Progressive Se. Ins. Co. v. Brown

182 N.E.3d 197

PROGRESSIVE SOUTHEASTERN INSURANCE COMPANY, Appellant,

v.Bruce A. BROWN, et al., Appellees.

Supreme Court Case No. 21S-CT-496

Supreme Court of Indiana.

Argued: December 16, 2021

Filed February 25, 2022

ATTORNEYS FOR APPELLANT, PROGRESSIVE SOUTHEASTERN INSURANCE COMPANY: Philip Kenneth Joseph Lashutka, Janet G. Horvath, J. Thomas Vetne, Jones Obenchain, LLP South Bend, Indiana

ATTORNEYS FOR APPELLEES, B & T BULK, LLC, AND BRUCE A. BROWN: Tracey S. Schafer, Anderson, Agostino & Keller, P.C., South Bend, Indiana

ATTORNEYS FOR APPELLEES, ROBIN S. JOHNSON, AS PERSONAL REPRESENTATIVE OF THE ESTATE OF DONA S. JOHNSON, AND ROBIN S. JOHNSON, INDIVIDUALLY: R. T. Green, Collin W. Green, Letha A. Maier, Blackburn & Green, Indianapolis, Indiana, Todd A. Richardson, Lewis & Kappes, P.C., Indianapolis, Indiana

ATTORNEYS FOR APPELLEE-INTERVENOR, STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY: Lizabeth R. Hopkins, Kopka Pinkus Dolin, P.C., Crown Point, Indiana

On Petition to Transfer from the Indiana Court of Appeals, No. 20A-CT-1765

Slaughter, Justice

The federal Motor Carrier Act of 1980 requires some motor carriers to maintain minimum levels of financial responsibility. One way carriers can comply with these requirements is by adding an MCS-90 endorsement to their insurance policy. This endorsement provides that if a motor vehicle is involved in an accident, the insurer may be required to pay any final judgment against the insured arising out of the accident. We must decide whether, under either federal or state law, the MCS-90 endorsement applies to an accident that occurred during an intrastate trip transporting non-hazardous property. We hold it does not.

I

B&T Bulk is a motor carrier based in Mishawaka, Indiana, and operates in both Indiana and Michigan. In 2017, a B&T Bulk employee, Bruce Brown, was driving a truck and empty trailer to pick up a load of cement in Logansport, Indiana, for delivery to South Bend, Indiana. Brown's truck crossed the centerline and struck Dona Johnson's oncoming vehicle. She died in the collision.

Before the accident, B&T Bulk had bought a commercial auto policy from Progressive Southeast Insurance Company, the plaintiff below. But at the time of the accident, the truck and trailer were not listed on the policy. The policy did have an MCS-90 endorsement, however, creating a suretyship whereby Progressive agreed to pay a final judgment against B&T Bulk in certain negligence cases.

Johnson's widower filed a wrongful-death action against Brown and B& T Bulk, individually and on behalf of Johnson's estate. Progressive filed this separate cause of action, seeking a declaration that (1) it has no duty to defend or indemnify B& T Bulk or Brown because the truck and trailer involved in the accident were not listed in the policy as insured autos; and (2) the MCS-90 endorsement does not apply. State Farm, Johnson's insurance carrier, intervened in the declaratory action. Progressive, B& T Bulk, Brown, Johnson's husband, and Johnson's estate, joined by State Farm, filed cross-motions for summary judgment.

The trial court entered an order finding (1) Progressive has no duty to defend or indemnify Brown; (2) the truck and trailer were not insured autos; and (3) the MCS-90 endorsement applies. Progressive appealed only the MCS-90 issue. The court of appeals affirmed, holding that the MCS-90 endorsement applies.

Progressive Se. Ins. Co. v. B&T Bulk, LLC , 170 N.E.3d 1125, 1134 (Ind. Ct. App. 2021). Progressive sought transfer, which we granted, Progressive Se. Ins. Co. v. Brown , 176 N.E.3d 446 (Ind. 2021), thus vacating the appellate opinion.

II

We review summary-judgment decisions de novo. Perkins v. Mem'l Hosp. of South Bend , 141 N.E.3d 1231, 1234 (Ind. 2020). "[S]ummary judgment is appropriate only when the designated evidence shows no genuine issue of material fact and the moving party is entitled to judgment as a matter of law." Rogers v. Martin , 63 N.E.3d 316, 320 (Ind. 2016) ; Ind. Trial Rule 56(C). Here, the parties agree there are no disputed issues of material fact. Thus, the sole issue is whether, as a matter of law, the MCS-90 endorsement applies to intrastate trips transporting non-hazardous property. We hold it does not and reverse the trial court on this issue.

In Part A, we hold under the plain language of the MCS-90 and the weight of federal authority that the endorsement does not apply to intrastate trips transporting non-hazardous property as a matter of federal law. In Part B, we hold that the endorsement also does not apply under Indiana law because the state statute incorporating the federal regulations does not expand the regulations’ scope.

A

Under section 30 of the Motor Carrier Act of 1980, certain motor carriers must maintain minimum levels of financial responsibility. 49 U.S.C. § 31139. The governing statutes and regulations ensure a motor carrier "has independent financial responsibility to pay for losses sustained by the general public arising out of its trucking operations." Travelers Ins. Co. v. Transport Ins. Co. , 787 F.2d 1133, 1140 (7th Cir. 1986). Motor carriers have three options to comply with the financial responsibility requirements, one of which is at issue here: the Form MCS-90 endorsement. 49 C.F.R. § 387.7(d)(1).

The MCS-90 is an endorsement to an underlying insurance policy between the motor carrier and its insurer. The endorsement "obligates an insurer to pay certain judgments against the insured ... even though the insurance contract would have otherwise excluded coverage." Canal Ins. Co. v. Coleman , 625 F.3d 244, 247 (5th Cir. 2010). It also requires the insured to reimburse the insurer for any payment made to the public under the endorsement. The MCS-90 thus "creates a suretyship among the injured public, the insured, and the insurer". Auto-Owners Ins. Co. v. Munroe , 614 F.3d 322, 327 (7th Cir. 2010). See also Carolina Cas. Ins. Co. v. Yeates, 584 F.3d 868, 878-79 (10th Cir. 2009) (en banc) (adopting the "Majority View" that the MCS-90 creates a suretyship).

Appellees argue that the "clear and unambiguous language" of the MCS-90 dictates that it applies to this accident. We disagree. The MCS-90, by its terms, applies only to "motor vehicles subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980". Section 29 is not relevant here because it merely amends a statute, now superseded, that was a predecessor to the Motor Carrier Act. See Pub. L. No. 96–296, § 29, 94 Stat. 820 (1980).

But section 30, codified at 49 U.S.C. § 31139, is relevant. It provides that the minimum financial responsibility requirements apply to motor carriers transporting property "in the United States between a place in a State" and (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". 49 U.S.C. § 31139(b)(1) ; 49 C.F.R. § 387.3(a). In other words, these requirements apply when a motor carrier transports property in foreign or interstate commerce. They also apply when a motor carrier in intrastate commerce transports hazardous property. 49 U.S.C. § 31139(d)(1) ; 49 C.F.R. § 387.3(b). Thus, section 30's financial responsibility requirements apply in only two circumstances: first, when a motor carrier transports property in foreign or interstate commerce; second, when a motor carrier transports hazardous property in foreign, interstate, or intrastate commerce. And because the MCS-90 applies only when the motor carrier is subject to section 30's requirements, the MCS-90 also applies only in these circumstances.

Here, all parties agree that Brown's trip was purely intrastate and that he was not transporting hazardous property at the time of the accident. But that does not end our inquiry because intrastate trips can also qualify as interstate commerce. Thus, whether the MCS-90 applies here depends on whether Brown was engaged in interstate commerce at the time of the accident. We hold he was not. Because the MCS-90 is a federally mandated form, the operation and effect of which are a matter of federal law, Carolina Cas. Ins. Co. v. E.C. Trucking , 396 F.3d 837, 841 (7th Cir. 2005) (citing John Deere Ins. Co. v. Nueva , 229 F.3d 853, 856 (9th Cir. 2000) ), we turn to federal law to answer this question.

Federal courts use three different approaches to determine whether an MCS-90 applies to a particular loss. The trip-specific approach is the narrowest approach and is the majority one. See, e.g., Coleman , 625 F.3d at 251. This approach relies on the unambiguous language of both the MCS-90 and section 30 of the Motor Carrier Act and looks at whether the motor carrier's employee was transporting property on an interstate trip at the time of the loss. Ibid.

Another, similar approach determines "[w]hether transportation is interstate or intrastate ... by the essential character of the commerce, manifested by shipper's fixed and persisting transportation intent at the time of the shipment ". Klitzke v. Steiner Corp. , 110 F.3d 1465, 1469 (9th Cir. 1997) (emphasis in original). See also Lyons v. Lancer Ins. Co. , 681 F.3d 50, 58 (2d Cir. 2012) ("the existence of the requisite interstate nexus may be determined by looking to the intent of the goods’ seller or shipper with respect to the goods’ destination"); Century Indem. Co. v. Carlson , 133 F.3d 591, 598 (8th Cir. 1998) (examining "the ‘essential character’ of the shipment from the shipper's intent"). Under this approach, even an intrastate trip can satisfy the interstate commerce requirement if the shipper has a "fixed and persisting transportation intent" to ship the goods to an interstate terminal. Carlson , 133 F.3d at 598.

The final and broadest approach, and the one Appellees ask us to adopt, applies the MCS-90 when the court finds it aligns with the public policy behind the Motor Carrier Act. See Canal Ins. Co. v. YMV Transport, Inc. , 867 F. Supp. 2d 1099, 1108 (W.D. Wash. 2011) (...