United States Court of Appeals
Fifth Circuit
F I L E D
April 1, 2003
IN THE UNITED STATES COURT OF APPEALS
Charles R. Fulbruge III
Clerk
FOR THE FIFTH CIRCUIT
No. 02-30613
ILLINOIS CENTRAL RAILROAD COMPANY,
Plaintiff,
versus
RONALD L. DUPONT, ET AL.,
Defendants.
____________________
FERN SHERIDAN ROSHTO DUPUY CONNOR, Etc., ET AL.,
Plaintiffs,
versus
CANADIAN NATIONAL/ILLINOIS CENTRAL
RAILROAD, ET AL.,
Defendants,
ILLINOIS CENTRAL RAILROAD COMPANY,
Defendant-Appellant,
versus
UNDERWRITERS INSURANCE COMPANY,
Defendant-Appellee.
Appeal from the United States District Court for
the Middle District of Louisiana
_______________________________________________________
Before REAVLEY, JOLLY and JONES, Circuit Judges.
REAVLEY, Circuit Judge:
In this insurance coverage dispute, appellee Illinois Central Railroad Co. (the
Railroad) argues that an insurance policy issued by appellant Underwriters Insurance Co.
(Underwriters) should be deemed to include an endorsement pertinent to a regulation of
the motor carrier insured. The district court disagreed, and granted summary judgment in
favor of Underwriters. We affirm.
BACKGROUND
The Railroad sued Denmar Logging, Inc., (Denmar) a Louisiana logging company,
after an accident in which one of Denmar’s contract drivers collided with a Railroad
train. The accident occurred in Louisiana, on a planned trip from a logging site in
Mississippi to a paper mill in Louisiana. Ronald Dupont was driving the truck involved
in the collision. At the time Dupont was hauling logs for Denmar but was driving his
2
own truck.1
Underwriters issued the business automobile insurance policy in issue to Denmar.
Underwriters intervened in this suit, seeking a declaratory judgment that its policy did not
cover the accident. It moved for summary judgment on grounds that the policy only
covered one truck that was owned by Denmar and was not involved in the accident. We
agree with Underwriters that the policy as written plainly did not cover the accident for
this reason.
The Railroad argued below that, by virtue of the Motor Carrier Act of 1980 and a
regulation promulgated thereunder, Denmar was required to have a special endorsement
in its insurance policy, providing that the insurer will pay within policy limits any
judgment recovered against the insured motor carrier for liability resulting from the
carrier’s negligence, whether or not the vehicle involved in the accident is specifically
described in the policy. This endorsement is known as the MCS-90 endorsement.2
1
The Railroad argues that Dupont was a Denmar employee rather than an
independent contractor, but we do not reach this issue.
2
The MCS-90 endorsement, set out at 49 C.F.R. § 387.15 (2002), states in part:
In consideration of the premium stated in the policy to which this
endorsement is attached, the insurer (the 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.
3
“Basically, the MCS-90 makes the insurer liable to third parties for any liability resulting
from the negligent use of any motor vehicle by the insured, even if the vehicle is not
covered under the insurance policy.”3 The Railroad argued that the endorsement should
be deemed a part of the policy because of the regulation.
A section of the Title 49 provides that neither the Secretary of Transportation nor
the Surface Transportation Board (which assumed certain responsibilities of the defunct
Interstate Commerce Commission) has jurisdiction over transportation by motor vehicle
of “agricultural or horticultural commodities (other than manufactured products
thereof).”4 The district court held that the regulation requiring the MCS-90 endorsement
did not apply to Denmar’s logging operations because trees and logs are agricultural or
horticultural commodities. It further held that if Denmar was required to have the MCS-
90 endorsement, it failed to obtain the endorsement and was therefore subject to a fine,
but that Underwriters could not be held liable for failing to include the endorsement,
since there is no federal remedy imposing such a liability on Underwriters.
DISCUSSION
We need not decide whether the MCS-90 regulation is inapplicable to the accident
because of the statutory exemption for agricultural commodities. We note briefly that
logs might well fall within the definition of an agricultural commodity applicable to the
3
T.H.E. Ins. Co. v. Larsen Intermodal Servs., Inc., 242 F.3d 667, 671 (5th Cir.
2001).
4
49 U.S.C. § 13506(a)(6)(B).
4
statutory exemption.5 There are, however additional issues of statutory construction as to
whether this agricultural exemption applies to the MCS-90 regulation,6 and whether the
5
The exemption applies to transportation by motor vehicle of “agricultural or
horticultural commodities (other than manufactured products thereof).” 49 U.S.C. §
13506(a)(6)(B). A regulation interpreting this exemption, 49 C.F.R. § 372.115 (2002),
provides that “Trees: Sawed into lumber” are manufactured products which are not
exempt. Were we required to decide the issue, we might well agree with the district court
that trees which have simply been cut down for hauling are agricultural commodities and
are not “manufactured products thereof,” since we might conclude that raw timber is not
the same as trees which have been “sawed into lumber” under the regulation.
6
The MCS-90 regulation was promulgated by the Secretary of Transportation.
Under 49 U.S.C. § 13506(a), the Secretary has no jurisdiction “under this part” to
regulate the transportation by motor vehicle of agricultural commodities. This exemption
is found in Subtitle IV of Title 49, titled “Interstate Transportation,” and Part B of this
subtitle covers “Motor Carriers” and other vehicles. If the MCS-90 regulation was
promulgated under the Secretary’s authority to “prescribe regulations in carrying out this
part” granted in a provision of Part B of Subtitle IV, 49 U.S.C. § 13301(a), and § 13506
of the same Part states that the Secretary has no jurisdiction to regulate the motor vehicle
transportation of agricultural commodities, then the district court was correct in its
analysis. However, the Railroad points out that a different subtitle of Title 49, Subtitle
VI, titled “Motor Vehicle and Driver Programs,” has its own Part B, titled “Commercial.”
A provision found in this part, 49 U.S.C. § 31139(b), provides that the Secretary “shall
prescribe regulations to require minimum levels of financial responsibility . . . .” The
Railroad may be correct in arguing that the MCS-90 regulation was promulgated under
this Subtitle, which does not contain an agricultural exemption. The MCS-90 regulation
is contained in Part 387 of Title 49 of the Code of Federal Regulations, setting out
regulations for “Minimum Levels of Financial Responsibility for Motor Carriers,” which
suggests that it is part of a regulatory package to implement Subtitle VI’s financial
responsibility section. The Railroad’s position is supported by the Eighth Circuit’s
analysis in Century Indem. Co. v. Carlson, 133 F.3d 591 (8th Cir. 1998), which held that
“[t]he MCS-90 endorsement applies notwithstanding that an interstate motor carrier
transported an agricultural commodity.” Id. at 600. The court concluded that the
agricultural commodity exemption was a limitation on the jurisdiction of the Interstate
Commerce Commission, while the MCS-90 regulation was promulgated under the
broader jurisdiction of the Department of Transportation to impose financial
responsibility standards, granted in section 30 of the Motor Carrier Act of 1980 and
codified at 49 U.S.C. § 31119. Carlson, 133 F.3d at 599-600.
5
MCS-90 regulation applies to a logging company like Denmar.7 We simply posit,
without resolving, these issues in the margin.
Regardless, we agree with the district court that, as an alternative basis for
summary judgment, the failure to include the endorsement in the policy cannot give rise
to the remedy the Railroad seeks, namely a reformation of the policy deeming the
endorsement to be a part of the policy.
Even if Denmar was hauling a non-exempt product, and was otherwise required to
have the MCS-90 endorsement in its vehicle insurance policy, its failure to obtain such an
endorsement does not make Underwriters liable. The Underwriters policy as written did
7
Even if the the financial responsibility regulations which include the MCS-90
endorsement are not subject to the statutory exemption for agricultural commodities, they
might not apply to Denmar. The Railroad states in its opening brief that “Denmar is a
Louisiana corporation that operates solely in the logging business.” The president of
Denmar testified in his deposition that “I work for an independent forester; he gets the
tract of timber; I go to it, start cutting, haul it to ABC, whatever, the mill. But I do not
have a contract.” Whether Denmar had title to the logs at the time of the accident is
unclear from the record. The MCS-90 regulation might not be applicable to a logging
company that was hauling its own logs to a paper mill. Section 31139—the financial
responsibility statute discussed above—by its terms applies to the interstate
“transportation of property for compensation.” 49 U.S.C. § 31119(b) (emphasis added).
It therefore appears to apply to carriers who transport the goods of another. The
regulations comprising Part 387 of 49 C.F.R., regulations which arguably implement
section 31119 and contain the MCS-90 endorsement, state that they apply to (1) carriers
transporting certain hazardous materials and “for-hire motor carriers,” (2) operating in
interstate or foreign commerce, and (3) weighing over 10,000 pounds. See 49 C.F.R. §
387.3 (2002) (emphasis added). “For-hire carriage” is defined as “the business of
transporting, for compensation, the goods or property of another.” Id. § 387.5 (emphasis
added). If Denmar is not in the business of transporting the goods of another for
compensation, and is instead a private carrier who hauls its own logs, the MCS-90
regulation might not apply to its business.
6
not contain the endorsement. We reject the Railroad’s argument that, since Denmar was
required to have the endorsement, the policy should be read as automatically including
the endorsement.
The regulations requiring the endorsement are directed at the motor carrier, not its
insurer. They state that they prescribe “the minimum levels of financial responsibility
required to be maintained by motor carriers,”8 and that “[p]roof of the required financial
responsibility” that includes the MCS-90 endorsement “shall be maintained at the motor
carrier’s principal place of business.”9 The regulations place responsibility on the motor
carriers, not their insurers, as one would expect of regulations promulgated by the
Secretary of Transportation pursuant to her authority to regulate motor carriers. Further,
as the district court noted, the sanction prescribed in the relevant regulation for failure to
carry the required insurance is a fine against the “person . . .who knowingly violates” the
financial responsibility rules.10
Since the regulations requiring the MCS-90 endorsement are directed at the motor
carrier, we do not read them as imposing a duty on the insurer to make sure that non-
exempt motor carriers secure the required insurance. In short, the Railroad seeks the
wrong remedy against the wrong party.
8
49 C.F.R. § 387.1 (2002).
9
Id. § 387.7(d).
10
Id. § 387.17 (2002); see also 49 U.S.C. § 31139(f).
7
The Railroad argues that as a matter of public policy the endorsement should be
deemed a part of the policy. Assuming that public policy concerns should inform our
analysis, we first question the fairness of placing a duty on insurance companies to
determine whether an insured is a motor carrier for hire, who engages in the interstate
shipment of non-exempt goods, using non-exempt vehicles, and is otherwise subject to
the Motor Carrier Act and its complex regulations. The motor carrier is in the best
position to know the nature of its business and the legal requirements for conducting that
business.
Second, holding that the MCS-90 endorsement is automatically a part of the policy
whether or not a motor carrier requested or paid for such an endorsement would create a
perverse incentive. Motor carriers then would have an incentive not to comply with the
regulations and obtain the endorsement and pay the additional premium associated with
it, knowing that the courts would deem the endorsement part of the policy whether or not
it was requested by the carrier.
The Railroad cites a Sixth Circuit case11 in support of its contention that as a
matter of law the MCS-90 endorsement should be incorporated into the policy, even if it
is not physically attached to the policy. That case involved a dispute about which of two
policies covering an accident was the primary policy. The court noted that one of the
insurers conceded that the MCS-90 endorsement was incorporated into its policy as a
11
Prestige Cas. Co. v. Mich. Mut. Ins. Co., 99 F.3d 1340 (6th Cir. 1996).
8
matter of law even though it was not attached to the policy,12 and therefore the court was
not called upon to decide the issue here.
AFFIRMED.
12
Id. at 1348 n.6.
9