Richard Toops Eloisa Toops, Individually and as Surviving Parents of Jeremy Brian Toops, Deceased Larry D. Hurst, as Administrator of the Estate of Jeremy Brian Toops, Deceased Thomas William Holm v. Gulf Coast Marine Inc. Stonewall Surplus Lines Insurance Company Technical Risks, Inc. Technical Risks Corporate Insurance, and United States Fidelity and Guaranty Company, United States Fidelity and Guaranty Company v. Richard Toops, Individually and A/n/f of Jeremy Brian Toops Eloisa Toops, Individually and A/n/f of Jeremy Brian Toops Larry D. Hurst, Administrator of the Estate of Jeremy Brian Toops, Deceased Thomas Holm, Individually and as Assignees of Rig Runner Express Inc. Rig Runner Express Inc. Eric Allen Davidson

Citation: 72 F.3d 483Docket: 95-40017

Court: Court of Appeals for the Fifth Circuit; February 29, 1996; Federal Appellate Court

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Richard and Eloisa Toops, as surviving parents of Jeremy Brian Toops, along with Larry D. Hurst, the estate administrator, and Thomas William Holm, filed a lawsuit against multiple defendants including Gulf Coast Marine Inc., various insurers, and Rig Runner Express Inc. The case arose from an accident on August 28, 1990, where Jeremy Toops was severely injured and later died after a tractor-trailer driven by Eric Allen Davidson struck the car he was in, which was being towed by Thomas Holm. 

Dayton-Scott Equipment Company, which rented cranes, had engaged Rig Runner, a licensed carrier, to transport a crane attachment from Louisiana to Texas. Following the accident, Toops' parents sued Davidson, Rig Runner, and Dayton-Scott. Rig Runner realized its $750,000 insurance policy was inadequate for potential liabilities and sought coverage from Dayton-Scott's insurers, including United States Fidelity and Guaranty Company (USF&G). However, USF&G denied coverage and refused to defend Rig Runner and Davidson.

The jury in Brazoria County found that Dayton-Scott was not in a joint venture with Rig Runner and that Rig Runner and Davidson were not agents of Dayton-Scott. Ultimately, while Dayton-Scott was not held liable, Davidson and Rig Runner were found negligent, resulting in a $12 million damages award for the Toops family.

Rig Runner settled its policy limits without appeal and, in May 1994, assigned all potential claims against USF&G and other insurers to Toops. Toops subsequently filed a breach of contract claim and sought a declaratory judgment against USF&G and others in state court, but USF&G removed the case to federal court. The District Court granted summary judgment in favor of all insurers except USF&G, whose motion for summary judgment was denied while Toops' motion was granted. The appeal revolves around the interpretation of USF&G's insurance policy, which defines insureds and includes Rig Runner as an insured under a specific provision. The Court determined that the language of the policy was clear, finding that Dayton-Scott had "hired" Rig Runner and thus established coverage. The Court rejected USF&G's argument for an exemption under another provision, concluding it did not apply to defeat coverage. The District Court reduced the judgment amount to $1 million and subsequently denied USF&G's motion for a new trial, even though USF&G referenced pertinent Fifth Circuit case law that could have influenced the interpretation. The District Court acknowledged that if the relevant cases had been presented earlier, a different outcome might have been possible. The appeal also questions whether the District Court erred in its application of the McBroome-Bennett doctrine, which states that a claimant must prove insured status before presuming coverage. The District Court noted that the doctrine is only relevant in cases of ambiguous policies, which it found the current policy to be unambiguous, thus not applicable.

USF&G contends that the court's alternative finding, which states that if the insurance policy is ambiguous, it should be interpreted against the insurer and favorably for the insured, is valid. However, the District Court correctly disregarded any application of the McBroome-Bennett doctrine, which lacks endorsement from the Texas Supreme Court or other Texas appellate courts and relies on outdated authority. Under Texas law, insurance contract terms must be construed strictly against the insurer, favoring the insured when ambiguity arises. Consequently, the District Court's strict interpretation against USF&G was appropriate.

Regarding USF&G's motion for a new trial under FED.R.CIV.P. 59, the Fifth Circuit determined it was not productive to analyze this motion since denials of new trial motions are typically not appealable. Instead, the court focused on reviewing the final judgment. The appellate court reviews the District Court's summary judgment de novo, requiring Toops to show no genuine issues of material fact exist and that he is entitled to judgment as a matter of law. If he meets this burden, USF&G must then disprove the claim.

Toops needed to establish that Dayton-Scott hired a 'covered auto' and that the drivers were under its control. The facts indicated that Dayton-Scott hired a licensed common carrier, which arranged the vehicles and drivers independently, failing to link Rig Runner (the hired entity) with the drivers, Williams and Davidson. Additionally, Davidson was identified as an independent contractor, not a Rig Runner employee, further undermining Toops' claim for coverage against USF&G.

The District Court erred in distinguishing between hiring a transportation company and hiring a truck. A vehicle qualifies as a "hired automobile" only if there is a separate contract for its exclusive use by the named insured. Relevant case law, including Sprow v. Hartford Ins. Co. and Russom v. Insurance Co. of North America, emphasizes this requirement. Additionally, for a vehicle to be considered hired, it must be under the exclusive use or control of the named insured, as outlined in decisions such as Liberty Mutual Ins. Co. v. American Employers Ins. Co.

The Fifth Circuit has clarified the criteria for determining if a truck is under the insured's control, identifying factors such as the lack of maintenance responsibilities by the hirer, absence of specific requirements for truck size or load, and the hirer's lack of authority over truck drivers. Courts consistently hold that hiring an independent contractor does not create coverage under a "hired auto" clause, as demonstrated in cases like Chicago Ins. Co. v. Farm Bureau Mutual Ins. Co. and Transport Indem. Co. v. Liberty Mut. Ins. Co.

Toops failed to demonstrate that Dayton-Scott separately hired the truck involved in the accident, nor that Davidson or Rig Runner had permission to use it. Consequently, Toops did not meet the burden of proof required for summary judgment. Additionally, issue preclusion was highlighted, as a prior jury trial found no joint enterprise between Rig Runner and Dayton-Scott, based on specific criteria such as mutual agreement and control. The jury also determined that Rig Runner and its drivers were not agents of Dayton-Scott at the time of the incident, indicating the absence of control over the details of performance during the trip.

The jury determined that Rig Runner was not an insured under USF&G's policy with Dayton-Scott, which the District Court dismissed as irrelevant to the question of agency or joint venture between the two parties. Under Texas law, issue preclusion prevents relitigation of essential factual issues decided in a prior case, even if the subsequent case involves a different cause of action. The prior jury's 'no' answer indicates that Dayton-Scott did not exercise sufficient control over Rig Runner, making the District Court's dismissal of issue preclusion incorrect.

Regarding the interpretation of the insurance policy, the District Court found the policy provisions unambiguous and did not apply additional construction rules, which USF&G argues was an error. USF&G contends that no corporation would insure third parties for risks it could not be liable for, although the policy language suggests otherwise. The policy states that anyone using a covered auto with permission qualifies as an insured, but must also show a separate contract and exclusive control under the precedent set in Sprow.

Ultimately, the court deemed the District Court's summary judgment erroneous, as the essential elements required by Sprow were not met, and reversed the decision in favor of USF&G.