United States District Court,

E.D. New York.

EMPIRE FIRE AND MARINE INSURANCE COMPANIES, Plaintiff,

v.

H. MORAN AND SONS, INC., Abraham Arrieta, Pepe Transport, Inc., M & M Farms,

Pepe Arrieta s/h/a Pepe Arietta, Francisco Garcia s/h/a Frank Garcia a/k/a

Frankie, T & C Tropical Inc. s/h/a T & C Tropicals, Global Tropical Fresh Fruit

Co. s/h/A, Global Tropicals, Brooklyn Terminal Market Merchants Association

Inc. s/h/a, New York-Brooklyn Terminal Market, Defendants.

Dec. 5, 2003.

MEMORANDUM, JUDGMENT & ORDER

JACK B. WEINSTEIN, Senior District Judge.

I. Introduction

Plaintiff moves for summary judgment. Defendant, T & C Tropical Inc. (T & C), cross moves for summary judgment against Plaintiff. For the reasons indicated below, Plaintiff’s summary judgment motion is granted. T & C’s cross motion is denied.

Plaintiff, Empire Fire and Marine Insurance Companies (“Empire”), issued a commercial lines insurance policy to H. Moran & Sons, Inc. (“Moran”) for the period covering January 14, 1998 to January 14, 1999. It was a multi-line policy consisting of a Truckers Coverage Form (“Truckers Form”) and a Motor Truck Cargo Legal Liability Special Coverage Form (“Cargo Form”). On October 19, 2000, Plaintiff commenced a declaratory judgment action against Moran, Abraham Arrieta (“Abraham”), Pepe Transport, Inc. (“Pepe Transport”), M & M Farms (“M & M”), Pepe Arrieta (“Pepe”), Francisco Garcia (“Garcia”), Global Tropical Fresh Fruit Co. (“Global”), T & C and Brooklyn Terminal Market Merchants Association, Inc. (“Market”).

Plaintiff now moves for summary judgment declaring that it does not have an obligation to indemnify or defend Moran and/or Garcia for the lawsuit brought by Abraham. T & C cross-moves for an order granting summary judgment holding that Plaintiff is obligated to defend and/or indemnify Moran and/or Garcia in the lawsuit brought by Abraham and in cross-claims commenced by T & C.

II. Facts

A. The Accident

In the early part of the week of May 14, 1998, Abraham and Garcia were scheduled to drive trucks bringing produce from Florida to the Market in New York. Abraham was driving on behalf of his employer Pepe Transport, owned by his father Pepe. Abraham was to deliver produce on his truck to M & M in New York City. Garcia was driving on behalf of his employer, Moran. Garcia was to deliver the produce to T & C located in the Market in New York City.

Garcia asked Abraham if he would carry a pallet of yams for him from Florida because Garcia’s truck was over legally prescribed weight limits. Abraham agreed. Garcia and Abraham met in Florida and unloaded the pallet from Garcia’s truck and loaded it onto Abraham’s truck. On May 14, 1998, Garcia and Abraham arrived in New York City at Global in the Market.

Garcia borrowed a forklift from T & C to retrieve the pallet of yams from Abraham’s truck. He drove the forklift towards Abraham’s truck, striking Abraham on the way to the truck. The parties agree that the forklift, while being operated by Garcia, preparatory to lifting the yams off Abraham’s truck, struck Abraham, causing him injuries. This was the “Accident.”

B. Procedural History

1. Underlying State Action

On or about February 6, 2000, Abraham filed a lawsuit in New York state court naming T & C, Moran, and Garcia as defendants to recover for his injuries from the Accident. On July 19, 2002, this action was marked off the trial calendar. To date, the action has not been restored to the trial calendar.

2. Federal Action

Plaintiff was given notice of the Accident when it received the summons and complaint related to the underlying state action on May 17, 2000. In a letter dated May 22, 2000, it notified Moran that it was questioning the application of coverage, reserving the right to investigate and contest coverage, but hired attorneys to provide a defense for their insured without waiving its rights. A similar letter, dated June 1, 2000, was sent to Garcia.

On May 10, 2001, this court granted plaintiff’s motion for a default judgment with prejudice against Moran. On November 29, 2001, by stipulation, the action was discontinued with prejudice against M & M and Global without cost to either of the discontinued parties as against each other. It was also stipulated that M & M, Global and their respective insurers would agree to be bound and not contest in any forum the decision of this court as to the issue of insurance coverage between the plaintiff and Moran and the validity of plaintiff’s disclaimer.

III. Choice of Law

Whether New York or Florida state law governs this case is the threshold issue. Federal courts sitting in diversity jurisdiction normally apply the forum state’s choice of law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 4878 (1941). The first step in any choice of law inquiry is to determine whether there is an actual conflict between the laws invoked by the parties. Booking v. General Star Mgmt. Co., 254 F.3d 414, 419 (2d Cir.2001). If there is a conflict, the court must classify the conflicting laws by subject matter with reference to New York law. Id. at 420. New York law requires courts to apply the law of the jurisdiction having “the most significant contacts with the matter in dispute.” Auten v. Auten, 308 N.Y. 155, 160, 124 N.E.2d 99 (1954). “For contract disputes, New York applies the law of the state having the most significant relationship to the transaction.” E.g., American Centennial Ins. Co. v. Sinker, 903 F.Supp. 408, 412 (E.D.N.Y.1995).

When examining choice of law questions involving insurance contracts, New York courts consider 1) the place of contracting, 2) where the contract was negotiated, 3) the place of performance, 4) the location of the subject matter of the contract, and 5) the domicile or place of business of the contracting parties. Zurich Ins. Co. v. Shearson Lehman, Hutton, Inc., 84 N.Y.2d 309, 618 N.Y.S.2d 609, 642 N.E.2d 1065 (1994).

There are a number of factors that weigh in favor of Florida law governing the outcome of this case. The insurance contract was negotiated and executed in Florida. The insurance policy was placed through plaintiff’s Florida-based insurance broker. Moran, the insured, is duly organized and existing under the laws of Florida. Their principal place of business is in Florida. Abraham, the injured party in the underlying action, is a Florida resident. Pepe Transport, Abraham’s employer at the time of the underlying action, is a Florida corporation. The arrangement for transportation of the pallet was made in Florida, and it was loaded onto Garcia’s truck in Florida.

Florida has the most significant contacts to the transaction and the parties. The use of the center of gravity or grouping of contacts is the appropriate analytical approach to choice of law questions in contract cases. Zurich Ins. Co., 84 N.Y.2d at 317, 618 N.Y.S.2d 609, 642 N.E.2d 1065.

Plaintiff’s argue that New York law should govern because New York was the situs of the Accident. This argument is not persuasive. The situs of the accident is not dispositive in determining the controlling law. See Maryland v. Continental Cas. Co., 332 F.3d 145, 153 (2d Cir.2003).

In Continental Cas. Co., the insured faced lawsuits related to environmental injuries at more than twenty sites. The Second Circuit Court of Appeals found that New York law applied to the claims, rather than the law of the state where each site was located. Id. at 152. The court reasoned that New York had the most significant contacts with the dispute, because the insurance policy was executed in New York, and the premiums were paid in New York. Id. at 149. The situs of the accident was irrelevant. “It is commonplace for courts applying New York choice-of-law rules to disregard (or at least discount) the location of the insured risk when the risk is located in two or more states.” Id. at 153.

The instant case is similar. There are numerous potential states in which accidents can occur in the interstate trucking industry. In Continental Cas. Co., a single policy covered potential exposure in more than twenty locations. The Continental Cas. Co. court looked to the location of the contract negotiation, not the location where the underlying action occurred.

There are certain instances in which “the policies underlying conflicting laws in a contract dispute are readily identifiable and reflect strong governmental interests and therefore should be considered.” Zurich Ins. Co., 84 N.Y.2d at 319, 618 N.Y.S.2d 609, 642 N.E.2d 1065 (citation omitted). There is no unique governmental interest in this textbook contract dispute case. Florida state law governs this case.

IV. Law

A. Standard of Review

Summary judgment should be granted only where there is “no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). When deciding a motion for summary judgment, the court must view the inferences to be drawn from the facts in the light most favorable to the party opposing the motion. L.B. Foster Co. v. America Piles, Inc., 138 F.3d 81, 87 (2d Cir.1998) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).

The moving party bears the initial burden of showing that no genuine issue of material fact exists. Celotex, 477 U.S. 317 at 323, 106 S.Ct. 2548, 91 L.Ed.2d 265. Once the moving party has met its initial burden, the non-moving party must come forward with “specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

B. Duty to Indemnify

“Regardless of the allegations of the complaint, it is the underlying facts that determines the duty to indemnify.” Hagen v. Aetna Casualty & Surety Co., 675 So.2d 963, 965 (Fla.Dist.Ct.App.1996); State Farm Fire and Casualty Co. v. CTC Dev. Corp., 720 So.2d 1072, 1077 (Fla.1998). The facts surrounding the accident must fall within the liability coverages under the insurance policy. See Hagen, 675 So.2d at 966.

Under New York and Florida law, insurance policies are to be construed liberally in favor of the insured and strictly against the insurer. Grissom v. Commercial Union Ins. Co., 610 So.2d 1299 (Fla.Dist.Ct.App.1992). When a policy provision is ambiguous, it should be construed against the insurer. If the relevant policy language is susceptible of more than one reasonable interpretation, one providing coverage and another limiting coverage, the insurance policy is ambiguous. Auto-Owners Ins. Co. v. Anderson, 756 So.2d 29, 34 (Fla.2000) (citation omitted); Excelsior Ins. Co. v. Pomona Park Bar & Package Store, 369 So.2d 938, 942 (Fla.1979). If a policy provision is unambiguous, however, it should be enforced according to its terms whether it is a basic scope of coverage or an exclusionary provision. Hagen, 675 So.2d at 965.

C. Duty to Defend

A liability insurer is under a duty to defend a suit against an insured only where the complaint alleges facts within the coverage of the insurance policy. Nat’l Union Fire Ins. Co. v. Lenox Liquors, Inc., 358 So.2d 533, 535 (Fla.1977). “The allegations of the complaint govern the duty to defend.” Id. at 536. “A liability insurance company has no duty to defend a suit where the complaint upon its face alleges a state of facts which fails to bring the case within the coverage of the policy.” Id. at 535 (citation omitted).

There is no conflict between New York and Florida on the scope of an insurer’s duty to defend. The duty of defense is broader than that of indemnification. State Farm Fire and Cas. Co. v. Higgins, 788 So.2d 992, 995 (Fla.Dist.Ct.App.2001). The insurer must defend even if the facts alleged in the complaint are untrue or the legal theories are unsound. Id. at 995. Nonetheless, the duty to defend does not create coverage where coverage does not exist. Id.

D. Insured’s Duty to Provide Notice

Under Florida law, the failure of an insured to give notice of a loss to their insurer in accordance with provisions of the policy creates a presumption of prejudice to insurer. Ideal Mut. Ins. Co. v. Waldrep, 400 So.2d 782 (Fla.Dist.Ct.App.1981). The insured can then only recover after demonstrating the insurer was not prejudiced by the late notice. Id.

V. Application of Facts to Policy

What is at issue is whether the Accident involved a covered “auto” as defined in the policy. Liability coverage is based on accidents resulting from “use” of a covered “auto.” It reads:

We will pay all sums an “insured” legally must pay as damages because of “bodily injury” or “property damage”to which this insurance applies, caused by an “accident” and resulting from the ownership, maintenance or use of a covered “auto.”

(Truckers Form at 2). An “auto” does not include “mobile equipment”:

“Auto” means a land motor vehicle, “trailer” or semitrailer designed for travel on public roads but does not include “mobile equipment.”

(Truckers Form at 10) (emphasis added). And forklifts are included in the definition of excluded “mobile equipment”:

“Mobile equipment” means any of the following types of land vehicles, including any attached machinery or equipment: … Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public roads….

(Truckers Form at 12) (emphasis added).

This insurance policy is not ambiguous. The definition of a covered “auto” does not include forklifts under the conditions of this Accident. The forklift was not on the insured “auto;” it was not taking a product off, or putting one on the “auto;” it was not owned or controlled by the insured; and the “auto” had no physical contact with the forklift at any time.

Since the Accident did not result from the ownership, maintenance or use of a covered “auto” as defined in the policy, plaintiff has no duty to indemnify the defendants.

Defendants argue that the term “use” “encompasses loading and unloading of goods” from the covered “auto.” (Def.’s Mem. Opp. Summ. J. at 10). Even were that so, what was involved here was an “intended use” of the forklift, interrupted by an event causing damages before “use” could be commenced.

Defendants also argue that the Accident is included under the policy because the facts of this case are not specifically listed under the Exclusions section of the policy. An exclusionary clause reads:

This insurance does not apply to any of the following: … “Bodily injury” or “property damage” resulting from the movement of property by a mechanical device (other than a hand truck) unless the device is attached to the covered “auto.”

(Truckers Form at 4). Defendants contend that because the forklift had not yet been loaded with produce, the injury was not the result of the “movement of property” as stated in the Exclusions. This suggestion ignores the fact that liability coverage under this policy applies to ” ‘bodily injury’ … resulting from … the use of a covered ‘auto.’ ” “Auto” does not include forklifts. If a state of facts is explicitly not included under the policy, it is not necessary they also be added to the exclusionary provisions of the policy. Plaintiff does not require two layers of protection. There was nothing from which to be excluded..

Plaintiff also moves for a declaratory judgment that it has no duty to defend defendants in litigation arising from the Accident. The relevant portion of the policy reads:

We will pay all sums an “insured” legally must pay as damages…. We have the right and duty to defend any “insured” against a “suit” asking for such damages…. We may investigate and settle any claim or “suit” as we consider appropriate.

(B Truckers Form at 2.)

An insurer must provide a defense for the insured if the complaint suggests, or the insurer has actual knowledge of, facts establishing a reasonable possibility of coverage. Klaesen Bros. Inc. v. Harbor Ins. Co., 410 So.2d 611, 613 (Fla.Dist.Ct.App.1982). In its relevant portions as against Moran and Garcia, the state court complaint alleges:

17. These defendants were reckless, careless and negligent in operating the forklift in an improper manner; in operating the forklift at an excessive rate of speed; in failing to keep the forklift under proper control; in causing the forklift to strike the plaintiff; and the defendants were otherwise reckless, careless and negligent.

(Compl. filed in the S.Ct. of N.Y. at 4, also appearing at Pl.’s Ex. C).

In its relevant portions as against T & C, the state court complaint claims:

12. This defendant, by its agents, servants and/or employees was reckless, careless and negligent in failing to keep the forklift under proper control; in failing to properly maintain the forklift; in failing to make certain as to who made use of the forklift; in failing to have proper safety provisions in effect; in creating a trap, a hazard and a nuisance; in failing to provide the plaintiff with a safe place to work; and the defendant was otherwise reckless, careless and negligent.

(Compl. filed in the S.Ct. of N.Y. at 3, also appearing at Pl.’s Ex. C).

The state court complaint does not allege any facts that establish a possibility of liability coverage. Plaintiff has no duty to defend Moran or Garcia under Florida law. See Klaesen, 410 So.2d at 613.

The policy also requires that the insured give plaintiff “prompt notice of the accident or ‘loss.’ ” (Truckers Form at 8.) Since plaintiff has neither a duty to indemnify or to defend, it is unnecessary to consider whether plaintiff was prejudiced by defendants’ possible tardiness in notifying plaintiff of the Accident.

VI. Cross-claims

Defendant T & C cross moves for summary judgment declaring that plaintiff has a duty to indemnify and defend it for cross claims commenced by T & C against Moran and Garcia in the underlying state action. T & C is in effect moving for a declaratory judgement that it is an “insured” under the policy.

The language of the policy controls the outcome. The relevant portion of the policy is limited by the term “auto.” It states:

The following are “insureds”:

a. You for any covered “auto”.

….

d. The owner or anyone else from whom you hire or borrow a covered “auto” that is not a “trailer” while the covered “auto”:

(1) Is being used exclusively in your business as a “Trucker”; and

(2) Is being used pursuant to operating rights granted to you by a public authority.

(Truckers Form at 3) (emphasis added). Garcia borrowed T & C’s forklift. The forklift involved in the Accident was not a covered “auto” under this policy. Plaintiff is not obligated to indemnify T & C against any damages resulting from the Accident. Plaintiff is not obligated to defend T & C in its cross claims against Moran and Garcia.

VII. Conclusion

Plaintiff’s motion for summary judgment is granted. Defendant T & C’s cross motion for summary judgment is denied. Costs and disbursements to plaintiff.

SO ORDERED.