Court: Collision Considered One 'Occurrence'
September 01, 2010
The 7th U.S. Circuit Court of Appeals recently held that a multiple vehicle collision constituted one "occurrence" for purposes of determining the number of applicable limits, and that the MCS-90 endorsement to a motor carrier's liability insurance policy was not triggered because of a settlement in which no actual judgment was entered against the carrier. Auto-Owners Insurance Co. v. Munroe, 2010 WL 2852611 (7th Cir. July 22, 2010)
The carrier's insurer, Auto-Owners, which issued the policy with the MCS-90 endorsement, was represented by Daniel R. Price of Wham & Wham, Centralia. Joseph Dulle of Stone, Leyton & Gershman, St. Louis, represented the underlying plaintiff, Munroe.
The insured, Wayne Wilkens Trucking (Wilkens), owned three tractor-trailers traveling southbound in a convoy. The second tractor-trailer was attempting to return to the southbound lane following a pass when its rear was struck by Munroe, another trucker heading north. After striking the southbound vehicle Munroe careened into a head-on collision with the third southbound tractor-trailer which was following close behind the second.
Munroe sustained serious injuries and sued all three drivers and Wilkens. All were covered under a single insurance policy issued by Auto-Owners. The policy specified a limit of $1 million for each occurrence, and also contained a combined limit of liability provision which stated a maximum total coverage of $1 million regardless of the number of automobiles involved in the accident.
In his underlying lawsuit Munroe entered a partial settlement agreement. He agreed to release Wilkens and the drivers from individual liability above their liability insurance coverage in exchange for about $900,000, which represented the remainder of the $1 million coverage limit after property damage was paid to the owner of Munroe's tractor-trailer. The agreement acknowledged that Auto-Owners would seek a declaratory judgment concerning the extent of coverage provided by the policy.
Auto-Owners filed the instant lawsuit, and the district court agreed that the policy limit was $1 million and granted summary judgment for Auto-Owners. Munroe took this appeal.
In an opinion by Judge Daniel A. Manion, the 7th Circuit affirmed. He first addressed Munroe's argument that the Auto-Owners policy provided at least $3 million of coverage, either because each vehicle was subject to a separate $1 million limit or because the accident constituted three separate occurrences, with a $1 million limit each, due to the separate negligent acts of each of the three Wilkens drivers.
As to the first part of the argument, Manion found that the policy language unambiguously limited coverage to $1 million per occurrence, regardless of the involvement of three Wilkens tractor-trailers. He then turned to the definition of "occurrence," which included within the definition "all continuous or repeated exposure to substantially the same generally harmful conditions."
Manion observed that Illinois has adopted the "cause theory" to determine the number of occurrences. Based on the cause theory, Munroe contended that since there were multiple causes - e.g., the negligence of the southbound passing driver, the negligence of other drivers maintaining too close a distance - multiple occurrences should be found.
Manion noted that all the Illinois cases applying the cause theory involved multiple discrete events rather than an uninterrupted continuum, and that the only question in those cases was whether all the discrete events could be attributed to a common cause. While acknowledging that determining whether there is a single continuous event or several discrete events may be difficult, he turned to Illinois National Insurance Co. v. Szczepkowicz, 185 Ill. App. 3d 1091, 542 N.E.2d 90 (1989), for assistance.
In that case, a truck driver stopped his vehicle in the middle of a state highway, blocking two lanes and causing a collision. The driver then moved the vehicle forward enough to free up most of one lane, but failed to completely remove the vehicle from the travel lanes. This resulted in a second collision about five minutes later. The court there held that the two collisions were not the result of an uninterrupted continuum because of the driver's intervening negligence.
Manion said that, unlike Szczepkowicz, the current case did involve a single force and an uninterrupted chain-reaction involving several vehicles, and thus a single continuous occurrence. Although there may have been several causes for the uninterrupted events, none of the causes occurred after the force that caused the injury had been set in motion. Consequently, there were no intervening causes and only a single occurrence, and only one $1 million limit would apply.
Munroe then argued that the federal Motor Carriers Act, 49 U.S.C. §13906(f), required that the three Wilkens tractor-trailers have a combined coverage of at least $2.25 million. He further claimed that the MCS-90 endorsement provided a minimum of $750,0000 coverage for each vehicle.
The MCS-90 endorsement provided that Auto-Owners pay, within the limits of liability of the endorsement, "any final judgment recovered against the insured." A schedule in the endorsement reflected a limit of $750,000 for a for-hire vehicle of the size of the Wilkens vehicles.
Manion said no court has discussed how the endorsement applies when more than one insured vehicle under the same endorsement is involved in the same accident, and he expressed skepticism that it would apply on a per-vehicle basis as well as a per-accident basis. He found it unnecessary to answer that question, however, because, the only thing the endorsement did was to obligate the insurer to pay up to the $750,000 amount for a "final judgment."
According to Manion, the endorsement thus created a suretyship among the injured public, the insured, and the insurer, under which the insurer agreed to guarantee a minimum payment to the injured public, regardless of coverage under the policy of which the endorsement was a part. The insurer's obligation, however, arises only from a final judgment. In this case, moreover, there was no final judgment, so that the MCS-90 endorsement was never triggered.
Here Munroe released Wilkens and the drivers from liability beyond the coverage limits of Wilkens' insurance policy, so there could be no liability that the insurer is responsible for under the MCS-90. This was true, said Manion, regardless of whether the settlement amount is greater or less than the liability limits mandated by the MCS-90. The MCS-90 guarantees payment of a final judgment up to a certain amount; it does not guarantee a minimum settlement amount.
Since Auto-Owners agreed to pay its coverage limit under the policy, its obligation was unaffected by the MCS-90. Therefore, there could never be an unpaid final judgment for more than $1 million in this case.
Accordingly, the court affirmed summary judgment in favor of Auto-Owners.
