Tractor Insurer Does Not Have to Pay on Car Driver's Judgment

 

In Sentry Select Ins. Co. v. Thompson, 2009 WL 3366928 (Va.), Thompson was driving a car northbound on the highway and Brown was driving a tractor-trailer rig south-bound when the vehicles collided and Thompson sustained bodily injuries.

The tractor Brown was operating was owned by Eagle Valley and was a registered United States Department of Transportation (USDOT) motor carrier. The tractor was attached to a Trailmobile trailer owned by Milligan, which was authorized by the USDOT to broker loads in interstate commerce as well as to haul goods as a contract carrier. Brown was using the Trailmobile with permission.

 

Sentry had issued Milligan an insurance policy that was in effect at the time of the accident. The Sentry policy scheduled two vehicles, neither of which was the tractor or Trailmobile involved in the accident. Neither the tractor nor the Trailmobile was specifically described in the Sentry policy in any way.

 

The Sentry policy contained Endorsement MCS-90, which stated:

 

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…regardless of whether or not each motor vehicle is specifically described in the policy.

 

The MCS-90 also provided that the insurer is not be liable for amounts in excess of $750,000.

Thompson filed a complaint in Virginia circuit court against Brown and Eagle Valley, and judgment of $1,700,000 was awarded in favor of Thompson. At the time of the accident, Canal Insurance Company had liability insurance in effect on the tractor up to $1,000,000 and, as a result of the judgment in for Thompson, made payment to Thompson in the for $969,767.80, the amount remaining on its policy. There was an unpaid balance of $730,232.20 on the judgment, along with interest and costs. Thompson demanded that Sentry pay the unpaid balance and Sentry denied.

 

The Sentry policy included as an insured (1) Milligan, the named insured; and (2) “[a]nyone else while using with your permission a covered 'auto' you own, hire or borrow.”

 

Sentry argued that the Trailmobile was not covered under the Sentry policy and that the MCS-90 did not obligate Sentry to provide coverage for a judgment against any party other than Milligan.

 

Thompson argued that the MCS-90 should be read essentially as an amendment to the Sentry Policy so the Trailmobile was a “covered auto” and Brown, as a permissive user of the Trailmobile, became an “insured.”

 

The parties agreed that the Trailmobile was not listed as a covered vehicle under the Sentry policy. Therefore, the question was whether the MCS-90 required coverage for the unpaid portion of the judgment against Brown or Eagle Valley or whether the MCS-90 limited Sentry's obligation to pay Thompson to only judgments against the named insured, Milligan.

 

According to the court, the Federal Motor Carrier Safety Administration (FMCSA) of the USDOT required that interstate transportation brokers and motor carriers transporting nonhazardous materials provided proof of financial responsibility in the amount of at least $750,000 in one of three ways. A primary purpose of the statute and the financial responsibility regulations promulgated thereunder was to protect the public by ensuring that motor carriers would be able to satisfy judgments up to at least $750,000 resulting from acts of negligence. Regulated motor carriers were required to provide proof of financial responsibility, and it was not necessary that a motor carrier obtain insurance as long as the carrier obtained a surety bond in the amount of $750,000 or obtained permission to self-insure.

 

Milligan, as a regulated motor carrier, was required to provide proof to the USDOT of financial responsibility. To comply with the requirement, Milligan arranged for Sentry to issue the MCS-90, one of the three approved methods of proving financial responsibility. According to its terms, the MCS-90 provided coverage “regardless of whether or not each motor vehicle is specifically described in the policy.” Under a plain reading of the MCS-90, then, the MCS-90 required Sentry to pay for judgments against the insured for accidents involving the Trailmobile, even though the Trailmobile was not specifically listed in the Sentry policy.

 

The court explained that its analysis should begin with the statute and regulations that provide the context for the MCS-90. First, the statute itself required that insurance “be sufficient to pay…for each final judgment against the registrant.” Thus, under the statute, the purpose of the insurance was to ensure payment for a judgment against the registered motor carrier up to $750,000.

 

Second, the regulations unambiguously defined “insured” in the context of the MCS-90 as “the motor carrier named in the policy of insurance, surety bond, endorsement, or notice of cancellation, and also the fiduciary of such motor carrier.” The FMCSA's enforcement guidance reinforced this definition.

 

Finally, in finding that the MCS-90 should not be read to incorporate terms of the Sentry policy as a whole, the court found significant that the regulations did not require a motor carrier to provide proof of insurance, but rather require only proof of financial responsibility up to $750,000 through one of three ways. Milligan could therefore have satisfied his statutory financial responsibility requirements through a surety bond or, with permission, as a self-insured. Had Milligan fulfilled his obligation in one of those ways, there would be no question that the Sentry policy terms would be inapplicable. Indeed, the Sentry policy would be totally irrelevant. Here, because the MCS-90 was promulgated for precisely the same purpose as a surety bond or self-insurance, it would make no sense to reach a different result based on how Milligan chose to discharge his federally mandated financial responsibility duties.

 

Thus, the court held that Sentry was not required to make a payment based on the judgment against Brown and Eagle Valley.

 

Editor's Note: Under what the court referred to as the unambiguous regulations defining “insured,” and its broader statutory and regulatory context, the MCS-90 endorsement requires payment only for a judgment against the named insured.