Lancer Insurance Company v. Rhonda Shelton

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
United States Court of Appeals
Fifth Circuit
F I L E D
August 7, 2007
Charles R. Fulbruge III
Clerk
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 06-10617
LANCER INSURANCE COMPANY
Plaintiff-Appellee
v.
RHONDA SHELTON, et al.
Defendants-Appellants
Appeal from the United States District Court
For the Northern District of Texas
USDC No. 3:04-CV-1835
Before DENNIS, CLEMENT, and PRADO, Circuit Judges..
PER CURIAM:*
Defendants appeal the district court’s grant of summary judgment to
plaintiff in this declaratory judgment action. For the following reasons, we
AFFIRM.
I. FACTS AND PROCEEDINGS
In July of 1999, Lancer Insurance Co. (“Lancer”) issued a $5 million motor
carrier liability policy to Rockmore Discovery Coaches & Tours of Milwaukee,
Wisconsin (“Rockmore”). The one-year policy covered bodily injury or property

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damage caused by any accident involving a covered vehicle owned, maintained,
or used by Rockmore. Lancer renewed the policy in 2000 and again in 2001. The
2001 policy had an expiration date of July 15, 2002.
On November 14, 2001, Lancer notified Rockmore that it planned to cancel
the 2001 policy, effective November 25, 2001, for non-payment of premiums.
Rockmore obtained replacement coverage from Republic Western Insurance Co.
(“RWIC”). The RWIC policy became effective on December 4, 2001, and also
provided $5 million in liability coverage.
On June 24, 2002, a bus driven by a Rockmore employee crashed on
Interstate 20 in Kaufmann County, Texas. The crash killed the driver and four
passengers and injured 35 other passengers.
Attorneys for the passengers who were injured or killed in the crash made
settlement demands on Lancer on the basis of the 2001 policy, as well as other
policies that are not at issue. Lancer filed for a declaratory judgment that, inter
alia, the 2001 policy was not in effect at the time of the crash. Upon cross-
motions for summary judgment, the district court concluded that the policy had
been cancelled as of November 25, 2001, and it granted summary judgment to
Lancer. The passengers appeal this decision.
II. STANDARD OF REVIEW
The district court’s grant of summary judgment is reviewed de novo. Shell
Offshore, Inc. v. Babbitt, 238 F.3d 622, 627 (5th Cir. 2001). The court applies the
same standard as the district court. Davidson v. Veneman, 317 F.3d 503, 508
(5th Cir. 2003). The district court’s grant of “[s]ummary judgment is appropriate
if the record shows ‘that there is no genuine issue as to any material fact and the

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No. 06-10617
1 The RWIC policy was held in an earlier case to have been in effect at the time of the
crash. See Republic W. Ins. Co. v. Rockmore, No. 3-02-CV-1569-K, 2005 WL 57284, at *11
(N.D. Tex. Jan. 10, 2005).
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moving party is entitled to judgment as a matter of law.’” Shell Offshore, 238
F.3d at 627 (quoting FED. R. CIV. P. 56(c)).
III. DISCUSSION
Appellants assert that the 2001 policy was in effect on June 24, 2002,
despite having been cancelled by the insurer and replaced with another policy
by the insured as of December 4, 2001.1 Appellants contend that despite the
unequivocal intent of both Rockmore and Lancer, and despite the fact that
Rockmore ceased paying premiums, the policy remained in effect following
Lancer’s cancellation because Lancer failed to comply with various state laws
governing policy cancellation.
The 2001 policy contains provisions governing cancellation of the policy in
the event of nonpayment of premiums. The policy may be cancelled following
sufficient notice to the insured. The parties do not dispute that Lancer gave
Rockmore sufficient notice to effect cancellation under this portion of the policy.
The 2001 policy also contains a Uniform Motor Carrier Bodily Injury and
Property Damage Liability Insurance Endorsement (“Form F”), which protects
third parties against the possibility that a motor carrier will be underinsured
with regard to the requirements of state or federal law. Texas requires that all
motor carriers operating in the state obtain insurance in the minimum amount
required by state law. TEX. TRANSP. CODE ANN. § 643.101. Form F provides, in
part:
The certification of the policy, as proof of financial responsibility
under the provisions of any State motor carrier law . . . amends the

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No. 06-10617
2 Each state has its own certification and notice requirements. Because Texas law
governs the facts of this case, we need only examine whether the policy was cancelled according
to Texas’s requirements, which do not mention or rely on the requirements that other states
might have.
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policy to provide insurance for automobile bodily injury and
property damage liability in accordance with the provisions of such
law or regulations to the extent of the coverage and limits of liability
required thereby[.]
With regard to cancellation, Form F states:
This endorsement may not be cancelled without cancellation of the
policy to which it is attached. Such cancellation may be effected by
the company or the insured giving thirty (30) days’ notice in writing
to the State Commission with which such Certificate has been filed,
such thirty (30) days’ notice to run from the date the notice is
actually received in the office of such Commission.
Lancer’s Form F indicates that certificates of insurance were filed in Arkansas,
Florida, Minnesota, Missouri, Nebraska, Ohio, Tennessee, Texas, and Wisconsin.
Though Lancer notified Rockmore and federal transportation authorities that
the policy was cancelled, Appellants assert that because it did not give notice to
these states, the policy remained in effect.2 Appellants essentially contend that
Form F acts as an additional set of cancellation requirements, even when the
insurer and the insured no longer wish to keep the policy in place and the
insured purchases coverage from another insurer.
Texas law, which governs these events, makes clear that insurers do not
need to give notice to the state in order to effect cancellation when replacement
coverage has been purchased. 43 TEX. ADMIN. CODE § 18.16(f). This is in
keeping with the language of Form F, which provides that “cancellation may be
effected” by giving notice to the state. Nothing in Form F or elsewhere suggests
that no other modes of policy cancellation are permissible. Consequently,

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Lancer’s failure to give notice to the state is of no moment because Rockmore
subsequently purchased the RWIC policy.
This result is in keeping with the policy behind Texas’s coverage
requirements and Form F, which exists “to ensure that liability insurance is
always available for the protection of motorists injured by commercial motor
carriers.” Nat’l Cas. Co. v. Lane Express, Inc., 998 S.W.2d 256, 263 (Tex. App.
1999). When the insured purchases replacement coverage, the state’s interest
in protecting innocent third parties from uninsured carriers is satisfied by the
second policy. Truck Ins. Exch. v. E.H. Martin, Inc., 876 S.W.2d 200, 203 (Tex.
App. 1994) (“However, this cancellation procedure is not required if another
insurance company has insured the common carrier with replacement
coverage.”). Federal provisions designed to protect motorists operate in an
identical manner. See 49 C.F.R. § 387.7(c) (“The liability of the retiring insurer
or surety, as to events after the termination date, shall be considered as having
terminated on the effective date of the replacement policy of insurance . . . .”).
Because Rockmore purchased replacement coverage that was effective at
the time of the crash, the 2001 policy and accompanying Form F endorsement
were no longer in effect. The district court correctly granted summary judgment
to Lancer.
IV. CONCLUSION
For the foregoing reasons, we AFFIRM.

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