United States District Court,

D. Massachusetts.

EVEDEN, INC., Plaintiff,

v.

The NORTHERN ASSURANCE COMPANY OF AMERICA, Defendant.

 

Civil Action No. 10–10061–GAO.

Filed March 12, 2014.

 

Brian P. Bialas, Jenevieve J. Maerker, Martin C. Pentz, Foley Hoag LLP, Boston, MA, for Plaintiff.

 

Olaf Aprans, Terence G. Kenneally, Thomas J. Muzyka, Clinton & Muzyka, P.C., Boston, MA, for Defendant.

 

OPINION AND ORDER

O’TOOLE, District Judge.

*1 The plaintiff, Eveden Inc. (“Eveden”), brought this action against The Northern Assurance Company (“Northern”), seeking recovery for a loss it claims falls within the coverage provided under its “all risk” cargo insurance policy with Northern. Specifically, Eveden brings four counts against Northern: breach of contract, declaratory judgment, breach of implied covenant of good faith and fair dealing, and violation of Massachusetts General Laws, chapter 93A. The parties have cross-moved for summary judgment on all claims on a substantial summary judgment record. Both sides make their presentation in exquisite detail, but in the end the resolution of their dispute does not turn on a close analysis of subsidiary facts, but rather can satisfactorily be understood and determined at a broader level, and that is sufficient to conclude that Eveden’s claimed loss is not covered by the Northern policy.

 

I. Background

 

A. The Parties’ Relationship

 

At relevant times, Eveden, a Massachusetts corporation, maintained a place of business in Hyde Park. At the time of the relevant events, Eveden had for some time been engaged in the business of manufacturing and selling ladies’ undergarments, using manufacturing facilities located in various countries other than the United States, including the Philippines, El Salvador, and Colombia. In 2005, Eveden made the decision to consolidate all of its foreign manufacturing into one facility to save costs in both freight and labor. Rick Alexander, president of Eveden’s U.S. Division, met with a former business partner, Fernando Herradon, to explore establishing a manufacturing facility in the Dominican Republic. Eveden was only interested in facility located in a “Duty Free Zone,” from where a manufacturer may ship its products duty free. The laws of the Dominican Republic afforded that opportunity. After some negotiations with Eveden, Herradon and his partner, Juan Carlos Garcia, created F & J Internacional, S.A. (“FJI”), a Dominican manufacturing entity that qualified for a license to operate in a Duty Free Zone.

 

Eveden identified such a facility in the Duty Free Zone of San Pedro de Macoris (the “Facility”). In August 2005 it entered into a production agreement with FJI and moved its sewing operations to the Facility by the end of 2005.

 

To satisfy the requirements of Dominican law, all inventory of raw materials, work in process, and finished goods at the Facility had to be deemed owned by FJI. Under Dominican law, there is a presumption that one in possession of goods is the owner. Accordingly, all materials shipped to the Facility by Eveden were shown on all the shipping and customs documents as consigned to FJI. Similarly, finished goods being shipped out of the Duty Free Zone were shipped under FJI’s name. Customs officials of the Duty Free Zone also required FJI to produce a certificate of origin certifying that FJI had manufactured the products.

 

Over the next couple of years, Eveden and FJI worked closely in the manufacturing and shipping of finished Eveden products within and from the Duty Free Zone. The physical plant bore a sign that read, “Eveden by F & J Internacional, S.A.” Eveden formed a Dominican subsidiary, Eveden Dominicana, to participate in the manufacturing process within the Facility. Eventually, rather than ship already cut goods to the Facility to be sewn there, Eveden Dominica employees cut, and FJI employees sewed, all within the same physical plant.

 

*2 Multiple financial dealings occurred between the parties, sometimes at arm’s length, sometimes as practical, if not formal, joint venturers. In late 2006 and early 2007 Eveden and FJI explored establishing a formal joint venture, and they executed a Good Faith Agreement (“GFA”) and Letter of Intent to form a Joint Venture (“LOI”). As things turned out, according to Eveden, relations between the parties soured before the contemplated joint venture could be formally established.

 

B. The Insurance Agreement

Eveden purchased from Northern Ocean Marine Open Cargo Policy, No. NBJC50154, effective September 1, 2007, (“the policy”), insuring the coverage period from September 1, 2007 through August 31, 2008. Clause 52 of the policy covered Eveden “against all risks of physical loss or damage from any external cause,” subject to certain exemptions.

 

C. The “Loss”

In early 2008, FJI was experiencing financial difficulties. For example, it wanted to terminate some of its employees but could not afford to pay the severance payments required by Dominican law. Eveden agreed to absorb fifty percent of the severance payments. Eveden also agreed to loan FJI emergency working capital so FJI could pay various creditors. That led to an internal dispute between FJI’s partners, Herradon and Garcia. The joint venture deal between Eveden and FJI apparently fell apart as a result, and by May, 2008, negotiations commenced for Eveden to purchase FJI’s business, including its Duty Free Zone license. Before the transaction could be consummated, Eveden discovered that an attachment, referred to as an “embargo” in Dominican law, had been obtained against FJI’s assets by a creditor of Herradon.

 

Eveden became concerned that because, in order to take advantage of duty free benefits the work in process and finished goods were nominally regarded as FJI’s under Dominican law, it would have difficulty protecting what it regarded as its property within the Facility from seizure by FJI’s creditors. In June, Eveden and FJI discussed a proposal where Eveden would purchase some of FJI’s assets and would provide payment to FJI in consideration for FJI’s cooperation with the release of Eveden’s assets. These negotiations stalled, however, because Eveden balked at FJI’s monetary demand.

 

Meanwhile, another creditor of FJI surfaced with documentation that purported that FJI had pledged all of the inventory and equipment of the Facility to it. On June 19, 2008, FJI evicted Eveden and its employees from the Facility and subsequently refused to permit their return.

 

On June 26, 2008, Eveden sued FJI in the Court of First Instance for San Pedro de Macoris, seeking a judicial order authorizing entry into the Facility to retrieve what it claimed as its property. The court granted Eveden an embargo on the goods, but did not authorize either entry or removal of goods. A few days later, the court ordered that the goods remain in the Facility with FJI as their custodian. Over the next two months, Eveden, FJI, and FJI’s major creditor attempted to resolve the impasse by negotiations, but they were not fruitful.

 

*3 Meanwhile, during the 2008 summer, various FJI employees brought wage or severance claims in the San Pedro de Macoris Labor Court and also obtained embargoes on the property within the Facility. The goods were originally scheduled to be sold in later August or early September to satisfy the employee’s claims, but Eveden was allowed to intervene and succeeded in postponing the sale. Eventually, the Labor Court ruled that Eveden had failed to prove that the embargoed assets belonged to it, and further ruled that even if they did, Eveden, given its relationship to FJI and the manufacturing Facility, would nonetheless be liable to employees. Eventually, the goods were sold for the benefit of the employee claimants in the fall of 2008 (after the expiration of the coverage period of the insurance policy).

 

II. Standard of Review

Summary judgment is appropriate “after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party bears the burden of showing the basis for its motion and identifying where there exists a lack of any genuine issue of material fact. Id. at 323. A dispute is “genuine” only if a reasonable jury could find for the nonmoving party.   Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). As to materiality, “the substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.” Id. In considering a motion for summary judgment, the Court must “view the record in the light most favorable to the nonmovant, drawing reasonable inferences in his favor.” Noonan v. Staples, Inc., 556 F.3d 20, 25 (1st Cir.2009).

 

III. Discussion

 

A. Liability

 

The parties agree that the relevant portion of the insurance agreement at issue provides “all-risk” coverage. An all-risk policy creates a “special type of insurance extending to risks not usually contemplated.” Markel Am. Ins. Co. v. Pajam Fishing Corp. ., 691 F.Supp.2d 260, 265 (D.Mass.2010). An insured bears the burden of establishing a prima facie case for recovery under an all-risk insurance policy. Fajardo Shopping Center, S.E. v. Sun Alliance Ins. Co. of Puerto Rico, Inc., 167 F.3d 1, 7 (1st Cir.1999).

 

Under the relevant provision, for coverage to apply, a physical loss must have occurred that is also fortuitous. See Markel, 691 F.Supp.2d at 265. A fortuitous event is “without intention or design, and which is unexpected, unusual and unforeseen” Id. Plaintiff need not prove the cause of a fortuitous loss, but rather only that the loss occurred. Id. at 265–66.

 

*4 The parties also agree that in this case questions of domestic law are answered by reference to federal general maritime law. In cases of marine insurance, the doctrine of proximate cause is strictly applied, whereby the assured may recover for a loss only if it was proximately caused by a hazard covered by the policy. Lanasa Fruit S.S. & Imp. Co. v. Universal Ins. Co., 302 U.S. 556, 562, 58 S.Ct. 371, 82 L.Ed. 422 (1938).

 

Eveden argues that FJI wrongfully converted its goods held at the Facility, and the wrongful conversion proximately caused Eveden’s loss. Loss resulting from conversion is both physical and fortuitous, and “all-risk language … covers conversion.” Intermetal Mexicana, S.A. v. Ins. Co. of North America 866 F.2d 71, 78 (3d Cir.1989) quoting Buckeye Cellulose Corp. v. Atlantic Mut. Ins. Co., 643 F.Supp. 1030, 1036 (S.D.N.Y.1986). Thus, Eveden relies on the theory that a wrongful conversion occurred to establish that there was a “fortuitous” “physical” loss that brings the loss within the scope of the policy. The determinative question is whether Eveden’s theory that there was a wrongful conversion is legally tenable.

 

Consideration of Dominican law pertaining to embargoes is relevant to that question. Under Federal Rule of Civil Procedure 44 .1, a determination of foreign law is a question of law for the Court to decide. The record contains input from each party’s expert on Dominican law, and after considering their submissions, I make the following determinations.

 

Embargoes issued by the Civil Chamber of the Court of the First Instance act as a lien upon physical assets. Embargoes may be obtained through ex parte application when the Civil Chamber is persuaded that a credit exists that is liquid and for a sum certain, that it is due and payable, and that the debtor’s assets are in danger of being dissipated. As in our law, an embargo may be used for the purpose of preserving property so that it is not moved or dissipated pending litigation on the merits of a claim. The guardian of the assets faces liability if the assets under embargo are not preserved. As noted above, Dominican law recognizes a presumption that the party in possession of property is the owner of that property.

 

Conversion is an intentional and wrongful exercise of dominion or control over a chattel, which seriously interferes with the owner’s rights in the chattel. See Evergreen Marine Corp. v. Six Consignments of Frozen Scallops, 4 F.3d 90, 94 (1st Cir.1993). Eveden claims that FJI converted Eveden’s assets on June 25, 2008 when Eveden’s counsel went to the warehouse, demanded return of the assets which had lawfully been in FJI’s possession, and that demand was refused.

 

Other issues aside, the fundamental flaw in Eveden’s case is that it cannot establish that FJI wrongfully exercised control over the property. There is no dispute between the parties that as of June 25, 2008, FJI was embroiled in a number of legal quarrels with creditors. There were embargoes on FJI’s assets authorized by a Dominican court with proper jurisdiction. The embargoes required FJI to maintain the property and not permit the assets to leave the warehouse. Compliance with a legal requirement to freeze the assets in place, without more, simply does not amount to conversion. See HRG Development Corp. v. Graphic Arts Mut. Ins. Co., 26 Mass.App.Ct. 374, 527 N.E.2d 1179, 1181 (Mass.App.Ct.1988) (“[Plaintiff] may have temporarily lost the use and enjoyment of its equipment, but only as a result of a proper order of the court which temporarily relieved [plaintiff] of its possessory rights.”)

 

*5 The policy provision relied on by Eveden, set forth in Clause 52, requires a “physical” loss. Intangible losses, such as a defect in title or a legal interest in property, are generally not regarded as “physical” losses in the absence of actually physical damage to the property. See id. at 1180 (“Nor do we think the salient phrase (‘physical loss or damage’) fairly can be construed to mean physical loss in the absence of physical damage.”). So, for example, an “ ‘all risk’ policy does not provide coverage for a defect in title.” Id. at 1181. See also Commercial Union Ins. Co. v. Sponholz, 866 F.2d 1162 (9th Cir.1989) (loss of vessel by police seizure not a “physical” casualty under “all risk” policy).

 

Moreover, losses falling within an “all risk” clause such as Clause 52 must have been “unforeseen” or “fortuitous.” See HRG Development Corp., 527 N.E.2d at 1180. See also Standard Elec. Supply Co., Inc. v. Norfolk & Dedham Mut. Fire Ins. Co., 1 Mass.App.Ct. 762, 307 N.E.2d 11, 12 (Mass.App.Ct.1973). Whether a loss has been fortuitous is a question of law, Intermetal Mexicanam, 866 F.2d at 77, and “there is nothing fortuitous about the fact that a creditor … would resort to the courts to obtain collateral for unpaid debts.” Id.

 

In sum, the placement of embargoes, and the ultimate judicial disposition of the property at the Facility, constituted neither a physical casualty nor a fortuitous loss, as would be necessary for recovery under Clause 52 of the Northern policy.

 

Eveden has not met its burden of proving a loss covered by the policy. FN1 The undisputed facts show that, given the fact of the embargoes, in the summer of 2008 FJI had a legal obligation under Dominican law to refuse Eveden’s demand to turn over any property held within the manufacturing Facility. The actions of FJI in this respect do not amount to conversion or any fortuitous physical loss covered by the policy.

 

FN1. In light of this conclusion it is not necessary to consider in detail Northern’s additional arguments that certain policy exclusions also would preclude coverage.

 

IV. Conclusion

For the foregoing reasons, the defendant’s Motion for Summary Judgment (dkt. no 88) is GRANTED. The plaintiff’s Motion for Summary Judgment (dkt no. 92) is DENIED. The plaintiff’s Motions for Partial Summary Judgment on Northern’s nondisclosure defense (dkt. no 94), and for exclusion due to strikes, riots and civil commotions or employee dishonesty exclusions (dkt. no. 96) are MOOT. Judgment shall enter for the defendant.

 

It is SO ORDERED.

United States District Court,

E.D. California.

TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, Plaintiff,

v.

LK TRANSPORTATION, INC., a California Corporation; Mario Prado, an individual; John Shower, an individual; John Ritchie, an individual; Sandra Ritchie, an individual, and Does 1 through 10, inclusive, Defendants.

 

No. 2:13–cv–01453 JAM EFB.

Signed March 13, 2014.

 

Theona Zhordania, McKenna Long & Aldridge, LLP, Los Angeles, CA, John Tinley Brooks, McKenna Long & Aldridge LLP, San Diego, CA, for Plaintiff.

 

John Richard Haluck, Koeller, Nebeker, Carlson & Haluck, LLP, Roseville, CA, John Dugan Douglas Barr, Barr & Mudford, Redding, CA, Paul J. O’Rourke, Jr., Law Offices of Paul J. O’Rourke, Jr., Fresno, CA, for Defendants.

 

ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANTS’ CROSS–MOTION FOR SUMMARY JUDGMENT

JOHN A. MENDEZ, District Judge.

*1 This matter is before the Court on Plaintiff Travelers Property Casualty Company of America’s (“Plaintiff”) Motion for Summary Judgment (Doc. # 17) and Defendants LK Transportation, Mario Prado, John Shower, John Ritchie, and Sandra Ritchie’s (collectively “Defendants”) Cross–Motion for Summary Judgment (Doc. # 23). Defendants oppose Plaintiff’s motion (Doc. # 24) and Plaintiff opposes Defendants’ motion (Doc. # 25).FN1

 

FN1. This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled for February, 19, 2014.

 

I. PROCEDURAL AND UNDISPUTED FACTUAL BACKGROUND

On April 19, 2010, Larry Kampmeinert, the owner of Defendant LK Transportation (“LK”), received a phone call from Descor Inc. (“Descor”) arranging for LK to go to the Yuba City area, pick up a construction trailer owned by Descor (“the Trailer”), and move it back to Sacramento for a fee. JSF at 5. A tractor was required to move the Trailer on the highway. JSF at 7. Mr. Kampmeinert contacted Mario Prado (“Prado”), who was an employee of LK. JSF at 8. Mr. Kampmeinert made arrangements for Prado to drive a tractor owned by LK (“the Tractor”) from the LK yard in Sacramento to Yuba City to pick up the Trailer. JSF at 8. While Prado was driving the Tractor to Yuba City to pick up the Trailer and transport it to Sacramento, he was involved in a two-vehicle accident. JSF at 10. The driver of the other vehicle, Martha Shower, died at the scene of the accident. JSF at 12. Her passengers, John Shower and John Ritchie, claim to have been injured during the accident. JSF at 13. When the accident occurred, Prado had not yet arrived at Descor’s work site and had not yet begun to haul the Trailer. JSF at 13. Prado and the Tractor were on the road only because Prado was on his way from Sacramento to pick up and transport the Trailer. JSF at 15.

 

At the time of the accident, the Tractor and Prado were insured under a policy (“the Northland Policy”) issued by Northland Insurance Company, an affiliate of Plaintiff. JSF at 16. The Northland Policy provided liability coverage in the amount of $1 million for LK for any accident involving the Tractor and for Prado while driving the Tractor. JSF at 18, Ex. A. At the time of the accident, Descor was the named insured in a policy issued by Plaintiff Travelers (the “Travelers Policy”), which provided liability coverage of $1 million per accident. JSF at 24, Ex. C. The Trailer was a “covered auto” under the Travelers Policy, but neither LK nor Prado were named insureds under the Travelers Policy, nor was the Tractor listed as an insured vehicle. JSF at 27–28.

 

On November 4, 2010, Defendants John Shower, John Ritchie, and Sandra Ritchie sued Prado and LK in Sacramento County Superior Court. JSF at 20. LK tendered the lawsuit to Northland, which paid its $1 million policy limits to John Shower and John Ritchie in partial settlement of their claims. JSF at 23. The settlement did not include a release of LK and Prado, or a dismissal of the action. JSF at 23. However, the settlement did include a “covenant not to execute,” which limits any further recovery by Shower and Ritchie to the amount they are entitled to recover from any other liability policy that provides coverage for the accident. JSF at 23. On June 6, 2013, LK and Prado tendered the lawsuit to Travelers and requested that Travelers defend and indemnify them under the Travelers Policy. JSF at 30.

 

*2 On July 19, 2013, Plaintiff Travelers filed the Complaint (Doc. # 1) in this Court. The Complaint includes the following causes of action for declaratory judgment: (1) no coverage exists for the accident under the Travelers Policy; and (2) no duplicate coverage is available under the Travelers Policy, as $1 million has already been paid out under the Northland Policy. The Court has jurisdiction over this action under 28 U.S.C. § 1332(a)(1), as there is complete diversity between the parties and the amount in controversy exceeds $75,000.

 

II. OPINION

A. Legal Standard

Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that 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(a). The purpose of summary judgment “is to isolate and dispose of factually unsupported claims or defenses.” Celotex v. Catrett, 477 U.S. 317, 323–324 (1986).

 

The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial. Anderson v.. Liberty Lobby, Inc., 477 U.S. 242, 248–49 (1986). If the moving party meets its burden, the burden of production then shifts so that “the non-moving party must set forth, by affidavit or as otherwise provided in Rule 56, ‘specific facts showing that there is a genuine issue for trial.’ “ T.W. Electrical Services, Inc. v. Pacific Electric Contractors Ass’n, 809 F.2d 626, 630 (9th Cir.1987) (quoting Fed.R.Civ.P. 56(e)). The Court must view the facts and draw inferences in the manner most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). “[M]ere disagreement or bald assertion that a genuine issue of material fact exists will not preclude the grant of summary judgment”. Harper v. Wallingford, 877 F.2d 728, 731 (9th Cir.1987).

 

The mere existence of a scintilla of evidence in support of the non-moving party’s position is insufficient: “There must be evidence on which the jury could reasonably find for [the non-moving party].” Anderson, 477 U.S. at 252. This Court thus applies to either a defendant’s or plaintiff’s motion for summary judgment the same standard as for a motion for directed verdict, which is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Id.

 

B. Discussion

 

1. LK’s Tractor as “Hired” or “Borrowed”

 

Defendants argue that coverage exists under the Travelers Policy because Prado and LK were using a “covered auto” at the time of the accident. Defs.’ Mot. at 7. Specifically, Defendants argue that the Tractor was a “hired” or “borrowed” auto under the terms of the Travelers Policy, because the Tractor was being used for Descor’s business purposes. Defs.’ Mot. at 7. Plaintiff responds that Descor did not hire or borrow the Tractor because it did not exercise “dominion and control” over the Tractor. Pl.’s Opp. at 3.

 

*3 Under California insurance law, a vehicle is “hired” or “borrowed” by an insured only if the insured exercises dominion and control over the vehicle.   Am. Int’l Underwriters Ins. Co. v. Am. Guarantee & Liab. Ins. Co., 181 Cal.App.4th 616, 630–31 (2010); see also City of Los Angeles v. Allianz Ins. Co., 125 Cal.App.4th 287, 296 (2004) (noting that “the sine qua non of borrowing a vehicle is the exercise of dominion and control over the vehicle”). There is some disagreement as to whether physical possession of the vehicle by the insured is required to find that the vehicle has been “hired” or “borrowed.” Compare Am. Int’l Underwriters, 181 Cal.App.4th at 631 (holding that “possession and control” are required for a vehicle to be a “hired auto”) (emphasis added), with Gurevich v. Hartford Cas. Ins. Co., 2013 WL 2147452, at 4* (N.D.Cal. May 15, 2013) (holding that “hiring an auto … requires temporary possession of the vehicle, or at least dominion and control over the vehicle”) (emphasis added). However, the mere fact that a vehicle is being used for the insured’s business purposes, without more, is insufficient to establish that the vehicle has been “hired” or “borrowed.” Allianz, 125 Cal.App.4th at 295 (noting that the plaintiff’s use of a vehicle “for its own purposes” is “not enough to constitute ‘dominion and control’ over” the vehicle).

 

Descor did not exercise “dominion and control” over the Tractor. Descor hired LK to move the Trailer and it had a contractual right to the removal and relocation of the Trailer by LK. JSF at 5 (stipulating that Descor “arrang[ed] for LK Transportation to go to the Yuba City area, pick up a construction trailer owned by Descor, and move it back to Sacramento for a fee”). However, Descor had no right to control how LK carried out its obligation to move the Trailer. For example, LK had the legal right to use an alternative vehicle other than the Tractor (including a different tractor) to haul the Trailer. Likewise, LK and Prado had the right to use the Tractor for other purposes (personal and business alike), as long as the Trailer was moved in accordance with the terms of LK’s agreement with Descor. The fact that Prado was driving the Tractor solely for the purpose of hauling the Trailer is immaterial: it is the legal right to control the Tractor that matters, and LK never relinquished that right. Accordingly, the Tractor driven by Prado and LK was not a “hired” or “borrowed” auto under the Travelers Policy.

 

In this way, the present case is similar to City of Los Angeles v. Allianz Ins. Co., 125 Cal.App.4th 287, 296 (2004). In Allianz, the City of Los Angeles sold treated sewage to a composting company. Allianz, 125 Cal.App.4th at 289 (2004). The composting company, in turn, hired MSM Trucking, to remove the sewage from the City’s property. Id. at 290. An MSM employee was injured, while on the City’s property, when he was loading the sewage into his MSM truck. Id. at 290. Despite the detailed procedures that the City required MSM to follow in loading the sewage, the court found that the MSM truck was not a “hired auto” covered by the City’s insurance policy. Id. at 295. The court noted that “MSM did not put its truck in the service of the City; it brought its truck on to the City’s property to perform a hauling contract it had entered into in furtherance of its own business interests.”   Id. at 295. The Court held that, as “the truck was at all times being used to accomplish MSM’s business purposes,” the City never exercised “dominion and control” over the vehicle. Id. at 295. Here, just as in Allianz, the Tractor was merely used in furtherance of LK’s own business interests, and Descor never exercised control over the vehicle.

 

*4 Defendants’ reliance on Allianz is misplaced. Defendants argue that Allianz stands for the proposition that a vehicle is “hired” if it is used for the insured’s business purposes. Defs.’ Mot. at 13. Defendants quote the following language from Allianz for this proposition: “[T]he sine qua non of borrowing a vehicle is the exercise of dominion and control over the vehicle, whether through the use of the vehicle in the pursuit of one’s own purposes or through possession and custody of the vehicle.” Defs.’ Mot. at 13 (quoting Allianz, 125 Cal.App.4th at 296). However, in the same paragraph, the court clarifies that an insured must have “use of the [vehicle] for its own purposes, to the exclusion of its owner.” Allianz, 125 Cal.App.4th at 296 (emphasis added). Thus, use of an auto for the insured’s business purposes must be exclusive to establish that the auto has been “hired.” The “exclusive use” requirement is merely an alternative form of stating the “dominion and control” requirement. Moreover, elsewhere in the opinion, the Allianz court unequivocally states that an insured’s use of a vehicle “for its own purposes” is “not enough to constitute ‘dominion and control’ over” the vehicle.   Allianz, 125 Cal.App.4th at 295.

 

Defendants’ reliance on Travelers Indem. Co. v. Swearinger, 169 Cal.App.3d 779 (1985) is similarly unavailing. In Swearinger, member families of a school district volunteered to host out-of-town students who were visiting for a basketball tournament. Swearinger, 169 Cal.App.3d at 782. Host families were required to provide transportation to and from the school for the visiting students. Id. at 782. A visiting student was injured in a car accident while riding in her host family’s car. Id. at 782. The court found that the school district had “borrowed” the host family’s car, rejecting the insurer’s argument that the school district did not have dominion and control over the car. Id. at 785. Defendants argue that, just as the host family’s car was “borrowed” because it was used for the school district’s purposes, the Tractor was “borrowed” because it was used for Descor’s purposes. Defs.’ Mot. at 8–9. However, Swearinger is readily distinguishable from the case at hand. In Swearinger, the “borrowed” car was used exclusively for the purposes of the school district. Swearinger, 169 Cal.App.3d at 782. The host family received no tangible benefit from its use. Here, the Tractor was used for the purposes of LK, and any benefit to Descor from its use was secondary. This distinction between exclusive use for the insured’s purposes and nonexclusive use for the owner’s purposes has repeatedly been recognized by California courts. See Allianz, 125 Cal.App.4th at 295 (“In Swearinger, the vehicle was used for one purpose—the school district’s purpose of transporting guest students, and the district was therefore a borrower. Here, the MSM truck was used for MSM’s purposes, and the City’s use in loading it was, at most, secondary.”);   Employers Ins. Co. of Wausau v. California Capital Ins. Co., 2011 WL 5997009 (Cal.Ct.App. Nov. 30, 2011) (noting that, “in contrast [to Swearinger ], the GMC truck was being used for the dual purpose of serving the business interests of both” the insured and another party). Furthermore, to the extent that Swearinger diminished the importance of “dominion and control” in borrowing a vehicle, it has since been rejected. Am. Int’l Underwriters Ins. Co. v. Am. Guarantee & Liab. Ins. Co., 181 Cal.App.4th 616, 629–31 (2010) (“declin[ing] to adopt the Swearinger view” because “the Swearinger decision is based on an inadequate definition of ‘borrow’ ”).

 

*5 For all of these reasons, the Tractor was not “hired” or “borrowed” by Descor. Accordingly, Prado’s and LK’s use of the Tractor cannot provide a basis for coverage under the Travelers

 

2. LK and Prado’s “Use” of Descor’s Trailer

Plaintiff argues that no coverage exists under the Travelers Policy because “the accident … did not result from the use of Descor’s trailer and … did not occur while LK or Prado was using the trailer.” Pl.’s Mot. at 6. Plaintiff contends that the proper standard for causation in this case is the “predominating cause/substantial factor” test. Pl.’s Mot. at 6. Defendants dispute Plaintiff’s conclusion that the accident did not result from Prado’s and LK’s use of the Trailer, and urge the Court to use the “minimal causation” test. Defs.’ Opp. at 7.

 

Under California law, an accident “arises out of the use” of a vehicle only if there is “some minimal causal connection between the vehicle and [the] accident.” State Farm Mut. Auto. Ins. Co. v. Partridge, 10 Cal.3d 94, 101 (1973). The California Supreme Court, in Partridge, noted that the phrase “arising out of the use” has “broad and comprehensive application, and affords coverage for injuries bearing almost any causal relation with the vehicle.”   Partridge, 10 Cal.3d at 100. However, the Partridge court declined to precisely define the causation requirement. Partridge, 10 Cal.3d at 100 n. 7. After Partridge, “a majority of California decisions have applied the ‘predominating cause/substantial factor test’ in order to determine whether the ‘minimal causal connection’ requirement has been met.” Oregon Mut. Ins. Co. v. Nat’l Gen. Ins. Co., 2010 WL 1343529 (E.D.Cal. Apr. 5, 2010) aff’d, 436 F. App’x 802 (9th Cir.2011); see State Farm Mut. Auto. Ins. Co. v. Grisham, 122 Cal.App.4th 563, 566 (2004) (noting that decisions, subsequent to Partridge, “have largely opted for the predominating cause/substantial factor test”). The Ninth Circuit has adopted this approach, holding that a vehicle’s “operation, movement, maintenance, loading, or unloading must be a substantial factor or predominating cause of the claimant’s injury.” Oregon Mut. Ins. Co. v. Nat’l Gen. Ins. Co., 436 F. App’x 802, 803 (9th Cir.2011).

 

The Travelers Policy provides coverage for “all sums an ‘insured’ legally must pay as damages” for injuries or damage “caused by an accident and resulting from the ownership, maintenance or use of a covered auto.” JSF, Ex. C at 20. The Travelers Policy defines “insured” as Descor and “anyone else while using with your permission a covered auto.” It is undisputed that the Trailer was a “covered auto” under the Travelers Policy. JSF at 28. Accordingly, for coverage to exist under the Travelers Policy, the “operation, movement, maintenance, loading, or unloading” of the Trailer by Prado and LK must have been a “substantial factor or predominating cause of the claimant’s injury .” Oregon Mut. Ins. Co. v. Nat’l Gen. Ins. Co., 436 F. App’x 802, 803 (9th Cir.2011). Defendants cannot show that this is the case. Defendants’ argument that the accident arose out of the “movement” of the Trailer is simply wrong. Defs.’ Opp. at 11. Although Prado and LK had the intention of eventually moving the Trailer, it is undisputed that the Trailer had not been moved at the time of the accident. JSF at 13–14. Finding that an accident arose from the movement of a motionless vehicle would defy common sense and the laws of physics.

 

*6 Defendants’ contention that the Court should apply the “completed operations” rule to the “process of moving” the Trailer is not persuasive. The “completed operations” rule states that the “unloading” of a vehicle includes “all the operations” required to “effect a completed delivery” of the cargo.   Entz v. Fid. & Cas. Co. of New York, 64 Cal.2d 379, 382, 412 P.2d 382 (1966). Defendants argue that the “ ‘movement’ of the trailer should encompass all operations which are part of effecting a complete delivery of the trailer from Yuba City to Sacramento.” Defs.’ Opp. at 11. However, the “completed operations” doctrine only pertains to the “delivery” of goods or cargo.   Entz, 64 Cal.2d at 382. Thus, even if the Trailer qualified as goods or cargo, the “completed operations” rule would not apply to this case because Prado and LK were not “unloading” or “delivering” the Trailer at the time of accident: indeed, the Trailer had not yet been “loaded” onto the Tractor. JSF at 13.

 

Defendants’ contend that the cases cited by Plaintiff which establish the “predominating cause/substantial factor” test are factually distinguishable from the case at bar. Defendants argue that the “predominating cause/substantial factor” test was created by California courts “mainly because parties were attempting to unrealistically shoe-horn clearly non-auto accident losses into automobile liability policies.” Defs.’ Opp. at 11. Defendants note that several of the cases cited by Plaintiff for the “predominating cause/substantial factor” test involved sexual assaults and dog bites that merely happened to occur in an automobile. Defs.’ Reply at 10. However, the unique factual context of these cases does not provide sufficient justification for limiting application of the “predominating cause/substantial factor” test to non-auto accident cases. Whether the injury arises from the bite of man’s best friend or from an auto accident, the importance of a causal limitation on liability remains constant. To hold otherwise would “convert auto liability policies into general liability policies.” State Farm Mut. Auto. Ins. Co. v. Grisham, 122 Cal.App.4th 563, 567 (2004).

 

Defendants’ argument that the Court should use the “minimal causation” test rather than the “predominating cause/substantial factor” test is without merit. Defendants primarily rely on two cases in which the Ninth Circuit appeared to use the “minimal causation” test. Defs.’ Opp. at 8 (citing State Farm Mut. Auto. Ins. Co. v. Davis, 937 F.2d 1415, 1419 n. 3 (9th Cir.1991) and Pac. Employers Ins. Co. v. Domino’s Pizza, Inc., 144 F.3d 1270, 1274 (9th Cir.1998)). However, as discussed above, the Ninth Circuit has since adopted the “predominating cause/substantial factor” test. Oregon Mut. Ins. Co. v. Nat’l Gen. Ins. Co., 436 F. App’x 802, 803 (9th Cir.2011). Furthermore, a previous interpretation of California law by the Ninth Circuit is “only binding in the absence of any subsequent indication from the California courts that [the] interpretation was incorrect.” Munson v. Del Taco, Inc., 522 F.3d 997, 1002 (9th Cir.2008). As the “majority of California decisions have applied the ‘predominating cause/substantial factor test,’ “ the Court need not use the “minimal causation” test. Oregon Mut. Ins. Co. v. Nat’l Gen. Ins. Co., 2010 WL 1343529 (E.D.Cal. Apr. 5, 2010) aff’d, 436 F. App’x 802 (9th Cir.2011).

 

*7 Defendants’ reliance on other tractor-trailer cases is misplaced. Each of the cases cited by Defendants involved a trailer that was physically connected to a tractor, and thus formed a single unit. Defs.’ Mot. at 21 (citing Mission Ins. Co. v. Hartford Ins. Co., 155 Cal.App.3d 1199 (1984) and Smith v. Travelers Indem. Co., 32 Cal.App.3d 1010 (1973)). In the present case, it is undisputed that the Trailer had not yet been connected to the Tractor when the accident occurred. JSF at 13. As the Tractor and the Trailer remained two separate units, Mission and Smith are not helpful to Defendants.

 

Defendants also urge the Court to construe the Travelers Policy “as broadly as possible,” due to the importance of giving “monetary protection to that ever changing and tragically large group of persons who while lawfully using the highways themselves suffer grave injury.” Defs.’ Mot. at 22 (quoting Interinsurance Exch. of Auto. Club of S. Cal. v. Ohio Cas. Ins. Co., 58 Cal.2d 142, 153 (1962). This public policy argument is not enough to carry the day. When interpreting the terms of a contract and applying established case law, fairness and impartiality are the beacons of light that guide the Court. The Court may not place the proverbial “thumb on the scale” for one civil litigant over another, absent explicit direction by the legislature or a higher court. The case relied upon by Defendants concerns a California “automobile financial responsibility” statute, and has no applicability in a contract interpretation case such as this. Interinsurance Exch., 58 Cal.2d at 153. As discussed above, California courts have already determined the proper scope of automobile insurance policies, and the Court must interpret the Travelers Policy accordingly. See, e.g., Bartlome v. State Farm Fire & Cas. Co., 208 Cal.App.3d 1235, 1239 (noting that, if “a term in an insurance policy has been judicially construed, … the judicial construction of the term should be read into the policy unless the parties express a contrary intent”).

 

For all of these reasons, the accident did not result from the use of the Trailer, and therefore was not covered by the Travelers Policy.

 

3. Anti–Stacking Provision

Plaintiff argues that coverage under the Travelers Policy is barred by the “anti-stacking” provisions that appear in both the Travelers Policy and the Northland Policy. Pl.’s Mot. at 9. Plaintiff notes that Northland—an affiliate of Travelers—has already paid out $1 million under the Northland Policy, and argues that no further coverage is available under the Travelers Policy. Pl.’s Mot. at 9. Defendants respond that the “antistacking” provisions do not apply because the Travelers Policy and the Northland Policy were not issued to the same named insured. Defs.’ Opp. at 4. Plaintiff does not address this argument in its reply.

 

The “anti-stacking” provisions provide as follows: “If this Coverage Form and any other Coverage Form or policy issued to you by us or any company affiliated with us apply to the same ‘accident,’ the aggregate maximum Limit of Insurance under all the Coverage Forms or policies shall not exceed the highest applicable Limit of Insurance under any one Coverage Form or policy.” JSF, Ex. C at 27 (emphasis added). Accordingly, this limitation only applies when two policies are issued to the same named insured. Here, the named insured under the Travelers Policy was Descor, Inc. JSF, Ex. A at 3. Conversely, the named insured under the Northland Policy was LK Transportation, Inc. JSF, Ex. C at 2. Therefore, the “anti-stacking” provisions do not block duplicate coverage under the Travelers Policy and the Northland Policy. Nevertheless, as discussed above, the accident was not covered by the Travelers Policy.

 

III. ORDER

*8 For the reasons set forth above, the Court GRANTS Plaintiff’s Motion for Summary Judgment and DENIES Defendants’ Cross–Motion for Summary Judgment:

 

IT IS SO ORDERED.