Filed 4/18/23 United Specialty Ins. Co. v. Barriga CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
UNITED SPECIALTY INSURANCE D080066
COMPANY,
Plaintiff and Respondent,
(Super. Ct. No. 37-2020-
v. 00013685-CU-IC-CTL)
LIBORIA AGUILAR BARRIGA et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of San Diego County,
Richard S. Whitney, Judge. Affirmed.
Su Barry; Herronlaw and Matthew V. Herron for Defendants and
Appellants.
Law Offices of Daniel J. Spielfogel and Daniel J. Spielfogel for Plaintiff
and Respondent.
The Estate of Salvador Rosales Aguilar and the decedent’s parents,
Liboria Aguilar Barriga and Aristeo Rosales Arreola (collectively the Aguilar
parties), appeal from a final judgment entered after a summary judgment
ruling in favor of United Specialty Insurance Company (USIC) in a
declaratory relief action. Based on our de novo review and interpretation of
the USIC insurance policy, we conclude that it provides no third-party
liability coverage for a wrongful death action against the insured arising from
a vehicle accident that occurred in Mexico, outside the policy’s defined
coverage territory. Accordingly, we affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
A. Accident and Wrongful Death Action
THX Transport, LLC (THX) transports goods for customers in the
United States and Mexico. Most of its business involves shipments across the
border. THX subcontracts with other shipping companies in Mexico.
In July 2017, Salvador Rosales Aguilar was riding his motorcycle in
Tijuana, Mexico. A tractor-trailer truck owned and insured by THX made an
illegal U-turn in front of him, causing him to crash. Aguilar was transported
to a hospital in San Diego, where he died eight days later.
In July 2019, the Aguilar parties filed a wrongful death action in
San Diego Superior Court against THX, the truck driver, and a Mexican
company with which THX subcontracted.
B. USIC Insurance Policy
At the time of the accident, THX was insured under a commercial
automobile policy issued by USIC. Section II of the policy (entitled
“Liability Coverage”) provides: “We 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.’ ” Section III (entitled
“Trailer Interchange Coverage”) separately covers damages the insured was
required to pay because of “loss” to a trailer it did not own or its equipment.
Section IV (entitled “Physical Damage Coverage”) separately covers “loss” to
the insured’s own covered auto or its equipment.
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Section V of the policy (entitled “Truckers Conditions”) sets forth
specific conditions that apply “in addition to the Common Policy Conditions.”
One of these is labeled “Policy Period, Coverage Territory.” It limits the
policy coverage to “ ‘accidents’ and ‘losses’ occurring . . . [w]ithin the coverage
territory.” The policy defines the “coverage territory” as follows:
“a. The United States of America;
“b. The territories and possessions of the United States of
America;
“c. Puerto Rico;
“d. Canada; and
“e. Anywhere in the world if:
“(1) A covered ‘auto’ of the ‘private passenger’ type is
leased, hired, rented or borrowed without a driver for a
period of 30 days or less; and
“(2) The ‘insured’s’ responsibility to pay damages is
determined in a ‘suit’ on the merits, in the United States
of America, the territories and possessions of the
United States of America, Puerto Rico, or Canada or in a
settlement we agree to.”
“We also cover ‘loss’ to, or ‘accidents’ involving, a covered
‘auto’ while being transported between any of these places.”
Section VI sets forth additional definitions of terms used in the policy.
It defines “bodily injury” as “bodily injury, sickness or disease sustained by a
person including death resulting from any of these.” It defines “loss” as
“direct and accidental loss or damage.” It defines “private passenger type” to
mean “a private passenger or station wagon type ‘auto’ and includes an ‘auto’
of the pickup or van type if not used for business purposes.”
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The USIC policy includes endorsement form MCS-90, which is a
federally required endorsement for motor carriers under sections 29 and 30 of
the Motor Carrier Act of 1980. (49 U.S.C. §§ 13906, 31139.) 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 [sic], within
the limits stated herein as a motor carrier of property, with
Sections 29 and 30 of the Motor Carrier Act of 1980 and the
rules and regulations of the Federal Highway
Administration (FHA).
“In consideration of the premium stated in the policy to
which this endorsement is attached, the insurer (company)
agrees to pay, within the limits of liability described herein,
any final judgment recovered against the insured for public
liability resulting from negligence in the operation,
maintenance or use of motor vehicles subject to the
financial responsibility requirements of Sections 29 and 30
of the Motor Carrier Act of 1980 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. . . .
“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
company.”
C. USIC’s Reservation of Rights Letter
In October 2019, USIC sent THX a reservation of rights letter stating
that it owed no duty to defend or indemnify THX in the wrongful death action
because (1) the accident did not occur within the coverage territory; and
(2) THX failed to give prompt notice of the accident. However, USIC agreed
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to provide THX with a defense in the wrongful death action subject to a full
reservation of rights.
D. Declaratory Relief Action
In March 2020, USIC filed this declaratory relief action against THX,
the Aguilar parties, and others. The complaint sought a judicial
determination that USIC owed no duty to defend or indemnify THX in the
wrongful death action brought by the Aguilar parties. THX failed to respond
to the complaint and a default was entered against it.
E. Summary Judgment Motion
In July 2021, USIC filed a motion for summary judgment or summary
adjudication of issues. USIC argued that it had no duty to defend or
indemnify under the THX policy because: (1) the accident did not occur
within the coverage territory; and (2) THX failed to provide USIC with notice
of the accident or loss.
In opposition, the Aguilar parties argued: (1) the “loss” occurred within
the coverage territory because Aguilar died in San Diego; (2) the policy
provided coverage for transportation between the United States and
“anywhere in the world”; (3) the coverage territory definition in the Truckers
Conditions portion of the policy was not clear and conspicuous; (4) USIC had
a duty to indemnify under the MCS-90 endorsement; and (5) USIC was not
prejudiced by THX’s alleged failure to give prompt notice.
In their statement of undisputed facts, the Aguilar parties admitted
that the truck was not a “private passenger” type as defined in the USIC
policy.
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F. Summary Judgment Ruling
The trial court issued a tentative ruling in favor of USIC, which it
confirmed after hearing arguments at the hearing.
The court concluded that “coverage was limited to the territories and
possessions of the United States of America, Puerto Rico, and Canada” and
“[i]t is undisputed the accident occurred in Mexico.” The court further found
that the “anywhere in the world” language of the policy by its terms applied
only to “private passenger” type vehicles, and “it is undisputed this case did
not involve a ‘private passenger’ type auto because it was a tractor-trailer
unit used for business purposes.” The court rejected the theory that there
was a covered “loss” just because Aguilar ultimately died in the United
States. The court also found that the policy’s definition of the coverage
territory was sufficiently conspicuous. Finally, with respect to the MCS-90
endorsement, the trial court concluded that it was subject to the same
territorial limitations as the rest of the policy.
The court entered a final judgment declaring that there was no
coverage and that USIC had no duty to defend or indemnify THX in the
wrongful death action as a matter of law. The Aguilar parties filed a timely
notice of appeal.
DISCUSSION
I
In the trial court, the Aguilar parties made five separate arguments for
coverage under the USIC policy. On appeal, they only pursue two of these
arguments: (1) their “loss” was suffered within the coverage territory
because Aguilar died in the United States; and (2) there is coverage under the
MCS-90 endorsement. We review these issues de novo in a summary
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judgment appeal. (Ryan v. Real Estate of Pacific, Inc. (2019) 32 Cal.App.5th
637, 642.)
A. No Third-Party Liability Coverage for Accident Outside Coverage
Territory
The Aguilar parties first argue that the Truckers Conditions of the
policy provide coverage for “ ‘accidents’ and ‘losses’ occurring . . . [w]ithin the
coverage territory.” Because Aguilar was transported to a hospital in the
United States and died there after the accident, they assert that they
suffered a covered “loss” within the coverage territory. We disagree.
Interpretation of an insurance policy is a question of law. (Palmer v.
Truck Ins. Exchange (1999) 21 Cal.4th 1109, 1115.) Insurance policies are
contracts to which the ordinary rules of contractual interpretation apply.
(Ibid.) We must generally give the terms used in the policy their ordinary
and popular meaning. (Ibid.) We must also interpret those terms in context
and give effect to every part of the policy, with each clause helping to
interpret the other. (Ibid.) A policy provision is ambiguous only if it is
susceptible to two or more reasonable constructions when considered within
the context of the policy as a whole. (Ibid.) We will resolve any ambiguity in
favor of the insured to protect the insured’s reasonable expectation of
coverage. (Ibid.)
Based on our review of the USIC policy as a whole, we conclude that
there is no third-party liability coverage for an accident that occurred in
Mexico. We begin with the overall structure of the policy. The policy
contains three separate coverage sections, immediately followed by the
additional Truckers Conditions. The three coverage sections are Liability
Coverage, Trailer Interchange Coverage, and Physical Damage Coverage.
The only coverage applicable here is the Liability Coverage.
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The Liability Coverage applies to judgments against the insured (THX)
for damages for bodily injury or property damage “caused by an ‘accident’ ”
from the use of a covered auto. The operative language of this Liability
Coverage does not use the word “loss”—it only refers to damages for bodily
injury or property damage caused by an “accident.” By contrast, the word
“loss” is used in connection with the separate Trailer Interchange Coverage
(for damages the insured must pay for “loss” to a trailer it does not own) and
Physical Damage Coverage (for “loss” to the insured’s own auto or
equipment).
The Truckers Conditions immediately following these three coverage
sections set forth additional conditions applicable to all three types of
coverage. One of these additional conditions limits coverage to “ ‘accidents’
and ‘losses’ . . . [w]ithin the coverage territory.” This is the provision the
Aguilar parties rely on in asserting that Aguilar’s death in the United States
constituted a “loss” in the covered territory.
Construing the policy as a whole, however, we conclude that the phrase
“ ‘accidents’ and ‘losses’ ” as used in this provision refers back to either
“accidents” falling within the Liability Coverage or “losses” falling within the
Trailer Interchange Coverage or Physical Damage Coverage. In other words,
this provision of the Truckers Conditions limits the policy’s Liability
Coverage to “accidents” occurring within the coverage territory and limits the
policy’s Trailer Interchange Coverage and Physical Damage Coverage to
“losses” occurring within the coverage territory. Because this case only
involves the policy’s Liability Coverage for liability resulting from an
accident, and because it is undisputed that the accident occurred in Mexico
outside the coverage territory, there is no coverage under the plain language
of the policy.
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The Aguilar parties’ contrary interpretation would read the territorial
provision of the Truckers Conditions in isolation is if it were a free-standing
coverage provision for all types of accidents and losses occurring within the
coverage territory. But it is not a separate coverage provision. The Truckers
Conditions are additional conditions that apply to the coverages set forth in
the preceding sections of the policy. We must consider the policy as a whole
and construe its language in context, rather than interpreting one provision
in isolation. (Employers Reinsurance Co. v. Superior Court (2008) 161
Cal.App.4th 906, 919.) Construing the territorial limits of the Truckers
Conditions by reference to the preceding coverage provisions they apply to,
we conclude that the policy is not reasonably susceptible to the interpretation
advanced by the Aguilar parties.
Our holding is consistent with the decision in Jones v. State Farm
Mutual Automobile Ins. Co. (2004) 268 Va. 396 (601 S.E.2d 645). In that
case, the plaintiffs sustained physical injuries in a motor vehicle accident in
St. Maarten (in the Netherlands Antilles), but incurred medical expenses in
both St. Maarten and the United States. (Id. at p. 398.) Their automobile
insurance policies each had similar territorial limitations, including one that
limited coverage “ ‘to accidents and losses which occur . . . [w]ithin the policy
territory’ ”—which the policy defined as the United States, its territories and
possessions, Puerto Rico, or Canada. (Id. at p. 398, fn. 1.) The plaintiffs
conceded that these territorial limitations were clear and unambiguous, but
argued that there was coverage because some of their medical expenses were
incurred in the United States. (Id. at p. 400.) However, the Virginia
Supreme Court rejected this argument on the ground that it would “alter the
terms of the insurance contract by judicial fiat and arbitrarily add to the
policy additional and unmeasured insurance risks involved for driving in
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St. Maarten or any other foreign country or territory which is not a part of
the insurance contract.” (Ibid.)
We agree with this holding. “Territorial limitations are ubiquitous to
the insurance industry as a means of allowing the insurer to make actuarial
assessments of policy risks.” (Marchitelli, Construction and Application of
Insurance Policies’ Coverage Territory Clauses Excluding Occurrences Within
or Without United States (2016) 10 A.L.R.7th Art. 7.) Extending the plain
language of USIC’s policy to an accident occurring outside the coverage
territory in a foreign country would expose it to risks not contemplated by the
contract of insurance.
In sum, the plain meaning of the policy is that the Liability Coverage
does not apply to an accident that occurred in Mexico. The mere fact that
Aguilar ultimately died in a hospital in the United States does not trigger
Liability Coverage for an accident that occurred outside the defined coverage
territory. The insured “could not reasonably have expected coverage from
this policy for liability arising out of a vehicular collision in Mexico.”
(Foremost Ins. Co. v. Eanes (1982) 134 Cal.App.3d 566, 572 [enforcing similar
territorial coverage provision].)
B. No Coverage Under MCS-90 Endorsement
The Aguilar parties alternatively contend that there is coverage under
the MCS-90 endorsement. They assert that the Motor Carrier Act of 1980
and the implementing regulations require that the MCS-90 endorsement
apply to foreign commerce, and that the endorsement is not limited to
negligence occurring in the United States. Once again, we disagree.
The Motor Carrier Act of 1980 and its implementing regulations
require motor carriers to demonstrate that they are in some way insured
against damage they cause. (Castro v. Budget Rent-A-Car System, Inc. (2007)
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154 Cal.App.4th 1162, 1175, fn. 7 (Castro).) A motor carrier can fulfill its
responsibility by (1) a federal form MCS-90 endorsement attached to its
insurance policy; (2) a surety bond; or (3) self-insurance. (Ibid.) If the motor
carrier chooses the form MCS-90 endorsement, it must use the form
prescribed by federal regulations. (49 C.F.R. § 387.15.) The primary purpose
of the MCS-90 endorsement is to assure that injured members of the public
will be able to obtain judgment from negligent interstate carriers. (Castro, at
p. 1175, fn. 7.) “Federal law applies to the operation and effect of the MCS-90
endorsement.” (Century-National Ins. Co. v. Global Hawk Ins. Co. (2012) 203
Cal.App.4th 1458, 1464 (Global Hawk).)
As the trial court noted, the MCS-90 endorsement explicitly states that
“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 company.” Thus, the provision of the Truckers Conditions
limiting the coverage territory remains in effect under the MCS-90
endorsement, unless the endorsement provides otherwise. (See Aerojet-
General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, 50, fn. 4
[endorsement controls in case of conflict between it and body of policy].)
Nothing in the MCS-90 endorsement expands coverage beyond the rest
of the policy’s coverage territory. By its terms, the standard MCS-90
endorsement in the USIC policy only applies to liability resulting from
“negligence in the operation, maintenance or use of motor vehicles subject to
the financial responsibility requirements of Sections 29 and 30 of the Motor
Carrier Act of 1980 . . . .” (Italics added.) Thus, the endorsement applies only
if the transportation was subject to these statutory requirements, which are
codified at title 49 United States Code sections 13906 and 31139.
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The Fifth Circuit has squarely ruled “that [United States Code] Section
31139 and the MCS-90 endorsement extend minimum financial responsibility
only to the portions of transportation by a motor carrier or private carrier
occurring within the United States.” (Canal Indem. Co. v. Galindo (5th Cir.
2009) 344 Fed.Appx. 909, 911 (per curiam) (Canal), italics added; see also
Lincoln General Ins. Co. v. De La Luz Garcia (5th Cir. 2007) 501 F.3d 436,
440–442 (Lincoln General) [reaching the same conclusion for nearly identical
MCS-90B endorsement for motor carrier of passengers]; Lyles v. FTL Ltd.,
Inc. (2018) 339 F.Supp.3d 570, 576 [“a motor vehicle is not subject to” these
financial responsibility requirements “if it is involved in an accident while
traveling outside of the United States”].)
In Canal, the Fifth Circuit found no coverage under endorsement MCS-
90 for a vehicle accident that occurred in Mexico, and agreed with the
reasoning of the magistrate and district court reaching the same result.
(Canal, supra, 344 Fed.Appx. at p. 911; see also Canal Indem. Co. v. Galindo
(W.D. Tex., Feb. 2, 2009, No. 2:07-CV-070) 2009 WL 10669138 [magistrate’s
report and recommendation]; Canal Indem. Co. v. Galindo (W.D. Tex.,
March 25, 2009, No. DR-07-CV-070-AML/DG) 2009 WL 10669159 [district
court order accepting magistrate’s report and recommendation].) The Aguilar
parties cite no contrary authority.
As the Fifth Circuit concluded, this conclusion is compelled by the plain
language of the controlling federal statute. Title 49 of the United States
Code, section 31139(b)(1) provides:
“The Secretary of Transportation shall prescribe
regulations to require minimum levels of financial
responsibility . . . for the transportation of property by
motor carrier or motor private carrier . . . in the United
States between a place in a State and–
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“(A) a place in another State;
“(B) another place in the same State through a place
outside of that State; or
“(C) a place outside the United States.”
By its terms, this statute applies only to the portion of any such
transportation “in the United States.” (49 U.S.C. § 31139(b)(1).) Another
provision of the statutory scheme similarly provides:
“The Secretary [of Transportation] . . . [has]
jurisdiction . . . over transportation by motor carrier and
the procurement of that transportation, to the extent that
passengers, property, or both are transported by motor
carrier–
“(1) between a place in–
“(A) a State and a place in another State;
“(B) a State and another place in the same State
through another State;
“(C) the United States and a place in a territory or
possession of the United States to the extent the
transportation is in the United States;
“(D) the United States and another place in the United
States through a foreign country to the extent the
transportation is in the United States; or
“(E) the United States and a place in a foreign country to
the extent the transportation is in the United States.” (49
U.S.C. § 13501, italics added.)
The plain meaning of these statutory provisions is that the financial
responsibility requirements of the Motor Carrier Act of 1980 do not apply to
transportation occurring outside the United States. Because the MCS-90
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endorsement applies only to motor carrier transportation subject to these
financial responsibility requirements, it does not cover an accident occurring
outside the United States. (Canal, supra, 344 Fed.Appx. at p. 911; see also
Lincoln General, supra, 501 F.3d at pp. 440–442.) We are bound by federal
law in construing the MCS-90 endorsement. (Global Hawk, supra, 203
Cal.App.4th at p. 1464.) We must therefore conclude that the MCS-90
endorsement provides no coverage for an accident that occurred in Mexico.
DISPOSITION
The judgment is affirmed. Respondent is awarded its costs on appeal.
BUCHANAN, J.
WE CONCUR:
O’ROURKE, Acting P. J.
IRION, J.
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