In Tri-National, Inc. v. Yelder, et al., the U.S. Court of Appeals for the Eighth Circuit considered an issue of first impression in the Eighth Circuit: whether the federally-mandated Motor Carrier Act (MCA) of 1980 MCS-90 endorsement for motor carriers requires a tortfeasor’s insurer to compensate an injured party when the injured party has already been compensated by its own insurance company. The U.S. Federal District Court for the Eastern District of Missouri decided that the MCS-90 endorsement requires such compensation and the Eighth Circuit agreed.
In June 2007, Larry Yelder, an employee of Yelder-N-Son Trucking, Inc. (collectively “Yelder”) collided with a Tri-National truck, causing extensive property damage. Tri-National filed a claim with its insurance company, Harco Insurance, which paid Tri-National $91,100 and retained its subrogation interests in the claim. On the date of the accident, the Yelder defendants were insured by Canal Insurance Company, which included a MCS-90 endorsement in the policy. In 2010, Canal sought a declaratory judgment against the Yelder defendants and Harco in the Federal District Court in Alabama asking the court to rule that Canal had no duty to defend or indemnify and that the MCS-90 endorsement did not require Canal to satisfy Harco’s subrogation claim. The Alabama court entered default judgment against the Yelder defendants only, stating Canal had no duty to defend or indemnify the Yelder defendants under the policy. The Alabama court made no ruling regarding the MCS-90 endorsement.
Harco filed a motion to dismiss for failure to join an indispensable party, Tri-National. The Alabama District Court dismissed Harco without prejudice after Harco made clear that it was never its intention to make a claim against Canal and that it “would be Tri-National who would go after Canal, not Harco.”
Tri-National later sued the Yelder defendants in Missouri state court and obtained a default judgment of $91,100. In 2012, Tri-National filed an equitable garnishment action in Missouri state court against Canal to collect on the Missouri state court’s default judgment. According to Tri-National, the decision to file the petition was Harco’s, Tri-National had no input in the decision, and any proceeds from the garnishment were “supposedly to go directly to Harco.” Canal removed the action to Federal District Court for the Eastern District of Missouri and, on opposing motions for summary judgment, the District Court granted Tri-National’s motion and denied Canal’s. Canal appealed claiming that the District Court erred in finding Tri-National was the real party in interest rather than its insurance company, Harco, that the Alabama dismissal did not bar Tri-National’s suit for equitable garnishment in Missouri, and that the MCS-90 endorsement required Canal to satisfy Tri-National’s default judgment against the Yelder defendants.
The Eighth Circuit ruled that although Tri-National received $91,100 in payment for its loss from Harco, Tri-National, not Harco, holds the default judgment from the Missouri state court against the Yelder defendants and as such Tri-National as the “judgment creditor may proceed in equity against” the Yelder defendants and Canal “to reach and apply the insurance money to the satisfaction of the judgment.” Missouri provides that the legal title to the cause of action remains in the insured and that the insurance company’s only interest is an equitable right to subrogation, citing Hagar v. Wright Tire & Appliance, Inc. The exclusive right to pursue the tortfeasor remains with the insured, which holds the proceeds for the subrogee insurance company. The only relevant exception is when the insured assigns his or her property damage claim against the tortfeasor to the insurance company which would then give the insurance company full legal title to the claim and permit the insurance company to pursue it against the tortfeasor.
The MCS-90 endorsement basically provides that the insurance company agrees to pay, in consideration of the premium stated, any final judgment recovered against the insured for public liability resulting from the negligence in operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of the Motor Carrier Act of 1980, regardless of whether or not each motor vehicle is specifically described in the policy, and whether or not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere. The Eighth Circuit previously ruled that MCS-90 endorsements are not treated as coverage where other insurance policies are available to provide full coverage for the victim’s injuries. National Indemnity Co. v. Ozark Mountain Sightseeing, Inc. A Tenth Circuit prior ruling, Carolina Casualty Insurance Company v. Yeates, held that the MCS-90 endorsement only applies where the underlying insurance policy to which the endorsement is attached does not provide coverage for the motor carrier’s accident, and the motor carrier’s insurance coverage is either not sufficient to satisfy the federally-prescribed minimum levels of financial responsibility or is non-existent.
Canal urged the Eighth Circuit to deny coverage to Tri-National under the Yelder defendants’ MCS-90 endorsement because Tri-National’s insurance policy, through Harco, provided full compensation for Tri-National’s injuries and Tri-National has already been made whole for its losses by Harco. The Eighth Circuit found Canal’s proposal – that Tri-National must wait to receive payment on its claim with Harco until Tri-National receives payment on its default judgment against the Yelder defendants, likely years after the negligent act – untenable. The court found that Canal’s proposition “would defeat the purpose of the regulations adopted to implement the [MCA], which is to assure that injured members of the public would be able to obtain judgments collectible against negligent authorized carriers.” (citations omitted).
The Eighth Circuit concluded and held that the fact that Harco satisfied Tri-National’s claim does not prevent Tri-National from asserting its rights as a member of the general public under the MCS-90 endorsement. Accordingly, the Eighth Circuit agreed with the District Court that the circumstances of Tri-National carrying its own insurance with Harco does not absolve Canal of its obligations under the MCS-90 endorsement, and the District Court opinion was affirmed.