Court: Court of Appeals for the Tenth Circuit; August 20, 2019; Federal Appellate Court
Bonni J. Genzer, an Uber driver, appeals against James River Insurance Company, claiming it breached its contract by denying coverage for injuries sustained in an accident during a fare return. She argues that under Oklahoma law, the "mend the hold" doctrine restricts James River to the reasons cited for coverage denial prior to her lawsuit. The district court ruled in favor of James River, stating that Oklahoma has not recognized the mend-the-hold doctrine and that Genzer’s claim does not fall within the insurance policy's coverage. The appeal court affirms this decision, maintaining jurisdiction under 28 U.S.C. 1291.
James River issued two Business Auto Coverage policies to Rasier LLC and its affiliates, effective from March 1, 2017, to March 1, 2018. The 100 Policy applies when a rideshare driver is actively providing services, requiring the driver to occupy a "covered auto" as defined by specific conditions, including being en route to pick up or drop off passengers. The 200 Policy applies to drivers awaiting ride requests, defining a "covered auto" under conditions that exclude active service and specify the driver must be logged in but not en route. These distinctions clarify the circumstances under which coverage is applicable, which the court found did not extend to Genzer’s situation.
On April 17, 2017, Genzer accepted a fare via UberPartner, transporting a passenger from Will Rogers World Airport to Woodward, Oklahoma. After the drop-off, she sustained injuries from a metal object ejected by an unidentified semi-trailer truck during her return trip. On May 3, 2017, Genzer submitted a claim for various coverages, asserting her Uber app was set to "Available" at the time of the accident. Claims examiner Michael Pitts informed her counsel that she appeared to be "offline" during the incident, which led to a denial of coverage. Genzer's counsel countered that she was logged into the system and seeking a return fare. Nevertheless, Pitts reiterated that there was no coverage, as she was not logged into the Uber app at the time of the accident. On May 23, 2017, a formal disclaimer was sent, stating that neither the 100 Policy (for drivers en route to pick up passengers) nor the 200 Policy (for drivers available for ride requests) applied, since Genzer was not logged into the app. Genzer subsequently filed a lawsuit against James River for breach of contract, which was removed to federal court. James River moved for summary judgment, which was granted on June 4, 2018, while Genzer's motion was denied. The legal analysis includes a review of the summary judgment standards and the "mend the hold" doctrine, which Genzer argued should prevent James River from changing its rationale for denying coverage during litigation. The case hinges on whether James River's pre-litigation and litigation rationales differ and if the mend-the-hold doctrine applies. James River maintains that coverage is only provided when drivers operate "covered autos" as defined in its policies.
The 200 Policy's covered-auto endorsement is applicable when a driver is logged into the UberPartner application and available for ride requests outside public-airport premises. If the driver is available at a public airport, the 100 Policy's subpart (c) applies. Upon accepting a ride request, subparts (a) and (b) of the 100 Policy come into effect: subpart (a) requires the driver to be either en route to pick up the passenger or traveling to their final destination, while subpart (b) applies when the driver is on public-airport premises during or immediately after providing services. Only the 100 Policy offers uninsured-motorist coverage, which Genzer sought under subpart (a)(2). Initially, Genzer reported to Uber that she was "returning" from dropping off a passenger and was in "available" status at the time of her accident, leading her counsel to inquire about coverage under the 200 Policy. However, James River determined that Genzer had logged off the UberPartner application and was not available during the accident, thus denying coverage under the 200 Policy, stating it does not include first-party medical coverage regardless of a driver's status.
In subsequent communications, Genzer's counsel maintained that she was logged in and searching for fares when the accident occurred, but James River reiterated that coverage does not exist for either available or offline statuses. Following this, Genzer filed a suit in state court demanding uninsured-motorist coverage under the 100 Policy, contradicting her earlier claim about availability and asserting she had been "providing rideshare transportation services" during the accident. This assertion aligns with subpart (a) of the 100 Policy, which applies when a driver is providing services outside public-airport premises. After the case was moved to federal court, James River disclaimed coverage under this provision, asserting that the 200 Policy does not cover uninsured-motorist claims and shifting its rationale for denial from Genzer’s alleged offline status to her service provision status. Genzer then cross-moved for summary judgment, emphasizing coverage under subpart (a)(2) of the 100 Policy, while James River maintained its position regarding the sequence of events during the accident and deemed any dispute over Genzer's online status immaterial. James River's rationale for denying coverage has evolved in response to Genzer's changing arguments.
Genzer initially claimed she was "available" for ride requests but not transporting a passenger during the accident, leading James River to deny coverage under the 200 Policy, asserting she was offline. James River maintained this rationale for denying coverage under both the 100 and 200 Policies, indicating that the 200 Policy does not cover uninsured-motorist claims even if the driver is online. Upon filing suit, Genzer altered her position, claiming she was "providing" transportation services, which prompted James River to disclaim coverage under subpart (a) of the 100 Policy, later confirmed by Genzer as subpart (a)(2). James River reiterated its denial under the 200 Policy for the same reason. The dispute then focused on the 100 Policy's subpart (a)(2).
The applicability of the mend-the-hold doctrine, which prevents a party from taking inconsistent positions regarding a contract's meaning, was examined. Several states limit this doctrine to circumstances involving bad faith or prejudicing another party, while others do not restrict positions taken during litigation. The status of the doctrine under Oklahoma law is uncertain. Genzer argues that Oklahoma has adopted the prelitigation version of the doctrine, citing an old case, Morrison v. Atkinson, which does not support her claim as it did not establish the doctrine. Although some later Oklahoma cases reference the doctrine, they confine its application to shifts between trial and appeal, without extending it to prelitigation contexts.
Genzer further argues that the prelitigation version of the doctrine is implicitly tied to the duty of good faith imposed on insurers in their dealings with insureds, citing cases where insurers initially denied coverage in bad faith but later presented legitimate defenses. These cases resemble the prelitigation mend-the-hold doctrine, although they do not explicitly reference it.
Genzer does not claim that James River denied coverage in bad faith; rather, she seeks to restrict the insurer to its prelitigation denial, regardless of its justification. This approach contradicts the mend-the-hold doctrine, which is based on a duty of good faith. Genzer references out-of-state cases that pertain to a prelitigation version of the doctrine, which she believes Oklahoma has adopted, but these cases largely focus on during-litigation scenarios, making them irrelevant to her claims. The court emphasizes that it must apply existing Oklahoma law without speculating on doctrines not recognized in the state.
Even if Oklahoma had adopted the prelitigation mend-the-hold doctrine, it would not apply here, as James River’s rationale for denying coverage has remained consistent. Initially, James River denied coverage because Genzer claimed to be logged into the UberPartner application at the time of her accident. After her lawsuit, when she asserted that she was providing transportation services, James River adjusted its defense to argue that she had already completed those services. This adjustment aligns with her evolving theory and does not represent a shift in position that would be unreasonable or absurd.
James River's differing rationales for denying coverage are not contradictory, as both the claim of being offline and having completed services could independently disqualify coverage under the policy. The insurer has consistently maintained that Genzer was offline during the accident while also arguing that she had completed her transportation services. The court notes that James River has not unfairly altered its defense, as it provided Genzer with proper notice of its during-litigation rationale in its disclaimer letter, which detailed the conditions under which the policy applies. Consequently, Genzer has not shown that she suffered any prejudice from James River's argument or even claimed such.
The mend-the-hold doctrine, as proposed by Genzer, is deemed excessive when applied to bar a valid defense without showing any prejudice to the opposing party. Even if recognized in Oklahoma, no compelling reason exists to apply it in this case. Genzer contends that the 100 Policy's covered-auto endorsement regarding uninsured-motorist coverage is ambiguous and should be interpreted favorably toward her. However, the court finds no ambiguity, asserting that Genzer's claim does not align with the clear terms of the policy. Under Oklahoma law, unambiguous contracts must be interpreted based on their plain meaning; ambiguities arise only when a provision is open to two interpretations.
The relevant subpart (a)(2) of the endorsement specifies coverage during a driver's acceptance of a transportation request and concludes when the passenger reaches their final destination. Genzer's argument that coverage extends to her entire route, including return travel after dropping off the passenger, contradicts the clear language of the provision. The definition limits coverage to the passenger’s requested services, which end once the passenger exits the vehicle. The endorsement does not suggest that the driver’s return trip or destination is included in the coverage, as passengers select only their own destinations in the Uber application. Therefore, Genzer’s interpretation lacks logical support and fails to reflect the intended scope of the insurance coverage.
Genzer argues that the phrase "including, but not limited to, dropping off of passengers" implies additional occurrences beyond simply dropping off passengers. The policy language acknowledges other stops, such as visiting a store or dropping off some passengers, and is compatible with the Uber Passenger application that allows added stops. However, the phrase "traveling to the final destination of the requested transportation services" sets a temporal limit; once the last passenger exits, coverage ends. Genzer's interpretation obscures this, suggesting that the term "final destination" lacks clarity regarding when coverage concludes, but fails to recognize the preceding context that defines "travel." Genzer's claim that she remained in a "covered auto" after dropping off her passenger because she had logged a ride request is also flawed; subpart (a)(2) requires that coverage applies only when a driver is actively fulfilling a ride request. Since she had already completed the drop-off, her acceptance of the request was no longer valid. Moreover, if coverage continued after dropping off a passenger, it would contradict the policy's structure of providing coverage only during specific ridesharing stages. The absence of similar language in subpart (a)(2) as found in subpart (b)(2), which allows for coverage immediately after requested services conclude, indicates a deliberate choice by the policy drafters. Although Genzer argues for a construction of the policy in her favor due to perceived ambiguity, the court finds no ambiguity in subpart (a)(2). Consequently, the coverage was valid only during the ride from Will Rogers World Airport to Woodward, and thus, no coverage applies to the injuries sustained during her return journey.
Genzer's claim regarding her injuries is ultimately governed by the explicit terms of the "100 Policy" and "200 Policy" associated with James River's Business Auto Coverage. The district court affirmed that the "100 Policy" (Policy Number CA436100OK-02) and the "200 Policy" (Policy Number CA436200OK-02) have distinct coverage scopes, with the "100 Policy" covering first-party medical claims in Oklahoma, while the "200 Policy" does not provide uninsured-motorist coverage for rideshare drivers in Oklahoma due to a waiver by the named insured.
Genzer argued that she was unaware of the passenger's destination until after accepting the fare. The district court noted ambiguity regarding whether Genzer intended to return to a specific location in Oklahoma City, but deemed this fact irrelevant for summary judgment purposes, assuming she intended to return to the Oklahoma City area. The definition of "uninsured motor vehicle," as per the "100 Policy," includes hit-and-run vehicles where the driver or owner cannot be identified, and it was agreed that the truck's driver met this criterion.
Central to the dispute was whether Genzer was in "available" status or had logged off the UberPartner application at the time of the accident. Both parties ultimately agreed that this distinction was immaterial. Genzer had initially claimed she was returning from a ride, but it was clarified that the ride was to Woodward, and the accident occurred in Watonga.
Genzer's claim was complicated by her lack of access to the policies, leading her counsel to submit a generic claim while requesting the applicable policy for review. The "200 Policy" was determined to apply to her situation since it covers available-status claims outside public-airport premises, despite her requesting uninsured-motorist coverage relevant to the "200 Policy." The distinction is critical, as the "200 Policy" is identified as the governing policy for available-status claims, while the "100 Policy" focuses on pickup and drop-off scenarios.
Additionally, the "200 Policy" provides personal-injury protection and uninsured-motorist endorsements in Kansas but lacks such coverage for Oklahoma. In contrast, the "100 Policy" includes uninsured-motorist endorsements for both states and covers first-party medical claims in Oklahoma.
James River's assertion that Oklahoma's coverage excludes "first party medical" indicates it was addressing the 200 Policy, interpreting this to mean that no uninsured-motorist coverage was available under the 100 Policy, regardless of Genzer's logged-in status. However, personal-injury protection and uninsured-motorist coverage are separate from each other and from vehicle damage coverage, meaning James River's statement does not effectively disclaim uninsured-motorist coverage. The discussion had focused exclusively on the 200 Policy prior to this assertion, with no indication that the 100 Policy was relevant at that time. Furthermore, James River's rationale for denying coverage—stating that coverage is unavailable whether Genzer was "available or offline"—fails to provide clarity on the reasons for the coverage denial, particularly since it does not align with the explanation that Genzer had already dropped off her passenger before the accident.
The disagreement between the parties centers on the letter's disclaimer of coverage under the 100 Policy's covered-auto endorsement, with Genzer claiming it pertains to subpart (c) and James River asserting it pertains to subpart (a). The letter does not specify either subpart but provides a broad denial referencing the entire covered-auto endorsement. It noted that Genzer was not on public-airport premises during the accident, focusing the denial on subpart (a). The parties' arguments relate to Oklahoma law; however, there is skepticism regarding the adoption of the "mend-the-hold" doctrine in Oklahoma, with federal courts expressing doubt about its applicability. The conclusion reached is that Oklahoma has not adopted this doctrine.
Genzer seeks certification of a legal question to the Oklahoma Supreme Court, but did not request this from the district court, and there is no compelling reason to initiate such a request now. The court emphasizes that certification is at the discretion of federal courts, referencing Lehman Bros. v. Schein. Genzer's argument lacks clarity in differentiating between pre- and during-litigation applications of the relevant legal doctrines, assuming Oklahoma adopts the prelitigation version. In her opening brief, she claims that certain cases apply the mend-the-hold doctrine, but later acknowledges in her reply that her bad-faith theory is separate from this doctrine. She cites insurance law treatises that suggest an insurer waives any denial grounds not asserted initially, but these do not universally reflect the adoption of the prelitigation mend-the-hold doctrine in all states; many reject this notion, as indicated by Ryerson Inc. v. Fed. Ins. Co. The court asserts that it must rely on Oklahoma law, and highlights a distinction in how defenses can shift during litigation. In this case, James River did not introduce a new defense after the failure of its first defense; it denied coverage based on Genzer's claims and later provided different grounds for denial in response to the complaint. Additionally, a specific regulatory subpart related to transportation services is deemed inapplicable.
