
minor child Erick Ivan Rodriguez Morquecho; MARCELINA MORQUECHO,
individually and as next friend of her minor child Richardo Velazquez
Morquecho; FIDEL MORQUECHO, individually and as personal representative
of the Estate of Virginia Anquina Serna, his wife, deceased, and as personal
representative of the Estate of Jamie Morquecho, his son, deceased
Intervenor Plaintiffs - Appellants
Appeal from the United States District Court
for the Southern District of Texas
Before KING, GARZA, and PRADO, Circuit Judges.
PRADO, Circuit Judge:
The issue of first impression before us is whether a federally prescribed
form endorsement covers a bus accident occurring in Mexico. The district court
No. 05-20938
held that it does not and granted summary judgment in favor of the insurer. For
the reasons that follow, we affirm the judgment of the district court.
I. BACKGROUND
A. Factual Background
On April 7, 2004, a tour bus owned by Maria De La Luz Garcia, doing
business as Garcia’s Tours (collectively, “Garcia’s Tours”), and operated by Jesus
Escoto (“Escoto”), a Garcia’s Tours’ employee, was involved in an accident with
a vehicle carrying eight members of the Morquecho family (collectively, the
“Morquechos” or the “Morquecho family”) in Monterrey, Mexico. The accident
occurred on Garcia’s Tours’ bus route between Houston, Texas, and Celaya,
Mexico. Two members of the Morquecho family were killed, and six others were
injured.
At the time of the accident, Garcia’s Tours held an insurance policy issued
by Lincoln General Insurance Company (“Lincoln General”). The policy provides
that Lincoln General “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 policy, however, contains several conditions, including a
territorial restriction. That specific condition provides that Lincoln General will
cover accidents and losses occurring only within the coverage territory, which is
defined as the United States, the territories and possessions of the United
States, Puerto Rico, and Canada, or “loss[es] to, or accidents involving, a covered
auto while being transported between any of these places.”
The policy also contains the federally mandated “Endorsement for Motor
Carrier Policies of Insurance for Public Liability Under Section 18 of the
Regulatory Reform Act of 1982,” referred to as the MCS-90B endorsement
because it is issued on federal form MCS-90B. Lincoln General issued the MCS-
90B endorsement to Garcia’s Tours in compliance with federal law, which
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No. 05-20938
requires that for-hire motor carriers of passengers carry minimum levels of
financial responsibility.1 The policy and the MCS-90B endorsement were in
effect on the date of the accident.
B. Procedural History
On July 6, 2004, the Morquechos filed suit against Garcia’s Tours and
Escoto (the bus driver) in Texas state court. The Morquechos asserted claims of
negligence, negligent hiring, negligent entrustment, and negligent retention, and
sought damages for the injuries sustained in the accident. Lincoln General
denied coverage and refused to defend or indemnify Garcia’s Tours in the state
court action. The Texas state court ultimately found Garcia’s Tours liable on all
counts and awarded the Morquecho family over $1.2 million in damages.
While the state court suit was pending, Lincoln General filed this
declaratory judgment action against Garcia’s Tours in federal district court.
Lincoln General sought a declaration that the policy did not provide coverage for
any damages arising out of the accident involving the Morquechos and,
consequently, that it had no duty to defend or indemnify Garcia’s Tours under
the terms of the policy. Because of their interest in this suit, the Morquecho
family intervened. In their complaint, the Morquechos requested a declaration
that the policy provided coverage for the accident and that the MCS-90B
endorsement applied to any judgment rendered against Garcia’s Tours in the
underlying state court suit.
Lincoln General and the Morquechos subsequently filed cross-motions for
summary judgment.2 In its summary judgment motion, Lincoln General argued
that it did not owe a duty to defend or indemnify the underlying state court
1
For carriers with a seating capacity of sixteen passengers or more, such as Garcia’s
Tours, the minimum level of financial responsibility is $5 million.
2
Garcia’s Tours never filed a motion for summary judgment, nor did it respond to
Lincoln General’s motion.
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No. 05-20938
action because the accident occurred in Mexico, outside of the policy’s coverage
territory, and because the MCS-90B endorsement did not expand coverage to
Mexico under its plain terms. Although the Morquechos conceded that the body
of the policy contained a territorial restriction that did not include Mexico, the
Morquechos contended that the terms of the MCS-90B endorsement trumped the
territorial limitation in the policy and mandated coverage for the accident.
The district court granted summary judgment in favor of Lincoln General.
The district court reasoned that because “[t]he application of the MCS-90B
endorsement derives its authority from the substantive provisions of 49 U.S.C.
§ 31138 and the jurisdictional limitations of 49 U.S.C. § 13501 . . . the
regulations governing the applicability of the form MCS-90B endorsement are
also limited to the transportation of passengers between a place in the United
States and a place in a foreign country to the extent the transportation is in the
United States.” Dist. Ct. Order at 19 (internal quotation marks omitted). The
district court held that “the application of form MCS-90B only applies to
transportation that occurs within the United States, and does not apply to
transportation occurring outside of the United States.” Id. Based on its
analysis, the district court concluded that “the MCS-90B endorsement cannot
apply to the accident in this case, and that Plaintiff Lincoln General is not
obligated to pay any final judgment recovered against Garcia[’s] Tours as a
result of the accident occurring in Mexico.” Id. at 21.
On July 29, 2005, the district court entered a final judgment dismissing
the case. On August 8, 2005, the Morquechos filed a motion for reconsideration,
in which they argued, for the first time, that the endorsement covers Garcia’s
Tours’ liability for negligent hiring, retention, and entrustment because those
acts occurred in the United States and not in Mexico. On September 26, 2005,
the district court denied the motion for reconsideration without commenting on
the Morquechos’ new argument.
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No. 05-20938
The Morquechos now appeal, arguing that the district court erred in
determining that the MCS-90B endorsement did not cover their accident in
Mexico. According to the Morquechos, the endorsement reads out any language
in the policy that would limit the right of injured third parties to recover,
including the territorial restriction in the policy. In the alternative, the
Morquechos raise the argument that they made in their motion for
reconsideration, asserting that the endorsement covers the accident, even
though it occurred in Mexico, because Garcia’s Tours’ negligent hiring, retention,
and entrustment occurred in the United States. This court has jurisdiction over
the Morquechos’ appeal pursuant to 28 U.S.C. § 1291.3
II. DISCUSSION
“We review the district court’s summary judgment and its interpretation
of the endorsement de novo.” Wells v. Gulf Ins. Co., 484 F.3d 313, 315 (5th Cir.
2007). The operation and effect of a federally mandated endorsement is a matter
of federal law. See Canal Ins. Co. v. First Gen. Ins. Co., 889 F.2d 604, 610 (5th
Cir. 1989), modified on other grounds, 901 F.2d 45 (5th Cir. 1990)); see also John
Deere Ins. Co. v. Nueva, 229 F.3d 853, 856 (9th Cir. 2000).
A. Coverage of the MCS-90B Endorsement
The first question before us is whether the MCS-90B endorsement to the
policy obligates Lincoln General to cover an accident occurring in Mexico. The
3
Even though the district court did not explicitly rule on Lincoln General’s claim that
it did not have a duty to defend, the Morquechos contend that we have a final judgment that
is appealable under § 1291. We agree. The district court’s ruling of no coverage under the
terms of the policy necessarily resolved Lincoln General’s duty to defend claim. The MCS-90B
endorsement does not create a duty to defend claims that are not covered by the policy. Cf.
Harco Nat’l Ins. Co. v. Bobac Trucking, Inc., 107 F.3d 733, 735-36 (9th Cir. 1997) (“[F]ederal
courts have consistently stated that the MCS-90 endorsement does not create a duty to defend
claims which are not covered by the policy . . . .”) (citing Canal Ins. Co. v. First Gen. Ins. Co.,
889 F.2d 604, 612 (5th Cir. 1989), modified on other grounds, 901 F.2d 45 (5th Cir. 1990)).
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No. 05-20938
resolution of this issue depends entirely upon the terms of the MCS-90B
endorsement. The endorsement provides in relevant part:
The insurance policy to which this endorsement is attached
provides automobile liability insurance and is amended to assure
compliance by the insured, within the limits stated herein, as a
for-hire motor carrier of passengers with Section 18 of the Bus
Regulatory Reform Act of 1982 and the rules and regulations of the
Federal Highway Administration (FHWA) and the Interstate
Commerce Commission (ICC).
In consideration of the premium stated in the policy to which
this endorsement is attached, the insurer (the company) agrees
judgement recovered against the insured for public liability
resulting from negligence in the operation, maintenance or use of
motor vehicles subject to financial responsibility requirements of
Section 18 of the Bus Regulatory Reform Act of 1982 regardless of
whether or not each motor vehicle is specifically described in the
policy and whether or not such negligence occurs on any route or in
any territory authorized to be served by the insured or
elsewhere. . . . It is understood and agreed that no condition,
provision, stipulation or limitation contained in the policy, this
endorsement, or any other endorsement thereon, or violation
thereof, shall relieve the company from liability or from the
payment of any final judgement, within the limits of liability herein
described, irrespective of the financial conditio[sic], insolvency or
bankruptcy of the insured. However, all terms, conditions and
limitations in the policy to which the endorsement is attached shall
remain in full force and effect as binding between the insured and
the company. The insured agrees to reimburse the company for any
payment made by the company on account of any accident, claim, or
suit involving a breach of the terms of the policy, and for any
payment that the company would not have been obligated to make
under the provisions of the policy except for the agreement
contained in this endorsement.
It is further understood and agreed that, upon failure of the
company to pay any final judgement recovered against the insured
as provided herein, the judgement creditor may maintain an action
in any court of competent jurisdiction against the company to
compel such payment. . . .
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No. 05-20938
By its plain language, the endorsement amends the policy only to the
extent necessary to assure that insurers of for-hire motor carriers of passengers
comply with Section 18 of the Bus Regulatory Reform Act of 1982. The
endorsement also obligates the insurer to pay for any judgments “recovered
against the insured for public liability resulting from negligence in the operation,
maintenance or use of motor vehicles subject to financial responsibility
requirements of Section 18 of the Bus Regulatory Reform Act of 1982 . . . .”
Accordingly, to understand the scope of the MCS-90B endorsement, we must
look to Section 18 of the Bus Regulatory Reform Act of 1982.
Section 18 of the Bus Regulatory Reform Act of 1982 provides that the
Secretary of Transportation shall establish regulations to require minimum
levels of financial responsibility to cover bodily injury and property damage for
the transportation of passengers of for-hire motor carriers. See Bus Regulatory
Reform Act of 1982, Pub. L. No. 97-261, 96 Stat. 1102 (1982). That section is
now codified in 49 U.S.C. § 31138(a), which describes the minimum level of
financial responsibility required by federal law. Section 31138 provides in
relevant part:
The Secretary of Transportation shall prescribe regulations to
require minimum levels of financial responsibility sufficient to
satisfy liability amounts established by the Secretary covering
public liability and property damage for the transportation of
passengers by commercial motor vehicle in the United States
between a place in a State and--
(1) a place in another State;
(2) another place in the same State through a place outside of that
State; or
(3) a place outside the United States.
49 U.S.C. § 31138(a). Section 31138 thus requires the Secretary to establish
minimum levels of financial responsibility to cover liability for bodily injury or
property damage “for the transportation of passengers by commercial motor
vehicle in the United States between a place in a State and--(1) a place in
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No. 05-20938
another State; (2) another place in the same State through a place outside of
that State; or (3) a place outside the United States.” Id. (emphasis added).
Consequently, although § 31138 recognizes that a commercial motor vehicle may
be transporting passengers to “a place outside the United States,” it requires
minimum levels of financial responsibility only for the part of the transportation
that occurs “in the United States.” See id.
Reading the statute in conjunction with the MCS-90B endorsement, the
minimum levels of financial responsibility requirements apply to the
transportation of passengers “in the United States”; thus, the endorsement does
not require an insurer to pay judgments recovered against the insured if the
transportation of passengers by motor vehicle does not occur in the United
States. Accordingly, the endorsement does not cover the Morquechos’ accident
in Mexico because the accident occurred in a place where the motor vehicle was
not subject to the minimum financial responsibility requirements in § 31138.
This court’s conclusion that the endorsement’s coverage is limited to
transportation “in the United States” comports with Congress’s treatment of
foreign motor carriers. Section 31138(c)(2) provides that
[a] person domiciled in a country contiguous to the United States
and providing transportation to which a minimum level of financial
responsibility under this section applies shall have evidence of
financial responsibility in the motor vehicle when the person is
providing the transportation. If evidence of financial responsibility
is not in the vehicle, the Secretary of Transportation and the
Secretary of Treasury shall deny entry of the vehicle into the United
States.
(emphasis added); see also 49 C.F.R. § 387.31(f) (“All passenger carrying vehicles
operated within the United States by motor carriers domiciled in a contiguous
foreign country, shall have on board the vehicle . . . proof of the required
financial responsibility . . . .”) (emphasis added).
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No. 05-20938
The Morquechos nevertheless assert that the endorsement is simply a
private insurance contract between the bus company and the insurer and that
the endorsement’s construction should be limited to the four corners of the
document. According to the Morquechos, the endorsement invalidates any
limitation or condition in the policy and applies regardless of whether the
negligence at issue “occurs on any route or in any territory authorized to be
served by the insured or elsewhere.”
We disagree. The MCS-90B endorsement is not a private contract in
which the parties negotiated the terms. Rather, the form and substance of the
endorsement are mandated by federal law. The MCS-90B endorsement must be
in the form prescribed by the Department of Transportation; therefore, the
parties are not free to negotiate or change the terms in the form endorsement.
See 49 C.F.R. § 387.39 (“Endorsements for policies of insurance . . . must be in
the form prescribed by the [Federal Motor Carrier Safety Administration of the
Department of Transportation] . . . .”); see also Ins. Corp. of N.Y. v. Monroe Bus
Corp., 491 F. Supp. 2d 430, 436 (S.D.N.Y. 2007) (noting that the terms of the
MCS-90B endorsement “are prescribed precisely by the federal transportation
regulations” and that federal form MCS-90B “is the only form permitted by
federal law”).
Moreover, although the Morquechos correctly quote some of the language
from the endorsement, they ignore the critical phrase in the endorsement
limiting the insurer’s payment of judgments recovered against the insured to
“public liability resulting from negligence in the operation, maintenance or use
of motor vehicles subject to financial responsibility requirements of Section 18 of
the Bus Regulatory Reform Act of 1982. . . .” Because the Morquechos’ accident
occurred in Mexico, a place where the for-hire motor carrier was not subject to
the minimum financial responsibility requirements of federal law, the MCS-90B
endorsement is not applicable and does not provide coverage for the Morquechos’
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No. 05-20938
accident. Thus, the district court did not err in concluding that the MCS-90B
endorsement does not apply.
B. Coverage for Claims of Negligent Hiring, Retention, and
Entrustment
The second issue before the court is whether the MCS-90B endorsement
covers Garcia’s Tours’ liability for negligent hiring, retention, and entrustment
given that those acts occurred in the United States.4 The Morquechos raised this
issue for the first time in their motion for reconsideration before the district
court. “We review a district court’s denial of a motion for reconsideration for
abuse of discretion.” LeClerc v. Webb, 419 F.3d 405, 412 n.13 (5th Cir. 2005).
“[G]enerally speaking, we will not consider an issue raised for the first
time in a Motion for Reconsideration.” Leverette v. Louisville Ladder Co., 183
F.3d 339, 342 (5th Cir. 1999) (per curiam); see also LeClerc, 419 F.3d at 412 n.13
(“A motion for reconsideration may not be used to . . . introduce new
arguments.”); Mungo v. Taylor, 355 F.3d 969, 978 (7th Cir. 2004) (“Arguments
raised for the first time in connection with a motion for reconsideration,
however, are generally deemed to be waived.”). Even if this court were to
consider this argument, however, it is foreclosed by this circuit’s decision in
Lincoln General Insurance Co. v. Reyna, 401 F.3d 347 (5th Cir. 2005).
In Reyna, the intervenors argued that the insurer’s policy covered a claim
for negligent hiring, training, and supervision and required the insurer to defend
its insured. 401 F.3d at 350. Although the bus crash occurred in Mexico, outside
of the policy’s coverage area, the negligent hiring, training, and supervising of
the bus driver occurred in Texas, which was in the coverage area of the policy.
Id. at 351. This court, however, rejected the intervenors’ argument, concluding
4
In the suit filed by the Morquechos against Garcia’s Tours on July 6, 2004, the Texas
state court found Garcia’s Tours liable on claims of negligence, negligent hiring, negligent
entrustment, and negligent retention.
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No. 05-20938
that the accident was excluded from coverage and that there was no duty to
defend. We reasoned that
in cases involving injury caused by negligence where intent is
clearly not at issue, the “but for” or “arising out of” standard still
applies. Under the “but for” standard, there could be no cause of
action against the employer but for the employee’s negligent
conduct, and where the employee’s conduct does not fall within the
scope of coverage, there is no occurrence or accident to trigger
coverage and the duty to defend. The “but for” analysis applies in
this case.
***
[T]here is no dispute the collision occurred within the Policy period
and in Mexico. The clear language of the Policy provides coverage
for any accident that occurs within the Policy period and within the
coverage territory. Mexico is not included in the Policy’s definition
of the coverage territory. Reyna’s negligence would not exist but for
the bus crash in Mexico, for which there can be no coverage. . . . The
Policy language provides that there is no coverage for injuries or
damages resulting from an accident in Mexico. That Reyna’s
alleged negligence occurred in Texas is irrelevant because the cause
of action against him arises out of the bus crash in Mexico which
does not fall within the coverage provisions.
Id. at 354-55 (internal footnote omitted).
Although Reyna involved a policy and not the MCS-90B endorsement at
issue in this case, Reyna’s analysis applies with equal force here. It is
undisputed that the operational negligence of Escoto, the bus driver, occurred
in Mexico. Thus, the negligent hiring, retention, and entrustment would not
exist “but for” the bus crash in Mexico, for which we have concluded there is no
coverage under the endorsement. That the Morquechos alleged the negligence
occurred in Texas is irrelevant because the cause of action against them arises
out of the bus crash in Mexico, which does not fall within the coverage of the
endorsement. Accordingly, under this court’s holding in Reyna, we cannot
conclude that the district court abused its discretion in denying the Morquechos’
motion for reconsideration.
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No. 05-20938
III. CONCLUSION
For the reasons stated above, the district court’s order granting summary
judgment to Lincoln General is AFFIRMED.
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