UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT
____________
No. 01-20201
____________
CONSUMERS COUNTY MUTUAL INSURANCE CO,
Plaintiff-Counter Defendant-Appellee,
versus
PW & SONS TRUCKING INC,
Defendant-Counter Claimant-
Appellant.
FRED PAILLET, IV
Defendant-Appellant
Appeals from the United States District Court
For the Southern District of Texas
October 8, 2002
Before EMILIO M. GARZA, BENAVIDES, and STEWART, Circuit Judges.
EMILIO M. GARZA, Circuit Judge:
P.W. & Sons Trucking, Inc. (PWS) and Fred Paillet IV appeal the district court’s grant of
summary judgment in favor of Consumers County Mutual Insurance Co. (“Consumers”) in this
declaratory judgment action. Specifically, PWS and Paillet contend that the district court erred when
it relied on a Department of Transportation regulation, 49 C.F.R. § 390.5, to determine whether
Paillet was an “employee” excluded from coverage under PWS’s commercial auto insurance policy.
Because we believe the district court properly relied on the regulation, we affirm.
In February of 1998, PWS, a small trucking company, hired two drivers to assist in hauling
four loads of plastic resin from Texas to various locations in Louisiana, Arkansas, Missouri, and New
York. The drivers, Paillet and Terry Wayne Bob, both held other jobs at the time and worked for
PWS on a load-by-load basis. Although there is evidence in the record that Paillet hauled loads for
PWS with some frequency, he was not regularly employed by PWS, nor was he obligated to haul
future loads after he completed a given trip. PWS paid Paillet on a percentage-of-the-load basis.
Paillet and Bob delivered the four loads of plastic resin to their destinations without incident.
On their return trip back to Texas, however, Paillet and Bob were involved in a one-vehicle accident
in Virginia. At the time of the accident, Bob was driving the tractor-trailer and Paillet was asleep in
the truck’s sleeper bunk. Bob died at the scene of the accident. Paillet sustained serious injuries and
remained in a coma for more than two months. Paillet later filed suit against PWS to recover for his
injuries. PWS notified Consumers of the lawsuit and requested a defense and indemnity under its
commercial auto insurance policy.
Thereafter, Consumers filed a declaratory judgment action in federal district court based on
the policy’s exclusions relating to liability for injuries to employees. In its complaint, Consumers
conceded that, at the time of the accident, Paillet and Bob were driving a tractor-trailer covered by
PWS’s policy with Consumers, and that the injuries caused by the accident fell within the policy’s
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general liability coverage.1 Consumers argued only that, because Paillet was an “employee” of PWS,
his injuries were excluded from coverage by one of the policy’s employee exclusions.2 In response,
PWS argued that the employee exclusions were not applicable to Paillet’s case because Paillet was
not actually an employee of PWS, but rather an independent contractor. To support its argument,
PWS relied on the traditional Texas common law distinction between employees and independent
contractors.3
1
By the terms of PWS’s policy with Consumers, Consumers agreed to indemnify PWS and
to defend PWS in any lawsuits for damages for “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.”
2
The policy at issue in this case includes standard employee exclusions. Specifically, the
policy excludes coverage for the following employee injuries:
4. EMPLOYEE INDEMNIFICATION AND EMPLOYER’S LIABILITY
Bodily Injury to:
a. An employee of the insured arising out of and in the course of
employment by the insured; . . .
5. FELLOW EMPLOYEE
Bodily injury to any fellow employee of the insured arising out of and in the
course of the fellow employee’s employment.
The policy does not define the term employee.
3
Under Texas common law, “[t]he 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). For an individual to be considered an employee, “[t]he employer must
control not merely the end sought to be accomplished, but also the means and details of its
accomplishment as well.” Id. In contrast, an independent contractor is an individual who, “[i]n the
pursuit of an independent business, undertakes to do a specific piece of work for other persons, using
his own means and methods, without submitting himself to their control and all its details.” William
Sommerville & Sons, Inc. v. Carter, 571 S.W.2d 953, 956 (Tex. Civ. App.–Tyler 1978), aff’d on
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After both Consumers and PWS filed summary judgment motions, the district court held that
the policy’s exclusions applied to preclude coverage in this case because Paillet was a “statutory
employee” of PWS. In reaching its decision, the court relied on § 390.5 of the Department of
Transpo rtation regulations, which provides definitions for several terms appearing in those
regulations. Section 390.5 defines an “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.
Such term includes a driver of a commercial motor vehicle (including an independent
contractor while in the course of operating a commercial motor vehicle), a mechanic,
and a freight handler.
49 C.F.R. § 390.5 (emphasis added). Because § 390.5 eliminates the traditional common law
distinction between employees and independent contractors for drivers like Paillet, the district court
determined that no genuine issues of material fact existed warranting trial in this case. The court then
granted summary judgment in favor of Consumers on the basis of the policy’s employee exclusions.
PWS and Paillet now appeal.
We review a district court’s grant of summary judgment de novo. McClendon v. City of
Columbia, 258 F.3d 432, 435 (5th Cir. 2001). The district court’s interpretation of an insurance
contract is a question of law that we also review de novo. Am. States Ins. Co. v. Bailey, 133 F.3d
363, 369 (5th Cir. 1998); Canutillo Indep. Sch. Dist. v. Nat’l Union Fire Ins., 99 F.3d 695, 700 (5th
Cir. 1996). We will affirm a district court’s grant of summary judgment when, viewing the evidence
in the light most favorable to the nonmoving party, the record reflects that no genuine issue of
material fact exists, and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P.
other grounds, 584 S.W.2d 274 (Tex. 1979).
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56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986).
The principal issue in this appeal is whether the district court properly relied on § 390.5 to
determine whether Paillet was an employee of PWS under the policy. Both parties contend that the
term employee as it is used in the policy is clear and unambiguous. Each, however, presents a
different plain meaning of that term. According to Consumers, in light of the policy’s purpose and
the special significance of § 390.5 in the trucking industry, the parties clearly intended the federal
definition to control. In contrast, PWS contends that the parties intended the traditional common law
definition of the term. Although PWS acknowledges the federal definition stated in § 390.5, PWS
argues that we cannot rely on § 390.5 absent an express incorporation of that definition in the terms
of the policy.
Texas rules of contract interpretation control in this diversity case. Am. Nat’l Gen. Ins. Co.
v. Ryan, 274 F.3d 319, 323 (5th Cir. 2001). Under Texas law, when faced with a coverage dispute,
our primary concern is to give effect to the intentions of the parties as expressed by the policy
language. Ideal Lease Serv., Inc. v. Amoco Prod. Co., 662 S.W.2d 951, 953 (Tex. 1983). We give
the terms used in the policy their plain, ordinary meaning unless the policy itself shows that the parties
intended the terms to have a different, technical meaning. Puckett v. U.S. Fire Ins. Co., 678 S.W.2d
936, 938 (Tex. 1984). When interpreting an insurance policy, however, we cannot simply consider
its terms in the abstract. Rather, we must “consider the policy as a whole and interpret it to fulfill
[the] reasonable expectations of the parties in light of customs and usages of the industry.” N. Am.
Shipbuilding, Inc. v. S. Marine & Aviation Underwriting, Inc., 930 S.W.2d 829, 834 (Tex. Civ.
App.–Houston [1st Dist.] 1996, n.w.h.).
The policy at issue in this case is a public-liability policy designed specifically for use by motor
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carriers in the interstate trucking industry. Federal law requires motor carriers to procure at least a
minimum level of public-liability insurance in order to obtain an operating permit. See Motor Carrier
Safety Act of 1984, 49 U.S.C. § 13906 (2000); 49 C.F.R. § 387.1 et seq. The purpose of this
insurance requirement is 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 the Motor
Carrier Safety Act places an affirmative insurance obligation on motor carriers with respect to the
public, it does not require motor carriers to obtain coverage for “injury to or death of [their]
employees while engaged in the course of their employment.” 49 C.F.R. § 387.15.
There is no question that PWS’s policy with Consumers was drafted to comply with federal
insurance requirements. As a result, these requirements must inform our interpretation of the policy’s
terms. Section 390.5, which was enacted pursuant to authority granted by the Motor Carrier Safety
Act, is central to this federal regulatory scheme.4 By eliminating the common law
employee/independent contractor distinction, the definition serves to discourage motor carriers from
using the independent contractor relationship to avoid liability exposure at the expense of the public.
In light of the clear int ention of the parties to comply with federal regulations and the broad
application of § 390.5 throughout those regulations, it is reasonable to conclude that the parties
intended § 390.5 to supply the definition of the term employee in the policy.
Nevertheless, PWS asks us to ignore the federal definition of employee in favor of the
common law definition of the term. PWS argues that we should not apply § 390.5 because the policy
behind this regulation, and the Motor Carrier Safety Act generally, has no application in this case.
4
Section 390.5 provides the only definition of the term “employee” used in the federal motor
carrier safety regulations, a subchapter of the Department of Transportation regulations. See 49
C.F.R. §§ 350-399.
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Specifically, PWS notes that one purpose of § 390.5 is to discourage trucking companies from using
the independent contractor status to manipulate their liability exposure with respect to the public.
See, e.g., id. at § 387.1 (stating that the purpose of federal motor carrier regulations generally is “to
assure that motor carriers maintain an appropriate level of financial responsibility for motor vehicles
operated on public highways”). Based on the stated purpose of the Motor Carrier Safety Act and its
regulations, PWS suggests that the definition of employee found in § 390.5 only applies to eliminate
the “independent contractor defense” when motor carriers are sued by members of the public for the
negligent acts of their drivers. When the issue is whether a driver is an employee for purposes o f
whether insurance coverage excludes the driver’s own injuries, PWS contends that § 390.5 should
yield to the traditional common law definition of employee.5
We are not persuaded that the term “employee” should be given different meanings under an
insurance policy depending on the context in which it is used.6 Rather, we must interpret a policy’s
terms in view of the policy as a whole and its overall purpose. Hartrick v. Great Am. Lloyds Ins. Co.,
62 S.W.3d 270, 274 (Tex. Civ. App.—Houston [1st Dist.] 2001, no pet. h.) (“[W]e construe the terms
of the policy as a whole, and consider all of its terms, not in isolation, but within the context of the
policy.”). An example illustrates the problem with PWS’s construction: In a case involving a
collision between a negligent driver and an innocent third party, the driver would be considered an
5
To support its position, PWS relies on several Fifth Circuit cases evaluating the effect of
federal regulations on disputes between multiple insurers regarding whose insurance is primary. None
of these cases address the interpretation of an employee exclusion in a public-liability policy or the
use of federal definitions to construe a policy’s terms. As a result, they are simply not on point.
6
Here, the term employee is used not only in the policy’s employee exclusions, but also in its
definition of who is an insured. When used in the latter context, § 390.5 serves to broaden coverage
for injuries to the public caused by common law independent contractors.
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employee for purposes of coverage for a third-party’s injuries. The driver would be an independent
contractor, however, to determine whether the employee exclusions preclude coverage for his
injuries. Absent some indication in the policy, we cannot assume that the parties intended such a
result.7
In the alternative, PWS argues that the term employee in t he insurance policy is at least
ambiguous. See Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589
(Tex. 1996) (stating that a contract is ambiguous if it is subject to two or m ore reasonable
interpretations). As a result, PWS contends that we should interpret it against the insurer, Consumers,
and apply the Texas common law definition. Nat’l Union Fire Ins. Co. v. Hudson Energy Co., 811
S.W.2d 552, 555 (Tex. 1991) (“Ambiguous insurance contracts are interpreted against the insurer.”).
Because we believe the term employee is not ambiguous, but clearly refers to employees within the
meaning of § 390.5, this argument is without merit.
In sum, we conclude that the district court properly relied on § 390.5 to determine that Paillet
7
We also note that the Ninth Circuit has rejected a similar “context-specific” approach to §
390.5 in Perry v. Harco Nat’l Ins. Co., 129 F.3d 1072 (9th Cir. 1997). The issue in Perry was
whether a truck driver, who was clearly an independent contractor at common law, was an
“employee” excluded from coverage by the policy’s MCS-90 Endorsement. Id. at 1073. The
endorsement explicitly excluded from coverage liability resulting from “injury to or death of the
insured’s employees while engaged in the course of their employment.” Because the MCS-90 is a
federally-mandated endorsement whose terms are specified by federal regulation, the federal definition
set forth in § 390.5 clearly applied. See 49 C.F.R. § 387.15 (creating form endorsements, including
the MCS-90, to be attached to a motor carrier’s liability policy). Nonetheless, the plaintiff argued
that the court should decline to rely on § 390.5 to interpret the term “employee” in the endorsement’s
exclusion because doing so would not serve the purposes of the Motor Carri er Safety Act and its
regulations. Id. at 1074. The Ninth Circuit rejected the plaintiff’s argument, holding instead that the
definition set forth in § 390.5 applied generally throughout the regulations regardless of whether its
application directly promoted a regulatory goal. Id. at 1074-75; see also 49 C.F.R. § 390.5 (stating
that, unless specifically defined elsewhere, the definition of “employee” applies throughout the entire
subchapter).
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was an employee of PWS for purposes of the policy’s employee exclusions. Because Paillet is an
employee under § 390.5 regardless of whether he would have been considered an employee or an
independent contractor at common law, the policy’s employee exclusions apply to preclude coverage
in this case.8 Therefore, the district court’s grant of summary judgment to Consumers is
AFFIRMED.
8
PWS suggests that Paillet was not an employee under § 390.5 because he was not injured
“while in the course of his employment.” Specifically, PWS suggests that, because it was Paillet’s
turn to rest and Bob’s turn to drive at the time of the accident, he was not acting “in the course of
his employment.” This argument is squarely foreclosed by precedent. See White, 599 F.2d at 53.
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