Volume 13, edition 1

Carolina Cas. Ins. Co. v. Ortiz

United States District Court,

E.D. California.

CAROLINA CASUALTY INSURANCE COMPANY, Plaintiff,

Elizabeth S. ORTIZ, et al, Defendants.

and related counter-claims.

No. CV F 08-0691 LJO SMS.

Jan. 4, 2010.

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT ON THE ISSUE OF INSURANCE COVERAGE

LAWRENCE J. O’NEILL, District Judge.

The parties have filed cross motions for summary judgment pursuant to Fed.R.Civ. P 56. Plaintiff and Counterclaim defendant Carolina Casualty Insurance Company (“Carolina Casualty” or “plaintiff”) moves for summary judgment, or in the alternative, summary adjudication, on its claims that it has no duty to indemnify and defend the Counterclaimants’ claims. Defendants and Counterclaimants move for summary judgment on the issue of insurance coverage.

FACTUAL BACKGROUND

Plaintiff Carolina Casualty issued an insurance policy number CTP 3398 30 (“Policy”) to Antonini Freight Express, Inc., Antonini Brothers, Inc. dba Antonini Fruit Express, Antonini Enterprises, LLC (collectively “Antonini”). This case involves whether Antonini’s Policy provided coverage to A & A Transport Company, Inc. as an “Additional Insured” for a motor vehicle accident on August 10, 2005.

A. The Hauling Agreement

For the 2005 tomato harvest season, Stanislaus Food Products Co., Inc. (“Stanislaus Food”) hired two trucking firms to transport tomatoes from fields throughout the central valley to Stanislaus Food’s processing plant in Modesto: Antonini and A & A Transport Company, Inc. (“A & A Transport”). A & A Transport and Antonini were the sole transporters of tomatoes from the fields to Stanislaus Foods’ processing plant.

On April 8, 2005, Antonini entered into the Hauling Agreement (“Hauling Agreement”) with Stanislaus Food. (Doc. 8, First Amended Complaint ¶ 12; see also Doc. 113, Hauling Agreement.) Stanislaus Food entered into a separate Hauling Agreement with A & A Transport, which generally mirrored the Hauling Agreement with Antonini. (Doc. 115, A & A Transport Hauling Agreement.) The Hauling Agreement which Antonini executed stated that Antonini is the “CONTRACTOR” and defendant A & A Transport as the “other designated hauler.” (Doc. 136, Undisputed Fact no. 38.) Stanislaus Food was called “COMPANY” in the Hauling Agreement. Antonini’s insurance obligations towards A & A Transport are set forth in Paragraph 9 of the Hauling Agreement which provides, in part, as follows:

“It is understood COMPANY’S tomato hauling needs are to be provided by two tomato haulers. CONTRACTOR must agree to provide trailer interchange insurance with the other designated hauler in a form and proof acceptable to COMPANY. CONTRACTOR agrees to name the other designated hauler as an additional named insured on their general liability and motor cargo insurance policy.” [Doc. 113, Hauling Agreement, ¶ 9.]

Thus, pursuant to their respective Hauling Agreements, Antonini and A & A Transport were each to name the other hauler as an additional insured on certain policies of insurance and provide proof of the insurance to Stanislaus Food. (Doc. 113, Hauling Agreement ¶ 9.)

B. The Underlying Action

The underlying action arose from a motor vehicle accident on August 10, 2005 involving an A & A Transport driver. Jose Pimentel Rodriguez was a truck driver for A & A Transport Company and was driving an A & A Transport tractor-trailer combination. He was hauling two trailers full of tomatoes from the field to Stanislaus Food’s processing plant in Modesto, California. The tractor-trailer drifted across the center line, clipped a tractor-trailer operated by Victor Newball, then struck a pick-up truck operated by Fred Carlotti, and finally struck a van occupied by five men, killing the five men.

An underlying wrongful death action was filed by the Ortiz defendants and the Diego defendants against A & A Transport and Jose Pimentel Rodriguez. A & A Transport and Jose Pimentel Rodriguez tendered the underlying action to their insurance carriers, all of whom settled except Carolina Casualty. A & A Transport assigned to the Ortiz defendants and the Diego defendants all of A & A Transport’s rights, actions and causes of action against Carolina Casualty, its agents, brokers, subsidiary, and all other person for breach of insurance contract and/or refusal to defend or indemnify A & A Transport. (Doc. 22, Counterclaim ¶ 20.) It is undisputed that the accident involved a tractor owned by A & A, operated by an employee of A & A, and pulling trailers owned by A & A with tubs owned by Stanislaus and leased to A & A. It is undisputed that Antonini was not involved in the underlying accident and did not involve any equipment owned or operated by Antonini.

Defendants and counterclaimants are ELIZABETH S. ORTIZ, individually and as Guardian ad Litem for KASSANDRA N. ORTIZ and ALEXIS J. ORTIZ, minors; KASSANDRA N. ORTIZ and ALEXIS J. ORTIZ, each individually; ESTATE OF JAVIER ORTIZ FUENTES, by and through its Representative ELIZABETH S. ORTIZ (collectively, the “Ortiz Defendants”).

Defendants and Counterclaimants are VERONICA DIEGO, individually and as Guardian ad Litem for JOSÉ ANTONIO DIEGO and ROBERTO DIEGO-JERONIMO, minors, each individually and as Successors in Interest of Aniceto Diego Trujillo, deceased; MARIA GUADALUPE ALFARO VEGA, individually and as Guardian ad Litem for KARINA ALEJANDRA CORTES ALFARO and LUIS GERARDO CORTES ALFARO, minors, each individually and as Successors in Interest of Gerardo Cortes Cervantes, a.k.a. Gerardo Cortez, deceased; MARIA IMELDA MERCADO individually and as Guardian ad Litem for VICKY NAVA, JOESELYN NAVA and STEPHANIE NAVA, minors; VICKY NAVA, JOESELYN NAVA and STEPHANIE NAVA, each individually and as Successors in Interest of Gabino Nava Sanchez a.k.a. Omar Ramirez, deceased; FAVIOLA QUEZADAS DE VELASQUEZ, individually and as Guardian ad Litem for LAURA ALEJANDRA VELASQUEZ QUEZADAS, ALONDRA LIZBETH VELASQUEZ QUEZADAS, JOSÉ DE JESUS VELASQUEZ QUEZADA, JOHN VELASQUEZ-QUEZADA, RICHARD VELASQUEZ-QUEZADA and DIEGO EMMANUEL VELASQUEZ-QUEZADA, minors, each individually and as Successors in Interest of José Velasquez Martinez, deceased, the moving parties herein (collectively, the “Diego Defendants”).

Carolina Casualty filed this action for a declaration of its rights and duties under the Policy as against the Ortiz defendants, the Diego defendants, A & A Transport and Jose Pimental Rodriguez. The Ortiz defendants and Diego defendants filed counterclaims against Carolina Casualty. A & A Transport and Jose Pimental Rodriguez defaulted in this action.

Plaintiff argues that its motion for summary judgment should be granted because A & A Transport has admitted the allegations in the complaint by its default in this action. On July 30, 2008, plaintiff and A & A and Rodriguez entered into a stipulation for default. (Doc. 20.) The Court entered default on July 31, 2008. (Doc. 21.) “Upon default, the factual allegations of the complaint, except those relating to the amount of damages will be taken as true.” Geddes v. United Fin. Group, 559 F.2d 557, 556 (9th Cir.1977). Plaintiff argues that with the default, A & A and its employee Rodriguez are deemed to have admitted that (1) Antonini’s insurance objections toward A & A are only to provide trailer interchange coverage, (2) name A & A as an additional insure for general liability and motor cargo insurance only, and (3) that Carolina Casualty had no duty to indemnify or make payments. Here, however, A & A Transport’s claims against Carolina Casualty have been assigned to the Ortiz Defendants and Diego Defendants, and while not specifically stated by the parties, the assignment of rights occurred before A & A Transport’s default. (See Doc.135, Ortiz Opposition p. 4.) Thus, it appears the rights had already been assigned before any default. While the argument does not appear to have merit, the Court does not reach plaintiff’s “default” argument because the Court reaches the merits of the coverage issue.

C. The Blanket Endorsement

Antonini obtained the insurance required under the Hauling Agreement. The Policy with Carolina Casualty included coverage for general liability, motor cargo, trailer interchange, and commercial automobile liability. (Doc. 8, First Amended Complaint ¶ 17.) The effective date of the policy was from October 1, 2004 to October 1, 2005.

Antonini’s Policy contained a blanket endorsement that modifies four types of coverages under the policy:

“This endorsement modifies insurance provided under the following:

COMMERCIAL AUTOMOBILE COVERAGE

COMMERCIAL GENERAL LIABILITY

BASIC CARGO COVERAGE

CARGO LIABILITY COVERAGE” (Doc. 109, Policy, Bates 100008.)

The Blanket Additional Insured Endorsement amends who is “insured” to include those persons required by a written contract to be covered as an additional insured. The Blanket Additional Insured Endorsement provides coverage for “additional insured”:

A. WHO IS AN INSURED (Section II-Liability Coverage) is amended to include as an insured any person or organization (called additional insured) with respect to the operation, maintenance, or use of a covered “auto” whom you are required to add as an additional insured on the policy under a written contract or agreement evidenced by certificate of insurance on file with “us” … (Doc. 109, Policy Bates 10008) (emphasis added.)

Thus, the Blanket Additional Insured Endorsement provided coverage for persons Antonini was require to add as an additional insured under a written contract.

D. Certificate of Insurance

Antonini’s Insurance agent, Seitz Perkins Insurance, executed a Certificate of Insurance on July 29, 2005, identifying A & A Transport as an additional insured on Carolina Casualty’s policy number CTP 3398 30. (Doc. 114, Certificate of Insurance.) The Certificate of Insurance was issued to “Insured” Antonini Freight Express and purports to list “A & A Transport Company” as the Certificate Holder for four types of insurance: (1) general liability, (2) automobile liability, (3) physical damage, and (4) cargo. (Doc. 114, Certificate of Insurance.) Each “box” next to each of these 4 types of insurance is checked on the Certificate. (See Doc. 114, Certificate of Insurance.) The top portion of the Certificate of Insurance states, in all capital letters:

Bernard Seitz was Antonini’s agent and also authorized to sign the Certificate of Insurance as “Crouse and Assoc.” Crouse and Assoc. is a managing general agent for Carolina Casualty with authority to do business on Carolina’s behalf. (Doc. 137, Carolina’s Response to Def’s Undisputed Facts Fact # 7.)

THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND, OR ALTER THE COVERAGES AFFORDED BY THE POLICIES BELOW.” (Doc. 114, Certificate of Insurance).

The parties dispute which “coverage” applied to A & A Transport in the “Policy.”

E. The Claims in the Current Action

The issue in the current action is whether Policy issued by Carolina Casualty to Antonini covers A & A Transport as an “Additional Insured” for the accident.

Carolina Casualty filed this declaratory relief action alleging the following claims:

1. Declaratory Relief,

2. Reformation. (Doc. 8, First Amended Complaint).

The Diego Defendants and the Ortiz defendants answered and filed counterclaims asserting the following:

1. Declaratory Relief,

2. Breach of Contract,

3. Breach of the Implied Covenant of Good Faith and Fair Dealing, and

4. Negligent Misrepresentation. (Doc. 22 (Ortiz Defendants) and Doc. 23 (Diego Defendants).

This Order addresses the “coverage” issue, and thereby, any claims which are dependent upon the issue of insurance coverage.

ANALYSIS AND DISCUSSION

A. Summary Judgment/Adjudication Standards

F.R.Civ.P. 56(b) permits a “party against whom relief is sought” to seek “summary judgment on all or part of the claim.” Summary judgment/adjudication is appropriate when there exists no genuine issue as to any material fact and the moving party is entitled to judgment/adjudication as a matter of law. F.R.Civ.P. 56(c); Matsushita Elec. Indus. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Assn., 809 F.2d 626, 630 (9th Cir.1987). The purpose of summary judgment/adjudication is to “pierce the pleadings and assess the proof in order to see whether there is a genuine need for trial.” Matsushita Elec., 475 U.S. at 586, n. 11, 106 S.Ct. 1348, 89 L.Ed.2d 538;International Union of Bricklayers v. Martin Jaska, Inc., 752 F.2d 1401, 1405 (9th Cir.1985).

On summary judgment/adjudication, a court must decide whether there is a “genuine issue as to any material fact,” not weigh the evidence or determine the truth of contested matters. F.R.Civ.P. 56(c); Covey v. Hollydale Mobilehome Estates, 116 F.3d 830, 834 (9th Cir.1997); see Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Poller v. Columbia Broadcast System, 368 U.S. 464, 467, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); Loehr v. Ventura County Community College Dist., 743 F.2d 1310, 1313 (9th Cir.1984). The evidence of the party opposing summary judgment/adjudication is to be believed and all reasonable inferences that may be drawn from the facts before the court must be drawn in favor of the opposing party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Matsushita, 475 U.S. at 587, 106 S.Ct. 1348, 89 L.Ed.2d 538. The inquiry 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, 477 U.S. at 251-252, 106 S.Ct. 2505, 91 L.Ed.2d 202.

To carry its burden of production on summary judgment/adjudication, a moving party “must either produce evidence negating an essential element of the nonmoving party’s claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial.” Nissan Fire & Marine Ins. Co. v. Fritz Companies, Inc., 210 F.3d 1099, 1102 (9th Cir.2000); see High Tech Gays v. Defense Indus. Sec. Clearance Office, 895 F.2d 563, 574 (9th Cir.1990). “[T]o carry its ultimate burden of persuasion on the motion, the moving party must persuade the court that there is no genuine issue of material fact.” Nissan Fire, 210 F.3d at 1102;see High Tech Gays, 895 F.2d at 574. “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.” Anderson, 477 U.S. at 248, 106 S.Ct. 2505, 91 L.Ed.2d 202.

“If a moving party fails to carry its initial burden of production, the nonmoving party has no obligation to produce anything, even if the nonmoving party would have the ultimate burden of persuasion at trial.” Nissan Fire, 210 F.3d at 1102-1103;see Adickes, 398 U.S. at 160, 90 S.Ct. 1598, 26 L.Ed.2d 142. “If, however, a moving party carries its burden of production, the nonmoving party must produce evidence to support its claim or defense.” Nissan Fire, 210 F.3d at 1103;see High Tech Gays, 895 F.2d at 574. “If the nonmoving party fails to produce enough evidence to create a genuine issue of material fact, the moving party wins the motion for summary judgment.” Nissan Fire, 210 F.3d at 1103;see Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (“Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make the 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.”)

“But if the nonmoving party produces enough evidence to create a genuine issue of material fact, the nonmoving party defeats the motion.” Nissan Fire, 210 F.3d at 1103;see Celotex, 477 U.S. at 322, 106 S.Ct. 2548, 91 L.Ed.2d 265. “The amount of evidence necessary to raise a genuine issue of material fact is enough ‘to require a jury or judge to resolve the parties’ differing versions of the truth at trial.’ ” Aydin Corp. v. Loral Corp., 718 F.2d 897, 902 (quoting First Nat’l Bank v. Cities Service Co., 391 U.S. 253, 288-289, 88 S.Ct. 1575, 1592, 20 L.Ed.2d 569 (1968)). “The mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient.” Anderson, 477 U.S. at 252, 106 S.Ct. 2505, 91 L.Ed.2d 202.

B. Standards for Interpreting Insurance Contracts

California’s substantive insurance law governs in this diversity case. State Farm Mut. Auto. Ins. Co. v. Khoe, 884 F.2d 401, 405 (9th Cir.1989). An insurance policy is fundamentally a contract between the insurer and the insured. Stein v. International Ins. Co., 217 Cal.App.3d 609, 614, 266 Cal.Rptr. 72 (1990). It is subject to the same general principles of interpretation as any other contract. AIU Ins. Co. v. Sup.Ct. (FMC Corp.), 51 Cal.3d 807, 821-822, 274 Cal.Rptr. 820, 799 P.2d 1253 (1990). Interpretation of clear and unambiguous provisions in a contract is a question of law for the court, allowing summary judgment/adjudication. See United States v. Sacramento Mun. Util. Dist., 652 F.2d 1341, 1344 (9th Cir.1981).

Here, none of the parties contends that the relevant terms of the insurance contract are ambiguous. Defendants note that “no party herein contends that the language of the Policy is ambiguous.” (Doc. 155, Joint Defendant Reply p. 2.) Plaintiff does not contend that the language of its insurance policy is ambiguous. Thus, the Court’s interpretation is a question of law.

The court’s initial focus in resolving a question of insurance coverage is always on the language of the insurance policy itself: “The rules governing policy interpretation require us to look first to the language of the contract in order to ascertain its plain meaning or the meaning a layperson would ordinarily attach to it.” Waller v. Truck Ins. Exch., Inc., 11 Cal.4th 1, 18, 44 Cal.Rptr.2d 370, 900 P.2d 619 (1995) (emphasis added); see also City of Hope Nat. Medical Center v. Genentech, Inc., 43 Cal.4th 375, 395, 75 Cal.Rptr.3d 333, 181 P.3d 142, (2008) (Contract interpretation is solely a judicial function when “based on the words of the instrument alone, when there is no conflict in the extrinsic evidence, or a determination was made based on incompetent evidence”.) Absent evidence indicating the parties intended a special usage, words used in an insurance policy should be interpreted in their “ordinary and popular sense.” Cal. Civ.Code § 1644. In determining whether a policy provision has a “plain meaning,” it must be read in the context of the entire policy: “The whole of a contract is to be taken together, so as to give effect to every part … each clause helping to interpret the other.” Cal.Civ.Code § 1641. To put words in context in the circumstances of the case, the parties may offer parol evidence showing special meanings they attached to the words used in the policy or a special meaning is given to them by usage. See Haynes v. Farmers Ins. Exch., 32 Cal.4th 1198, 1204, 13 Cal.Rptr.3d 68, 72, 89 P.3d 381 (2004). Terms are to be interpreted “in their ‘ordinary and popular sense,’ unless used by the parties in a technical sense or a special meaning is given to them by usage.’ ” MacKinnon v. Truck Ins. Exchange, 31 Cal.4th 635, 647-648, 3 Cal.Rptr.3d 228, 73 P.3d 1205 (2003). Coverage clauses are interpreted to protect the objectively reasonable expectations of the insured. AIU Ins. Co. v. Superior Court, 51 Cal.3d, 51 Cal.3d 807, 274 Cal.Rptr. 820, 799 P.2d 1253 (1990).

In this case, plaintiff seeks to introduce numerous declarations from various witnesses as to their “intent” regarding the insurance policy. For instance, plaintiff seeks to introduce the testimony of Joseph Antonini as to his intent on insurance coverage. Plaintiff seeks to introduce testimony of Gregory Crouse that there was no intent to provide any coverage for this kind of accident; and of A & A’s agent/insurance broker, James Cook, that there was insurance coverage other than the auto liability with Century National and the excess liability coverage with General Star. Plaintiff seeks to introduce the declaration of William Butler, of Stanislaus Food, as to Stanislaus Food’s intent on insurance for the contractors under the Hauling Agreement. When insurance policy terms are ambiguous, extrinsic evidence is generally admissible to establish the parties’ intent. Cooper Cos. v. Transcontinental Ins. Co., 31 Cal.App.4th 1107, 1104, 37 Cal.Rptr.2d 508, 514 (1995). Here, however, the parties do not argue that any term of the Policy is ambiguous. The Court does not find that the declarations as to the subjective intent of the declarants dispositive of the issue of coverage.

Here, the parties do not contend that any term of the Policy is ambiguous. When terms are unambiguous, California law requires that the mutual intention of the parties is to be “inferred, if possible, solely from the written provisions of the contract.” MacKinnon v. Truck Ins. Exchange, 31 Cal.4th at 647-648, 3 Cal.Rptr.3d 228, 73 P.3d 1205. The mutual intention of the contracting parties at the time the contract was formed governs interpretation. Cal. Civ.Code § 1636. “The parties’ mutual intent is to be determined, if semantically possible, solely from the written provisions of the contract.” AIU Ins. Co. v. Sup.Ct., FMC Corp., 51 Cal.3d at 822, 274 Cal.Rptr. 820, 799 P.2d 1253;Waller, 11 Cal.4th at 18, 44 Cal.Rptr.2d 370, 900 P.2d 619 (Such intent is to be inferred, if possible, solely from the written provisions of the contract); Haynes v. Farmers Ins. Exch., 32 Cal.4th 1198, 1204, 13 Cal.Rptr.3d 68, 89 P.3d 381 (2004) (same). Therefore, the Court turns to the language used in the Policy and the Hauling Agreement.

C. Analysis of Hauling Agreement and Whether Automobile Coverage was Provided

Antonini was required, pursuant to the Hauling Agreement, to name A & A Transport as an additional insured. Defendants argue that Antonini added A & A Transport as an additional insured on Antonini’s automobile coverage pursuant to the Hauling Agreement.

When additional insured endorsements, by their own terms, depend on the existence of a written contract between the named insured and the additional insured, the contract is a significant circumstance in determining the objectively reasonable expectations of the additional insured. St. Paul Mercury Ins. Co. v. Frontier Pacific Ins. Co., 111 Cal.App.4th 1234, 1245, 4 Cal.Rptr.3d 416, 426 (2003) (since entity was named an additional insured because of named insured’s contractual obligation to do so, ambiguity as to the scope of the additional insured status was resolved by examining what the underlying rental contract which required the named insured to have provided for the other party); Cal.Civ.Code § 1642 (“Several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together.”) Since the Hauling Agreement required A & A Transport to be named as an additional insured, the starting point in the Court’s analysis in the Hauling Agreement.

1. Insurance Requirements in the Hauling Agreement

The parties focus on the insurance requirements in the following portion of the Hauling Agreement in Paragraph 9:

This language, however, must be placed in context with the entirety of Paragraph 9 of the Hauling Agreement and in context with the totality of the Hauling Agreement.

The purpose of the Hauling Agreement was for Stanislaus Food to engage “a reliable hauler to transport tomatoes from their place of origin to the business premises of COMPANY.” (Doc. 113, Hauling Agreement, “Recitals.”) “COMPANY,” in the Hauling Agreement, is Stanislaus Food. CONTRACTOR is Antonini. Stanislaus Food included several provisions in the Hauling Agreement with the purpose of protecting itself in the hauling operations. The COMPANY included a comprehensive indemnity provision in the Hauling Agreement:

“7. Indemnity/Liability: CONTRACTOR does hereby undertake and assume the whole and entire responsibility and liability for any and all Claims as defined in subparagraph(b).

(a) Indemnification/Liability: CONTRACTOR shall … indemnify, defend, and hold harmless the COMPANY from and against all CLAIMS …

(b) Definition of Claims: … “Claims” means any and all claims, losses, costs, damage, expenses, liabilities, liens, actions, cause of action, and charges of any kind for:

(I) Injury to any persons (including death at any time resulting from that injury); and /or

(ii) Loss of, injury or damage to, or destruction of tangible property; and/or

(iii) Other losses, costs, damages, expenses, liabilities, liens, or charges in any manner sustained by COMPANY, its agents, servants, and employees, and arising out of contractors services being performed under this Agreement; and

(iv) Which Claim resulted from the negligent act, intentional act, or failure to act on the part of the CONTRACTOR, its agents, employees, servants and contractors;

(v) Or which Claim results from the Contractor’s breach, failure to perform, or other default of this Agreement. (Doc. 113, Hauling Agreement ¶ 7.)

Thus, the Hauling Agreement provided an extensive indemnity provision to protect Stanislaus Food. To protect itself further from potential liability, the COMPANY required Antonini to name COMPANY as an additional insured in Antonini’s liability insurance:

8. Insurance: At all times during the performance of such hauling and the performance of such other services for and on behalf of COMPANY … the CONTRACTOR does hereby agree to procure, hold and maintain in full force and effect comprehensive general liability and business automobile insurance … and COMPANY … shall be included under such policy or policies as an additional insured…. COMPANY .. shall be included under said umbrella policy as an additional insured with respect to the comprehensive general, product, and automobile, and excess liability coverage specified herein and all such policies … All of such insurance shall be written with insurance carriers approved by COMPANY and specifically cover all of the CONTRACTORS’ activities and operations including those provided as set forth in this Agreement, owned and non-owned vehicles, and such other coverage as will be necessary to fully protect the COMPANY …

As respects vehicles, CONTRACTOR’s business automobile policy shall be a comprehensive form specifically covering all vehicles and trailers owned, non-owned, hired, and all vehicles used by sub-haulers. (Doc. 113, Hauling Agreement ¶ 8) (emphasis added.)

Thus, Antonini, as the CONTRACTOR, agreed to name Stanislaus Food, as the COMPANY, as “an additional insured” as to its general liability, automobile insurance and on its umbrella policy for the purpose of “fully protect[ing] the COMPANY.”

In accordance with the COMPANY’s desire to protect itself and its products fully in the hauling operations, the Stanislaus Food required Antonini to provide worker compensation insurance. It also required Antonini to name the other hauler as an additional insured on certain policies. Paragraph 9 which states in full:

“9. Worker’s Compensation/Trailer Interchange Insurance. At all times during the performance of such hauling and the performance of such other services for and on behalf of COMPANY, the CONTRACTOR does hereby agree to procure, hold and maintain in full force and effect worker’s compensation insurance covering and protecting the employees and servants of CONTRACTOR … CONTRACTOR further does hereby promise and agree to provide to COMPANY written proof of such coverage at the same time as proof of other insurance coverage is provided.

The above highlighted language in Paragraph 9 of the Hauling Agreement is the sole language which requires some kind of insurance coverage for the “other designated hauler.” Paragraph 9 of the Hauling Agreement explicitly identifies the types of insurance for the “other designated hauler:” trailer interchange insurance, general liability and motor cargo insurance. The Hauling Agreement does not identify any other kind of insurance coverage required by Antonini for the “other designated hauler.”

On the other hand, the Hauling Agreement requires Antonini to name Stanislaus Food as an additional insured for comprehensive general liability, business automobile insurance and in an umbrella policy. (Doc. 113, Hauling Agreement, ¶ 8 (“CONTRACTOR does hereby agree to procure .. comprehensive general liability and business automobile insurance … and COMPANY … shall be included … as an additional insured.”) This is consistent with the intent of “fully” protecting Stanislaus Food and is consistent with the broad scope of the “indemnity” provision in the Hauling Agreement.

To accomplish the intent of naming additional insureds on Antonini’s Policy, the Blanket Additional Insured Endorsement was issued by Carolina Casualty. The Blanket Additional Insured Endorsement provides coverage for “additional insured”:

“This endorsement modifies insurance provided under the following:

COMMERCIAL AUTOMOBILE COVERAGE

COMMERCIAL GENERAL LIABILITY

BASIC CARGO COVERAGE

CARGO LIABILITY COVERAGE” (Doc. 109, Policy, Bates 100008.)

The Blanket Additional Insured Endorsement alters “WHO IS AN INSURED” according the what is required “under a written contract or agreement.” The Hauling Agreement required the “COMPANY” to be an additional insured for Antonini’s Commercial Automobile coverage and for its Commercial General Liability coverage. The Hauling Agreement required the “other designate hauler,” A & A Transport, to be named an additional insured for Antonini’s Commercial General Liability, Basic Cargo liability, and trailer interchange coverage. Accordingly, the Blanket Additional Insured Endorsement modified who is an additional insured only for those coverages required by the Hauling Agreement. The plain language of the Hauling Agreement required A & A Transport to be named as an additional insured for General Liability, Basic Cargo liability, and trailer interchange coverage, only. The Hauling Agreement did not require Antonini to name A & A Transport as an additional insured for the Commercial Automobile coverage. Therefore, A & A Transport is not an additional insured for the Commercial Automobile coverage because the Hauling Agreement did not so require it.

Thus, the Blanket Additional Insured Endorsement governs Additional Insured status by reference to what is required in the Antonini’s written contract. The Hauling Agreement provides that Antonini agrees to provide trailer interchange insurance and name A & A as an additional named insured on the general liability and motor cargo insurance only. Therefore, the Blanket Additional Insured Endorsement does not provide coverage under Antonini’s automobile coverage.

2. Defendants’ Argument re Paragraph 8 of the Hauling Agreement

Defendants argue that Paragraph 8 of the Hauling Agreement requires additional insured status as to Antonini’s automobile coverage. Defendants argue that Paragraph 8 of the Hauling Agreement shows that Stanislaus Food required coverage of all “vehicles” and trailers including those which were “un-owned” by Antonini and/or being used by “sub-haulers.” (Doc. 135, Ortiz Defendants’ Opposition, p. 8:1-5.) Defendants argue that this contract term required automobile coverage between the haulers, Antonini and A & A Transport.

Defendants, however, read Paragraph 8 of the Hauling Agreement in isolation without the context of the remaining paragraph. The first part of Paragraph 8 states the insurance requirements for which the Contractor, here Antonini, must provide to protect Stanislaus Foods and to protect itself.

“As respects vehicles, CONTRACTOR’s business automobile policy shall be a comprehensive form specifically covering all vehicles and trailers owned, non-owned, hired, and all vehicles used by sub-haulers, …” (Doc. 113, Hauling Agreement ¶ 8) (emphasis added.)

This highlighted language requires Antonini to obtains and “maintain in full force and effect comprehensive general liability and business automobile insurance.” It states what insurance Antonini, as a hauler for Stanislaus Food, must maintain. It also states what insurance Antonini must name Stanislaus Food as an additional insured. It does not provide for any insurance requirement between one contractor and the other contractor.

The language relied upon by defendants, (“As respects vehicles, CONTRACTOR’s business automobile policy shall be a comprehensive form specifically covering all vehicles and trailers owned, non-owned, hired, and all vehicles used by sub-haulers,”) pertains to obligations between Antonini and Stanislaus. In fact, the entirety of Paragraph 8 deals with insurance obligations between Antonini and Stanislaus. Thus, the insurance obligations discussed in paragraph 8 are between the CONTRACTOR, Antonini, and the COMPANY, Stanislaus Food. Paragraph 8 makes no mention of the “other designated hauler” and simply does not apply to A & A Transport.

There is no evidence that A & A Transport was a sub-hauler for Antonini. Indeed, the parties agree that Antonini and A & A Transport are independent entities, each with their separate Hauling Agreements with Stanislaus Food. (See Doc. 113, Antonini Hauling Agreement and Doc. 115, A & A Transport Hauling Agreement.)

3. Use of the Language “Policy” v. “Coverage”

Defendants argue that the use of the term “policy” and not the term “coverage” in Paragraph 9 of the Hauling Agreement is significant. (Doc. 124, Defendants Motion, McLaughlin Decl. ¶ 22; Doc. 135, Ortiz Defendant’s Opposition p. 12.)

“CONTRACTOR agrees to name the other designated hauler as an additional named insured on their general liability and motor cargo insurance policy.” (Emphasis added.)

Defendants argue the terms “policy” and “coverage” are “terms of art” in the insurance industry. The term “policy” is afforded a much broader interpretation than “coverage.” Defendants argue that under industry standards, an indication that someone is an “additional insured” under the “policy” conveys that the person is presumptively covered under all available “coverages” unless expressly stated otherwise. (Doc. 124, Defendants Motion, McLaughlin Decl. ¶ 22.)

Defendants do not offer evidence to support their position the Hauling Agreement conformed to industry standards. Defendants have the burden of proving coverage. Royal Globe Ins. Co. v. Whitaker, 181 Cal.App.3d 532, 537, 226 Cal.Rptr. 435 (1986) (It is the insured’s burden to prove that a claim comes within the basic coverage of the policy.) There is no evidence that the Hauling Agreement was drafted by any person in the insurance industry or with any intent to comply with insurance industry standards. The Hauling Agreement is not an insurance contract. It is a rather simply stated document. From the Court’s reading of the Hauling Agreement, it appears to have been drafted to accomplish Stanislaus Food’s basic hauling needs, with some legal terminology included.

For instance, the Hauling Agreement contains standard “legal” paragraphs such as “Entire Agreement,” “Venue/Jurisdiction,” “Failure to Perform.” The evidence shows that Paragraph 9 of the Hauling Agreement was drafted by William Butler, Executive Vice President of Stanislaus, and his lawyers (Doc. 159, p. 17, Butler Decl. ¶ 3.) The Court, however, does not rely upon this evidence, but relies upon the lack of evidence as to the standards upon which the Hauling Agreement was drafted.

Regardless, the Court need not speculate. There is no evidence that the insurance industry standards were meant to apply in the insurance terminology used in the Hauling Agreement.

Further, a plain reading of the totality of the Hauling Agreement shows that the terms “policy” and “coverage,” and at times, “insurance” are used interchangeably. For instance, Paragraph “8 .Insurance”, requires the contractor to provide business automobile liability insurance, which is referred to both as “coverage” and as a “policy:”

Compare: “… each accident under the business automobile liability coverages”With: “Contractor’s business automobile policy shall be a comprehensive form …”

(Doc. 109, Hauling Agreement ¶ 8, 1st full paragraph with 2nd paragraph). Thus, the Hauling Agreement refers to both “coverage” and “policy” when referring to “business automobile” insurance. Further, other language demonstrates that the Hauling Agreement does not differentiate between the terms “policy” and “coverage:”

“… COMPANY … shall be included under said umbrella policy as an additional insured with respect to the comprehensive general, product, and automobile, and excess liability coverage specific herein and all such policies shall provide a waiver …” (Doc. 113, Hauling Agreement ¶ 8.)

The use of the words “coverage” and “policies” are used interchangeably. In other language, the Hauling Agreement refers to insurance as, just “insurance:”

• “… maintain in full force and effect comprehensive general liability and business automobile insurance” (Doc. 113, Hauling Agreement ¶ 8, 1st sentence.)

• “… maintain in full force and effect worker’s compensation insurance …” (Doc. 113, Hauling Agreement ¶ 9.)

The language of Hauling Agreement uses the terms “policy,” “coverage” and “insurance” almost interchangeably. “The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.” Cal.Civ.Code § 1641. Defendants do not present evidence that the Hauling Agreement was drafted according to insurance industry standards such that these interchanged words have unique and precise meanings. “The words of a contract are to be understood in their ordinary and popular sense, rather than according to their strict legal meaning; unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed.” Civ.Code § 1644.

4. “Any Auto”

Defendants argue that the Blanket Additional Insured Endorsement amends the Policy to cover the additional insured “with respect to the operation, maintenance, or use of a covered ‘auto’ whom you are required to add as an additional insured on the policy.” Defendants argue that the Blanket Additional Insured Endorsement provides coverage for any “auto” which Antonini was required to add as an “additional insured.”

Defendants argue the Policy definition of “auto” covers the tractor-trailer combination because an “auto” is “a land motor vehicle, ‘trailer’ or semitrailer designed for travel on public roads.” (Doc. 109, Policy Bates 100048). The term “auto” is defined broadly to include “all autos,” which defendant argues includes “all autos” of any “additional insured.” Defendants argue that including the tractor trailer combination in “any auto” is consistent with the Policy.

Defendants argue that Antonini, through its broker Mr. Seitz, negotiated for the inclusion of “any autos” in the Policy. Defendants argue that the coverage was provided to “covered autos” which was defined by the Policy as “any auto.” See e.g., Doc. 135, Ortiz Opposition p. 10.) The parties refer to this as the “Symbol 41” designation, which means that “any auto” is covered by the Policy. (See Doc. 109, Policy, Bates 100038, “Symbol 41” “description of covered auto designation symbols as ‘any auto.’ ”) Defendants argue that the term “any autos” is unambiguous and covered the tractor trailer used by A & A Transport because A & A Transport is an additional insured. (See Doc. 155, Joint defendants’ Reply, p. 3-4.) Again, the Blanket Additional Insured Endorsement and the Hauling Agreement must be read together. The Hauling Agreement required Antonini to add Stanislaus Foods, not A & A Transport, as an additional insured on the automobile liability coverage. Further, the “Symbol 41” is consistent with the scope of the insurance required under the Hauling Agreement for Antonini to provide for itself: “CONTRACTOR’s business automobile policy shall be a comprehensive form specifically covering all vehicles and trailers owned, non-owned, hired, and all vehicles used by sub-haulers.” Defendants offer evidence from Mr. Seitz that the “Symbol 41” to cover “any auto” was specifically negotiated for by Mr. Seitz. His testimony, however, is not inconsistent with the purpose and intent of the Hauling Agreement of fully protecting Antonini and Stanislaus Food. His testimony does not state that he negotiated for “Symbol 41” coverage for A & A Transport. (See Doc. 120, Seitz Depo. p. 44-47.)

However, the plain language of the Blanket Additional Insured Endorsement is not as broad as defendants propose. The Blanket Additional Insured Endorsement must be read in conjunction with the Hauling Agreement. As explained above, the Hauling Agreement required Antonini to add Stanislaus Foods, not A & A Transport, as an additional insured on the automobile liability coverage. (Doc. 113, Hauling Agreement ¶ 8 (“under the business automobile liability coverages, and COMPANY … shall be included under such policy or policies as an additional insured”).) The Hauling Agreement does not require Antonini to add A & A Transport “any autos” to an automobile policy. The Hauling Agreement required comprehensive automobile coverage for covering all of Antonini’s “vehicles and trailers owned, non-owned, hired, and all vehicles used by subhaulers.” (Doc. 113, Hauling Agreement ¶ 8.)

Defendants have the burden of proving coverage under the automobile liability. Royal Globe Ins. Co. v. Whitaker, 181 Cal.App.3d 532, 537, 226 Cal.Rptr. 435 (1986) (It is the insured’s burden to prove that a claim comes within the basic coverage of the policy.) The Blanket Additional Insured Endorsement does not provide coverage because the Hauling Agreement does not require “autos” of A & A Transport to be added to the Policy.

5. Certificate of Insurance

Defendants argue that the Certificate of Insurance demonstrate that there was coverage for automobile liability. Defendants argue that Certificate of Insurance demonstrates an “intent” to include automobile liability coverage to the other hauler as an additional insured. (Doc. 131, Opposition p. 6.) Defendants argue that since the “box” on the Certificate next to “automobile liability” is checked, the Certificate of Insurance “certifies” the nature and extent of coverage afforded to the identified additional insured. Defendants’ argument is not so much that the Certificate is binding as to the coverage listed on the Certificate. Defendants’ argument is that the Certificate shows the parties intent as to the types of coverage that should have been provided.

For instance, as further evidence of intent, defendants argue a “course of conduct.” A Certificate of Insurance was issued in 2006, a year after the accident. The Certificate of Insurance refers to the same “Blanket Additional Insured Endorsement” as is the subject of this litigation, and again certifies that A & A as an additional insured under Antonini’s Carolina Casualty policy (although for a new policy) for “Automobile Liability.” (Doc. 131, Diego Opposition p. 6; Doc. 118, Exh. H “Certificate of Insurance.”) The Court declines to speculate on whether this Certificate establishes any course of conduct or any specific intent. The 2006 Certificate of Insurance is not in a different form as the Certificate of Insurance at issue and thus, could be entirely consistent with the intent not to provide coverage for automobile liability. It is undisputed that A & A Transport did not tender the defense until June, 2007, long after the accident and after the 2006 Certificate of Insurance. Thus, the Court finds that the 2006 Certificate of Insurance is not a relevant “course of conduct” because it predates any notice to Carolina Casualty that anyone expected “automobile liability” insurance.

Plaintiff argues the Certificate of Insurance is not a contract between the insurer and the certificate holder. The language of the Certificate notes that it does not alter, amend or extend the terms of the Policy. The language of the Certificate notes that it is for information only.

“A certificate of insurance is merely evidence that a policy has been issued. It is not a contract between the insurer and the certificate holder. [Citations.]” Empire Fire & Marine Ins. Co. v. Bell, 55 Cal.App.4th 1410, 1423, fn. 25, 64 Cal.Rptr.2d 749 (1997); seeIns.Code § 384. Here, the certificate states that it “does not amend, extend or alter” the coverage provided by the policy. The language at the top of the Certificate of Insurance states:

The terms of the insurance policy prevail over any conflicting terms stated in the certificate. Pardee Construction Co. v. Insurance Co. of the West, 77 Cal.App.4th 1340, 1347, 92 Cal.Rptr.2d 443, fn. 2 (2000) (“A certificate of insurance is merely evidence that a policy has been issued.”) Therefore, the Certificate of Insurance does not alter the coverage.

Absent the Hauling Agreement, the Certificate of Insurance may provide some evidence of an intent to provide the insurance coverage noted on the Certificate. However, here, the Hauling Agreement states in plain terms the types of insurance Antonini was to provide A & A Transport as an Additional Insured. Accordingly, the Court finds the plain terms of the automobile coverage of the Policy does not provide coverage to A & A Transport.

D. General Liability Coverage Applicable to Auto Accidents

1. Defendants’ Arguments

Defendants argue that the Blanket Additional Insured Endorsement makes the General Liability Coverage applicable to auto accidents. (Doc. 135, Ortiz Opposition p. 11.) Defendants argue the express terms of the Blanket Additional Insured Endorsement made the Commercial General Liability Coverage explicitly applicable to auto accidents. Defendants highlight the following language from the Blanket Additional Insured Endorsement:

Defendants argue that the highlighted language modified the coverage provided under the Commercial General Liability provision of the Policy to include coverage for the operation, maintenance, or use of any covered “auto.”

2. Plaintiff’s Argument

Plaintiff argues the Blanket Additional Insured Endorsement does not change the Policy Exclusions. The General Liability contains an auto exclusion which applies to the case. (Doc. 160, Plaintiff’s Reply, p. 6-7.) The Auto Exclusion under the Commercial General Liability precludes coverage for the injuries arising out of the accident. The Auto Exclusion to the Commercial General Liability Coverage Form precludes coverage for any “ ‘[b]odily injury’ or ‘property damage’ arising out of the ownership, maintenance, use or entrustment to others’ of any ‘auto.’ ” (Doc. 109, Policy, Bates 100074.) The Auto Exclusion excludes any bodily injuries, including death, arising out of the ownership, maintenance, use or entrustment to other of a truck.

3. The Blanket Additional Insured Endorsement does not Amend Coverage in the General Liability Policy

It is undisputed that Antonini’s Commercial General Liability Coverage includes A & A Transport as an Additional Insured, pursuant to the Blanket Additional Insured Endorsement. Neither party has argued otherwise. Indeed, as shown, infra, the Hauling Agreement required Antonini to name A & A Transport as an additional insured on its “general liability” policy.

Here, plaintiff argues that the accident was excluded from coverage. The burden is on the insured to prove the claim is within the basic scope of coverage, whereas the insurer bears the burden of proof on exclusions. Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th at 16, 44 Cal.Rptr.2d at 376, 900 P.2d 619. Policy exclusions are strictly construed. MacKinnon v. Truck Ins. Exchange, 31 Cal.4th 635, 648, 3 Cal.Rptr.3d 228, 73 P.3d 1205 (2003).

The Commercial General Liability Coverage is organized in the following Sections (Doc. 109, Policy, Bates 100071-100078, 100104-100111; See Doc. 127, parties’ stipulation of pages):

Section I-COVERAGES (Bates 100071)

Section II-WHO IS AN INSURED (Bates 100104)

Section III-LIMITS OF INSURANCE (Bates 100105)

Section IV-COMMERCIAL GENERAL LIABILITY CONDITIONS (Bates 100105)

Section V-DEFINITIONS (Bates 100107).

The Blanket Additional Insured Endorsement amends only Section II, who is the insured. The plain language of the Blanket Additional Insured Endorsement amends “Section II-WHO IS AN INSURED:”

Section II of the Commercial General Liability identifies who is the “insured.”

Defendants argue that the Blanket Additional Insured Endorsement amended the entirety of the Commercial General Liability Coverage. However, the plain language of the Blanket Additional Insured Endorsement amended only the “Section II.” No other Section was amended. “Section I-COVERAGES” was not amended. The Blanket Additional Insured Endorsement is consistent with the Hauling Agreement that Antonini would amend the “additional insured” in the Policy because the Hauling Agreement required Antonini to add the “additional insured” status.

The significance of this finding is that the Blanket Additional Insured Endorsement does not change any of the coverage or exclusions in the “Section I-COVERAGES.” “Section I-COVERAGES” contains the following subsections and is organized as follows, in relevant part:

Section I-COVERAGES (Bates 100071)

COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement (Bates 100071)

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies…. (Doc. 109, Policy, Bates 100071.)

“SECTION I-COVERAGES” also contains the exclusions to the Insuring Agreement. In pertinent part, the exclusions exclude insurance for “autos” as follows:

Section I-COVERAGES (Bates 100071)

COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement (Bates 100071)

2. Exclusions

This insurance does not apply to:

…

g. Aircraft, Auto Or Watercraft

“Bodily injury” or “property damage” arising out of the ownership, maintenance, use or entrustment to others of any aircraft, “auto” or watercraft owned or operated by or rented loaned to any insured…. (Doc. 109, Policy, Bates 100074.)

The language in the “Aircraft, Auto Or Watercraft” exclusion excludes bodily injury arising from the ownership, maintenance, use or entrustment to others of any “auto.” An “auto” is a land motor vehicle, trailer or semitrailer. (Doc. 109, Policy, Bates 100048 (auto definition).) The exclusion precludes coverage for injury arising from the use of an auto.

Defendants argue that while there is an auto exclusion, the Commercial General Liability covers was made applicable to auto accidents by the express terms of the Blanket Additional Insured endorsement made:

As noted, infra, the Blanket Additional Insured Endorsement only modifies who is insured. It is does not modify, change or alter the exclusions. The auto exclusion still exists and applies, notwithstanding who gets added as an additional insured. Further, the auto exclusion and “who is an insured” under the Policy are not in conflict. The Blanket Additional Insured Endorsement only modifies “who is the insured.” It simply does not address, modify or change any exclusion. Accordingly, the General Liability Coverage is not applicable to automobile accidents.

E. Cargo and Trailer Interchange do not Cover the Accident

The defendants do not contend that the Cargo coverage and the Trailer Interchange coverage provide insurance coverage for the accident. “The Diego Defendants do not contest the fact that Cargo and Trailer Interchange is not applicable to their wrongful death claim for damages.” (Doc. 131, Diego Opposition p. 7:15-16.) The Ortiz Defendants do not argue that the Cargo coverage and the Trailer Interchange coverage provide insurance coverage for the accident. (See Doc. 135, Ortiz Opposition; Doc. 104, Joint Defendant Moving Papers.)

CONCLUSION

For the foregoing reasons, the Court GRANTS plaintiff Carolina Casualty’s motion for summary adjudication on the issue of insurance coverage and DENIES Defendants’ motion for summary judgment. The Court finds that coverage was not afforded under Carolina Casualty Insurance Company’s policy numbered CTP 3398 30 to A & A Transport as an additional insured for the claims and action against A & A Transport and its employee Jose Pimental Rodriguez for the injuries and damages arising out of the accident on August 10, 2005.

In light of the ruling, counsel are to meet and confer on the status of the remaining counts and claims, and within 25 days file status declarations as to the remainder of the action.

IT IS SO ORDERED.

Canal Ins. Co. v. Barker

United States Court of Appeals,

Fourth Circuit.

CANAL INSURANCE COMPANY, Plaintiff-Appellee,

James M. BARKER, III, d/b/a Barker & Son; Denise A. Penn; Houstonia Clymer, Defendants-Appellants,

and

Justin J. Colvard, Defendant.

No. 08-1301.

Argued: Oct. 29, 2009.

Decided: Dec. 31, 2009.

Affirmed by unpublished PER CURIAM opinion.

Unpublished opinions are not binding precedent in this circuit.PER CURIAM:

A truck owned by James M. Barker III, d/b/a Barker & Son (“Barker”), and driven by Justin J. Colvard (“Colvard”), collided with a car, which was driven by Denise A. Penn (“Penn”) and carrying Houstonia Clymer (“Clymer”) (collectively, “Appellants”). Penn and Clymer were injured in the collision. Canal Insurance Company (“Canal” or “Appellee”) brought suit seeking a declaratory judgment as to the policy limits of an insurance policy that Canal issued to Barker. The district court rejected Appellants’ contention that Virginia Code § 46.2-2143 or federal regulations would operate to increase the policy’s limit to $750,000 through its “Out of State Insurance” provision, and instead granted Canal’s Motion for Judgment on the Pleadings that the policy was limited to the face amount of $100,000 listed on its declaration page. We agree and affirm the judgment.

On August 2, 2005, the tractor-trailer driven by Colvard and owned by Barker was traveling southbound on Interstate 85 in Brunswick County, Virginia, when it was involved in the collision with the car carrying Penn and Clymer. Earlier that day, Colvard made a delivery to a location in Petersburg, Virginia, and was “deadheading” (traveling with an empty trailer) at the time of the accident. The following day, Colvard was expected to pick up property in Salisbury, North Carolina and transport it to Elberton, Georgia. Barker and Colvard were both domiciled in Georgia, and Penn and Clymer were both domiciled in New York. Canal is a corporation with its principal place of business in, and organized under the laws of, South Carolina.

Barker had previously purchased an insurance policy from Canal, Basic Automobile Policy No. 447668 (“the Policy”), covering the period between September 2004 and September 2005. The Policy provides on the declaration page that Barker was insured to a $100,000 limit of liability, and Canal offered to pay that amount to satisfy Penn and Clymer’s claims arising out of the accident. At issue is the meaning and effect that the Policy’s Out of State Insurance provision has on the Policy’s liability limit, and specifically whether this provision operates to increase the limit to $750,000, the amount of insurance that Appellants allege is required by Virginia law.

The “Out of State Insurance” provision states in pertinent part:

If, under the provisions of the motor vehicle financial responsibility law or the motor vehicle compulsory insurance law or any similar law of any state or province, a non-resident is required to maintain insurance with respect to the operation or use of a motor vehicle in such state or province and such insurance requirements are greater than the insurance provided by the policy, the limits of the company’s liability and kinds of coverage afforded by the policy shall be as set forth in such law, in lieu of the insurance otherwise provided by the policy, but only to the extent required by such law and only with respect to the operation or use of a motor vehicle in such state or province….

Canal brought suit, seeking a declaratory judgment that the Policy had a liability limit of the face value of $100,000. Penn and Clymer counterclaimed that Canal owed a duty to indemnify Barker and Colvard at least $750,000 to cover claims arising from the accident. Penn and Clymer argued, inter alia, that Virginia Code § 46.2-2143(B) required that “[a]ll motor carriers shall keep in force at all times insurance … in an amount required by this section,” and that under subsection (C), that amount of “minimum insurance for motor carriers operating in interstate commerce shall equal the minimum required by federal law, rule, or regulation.” Viewed with reference to federal regulations 49 C.F.R. §§ 387.7 and 387.9, which set the minimum level of financial responsibility for interstate motor carriers at $750,000, Penn and Clymer argued that both Virginia law, and federal regulations, operated to increase the Policy’s liability limit to $750,000. Canal contended that a holistic reading of the statutory scheme in Virginia regulating motor carriers clearly establishes that Virginia Code § 46.2-2143 only applies to motor carriers who are registering in Virginia.

The district court found Canal’s interpretation of the statutory scheme in Virginia regulating motor carriers to be more persuasive. J.A. 110. Particularly, the court found this interpretation to be supported by Virginia Code § 46.2-2102(2), which exempts “from this chapter … [t]ransportation of property between any point in this Commonwealth and any point outside this Commonwealth or between any points wholly within the limits of any city or town in this Commonwealth.” Therefore, the court held that § 46.2-2102(2) exempts the application of Chapter 21 (which includes § 46.2-2143) to motor carriers like Barker who engage in interstate commerce. J.A. 110. The court also found that § 46.2-2143, when read in its entirety, sets forth the requirements for a motor carrier to register in Virginia. J.A. 110-11. The district court was not persuaded by the argument that federal regulations operated, through the Out of State Insurance provision, to increase the Policy’s liability limit to $750,000. J.A. 112. Even though Barker was required by federal regulations to show a financial responsibility of $750,000, the court held that Barker was not required to carry insurance and could opt to meet the financial responsibility through one of several ways. J.A. 113-14.

II.

We review de novo a district court’s decision to grant judgment on the pleadings. See Burbach Broad. Co. of Del. v. Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir.2002). In reviewing an award of judgment on the pleadings, we assume the facts alleged in the relevant pleadings to be true, and we draw all reasonable inferences therefrom. Volvo Constr. Equip. N. Am. v. CLM Equip. Co., Inc., 386 F.3d 581, 591 (4th Cir.2004) (citing Elkins Radio, 278 F.3d at 406).

The appellants have raised several issues upon appeal, and we address each in turn.

The principal question raised on appeal is whether the district court erred in its holding that Virginia Code § 46.2-2143 only served to establish financial responsibility requirements for motor carriers who are registered in the state of Virginia, or whether, as Appellants contend, § 46.2-2143 also applies to interstate motor carriers such as Barker. We hold that the district court did not err in its interpretation of the Virginia statute.

The applicable rules of statutory interpretation, to be applied in the interpretation of a Virginia statute, are not in dispute. Where the language of a statute is clear and unambiguous, “a court may look only to the words of the statute to determine its meaning.” Hubbard v. Henrico Ltd. P’ship, 255 Va. 335, 339, 497 S.E.2d 335, 337 (1998) (citing Harrison & Bates, Inc. v. Featherstone Assocs., 253 Va. 364, 368, 484 S.E.2d 883, 885 (1997)). Furthermore, it is a “settled principle of statutory construction that every part of a statute is presumed to have some effect and no part will be considered meaningless unless absolutely necessary.” Id. at 340-41 (citing Sims Wholesale Co. v. Brown-Forman Corp., 251 Va. 398, 405, 468 S.E.2d 905, 909 (1996)). “Whenever possible, however, it is our duty to interpret the several parts of a statute as a consistent and harmonious whole so as to effectuate the legislative goal. ‘[A] statute is not to be construed by singling out a particular phrase.’ “ Virginia Elec. & Power Co. v. Bd. of County Supervisors of Prince William County, 226 Va. 382, 387-88, 309 S.E.2d 308, 311 (1983) (quoting VEPCO v. Citizens, 222 Va. 866, 869, 284 S.E.2d 613, 615 (1981)). “Consequently, courts apply the plain language of a statute unless … applying the plain language would lead to an absurd result.” Boynton v. Kilgore, 271 Va. 220, 227, 623 S.E.2d 922, 926 (2006).

Additionally, as the parties have observed, Canal issued the insurance policy to Barker in Georgia; therefore, the interpretation of the policy is governed by Georgia law. See Res. Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631, 635 (4th Cir.2005).

The plain terms of Virginia Code § 46.2-2143, when read in their entirety, and even without reference to other sections of the Code, make clear that it is a registration statute. Virginia Code § 46.2-2143(B) provides that “[a]ll motor carriers shall keep in force at all times insurance, a bond or bonds, in an amount required by this section.” Furthermore, Virginia Code § 46.2-2143(C) provides that “[t]he minimum insurance for motor carriers operating in interstate commerce shall equal the minimum required by federal law, rule, or regulation.” The Appellants conclude that these two subsections of § 46.2-2143, in conjunction with certain federal regulations, operate as an insurance requirement for all motor carriers and not only those registering in Virginia.

However, a reasonable interpretation of Virginia Code § 46.2-2143 must try to reconcile subsection (A) with subsections (B) and (C), in an attempt “to interpret the several parts of a statute as a consistent and harmonious whole.” Virginia Elec. & Power Co., 226 Va. at 388. Subsection (A) provides that “[n]o certificate of public convenience and necessity, permit, identification marker, registration card, or license plate shall be issued by the Department to any vehicle operated by a motor carrier until the motor carrier certifies to the Department that the vehicle is covered” under one of four different listed methods of coverage. In addition, subsection (A) provides that motor carriers who have filed proof of financial responsibility “in accordance with the single state registration system authorized by 49 U.S.C. § 14504 or the unified carrier registration system authorized by 49 U.S.C. § 14504a are deemed to have fulfilled the requirements of this article for insurance purposes,” so long as the motor carrier has on board a federally-authorized receipt of insurance. Only after § 46.2-2143 explains the prerequisites for registering a motor carrier in Virginia with the Department of Motor Vehicles does the statute reach the issues of the types of financial responsibility, when financial responsibility is required, and in what amount.

Importantly, it is not just subsection (A) that couches motor carrier insurance and financial responsibility obligations in the context of registration. Virginia Code § 46.2-2143(C) also provides as follows:

Any motor carrier that meets the minimum federal financial responsibility requirements and also operates in intrastate commerce may submit, in lieu of a separate filing for its intrastate operation, proof of the minimum federal limits, provided that (i) both interstate and intrastate operations are insured, (ii) the public liability filed is at least $750,000, and (iii) any cargo insurance requirements of this section have been met.

This language, in light of the rest of the statute, is reasonably read as an alternative means of filing proof of financial responsibility with the Virginia Department of Motor Vehicles prior to its issuance of motor carrier registration for carriers operating on an interstate and intrastate basis.

A clear indicator that Virginia Code § 46.2-2143 is a registration statute, although one that did not form the basis of the district court’s opinion, is the title of that statutory section: “Surety bonds, insurance, letter of credit or securities required prior to issuance of registration; amounts.” (emphasis added). The Appellants place emphasis upon the article in which § 46.2-2143 is situated (“Insurance Requirements”) as contrasted with the chapter in which its statutory predecessor was situated (“Titling and Registration of Motor Vehicles”). Appellants’ Br. at 10-12. However, Appellants ignore the title of the statutory section, which is the more specific statutory interpretive marker. It is clear that “[t]he purpose of a title is to state the general subject covered by the act. While not a part of the act itself, it may be read to ascertain the act’s purpose.” Jakabcin v. Town of Front Royal, 271 Va. 660, 667 n. 3, 628 S.E.2d 319, 323 (2006) (citing authorities). In this case, as the section title indicates, the general subject of Virginia Code § 46.2-2143 concerns the financial responsibility requirements for motor carriers prior to the issuance of registration from the Virginia Department of Motor Vehicles.

Looking outside the provisions of § 46.2-2143, we agree with the district court that a “comprehensive reading of the pertinent sections of Chapter 21 supports Canal’s interpretation of the § 46.2-2143.” J.A. 110. Most applicable is § 46.2-2101(2), which provides that “[t]he following are exempt from this chapter … [t]ransportation of property between any point in this Commonwealth and any point outside this Commonwealth or between any points wholly within the limits of any city or town in this Commonwealth.” In connection with § 46.2-2102, which states that “[n]o motor carrier shall operate any motor vehicle for the transportation of property for compensation on any highway in this Commonwealth on an intrastate basis except in accordance with the provisions of this chapter,” this statutory scheme clearly regulates motor carriers operating on an intrastate basis, but not those operating on an interstate basis or operating entirely within city or town limits.

We hold that Virginia Code § 46.2-2143 is a registration statute that sets forth the financial responsibility and insurance requirements before the Department of Motor Vehicles can issue registration for a vehicle operated by a motor carrier. As Barker was under no obligation to register the tractor-trailer involved in this accident in Virginia, and instead had registered and principally garaged it in another state, § 46.2-2143 does not apply to Barker. Therefore, § 46.2-2143 does not require the liability limit of the Policy, through its Out of State Insurance provision, to be increased above the $100,000 face value of the Policy.

A separate question, although one related to the interpretation of Virginia Code § 46.2-2143, concerns the effect and application of the § 46.2-2101(2) exemption to the present circumstances. The exemption under § 46.2-2101(2) from “this chapter” means an exemption from Chapter 21 (“Regulation of Property Carriers”), which includes § 46.2-2143.

The Appellants contend that “Barker did not even fall within section 2101’s literal exemption…. If Barker’s truck was empty, it did not fall within section 2101 when the accident happened, as the truck had finished transporting property into Virginia and would not transport property again until after it left the state.” Appellants’ Reply Br. at 6-7. We disagree that the term “transportation of property,” as found in § 46.2-2101(2), would have such a narrow definition that it would not cover Barker’s carrying property into Virginia from out of state, and then “deadheading” (traveling with an empty trailer) back out of state. See Black’s Law Dictionary 1638 (9th ed.2009) (defining “transportation” as the “movement of goods or persons from one place to another by a carrier”). A common sense interpretation of the exemption for “transportation of property between any point in this Commonwealth and any point outside this Commonwealth” must include both the trip into the Commonwealth to unload property, and the return trip with an empty truck. Under the present facts, where Barker’s truck had delivered property to Petersburg, Virginia earlier that day, and was “deadheading” back to North Carolina for a scheduled pickup, Barker falls within the § 46.2-2101(2) exemption from Chapter 21.

Appellants further argue that § 46.2-2143 and § 46.2-2101(2) are, in effect, in conflict concerning whether Virginia law specifically requires “motor carriers operating in interstate commerce” to keep “minimum insurance” as set forth in Section 2143. Appellants’ Br. at 16. Therefore, they conclude, “the specific should control the general,” and “Section 2101 should not apply to exempt interstate motor carriers from section 2143.” Id. However, “[i]n a situation where one statute speaks to a subject generally and another deals with an element of that subject specifically, the statutes will be harmonized, if possible, and if they conflict, the more specific statute prevails.” Crawford v. Haddock, 270 Va. 524, 528, 621 S.E.2d 127, 129 (2005) (internal quotation marks omitted)(emphasis added).

We hold that the most natural reading of the applicable statutes makes clear that they form a harmonious statutory scheme. We held above that Virginia Code § 46.2-2143 is a registration statute that did not apply to Barker, and therefore there is no conflict between this statute and § 46.2-2101(2). Virginia’s statutory scheme makes doubly clear through its exemption in § 46.2-2101(2) that Barker was not required to carry insurance in the amount of $750,000.

The Appellants challenge the district court’s holding that the federal financial responsibility regulations, standing alone, do not require Barker to maintain $750,000 in insurance. J.A. 112-15. The applicable federal regulations provide that the motor carrier’s financial responsibility requirement can be proven by obtaining: (1) liability insurance which includes a MCS-90 endorsement; (2) a Form MCS-82 surety bond; or (3) written authorization to self-insure from the Federal Motor Carrier Safety Administration. See49 C.F.R. § 387.7(d). The federal financial responsibility regulations cannot be said to require a motor carrier to maintain a minimum of $750,000 in insurance, where a motor carrier opts not to use insurance to fulfill such requirements. It is undisputed that Barker was not using the Policy to fulfill the federal financial responsibility requirements, as the Policy does not contain a MCS-90 endorsement. We hold then that the district court did not err in its finding that federal financial responsibility regulations did not require Barker to maintain $750,000 in insurance. Furthermore, the language of the Out of State Insurance provision is not susceptible to an interpretation whereby federal law, on its own, would trigger its application.

Finally, Appellants argue that, because Penn and Clymer never admitted to the accuracy of the policy attached to Canal’s complaint when it brought suit, the district court could not enter a judgment on the pleadings.

Both parties to the Policy, Barker and Canal, agree that the copy attached to the complaint is a true and complete copy of the Policy. See J.A. 13, 81. However, Penn and Clymer suggest that the policy copy attached to the complaint is not complete and accurate, on the basis of two signed endorsements produced by First Southern Insurance Agency (apparently acting as insurance agent to Barker) that were not included therein. See J.A. 101-02.

Had Appellants’ allegations or their accompanying documents contained some basis for belief that the Policy attached to the complaint was not a complete and accurate copy of the Policy that was in effect at the time of the accident, this argument might have gained some traction. One endorsement cited by Appellants has an “Endorsement Effective Date” of September 9, 2005, and an “Issue Date” of September 21, 2005. J.A. 101. The other has an “Endorsement Effective Date” of September 3, 2005, and an “Issue Date” of September 19, 2005. J.A. 102. The two endorsements concern the schedule of insured equipment, and both endorsements also clearly provide “ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.” J.A. 101-02 (capitalization in original). As the Appellants provided no more than a basis for belief that subsequent changes were made to the Policy after the date of the accident on August 2, 2005, and there being no basis to doubt the true and complete nature of the policy copy attached to Canal’s complaint as of the date of the accident, the district court properly granted Canal’s Motion for Judgment on the Pleadings.

III.

For the foregoing reasons, the judgment of the district court is

AFFIRMED.