2020 WL 1181531

United States District Court, S.D. West Virginia,
at Charleston.
Vanessa H. TAYLOR, Personal Representative of the Estate of Joseph A. Savage, deceased, Plaintiff,
v.
SETHMAR TRANSPORTATION, INC., Sunshine Mills, Inc., Freight Movers, Inc., Z Brothers Logistics, LLC, and Alisher Mansurov, Defendants.
Civil Action No. 2:19-cv-00770
|
Signed 03/11/2020
Attorneys and Law Firms
Jeff David Stewart, The Bell Law Firm, S. Andrew Stonestreet, Stewart Bell, Charleston, WV, Michael Jay Leizerman, Pro Hac Vice, Rena Mara Leizerman, Pro Hac Vice, Leizerman & Associates, Toledo, OH, Mitch Slade, Mitch Slade Law Office, Spartanburg, SC, for Plaintiff.
Adam J. Gasper, Pro Hac Vice, McDowell Rice Smith & Buchanan, Kansas City, MO, Jonathan Zak Ritchie, Ryan McCune Donovan, Hissam Forman Donovan Ritchie, Charleston, WV, for Defendant Sethmar Transportation, Inc.
Charles R. Bailey, Albert C. Dunn, Jr., Bailey & Wyant, Charleston, WV, for Defendant Sunshine Mills, Inc.

MEMORANDUM OPINION AND ORDER
John T. Copenhave, Jr., United States District judge
*1 Pending are (i) defendant Sethmar Transportation, Inc.’s motion to dismiss, filed February 4, 2020, (ii) plaintiff’s motion for leave to file her “First Amended Complaint,” filed February 10, 2020, (iii) defendant Sunshine Mills, Inc.’s motion to dismiss, filed February 18, 2020, (iv) plaintiff’s amended motion for leave to file her First Amended Complaint, filed February 20, 2020, and (v) Sethmar Transportation, Inc.’s motion to stay, filed February 21, 2020.

I. Background
On October 23, 2019, plaintiff Vanessa H. Taylor, as Personal Representative of the Estate of Joseph A. Savage, instituted this action against Sethmar Transportation, Inc. (“Sethmar”), Sunshine Mills, Inc. (“SMI”), Freight Movers, Inc. (“Freight Movers”), Z Brothers Logistics, LLC (“Z Brothers”), and Alisher Mansurov in connection with Mr. Savage’s fatal collision with a tractor-trailer driven by Mr. Mansurov on November 9, 2017. See ECF No. 1 Plaintiff brings claims of negligence and recklessness against Mr. Mansurov (Count I), Z Brothers (Count III), Freight Movers (Count V), Sethmar (Count VII), and SMI (Count IX) in addition to vicarious liability against Z Brothers (Count II), Freight Movers (Count IV), Sethmar (Counts VI), and SMI (Count VIII). Id.

On February 4, 2020, Sethmar moved to dismiss plaintiff’s claims alleged against it (Counts VI and VII) for lack of personal jurisdiction, insufficient service of process, and failure to state a claim pursuant to Federal Rules of Civil Procedure 12(b)(2), 12(b)(5), and 12(b)(6). See ECF Nos. 27 and 28. Plaintiff filed a response to Sethmar’s motion to dismiss on February 10, 2020 and concurrently filed a motion for leave to file the First Amended Complaint, which added allegations to address Sethmar’s motion to dismiss. See ECF Nos. 30 and 31.

On February 18, 2020, SMI moved to dismiss plaintiff’s claims alleged against it (Counts VIII and IX) for lack of personal jurisdiction and failure to state a claim under Rules 12(b)(2) and 12(b)(6). See ECF Nos. 33 and 34. On February 20, 2020, plaintiff then filed an amended motion for leave to file her First Amended Complaint, attached as “Exhibit 1 – First Amended Complaint” to her amended motion. See ECF Nos. 35 and 35-1.

In its March 5, 2020 response in opposition to plaintiff’s amended motion for leave, Sethmar maintains that the proposed First Amended Complaint is still futile because it does not address Sethmar’s argument that the negligence claim (Count V) is preempted by federal law and does not otherwise resolve the issues raised in the motion to dismiss. See ECF No. 45. SMI joined with Sethmar’s opposition on March 6, 2020, noting that plaintiff’s “additional conclusory allegations” in the proposed First Amended Complaint do not support a denial of SMI’s motion to dismiss. See ECF No. 46 at 2. Plaintiff filed a reply in support of her amended motion for leave on March 9, 2020. See ECF No. 48. The reply adds that if the court declines to grant her amended motion and/or determines that defendants’ motions to dismiss are not moot, in the alternative, she requests (i) 14 additional days to file responses to the motions to dismiss, (ii) limited jurisdictional discovery regarding the nature and extent of defendants’ respective minimum contacts with West Virginia as they pertain to this case, and (iii) 14 days from the conclusion of the jurisdictional discovery to respond to the personal jurisdiction challenges raised in defendants’ motions to dismiss. Id. at 12–13.

*2 In addition, Sethmar moved on February 21, 2020 to stay discovery and certain deadlines, including the scheduling conference (March 13), the entry of the scheduling order (March 20), and the Rule 26(a)(1) disclosures (March 30), pending a ruling on defendants’ motions to dismiss and any subsequent or refiled motions to dismiss. See ECF No. 37. In its motion to stay, Sethmar reiterates that plaintiff’s proposed amendments to the complaint are futile and would not cure the deficiencies raised by the motions to dismiss. Id.

II. Legal Standard

A. Motion to Amend
Federal Rule of Civil Procedure 15(a)(2), invoked by plaintiff, provides that a party who can no longer amend a pleading as of right can still amend by obtaining “the opposing party’s written consent or the court’s leave.” Fed. R. Civ. P. 15(a)(2). “The court should freely give leave when justice so requires.” Id. In applying Rule 15(a), “[t]he law is well settled that leave to amend a pleading should be denied only when the amendment would be prejudicial to the opposing party, there has been bad faith on the part of the moving party, or the amendment would be futile.” Edwards v. City of Goldsboro, 178 F.3d 231, 242 (4th Cir. 1999) (quoting Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir. 1986)). Our court of appeals has explained:
Whether an amendment is prejudicial will often be determined by the nature of the amendment and its timing. A common example of a prejudicial amendment is one that “raises a new legal theory that would require the gathering and analysis of facts not already considered by the [defendant, and] is offered shortly before or during trial.” An amendment is not prejudicial, by contrast, if it merely adds an additional theory of recovery to the facts already pled and is offered before any discovery has occurred.
Laber v. Harvey, 438 F.3d 404, 427 (4th Cir. 2006) (alteration in original) (citations omitted).

A proposed amendment is futile “if … [it] fails to satisfy the requirements of the federal rules,” such as Rule 12(b)(6). United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 376 (4th Cir. 2008) (quoting United States ex rel. Fowler v. Caremark RX, LLC, 496 F.3d 730, 740 (7th Cir. 2007)). “[R]epeated, ineffective attempts at amendment” may also indicate that amending the complaint would be futile or that it was brought in bad faith. See Martin v. Duffy, 858 F.3d 239, 247 (4th Cir. 2017); see also Wilkins v. Wells Fargo Bank, N.A., 320 F.R.D. 125, 127 (E.D. Va. 2017) (“Bad faith includes seeking to amend a complaint … after repeated ‘pleading failures.’ ”) (quoting U.S. ex rel. Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451, 461 (4th Cir. 2013)).

B. Motion to Stay
Federal Rule of Civil Procedure 26(c)(1) provides pertinently that:
The court may, for good cause, issue an order to protect a party or person from … undue burden or expense, including one or more of the following: (A) forbidding the disclosure or discovery; [or] (B) specifying terms, including time and place or the allocation of expenses, for the disclosure or discovery….
*3 Fed. R. Civ. P. 26(c)(1)(A), (B). Under this rule, a district court has the discretion to stay discovery pending the outcome of a dispositive motion. See Thigpen v. United States, 800 F.2d 393, 396-97 (4th Cir. 1986), overruled on other grounds by Sheridan v. United States, 487 U.S. 392 (1988) (“Nor did the court err by granting the government’s motion under Fed. R. Civ. P. 26(c) to stay discovery pending disposition of the 12(b)(1) motion.”).

District courts consider whether a motion to stay under Rule 26(c)(1) is warranted on a case-by-case basis because “such an inquiry is necessarily fact-specific and depends on the particular circumstances and posture of each case.” Hachette Distribution, Inc. v. Hudson County News Co., Inc., 136 F.R.D. 356, 358 (E.D.N.Y. 1991). Several factors guide the court’s analysis, none of which alone is dispositive. These factors are:
(1) the type of motion, (2) whether the motion is a legal challenge or dispute over the sufficiency of allegations, (3) the nature and complexity of the action, (4) whether counterclaims and/or cross-claims have been interposed, (5) whether other parties agree to the stay, (6) the posture or stage of the litigation, (6) the expected extent of discovery in light of the number of parties and complexity of the issues in the case, (7) and any other relevant circumstances.
Citynet, LLC v. Frontier W. Va. Inc., No. 2:14-cv-15947, 2016 WL 6133844, at *1 (S.D.W. Va. Oct. 19, 2016) (internal quotation marks omitted) (citations omitted).

III. Discussion

A. Motion to Amend
Plaintiff states that the proposed First Amended Complaint addresses the issues raised in defendants’ respective motions by adding allegations regarding personal jurisdiction, service of process, vicarious liability, and direct negligence. See ECF Nos. 31, 36, and 48. Neither Sethmar nor SMI suggest that the filing of the amended complaint would result in prejudice. While the existence of prejudice to an opponent “is reason sufficient to deny amendment,” the “absence of prejudice, though not alone determinative, will normally warrant granting leave to amend.” Davis v. Piper Aircraft Corp., 615 F.2d 606, 613 (4th Cir. 1980).

Sethmar and SMI argue that the amendment is futile as to them and that it was brought solely to prolong the disposition of plaintiff’s claims. See ECF Nos. 45 and 46. However, plaintiff has not made “repeated, ineffective attempts at amendment.” Rather, this marks the first time the court has considered granting leave to amend the complaint in this case. See Martin, 858 F.3d at 247 (denying leave to file amended complaint when it marked plaintiff’s “third attempt to state a claim for an equal protection violation”); U.S. ex rel. Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451, 461 (4th Cir. 2013) (affirming district court’s denial of leave to amend complaint when it “would have resulted in a fifth complaint filed in this case”).

In her reply filed March 9, 2020, plaintiff offers several cases1 that cast doubt on defendants’ preemption argument and suggest that further briefing is necessary to analyze this complex issue. ECF No. 48 at 4–5. In addition to offering a blackline showing that the allegations added to the First Amended Complaint are not futile and support personal jurisdiction, see ECF No. 48-1, plaintiff notes that it would be premature to decline leave to amend the complaint for lack of personal jurisdiction. See, e.g., Pridgen v. Appen Butler Hill, Inc., No. CV JKB-18-61, 2019 WL 1048950, at *3 (D. Md. Mar. 5, 2019) (“[T]his court, and others, have declined to deny leave to amend on futility grounds for lack of personal jurisdiction.”); Synthes, Inc. v. Marotta, 281 F.R.D. 217, 230 (E.D. Pa. 2012) (noting “general reluctance in the Third Circuit to rule on personal jurisdiction questions in the context of a motion for leave to amend a complaint”). Furthermore, Sethmar and SMI do not suggest that the proposed amendments would prove futile as to plaintiff’s claims against the remaining defendants. Z Brothers and Freight Movers have yet to make an appearance in this case despite the docket reflecting that they received service on November 26, 2019.2

*4 Finally, plaintiff asserts that the proposed First Amended Complaint renders the motions to dismiss a legal nullity. ECF No. 36 at 2. “As a general rule, “an amended pleading ordinarily supersedes the original and renders it of no legal effect.” ” Young v. City of Mount Ranier, 238 F.3d 567, 572 (4th Cir. 2001) (quoting In re Crysen/Montenay Energy Co., 226 F.3d 160, 162 (2d Cir. 2000)); see also Turner v. Kight, 192 F. Supp. 2d 391, 397 (D. Md. 2002). If leave is granted, the amended complaint prompts a new motion to dismiss.

For the foregoing reasons, the court grants plaintiff’s amended motion for leave to amend the complaint. Accordingly, the court denies without prejudice the motions to dismiss filed by Sethmar and SMI.

B. Motion to Stay
Plaintiff has not filed a response to or otherwise opposed Sethmar’s motion to stay. Even though this memorandum opinion and order fully resolves the motions to amend, Sethmar also seeks a stay until the court rules on “any subsequent or re-filed motions to dismiss.” ECF No. 37 at 1. The court anticipates that defendants will again file motions to dismiss. In her reply filed March 9, 2020, plaintiff “does not request that this Court address, review, or issue a ruling on preemption at this point.” Id. at 5. Instead, plaintiff suggests that “[i]f the Court grants the Motion to Amend and deems the pending Motions to Dismiss moot, the parties each would have an opportunity to raise and fully brief the complex issue.” Id. Respecting personal jurisdiction, plaintiff also focuses on whether the proposed amendments to the complaint are futile while adding that she can “provide a more specific response to the motion to dismiss” later. Id. at 6–9. Once the new motions to dismiss are filed, a studied, substantive response by plaintiff is expected.

Among the factors warranting a stay, the subsequent motions to dismiss could be dispositive in favor of Sethmar and SMI. Sethmar moved to dismiss for lack of service of process under Rule 12(b)(5), and both Sethmar and SMI moved to dismiss for lack of personal jurisdiction under Rule 12(b)(2), for failure to state a claim upon which relief can be granted under Rule 12(b)(6), and preemption of plaintiff’s negligence claims against under federal law.

Regarding the nature and complexity of the action, Sethmar argues that coordinating discovery between the out-of-state parties may prove costly and burdensome. ECF No. 37 at 4. A resolution of any motions to dismiss could also moot SMI’s crossclaim against Sethmar, which alleges that Sethmar is obligated to indemnify SMI should the court find in plaintiff’s favor. ECF No. 32 at 15. The lack of any opposition to the stay by any party further weighs in favor of granting the stay. Moreover, the court has yet to enter a scheduling order and the case remains in the early stages. Among other factors, defendants note that a stay is often warranted when parties raise personal jurisdiction as a preliminary issue. ECF No. 37 at 5. Indeed, staying discovery is appropriate where jurisdictional objections are “purely questions of law that are potentially dispositive.” Hachette, 136 F.R.D. at 358.

*5 For the foregoing reasons, the court will stay all proceedings herein except insofar as they relate to motions to dismiss and jurisdictional issues, including evidentiary matters with respect to personal jurisdiction and service of process.

IV. Conclusion
Accordingly, it is ORDERED that:
1. The motions to dismiss filed by Sethmar and SMI be, and they hereby are, denied without prejudice.
2. Plaintiff’s amended motion for leave to file her First Amended Complaint be, and it hereby is, granted. The clerk is directed to file “Exhibit 1 – First Amended Complaint” attached to plaintiff’s February 20, 2020 motion as the operative complaint in this case.
3. Plaintiff’s motion for leave to file her First Amended Complaint, filed February 10, 2020, be, and it hereby is, denied as moot.
4. Sethmar’s motion to stay be, and it hereby is, granted as to all proceedings herein except insofar as they relate to motions to dismiss and jurisdictional issues, including evidentiary matters with respect to personal jurisdiction and service of process.

Consequently, the scheduling conference set for March 13, the entry of the scheduling order, and the Rule 26(a)(1) disclosures be, and they hereby are, stayed pending the further order of the court.

All Citations
Slip Copy, 2020 WL 1181531

Footnotes

1
See Gilley v. C.H. Robinson Worldwide, Inc., No. CV 1:18-00536, 2019 WL 1410902, at *5 (S.D.W. Va. Mar. 28, 2019) (concluding that the Federal Aviation Administration Authorization Act (“FAAAA”) “does not preempt the plaintiffs’ state law vicarious liability claim based upon the particular facts before the court”); see also Gillum v. High Standard, LLC, No. SA-19-CV-1378-XR, 2020 WL 444371, at *3 (W.D. Tex. Jan. 27, 2020) (finding “neither persuasive nor binding authority from any circuit court” on this issue); Creagan v. Wal-Mart Transportation, LLC, 354 F. Supp. 3d 808, 812, 813 n.4 (N.D. Ohio 2018) (“[C]ourts are divided on the issue currently before me: whether negligent hiring claims against brokers are preempted by the FAAAA when the alleged negligence results in personal injury.”); Mann v. C. H. Robinson Worldwide, Inc., No. 7:16-CV-00102, 2017 WL 3191516, at *6 (W.D. Va. July 27, 2017) (noting that “neither [the United States Supreme Court] nor any federal court of appeals has addressed whether a personal injury claim against a broker based on negligent hiring is preempted”).

2
The summons was returned unexecuted for Mr. Mansurov on January 21, 2020 and again on February 25, 2020. See ECF Nos. 21 and 42. The proposed first amended complaint adds, “To the extent service of process on Mr. Mansurov at his last known address and to the West Virginia Secretary of State cannot be effected, Mr. Mansurov’s insurance company may be served with process at American Interfidelity Exchange, 9234 Broadway, Suite A, Merrillville, Indiana 46410 pursuant to W. Va. Code § 56-3-31(b).” ECF No. 35-1 at 4.

2020 WL 1323234

United States District Court, E.D. Michigan, Southern Division.
HORACE MANN INSURANCE COMPANY, Plaintiff,
v.
ACUITY, A MUTUAL INSURANCE COMPANY, and GREAT AMERICAN ASSURANCE COMPANY, Defendants.
Civil Action No. 18-CV-13878
|
03/20/2020

BERNARD A. FRIEDMAN, SENIOR UNITED STATES DISTRICT JUDGE

OPINION AND ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT, GRANTING DEFENDANT GREAT AMERICAN’S MOTION FOR SUMMARY JUDGMENT, AND DENYING DEFENDANT ACUITY’S MOTION FOR SUMMARY JUDGMENT
*1 This matter is presently before the Court on the motion of plaintiff Horace Mann Insurance Company (“Horace Mann”) for summary judgment [docket entry 16]; the motion of defendant Acuity, A Mutual Insurance Company (“Acuity”) for summary judgment [docket entry 20]; and the motion of defendant Great American Assurance Company (“Great American”) for summary judgment [docket entry 21]. Response and reply briefs have been filed. Pursuant to E.D. Mich. LR 7.1(f)(2), the Court shall decide these motions without a hearing.

This is a declaratory judgment action in which three insurance companies dispute which of them is responsible for paying Reva Kaysar’s Personal Injury Protection (“PIP”) benefits under Michigan’s No-Fault Act. Each of the three insurance companies has filed a summary judgment motion seeking a ruling that the other companies are liable (i.e., “higher in priority”) for those benefits.

Kaysar is a truck driver who was injured in December 2017 when the tractor-trailer he was driving was involved in a collision on I-96 in Brighton, Michigan. Horace Mann is the no-fault carrier for Kaysar’s car, and it has been paying his PIP benefits to date. Horace Mann believes that the defendants are higher in priority under the No-Fault Act and should therefore be required to reimburse Horace Mann for the benefits it has paid to date and be responsible for any benefits payable to Kaysar or on his behalf in the future. Horace Mann’s claims are for “reimbursement/recoupment pursuant to MCL § 500.3114” (Count I), equitable subrogation (Count II), common law indemnity (Count III), and declaratory relief (Count IV).

Kaysar owns the tractor he was driving when he crashed, a 2011 Volvo TT, and it is registered in his name. Great American insured the tractor under a policy it issued to Kaysar’s freight-hauling company, E&E Freight Moving LLC (“E&E”), a business Kaysar owns with his wife. However, Great American’s policy is a so-called “bobtail policy,”1 which contains exclusions applicable when the tractor is used for hauling. At the time of the accident, Kaysar was hauling a load for Moon Star Express LLC (“Moon Star”), a shipping company that owns the trailer. Moon Star was also leasing the tractor from E&E at this time. Moon Star is insured by Acuity under a policy that covers the trailer as well as any vehicles Moon Star owns.

The parties agree, correctly, that under the No-Fault Act, a person injured in a motor vehicle accident must ordinarily turn first to his own no-fault carrier for PIP coverage, even if he was injured while driving or riding in a vehicle other than the one identified in his policy. In the present case, this means that Horace Mann, which insures Kaysar’s private vehicle, is responsible for paying his PIP benefits unless an exception applies. Horace Mann argues that the No-Fault Act’s “employee exception” applies because Kaysar was employed by Moon Star at the time of the accident. This exception states that “[a]n employee…who suffers accidental bodily injury while an occupant of a motor vehicle owned or registered by the employer shall receive [PIP] benefits to which the employee is entitled from the insurer of the furnished vehicle.” Mich. Comp. Laws § 500.3114(3).

*2 The parties debate at length about whether Kaysar was an employee or an independent contractor vis-a-vis Moon Star. The evidence bearing on this issue is disputed. Horace Mann points to the Employment and Confidentiality Agreement, signed by Kaysar and a Moon Star representative on July 28, 2017. This document, which identifies Kaysar as “employee,” states:
2. Employment:
a. Employee will be employed by Moon Star for an indefinite term, and Moon Star will compensate Employee in such amount and upon such terms as Moon Star may determine from time to time. Either Employee or Moon Star may terminate the employment relationship at any time, for any reason or for no reason, with or without cause.
b. Employee’s duties and responsibilities will be established or directed by Moon Star, and Employee shall abide by all such directives and all statements of policy or procedure that Moon Star may issue. During his or her employment, Employee shall use his or her best efforts and entire business time and attention to advance the interests of Moon Star, under the direction of Moon Star, and Employee shall not directly or indirectly engage in or be associated with any other commercial or business duties or pursuits without the prior written consent of Moon Star.
Pl.’s Ex. F. This document plainly indicates that Kaysar was Moon Star’s employee.

But a different document entitled Independent Contractor Agreement, which Kaysar (or possibly his wife) signed on July 25, 2017, identifies Kaysar’s company, E&E, as “contractor” and Moon Star as “carrier.” Pl.’s Ex. G. This multi-page document states in the first paragraph that “carrier and contractor agree and intend to create by this Agreement an independent contractor relationship, and not a joint venture, partnership, or an employer employee relationship in any manner. Neither contractor nor contractor’s employees shall be considered employees of carrier.” Further, in paragraph 2, “contractor agrees to use the equipment more specifically described in Appendix A…to transport load and unload on behalf of carrier.” And in paragraph 3, “contractor warrants the Equipment is in good, safe, and efficient operating condition and guarantees title thereto.” The only equipment identified in Appendix A is Kaysar’s Volvo tractor. Acuity points to the various provisions of this agreement showing E&E’s independence in “determining the manner, means and method of performance of all services rendered under the agreement,” Acuity’s Resp. Br. at 4-5 (quoting ¶ 9 of the agreement), which support the argument that Kaysar worked for Moon Star an as independent contractor, not as its employee. Acuity also cites Kaysar’s deposition testimony and an affidavit from Moon Star’s safety director, Renee Osaer, to the effect that Kaysar could turn down hauling jobs from Moon Star without negative consequences, that he could haul for other companies so long as he covered up the Moon Star logo, and that Kaysar was responsible for paying for his own fuel and choosing his travel routes.

Kaysar’s status as an employee or independent contractor vis-a-vis Moon Star is clearly disputed, and the Court cannot resolve that issue on summary judgment. The Court need not do so, however, because Kaysar is self-employed and was working for his business when he was injured. Under Michigan law, Kaysar is therefore deemed to be an employee for purposes of the No-Fault Act’s employee exception. This rule was first articulated by the Michigan Supreme Court in Celina Mutual Ins. Co. v. Lake States Ins. Co., 549 N.W.2d 834 (Mich. 1996). In that case, the injured person, Robert Rood, was injured while on a job and “driving a wrecker truck owned by Rood’s Wrecker & Mobile Home Service,” a sole proprietorship owned by Rood. Id. at 834-35. The Michigan Supreme Court stated: “We believe that it is most consistent with the purposes of the no-fault statute to apply § 3114(3) in the case of injuries to a self-employed person.” Id at 836. Therefore, the insurer of the wrecker he was driving when injured (Celina) was first in priority for paying Rood’s PIP benefits, not the insurer of his private vehicles (Lake States). As later explained by the Michigan Court of Appeals, the rule articulated in Celina “is that a self-employed person operating a motor vehicle owned by that self-employed person in the course of his or her self-employment is both an employee and employer for purposes of MCL 500.3114(3).” Farm Bureau Gen. Ins. Co. of Am. v. Westfield Ins. Co., No. 330961, 2017 WL 2348747, at *7 (Mich. Ct. App. May 30, 2017).

*3 The same result was reached in Besic v. Citizens Ins. Co. of the Midwest, 800 N.W.2d 93 (Mich. Ct. App. 2010). In that case, the driver owned the tractor, leased it to MGR (the shipping company for which he was driving), and crashed while hauling a load. The contractor was “Besic Express, a corporation solely owned by Besic.” Id. at 94. “Besic owned the truck and worked as a self-employed independent contractor for MGR. Consistently with…Celina, the priority language in MCL 500.3114(3) extends to the self-employment situation of Besic.” Id. at 100 (citation omitted). Therefore, the bobtail insurer (Clearwater), which provided PIP coverage but excluded it if the lessee’s policy provided such coverage, was held liable because the only other insurer of the tractor (the carrier’s insurer, Lincoln) did not provide PIP coverage.

Similarly, in Perkovic v. Hudson Ins. Co., No. 302868, 2012 WL 6633991 (Mich. Ct. App. Dec. 20, 2012), the driver owned the tractor, leased it to the carrier, and was injured while hauling a load. The court found that the driver was an independent contractor vis-a-vis the carrier but that, despite this, the employee exception “applies to a self-employed person.” Id. at *4. “Thus, under MCL 500.3114(3), [the driver] was an employee who suffered accidental bodily injury while an occupant of a motor vehicle owned by the employer (himself), and he is entitled to receive PIP benefits ‘from the insurer of the furnished vehicle.’ MCL 500.3114(3). Thus, Zurich has priority.” Id. Zurich was the carrier’s insurer, and it provided PIP coverage; the bobtail policy, provided by Citizens, also provided PIP coverage but excluded coverage for accidents occurring “in the business of anyone to whom it is leased…if the lessee has [PIP] coverage.” Id. at *1. That exclusion was upheld in light of the PIP coverage provided by Zurich.

And finally, in Maroky v. Encompass Indem. Co., No. 333489, 2017 WL 4700030, *1 (Mich. Ct. App. Oct. 19, 2017), the injured driver was “the sole member of a corporate entity, Envoy Trucking,” that owned the tractor and leased it to ADM Transit. He was injured while hauling a load for the lessee. Following Besic, the court found that the driver “was self-employed and working under an owner-operator agreement with ADM Transit. Given this, the priority language of MCL 500.3114(3) applies to plaintiff’s self-employment situation consistent with our Supreme Court’s analysis in Celina, 452 Mich. at 89.” Id. at *4. Further, “ADM Transit’s insurer was OOIDA under a policy that included PIP benefits. Accordingly, OOIDA is the insurer of highest priority per MCL 500.3114(3).” Id.

Based on this line of cases, the Court concludes that Kaysar was an employee within the meaning of Mich. Comp. Laws § 500.3114(3). Under that statute, he therefore shall “receive [PIP] benefits to which [he] is entitled from the insurer of the furnished vehicle.” Both Acuity and Great American are insurers of the tractor Kaysar was driving. Great American, as noted, issued a bobtail policy on the tractor. Acuity insures motor vehicles that Moon Star owns, and Moon Star owned the Volvo tractor at the time of Kaysar’s accident by virtue of the long-term lease agreement it entered into with E&E. Under § 500.3101(2)(l), a motor vehicle’s “owner” includes: “(i) A person renting a motor vehicle or having the use of a motor vehicle, under a lease or otherwise, for a period that is greater than 30 days.” That Moon Star leased Kaysar’s Volvo tractor and is therefore an owner it under this definition is apparent from the Independent Contractor Agreement between E&E and Moon Star, which states in relevant part:
6. Carrier agrees to pay contractor for the use and operation of the Equipment on the following basis or Appendix (Exhibit) B attached:
*4 Per Appendix (Exhibit) B….Upon termination of the lease agreement, as a condition precedent to payment, contractor shall remove all identification devices of the carrier and, except in the case of identification painted directly on equipment, return them to the carrier.
***
19. This Agreement shall become effective on 7-25 at 2017 [sic] as reflected on the equipment receipt attached as Appendix (Exhibit A). When possession of equipment is surrendered by carrier to contractor, contractor shall furnish a similar receipt to carrier and at the time return to carrier all identification devices and other property furnished by carrier to contractor.
20. The carrier shall have the exclusive possession, control and use of the equipment for the duration of the lease and shall assume complete responsibility for the operation of the equipment for the duration of the lease. The carrier shall be considered the “owner” of the equipment, as that term is defined in 29 CFR 1057.2(d) in the event the carrier desires to sublease the equipment.
Pl.’s Ex. G. As noted above, the “equipment” is identified in “Appendix (Exhibit) A” as Kaysar’s Volvo tractor. Further, this lease agreement, dated July 25, 2017, had a one-year term and was therefore in effect at the time of the accident at issue in this case. Id. ¶ 14.

Other provisions of this lease shed light on the agreement between Moon Star and E&E regarding the parties’ respective responsibilities to arrange for insurance coverage. Under paragraph 9(d), contractor was responsible for “[p]aying all…public liability, property damage insurance on the equipment while not being operated in the service of the carrier.” And under paragraph 11, carrier was required to
maintain insurance coverage for the protection of the public pursuant to commission regulations under 49 U.S.C. 10927. The contractor agrees to carry bobtail and off-dispatch insurance coverage with respect to public liability and property damage in the limits of $1,000,000.00 combined single limits.
Thus, Kaysar was required to (and did) purchase bobtail insurance (from Great American). And Moon Star was required to (and did) purchase liability insurance (from Acuity). This division of responsibility further supports Horace Mann’s argument that Moon Star leased Kaysar’s tractor. Moon Star was responsible for insuring it for its business purposes; Kaysar was responsible for insuring it while it was not being used for these purposes. The referenced statute, § 10927, part of the Interstate Commerce Act, has been recodifed as § 13906. That section requires motor carriers to have security, in the form of a bond or insurance policy, “sufficient to pay…judgment…for bodily injury to…an individual resulting from the negligent operation…of motor vehicles or for loss or damage to property.”

The Court concludes that Moon Star owned the tractor under § 500.3101(2)(l)(i). The Court therefore rejects the first reason Acuity offered, in its letter to Kaysar denying coverage, that the “motor vehicle involved in the…accident was not owned by Acuity’s named insured, Moon Star Express, LLC.” Pl.’s Ex. K.

Acuity’s second reason for denying Kaysar’s claim was that the PIP coverage otherwise provided under the policy’s Michigan Truckers Amendatory Endorsement was unavailable to him because that endorsement “excepts from coverage an automobile hired or borrowed by the named insured from someone who does not provide Michigan [PIP] Coverages on autos that person hires or borrows.”2 Pl.’s Ex. K. On this point, Acuity asserted in its rejection letter that “there is no coverage for the 2011 Volvo…because Great American…claims…that it does not provide PIP coverage for an automobile hired or borrowed by its insured, E&E Freight Moving, LLC.” Id. In its response to plaintiff’s summary judgment motion, Acuity elaborated on this assertion as follows:
*5 Moon Star did not hire or borrow the 2011 Volvo from Reva Kaysar. Rather, Moon Star hired the Volvo from E&E Freight by way of the Independent Contractor Agreement. E&E Freight hired or borrowed the Volvo from Reva, the titled owner of the vehicle. While E&E Freight was the named insured on a policy issued by Great American for the Volvo, Great American has denied coverage for PIP benefits under the “Trucking or Business Use” exclusion in its policy. Since E&E Freight failed to provide [PIP] coverage on the Volvo that it hired or borrowed from Reva, the exception to the…endorsement applies. Thus, the Volvo is not a covered auto under the Acuity policy.
Acuity’s Resp. Br. at 19.

The Court rejects this argument for two reasons. First, the argument is hyper-technical and a transparent attempt to avoid coverage. E&E is a husband-and-wife company with one tractor (the Volvo) and one driver (Kaysar). E&E does not “hire or borrow” tractors. Second, the exclusion states: “However, a covered auto does not include an auto you hire or borrow from someone who does not provide Michigan [PIP] Coverages on autos that person hires or borrows.” Even assuming (incorrectly, as just noted) that the Volvo is an “auto[ ] that [E&E] hires or borrows,” the exclusion still does not apply because E&E did “provide Michigan [PIP] Coverages” to the extent required by the Independent Contractor Agreement. As noted above, that agreement requires in paragraphs 9(d) and 11 that the contractor (E&E) pay for “insurance on the equipment while not being operated in the service of the carrier” and for the carrier (Moon Star) to “maintain insurance coverage for the protection of the public pursuant to commission regulations.” E&E obtained PIP coverage through its Great American policy precisely to the extent required by this agreement, i.e., while the tractor was bobtailing.

As for Great American, it denied coverage with the following explanation:
It appears that at the time of the accident you were using the truck in the business of Moon Star Express, to whom the truck reportedly was leased. Because we were informed that you were hauling a load for Moon Star Express, we conclude that the above policy language precludes coverage for Michigan no-fault benefits under the Great American policy.
Pl.’s Ex. J. Great American pointed to the following exclusion in its policy:

C. EXCLUSION
This insurance does not apply to any of the following:

13. TRUCKING OR BUSINESS USE
Bodily injury or property damage arising out of any accident which occurs while the covered auto is being used in the business of any lessee or while the covered auto is being used to transport cargo of any type….
Id. Great American also pointed to a policy provision stating that “[f]or any covered auto, the insurance provided by this policy is excess over any other collectible insurance.” Id.
*6 The Great American policy incorporates twenty-two endorsements, one of which is “17. CA2220…Michigan Personal Injury Protection.” Pl.’s Ex. D, Bates GAAC000010. This endorsement (Bates GAAC000046-50) states: “We will pay [PIP] benefits to or for an insured who sustains bodily injury caused by an accident and resulting from…use of an auto.” However, the policy contains an exclusion in Part II applicable when the tractor is used “in the business of a lessee.” It is undisputed that Kaysar was injured while hauling a trailer for Moon Star. Additionally, the general rule that endorsements trump general policy provisions, see, e.g., Besic, 800 N.W.2d at 97, does not apply because the endorsement, unlike the one at issue in Besic, states: “With respect to coverage provided by this endorsement, the provisions of the Coverage Form apply unless modified by the endorsement.” Pl.’s Ex. D, Bates GAAC000046. Further, Part III of the Great American policy states: “Each and every exclusion which appears in Part II – Liability Coverage for Non-Trucking Use shall apply to any Uninsured/Underinsured Motorist Coverage, Personal Injury Protection (No-Fault) Coverage and Medical Payments Coverage.” Plainly, Great American’s policy is a bobtail policy that provides coverage only for “non-trucking liability,” as the title of the policy states.

A bobtail policy’s exclusion just like the one in this case was a central issue in Integral Ins. Co. v. Maersk Container Serv. Co., 520 N.W.2d 656 (Mich. Ct. App. 1994). In that case, the driver, Ralph Scott, owned the tractor and had bobtail coverage through Integral Insurance Company. Scott leased his tractor to Maersk Container Service Company, which owned the trailer Scott was hauling when he was injured. Maersk was insured by INA. The bobtail policy, as in the present case, “excluded coverage when Scott was hauling cargo for a company to whom the tractor was leased.” Id. at 658. The trial court held that the exclusion in the bobtail policy was void as against public policy, but the court of appeals reversed because “[t]aken together, the policy issued by INA and the bobtail policy issued by Integral provided continuous insurance coverage to the tractor as required by the motor vehicle financial responsibility act.” Id. at 659.

Great American is entitled to summary judgment based on the identical type of exclusion that was upheld in Integral. The exclusion in Parts II and III of the policy clearly state that there is no coverage under this policy “while the covered auto is being used in the business of any lessee.” Importantly, the exclusion also states that it applies to the PIP coverage provided in the endorsement.

The Court concludes that Horace Mann is entitled to summary judgment because Kaysar was an employee at the time he was injured, and therefore the “employee exception” of Mich. Comp. Laws § 500.3114(3) applies. This means that the insurer responsible for paying Kaysar’s PIP benefits is the insurer of the vehicle he was driving, i.e., either Acuity or Great American. Great American is entitled to summary judgment based on the exclusions in its policy applicable when the tractor is used “in the business of a lessee” because when Kaysar was injured he was hauling a load for Moon Star who was leasing the tractor. Acuity is the only remaining insurer. Acuity’s policy provides PIP coverage and, for the reasons stated above, the Court rejects Acuity’s reasons for denying coverage. Acuity must reimburse Horace Mann for all PIP benefits Horace Mann has paid to date. Acuity is also responsible for paying Kaysar’s PIP benefits in the future.3 Accordingly,

*7 IT IS ORDERED that plaintiff’s motion for summary judgment is granted. IT IS FURTHER ORDERED that defendant Great American’s motion for summary judgment is granted.

IT IS FURTHER ORDERED that defendant Acuity’s motion for summary judgment is denied.
s/Bernard A. Friedman

BERNARD A. FRIEDMAN

SENIOR UNITED STATES DISTRICT JUDGE

Dated: March 20, 2020

Detroit, Michigan
All Citations
Slip Copy, 2020 WL 1323234

Footnotes

1
“Generally, a ‘bobtail’ policy is a policy that insures the tractor and driver of a rig when it is operated without cargo or a trailer.” Besic v. Citizens Ins. Co. of the Midwest, 800 N.W.2d 93, 95 n.1 (Mich. Ct. App. 2010) (quoting Integral Ins. Co. v. Maersk Container Serv. Co., Inc., 520 N.W.2d 656 (1994)).

2
This endorsement, as quoted in Acuity’s denial letter, states:
MICHIGAN TRUCKERS AMENDATORY ENDORSEMENT
With respect to coverage provided by this endorsement, the provisions of the Coverage Form apply unless modified by the endorsement.
Michigan Personal Injury and Property Protection Coverages are changed as follows:
1. A covered auto also includes an auto you hire or borrow which:
a. Is a covered auto for Liability Coverage;
b. Is being used exclusively in your business as a trucker; and
c. Is being used pursuant to operating rights granted to you by a public authority.
However, a covered auto does not include an auto you hire or borrow from someone who does not provide Michigan [PIP] Coverages on autos that person hires or borrows.
2. This insurance does not apply to a covered auto hired or borrowed from you by any trucker if the trucker has [PIP] Coverage on the auto.

3
The Court notes that this result is consistent with the purpose of the No-Fault Act’s employee exception, as articulated recently by the Michigan Court of Appeals:
We have recognized that the purpose of the employer-employee exception, MCL 500.3114(3), to the general priority statute of MCL 500.3114(1) is to provide predictability in commercial settings by imposing liability on an employer’s insurer rather than the insurer of the injured individual. Besic v. Citizens Ins. Co. of the Midwest, 290 Mich. App. 19, 31-32; 800 N.W.2d 93 (2010). Additionally, the Michigan Supreme Court has recognized that the cases interpreting MCL 500.3114(3) “have given it a broad reading designed to allocate the cost of injuries resulting from use of business vehicles to the business involved through the premiums it pays for insurance.” Celina Mut. Ins. Co., 452 Mich. at 89.
Farm Bureau Gen. Ins. Co. of Am. v. Westfield Ins. Co., No. 330961, 2017 WL 2348747, at *4 (Mich. Ct. App. May 30, 2017). The result the Court has reached in the present case is particularly fair in light of the Independent Contractor Agreement in which Kaysar agreed to purchase bobtail coverage for the tractor and Moon Star agreed to purchase insurance that would cover the tractor while it was hauling Moon Star’s loads.