Court of Appeals of Wisconsin.

FABCO EQUIPMENT, INC. and Twin City Fire Insurance Company, Plaintiffs–Appellants,

v.

KREILKAMP TRUCKING, INC., Defendant–Respondent.

 

No. 2012AP1864.

Nov. 13, 2013.

 

Appeal from an order of the circuit court for Washington County: James K. Muehlbauer, Judge. Affirmed in part; reversed in part and cause remanded with directions.

 

Before BROWN, C.J., REILLY and GUNDRUM, JJ.

 

¶ 1 GUNDRUM, J.

FABCO Equipment, Inc. and its insurer, Twin City Fire Insurance Company, FN1 appeal the circuit court’s denial of their summary judgment motion and grant of summary judgment to Kreilkamp Trucking, Inc., which resulted in the dismissal of FABCO’s breach of contract claims related to FABCO and Kreilkamp’s Agreement for Transportation Services. Specifically, FABCO claims Kreilkamp breached its duty under the agreement to defend and indemnify FABCO related to a lawsuit brought against it by the estate and widow of one of Kreilkamp’s employees who was killed in the course of unloading equipment for FABCO. FABCO further alleges that Kreilkamp breached its contractual duty to add FABCO as an “additional insured” on Kreilkamp’s insurance policies. Finally, FABCO appeals the court’s denial of its motion for discovery sanctions against Kreilkamp. Based upon our review, we conclude that Kreilkamp breached its duty to defend FABCO in the lawsuit brought by the estate and widow, but did not breach its duty to add FABCO as an “additional insured.” We further conclude that the circuit court erred in denying FABCO’s motion for sanctions in the manner it did. We reverse in part, affirm in part, and remand for further proceedings.

 

FN1. We will use “FABCO” to refer to both FABCO and Twin City together and will also refer to FABCO and Twin City separately, as the context warrants.

 

BACKGROUND

¶ 2 The following facts are undisputed. Kreilkamp is a transportation company that provides transport, loading and unloading, and related services for the shipment of goods and equipment. FABCO leases construction equipment to customers. FABCO and Kreilkamp entered into an Agreement for Transportation Services whereby Kreilkamp would deliver FABCO equipment to and from FABCO customers. In 2008, a Kreilkamp employee died when a large piece of FABCO rental equipment he was attempting to unload with a forklift fell on him. The employee’s estate and widow, individually and as representative of the estate, FN2 filed suit against FABCO and Terex Corporation, the purported manufacturer of the equipment which fell on the employee, alleging that negligence by each caused the employee’s death. Pursuant to an indemnification provision in the agreement, FABCO tendered its defense to Kreilkamp, which tender was refused by Kreilkamp and its insurer. FABCO then filed this lawsuit, asserting, as relevant to this appeal, that Kreilkamp had breached the agreement by failing to fulfill its obligations therein to: (1) defend and indemnify FABCO with regard to the estate’s lawsuit and (2) add FABCO as an additional insured on Kreilkamp’s insurance policies. During the pendency of this lawsuit, FABCO settled the lawsuit by the estate.

 

FN2. Hereinafter we will refer to the estate and widow collectively as “the estate.”

 

¶ 3 The parties filed cross-motions for summary judgment. The circuit court granted Kreilkamp’s motion and denied FABCO’s, concluding that FABCO was not entitled to a defense or indemnification because a clause in the indemnification provision “excludes claims relating to Fabco’s negligence” and the estate’s lawsuit claimed FABCO was negligent, and further concluding that FABCO in fact was added as an “additional insured” under Kreilkamp’s insurance policy.

 

¶ 4 While the case was pending in circuit court, FABCO also filed numerous motions to compel discovery, as well as a motion for discovery sanctions, asserting that it incurred substantial costs and attorneys’ fees because Kreilkamp had delayed acknowledging the existence of the fully executed agreement for nearly three years, had engaged in “dilatory and abusive discovery practices,” and had failed to comply with statutory and court-ordered discovery deadlines. FABCO further alleged that Kreilkamp had “spoliated evidence by deleting and destroying 36 relevant email communications .” The circuit court granted FABCO’s motion for sanctions. Following court-ordered briefing related to the amount of the sanctions, however, the court sua sponte reversed itself, concluding that FABCO had not met its burden of proving that “exceptional circumstances” existed under WIS. STAT. § 804.12(4m) (2011–12) FN3 to permit the court to order sanctions for Kreilkamp’s conduct relating to its electronic communications. FABCO appeals. Additional facts are set forth below.

 

FN3. All references to the Wisconsin Statutes are to the 2011–12 version unless otherwise noted.

 

DISCUSSION

Summary Judgment—Breach of Contract

¶ 5 We review de novo a grant of summary judgment, applying the same methodology as the circuit court. Paskiewicz v. American Family Mut. Ins. Co., 2013 WI App 92, ¶ 4, 349 Wis.2d 515, 834 N.W.2d 866. Summary judgment is proper when the relevant facts are undisputed and only a question of law remains. Id. This case involves interpretation of the parties’ contract. We review de novo the circuit court’s contract interpretation. Ehlinger v. Hauser, 2010 WI 54, ¶ 47, 325 Wis.2d 287, 785 N.W.2d 328.

 

¶ 6 “Interpretation of an indemnification agreement, like any other written contract, begins with the language of the agreement.” Mathy Constr. Co. v. West Bend Mut. Ins. Co., No.2008AP1326, unpublished slip op., ¶ 12 (WI App Feb. 25, 2010); see Estate of Kriefall v. Sizzler USA Franchise, Inc., 2012 WI 70, ¶¶ 14, 48, 342 Wis.2d 29, 816 N.W.2d 853. “Where the terms of a contract are clear and unambiguous, we construe the contract according to its literal terms,” and consistent with “what a reasonable person would understand the words to mean under the circumstances.” Tufail v. Midwest Hospitality, LLC, 2013 WI 62, ¶¶ 26, 28, 348 Wis.2d 631, 833 N.W.2d 586 (citation omitted).

 

Indemnification Provision

¶ 7 In its primary issue on appeal, FABCO claims Kreilkamp breached the agreement because it failed to honor the indemnification provision therein. We agree. That provision states:

 

Indemnity. [Kreilkamp] agrees that it will defend, indemnify, and hold harmless [FABCO] from and against all claims, lawsuits, demands, liability, costs and expenses, including reasonable attorney’s fees and other costs of defense, caused by, arising out of, or connected with the performance of [Kreilkamp] hereunder and which result in any injury to, or the death of any persons, damage to or loss of property, including cargo, and any disputes involving the performance of services hereunder by third parties; provided, however, that [Kreilkamp] shall not be required to defend, indemnify or hold harmless [FABCO] to the extent any claims, lawsuits, demands, liability, cost or expenses are the result of [FABCO’s] negligence.

 

As pertinent to this case, the provision is triggered when there is a “claim [ ], lawsuit[ ], demand[ ], [or] liability” against FABCO which “[is] caused by, aris[es] out of, or [is] connected with the performance of [Kreilkamp] … which result[s] in … the death of any person[ ].” Of note, the agreement does not say that Kreilkamp’s “performance” need be negligent, reckless or intentional—only that its performance result in the death. As our supreme court recently pointed out in a case similar to the one here, an indemnitor is “obligated to honor its duty to defend upon [an indemnitee’s] tender of a claim against it for acts or omissions that were arguably within the purview of the [agreement].” Kriefall, 342 Wis.2d 29, ¶ 60. Here, FABCO tendered just such a claim to Kreilkamp and Kreilkamp rejected the tender.

 

¶ 8 The estate’s complaint against FABCO alleged that the Kreilkamp employee died while he “was working within the scope of his employment with Kreilkamp, under contract with FABCO to deliver and unload heavy equipment from a trailer on a FABCO site.” It alleged that the employee was at the FABCO site “unloading [the] … machine … from a flatbed trailer as a part of his job duties.” As the employee “attempted to maneuver the [machine]” on the trailer, the complaint continued, “the machine … moved too far, pushing [the employee] over the edge, onto the ground and falling forcefully on top of him, crushing and killing him on impact .”

 

¶ 9 Consistent with the terms of the indemnification provision, the estate’s lawsuit was a “claim[ ], lawsuit[ ]” against FABCO which “ar[ose] out of, or [was] connected with the performance of [Kreilkamp],” here through the performance of the employee himself. And, while the complaint was against FABCO and Terex, not Kreilkamp,FN4 and directly alleged that negligence by FABCO (and Terex) was a cause of the employee’s death, looking within the four-corners of the complaint, the complaint also alleged facts which arguably showed that the employee’s death was at least in part the result of Kreilkamp’s performance. Based on the above, we conclude that Kreilkamp, by rejecting FABCO’s tender of defense related to the estate’s lawsuit, breached its duty to defend FABCO, and thereby breached the indemnity provision and the agreement.

 

FN4. The fact that Kreilkamp was not named as a defendant in the estate’s lawsuit is not surprising, in that Wisconsin’s worker compensation laws likely precluded the estate from suing Kreilkamp for the employee’s death, see WIS. STAT. § 102.03(2); see, e.g., Gunka v. Consolidated Papers, Inc., 179 Wis.2d 525, 530, 533, 508 N.W.2d 426 (Ct.App.1993), and, as the parties acknowledge, the employee’s widow was compensated through Kreilkamp’s employer obligation under these laws.

 

¶ 10 Kreilkamp contends the indemnity provision in the agreement is “ineffective” and “unenforceable under Wisconsin law .” It argues that FABCO is seeking recovery for its own negligence and asserts that the indemnity provision only requires Kreilkamp to defend and indemnify FABCO “where liability does not arise out of FABCO’s negligence.” Kreilkamp contends that because the estate’s allegations allege negligence by FABCO, the indemnification provision clause stating that Kreilkamp “shall not be required” to defend or indemnify FABCO “to the extent any claims, lawsuits … are the result of [FABCO’s] negligence” negates any obligation on its part to defend and indemnify FABCO. We disagree with Kreilkamp’s reading of both the indemnity provision and FABCO’s claim.

 

¶ 11 The indemnity provision is valid under Wisconsin law. As our supreme court has stated:

 

This court has repeatedly held that indemnity agreements are valid and are not against public policy. One party may indemnify another against liability for the indemnitor’s acts and those of his employees, agents and subcontractors as well as against liability for the indemnitee’s own acts. The agreement will be broadly construed where indemnity is sought for liability based on the indemnitor’s negligence but will be strictly construed where the indemnitee is the negligent party. The court will not allow an indemnitee to be indemnified for his own negligent acts absent a clear and unequivocal statement to that effect in the agreement. However, even in the absence of such specific language the court will construe the agreement to provide such indemnity if that is the only reasonable construction.

 

Barrons v. J.H. Findorff & Sons, Inc., 89 Wis.2d 444, 452–53, 278 N.W.2d 827 (1979) (citations omitted). Here, contrary to Kreilkamp’s assertion, FABCO is not seeking recovery for its own negligence; rather, it recognizes that, under the indemnification provision, it is not entitled to recover “to the extent” it is found causally negligent. Further, the provision clearly indicates that FABCO can recover in circumstances where it is in part causally negligent; it just cannot recover for “the extent” of its own causal negligence.

 

¶ 12 Here, the allegations in the estate’s complaint identify that the estate’s claims against FABCO “ar[ose] out of or [were] connected with” Kreilkamp’s performance and that the performance arguably resulted, at least in part, in the employee’s death. This triggered the indemnification provision requirement that Kreilkamp defend FABCO, despite the fact the complaint also alleged that FABCO’s own negligence contributed, at least in part, to the death. Kreilkamp breached this duty by failing to accept FABCO’s tender of defense. As a result, we reverse the circuit court on this issue and remand for a determination of the amount of damages—the reasonable defense and settlement costs sought by FABCO, subject to the limitation discussed below—to which FABCO is entitled for the breach. See Newhouse v. Citizens Sec. Mut. Ins. Co., 176 Wis.2d 824, 837–38, 501 N.W.2d 1 (1993); see also Kriefall, 342 Wis.2d 29, ¶ 62.

 

¶ 13 FABCO’s right of recovery for Kreilkamp’s breach of its duty to defend is limited, as we have alluded, by FABCO’s own causal negligence, if any. The indemnification provision states that Kreilkamp is not required to “defend, indemnify or hold harmless [FABCO] to the extent any claims, lawsuits, demands, liability, cost or expenses are the result of [FABCO’s] negligence.” (Emphasis added.) Thus, the amount Kreilkamp will be required to reimburse FABCO related to the breach will be reduced based on “the extent,” i.e., percentage, of causal negligence ultimately found attributable to FABCO. See Kriefall, 342 Wis.2d 29, ¶¶ 58, 63 (analyzing and applying similar “to the extent” language as a limitation on damages). Whether FABCO was actually negligent, whether that negligence was a cause of the employee’s death and, hence, the related lawsuit by the estate, and “the extent” of any causal negligence are factual questions which have yet to be determined. Upon remand, a trial will be required to determine these issues. If a fact finder finds FABCO causally negligent, whatever percentage of causal negligence the fact finder attributes to FABCO is the percentage by which the reasonable defense and settlement costs sought by FABCO should be reduced. See id., ¶ 63.

 

¶ 14 Kreilkamp also argues that FABCO’s insurer, Twin City, which paid most of the defense and settlement costs related to the estate’s lawsuit, is “barred from recovering the costs of defense it paid because it had its own independent duty to defend FABCO” against the estate’s lawsuit. We disagree.

 

¶ 15 While we agree that it is generally the rule that an insurer cannot recover against another insurer when both are on equal footing due to having fulfilled their contractual obligations to the same insured, Zurich Am. Ins. Co. v. Wisconsin Physicians Servs. Ins. Corp., 2007 WI App 259, ¶ 32, 306 Wis.2d 617, 743 N .W.2d 710 (citing Employers Health Ins. v. General Cas. Co. of Wis., 161 Wis.2d 937, 958, 469 N.W.2d 172 (1991)), where one of the insurers breaches its contract with the insured by refusing to fulfill its obligations under the contract, the nonbreaching insurer can pursue recovery from the breaching insurer. Id. In such a case, the nonbreaching insurer “does have superior equity over” the breaching insurer, and permitting recovery from the breaching insurer fulfills the purpose of subrogation which is “to have the party who should have paid the debt, reimburse the party who actually paid the debt.” Id., ¶¶ 34, 39; see also Hartford Accident & Indem. Co. v. Worden–Allen Co., 238 Wis. 124, 132–33, 297 N.W. 436 (1941). Here, Kreilkamp breached its duty to defend FABCO, whereas Twin City fulfilled its responsibilities to FABCO as its insurer. Twin City has “superior equity” over Kreilkamp.

 

¶ 16 We observe that due to Kreilkamp’s refusal of FABCO’s tender of defense, if FABCO had not had insurance, it would have had to pay the entirety of its defense costs, in which case no question would arise regarding its right to recover for those costs from Kreilkamp. See Safway Rental & Sales Co. v. Albina Engine & Mach. Works, Inc., 343 F.2d 129, 133–35 (10th Cir.1965); General Accident Fire & Life Assurance Corp. v. Smith & Oby Co., 272 F.2d 581, 586 (6th Cir.1959). And, significantly, Kreilkamp was not an “insurer” of FABCO and does not stand in the same position as if it were. Kreilkamp is a corporation which entered into a business transaction with FABCO, and, as part of that transaction, agreed to indemnify FABCO for damages, attorneys’ fees, and costs stemming from deaths, or other harms, which resulted from Kreilkamp’s performance. By contrast, an insurer generally is not in a position where its performance related to its contract with the insured could result in a person’s injury or death. In a case such as this, where the employee’s death at least arguably resulted in part from Kreilkamp’s own performance, we find no inequity in requiring Kreilkamp to pay the reasonable defense costs paid by Twin City on behalf of FABCO, costs which FABCO itself would have paid if it did not have insurance and which Kreilkamp would have been required to shoulder had it not wrongfully denied FABCO’s tender of defense.FN5 See Hartford Accident & Indem. Co., 238 Wis. at 130–33 (rejecting indemnitor’s argument that indemnitee’s insurer was precluded from recovering defense costs from indemnitor); Three T’s Trucking v. Kost, 2007 WI App 158, ¶¶ 15–21, 303 Wis.2d 681, 736 N.W.2d 239; Lesmark, Inc. v. Pryce, 334 F.2d 942, 945 (D.C.Cir.1964); General Accident Fire & Life Assurance Corp., 272 F.2d at 586; Wiseman v. North Cent. Airlines, Inc., 246 F.Supp. 775, 778–79 (D.S.D.1965); New Amsterdam Cas. Co. v. Kilroy Structural Steel Co., 159 N.E.2d 797, 797–98 (Ohio Ct.App.1959); Broce Constr. Co. of Okla. v. Traders & Gen. Ins. Co ., 465 P.2d 475, 476–77 (Okla.1970); Rushing v. International Aviation Underwriters, Inc., 604 S.W.2d 239, 243–45 (Tex.Civ.App.1980); see also Huset v. Milwaukee Dressed Beef Co., 46 Wis.2d 317, 327, 174 N.W.2d 740 (1970) (approving circuit court judgment requiring indemnitor and its insurer to pay the settlement and litigation expenses of indemitee and its insurer).

 

FN5. Of course, if the “extent” of causal negligence attributable to FABCO for the death of Kreilkamp’s employee is found to be 100%, both FABCO and Twin City will recover nothing.

 

“Additional Insured” Provision

¶ 17 FABCO also appeals the circuit court’s rejection of its argument that Kreilkamp breached the agreement by failing to add FABCO as an “additional insured” on Kreilkamp’s insurance policies. The agreement language at issue states that “[Kreilkamp] agrees to add [FABCO] as an ‘Additional Insured’ on [Kreilkamp’s]” insurance policies. FABCO appears to contend, without citation to any legal support, that Kreilkamp needed to specifically add FABCO’s name to the policies. Kreilkamp counters that FABCO was in fact added as an additional insured under Kreilkamp’s insurance endorsement which states that “[a]ny person or organization whom you have agreed in a written contract, executed prior to loss, to name as additional insured” is an “insured.” Considering these same positions, the circuit court concluded:

 

The court is not persuaded that Kreilkamp’s contractual obligation to “add ” Fabco as an “additional insured” under its insurance policies required Kreilkamp to take separate additional overt actions to do so when Kreilkamp’s applicable auto policy with Discover Property and Casualty Insurance Company contained an endorsement automatically adding as an additional insured “Any person or organization [with] whom [Kreilkamp has] agreed in a written contract … to name as an additional insured.” By virtue of this endorsement and its written contract with Kreilkamp, Fabco was, in fact “added ” as an “additional insured.”

 

We agree with the circuit court’s reasoning and determination; FABCO was in fact automatically added as an “additional insured.” FN6 We affirm the circuit court on this issue.

 

FN6. While neither party develops arguments specific to individual insurance policies, other than Kreilkamp’s reference to an auto policy, we observe that Kreilkamp’s commercial general liability policy appears to have similar “additional insured” language as the auto policy.

 

Sanctions

¶ 18 Lastly, FABCO argues that the circuit court “erred when it reversed its initial decision to impose sanctions on Kreilkamp for its discovery violations on the grounds that Kreilkamp was entitled to the safe-harbor protections set forth in WIS. STAT. § 804.12(4m).” Though it appears Kreilkamp never suggested to the circuit court that § 804.12(4m) operated to provide Kreilkamp protection from sanctions, on appeal, Kreilkamp asks us to affirm the court’s about-face and its ultimate decision to deny FABCO’s request for sanctions. We decline to do so.

 

¶ 19 After extensive litigation related to FABCO’s motions to compel and for sanctions stemming from Kreilkamp’s handling of discovery related to communications with its insurer, including the deletion of thirty-six relevant emails, the circuit court found in June 2012 that Kreilkamp’s discovery responses were “either recklessly evasive or incomplete.” The court concluded that “Kreilkamp’s conduct during discovery warrants sanctions,” granted FABCO’s motion for sanctions, and determined that “the appropriate sanction for Kreilkamp’s conduct is an award of reasonable attorney’s fees and costs incurred in connection with compelling Kreilkamp to produce the requested information, with the amount to be determined after Fabco submits appropriate documentation.”

 

¶ 20 FABCO subsequently submitted documentation in support of its request for fees and costs and Kreilkamp responded by challenging certain of the fees and costs. Rather than determine the appropriate sanction amount, however, the circuit court issued an order “withdraw[ing]” its June 2012 order and denying FABCO’s motion for sanctions, determining sua sponte and with no input from the parties that it had “no choice” under WIS. STAT. § 804.12(4m) but to “not impose sanctions” because the discovery abuses were related to the deleted emails and FABCO had failed to establish that “exceptional circumstances” existed to justify such sanctions.

 

¶ 21 We believe the court erred in making this determination without permitting the parties an opportunity to address the application of WIS. STAT. § 804.12(4m). That provision states: “Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.” Upon remand, the parties are entitled to present evidence and argument specifically related to subsection (4m). Because, as the circuit court has already found, FABCO has met its initial burden of showing the emails were “lost,” the burden shifts to Kreilkamp to show they were lost “as a result of” the routine, good faith operation of an electronic system. If the court finds that burden met, the burden would then shift to FABCO to convince the court that “exceptional circumstances” nonetheless warrant sanctions. But, if, after considering the evidence, the court does not find that the emails were lost in a routine or good-faith manner, then § 804.12(4m) does not apply.

 

Order affirmed in part; reversed in part and cause remanded with directions.

 

Recommended for publication in the official reports.

United States Court of Appeals,

Eighth Circuit.

Benny ARAGON, Plaintiff–Appellant

v.

WAL–MART STORES EAST, LP, doing business as Walmart Distribution Center Number 6077; Pallet Companies, Inc., doing business as IFCO Systems, N.A., Defendants–Appellees.

 

No. 13–1508.

Submitted: Sept. 26, 2013.

Filed: Nov. 13, 2013.

 

Appeal from United States District Court for the Eastern District of Missouri—Hannibal.Amanda Jo Montee, Russell C. Purvis, argued, of Saint Joseph, MO, for Plaintiff–Appellant.

 

Robbye Toft, argued, of Saint Louis, MO, for Defendants–Appellees.

 

Before WOLLMAN, SMITH, and KELLY, Circuit Judges.

 

WOLLMAN, Circuit Judge.

*1 Benny Aragon was injured when pallets fell onto him from a trailer, breaking his leg and ankle. He appeals from the district court’s FN1 entry of summary judgment in favor of Wal–Mart Stores East, LP (Wal–Mart), and Pallet Companies, Inc., doing business as IFCO Systems, N.A. (IFCO), on his negligence claim. We affirm.FN2

 

I.

Aragon had been driving commercial motor vehicles for more than thirty years and was experienced in securing loads with load locks, load bars, and straps. Although he had never before hauled plastic pallets, Aragon had hauled numerous loads of wooden pallets during his career and had used straps or load locks to secure the cargo to prevent it from shifting backwards during transport. Aragon owned load locks and always kept them in the tractor he was driving. According to Aragon, ninety percent of the pallets he had hauled were shrink wrapped.

 

After a period of driving independently, Aragon began driving for J.B. Hunt Transports, Inc. (Hunt). Hunt provided Aragon with three straps that Aragon used to secure loads. The Hunt straps had clips that attached to the interior sides of Hunt box trailers. While working for Hunt, Aragon was assigned to pick up a box trailer containing shrink-wrapped pallets of reusable plastic containers (RPCs) from Wal–Mart’s distribution facility in Moberly, Missouri, and deliver the trailer to IFCO’s facility in Bolingbrook, Illinois. IFCO hired Unyson Logistics to coordinate the transportation of its RPCs. Unyson in turn brokered to Hunt the haulage of IFCO’s RPCs. IFCO and Unyson had a written agreement that included Carrier Guidelines requiring carriers to supply box trailers for transporting the RPCs and to supply either two load locks or straps for securing the load. Hunt adopted the Carrier Guidelines when it accepted Unyson’s offer to act as the carrier of IFCO’s RPCs.

 

On October 7, 2010, Aragon arrived at the Moberly distribution center. He proceeded to the Wal–Mart dispatch office, where he was informed about the location of the box trailer and was given the bill of lading. Aragon located the box trailer that was owned by Hunt and that had been loaded by IFCO. Aragon maintains that the trailer was sealed with a yellow plastic seal. Aragon did not inspect or secure the load before hooking the trailer to his tractor. After securing the trailer to his tractor, Aragon drove to the gate of the distribution center. Aragon testified that either he or the security guard broke the seal on the trailer and that Aragon opened the trailer’s four-foot-wide right door. Aragon then looked inside the trailer and observed the shrink-wrapped pallets on the trailer’s right side. Aragon saw that there were neither straps nor load locks securing the pallets. He did not open the left door of the trailer.

 

The security guard verified that Aragon had the correct trailer and that the trailer contained the cargo indicated on the bill of lading. Aragon did not inquire about the securement of the load, and he alleges that no one from Hunt, Wal–Mart, or IFCO instructed him regarding the securement of the pallets. After Aragon viewed the load, he closed the trailer door and either he or the security guard sealed the trailer with a second seal. Aragon did not break the second seal or open the trailer doors during the 380–mile drive to Bolingbrook.

 

*2 Aragon testified that he broke the trailer’s seal when he arrived at the Bolingbrook facility. As Aragon opened the left trailer door, pallets fell onto him, knocking him down and causing his injuries. Aragon cannot recall whether an IFCO employee was present when he broke the seal or opened the trailer.

 

Aragon filed suit against Wal–Mart and IFCO for negligence. Wal–Mart removed the case to federal district court on the basis of diversity jurisdiction. Wal–Mart and IFCO jointly moved for summary judgment, which the district court granted. Aragon appeals, arguing that the district court erred in granting summary judgment to Wal–Mart and IFCO because a reasonable jury could have found (1) that under the rule set forth in United States v. Savage Truck Line, Inc., 209 F.2d 442 (4th Cir.1953), Wal–Mart and IFCO owed him a duty that they breached, causing his injuries; and (2) that the two exceptions to a driver’s duty to inspect and secure cargo under the Federal Motor Carrier Safety Regulations (the Safety Regulations) apply.

 

II.

[1] We review a grant of summary judgment de novo. BancorpSouth Bank v. Hazelwood Logistics Ctr., LLC, 706 F.3d 888, 893 (8th Cir.2013). Summary judgment is proper if, after viewing the evidence in the light most favorable to the nonmovant, no genuine issues of material fact exist and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Ashanti v. City of Golden Valley, 666 F.3d 1148, 1150 (8th Cir.2012). Sitting in diversity, we apply the substantive law of the applicable state. Razorback Concrete Co. v. Dement Constr. Co., 688 F.3d 346, 349 (8th Cir.2012). The parties do not dispute that Missouri law applies. We review the district court’s interpretation of state law de novo. Id.

 

[2] Under Missouri law, a negligence claim consists of three elements: (1) a legal duty owed to the plaintiff by the defendant; (2) a breach of that duty; and (3) an actual injury to the plaintiff resulting from the defendant’s breach. Lopez v. Three Rivers Elec. Coop., Inc., 26 S.W.3d 151, 155 (Mo.2000) (en banc). “Whether a duty exists is purely a question of law [,]” suitable for determination on summary judgment. Id. The Supreme Court of Missouri has not addressed whether shippers have a duty of care to secure goods that they have loaded to avoid injury to the carrier or the driver. In the absence of controlling Missouri law, we must predict how the Supreme Court of Missouri would resolve the issue. See Miller v. Redwood Toxicology Lab., Inc., 688 F.3d 928, 937 (8th Cir.2012).

 

To determine whether Aragon’s negligence claim can survive summary judgment, we must first decide whether under Missouri law Wal–Mart and IFCO owed a legal duty to Aragon. The Supreme Court of Missouri recognizes that a duty of care may be imposed by common law, a controlling statute or ordinance, or a contractual relationship. Scheibel v. Hillis, 531 S.W.2d 285, 288 (Mo.1976) (en banc). Aragon alleges that Wal–Mart and IFCO were negligent in two ways: first, by improperly loading the cargo; and second, by failing to secure it. Aragon, Wal–Mart, and IFCO have proceeded under the assumption that the Supreme Court of Missouri would apply the Savage rule in determining whether a shipper is liable for a defect in loading. With respect to his allegation that Wal–Mart and IFCO failed to secure the cargo, Aragon contends that a shipper’s duty to secure loaded cargo derives from the Safety Regulations.

 

*3 [3][4][5] The Supreme Court of Missouri has not adopted the rule set forth in Savage. Assuming, without deciding, that the Supreme Court of Missouri would adopt the Savage rule, we hold that Wal–Mart and IFCO did not breach their duty to properly load the cargo because a latent defect in loading did not exist. The Savage court summarized its rule concerning the allocation of duty between the shipper and the carrier as follows:

 

The primary duty as to the safe loading of property is … upon the carrier. When the shipper assumes the responsibility of loading, the general rule is that he becomes liable for the defects which are latent and concealed and cannot be discerned by ordinary observation by the agents of the carrier; but if the improper loading is apparent, the carrier will be liable notwithstanding the negligence of the shipper.

 

Savage, 209 F.2d at 445. Two factors are taken into account in determining whether a defect is latent or open and obvious: the experience of the carrier and the presence or absence of any assurances by the shipper regarding the security of the load. Vargo–Schaper v. Weyerhaeuser Co., 619 F.3d 845, 849 (8th Cir.2010). Although “the obviousness of the absence of a particular method of securing a load, does not necessarily compel a conclusion that the risk created by the missing securement device is patent[,]” Spence v. ESAB Grp., Inc., 623 F.3d 212, 220 (3d Cir.2010), a nonmovant must present evidence that creates a triable question of fact, Crossley v. Ga.-Pac. Corp., 355 F.3d 1112, 1113 (8th Cir.2004).

 

Aragon argues that the defect in securing the load was latent, pointing to the following facts: he lacked experience in hauling pallets of RPCs for Wal–Mart or IFCO; the load was shrink wrapped; the security guard assured him that the load was secured; and the trailer was sealed when he hooked it to his tractor. With respect to his lack of experience, Aragon conceded that he did not inquire about the securement of the load, despite the fact that he noticed that the pallets were not secured by straps or load locks. That the load was shrink wrapped does not indicate whether the defect was latent or obvious. Aragon testified that almost all of the pallets he hauled were shrink wrapped and that he always had secured them with load locks. Moreover, the security guard’s statement, “That’s okay[,]” J.A. 176, did not equate to an assurance by Wal–Mart or IFCO regarding the safety of the load. The guard was responsible for ensuring that the cargo and the items listed in the bill of lading corresponded and that all cargo was accounted for. Finally, taking the facts in the light most favorable to Aragon, the load was sealed when he secured the trailer to his tractor, but it is undisputed that the seal was broken before Aragon left the Moberly distribution center. At that time, as Aragon concedes, he had an opportunity to view and inspect the load. Aragon thus has failed to set forth sufficient evidence to show that the failure to secure the load was latent.

 

*4 Taking these facts in the light most favorable to Aragon, we agree with the district court’s conclusion that the evidence is insufficient to create a triable issue of fact, as no reasonable jury could have found that the absence of securing devices was anything other than open and obvious to Aragon. Aragon argues that Franklin Stainless Corp. v. Marlo Transport Corp., 748 F.2d 865 (4th Cir.1984), supports his position. In Franklin, the shipper was held liable for injuries caused by the loading of heavy steel coils in the center of a trailer without the use of bracing to secure them. Id. at 865–66. Citing the Savage rule, the shipper argued that its defective loading was open and obvious. Id. at 867. The Fourth Circuit concluded that although the manner in which the coils were loaded in the trailer was apparent to the carrier, the defect in the shipper’s manner of loading was not necessarily patent. Id. at 868. In reaching this conclusion, the court considered the following factors: the driver of the truck had informed the shipper that he had never hauled steel coils before; the driver had inquired as to whether the load was secure and was assured by the shipper that it was; and the shipper’s traffic manager had assured the driver that the method of loading was safe. Id. at 868–69. The court held that the carrier’s ignorance regarding the defect in the loading and its reasonable reliance on the shipper’s assurances precluded a finding that the defect was apparent. Id. at 869. Unlike the facts in Franklin, Aragon never expressed to the shipper his lack of experience in hauling pallets of RPCs, he never inquired as to whether the load was secure, he never received assurance from Wal–Mart or IFCO that the load was secure, and he never received assurance from Wal–Mart or IFCO that the method of loading employed was safe. Aragon has not offered sufficient evidence in support of his assertions that the visible absence of straps was latent or that he received assurance that the pallets were loaded and secured properly by IFCO.

 

[6] Next, we must determine whether the Supreme Court of Missouri would conclude that Wal–Mart and IFCO, as shippers, had a duty to secure cargo pursuant to the Safety Regulations. The Safety Regulations place the duty to secure cargo on carriers, reflecting the everyday practice and understanding in the trucking industry that carriers have the final responsibility for the loads they haul. See Vargo–Schaper, 619 F.3d at 849; see also Decker v. New England Pub. Warehouse, Inc., 749 A.2d 762, 766 (Me.2002). Specifically, the Safety Regulations impose a duty on the carrier to inspect cargo to confirm that it is secure before and during transport of the cargo in a commercial motor vehicle. 49 C.F.R. § 392.9(a)(1), (b)(1)-(3). The Safety Regulations provide two exceptions to a driver’s duty to examine and secure cargo: (1) when the carrier of a sealed commercial motor vehicle has been ordered not to open the seal to inspect the cargo, and (2) when the commercial vehicle has been loaded in a manner that makes inspection of its cargo impracticable. Id. § 392.9(b)(4). Aragon asserts that both of these exceptions apply and give rise to the shipper’s duty to secure cargo.

 

*5 Aragon contends that the first exception applies because the trailer was loaded and sealed before he arrived at the Moberly distribution center. Additionally, he maintains that Wal–Mart’s dispatcher instructs drivers not to break the seal on a trailer outside the presence of a security guard. Aragon, however, had the opportunity to inspect the load when the seal was broken and the trailer door was opened at the distribution center gates. Moreover, Wal–Mart and IFCO did not prohibit Aragon from breaking the seal. Aragon testified that Wal–Mart and IFCO did not instruct him about the securement of the load or about who had the responsibility to secure the load. Despite the lack of instructions to the contrary, Aragon argues that the existence of the seal and the requirement that security be present when the seal is broken are sufficient to establish that he was not authorized to open the sealed trailer to secure the load. Notwithstanding this requirement, Aragon had the opportunity to inspect the cargo and assure himself that it was properly distributed and adequately secured, as he was required to do under the Safety Regulations. Despite his opportunity to observe and inspect the cargo, and despite his obligations under the Safety Regulations, Aragon accepted the unsecured cargo. Wal–Mart’s requirement that a security guard be present when a seal is broken is insufficient to shift to the shipper the driver’s duty to secure the load when the driver has the opportunity to inspect the load.

 

Aragon also contends that the second exception applies because the inspection of the cargo was impracticable, as it was shrink wrapped. We disagree. Aragon observed the load and noticed that there were no straps securing it. Aragon had always secured the shrink-wrapped pallets in other loads that he had hauled. Further, Aragon did not open the left trailer door to see whether the pallets on the left were shrink wrapped, nor did he use the straps that Hunt had given him to secure the load.

 

Aragon has not set forth sufficient facts to show that he was carrying a sealed load and was ordered not to break the seal to secure the load, nor has he established that inspecting the cargo was impracticable. Even assuming these exceptions gave rise to a duty on the part of Wal–Mart and IFCO, Aragon’s negligence claim cannot survive summary judgment.

 

The judgment is affirmed.

 

FN1. The Honorable Audrey G. Fleissig, United States District Judge for the Eastern District of Missouri.

 

FN2. We deny Aragon’s motion to strike and grant Wal–Mart and IFCO’s unopposed motion to file a supplemental appendix.