United States District Court,

D. Connecticut.

Shawn POULIOT, Plaintiff

v.

PAUL ARPIN VAN LINES, INC.; Arpin Logistics, Inc.; The Festo Corporation;

Michael D. Kovac d/b/a Trans-Expo International, Erica Ramirez, in Her Capacity

as Employee of Trans-Expo International, Defendants.

May 2, 2005.

RULING ON MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 359, 364, and 366]

HALL, District Judge.

Shawn Pouliot (“Pouliot”) initiated this lawsuit against Paul Arpin Van Lines, Inc. and Arpin Logistics, Inc. (collectively “Arpin”) alleging that Arpin is liable to him for physical injuries sustained by Pouliot on October 23, 2001. Arpin filed a Third-Party Complaint against The Festo Corporation (“Festo”), Michael D. Kovac d/b/a Trans-Expo International, Inc. (“Trans-Expo”), and Erica Ramirez (“Ramirez”). Thereafter, Pouliot asserted direct claims against the three third-party defendants. Festo, Trans-Expo, and Ramirez seek summary judgment on Arpin’s common law indemnification claims against them. Arpin seeks summary judgment on Pouliot’s claims against it. Festo, Trans-Expo, and Ramirez’ motions are hereby granted. Arpin’s motion is granted in part and denied in part.

I. FACTS

Shawn Pouliot (“Pouliot”), a resident of South Carolina, and Arpin Logistics, Inc. (“Arpin”), incorporated in Rhode Island, entered into an Owner-Operator Agreement on March 16, 2001. Owner Operator Agreement [Dkt. No. 376, Ex. C]. The agreement defined Pouliot as the Contractor and Arpin as the Carrier. The agreement provided that Pouliot would “pick up, transport and deliver all shipments as directed and instructed by the Carrier.” Id. at 4. Under the terms of the agreement, Pouliot was required to “represent[ ], warrant[ ] and covenant[ ] that he is an independent contractor only, and is not an employee.” Id. at 2. Furthermore, Pouliot, under the terms of the agreement, reserved the right to hire employees to help him carry out work on behalf of Arpin, to create his own schedule, and to “accept or reject any assignments tendered to him by the Carrier.” Id.

Pouliot generally used his own vehicle when transporting and delivering shipments on behalf of Arpin. From October 20 through October 23, 2001, however, Pouliot drove a 1989 Peterbuilt straight truck owned by Paul Arpin Van Lines, Inc., because his own truck was being repaired. On Saturday, October 20, 2001, Pouliot left Arpin’s headquarters in Rhode Island with instructions to pick up a shipment in Hauppauge, New York, and to deliver that shipment to Naugatuck Valley Community College in Waterbury, Connecticut. Pouliot picked up two pieces of equipment in Hauppauge on the morning of October 23, 2001. The parties dispute whether Arpin provided Pouliot with all relevant information and equipment with respect to one of the two items to be picked up and delivered, the Learnline 2000. That unit weighed eight hundred and twelve pounds. Arpin provided Pouliot five to six straps with which to secure the unit. Pouliot contends that the truck provided to him for the purposes of pick-up and delivery was defective and not properly equipped. Specifically, Pouliot claims that the liftgate was defective and that the truck ought not to have been in use.

While unloading the Learnline 2000, Pouliot was seriously injured. The unit shifted on the liftgate platform while Pouliot attempted to lower the liftgate. Pouliot attempted to adjust the unit. The parties dispute the details of what exactly occurred as Pouliot attempted to do so. He failed, however, to adjust the placement of the unit which continued to move and seriously injured Pouliot.

II. DISCUSSION

A. Standard of Law

In a motion for summary judgement, the burden is on the moving party to establish that there are no genuine issues of material fact in dispute and that it is entitled to judgement as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); ERLINK”http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=506&FindType=Y&ReferencePositionType=S&SerialNum=2000478509&ReferencePosition=300″White v. ABCO Engineering Corp., 221 F.3d 293, 300 (2d Cir.2000). The burden of showing that no genuine factual dispute exists rests upon the moving party. Carlton v. Mystic Transp., Inc., 202 F.3d 129, 133 (2d Cir.2000) (citing Gallo v. Prudential Residential Servs., Ltd. Partnership, 22 F.3d 1219, 1223 (2d Cir.1994)). Once the moving party has met its burden, in order to defeat the motion the nonmoving party must “set forth specific facts showing that there is a genuine issue for trial,” Anderson, 477 U.S. at 255, 106 S.Ct. 2505, and present such evidence as would allow a jury to find in his favor. Graham v. Long Island R.R., 230 F.3d 34, 38 (2d Cir.2000).

In assessing the record, the trial court must resolve all ambiguities and draw all inferences in favor of the party against whom summary judgement is sought. Anderson, 477 U.S. at 255, 106 S.Ct. 2505; Graham, 230 F.3d at 38. “This remedy that precludes a trial is properly granted only when no rational finder of fact could find in favor of the non-moving party.” Carlton, 202 F.3d at 134. “When reasonable persons, applying the proper legal standards, could differ in their responses to the question” raised on the basis of the evidence presented, the question must be left to the jury. K”http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=506&FindType=Y&ReferencePositionType=S&SerialNum=2000038192&ReferencePosition=178″Sologub v. City of New York, 202 F.3d 175, 178 (2d Cir.2000).

B. Arpin’s Common Law Indemnity Claim (Counts One and Two)

In a Memorandum of Decision dated February 7, 2004, the court (Squatrito, J.) previously rejected the third party defendants’ motions to dismiss Arpin’s common law indemnity claims against them on the basis that, construed in the light most favorable to Arpin, Arpin’s complaint stated a claim for common law indemnity. The third party defendants now argue that following extensive discovery Arpin has failed to create a question of material fact with respect to these claims and that summary judgment is appropriate.

Arpin cannot seek indemnity from Festo, Trans-Expo, or Ramirez on the basis of a contractual agreement to indemnify. Therefore, its claims are based on the alleged negligence of the third party defendants. “A party seeking indemnification based on a tort theory of liability must prove that the injury resulted from the active or primary negligence of the party against whom reimbursement is sought.” Williams v. Hoffman/New Yorker, Inc., 923 F.Supp. 350, 352 (D.Conn.1996) (internal quotation marks omitted). In order for Arpin’s claims against Festo, Trans-Expo, and Ramirez to survive summary judgment, Arpin must provide evidence to support findings of four elements of the claim of common law indemnity. These are the following:

(1) that the [third party] defendant[s] [were] negligent; (2) that the [third party] defendant[s’] negligence, rather than the negligence with which [Arpin was] found chargeable, was the direct and immediate cause of the accident; (3) that the [third party] defendant was in exclusive control of the situation; and (4) that [Arpin] did not know of the [third party defendants’] negligence, had no reason to anticipate it and could reasonably rely on the defendant not to be negligent.

City of Bristol v. Dickau Bus Co., 63 Conn.App. 770, 775, 779 A.2d 152 (2001). Where a tortfeasor can prove each of these elements against another tortfeasor, he is entitled to indemnity as an exception to the general rule that “[o]rdinarily there is no right of indemnity or contribution between joint tort-feasors.” Kaplan v. Merberg Wrecking Corp., 152 Conn. 405, 412, 207 A.2d 732 (1965).

The third party defendants argue that as a matter of law, there is no material question of fact with respect to the third element of Arpin’s claim and that Arpin cannot prove that they were in exclusive control of the situation. While the fact of exclusive control is generally a question of fact, “the issue may properly be decided as a question of law” where it does not “turn upon any meaningful dispute about the alleged facts.” Skuzinski v. Bouchard Fuels, Inc., 240 Conn. 694, 705, 694 A.2d 788 (1997).

Arpin is charged with “[p]ersonal independent negligence,” Kaplan, 152 Conn. at 415, 207 A.2d 732, specifically, providing Pouliot with a truck and liftgate inadequate to the task of safely transporting a very large piece of equipment. This fact, however, does not preclude a finding that Arpin may be entitled to common law indemnification. “Personal independent negligence may be passive or secondary negligence.” Id.; see also Weintraub v. Richard Dahn, Inc., 188 Conn. 570, 452 A.2d 117 (1982). Where, as in this case, however, it is the negligence charged to Arpin that was the “direct, immediate cause of the accident and the resulting injuries,” Arpin is not entitled to common law indemnification. Kaplan, 152 Conn. at 416, 207 A.2d 732. Furthermore, Arpin has not come forward with evidence that could support a finding that any of the third party defendants was “in control to the exclusion of” Arpin, as is required in order to support a claim for common law indemnification. Id. The Connecticut Supreme Court has stated that “[i]t is plausible to define exclusive control over ‘the situation’ as exclusive control over the dangerous condition that gives rise to the accident.” Skuzinski, 240 Conn. at 706, 694 A.2d 788. The relevant “dangerous condition” is Pouliot’s use of an allegedly defective truck and liftgate. The third party defendants had no control over this condition. While their actions may have contributed to Arpin’s provision of the truck and liftgate to Pouliot, these allegations do not support a finding of exclusive control on the part of the third party defendants. Arpin argues that its own allegedly negligent actions would not have occurred had it not been for the actions of the third party defendants. Determining whether a party had exclusive control does not turn, however, on whether that party’s actions were a “but for” cause of the damages. Viewing the evidence in the light most favorable to Arpin, there is no material question of fact concerning Arpin’s common law indemnity claim against from Festo, Trans-Expo, or Ramirez. The third party defendants are entitled to summary judgment on this claim.

C. Choice of Law

Arpin argues that Rhode Island law governs the tort claims; Pouliot argue that Connecticut law applies. While Connecticut has “traditionally adhered to the doctrine that the substantive rights and obligations arising out of a tort controversy are determined by the law of the place of injury, or lex loci delicti … in certain circumstances in which the traditional doctrine does not apply, the better rule is the analysis contained in the Restatement (Second) of the Conflict of Laws.” Williams v. State Farm Mutual Automobile Insur. Co., 229 Conn. 359, 370, 641 A.2d 783 (1994); see O’Connor v. O’Connor, 201 Conn. 632, 519 A.2d 13 (1986). In cases where the principle of lex loci delicti results in “an arbitrary, irrational result,” Connecticut courts will look to the Restatement (Second) of Conflicts of Laws. O’Connor, 201 Conn. at 649-50, 519 A.2d 13.

The Restatement (Second) requires that this court consider which state “has the most significant relationship to the occurrence and the parties.” Such determination will require consideration of factors, including “(a) the place where the injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered.” Id. The relative importance of these factors is determined with respect to the instant issue.

In the instant case, lex loci delicti requires that this court apply Connecticut law as the injury undisputedly occurred in Connecticut. Such result is not irrational as Connecticut has an interest in protecting workers and ensuring general safety within the state. Furthermore, while Arpin is incorporated in Rhode Island, it is licensed to transport goods in Connecticut. Therefore, Connecticut has an interest in its operations and the manner in which those operations are performed. In this case, therefore, because the application of lex loci delicti does not yield an “arbitrary, irrational result” the court will apply the law of Connecticut to Pouliot’s tort claims.

D. Worker’s Compensation

In a Memorandum of Decision dated November 26, 2003, this court (Squatrito, J.) previously rejected Arpin’s motion to dismiss on the ground that federal laws classifying Pouliot as an employee covered by the worker’s compensation provision of Rhode Island law pre-empted the instant action. [Dkt. No. 217]. The court noted that a factual dispute existed with respect to whether Pouliot was an employee or independent contractor of Arpin. Id. at 16-17.

The Connecticut Supreme Court has stated that, in the context of worker’s compensation law, choice of law depends on an interests analysis approach. Simaitis v. Flood, 182 Conn. 24, 31-33, 437 A.2d 828 (1980). Furthermore, “the state of the injury has an interest in compensating employees injured within its borders.” Id. (citing Carroll v. Lanza, 349 U.S. 408, 75 S.Ct. 804, 99 L.Ed. 1183 (1955)). In the instant case, while Connecticut maintains an interest in compensating Pouliot because he was injured in this state, Rhode Island has an interest in limiting the liability of Arpin, a Rhode Island corporation, for Pouliot’s injury.

The Owner-Operator Agreement entered into by Pouliot and Arpin provides that Pouliot is “an independent Contractor only, and is not an employee of the Company.” Owner Operator Agreement [Dkt. No. 376, Ex. C] at 2. The term “employee” is defined by Rhode Island statute to include “any person who has entered into the employment of or works under contract of service or apprenticeship with any employer ….” R.I. Gen Laws § 28-29-2(4); see DiRaimo v. DiRaimo, 117 R.I. 703, 707-08, 370 A.2d 1284 (1977). While the determination of whether an individual is an employee is highly fact-determinative, Laliberte v. Salum, 503 A.2d 510, 513 (R.I.1986), the fact that the parties to this action contracted that Pouliot was an independent contractor and not an employee is highly relevant. In fact, Arpin concedes as much in its Amended Answer, wherein it asserts that Pouliot was “an independent contractor who undertook the pickup and delivery of equipment in his capacity as an independent contractor …” Am. Answer and Crossclaims of Def. Paul Arpin Van Lines, Inc. and Arpin Logistics, Inc. to Fifth Am. Compl. of Shawn Pouliot [Dkt. No. 314] at 16.

Furthermore, the following facts support a finding that Pouliot was not an employee subject to the exclusivity provisions of Rhode Island’s worker’s compensation law: Pouliot hired and paid his own helpers; he paid his own taxes, including social security taxes; and, notably, held his own workers’ compensation policy. Arpin’s argument that federal law requires that Pouliot be considered an employee has been previously addressed and rejected by this court. [Dkt. No. 217] Pouliot, an independent contractor, has the right to enforce his common law rights with respect to the October 23, 2001 accident. [FN1]

E. Negligence

Arpin argues that it cannot be liable for any negligence on its part because the Owner-Operator Agreement limits such liability. The Owner-Operator Agreement includes a choice of law clause which provides that it “shall be interpreted under the laws of the State of Rhode Island.” Owner Operator Agreement [Dkt. No. 376, Ex. C] at 16. Under Rhode Island law, “exculpatory indemnification clauses relieving a person from his or her own negligence” are enforceable so long as such clauses are “sufficiently specific.” Corrente v. Conforti & Eisele Co., Inc., 468 A.2d 920, 922 (R.I.1983) (citing Dower v. Dower’s Inc., 100 R.I. 510, 217 A.2d 437 (1966)); see also Crowther v. Mariner Square Condominium Ass’n, 667 A.2d 789, 790 (R.I.1995) (per curiam). Rhode Island law provides for enforcement of “exculpatory-indemnification clauses that negate liability for an individual’s own negligence if the clause is sufficiently specific.” Rhode Island Hospital Trust Nat’l Bank v. Dudley Service Corp., 605 A.2d 1325, 1327 (R.I.1992) (emphasis added). The relevant clause need not, however, specifically include the term “negligence.” Best Impressions v. Port Edgewood, Ltd., 641 A.2d 1323, 1324 (R.I.1994). Instead, the court considers “the intent of the parties as expressed in the contract.” Id.

The court concludes that the relevant provisions of the Owner-Operator Agreement are not sufficiently precise to excuse Arpin from liability for its own negligence. The first provision cited by Arpin provides that “[i]t is expressly understood by [Pouliot] that in no event does [Arpin] assume any liability of any nature whatsoever to [Pouliot] for any loss or damage …” Owner Operator Agreement [Dkt. No. 376, Ex. C] at 11. The provision could be read to state either one of two principles. It could be read, as Arpin argues, to provide that Arpin has no liability for damages suffered by Pouliot. Alternatively, it could be read to provide that Arpin will not indemnify Pouliot for liability to him for losses or damages sustained by third parties. As the provision is not clear, it will not, under Rhode Island law, be read to disclaim Arpin’s liability for its own negligence.

The second provision cited by Arpin to support its claim that it cannot be held liable for negligence is explicitly related to injury to Pouliot’s employees and any third parties. See Owner Operator Agreement [Dkt. No. 376, Ex. C] at 12. That provision provides that:

[Pouliot] agrees to indemnify, save and hold [Arpin] harmless from and against any and all claims, demands, liabilities, damages, losses, judgments, awards, causes of action at law or in equity, including but not limited to those involving injury to or death of, [Pouliot]s employees and/or third parties and damages to property including but not limited to, cargo and attorney’s fees and all reasonable costs of litigation, and from and against any obligation whatsoever arising out or attributable to any act or omission of [Pouliot] or any of the persons engaged or employed by [Pouliot] in connection with the operation or maintenance of the Equipment, and in connection with [Pouliot’s] performance of transportation of [sic] other services hereunder.

Owner Operator Agreement [Dkt. No. 376, Ex. C] at 12 (emphasis added). A reasonable reading of this less-than-clear clause would be that Pouliot indemnifies Arpin for damages to persons other than Pouliot resulting from the negligence of Pouliot or one of his employees. The second portion of the clause holds Arpin harmless from liability arising from Pouliot’s actions, not, as in suit here, Arpin’s acts or omissions. Certainly, given the standards under Rhode Island law for reading such provisions, neither provision is “sufficiently specific” under Rhode Island law to excuse Arpin from liability for its own negligence. Therefore, a genuine issue of material fact exists with respect to Arpin’s negligence and any liability arising therefrom.

F. Vicarious Liability

Pouliot claims that Arpin is vicariously liable for any acts of Festo, Trans-Expo, or Ramirez that resulted in injury to Pouliot. Pouliot argues that federal trucking regulations impose liability on Arpin for the acts of individuals it hires in connection with its work as a for-hire motor carrier. Pouliot cites no statute or case law for this conclusion. The treatises cited do not address the situation here, where a trucking company hires a freight forwarder, like Trans-Expo, or picks up and delivers a shipment on behalf of a shipper, like Festo. Instead, they address the company’s hiring of a trucker to make the shipment.

Pouliot argues that it is the responsibility of the finder of fact to determine whether Festo, Trans-Expo, and Ramirez were agents of Arpin or, instead, whether they were engaged in a joint venture with Arpin. It cites to no evidence, however, on which a jury could make such a factual determination in its favor. Pouliot has failed to “do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Therefore, Arpin is entitled to summary judgment on Count Seven of the Fifth Amended Complaint [Dkt. No. 201].

G. Recklessness

Arpin argues that Pouliot has failed to allege sufficient facts to support a claim for recklessness. “Recklessness is a state of consciousness with reference to the consequences of one’s acts. It is more than negligence, more than gross negligence.” Dubay v. Irish, 207 Conn. 518, 532, 542 A.2d 711 (1988) (internal citations, quotation marks and alterations omitted). Under Connecticut law, recklessness may be inferred from a party’s conduct. Id. Whether conduct is reckless is a question of fact to be determined by the trier of fact. Frillici v. Town of Westport, 264 Conn. 266, 277-278, 823 A.2d 1172 (2003) (holding that trial court’s factual finding regarding recklessness was not clearly erroneous). Summary judgment may, however, be appropriate where the relevant facts are undisputed and “when the mind of a fair and reasonable man could reach but one conclusion” on the basis of those facts. Dubay, 207 Conn. at 535 n. 10, 542 A.2d 711.

When determining whether a plaintiff has alleged a cause of action sounding in recklessness, Connecticut courts consider whether the plaintiff has sufficiently alleged that the defendant’s behavior was wilful, wanton, or reckless. “[W]illful, wanton, or reckless conduct tends to take on the aspect of highly unreasonable conduct, involving an extreme departure from ordinary care, in a situation where a high degree of danger is apparent.” Craig v. Driscoll, 262 Conn. 312, 342-343, 813 A.2d 1003 (2003) (internal quotation marks omitted). Such conduct “must be more than any mere mistake resulting from inexperience, excitement, or confusion, and more than mere thoughtlessness or inadvertence, or simply inattention.” Id. at 343, 813 A.2d 1003 (internal quotation marks omitted). In the instant case, relevant and material facts are disputed. Furthermore, a rational fact-finder could infer, from the facts as alleged by Pouliot, that Arpin’s actions were reckless. Providing an individual with a defective vehicle with which to transport an 800-pound piece of equipment may be considered reckless behavior, undertaken with a wanton disregard for the possibility of injury to that individual, in a situation where danger is apparent.

III. CONCLUSION

For the reasons discussed above, Arpin’s motion for summary judgment [Dkt. No. 364] is DENIED in part and GRANTED in part. Festo’s motion for summary judgment [Dkt. No. 359] is GRANTED. Trans-Expo and Ramirez’ motion for summary judgment [Dkt. No. 366] is GRANTED.

8 SO ORDERED.

FN1. Pouliot argues that he effectively opted out of Rhode Island’s Workers’ Compensation system by filing a notice pursuant to Rhode Island General Law § 28-19-17 following notification by Arpin that it intended to allege that Pouliot was an employee and, therefore, subject to the workers’ compensation exclusivity provision. Rhode Island General Law § 28-19-17 provides that an employee must provide such notice within ten days of the time of the contract of hire or appointment. Pouliot filed his notice within ten days after Arpin indicated its intention to argue Pouliot was an employee but well after such ten day period would have expired had he been hired as an employee. Because the court finds that Pouliot was not hired as an employee, the court need not decide whether Pouliot successfully opted out pursuant to § 28-19-17.

United States District Court,

E.D. Tennessee.

Richard Lynn HENSLEY

v.

Anthony MILES, et al.

May 18, 2005.

MEMORANDUM OPINION AND ORDER

GREER, J.

This declaratory judgment action is before the Court for consideration of the objections of the defendant, Arkansas Property and Casualty Guaranty Fund (“Arkansas Fund”) [Doc. 155] to the Report and Recommendation of the United States Magistrate Judge which recommends that the motion for summary judgment filed by the plaintiff be granted and that the motion for summary judgment filed by the defendant Arkansas Fund be denied. [Doc. 154] [FN1]

FN1. A Supplemental Report and Recommendation of the United States Magistrate Judge was filed on January 26, 2005 [Doc. 161] which granted the motion of Arkansas Property and Casualty Guaranty Fund to withdraw any defense that the North Carolina Guaranty Fund was the proper fund against which plaintiff must pursue his claim in the event the Legion policy afforded coverage. Thus, the question of whether or not the Legion policy of insurance afforded uninsured/underinsured motorist coverage to the plaintiff is the only question to be resolved in these motions for summary judgment.

Arkansas Fund is a statutorily created entity which is responsible for payment of claims of the insureds, including the plaintiff, of Legion Insurance Company (“Legion”), which is insolvent, if those claims are covered claims as defined by Ark.Code Ann. § 23-90-102. In other words, as pointed out by the Magistrate Judge, the Arkansas Fund stands in Legion’s corporate shoes as far as its basic liability to the plaintiff is concerned. The parties agree that there are no issues of fact in dispute in this matter and that the case is, therefore, ripe for resolution by summary judgment. The sole issue is whether or not the Legion policy of insurance at issue in this case afforded uninsured/underinsured coverage to the plaintiff in this case.

28 U.S.C. § 636(b)(1) provides, in pertinent part:

Within ten days after being served with a copy, any party may serve and file written objections to such proposed findings and recommendations as provided by rules of court. A judge of the court shall make a de novo determination of those portions of the report or specified proposed finding or recommendations to which objection is made. A judge of the court may accept, reject, or modify, in whole or in part, the finding or recommendations made by the magistrate. The judge may also receive further evidence or recommit the matter to the magistrate with instructions.

This Court’s de novo review of the Magistrate Judge’s report is both statutorily and constitutionally required. United States v.. Worley, 193 F.3d 380, 383-384 (6th Cir.1999); United States v. Shami, 754 F.2d 670, 672 (6th Cir.1985). After careful consideration of the record as a whole, the Report and Recommendation of the Magistrate Judge will be adopted and approved for the reasons set forth below.

FACTS

On July 5, 2000, the plaintiff, Richard Lynn Henlsey (“Hensley”) and the defendant, Anthony Miles (“Miles”), were involved in an automobile accident in Sullivan County, Tennessee. At the time of the accident, Hensley was operating a tractor-trailer that was leased to Fikes Trucking Company, Inc. (“Fikes”) of Arkansas and was hauling a load of cargo for Fikes. [FN2] Miles was operating a rented vehicle owned and self-insured by Enterprise Rent-A-Car (“Enterprise”) when he lost control, crossed the median between the north bound and south bound lanes of Interstate 81 and crashed into Mr. Hensley’s truck. Miles was clearly at fault in the accident and Mr. Hensley was seriously injured. A tort action was ultimately filed in this Court (Civil action No. 2:01-CV-124) and remains pending. Miles had no insurance.

FN2. The title owner of the tractor-trailer was Jo Hartley, with whom Hensley was a partner in a business known as H & H Logistics.

Legion issued policy of insurance no. CA112021234 (“the Legion policy”) to Fikes Trucking. The Legion policy included uninsured /underinsured motorist coverage and Hensley was a covered insured in light of the circumstances existing in this case. The Arkansas Fund makes two arguments that the Legion policy affords no coverage to Hensley, however. First, the Arkansas Fund argues that the Legion policy excluded any coverage while the truck was being used “to carry property in any business”. Second, the Arkansas Fund argues that even if the Legion policy did cover the accident, nevertheless the uninsured motorist coverage was not triggered under the terms of the policy.

In pertinent part, a change endorsement to the Legion policy dated October 1, 1991, reads as follows:

Liability coverage for a covered “auto” described in the Schedule is changed as follows:

1. The following exclusions are added: This insurance does not apply to:

a. A covered “auto” while used to carry property in any business.

b. A covered “auto” while used in the business of anyone to whom the “auto” is rented.

Uninsured/underinsured motorist coverage in the Legion policy is provided by another change endorsement, and the pertinent parts read as follows:

A. COVERAGE

1. We will pay all sums the “insured” is legally entitled to recover as compensatory damages from the owner or driver of an “uninsured motor vehicle” or an “underinsured motor vehicle”. The damages must result from “bodily injury” sustained by the “insured” caused by an “accident”. The owner’s or driver’s liability for these damages must result from the ownership, maintenance or use of the “uninsured motor vehicle” or the “underinsured motor vehicle”.

….

F. ADDITIONAL DEFINITIONS

As used in this endorsement:

….

3. “Uninsured motor vehicle” means a land motor vehicle or trailer:

a. For which no liability bond or policy at the time of an “accident” provides at least the amounts required by the applicable law where a covered “auto” is principally garaged;

b. For which an insuring or bonding company denies coverage or is or becomes insolvent; or

c. That is a hit-and-run vehicle and neither the driver nor owner can be identified. The vehicle must hit an “insured”, a covered “auto” or a vehicle an “insured” is “occupying”.

However, “uninsured motor vehicle” does not include any vehicle:

(1) Owned or operated by a self insurer under any applicable motor vehicle law, except a self insurer who is or becomes insolvent and cannot provide the amounts required by that motor vehicle law;….

4. “Underinsured motor vehicle” means a land motor vehicle or trailer for which the sum of all liability bonds or policies at the time of an “accident” provides a limit that is less than the amount an “insured” is legally entitled to recover as damages caused by the “accident”;

However, “underinsured motor vehicle” does not include any vehicle:

a. Owned or operated by a self insurer under any applicable motor vehicle law;

….

Objections

Defendant Arkansas Fund objects to the recommendation of the United States Magistrate Judge to find uninsured motorist coverage on behalf of Hensley under the Legion policy on the basis that his decision is “contrary to Tennessee statutes, the clear language of the policy, and directly conflicts with a previous ruling of the District Court in this case.” The Court will deal with each of these issues separately.

The Arkansas Fund’s argument that the Magistrate Judge’s Report and Recommendation is Contrary to Tennessee Statutes

As an initial matter, the Arkansas Fund contends that the Tennessee Uninsured Motorist statute precludes coverage for Hensley under the Legion policy because the owner of the vehicle operated by Miles (Enterprise) was a self insured entity. Hensley argues, on the other hand, that the Tennessee statute is irrelevant and that Arkansas law should be applied in deciding this dispute since the policy of insurance was issued in Arkansas, a matter about which there is no dispute. [FN3] This choice of law question was not specifically discussed by the Magistrate Judge and it is unclear whether the Magistrate Judge applied Tennessee or Arkansas law, although it does not appear that the Magistrate Judge relied on any language of the Tennessee statute.

FN3. The tractor-trailer operated by Hensley was titled in the Commonwealth of Virgina and garaged in North Carolina. Hensley was a resident of North Carolina. None of these facts affect the choice of law questions.

In a diversity action brought pursuant to 28 U.S.C. § 1332, this District Court, sitting in Tennessee, must apply the substantive law, including the choice of law rules, of the forum state, that is, Tennessee. Hayes v. Equitable Energy RES Co., 266 F.3d 560, 566 (6th Cir.2001) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1447 (1941)). It is the settled rule in Tennessee that the construction and validity of contracts, including insurance policies, are governed by the law of the place where the contract was made. Great American Insurance Co. v. Hartford, 519 S.W.2d 579 (1975); Ohio Casualty v. Travelers, 493 S.W.2d 465 (1973); Karr v. American Universal Ins. Co., 341 F.2d 220 (6th Cir.1965). It is undisputed that the policy of insurance at issue in this case was issued and delivered in the State of Arkansas; therefore, it is the law of Arkansas and not the law of Tennessee that must be applied to the interpretation of the Legion policy in this case and the Tennessee statute cited by the Arkansas Fund is simply irrelevant.

The Arkansas Fund’s argument that the Legion policy excludes coverage while the truck was used to “to carry property in any business”

The Fund’s argument in this regard can be “disposed of rather quickly” as indicated by the Magistrate Judge. It is undenied that, at the time of the accident involving Hensley and Miles, Hensley was carrying cargo on behalf of Fikes. It is equally undisputed that the change endorsement set forth above, by its own clear and unambiguous terms, was limited to liability coverage, not uninsured motorist coverage. The exclusion of the policy relating to “carry [ing] property in any business” is inapplicable to the uninsured motorist coverage of the Legion policy. Thus, the Fund’s argument in this regard is without merit.

The Arkansas Fund’s argument that the vehicle operated by Miles and owned by Enterprise was excluded from the definition of an “uninsured motor vehicle” in the Legion policy

Having determined that Arkansas law applies to the interpretation of the Legion policy, the Court’s initial point of inquiry is the statutory provisions of the Arkansas Code related to uninsured motor vehicles. The uninsured motor vehicle law of the State of Arkansas is contained in Title 23, Chapter 89 of the Arkansas Code. More specifically, Ark.Code Ann. § 23-89-401 provides that an “… “uninsured motor vehicle” shall be deemed to include, subject to the terms and conditions of the coverage, an insured motor vehicle when the liability insurer thereof is unable to make payment with respect to the legal liability of its insured within the limits specified therein because of insolvency.” This statutory provision is of only minimal assistance to the Court in interpreting the Legion policy other than that it clearly establishes a legislative intent in Arkansas that the terms of uninsured motorist coverage should cover situations where the insurer is unable to make payment with respect to the legal liability of its insured because of insolvency. No other provision of the Arkansas Code appears to have any application to the situation raised in this case.

Given that the Arkansas statute is not dispositive of the question raised herein, the question of whether or not the Legion policy precludes coverage to Hensley in this case because the owner of the vehicle driven by Miles (Enterprise) was a self insured entity not legally liable for Miles’ actions is a matter of interpretation of the provisions of the Legion policy. The question is also apparently one of first impression as no Arkansas case interpreting the precise policy provisions at issue in this matter has been found by this Court. Several decisions of the Arkansas courts are, however, helpful in interpreting the provisions of this policy.

The Arkansas courts have established several general rules of construction which apply to the interpretation of insurance contracts issued in the State of Arkansas. It appears to be clearly settled Arkansas law that an insurer may contract with its insured upon whatever terms the parties may agree upon which are not contrary to statute or public policy. Aetna Ins. Co. v. Smith, 263 Ark. 849, 568 S.W.2d 11 (1978). Insurance policies are, however, to be strictly construed against the insurer. Smith v. Prudential Property and Casualty Ins. Co., 340 Ark. 335, 10 S.W.3d 846 (2000); M.F.A. Mutual Ins. Co. v. McKinley, 245 Ark. 326, 432 S.W.2d 484 (1968). If a reasonable construction would justify recovery under an insurance policy, it is the duty of the court to give that construction to the policy. Smith at 10 S.W.3d 850. Said another way, the Arkansas courts have established a cardinal rule of insurance law that a policy of insurance is to be construed liberally in favor of the insured and strictly against the insurer or, as more fully stated, if the language employed is ambiguous, where there is doubt or uncertainty as to its meaning and it is fairly susceptible of two interpretations, one favorable to the insured and the other favorable to the insurer, the former will be adopted. Nationwide Mutual Ins. Co. v. Worthey, 314 Ark. 185, 861 S.W.2d 307 (1993); Drummond Citizens Ins. v. Sergeant, 266 Ark. 611, 588 S.W.2d 419 (1979).

In reviewing an insurance policy, when the terms of the policy are clear, the language in the policy controls. Columbia Mut. Ins. Co. v. Home Mut. Fire Ins. Co., 74 Ark.App. 166, 47 S.W.3d 909 (2001) If a policy provision is unambiguous, and only one reasonable interpretation is possible, the court will give effect to the plain language of the policy without resorting to rules of construction; it is the duty of the courts to give effect to the plain wording of the policy. Smith v. Southern Farm Bureau Cas. Ins. Co., 353 Ark. 188, 114 S.W.3d 205 (2003) A policy will not be interpreted to bind the insurer to a risk that is plainly excluded and for which it was not paid. First Financial Ins. Co. v. National Indemnity Co., 49 Ark.App. 115, 898 S.W.2d 63 (1995). If, however, the policy language is ambiguous, and thus susceptible to more than one reasonable interpretation, the policy will be construed liberally in favor of the insured and strictly against the insurer. Smith, supra. The language of an insurance policy is to be construed in its plain, ordinary and popular sense. The fact that a term is not defined in a policy does not automatically render it ambiguous. As a guideline of contract interpretation, the different clauses of a contract must be read together and the contract should be construed so that all parts harmonize. Id. Language is ambiguous if there is doubt or uncertainty as to its meaning, and it is fairly susceptible to more than one reasonable interpretation. Gawrieh v. Scottsdale Ins. Co., 83 Ark.App. 59, 117 S.W.3d 634 (2003); Continental Cas. Co. v. Davidson, 250 Ark. 35, 463 S.W.2d 652 (1971).

With respect to uninsured motorist coverage, the plaintiff must show that both the tortfeasor and the vehicle driven by the tortfeasor are uninsured. Home Ins. Co. v. Harwell, 263 Ark. 884, 568 S.W.2d 17 (1978)(vehicle); Southern Farm Bureau Cas. Ins. Co. v. Gottsponer, 245 Ark. 735, 434 S.W.2d 280 (1968) (driver). Likewise, uninsured motorist provisions of an insurance policy must be viewed in light of the purpose of the uninsured motorist statute which is to require that the same amount of coverage be available to one injured by the negligence of an uninsured motorist as would be available had the motorist had the minimum coverage necessary to satisfy the Arkansas Motor Vehicle Safety Responsibility Act, or, in other words, had the motorist been covered by appropriate liability insurance. Aetna Ins. Co. v. Smith, 263 Ark. 849, 568 S.W.2d 11 (1978)

With these rules of construction in mind, this Court now turns to an examination of the Legion policy in light of the factual circumstances existing in this case. It is undisputed that Miles, the driver of the automobile which collided with Hensley, was uninsured. The vehicle he was driving, however, was self insured by Enterprise and the Arkansas Fund argues that, because the Enterprise vehicle was self insured, Legion is not obligated to provide uninsured motorist coverage under the clear terms of its policy. As noted by the Magistrate Judge, Enterprise has been dismissed from the underlying tort action based upon a finding that it has no duty or legal liability to compensate Hensley for the tortious action of Miles. The Magistrate Judge found, therefore, that Enterprise’s self insurance was “utterly irrelevant” and that there was and is no insurance coverage available to Miles, thus triggering the uninsured motorist coverage of the Legion policy. For the reasons set forth below, this Court must agree.

The Legion policy clearly obligates Legion to pay all sums Hensley is legally entitled to recover as compensatory damages from the owner or driver of an uninsured motor vehicle or an underinsured motor vehicle where bodily injury is sustained as the result of an accident. The owner’s or driver’s liability for these damages must result from the ownership, maintenance or use of the uninsured or underinsured motor vehicle. Under the terms of the coverage, therefore, the only question to be decided is whether or not the motor vehicle driven by Miles on the date of his accident with Hensley was an uninsured motor vehicle.

The policy defines an uninsured motor vehicle as a vehicle (a) for which no “liability bond or policy” is in effect at the time of the accident, (b) for which an insuring or bonding company denies coverage or becomes insolvent, or (c) there is a hit-and-run vehicle and neither the driver nor owner can be identified. Absent any further definitions or exclusions from coverage, the Legion policy would clearly afford coverage to Hensley under the facts and circumstances of this case. Therein the problem arises, however, because the policy further provides that an “uninsured motor vehicle” does not include any vehicle “owned or operated by a self-insurer under any applicable motor vehicle law, except a self-insurer who is or becomes insolvent and cannot provide the amounts required by that motor vehicle law”. The policy further contains a similar exclusion from the definition of “underinsured motor vehicle”; however, the exclusion is worded significantly differently in that it appears, by its language, to exclude all motor vehicles owned or operated by a self insured, not just those self insurers who are solvent and can provide the amounts of liability coverage required. [FN4]

FN4. It appears that the purpose of the self-insurer language of the policy, in the first instance, was to assure that a self-insured vehicle could not automatically be considered uninsured simply because the self-insurer was not an insurance company and no insurance policy had been issued for the vehicle. No reason exists to treat a vehicle covered by a policy of insurance issued by an insurance company differently from a vehicle which is self-insured for the purpose of determining its status as an uninsured motor vehicle.

The Arkansas Fund argues that because the vehicle operated by Miles was owned by Enterprise, a self insurer, the vehicle operated by Miles was not an uninsured motor vehicle under the clear language of the policy and the Legion uninsured motorist coverage, therefore, does not apply. The language of the policy, however, is neither as clear nor unambiguous as the Arkansas Fund argues. As the Magistrate Judge appropriately asks: “What is the difference between insurance that never existed and insurance that is unavailable, or inapplicable? The answer, obviously, is that there is no difference.” The Magistrate Judge determined that his conclusion was confirmed by paragraph (F)(3)(b) of the Legion change endorsement which provides that an uninsured motor vehicle includes any vehicle for which an insuring or bonding company denies coverage or becomes insolvent. In the first instance, the uninsured motorist coverage of the Legion policy would be available to Hensley if Enterprise had been insured by an insurance company which had issued a policy of liability insurance but the company had then denied coverage under the policy. Under the Arkansas Fund’s argument, the self insurer, Enterprise, would be excluded from the definition of an uninsured motor vehicle under the same circumstances and the Legion policy would afford no coverage. When viewing the uninsured motorist provisions of the Legion policy in total, it is clear that the Legion policy contemplated the possibility that its uninsured motorist coverage would apply if the insuring entity became insolvent or denied coverage to its insured. By the language of the Legion policy the exclusion of a self insured from the definition of uninsured motor vehicle does not apply to a self insurer who becomes insolvent and cannot provide the required coverage. When read together, the policy provisions clearly establish that Legion intended to provide coverage both in the situation where the insuring entity became insolvent and in the situation where the insuring entity denied coverage, regardless of whether the insuring entity is an insurance company or a self-insurer. In fact, courts around the country are almost unanimous in equating insolvency of an insurer with a denial of coverage. See, for instance Superior Risk Ins. Co. v. Dudas, 38 Ohio App.2d 64, 312 N.E.2d 534 (1974); Katz v. American Motorist Ins. Co., 244 Cal.App.2d 886, 53 Cal.Rptr. 669 (1966); Fireman’s Ins. Co. v. Diskin, 255 Cal.App.2d 502, 63 Cal.Rptr. 177 (1967); Bartholomew v. Glen Falls Ins. Co., 241 So.2d 698 (Fla.App.1970); Farkas v. Hartford Accident & Indemnity Co., 285 Minn. 324, 173 N.W.2d 21 (1969); Seabaugh v. Sisk, 413 S.W.2d 602 (Mo.App.1967); General Accident v. Shasky, 266 Or. 312, 512 P.2d at 987 (1973); Murray v. Montana Ins. Guaranty Assoc., 175 Mont. 220, 573 P.2d 196 (1997); Travis v. General Accident Group, 31 A.D.2d 20, 294 N.Y.S.2d 874 (1968).

This Court finds, therefore, that the clear and unambiguous language of the Legion policy itself contemplates uninsured motorist coverage both when the insuring entity, whether an insurance company or a self-insurer, becomes insolvent and when the insuring entity denies coverage to its insured. Furthermore, even if the provisions of the policy are ambiguous and susceptible to both interpretations, this Court must interpret the policy in the way most favorable to Hensley. Likewise, to give effect to the exclusion in the policy as urged by the Arkansas Fund would deprive Hensley of the benefit of the purpose of the Arkansas uninsured motorist statute which is to provide a basic minimum coverage against the actions of financially irresponsible motorists. See Payne v. Farm Bureau Mutual Ins. Co. of Arkansas Inc., 298 Ark. 540, 768 S.W.2d 543 (1989).

Although the appellate courts of Arkansas have not been confronted with the specific policy language at issue in this case, this Court also believes that the Arkansas Fund’s interpretation of the policy provisions in this case might very well violate the public policy of the State of Arkansas and would certainly defeat the purposes for which the Arkansas uninsured motorist statute was enacted. Three cases illustrate the point.

In Glen R. Vaught v. State Farm Fire & Casualty Co., 413 F.2d 539 (8th Cir.1969), the Eighth Circuit, applying Arkansas law, considered a case, the facts of which are remarkably similar to the facts in this case. In Vaught, the plaintiff was involved in an accident in which an automobile driven by him and a vehicle owned by the City of North Little Rock, driven by Joseph Roberts, an employee of the city, collided. Since neither the City of North Little Rock nor Roberts had insurance covering the vehicle, the plaintiff instituted a suit against the defendant, State Farm Fire & Casualty Company, under the terms of a State Farm policy which included coverage for uninsured automobiles but excluded automobiles owned by municipality from the term “uninsured automobiles.” The District Court held that the policy provision was contrary to the public policy of the State of Arkansas as set forth in its uninsured motorist statute and held the exclusion invalid. The District Court held:

The Arkansas statute requires coverage ‘for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles. * * * ‘ Under existing Arkansas law it is true that the plaintiff had no cause of action against the City of North Little Rock, the owner of the vehicle, but the plaintiff did have a cause of action against the operator of the uninsured vehicle, Joseph Roberts. To give effect to the exclusion in the policy would deprive plaintiff of the benefit of the statute, although the collision was with one who is legally liable, and one who was driving an uninsured vehicle at the time of the accident.

The obvious intent of the Legislature in enacting the Uninsured Motorist Act was to provide insurance to policy holders such as plaintiff Vaught against inadequate compensation for injuries in a collision with uninsured motorist vehicles at least to the extent provided by statute.

In the cases cited from other jurisdictions the courts have refused to allow limitations contained in the insurance policies to subvert the intent of the state statutes.

There does not appear to be any valid legal reason for the limited definition of ‘uninsured automobile’ contained in plaintiff Vaught’s policy. To allow such a special exception from coverage written into the insurance contract would defeat the purpose for which the statute was passed, and the court finds that the definition contained in Vaught’s policy … is void and of no effect.

Carter v. St. Paul Fire & Marine Ins. Co., 283 F.Supp. 384, 388 (D.Ark.1968); (consolidated in the District Court with Vaught v. State Farm Fire & Casualty Co.)

Stating that “we are convinced that if the Arkansas Supreme Court were faced with the question raised here that its opinion would be the same as that of the District Court,” the Eighth Circuit affirmed the District Court’s decision. This Court believes the same reasoning to be applicable in this case.

The second case is Robey v. Safeco Ins. Co. of America, 270 F.Supp. 473 (D.C.Ark.1967). In that case, the District Judge, applying Arkansas law, had before him the question of the legal effect of a policy provision contained in an uninsured motorist policy limiting liability where there was “other insurance.” Safeco had issued two different policies to the plaintiff insuring two separate vehicles and the policies were identical, with the exception of the amount of coverage, and both policies contained the “other insurance” exclusion. The plaintiff had recovered under the first policy but Safeco denied coverage on the second. The District Judge held the “other insurance” provisions in the Safeco policies to be invalid under Arkansas law.

The third case which is illustrative as to the public policy of the State of Arkansas is the Arkansas Supreme Court decision in State Farm Mutual Automobile Ins. Co. v. Cates, 261 Ark. 129, 546 S.W.2d 423 (1977). Facts in the case were relatively simple. Cates was injured when his vehicle was struck in the rear by a gravel truck driven by an employee of J.T. Allen. Cates suffered damages of at least $20,000.00 and, in a separate case, sued the driver and owner of the gravel truck and the owner’s company paid its policy limits. Louisiana Industries Inc., who paid J.T. Allen for hauling gravel, was joined in the suit. Its insurance company paid Cates $7,500.00 but in the settlement agreement denied that it was the employer of either Allen or the driver and recited that the settlement was a compromise of a doubtful and disputed claim. Cate’s insurance with State Farm provided for a maximum of $10,000.00 for personal injury damages resulting from an accident caused by an uninsured vehicle. When State Farm refused to pay Cates, arguing that the gravel truck was insured, or if not, the payment of $7,500.00 by Louisiana Industries should reduce its liability to zero, he sued under his uninsured motorist coverage. The Court framed its question and the answer to the question as follows:

“Therefore, the question is, did Louisiana Industries insurance cover the gravel truck? If it did, the truck would be insured. If not, the truck would be uninsured. Since the jury found that Dorathy (the driver) was not an agent or employee of Louisiana Industries, it follows that Louisiana Industries was not legally responsible for the use of the vehicle. Therefore, the truck was uninsured.”

The reasoning of all these cases clearly establishes that the public policy of Arkansas cannot be furthered by enforcing exclusions such as the one contained in the Legion policy. To do so would sabotage the purpose of the Arkansas uninsured motorist statute which is to provide a basic minimum coverage against the actions of financially irresponsible motorists.

The Fund’s argument that the ruling of the Magistrate Judge directly conflicts with a previous ruling of the District Court

The Fund accurately points out that this Court in a memorandum opinion entered March 9, 2004 dismissed GEICO Direct as a party to this declaratory judgment action based upon a policy of insurance it issued covering the personal vehicle of the plaintiff. The GEICO policy offered uninsured motorist coverage using language virtually identical to the Legion policy in defining an uninsured motor vehicle. This Court declared that “the vehicle owned by Enterprise that was involved in this accident is not uninsured for purposes of Tennessee or North Carolina law, or under the terms of the GEICO policy. As set forth earlier in this memorandum opinion, the Legion policy must be interpreted by applying the law of the State of Arkansas and a prior holding of this Court under either Tennessee or North Carolina law is simply irrelevant. Such holding has not become the law of this case with respect to whether or not the Legion policy affords coverage to the plaintiff.

CONCLUSION

For the reasons set forth above, it is hereby ORDERED that the Magistrate Judge’s Report and Recommendation [Doc. 161] is ADOPTED and APPROVED, that the motion for summary judgment filed by the plaintiff is GRANTED and the motion for summary judgment filed by the defendant, Arkansas Property and Casualty Guaranty Fund, is DENIED. It is specifically declared that the Legion policy which is the subject of this cause affords uninsured motorist coverage to the plaintiff and Hensley’s claim is a covered claim as defined by Ark.Code Ann. § 23-90-103.