                           In the
 United States Court of Appeals
               For the Seventh Circuit
                        ____________

No. 03-1225
CAROLINA CASUALTY INSURANCE COMPANY,
                              Intervenor/Plaintiff-Appellant,
                               v.

E.C. TRUCKING et al.,
                                        Defendants-Appellees.

                        ____________
           Appeal from the United States District Court
                for the Northern District of Indiana.
       No. 300: CV 228—Robert L. Miller, Jr., Chief Judge.
                        ____________
 SUBMITTED SEPTEMBER 18, 2003—DECIDED JANUARY 31, 2005
                        ____________




  Before COFFEY, ROVNER, and WILLIAMS, Circuit Judges.
  WILLIAMS, Circuit Judge. Carolina Casualty intervened
in Vanesse Fort’s wrongful death action, seeking a declara-
tory judgment that it had no duty to provide coverage for
any judgment rendered against its insured, C.W. Keller
Trucking, Inc., in the wrongful death case. The district court
denied Carolina Casualty the requested relief, finding that
the federally-mandated MCS-90 endorsement attached to
its policy was applicable. We agree and, therefore, affirm.
2                                               No. 03-1225

                    I. BACKGROUND
  This appeal arises from a tragic accident on March 15,
2000 in Peru, Indiana, in which a tractor-trailer driven by
Jacob Nance struck Eric Fort’s vehicle, killing Fort. E.C.
Trucking, Inc. owned the tractor, which it leased to Ryder
Integrated Logistics. Ryder owned the trailer.
  When the accident took place, Ryder and E.C. Trucking
were parties to a lease agreement. Under this agreement,
Ryder leased three tractors from E.C. Trucking and pro-
vided to E.C. Trucking its Interstate Common Carrier (ICC)
authority, enabling E.C. Trucking to haul automobile parts
in certain runs specified by Ryder. E.C. Trucking did not
have its own ICC authority. Ryder also had an agreement
with C.W. Keller Trucking, Inc. under which Keller acted as
a subcontractor for Ryder, hauling automobile parts on runs
designated by Ryder using Keller’s own ICC authority. At
the time of the accident, E.C. Trucking owned Keller and
was legally entitled to use the name “E.C. Trucking d/b/a
C.W. Keller Trucking.”
  On the day of the collision, Nance was scheduled to do a
run pursuant to Ryder’s agreement with Keller. As dictated
by that agreement, Nance was to use a tractor bearing
Keller’s placards and ICC authority. The scheduled tractor
experienced mechanical difficulty so Nance instead used a
tractor owned by E.C. Trucking and leased to Ryder bearing
Ryder’s placards and ICC authority. A dispatcher employed
by the owner of both E.C. Trucking and Keller made the
switch, but did not get Ryder’s permission to do so.
  Vanesse Fort, Eric Fort’s widow, brought a wrongful death
action against Ryder, Nance, E.C. Trucking, and Keller.
Carolina Casualty Insurance Company, Keller’s insurer at
the time of the accident, intervened in the lawsuit, seeking
a declaration that its policy with Keller did not afford cov-
erage for the dispute. The district court bifurcated the cov-
erage dispute and the wrongful death action.
No. 03-1225                                                3

   Before trial in the wrongful death suit, Fort entered into
a loan receipt agreement with Ryder, agreeing to dismiss
her suit against all defendants except Keller. Under the
agreement, Fort received $2.25 million from Ryder and
agreed that she would repay Ryder one-third of the amount
she recovered from Keller, but no more than $2.25 million.
Ultimately, a jury found Keller liable in the wrongful death
action and awarded Fort $1,042,234.75. Keller requested
that the district court reduce the judgment against it by the
amount Keller would retain from the loan receipt agreement
with Ryder (which would reduce Keller’s payment to zero).
The district court denied the request and this court af-
firmed in Fort v. C.W. Keller Trucking, 330 F.3d 1006 (7th
Cir. 2003).
  In the coverage dispute, the district court found that, al-
though the general provisions of Carolina Casualty’s policy
with Keller did not afford coverage, Fort was entitled to
recover pursuant to a federally-mandated endorsement
attached to Carolina Casualty’s policy with Keller, the
MCS-90 endorsement. The district court further found that
Ryder’s insurance policy with Old Republic Insurance
Company (which was not a party to the action) did not af-
ford coverage. Carolina Casualty appeals the district court’s
judgment in favor of Fort and its finding that the Old
Republic policy did not provide coverage.


                      II. ANALYSIS
A. MCS-90 Endorsement
  We first consider Carolina Casualty’s argument that the
district court erred by finding that the policy’s MCS-90
endorsement entitled Fort to recover from the insurer.
Regulations promulgated pursuant to the Motor Carrier
Act, 49 U.S.C. § 13906(f), mandate that liability insurance
policies providing coverage for motor carriers include a
MCS-90 endorsement. 49 C.F.R. §§ 387.7(a), 387.9, 387.15.
4                                                   No. 03-1225

“Federal law applies to the operation and effect of [such]
endorsements.” John Deere Ins. Co. v. Nueva, 229 F.3d 853,
856 (9th Cir. 2000). The MCS-90 endorsement provides, in
pertinent part, as follows:
    In consideration of the premium stated in the policy
    to which this endorsement is attached, the insurer
    (the company) agrees to pay, within the limits of
    liability described herein, any final judgment recov-
    ered against the insured for public liability result-
    ing from negligence in the operation, maintenance
    or use of motor vehicles . . . regardless of whether
    or not each motor vehicle is specifically described in
    the policy . . . . [N]o condition, provision, stipulation,
    or limitation contained in the policy, this endorse-
    ment, or any other endorsement thereon, or viola-
    tion thereof, shall relieve the company from liability
    or from the payment of any final judgment, within
    the limits of liability herein described, irrespective
    of financial condition, insolvency or bankruptcy of
    the insured.
Thus, “whatever limitation a policy expresses regarding
coverage extending only to ‘covered’ or ‘specified’ autos, this
limitation ceases to operate when an injured member of the
public seeks indemnification on behalf of the insured.” John
Deere, 229 F.3d at 859.
  We agree with the district court that the endorsement
was intended to compensate members of the public such as
Fort. See id. at 857 (“It is well-established that the primary
purpose of the MCS-90 is to assure that injured members of
the public are able to obtain judgments from negligent
authorized interstate carriers.”); see also Travelers Ins. Co.
v. Transport Ins. Co., 787 F.2d 1133, 1140 (7th Cir. 1986)
(noting that ICC regulations are intended “to ensure that
an ICC carrier has independent financial responsibility to
pay for losses sustained by the general public arising out of
No. 03-1225                                                 5

its trucking operations”). Indeed, in this case the endorse-
ment is particularly applicable, as a jury rendered a final
judgment against Keller, Carolina Casualty’s insured, for
liability arising from the negligent injury of a member of
the public, namely Eric Fort.
   Carolina Casualty argues that, despite the endorsement’s
language which plainly suggests that Fort is entitled to
recover, the MCS-90 endorsement is not applicable to Fort,
as she was already compensated when she received $2.25
million from Ryder pursuant to the aforementioned loan
receipt agreement. We disagree. Our prior decision in Fort
v. C.W. Keller Trucking held that the payment Fort received
from Ryder was a loan, which under Indiana law is not
considered satisfaction of a judgment. 330 F.3d at 1009-13.
See American Transport Co. v. Central Indiana Ry. Co., 264
N.E.2d 64, 67 (Ind. 1970) (finding that funds received via
loan receipt agreement in no way constitutes a partial
payment or partial satisfaction of the judgment); Sanders
v. Cole Mun. Fin., 489 N.E.2d 117, 120 (Ind. Ct. App. 1986)
(same). Further, Carolina Casualty cites no authority (and
we know of none) supporting the proposition that a member
of the public is not entitled to recover pursuant to the MCS-
90 endorsement if she receives funds pursuant to a loan
receipt agreement. Therefore, in this case, we decline to find
that the loan receipt agreement relieved the insurer,
Carolina Casualty, of its obligation under the MCS-90
endorsement to pay Fort, a member of the public, for the
final judgment rendered against its insured, Keller.
  Carolina Casualty's remaining arguments warrant little
discussion. Carolina Casualty contends that Fort should not
be able to recover under the MCS-90 endorsement because
portions of the money Fort recovers will flow to Ryder, as
the loan receipt agreement provides that Ryder is entitled
to one-third of the amount Fort recovers from Keller. This
argument is of no avail; what Fort does with the money she
receives from Carolina Casualty has no bearing on the
6                                                 No. 03-1225

applicability of the MCS-90 endorsement. Carolina Casu-
alty also asserts that because E.C. Trucking owns Keller
and the loan receipt agreement provided that Fort would
not attempt to recover from E.C. Trucking, she should be
barred from recovering against Keller, and, ultimately, its
insurer Carolina Casualty. We reject this argument, as the
loan receipt agreement itself contemplated that Fort would
pursue its claims against Keller.


B. Old Republic Policy
  In holding that the MCS-90 endorsement provided
coverage, the district court also determined that a separate
policy, which Old Republic Insurance Company issued
Ryder insuring its trailers, did not provide coverage for the
accident. Carolina Casualty challenges this conclusion on
two fronts: first, it argues that the district court should not
have sua sponte decided this issue and second, it argues
that the district court was wrong to conclude that the Old
Republic policy did not apply. We disagree with both argu-
ments.
  Although it is not favored, a district court may enter
summary judgment sua sponte so long as the losing party is
given notice and an opportunity to be heard on the un-
derlying issues. Jones v. Union Pac. R.R. Co., 302 F.3d 735,
740 (7th Cir. 2002). Here, Carolina Casualty was on notice
and had a reasonable opportunity to present evidence re-
garding whether the Old Republic policy provided coverage
for the accident. In fact, in its brief in support of its motion
for summary judgment, Carolina Casualty specifically
raised the issue of coverage under the Old Republic policy
and attached a copy of the policy to its brief. The brief
included a separate heading discussing the Old Republic
policy and also specifically noted: “To the extent the Old
Republic policy provides coverage, this Court should find
that [Carolina Casualty] has no obligation to pay under the
No. 03-1225                                                      7

MCS-90.” Appellant’s Summary Judgment Brief at 18. Hav-
ing placed this issue before the district court at a time when
the court was actively considering summary judgment mo-
tions, Carolina Casualty cannot now complain that it was
denied an opportunity to present evidence on the issue.
  We now turn to the district court’s disposition of Carolina
Casualty’s substantive claim on this issue. The relevant
provision of Ryder’s Old Republic policy provides:
      The following are “insureds”:
      a. You for any covered “auto.”
      b. Anyone else while using with your permis-
         sion a covered “auto” you own, hire or bor-
         row . . . .
  Indiana1 follows the “liberal rule” on permissive use. See
Vanliner Ins. Co. v. Sampat, 320 F.3d 709, 713 (7th Cir.
2003); State Farm Mut. Auto. Ins. Co. v. Gonterman, 637
N.E.2d 811, 813 (Ind. Ct. App. 1994). Pursuant to this rule:
      [O]ne who has permission of an insured owner to
      use his automobile continues as such a permittee
      while the car remains in his possession, even though
      that use may later prove to be for a purpose not con-
      templated by the insured owner when he entrusted
      the automobile to the use of such permittee.
Gonterman, 637 N.E.2d at 813. Nevertheless, when an owner
has placed restrictions on the use of a vehicle, violations of
such restrictions may terminate permission. Id. at 814. “In
a coverage dispute, permissive use cannot be implied when
an express restriction on the scope of permission prohibits
the use at issue.” Id.
  In the case at bar, Ryder did not authorize Keller to use
its trailer with a tractor bearing Ryder's placards and ICC



1
    The parties do not dispute that Indiana law governs this issue.
8                                               No. 03-1225

authority. To the contrary, the Ryder/Keller subcontractor
agreement, pursuant to which Nance was acting when he
had the accident, provided that all runs done pursuant to
the agreement would use E.C. Trucking owned tractors
bearing Keller placards and ICC authority. Keller did not
obtain permission to use the trailer involved in the accident
and, because permissive use is a prerequisite for coverage
under the Old Republic policy, the district court did not err
by finding that the policy does not cover the accident.
  Carolina Casualty contends that Ryder gave implied per-
mission to use the trailer because, according to Carolina
Casualty, the same trailer would have been used had the
originally scheduled tractor not experienced mechanical
difficulties. But permissive use cannot be implied when, as
here, an express restriction prohibits that use. See Warner
Trucking, Inc. v. Carolina Cas. Ins. Co., 686 N.E.2d 102,
107 (Ind. 1997) (“[I]mplied permission is inadequate as a
matter of law to overcome [an] express restriction upon
permission”).


                    III. CONCLUSION
    For the foregoing reasons, we AFFIRM.

A true Copy:
        Teste:

                         ________________________________
                         Clerk of the United States Court of
                           Appeals for the Seventh Circuit




                    USCA-02-C-0072—1-31-05
