PROGRESSIVE NORTHERN INSURANCE COMPANY, Plaintiff, v. WILLIAM F. SPENCER, DELVINA SPENCER, TAMMY COOPER d/b/a Mid-States Trucking, Defendants.

 

Case No. 13-CV-184-GKF-PJC

 

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA

 

2014 U.S. Dist. LEXIS 54088

 

 

April 18, 2014, Decided

April 18, 2014, Filed

 

 

PRIOR HISTORY: Progressive Northern Ins. Co. v. Spencer, 2013 U.S. Dist. LEXIS 124709 (N.D. Okla., Aug. 22, 2013)

 

COUNSEL:  [*1] For Progressive Northern Insurance Company, Plaintiff: Brad Roberson, Dawn Michelle Goeres, LEAD ATTORNEYS, Pignato Cooper Kolker & Roberson PC, OKLAHOMA CITY, OK.

 

For William F Spencer, Delvina Spencer, Defendants: James Edward Frasier, Steven R Hickman, LEAD ATTORNEYS, Frasier Frasier & Hickman, TULSA, OK.

 

JUDGES: GREGORY K. FRIZZELL, CHIEF UNITED STATES DISTRICT JUDGE.

 

OPINION BY: GREGORY K. FRIZZELL

 

OPINION

 

OPINION AND ORDER

Before the court is the Motion for Summary Judgment [Dkt. #20] filed by plaintiff Progressive Northern Insurance Company (“Progressive”). Defendants William F. Spencer and Delvina Spencer (“Spencers”) oppose the motion.

In this lawsuit, Progressive, which issued a motor vehicle liability insurance policy to defendant Tammy Cooper d/b/a Mid-States Trucking (“Cooper”), seeks declaratory judgment that it has no duty to defend or respond to a state court lawsuit against Cooper and others for injuries and damages William F. Spencer suffered in a 2011 vehicle accident in Kansas.1

 

1   Cooper was served by certified mail, return receipt requested, on July 9, 2013. [Dkt. #14]. She has not entered an appearance and is therefore in default.

 

I. Material Facts

On June 25, 2011, William F. Spencer and non-party  [*2] Delmer Lee Bruton, Jr. (“Bruton”) were involved in a motor vehicle accident (“underlying accident”) in or around Iola, Allen County, Kansas. [Dkt. #20, Ex. 1, Excerpt of Kansas Motor Vehicle Accident Report]. At the time of the accident, Bruton was driving a 1996 Peterbilt, VIN 1XP5D69X0TD411200. [Id.].2 According to the accident report generated by the Kansas Highway Patrol on June 25, 2011, Cooper was the registered owner of the Peterbilt on that date. [Id.].

 

2   In its Complaint, Progressive alleged that during her deposition in the underlying lawsuit, Cooper testified she had sold the Peterbilt to Volner in March 2010 and had not maintained insurance on it since that time. [Dkt. #2, Complaint, ¶¶17-18]. It alleged that, likewise, Volner testified he bought the Peterbilt from Cooper in March 2010 and had maintained insurance on it since that time. [Id., ¶19]. Progressive alleged Volner’s wife testified that title to the Peterbilt had not been transferred to Volner until after the June 25, 2011 accident. [Id., ¶21]. Further, it alleged the wife testified that she–without Cooper’s knowledge–went to Cooper’s residence, obtained a permanent lease agreement that had been executed by Cooper  [*3] with respect to a completely unrelated lease arrangement, “whited out” certain portions of the existing permanent lease agreement and proceeded to write in Cooper as the leasee and legal owner of the Peterbilt and Volner as the lessor of the vehicle. [Id., ¶22].

On August 8, 2011, the Spencers filed suit in Creek County (Bristow) against Bruton, non-party Joey L. Volner d/b/a C&A Trucking (“Volner”) and Volner’s insurer, non-party Scottsdale Insurance Company (“underlying litigation” or “Spencer lawsuit”). [Dkt. #20, Ex. 2, Petition]. On September 28, 2012, the Spencers filed a First Amended Petition in the underlying lawsuit, adding Cooper and Progressive as defendants. [Dkt. #20, Ex. 3, First Amended Petition]. In their First Amended Petition, the Spencers made the following allegations:

 

 

COUNT ONE

 

I    * * *

That at all times material herein, the Defendants were acting by and through the scope of their agents, servants and employees who were within the scope and appointment of their agency and authority.

 

II

That on or about the 25th day of June, 2011, the Plaintiff, William F. Spencer was operating on a 2007 Volvo semi tractor-trailer traveling southbound on U.S. 169 near Iola, State of Kansas.  [*4] That at that time, and at that place, the Defendants were operating their 1996 Peterbilt tractor-trailer northbound.

The Defendants suddenly and without warning drove their vehicle into the path of the vehicle operated by the Plaintiff herein.

That as a result of the gross negligence of the Defendants, and each of them, William F. Spencer was severely injured which has prevented him from transacting his business, forced him to expend large sums of money to effect a cure to his injuries, caused him a loss of earnings and earning capacity, and caused him to suffer disfiguring, painful, and permanent injuries.

* * *

 

COUNT TWO

COMES NOW the Plaintiff, Delvina Spencer, and adopts all allegations heretofore made in Count One of this Petition as if they were fully set forth herein.

 

V

That as a result of the negligent acts of the Defendants, and each of them, this Plaintiff has suffered a loss of services, society, companionship and consortium of her husband, William F. Spencer.

WHEREFORE, premises considered, Plaintiffs do pray for judgment against the Defendants, and each of them, for a sum in excess of Ten Thousand Dollars ($10,000.00), as actual damages herein together with a sum in excess of  [*5] Ten Thousand Dollars ($10,000.00) as punitive damages, together with interest thereon, all costs of this action and for such other relief to which they may be entitled.

 

 

[Id., Ex. 3].

Progressive filed a motion for summary judgment in the underlying litigation, asserting that a direct action against an insurer of motor carriers is not permitted pursuant to 47 Okla. Stat. § 162.1. [Dkt. #20, Ex. 4, Order Sustaining Motion for Summary Judgment of Co-Defendant]. On June 6, 2013, the state court granted Progressive’s motion and dismissed it from the action. [Id.] Progressive did not seek declaratory judgment on the coverage issue in the underlying litigation, instead filing this action in federal court.

Progressive issued to its named insured, Cooper, Policy Number 07666624-0, with effective dates of October 8, 2010, to October 8, 2011 (“Progressive Policy”). [Dkt. #20, Ex. 5, Declarations Page issued October 9, 2010].3 On four occasions before June 25, 2011, the date of the underlying accident, Progressive issued Supplemental Declarations pages to Cooper. [Dkt. #21, Exs. 6-9, Declarations Pages issued October 11, 2010; February 23, 2011; March 26, 2011; and May 18, 2011].

 

3   The Spencers assert–and  [*6] Progressive admits–that certain endorsements, including endorsements Z435 and MCS90, were omitted from the copy of the policy attached as Ex. 10 to Progressive’s Motion for Summary Judgment. Progressive included the missing endorsements as Exs. 1-7 in its reply.

At no point from October 8, 2010 to the date of the underlying accident was the Peterbilt listed as an identified covered vehicle on any Declarations Page of the Progressive Policy. [Id., Exs. 5-9]. At no time prior to the date of the underlying accident were Volner or Bruton listed drivers on the Policy. [Id.].

The Progressive contract form is 6912 (03/05), and as of June 25, 2011, the Policy was modified by form numbers 2852OK (11/04), Z434 (09/06), MCS90 (10/99), 4852OK (02/10), 4881OK (11/04), Z228 (07/05) and Z435 (12/06). [Id.].

The Progressive Policy states, in pertinent part:

 

 

COMMERCIAL AUTO POLICY    If you pay your premium when due, we will provide the insurance described in this policy.

* * *

 

GENERAL DEFINITIONS

The words and phrases below, whether in the singular, plural or possessive, have the following special meanings when appearing in boldface type in this policy, and in endorsements issued in connection with this policy,  [*7] unless specially modified.

* * *

5. “Insured auto” or “your insured auto” means:

 

 

a. Any auto specifically described on the Declarations Page, unless you have asked us to delete that auto from the policy.

b. Any additional auto on the date you become the owner if:

 

 

(i) you acquire the auto during the policy period shown on the Declarations Page;

(ii) we insure all autos owned by you that are used in your business; and

(iii) no other insurance policy provides coverage for that auto.

 

 

We will provide coverage for an additional auto for a period of thirty (30) days after you become the owner of such additional auto. We will not provide any coverage after this thirty (30) day period unless within this period you ask us to insure the additional auto. If you add any coverage, increase your limits or make any other changes to this policy during this thirty (30) day period, these changes to your policy will not become effective until after you ask us to add the coverage, increase your limits or make such changes. We may charge premium for the additional auto from the date you acquire the auto.

With respect to PART I — LIABILITY TO OTHERS, if we provide coverage for an additionally acquired auto in accordance  [*8] with this paragraph b., we will provide the same coverage for such additional auto as we provide for any auto shown on the Declarations Page.

* * *

 

 

c. Any replacement auto on the date you become the owner if:

 

(i) you acquire the auto during the policy period shown on the Declarations Page;

(ii) the auto that you acquire replaces one specifically described on the Declarations Page due to termination of your ownership of the replaced auto or due to mechanical breakdown of, deterioration of, or loss to the replaced auto that renders it permanently inoperable; and

(iii) no other insurance policy provides coverage for that auto.

If we provide coverage for a replacement auto, we will provide the same coverage for the replacement auto as we provide for the replaced auto. We will provide that coverage for a period of thirty (30) days after you become the owner of such replacement auto. We will not provide any coverage after this thirty (30) day period unless within this period you ask us to insure the replacement auto. If you add any coverage, increase your limits or make any other changes to your policy during this thirty (30) day period, these changes to your policy will not become effective until  [*9] after you ask us to add the coverage, increase your limits or make such changes.

If ownership of any insured auto is transferred, or such auto becomes permanently inoperable, this policy no longer applies to it.

* * *

 

 

 

 

14. “Temporary substitute auto” means any auto used, with the permission of its owner, as a substitute for an insured auto that has been withdrawn from normal use due to breakdown, repair, servicing, loss or destruction, and that is:

a. not owned by or registered to you, or if you are a natural person, not owned by or registered to you, your nonresident spouse, or a resident of the household in which you reside;

b. not leased by you under a written contract for a period of six (6) months or more, or if you are a natural person, not leased by you, your nonresident spouse, or a resident of the household in which you reside, under a written contract for a period of six (6) months or more;

c. not owned by your employee or leased by your employee under a written contract for a period of six (6) months or more; and

d. not borrowed from your employees or members of their households.

 

 

* * *

17. “You”, “your” and “yours” refer to the named insured shown on the Declarations Page.

* * *

 

INSURING  [*10] AGREEMENT — LIABILITY TO OTHERS

 

Subject to the Limits of Liability, if you pay the premium for liability coverage, we will pay damages, OTHER THAN PUNITIVE OR EXEMPLARY DAMAGES, for bodily injury, property damage, and covered pollution cost or expense, for which an insured becomes legally responsible because of an accident arising out of the ownership, maintenance or use of an insured auto. However, we will only pay for the covered pollution cost or expense if the same accident also caused bodily injury or property damage to which this insurance applies.

We will settle or defend, at our option, any claim or lawsuit for damages covered by this Part I. We have no duty to settle or defend any lawsuit, or make any additional payments, after the Limit of Liability for this coverage has been exhausted by payment of judgments or settlements.

 

ADDITIONAL DEFINITIONS USED IN THIS PART ONLY

A. When used in PART I — LIABILITY TO OTHERS, insured means:

 

 

1. You with respect to an insured auto.

2. Any person while using, with your permission, and within the scope of that permission, an insured auto you own, hire, or borrow …

* * *

For purposes of this subsection A.2., an insured auto you own includes any  [*11] auto specifically described on the Declarations Page.

3. Any other person or organization, but only with respect to the legal liability of that person or organization for acts or omissions of any person otherwise covered under this PART I – LIABILITY TO OTHERS.

* * *

 

 

B. When used in PART I — LIABILITY TO OTHERS, insured auto also includes:

1. Trailers, with a load capacity of 2,000 pounds or less and designed primarily for travel on public roads, while connected to your insured auto that is a power unit;

2. Mobile equipment while being carried or towed by an insured auto; and

3. Any temporary substitute auto.

 

 

 

 

[Dkt. #20, Ex. 10, Oklahoma Commercial Auto Policy, at pp. SPENCER 0063-0068].

Endorsement MCS90, dated October 8, 2010, states, in pertinent part:

 

the insurer . . . agrees to pay, within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980 regardless of whether or not each motor vehicle is specifically described in the policy and whether or  [*12] not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere.

 

 

[Dkt. #22, Ex. 2, Endorsement MCS90].

Title for the Peterbilt was issued to Cooper on April 23, 2009. [Dkt. #20, Ex. 11, Title]. Cooper registered the Peterbilt in her name on January 1, 2010. [Dkt. #20, Ex. 12, Registration].

In October of 2012, after receiving notice from Cooper of the Spencer lawsuit and the First Amended Petition, Progressive retained counsel to represent Cooper pursuant to a reservation of all of its rights and defenses under the Policy. [Dkt. #2, Complaint, ¶30]. Progressive continued to provide a defense for Cooper in the underlying litigation, but tendered the defense and indemnity of Cooper to another insurer, Scottsdale Insurance Company (“Scottsdale”). [Dkt. #22 at 9, n.1]. During the April 15, 2014 hearing on the pending motion, counsel for Progressive advised that Scottsdale had recently accepted its tender of defense.

 

II. Summary Judgment Standard

A motion for summary judgment shall be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).  [*13] Federal Rule of Civil Procedure 56(a) “mandates the entry of summary judgment, 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); Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998). A court must examine the factual record in the light most favorable to the party opposing summary judgment. Wolf v. Prudential Ins. Co. of Am., 50 F.3d 793, 796 (10th Cir. 1995).

When the moving party has carried its burden, “its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no ‘genuine issue for trial.'” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986) (citations omitted).

“An issue is ‘genuine’ if there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way. . . . An issue of fact is ‘material’  [*14] if under the substantive law it is essential to the proper disposition of the claim.” Adler, 144 F.3d at 670 (citations omitted). In essence, the inquiry for the court 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.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). “The mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient; there must be evidence on which the [trier of fact] could reasonably find for the plaintiff.” Id. at 252.

 

III. Analysis

Progressive seeks summary judgment on its declaratory judgment claim, asserting: (1) the Peterbilt is not an “insured auto” under the Progressive Policy; and (2) the Peterbilt is not an “insured auto” under the Progressive Policy as set forth in Paragraph B of the Additional Definitions Section of Part I – Liability to Others.

The  [*15] Spencers contend summary judgment is inappropriate because (1) no justiciable controversy exists and (2) even if a justiciable controversy exists, Progressive has liability exposure based on the Form MCS-90 it issued in connection with the policy.

 

A. Justiciability

The Declaratory Judgment Act permits the court, “[i]n a case of actual controversy . . . to declare the rights and other relations of any interested party seeking such declaration.” 28 U.S.C. § 2201(a). The Supreme Court has stated:

 

The difference between an abstract question and a “controversy” contemplated by the Declaratory Judgment Act is necessarily one of degree, and it would be difficult, if it would be possible, to fashion a precise test for determining in every case whether there is such a controversy. Basically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.

 

 

Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S. Ct. 510, 85 L. Ed. 826 (1941). “It is well established that what makes a declaratory judgment action  [*16] a proper resolution of a case or controversy rather than an advisory opinion is the settling of some dispute which affects the behavior of the defendant toward the plaintiff.” Rio Grande Silvery Minnow v. Bureau of Reclamation, 601 F.3d 1096, 1109-1110 (10th Cir. 2010) (citation omitted). “The crucial question is whether granting a present determination of the issues offered will have some effect in the real world.” Wyoming v. U.S. Dep’t of Agric., 414 F.3d 1207, 1212 (10th Cir. 2005) (citation omitted).

At the time Progressive filed this action, it had incurred and was continuing to incur costs to provide a defense to Cooper in the underlying litigation. Although Scottsdale has recently accepted the tender of defense, Progressive has nonetheless racked up “real world” expenses. Moreover, Progressive seeks a declaration of coverage because it intends to seek indemnification of those expenses from Scottsdale. Therefore, a justiciable “controversy” exists.

 

B. Coverage Under the Policy

The Spencers concede the Peterbilt was not an “insured auto” under the terms of the policy itself but contend that under Form MCS-90, Progressive is “on the risk” if Cooper is liable as a motor carrier, “regardless  [*17] of whether or not each motor vehicle is specifically described in the policy.”4

 

4   The Spencers also contend Progressive’s declaratory judgment claim was a compulsory counterclaim in the underlying litigation. The court, however, previously rejected this argument in its Opinion and Order of August 22, 2013 [Dkt. #15] denying the Spencers’ Motion to Dismiss.

Although the Spencers cite no legal authority for their position, it appears to be based on the Tenth Circuit’s holding in Empire Fire and Marine Ins. Co. v. Guaranty Nat’l Ins., 868 F.2d 357 (10th Cir. 1989). That holding, however, was expressly overruled by the Tenth Circuit in Carolina Cas. Ins. Co. v. Yeates, 584 F.3d 868 (10th Cir. 2009).

The Carolina Casualty decision contains an extensive discussion of jurisprudence on the scope and application of federally mandated insurance for interstate commercial motor carriers. As the court explained, federal regulations require interstate trucking companies to maintain insurance or another form of surety “conditioned to pay any final judgment recovered against such motor carrier for bodily injuries to or the death of any person resulting from the negligent operation, maintenance or use  [*18] of motor vehicles.” Id. at 870 (quoting 49 C.F.R. § 387.301(a)). Most interstate trucking companies obtain the MCS-90 endorsement to one or more of their insurance policies. An MCS-90 endorsement “is intended to eliminate the possibility of a denial of coverage by requiring the insurer to pay any final judgment recovered against the insured for negligence in the operation, maintenance, or use of motor vehicles subject to federal financial responsibility requirements, even though the accident vehicle is not listed in the policy.” Id. (citation omitted).

The court in Carolina Casualty explained:

 

In Empire Fire, we evaluated the effect of an MCS-90 endorsement where multiple insurance policies covered an accident between a trucker and a member of the public. In resolving which of the policies provided primary coverage, we concluded the MCS-90 endorsement amended contrary language in the underlying insurance policy, which would otherwise have limited the insurance carrier’s liability to excess coverage. Because multiple potential sources of liability coverage existed, we held that liability for primary coverage should be allocated among the insurers pursuant to traditional state insurance  [*19] and contract law principles. This holding has been interpreted to mean that an MCS-90 endorsement modifies the underlying insurance policy in a variety of ways, including (1) allowing recovery from a policy that otherwise does not provide liability coverage, and (2) allowing primary liability recovery from a policy that provides only excess coverage.

 

 

Id. at 870-71 (citations omitted). The court acknowledged that the ruling in Empire Fire “has placed this circuit in a minority for quite some time,” and only the Sixth Circuit had followed its lead. Id. at 871. Therefore, the court, sitting en banc, revisited its prior reasoning and “join[ed] the majority of circuits in recognizing the MCS-90 endorsement as a surety obligation.” Id. The court stated:

[W]e hold the MCS-90 endorsement only applies where: (1) the underlying insurance policy to which the endorsement is attached does not provide coverage for the motor carrier’s accident, and (2) the motor carrier’s insurance coverage is either not sufficient to satisfy the federally-prescribed minimum levels of financial responsibility or is non-existent.

 

 

Id.

In so ruling, the court recapped the history of the MCS-90 endorsement. The Motor Carrier  [*20] Act of 1980 (“MCA”) provides that a commercial motor carrier may operate only if registered to do so and must be “willing and able to comply with . . . [certain] minimum financial responsibility requirements.” Id. at 874. Specifically, a motor carrier transporting property must demonstrate financial responsibility of at least $750,000.00. Id. at 874 n.4. Implementing regulations require proof of financial responsibility by one of three methods: (1) a Form MCS-90 endorsement; (2) a Form MCS-82 surety bond; or (3)authorization from the Federal Motor Carrier Safety Administration to self-insure. Id. at 874.

The Tenth Circuit listed several “key conclusions” about the financial responsibility requirements:

 

o [T]he financial responsibility provisions require motor carriers to demonstrate they are adequately insured in order to protect the public from risks created by the carriers’ operations. From the express language of the [MCA] and the regulations, these provisions are intended to impose a mandatory requirement that motor carriers obtain a minimum level of liability insurance, depending on the cargo they carry.

o [T]he provisions were designed to ensure collectability of a judgment–not  [*21] to relieve the injured member of the public from the requirement that he or she obtain a final judgment of legal liability against the motor carrier and its insurers as a prerequisite.

o [A]n MCS-90 endorsement . . . is ambiguous with respect to how it interacts with the underlying insurance policy. The endorsement states that “no condition, provision, stipulation, or limitation contained in the policy, this endorsement, or any other endorsement thereon, or violation thereof, shall relieve the [insurance company] from liability or from the payment of any final judgment, within the limits of liability herein described.” On one hand, this provision may suggest the endorsement modifies the underlying policy to the extent the policy is inconsistent. But on the other hand, the endorsement further provides that “all terms, conditions, and limitations in the policy to which the endorsement is attached shall remain in full force and effect as binding between the insured and the company.” It is precisely this ambiguity that has created the confusion about the effect of an MCS-90 endorsement on an injured party’s right to recover a negligence judgment against a motor carrier.

 

 

Id. at 875 (citations  [*22] omitted).

The court explained that courts dealing with MCS-90 endorsements are typically confronted with two determinations that must be resolved contemporaneously: “(1) the proper allocation of insurance liability among multiple insurers and the motor carrier; and (2) any possible public financial responsibility because of a shortfall in available sources for satisfaction of a judgment against the motor carrier, at least up to the prescribed minimum amount under the regulations.” Id.

The court described the framework adopted by the majority approach as follows:

 

First, the cases describe the insurer’s obligation under the MCS-90 endorsement as one of a surety rather than a modification of the underlying policy. The endorsement is a safety net in the event other insurance is lacking. . . . Under this reasoning, an MCS-90 insurer’s duty to pay a judgment arises not from any insurance obligation, but from the endorsement’s language guaranteeing a source of recovery in the event the motor carrier negligently injures a member of the public on the highways.

Second, in marked contrast to our approach in Empire Fire, these cases describe the surety obligation–to pay a negligence judgment against  [*23] a motor carrier under the MCS-90 endorsement–as one that is triggered only when (1) the underlying insurance policy to which the endorsement is attached does not otherwise provide coverage, and (2) either no other insurer is available to satisfy the judgment against the motor carrier, or the motor carrier’s insurance coverage is insufficient to satisfy the federally-prescribed minimum levels of financial responsibility.

Third, . . . the MCS-90 endorsement, its terms and its operating provisions that supercede any limitation in the underlying insurance policy are only implicated as between an injured member of the public and the MCS-90 insurer. Referencing the express language of the MCS-90 endorsement . . . –these cases conclude the MCS-90 endorsement operates only to protect the public and does not alter the relationship between the insured and the insurer as otherwise provided in the policy. . . . The endorsement, in other words, is irrelevant to and has no effect on the ultimate allocation of a judgment against a motor carrier as between the carrier and its various insurers.

Finally, . . . the MCS-90 endorsement operates only to guarantee a source of payment of a judgment, and does  [*24] not relieve the motor carrier or its liability insurers . . . of their duty to satisfy an injured party’s judgment against the carrier. The peculiar nature of the MCS-90 endorsement grants the judgment creditor the right to demand payment directly from the insurer, and simultaneously grants the insurer the right to demand reimbursement from the insured. A motor carrier may be required to reimburse the MCS-90 insurer for any payout the insurer would not otherwise have been obligated to make. . . .

 

 

Id. at 878-79 (citations omitted).

The Tenth Circuit abandoned the Empire Fire framework, adopted the majority view and concluded the MCS-90 endorsement is intended to impose a surety obligation on the insurance company. Id. at 879.

The court described two scenarios which would trigger the surety obligation imposed by the MCS-90 endorsement:

 

After a negligence judgment is rendered against a motor carrier, the MCS-90 insurer’s obligation is only triggered when (1) its underlying insurance policy does not provide liability coverage, and (2) either no other insurer provides coverage for the accident or the motor carrier’s insurance coverage, in aggregate, is insufficient to satisfy the regulatory  [*25] requirements. Finally, we conclude the MCS-90 endorsement does not apply once the federally-mandated minimums have been satisfied.

 

 

Id. at 885-86.

In this case, Progressive seeks a declaratory judgment that it has no duty to defend or respond to a state court lawsuit against Cooper and others for injuries and damages William F. Spencer suffered in the 2011 vehicle accident in Kansas, because the tractor trailer involved in the accident was not a covered vehicle under the policy. It is uncontroverted that the tractor trailer was not a covered vehicle under the policy.

Progressive does not seek any determination regarding its obligation under the MCS-90 endorsement and, indeed, that issue is not a “justiciable controversy” as defined above. Applying the Tenth Circuit’s holding in Carolina Casualty, that issue is not ripe because no judgment has been entered in the underlying case, nor has there been a determination that no other insurer provides coverage for the accident or the insurance coverage is insufficient to satisfy the regulatory requirements.

 

IV. Conclusion

For the reasons set forth above, Progressive’s Motion for Summary Judgment [Dkt. #20] is granted.

ENTERED this 18th day of April,  [*26] 2014.

/s/ Gregory K. Frizzell

GREGORY K. FRIZZELL, CHIEF JUDGE

UNITED STATES DISTRICT COURT

DAVID RODNEY BEAVERS, et al., Plaintiffs, v. LENNIERE VICTORIAN, et al., Defendants.

 

Case No. CIV-11-1442-D

 

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA

 

2014 U.S. Dist. LEXIS 40892

 

 

March 27, 2014, Decided

March 27, 2014, Filed

 

 

COUNSEL:  [*1] For David Rodney Beavers, an individual, Cynthia D Beavers, an individual, Cynthia D Beavers, as next friend of POB a minor, Morgan A Beavers, an individual, Plaintiffs: Kevin M Coffey, Paul A Harris, Harris & Coffey PLLC, Oklahoma City, OK.

 

For Lenniere Victorian, an individual, Defendant: Brad Leslie Roberson, Paul M Kolker, Pignato & Cooper, Oklahoma City, OK.

 

For Bee-Line Delivery Service Inc, a Texas Corporation, Defendant, Cross Defendant: Haylie D Treas, Laura L Eakens, Jennings Cook & Teague, Oklahoma City, OK; Rodney L Cook, Phillips Murrah PC-101-OKC, Oklahoma City, OK.

 

For Gulf Delivery Systems Inc, Defendant: Dan S Folluo, Rhodes Hieronymus Jones Tucker & Gable, Tulsa, OK; Laura L Eakens, Jennings Cook & Teague, Oklahoma City, OK.

 

For Bee-Line Transportation Inc, Defendant: Laura L Eakens, Jennings Cook & Teague, Oklahoma City, OK; Rodney L Cook, Phillips Murrah PC-101-OKC, Oklahoma City, OK.

 

For Anthony B Copeland, an individual, Lenniere Victorian, an individual, Cross Defendants: Brad Leslie Roberson, Paul M Kolker, Pignato & Cooper, Oklahoma City, OK.

 

JUDGES: TIMOTHY D. DEGIUSTI, UNITED STATES DISTRICT JUDGE.

 

OPINION BY: TIMOTHY D. DEGIUSTI

 

OPINION

 

ORDER

Before the Court are Plaintiffs’ Motion for Partial  [*2] Summary Judgment Against Bee-Line Delivery on Claim of Vicarious Liability for Negligence of Defendants Copeland and Victorian [Doc. No. 46] and Defendant Bee-Line Delivery Service, Inc.’s Motion for Summary Judgment [Doc. No. 202], filed pursuant to Fed. R. Civ. P. 56. The Motions are fully briefed and at issue.1 Because they involve overlapping claims and issues, the Motions will be addressed together.

 

1   Plaintiffs’ Motion is supported by opening and reply briefs [Doc. Nos. 46 & 73]; it is opposed by Defendant Bee-Line Delivery Service, Inc.’s response and surreply briefs [Doc. Nos. 70 & 113]. Defendant Bee-Line Delivery Service Inc.’s Motion is supported by opening and reply briefs [Doc. Nos. 202 & 237]; it is opposed by Plaintiffs’ response brief. [Doc. No. 222]. Defendant Owens Corning Roofing and Asphalt, LLC, which Plaintiffs subsequently dismissed, also filed a brief [Doc. No. 95] regarding Plaintiffs’ Motion.

 

Factual and Procedural Background

This personal injury case arises from a traffic accident in Colorado on February 21, 2011, allegedly caused by the negligence of Defendant Lenniere Victorian, a commercial driver employed by Anthony B. Copeland doing business as Trinity Delivery  [*3] Service.2 Mr. Victorian was driving a semitrailer-tractor loaded with freight that Mr. Copeland had been engaged to haul and deliver by Defendant Bee-Line Delivery Service, Inc. (“Bee-Line”). Bee-Line had previously been hired by the shipper of the freight, Owens Corning Roofing and Asphalt, LLC (“Owens Corning”), to provide transportation services for interstate shipments. Mr. Copeland was a named defendant, but he is now deceased and has been replaced in this action by the administrator of his estate; the estate has admitted vicarious liability for any negligence of Mr. Victorian.3

 

2   Defendants removed Plaintiffs’ state court action to federal court based on diversity jurisdiction under 28 U.S.C. § 1332. After removal, Plaintiffs filed amended pleadings that similarly invoke diversity jurisdiction. See First Am. Compl. [Doc. No. 104], ¶¶ 2-13; Second Am. Compl. [Doc. No. 148], ¶¶ 2-13.

3   Capacity to be sued under Fed. R. Civ. P. 17(b)(3) is determined by the law of the forum state. Oklahoma law holds “that in the case of a sole proprietorship, the firm name and the sole proprietor’s name are but two names for one person.” Bishop v. Wilson Quality Homes, 1999 OK 60, 986 P.2d 512, 514-15 (Okla. 1999).

By  [*4] the Second Amended Complaint, Plaintiffs assert claims against Bee-Line that include: 1) vicarious liability for the negligence of Mr. Victorian, attributed to Mr. Copeland, based on legal theories discussed infra that allegedly deem Mr. Copeland (acting as Trinity Delivery Service) and his employee, Mr. Victorian, to be agents or employees of Bee-Line;4 and 2) negligent hiring of Mr. Copeland and his employee, Mr. Victorian. Plaintiffs’ Motion seeks a summary judgment ruling regarding their first theory of liability, while Bee-Line’s Motion seeks summary judgment in its favor on both theories. Bee-Line also seeks a summary judgment ruling that punitive damages are not recoverable under the undisputed facts shown by the existing record.

 

4   Plaintiffs also asserted in their pleading that Bee-Line is vicariously liable for the negligence of Mr. Copeland in hiring, training, and supervising Mr. Victorian. See Second Am. Compl. [Doc. No. 148], ¶¶ 44-47, 65. This negligence claim, denominated Plaintiffs’ Third Cause of Action, has been resolved by summary judgment in favor of Mr. Copeland’s estate. See Order of November 28, 2102 [Doc. No. 233]. Because Mr. Copeland’s negligence is not established,  [*5] Bee-Line cannot be vicariously liable for it.

 

Standard of Decision

Summary judgment is proper “if the movant shows there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A material fact is one that “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). An issue is genuine if the evidence is such that a reasonable jury could return a verdict for either party. Id. at 255. All facts and reasonable inferences must be viewed in the light most favorable to the nonmoving party. Id. If a party who would bear the burden of proof at trial lacks sufficient evidence on an essential element of a claim, then all other factual issues concerning the claim become immaterial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).

The movant bears the initial burden of demonstrating the absence of a dispute of material fact warranting summary judgment. Celotex, 477 U.S. at 322-23. If the movant carries this burden, the nonmovant must then go beyond the pleadings and “set forth specific facts” that would be admissible in evidence and that show a genuine issue for  [*6] trial. See Anderson, 477 U.S. at 248; Celotex, 477 U.S. at 324; Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir. 1998). “To accomplish this, the facts must be identified by reference to affidavits, deposition transcripts, or specific exhibits incorporated therein.” Adler, 144 F.3d at 671; see also Fed. R. Civ. P. 56(c)(1)(A). “The court need consider only the cited materials, but may consider other materials in the record.” See Fed. R. Civ. P. 56(c)(3); see also Adler, 144 F.3d at 672. The Court’s inquiry is whether the facts and evidence identified by the parties present “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.” Anderson, 477 U.S. at 251-52.

 

Undisputed Facts

Although the parties disagree about which facts are relevant to establish Bee-Line’s alleged liability, many facts asserted by the parties in support of their respective positions are undisputed. Bee-Line is, and was at the relevant time, registered as a motor carrier with the Federal Motor Carrier Safety Administration (FMCSA), No. MC288734, operating under authority of the United States Department of Transportation (DOT),  [*7] No. 598623; it was also registered as a contract carrier and a broker. At the relevant time, Mr. Copeland d/b/a Trinity Delivery Service was registered as a motor carrier, FMCSA No. MC716172 and DOT No. 2042113.

In April, 2010, Owens Corning and Bee-Line entered into a written contract, entitled Motor Carrier/Shipper Agreement (the “Shipping Agreement”), under which Bee-Line agreed to perform motor carrier transportation services for Owens Corning in accordance with the terms and conditions of the Shipping Agreement. As pertinent to the parties’ arguments in this case, the Shipping Agreement provided for Bee-Line to take possession of a freight shipment from Owens Corning upon execution of the freight documentation, and to maintain responsibility for the shipment until it was tendered for delivery to Owens Corning’s consignee. Bee-Line agreed to provide and operate all motor vehicles and equipment necessary to perform the motor carrier transportation services in a safe and efficient manner, and to provide properly trained and licensed drivers and other personnel needed to perform the services. Bee-Line also agreed to comply with equipment and operational protocols that were set forth  [*8] in Appendix A to the Shipping Agreement, including responsibilities of drivers, and to maintain insurance coverage as set forth in Appendix G.

Plaintiffs (and Owens Corning) contend the Shipping Agreement expressly prohibited Bee-Line from acting as a broker or delegating its motor carrier responsibilities to another carrier. Bee-Line disagrees and contends the Shipping Agreement permitted it to use independent contractors, including another motor carrier, to perform the transportation services. Regardless of the parties’ disagreement on this issue, Bee-Line asserts that the Shipping Agreement has no bearing on its status as a motor carrier with respect to third parties, and that its contractual relationship with or obligations to Owens Corning are irrelevant to Plaintiffs’ personal injury claims against it. Bee-Line asserts that the motor carrier for the freight shipment involved in this case was Trinity Delivery Service, which was assigned by Bee-Line to transport the shipment at issue.

Bee-Line relies on the terms of its contract with Mr. Copeland d/b/a Trinity Delivery Service.5 On February 21, 2011 (the date of the accident), Bee-Line as broker and Trinity Delivery Service as carrier  [*9] entered into a written contract, entitled Transportation Brokerage Agreement (the “Brokerage Agreement”), which Mr. Copeland executed as “Owner” of Trinity Delivery Service. See Pls.’ Mot. Partial Summ. J., Ex. 9 [Doc. No. 46-9] at 7; Bee-Line’s Mot. Summ. J., Ex. 3 [Doc. No. 202-3]. The Brokerage Agreement identified the parties’ status as an independent contractor relationship, and not an agency, partnership, or any form of employer-employee relationship. By the Brokerage Agreement, Trinity Delivery Service agreed to provide transportation services for property tendered for delivery, subject to the availability of suitable equipment and the specific shipment instructions. The Brokerage Agreement required Trinity Delivery Service to furnish all equipment needed to provide the transportation services, to maintain equipment in good repair and working order, to employ properly licensed and trained personnel, and to comply with all applicable DOT laws and regulations, as well as other laws applicable to motor carrier operations.

 

5   Bee-Line initially contended it contracted with a corporation formed by Mr. Copeland, Trinity Delivery Service, Inc. The record is clear, however, the authorized  [*10] motor carrier was a sole proprietorship, “Mr. Copeland d/b/a Trinity Delivery Service.” See Bee-Line’s Resp. Pls.’ Mot. Partial Summ. J., Exs. 4 & 10 [Doc. Nos. 70-4 & 70-10]; Bee-Line’s Mot. Summ. J., Exs. 1 & 4 [Doc. Nos. 202-1 & 202-4].

Bee-Line also relies on additional facts: Mr. Copeland’s motor carrier certificate authorized Trinity Delivery Service to act as a “common carrier of property” and to transport the general freight at issue in this case, see Bee-Line’s Mot. Summ. J., Ex. 4 [Doc. No. 202-4]; Mr. Copeland or Trinity Delivery Service owned the tractor and leased the semitrailer involved in the shipment; the tractor bore a logo of Trinity Delivery Service and the FMCSA and DOT numbers registered to Mr. Copeland acting as Trinity Delivery Service; Bee-Line had no direct relationship with Mr. Victorian and did not designate his route nor directly control his activities; and Bee-Line’s dispatcher confirmed through an FMCSA online database before contracting with Mr. Copeland that his operating authority was active, his insurance coverage was satisfactory, and available information did not reflect any prior accidents or an adverse safety rating. Plaintiffs present additional  [*11] facts to show that the dispatcher was inexperienced and operating under a short deadline to locate an available motor carrier, that he hired Mr. Copeland at the last minute without inquiring into his trucking business or verifying information viewed on FMCSA’s website, and that he did not receive confirmation of Bee-Line’s insurance coverage until the day after the accident occurred.6

 

6   Plaintiffs also recite opinions of their retained expert, Norris Hoover, regarding Mr. Victorian’s conduct and a conclusion that “[i]t was negligent to hire and entrust Lenniere Victorian with a tractor-semi trailer for this haul.” See Pls.’ Resp. Bee-Lines Mot. Summ. J. at 22, ¶ 27. Defendants challenge the admissibility of Mr. Hoover’s opinions in a separate Daubert motion. With respect to Plaintiffs’ negligent hiring claim, however, these opinions are irrelevant because they do not address Bee-Line’s hiring of Mr. Copeland or his trucking company.

Pursuant to their respective written agreements, Owens Corning generated documentation regarding the freight shipment involved in the accident — a “shipment tender,” an invoice, and a bill of lading — that identified Bee-Line as the carrier of the freight,  [*12] while Bee-Line generated a rate confirmation document signed by Mr. Copeland that listed Trinity Delivery Service as the carrier. See Pls.’ Mot. Partial Summ. J., Exs. 3-5 [Doc. Nos. 46-3, 46-4, 46-5]; Bee-Line’s Resp. Br., Ex. 6 [Doc. No. 70-6]. The bill of lading listed Trinity Delivery Service as the trucking company. See Bee-Line’s Resp. Br., Ex. 6 [Doc. No. 70-6]. Bee-Line’s confirmation document included special instructions to Trinity Delivery Service, and stated as one requirement: “Driver must place ‘Bee-Line’ sign in Windshield of Tractor to enter plant.” See Pls.’ Mot. Partial Summ. J., Ex. 5 [Doc. No. 46-5].

Plaintiffs’ position is that Bee-Line was the motor carrier for the freight shipment and had a nondelegable duty of care with regard to transportation services provided for Owens Corning under the Shipping Agreement. By their Motion, Plaintiffs seek a summary adjudication of Bee-Line’s vicarious liability for the negligence of its “sub-hauler,” Mr. Copeland d/b/a Trinity Delivery Service (acting through employee, Mr. Victorian), based on common law principles and the federal Motor Carrier Safety Act and implementing regulations. See Pls.’ Mot. Partial Summ. J. [Doc.  [*13] No. 46], at 17-23. Bee-Line’s position is that no vicarious liability arises from acts of a duly licensed and insured motor carrier (Trinity Delivery Service), which was an independent contractor engaged to provide the semitrailer and tractor, employ the driver, and transport the freight shipment involved in the accident. Bee-Line also asserts that Plaintiffs lack sufficient evidence to establish any negligence by Bee-Line in its selection of Mr. Copeland’s proprietorship to transport the load.

 

Discussion

 

A. Choice of Law

Plaintiffs discuss in their briefs various tort law theories of liability and cite cases from numerous jurisdictions, without any discussion of the proper choice of law. Particularly with respect to one legal theory — namely, that Bee-Line was a regulated common carrier engaged in a business involving sufficient risk that tort liability may be imposed under the Restatement (Second) of Torts, § 428 — Plaintiffs rely heavily on citations of California case law. Bee-Line notes this lack of attention by Plaintiffs to “which jurisdiction’s law they believe controls,” and observes that “Section 428 has not been adopted by Oklahoma, Texas, or Colorado, the states whose law  [*14] might apply here.” See Bee-Line’s Combined Surreply Br.[Doc. No. 113] at 11 n.1. Because a choice of state laws may affect Plaintiffs’ right of recovery under a common law theory of liability, the Court begins its analysis by addressing this antecedent question.7

 

7   Of course, as to issues governed by federal law, choice of a particular state’s law is unimportant. See, e.g., Price v. Westmoreland, 727 F.2d 494, 496 (5th Cir. 1984) (ICC regulations “preempt state law in tort actions in which a member of the public is injured by the negligence of a motor carrier’s employee”).

“A federal court sitting in diversity applies the substantive law, including the choice of law rules, of the forum state.” See BancOklahoma Mortgage Corp. v. Capital Title Co., 194 F.3d 1089, 1103 (10th Cir. 1999) (internal quotation omitted). Oklahoma has adopted the general rule of the Restatement (Second) of Conflict of Laws “that the rights and liabilities of parties with respect to a particular issue in tort shall be determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties.” Brickner v. Gooden, 1974 OK 91, 525 P.2d 632, 637 (Okla. 1974)  [*15] (emphasis added); see Restatement (Second) of Conflict of Laws, § 145 (1971). Under this significant relationship test, the following factors should be considered and “evaluated according to their relative importance with respect to a particular issue:

 

(1) the place where the injury occurred,

(2) the place where the conduct causing the injury occurred,

(3) the domicile, residence, nationality, place of incorporation and place of business of the parties, and

(4) the place where the relationship, if any, between the parties occurred.”

 

 

Brickner, 525 P.2d at 637.

With respect to the issue of vicarious liability, the parties cite no case law applying Oklahoma’s choice-of-law rules to this issue. The Court’s research has found one case, Edwards v. McKee, 2003 OK CIV APP 59, 76 P. 3d 73, 76 (Okla. Civ. App. 2003), in which an injured passenger’s claim against the driver of a semitrailer truck and his employer was found to be governed by the law of the state where the accident occurred. In this case, with respect to Bee-Line’s potential liability for the negligence of Mr. Victorian, imputed to Mr. Copeland or Trinity Delivery Service, the Court agrees that the place where the collision occurred (Colorado) is important  [*16] under both of the first two factors and that neither of the other factors points to a particular state. The parties reside or conduct business in Oklahoma and Texas, and Plaintiffs had no direct relationship with Bee-Line. Accordingly, the Court finds that Colorado has the most significant relationship to the occurrence and the parties for purposes of Bee-Line’s vicarious liability for Plaintiffs’ injuries, except as provided by federal law.

With respect to Bee-Line’s possible liability for negligent hiring of Mr. Copeland’s proprietorship to transport the subject load, Bee-Line contends in its summary judgment brief that there is no conflict among the laws of Colorado, Oklahoma, and Texas regarding this claim and, thus, no need to choose a particular state’s law. Plaintiffs do not disagree with this contention. Accordingly, the Court will utilize the same case authorities cited by the parties with regard to Plaintiffs’ negligent hiring claim.

 

B. Vicarious Liability

Plaintiffs primarily rely on two theories of vicarious liability: 1) Bee-Line was the “motor carrier” for the Owens Corning shipment, as defined by 49 U.S.C. § 13102(4), and had a nondelegable duty of care under common law  [*17] principles, as recognized in Section 428 of the Restatement (Second) of Torts; and 2) Bee-Line was a statutory employer of Mr. Copeland or Trinity Delivery Service (and, thus, Mr. Victorian) as determined by the Federal Motor Carrier Safety Regulations (FMCSR), specifically 49 C.F.R. § 390.5, and case law.8

 

8   Plaintiffs also invoke equitable principles and “the doctrine of quasi-estoppel,” which prevents a party from changing positions to avoid an obligation or consequence of a position previously taken to obtain a benefit. See Pls.’ Mot. Partial Summ. J. [Doc. No. 46] at 25-26. Plaintiffs provide no persuasive authority, however, for applying this doctrine as a principle of tort law. The cases cited by Plaintiffs were not decided in this context and are inapposite. Where the doctrine has been recognized, it requires mutuality of parties; estoppel cannot be invoked by a stranger to the transaction. See Swilley v. McCain, 374 S.W.2d 871, 875 (Tex. 1964); 28 Am. Jur. 2d Estoppel & Waiver, § 120 (2011). Thus, the Court finds that Plaintiffs lack any substantial legal support for this theory, and it should be disregarded.

 

1. Liability for Nondelegable Duty

Federal law defines a “motor carrier”  [*18] as “a person providing motor vehicle transportation for compensation.” 49 U.S.C. § 13102(14). Plaintiffs argue that Bee-Line was acting as a “motor carrier” while providing services to Owens Corning under the Shipping Agreement and it had a nondelegable duty as a motor carrier that renders it liable for injuries caused during the provision of those services. Bee-Line disagrees and argues, in effect, that it delegated its motor carrier responsibilities to Mr. Copeland, as Trinity Delivery Service, through the Brokerage Agreement. Plaintiffs contend that the Shipping Agreement prohibited Bee-Line from brokering its “motor carrier” duties to another motor carrier, and that the Brokerage Agreement violated Bee-Line’s contractual obligations to Owens Corning and, thus, was invalid. The parties also disagree whether there can be more than one “motor carrier” for a single load.9

 

9   Bee-Line’s only support for its position that “[t]here can be only one motor carrier transporting a load” is the opinion of an expert witness. See Bee-Line’s Mot. Summ. J. [Doc. No. 202] at 3, ¶ 43. However, there is legal authority to the contrary. See Simmons v. King, 478 F.2d 857, 863 (5th Cir. 1973) (one registered  [*19] motor carrier was vicariously liable as the statutory employer of the negligent driver based on a lease agreement, while another registered motor carrier that employed the driver could be liable under common law standards based on its actual control over him).

Owens Corning appears to take Plaintiffs’ side of this dispute. In a reply brief that Owens Corning filed in opposition to Bee-Line’s response to Plaintiffs’ Motion (before being dismissed from the case), Owens Corning argued that the Shipping Agreement determined Bee-Line’s status and duties with regard to the shipment at issue, and that Bee-Line could be held liable as a motor carrier with regard to the load. This argument, like part of Plaintiffs’ argument, blurs the distinction between liability for damaged cargo, which is governed by federal statutes under the Carmack Amendment, 49 U.S.C. § 14706, and liability for personal injuries to the public, as to which federal statutes are silent. See, e.g., Schramm v. Foster, 341 F. Supp. 2d 536, 547 (D. Md. 2004) (Motor Carrier Safety Act and FMCSR do “not create a private right of action for personal injuries”).

Upon consideration of the parties’ arguments, the Court finds that the  [*20] identity of the “motor carrier” in the transportation services that resulted in Plaintiffs’ injuries is relevant to the issue of Bee-Line’s liability only if there exists a legal basis for attaching liability for personal injuries to that status. Plaintiffs provide no legal authority for the proposition that federal law imposes such liability, and the Court has found none. Instead, the source of liability, if any, must come from state tort law and the common law principles argued in Plaintiffs’ briefs.10 Under the Court’s choice-of-law ruling, Bee-Line may be held liable for Plaintiffs’ injuries based solely on its status as a “motor carrier” — assuming that status is established — only if Colorado law would recognize a nondelegable duty of a motor carrier to provide its services in a manner reasonably safe to the public.

 

10   While Plaintiffs rely heavily on Bee-Line’s alleged agreement with Owens Corning not to delegate the transportation duties to another motor carrier, Plaintiffs do not contend they have any contractual rights under the Shipping Agreement. Thus, the Court confines its analysis to tort law principles.

The Court has found no legal authority to suggest that such a duty  [*21] would be found as a matter of Colorado law. Plaintiffs argue by reference to cases from other jurisdictions that a motor carrier should have a nondelegable duty to transport goods with reasonable safety to the public.11 All of these cases rely on Section 428 of the Restatement (Second) of Torts, which provides:

 

An individual or a corporation carrying on an activity which can be lawfully carried on only under a franchise granted by public authority and which involves an unreasonable risk of harm to others, is subject to liability for physical harm caused to such others by the negligence of a contractor employed to do work in carrying on the activity.

 

 

Restatement (Second) of Torts, § 428 (1965). Commentary to this section explains that “[t]he rule stated in this Section is principally applicable to public service corporations which, as such, are permitted by their franchise to use instrumentalities which are peculiarly dangerous unless carefully operated.” Id. cmt. a. The Court finds no indication that the Colorado Supreme Court would adopt this rule or apply it to interstate motor carriers.

 

11   Most cases cited by Plaintiffs predate the federal Motor Carrier Safety Act enacted in 1984, and  [*22] all apply laws of states other than Colorado. Some also involve leasing arrangements, discussed infra (note 13).

The Colorado Supreme Court has, however, adopted another rule set forth in other sections of the Restatement: “the ‘inherently dangerous activity’ exception to the general rule that employers of independent contractors are not liable for the torts of their contractors.” See Huddleston ex rel. Huddleston v. Union Rural Elec. Ass’n, 841 P.2d 282, 286 (Colo. 1992) (en banc). Under this exception,

 

an  [*23] activity will qualify as ‘inherently dangerous’ when it presents a special or peculiar danger to others that is inherent in the nature of the activity or the particular circumstances under which the activity is to be performed, that is different in kind from the ordinary risks that commonly confront persons in the community, and that the employer knows or should know is inherent in the nature of the activity or in the particular circumstances under which the activity is to be performed. In addition, although an activity may be inherently dangerous, an employer will not be liable for injuries caused by the collateral negligence of its independent contractor in performing that activity.

 

 

Id. at 290. The court defined “collateral negligence” as follows:

It is negligence of the independent contractor that occurs after the independent contractor has departed from the ordinary and prescribed way of doing the work, when such departure is not reasonably to have been contemplated by the employer, and when such negligence would not have occurred but for such a departure. In the event that such a departure is by itself a negligent act or omission on the part of the independent contractor, that too  [*24] is “collateral negligence.” What is common in either case is that “collateral negligence” is negligence not reasonably to have been contemplated by the employer, in contrast to negligence reasonably to have been contemplated as a recognizable risk associated with the ordinary or prescribed way of doing the work under the circumstances.

 

 

Id. at 288-89 (footnote omitted).

In this case, there are no facts in the summary judgment record to suggest that the transportation services Bee-Line employed other motor carriers to provide for Owens Corning, or that it engaged Mr. Copeland’s company to provide on this occasion, was “inherently dangerous” activity. Courts applying this exception have declined to apply it to a logging truck transporting several tons of logs on steep mountain roads, see Ek v. Herrington, 939 F.2d 839, 843-44 (9th Cir. 1991) (Idaho law); a logging truck hauling pulp timber, see Williams v. Tennessee River Pulp & Paper Co., 442 So. 2d 20, 23 (Ala. 1983); and a tractor-livestock trailer loaded with cattle, see Kime v. Hobbs, 252 Neb. 407, 562 N.W.2d 705, 713 (Neb. 1997). Further, if transporting the subject load of shingles from Denver to Phoenix in winter might qualify as “inherently  [*25] dangerous,” the facts regarding the accident stated in the record lead to an inescapable conclusion that “collateral negligence” was involved. If Plaintiffs’ evidence is believed, “Mr. Victorian was grossly negligent in the operation of a commercial motor vehicle.” See Pls.’ Response Bee-Line’s Mot. Summ. J., Ex. 10 [Doc. No. 222-10] at 4. He embarked on a trip through Wolf Creek Pass driving a semitrailer-tractor rig with a gross weight of approximately 76,000 pounds without taking proper safety precautions; he failed to use the proper gear or maintain control of the rig as it descended the west side of the pass; he failed to inspect or properly maintain the air brakes, which were inoperative due to excessive, frozen water in the air tanks; and after the collision, Mr. Victorian was cited for careless driving and multiple safety violations. Under these circumstances, there is no indication that Mr. Victorian’s negligence, if proven, was reasonably contemplated by Bee-Line. See Ek, 939 F.2d at 844 (malfunctioning brakes and overloading a logging truck are ordinary risks that the employer of an independent contract has no duty to prevent). Therefore, the “inherently dangerous activity”  [*26] exception cannot be applied to hold Bee-Line vicariously liable for its independent contractor’s negligence, if any, in this case.

 

2. “Statutory Employee” Principle

Plaintiffs also seek to avoid the common law rule of non-liability for negligence of an independent contractor by invoking a “statutory employee” exception developed under 49 C.F.R. § 390.5. This regulation, which defines terms for purposes of FMCSR, states in pertinent part:

 

Employee means any individual, other than an employer, who is employed by an employer and who in the course of his or her employment directly affects commercial motor vehicle safety. Such term includes a driver of a commercial motor vehicle (including an independent contractor while in the course of operating a commercial motor vehicle) . . . .

 

 

49 C.F.R. § 390.5 (emphasis added).12 “By eliminating the common law employee/independent contractor distinction, the definition serves to discourage motor carriers from using the independent contractor relationship to avoid liability exposure at the expense of the public.” Consumers County Mut. Ins. Co. v. P.W. & Sons Trucking, Inc., 307 F.3d 362, 366 (5th Cir. 2002).13

 

12   The Motor Carrier Safety Act contains a  [*27] similar definition of “employee,” including that it means “an individual not an employer.” See 49 U.S.C. § 31132(2).

13   A similar “statutory employee” exception has also been recognized under statutory provisions and regulations for leased motor vehicles. See 49 U.S.C. § 14102 (formerly, § 11107); 49 C.F.R. § 376.12 (formerly, § 1057.12 or, earlier, § 1057.4). Cases decided under leasing rules vary among jurisdictions on the issues of whether the presumption of respondeat superior liability is rebuttable or irrebuttable and whether proof of conduct within the scope of employment is required. See, e.g., Schell v. Navajo Freight Lines, Inc., 693 P.2d 382, 384-85 (Colo. App. 1984) (electing to follow the “great weight of authority” for an irrebuttable presumption and the “preferable rule” requiring acts within the scope of employment); see also Wyckoff Trucking, Inc. v. Marsh Bros. Trucking Service, Inc.., 58 Ohio St. 3d 261, 569 N.E.2d 1049, 1052-53 (Ohio 1991) (discussing minority and majority views regarding leased vehicles). These provisions are inapplicable in this case, however, because it is undisputed that no leasing or interchange agreement was involved.

By its terms, Section 390.5 is inapplicable to create  [*28] a statutory employment relationship between Bee-Line and Mr. Copeland doing business as Trinity Delivery Service under the facts of this case. First, FMCSR defines “employer” to mean “any person engaged in a business affecting interstate commerce who owns or leases a commercial motor vehicle in connection with that business, or assigns employees to operate it.” 49 C.F.R. § 390.5. It is undisputed that Bee-Line neither owned nor leased the commercial motor vehicle used in the interstate shipment at issue, nor assigned an employee to operate it. More importantly, to the extent that Bee-Line might have “assigned” Mr. Copeland or Trinity Delivery Service to operate a commercial motor vehicle in the transaction, Mr. Copeland could not be an “employee” because he was not the driver operating the commercial motor vehicle but the “employer” of the driver, acting under his own motor carrier authority. An “employee” is “any individual, other than an employer . . . .” Id.

Courts have adopted a “plain language” interpretation of § 390.5 to hold that a registered motor carrier that is an employer of an individual driver of a commercial motor vehicle cannot be a statutory employee of another registered  [*29] motor carrier. See, e.g., Illinois Bulk Carrier, Inc. v. Jackson, 908 N.E.2d 248, 255-56 (Ind. App. 2009). The courts’ analysis in these cases focuses largely on the term “individual” in holding that a corporation or other legal person cannot fit the definition of “employee.” See Brown v. Truck Connections Int’l, Inc., 526 F. Supp. 2d 920, 924-25 (E.D. Ark. 2007). While most cases have involved corporate employers of commercial truck drivers, the same rule may apply to a sole proprietorship. See Martinez v. Hays Constr., Inc., 355 S.W.3d 170, 184 n.4 (Tex. App. 2011) (“Under the plain meaning of Rule 390.5, . . . Bello Transportation, a sole proprietorship, cannot be an employee.”). Under the circumstances of this case, the Court is persuaded that Mr. Copeland, acting as Trinity Delivery Service, could not be considered a statutory employee of Bee-Line because he was the employer of Mr. Victorian, the employee operating the commercial motor vehicle.

Plaintiffs urge a different reading of § 390.5 based on FMCSA’s interpretative guidance regarding the regulation that states as follows:

 

Question 17: May a motor carrier that employs owner-operators who have their own operating authority  [*30] issued by the ICC or the Surface Transportation Board transfer the responsibility for compliance with the FMCSRs to the owner-operators?

Guidance: No. The term ”employee,”‘ as defined in §390.5, specifically includes an independent contractor employed by a motor carrier. The existence of operating authority has no bearing upon the issue. The motor carrier is, therefore, responsible for compliance with the FMCSRs by its driver employees, including those who are owner-operators.

 

 

See FMCSA Interpretation for 390.5 (available at http://www.fmcsa.dot.gov/rules-regulations/ administration/fmcsr/fmcsrruletext.aspx?reg=390.5&guidence=Yeder, accessed March 17, 2014). This informal agency interpretation contained in a policy statement or enforcement guideline is not entitled to the degree of deference afforded to formal regulations under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984), but is “‘entitled to respect’ . . . to the extent that these interpretations have the ‘power to persuade.'” See Christensen v. Harris County, 529 U.S. 576, 587, 120 S. Ct. 1655, 146 L. Ed. 2d 621 (2000) (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S. Ct. 161, 89 L. Ed. 124 (1944)).

Plaintiffs cite no authority for the proposition  [*31] that FMCSA’s interpretive guidance regarding 49 C.F.R. § 390.5 was intended to address the issue of common law tort liability for personal injuries caused by negligence of a commercial truck driver. Rather, the agency was speaking to the question of who is responsible for compliance with FMCSR, which establishes motor carrier requirements for matters such as record keeping, driver qualification and fitness, driver duties and hours of service, vehicle inspections and maintenance, and transportation of hazardous materials. See 49 C.F.R. §§ 390-397. The common sense answer is that the responsibility for these matters should lie with the employer rather than an individual driver, even if the driver is also registered as a motor carrier (owner-operator). The Court finds no persuasive value from this FMCSA guidance when considering the separate question of vicarious liability for the driver’s negligence. To the contrary, because the federal motor carrier statutes do not address tort liability, the Court doubts that FMCSA intended to express any view regarding the issue of one motor carrier’s vicarious liability for the negligence of another motor carrier.

For these reasons, the Court finds  [*32] that Plaintiffs have failed to demonstrate a genuine issue of material fact regarding their claim against Bee-Line of vicarious liability for the negligence of Mr. Copeland’s employee, Mr. Victorian. Therefore, this claim fails as a matter of law.

 

C. Negligent Hiring

Although Bee-Line denies it “hired” Mr. Copeland to deliver the load of Owens Corning freight involved in the accident, it is undisputed that Bee-Line contracted with his sole proprietorship to perform the transportation services that Bee-Line was obliged to provide for Owens Corning. Bee-Line concedes that the state laws of all jurisdictions connected with this case “recognize a cause of action for the negligent hiring of an independent contractor.” See Bee-Line’s Mot. Summ. J. [Doc. No. 202] at 20 n.4 (citing Western Stock Center, Inc. v. Sevit, Inc., 195 Colo. 372, 578 P.2d 1045, 1048 (Colo. 1978); Hudgens v. Cook Indus., Inc., 1973 OK 145, 521 P.2d 813, 816 (Okla. 1973); Malone v. Ellis Timber, Inc., 990 S.W.2d 933, 936 (Tex. App. 1999)). Bee-Line seeks summary judgment on the ground that Plaintiffs lack sufficient evidence to establish an essential element of their negligent hiring claim, that is, Bee-Line breached its duty to use reasonable care  [*33] in selecting Mr. Copeland’s company to perform the transportation services requested by Owens Corning and a more thorough investigation would have revealed Trinity Delivery Service was not competent for the job.14

 

14   Bee-Line does not dispute that it had a legal duty to Plaintiffs to select a competent trucking company, that Plaintiffs were injured, or that the accident was caused by deficiencies in Mr. Copeland’s company that a reasonable investigation would have revealed. See, e.g., Raleigh v. Performance Plumbing and Heating, 130 P.3d 1011, 1015 (Colo. 2006) (stating in a negligent hiring case: “To obtain submittal of a negligence claim to a jury, the plaintiff must establish a prima facie case demonstrating the following elements: (1) the existence of a legal duty to the plaintiff; (2) the defendant breached that duty; (3) the plaintiff was injured; and (4) the defendant’s breach of duty caused the injury.”). Bee-Line disputes only the second element, a breach of its duty to Plaintiffs.

Bee-Line bases its arguments almost entirely on the Oklahoma Supreme Court’s opinion in Hudgens, which involved the hiring of a commercial truck driver as an independent contractor to haul a load of  [*34] wheat. The court held that the employer had a duty to exercise reasonable care in selecting a motor carrier and was responsible for injuries caused by the driver’s negligence if the employer knew or should have known the person selected was not a “competent contractor,” that is, “one who possesses the knowledge, skill, experience, personal characteristics, and available equipment which a reasonable man would realize that an independent contractor must have in order to do the work which he contracts to do without creating unreasonable risk of injury to others.” Hudgens, 521 P.2d at 816.15 The court held that the facts of that case raised a triable issue of whether the defendant was negligent; the defendant made no inquiries at all into the contractor’s fitness and, if it had, could have discovered a lengthy history of arrests, accidents, safety violations, and drunk driving, and that the contractor had no permit to haul grain in Oklahoma, did not comply with federal highway safety regulations, and used defective and unsafe equipment.

 

15   Although not cited in Hudgens, this standard appears in commentary to the Restatement (Second) of Torts, § 411 (1965), adopted by the Colorado Supreme  [*35] Court in Western Stock Center, 578 P.2d at 1048.

Upon consideration of Bee-Line’s arguments in light of the facts shown by the case record, the Court finds that Plaintiffs have sufficiently demonstrated a genuine dispute of material facts with regard to the reasonableness of Bee-Line’s decision to contract with Mr. Copeland, doing business as Trinity Delivery Service, for the Owens Corning load due to be picked up on February 21, 2011. In reaching this conclusion, the Court is constrained by Rule 56 to accept all supported facts as true, and to draw all reasonable inferences from those facts in Plaintiffs’ favor, regardless whether the Court would draw the same inferences. The Court is also constrained by the lack of any facts or evidence in the case record regarding Bee-Line’s policies or procedures for selecting motor carriers, or any industry standards or recommended hiring criteria that ordinarily guide contracting decisions in the trucking industry. See Hudgens, 521 P.2d at 815 (noting testimony regarding practices of another wheat shipper with respect to haulers’ credentials). Accordingly, the Court, like any jurors called to judge Bee-Line’s conduct, must make a common sense  [*36] assessment of the reasonableness of Bee-Line’s decision.

To that end, the facts relevant to Plaintiffs’ negligent hiring claim include that Bee-Line’s investigation consisted of speaking with Mr. Copeland in Texas on the morning of the day set for pick-up of the Owens Corning shipment in Denver and asking him the name of his trucking business and his motor carrier number. Bee-Line also checked FMCSA’s online database to determine that Mr. Copeland’s operating authority was active, he had insurance coverage, and he did not have a negative safety rating. In fact, Mr. Copeland and Trinity Delivery Service had no safety rating. Bee-Line (and its industry expert) contend this fact is immaterial, but reasonable persons could conclude it warranted further inquiry. See, e.g., Schramm v. Foster, 341 F. Supp. 2d 536, 551 (D. Md. 2004) (finding a duty of inquiry despite the lack of a negative safety rating).16 Bee-Line also notes that its designated expert, Ronald Ashby, has expressed an opinion that contracting with Trinity Delivery Service to transport the Owens Corning load was a reasonable decision, while Plaintiffs’ expert provided no opinion on this issue. However, because Mr. Ashby does  [*37] not identify any industry standards or practices regarding contracting decisions, or otherwise explain the basis for his conclusion, the Court finds that a fact-finder could reasonably give his opinion little weight.

 

16   Bee-Line’s expert states that “[t]he majority of the motor carrier population (78%) have [sic] not been assigned a safety rating.” See Bee-Line’s Mot. Summ. J., Ex. 2 [Doc. No. 202-2] at 2-3. In view of the prevalence of this circumstance, its significance is unclear.

Assuming Bee-Line had a duty of inquiry, a reasonable jury could find that Bee-Line’s efforts were insufficient to decide that Mr. Copeland or Trinity Delivery Service was a competent contractor for the Owens Corning job. Bee-Line did not obtain verification of Mr. Copeland’s insurance coverage before contracting with him. It did not request any information concerning the trucking experience of Mr. Copeland, his company (which had been in operation for less than eight months), or his drivers. Bee-Line did not request any information or documentation from Mr. Copeland regarding his company’s equipment or maintenance practices, the credentials or safety records of its truck drivers, or the company’s trucking  [*38] experience in Colorado. Viewed most favorably to Plaintiffs, the facts reflect that Bee-Line conducted only a minimal inquiry into the competence of Mr. Copeland’s company to perform the job for which it was selected.

In short, on the summary judgment record presented, the Court finds that Plaintiffs have come forward with sufficient facts to demonstrate a triable issue of negligent conduct by Bee-Line in its hiring of Mr. Copeland’s proprietorship for the shipment at issue.

 

D. Punitive Damages

Bee-Line also seeks a summary judgment ruling on the issue of whether punitive damages are available under the facts shown by the case record. Plaintiffs assert that this issue is governed by Oklahoma law and, specifically, its punitive damages statute authorizing recovery upon clear and convincing evidence that “the defendant has been guilty of reckless disregard for the rights of others.” See Okla. Stat. tit. 23, § 9.1(B)(1). Plaintiffs contend “there is competent evidence Bee-Line Delivery acted with reckless disregard in allowing an unqualified [employee] to be the Dispatch Manager on interstate hauls that included the State of Colorado, and that [the dispatcher] acted recklessly in hiring  [*39] Copeland at the last minute and failing to ask him any questions about his or his drivers’ competency.” See Pls.’ Resp. Bee-Line’s Mot. Summ. J. [Doc. No. 222] at 30. Bee-Line argues that the evidence is insufficient to establish reckless disregard for Plaintiffs’ rights, as required by § 9.1(B).

Assuming, without deciding, that Oklahoma law provides the appropriate standard, the Oklahoma Uniform Jury Instructions would guide a jury’s determination of the issue of punitive damages. Instruction 5.6 provides in pertinent part:

 

The conduct of [Defendant] was in reckless disregard of another’s rights if [Defendant] was either aware, or did not care, that there was a substantial and unnecessary risk that [his/her/its] conduct would cause serious injury to others. In order for the conduct to be in reckless disregard of another’s rights, it must have been unreasonable under the circumstances, and also there must have been a high probability that the conduct would cause serious harm to another person.

 

 

Okla. Unif. Civil Jury Instr. 5.6 (available at http://www.oscn.net/applications/oscn). In light of the determination that Plaintiffs’ negligent hiring claim must be submitted to the jury, the Court  [*40] finds that a jury must decide the issue of whether the degree of negligence, if any, could be considered reckless. Further, in light of the obvious danger to the public presented by the operation of semitrailer truck carrying a heavy load of shingles by a trucking company that is not a “competent contractor,” if that is the jury’s finding, the Court finds that the availability of punitive damages presents a factual issue to be determined by the jury.

 

Conclusion

For these reasons, the Court finds that Bee-Line is entitled to summary judgment on Plaintiffs’ vicarious liability claim against Bee-Line, but that genuine disputes of material facts preclude summary judgment on Plaintiffs’ negligent hiring claim regarding Bee-Line’s selection of Mr. Copeland or Trinity Delivery Service for the Owens Corning shipment and the issue of punitive damages.

IT IS THEREFORE ORDERED that Plaintiffs’ Motion for Partial Summary Judgment [Doc. No. 46] is DENIED and that Defendant Bee-Line Delivery Service, Inc.’s Motion for Summary Judgment [Doc. No. 202] is GRANTED in part and DENIED in part, as set forth herein.

IT IS SO ORDERED this 27th day of March, 2014.

/s/ Timothy D. DeGiusti

TIMOTHY D. DEGIUSTI

UNITED  [*41] STATES DISTRICT JUDGE