Hartford Cas. Ins. Co. v. Ewan

HARTFORD CASUALTY INSURANCE COMPANYand HARTFORD UNDERWRITERS INSURANCE COMPANY, Plaintiffs-Appellees, v. DESHON EWAN and PATRICK EWAN, Defendants-Appellants,andJOHN MOSLEY, doing business as M&W Tree Service, Defendant.

No. 12-6190

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

FILED: August 28, 2013

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

File Name: 13a0801n.06

ON APPEAL FROM THE

UNITED STATES DISTRICT

COURT FOR THE WESTERN

DISTRICT OF TENNESSEE

BEFORE: GILMAN, GRIFFIN, and WHITE, Circuit Judges.^*

HELENE N. WHITE, Circuit Judge. DeShon Ewan and her husband Patrick Ewan (the Ewans) appeal the district court's declaratory judgment in favor of Hartford Casualty Insurance Company (Hartford Casualty) and Hartford Underwriters Insurance Company (Hartford Underwriters) (collectively, the Hartford Plaintiffs), holding that the commercial general liability policy (CGL Policy) issued by Hartford Casualty to cover John Mosley's landscaping business does not provide coverage for bodily injury or property damage resulting from an accident Mrs. Ewan hadwith Mosley's Mack truck because any resulting injury or damage was covered exclusively under the automobile policy (Auto Policy) issued by Hartford Underwriters covering the Mack truck. We AFFIRM on the basis that the CGL Policy does not provide coverage.

I.

Mosley owns M&W Tree Service, a landscaping business in Mississippi. He also owns a Mack truck with an attached tree spade, which his workers use "to create a hole in the ground at a job site, transport the dirt to the nursery, extract a tree from the nursery, and transport and plant the tree at the job site." The Mack truck also transports the workers who perform the tree transplanting operations. Mosley purchased two insurance polices for his business: the Auto Policy issued by Hartford Underwriters and the CGL Policy issued by Hartford Casualty. Hartford Casualty and Hartford Underwriters are affiliated companies; both are members of The Hartford Insurance Group. The Mack truck is the only "covered auto" under the Auto Policy. The CGL Policy describes the covered business "John Moseley DBA: M&W Tree Service" as "landscaping (with no tree removal or snow plowing)."¹ Mosley purchased both policies at the same time and from the same agent; the policies were delivered to him in Mississippi.

In March 2005, non-party Jason Whitby, a subcontractor of M&W Tree Service, was involved in an accident with Mrs. Ewan while driving the Mack truck. Whitby allegedly struck the driver's side of Mrs. Ewan's car. The Ewans filed suit in Tennessee state court against Mosley and Whitby, seeking damages allegedly suffered as a result of the accident. Counsel for Mosley andWhitby disclosed the Auto Policy to the Ewans as the only applicable insurance policy and offered to settle the lawsuit for the policy limit of $500,000. The Ewans accepted this offer and executed a release and settlement agreement. Thereafter, the Ewans discovered the existence of the CGL Policy, which has a policy limit of $1,000,000. They returned to state court to rescind their earlier settlement agreement, arguing that the CGL Policy also covered the accident and that they were never told of its existence during settlement negotiations.

In November 2010, the Hartford Plaintiffs filed this action in federal court against the Ewans and Mosley, seeking a declaration that the CGL Policy does not provide coverage for bodily injury or property damage resulting from the March 2005 accident, and that any resulting injury or damage was covered exclusively under the Auto Policy. The parties agreed to proceed on a "case stated" basis in lieu of trial or summary judgment. The district court entered judgment in favor of the Hartford Plaintiffs:

Because the CGL Policy explicitly excludes from coverage damages "arising out of the ownership, maintenance, use or entrustment to others of any . . . auto . . . owned or operated by . . . any insured," and because the Auto Policy expressly identifies the Mack truck and the tree spade as a "covered auto," this [c]ourt declares that the CGL Policy issued by Hartford Casualty does not provide coverage for alleged damages to the Ewans resulting from the Auto Accident. The Auto Accident was covered exclusively under the Auto Policy with its attendant $500,000.00 limit on liability.

Hartford Cas. Ins. Co. v. Ewan, 890 F. Supp. 2d 886, 896 (W.D. Tenn. 2012) (internal citation omitted) (ellipses in original). The Ewans timely appealed.

II.

Although we have not explicitly adopted the case-stated procedure, we have recognized that parties may submit a matter to the district court for decision based on their submissions and a stipulated record. See Int'l Union v. Winters, 385 F.3d 1003, 1005 n.1 (6th Cir. 2004); cf. FDIC v. St. Paul Fire & Marine Ins. Co., 942 F.2d 1032, 1038 (6th Cir. 1991) ("Stipulations voluntarily entered by the parties are binding, both on the district court and on us."). Under the case-stated procedure recognized by the First Circuit, "the parties waive trial and present the case to the court on the undisputed facts in the pre-trial record. The court is then entitled to engage in a certain amount of factfinding, including the drawing of inferences." Situation Mgmt. Sys. v. ASP. Consulting LLC, 560 F.3d 53, 58 (1st Cir. 2009) (internal quotation marks omitted). "We review the district court's factual findings for clear error and its legal conclusions de novo." Id.

The parties agree that

we [must] consider the policy language through the lens of the substantive contract law of [Mississippi], which includes the following concepts:

[I]f a contract is clear and unambiguous, then it must be interpreted as written. A policy must be considered as a whole, with all relevant clauses together. If a contract contains ambiguous or unclear language, then ambiguities must be resolved in favor of the non-drafting party. Ambiguities exist when a policy can be logically interpreted in two or more ways, where one logical interpretation provides for coverage. However, ambiguities do not exist simply because two parties disagree over the interpretation of a policy. Exclusions and limitations on coverage are also construed in favor of the insured. Language in exclusionary clauses must be clear and unmistakable, as those clauses are strictly interpreted. Nevertheless, a court must refrain from altering or changing a policy where terms are unambiguous, despite resulting hardship on the insured.

Architex Ass'n v. Scottsdale Ins. Co., 27 So.3d 1148, 1157 (Miss. 2010) (internal quotation marks omitted); see State Farm Mut. Auto. Ins. Co. v. Scitzs, 394 So.2d 1371, 1372 73 (Miss. 1981) (summarizing the "firmly established" rules of construction for insurance contracts).

The Hartford Plaintiffs do not dispute that the CGL Policy provides a broad grant of coverage for Mosley's business, subject to exclusions. The CGL Policy contains an "auto exclusion" clause that excludes from coverage "'[b]odily injury' or 'property damage' arising out of the ownership, maintenance, use or entrustment to others of any aircraft, 'auto' or watercraft owned or operated by or rented or loaned to any insured."² The policy further states:

This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the "occurrence" which caused the "bodily injury" or "property damage" involved the ownership, maintenance, use or entrustment in others of any aircraft, "auto" or watercraft that is owned or operated by or rented or loaned to any insured.³

"Auto" is defined as "a land motor vehicle, trailer or semi-trailer designed for travel on public roads, including any attached machinery or equipment. But 'auto' does not include 'mobile equipment.'" The CGL Policy also contains a mobile-equipment exclusion clause (in addition to the auto exclusion) that excludes from coverage "'[b]odily injury" or 'property damage' arising out of . . . [t]he transportation of 'mobile equipment' by an 'auto' owned or operated by or rented or loaned to any insured[.]"

Construing these clauses, an auto or mobile equipment transported by an auto is excluded from coverage under the CGL Policy, but mobile equipment on its own is not. Thus, the question is whether the Mack truck with the attached tree spade is an auto (with an attached piece of machinery or mobile equipment) that is excluded from coverage under the CGL Policy, or mobile equipment that is not. See Architex Ass'n, 27 So.3d at 1156 ("The [insurance] policy either affords coverage or not, based upon application of the policy language to the facts presented."). There is no dispute that the Mack truck is a land vehicle that travels on public roads and has attached machinery, which falls within the definition of an "auto" under the CGL Policy. Because the Hartford Plaintiffs have established that the auto exclusion applies, the...