2021 WL 1110397

United States District Court, W.D. New York.
JAMES J. GIARLA, AMBER L. GIARLA, Plaintiffs,
v.
THE COCA-COLA COMPANY, COCA-COLA REFRESHMENTS USA, INC., Defendants.
17-CV-359S
|
03/23/2021

WILLIAM M. SKRETNY, United States District Judge

DECISION AND ORDER

I. Introduction
*1 This is a removed diversity personal injury action for injuries suffered by Plaintiff James Giarla while driving a tractor trailer on the Queen Elizabeth Way in Ontario, Canada. Plaintiffs are New York residents (Docket No. 1, Ex. B, Compl. ¶ 1; Docket No. 1, Notice of Removal ¶10). Defendants are corporations incorporated in Delaware and do business in Georgia (Docket No. 1, Ex. B, Compl. ¶¶ 2-3, 20-21; Docket No. 1, Notice of Removal ¶10).

James Giarla was hit by a truck owned by Coca-Cola Refreshments Canada. Plaintiffs now allege that Defendants, the Coca-Cola Company and Coca-Cola Refreshments USA, Inc., are responsible for Coca-Cola Refreshments Canada in this action.

For the reasons stated herein, Defendants’ Motion for Judgment to Dismiss the Complaint (Docket No. 16) is granted. Plaintiffs argue that they should be granted leave to replead (Docket No. 19, Pls. Memo. at 18). Leave to amend is granted; Plaintiffs shall file and serve their Motion for Leave to Amend (with the proposed Amended Complaint) within fourteen (14) days of entry of this Order.

II. Background

A. Defendant Coca-Cola’s Corporate Organization
Pertinent to this case, Plaintiffs allege the corporate affiliation of Coca-Cola Company (“Coke”) and the history of Defendant Coca-Cola Refreshments USA (“CCR”), the wholly owned subsidiary of Coke (Docket No. 1, Ex. B, Compl. ¶¶ 19-21). CCR is Coke’s largest bottler (id. ¶¶ 16-18). Coke acquired Coca-Cola Enterprises and Coca-Cola Enterprises was renamed Coca-Cola Refreshments, Inc. (id. ¶¶ 16, 18).

Plaintiffs allege the Coca-Cola Refreshments Canada (“CCR-Canada”) was a wholly owned subsidiary of CCR as of 2015 (id. ¶¶ 27-28, 37, 64-68). They claim that there were not separate “operating segments” for the United States and Canada but a unified operation under the “North America segment” caption (id. ¶ 71). They argue that Coke did not distinguish between CCR and CCR-Canada, allegedly treating them as one operating segment for North America (id. ¶ 73). As an example of the continental perspective, Plaintiffs point to the January 2016 transfer by Coke of bottling and related supply chain operations from CCR and CCR-Canada to a Bottling Investment segment (id. ¶ 82), although this change post-dates James Giarla’s accident.

Plaintiffs conclude that Coke and CCR “should be held accountable to a New York State resident and not be allowed to escape that responsibility by asserting a corporate separation that exists in name only” (id. ¶ 89).

B. Queen Elizabeth Way Collision, February 25, 2015
James Giarla was a tractor trailer driver. On February 25, 2015, he was driving from Michigan back to his employer in Blaisdell, New York, passing through Ontario, Canada, on the Queen Elizabeth Way (Docket No. 1, Ex. B, Compl. ¶¶ 33-35). Plaintiffs allege that driver Francesco Rappazzo, employed by CCR-Canada, drove a CCR-Canada truck, and collided into James Giarla’s tractor trailer on the Queen Elizabeth Way in Grimsby, Ontario (id. ¶ 38). Plaintiffs contend that CCR-Canada is a wholly owned subsidiary of Coke (id. ¶ 37; see Docket No. 15, Am. Ans. ¶ 7 (admitting allegation that CCR-Canada owned the truck and it was operated by Rappazzo in the course of his employment with CCR-Canada)).

C. Plaintiffs’ New York State Complaint (Docket No. 1, Ex. B)
*2 Plaintiffs sued in New York State Supreme Court, Niagara County (Docket No. 1, Ex. B, Compl.). Plaintiffs did not set forth a formal First Cause of Action, but they allege a claim for negligence for the injuries to James Giarla (see id. ¶¶ 30-89) and a Second Cause of Action asserting a consortium claim for Plaintiff Amber Giarla (id. ¶¶ 90-91).

For their state action, Plaintiffs alleged New York State courts jurisdiction over this matter (see id. ¶¶ 46-63). Plaintiffs claim that they had only minimal contacts with the Province of Ontario because it was the site of the accident, stating that James Giarla drove through the Province but otherwise had his medical treatments exclusively in New York (id. ¶¶ 46-54). James Giarla received workers’ compensation in New York and no income or other benefits in Ontario (id. ¶¶ 51, 53, 52).

They next argue that Defendants (Coke, CCR, and non-party CCR-Canada) have significant contacts with New York (id. ¶¶ 55-63). Plaintiffs claim that Coke and CCR has common ownership over Coke’s wholly own subsidiary, CCR-Canada, and minimal contacts in Canada (id. ¶¶ 64-70). They contend that Coke considered the United States and Canadian operations the “North American” operations (id. ¶¶ 71, 73, 74). Plaintiffs, however, did not sue CCR-Canada.

Plaintiffs next assert prejudice to them if Ontario law applies in this case, concluding that New York law should apply (id. ¶¶ 83-89).

D. Answer and Proceedings
Defendants separately answered the Complaint (id., Exs. C (Ans. of Coca-Cola Company), D (Ans. of Coca-Cola Refreshments USA)). They separately served demands pursuant to N.Y. CPLR 3017(c) for Plaintiffs to allege the amount of their damages (id. Exs. F, G). Plaintiffs responded on April 21, 2017, alleging damages totaling at least $2 million, but claiming that James Giarla then still was undergoing medical treatment (id., Ex. H) that might increase their damages.

Defendants then removed this action on April 27, 2017 (Docket No. 1). They then jointly amended their Answer (Docket No. 15).
E. Defense Motion for Judgment on Pleadings Dismissing the Complaint (Docket No. 16)

On September 19, 2017, Defendants filed their present Motion1 for Judgment on the Pleadings to Dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(c) (Docket No. 16).

Responses to this motion, as extended (see Docket Nos. 18, 17), were due by October 9, 2017, and reply was due by October 16, 2017 (Docket No. 20).

III. Discussion

A. Applicable Standards
1. Motion for Judgment on Pleadings to Dismiss
Under Rule 12(c) of the Federal Rules of Civil Procedure, after pleadings are closed a party “may move for judgment on the pleadings,” Fed. R. Civ. P. 12(c). Since this rule calls for a summary proceeding that may deprive the opponent of the opportunity to a full and fair hearing on the merits of their claims, the movants must show a clear right to judgment on the pleadings, that there are no material issues of fact to be resolved, and entitlement to judgment as a matter of law, 5C Charles A. Wright, Arthur R. Miller, Federal Practice and Procedure § 1368, at 223 (Civil 3d ed. 2004). “A motion for judgment on the pleadings…theoretically is directed towards a determination of the substantive merits of the controversy; thus federal courts are unwilling to grant a judgment under Rule 12(c) unless it is clear that the merits of the controversy can be fairly and fully decided in this summary manner,” id., § 1369, at 259.

*3 Rule 12(c) “should be read in conjunction with several other federal rules authorizing pretrial motions, especially the various Rule 12(b) motions to dismiss,” id. at 258. Rule 12(b)(6), in turn, provides that the Court cannot dismiss a Complaint unless it appears “beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). As the Supreme Court held in Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), a Complaint must be dismissed if it does not plead “enough facts to state a claim to relief that is plausible on its face,” id. at 570 (rejecting longstanding precedent of Conley, supra, 355 U.S. at 45-46); Hicks v. Association of Am. Med. Colleges, No. 07-00123, 2007 U.S. Dist. LEXIS 39163, at *4 (D.D.C. May 31, 2007).

To survive a motion to dismiss, the factual allegations in the Complaint “must be enough to raise a right to relief above the speculative level,” Twombly, supra, 550 U.S. at 555; Hicks, supra, 2007 U.S. Dist. LEXIS 39163, at *5. As reaffirmed by the Court in Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009),
“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ [Twombly, supra, 550 U.S.] at 570….A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id., at 556….The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully. Ibid. Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of “entitlement to relief.” ’ Id., at 557…(brackets omitted).”
Iqbal, supra, 556 U.S. at 678 (citations omitted).

A Rule 12(c) motion is addressed to the face of the pleading, “otherwise, a summary judgment motion or trial is necessary,” 5C Federal Practice and Procedure, supra, § 1368, at 248, 251. The pleading is deemed to include any document attached to it as an exhibit, Fed. R. Civ. P. 10(c), or any document incorporated in it by reference. Goldman v. Belden, 754 F.2d 1059 (2d Cir. 1985).

In considering such a motion, the Court must accept as true all the well pleaded facts alleged in the Complaint. 5C Federal Practice and Procedure, supra, § 1368, at 227, 230, 237-38; Oneida Indian Nation of N.Y. v. City of Sherrill, N.Y., 337 F.3d 139, 152 (2d Cir. 2003) (court applies same standard for Rule 12(b) and 12(c) dismissals), rev’d on other grounds sub nom. City of Sherrill, N.Y. v. Oneida Indian Nation of N.Y., 544 U.S. 197, 125 S.Ct. 1478, 161 L.Ed.2d 386 (2005); Bloor v. Carro, Spanbock, Londin, Rodman & Fass, 754 F.2d 57 (2d Cir. 1985). However, conclusory allegations that merely state the general legal conclusions necessary to prevail on the merits and are unsupported by factual averments will not be accepted as true. New York State Teamsters Council Health and Hosp. Fund v. Centrus Pharmacy Solutions, 235 F. Supp. 2d 123 (N.D.N.Y. 2002).

2. Choice of Law
As a diversity action, the procedures are governed by federal law and rules, while the substantive law is governed by state law, see Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Ocean Ships, Inc. v. Stiles, 315 F.3d 111, 116 n.4 (2d Cir. 2002). A federal court sitting in diversity (as here) applies the choice of law rules from the state in which it sits, Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), here New York law.

*4 Under New York’s choice of law rules, “the first step in any case presenting a potential choice of law is to determine whether there is an actual conflict between the laws of the jurisdiction involved.” Matter of Allstate Ins. Co., 81 N.Y.2d 219, 223, 597 N.Y.S.2d 904, 905 (1993). This Court need not determine which jurisdiction’s law applies where the relevant issue would turn out the same under the forum’s law or the other cited jurisdiction and no true conflict exists, Elgin Sweeper Co. v. Melson Inc., 884 F. Supp. 641, 648 (N.D.N.Y. 1995); Howard v. Clifton Hydraulic Press Co., 830 F. Supp. 708, 712 (E.D.N.Y. 1993).

Another factor in identifying the proper jurisdiction’s law under New York’s choice of law rules is whether the law regulates conduct or allocates loss, Padula v. Lilarn Properties Corp., 84 N.Y.2d 519, 522, 620 N.Y.S.2d 310, 313 (1994) (Docket No. 19, Pls. Memo. at 12-13). Loss allocation, such as vicarious liability laws, guest statutes, or charitable immunity laws, id., and agency law, see Presbyterian Church of Sudan v. Talsiman Energy, Inc., 453 F. Supp.2d 633, 687-88 (S.D.N.Y. 2006) (plaintiff failed to address choice of law for question of which jurisdiction’s agency law applies), “are those which prohibit, assign, or limit liability after the tort occurs,” Padula, supra, 84 N.Y.2d at 522, 620 N.Y.S.2d at 313. The Neumeier rules (Neumeier v. Kuehner, 31 N.Y.2d 121, 335 N.Y.S.2d 64 (1972)) apply to determine the appropriate substantive law for loss allocation depending upon the domicile of the parties and the interests of the applicable jurisdictions.

Contrast conduct regulation, such as Labor Law §§ 240, 241, as held in Padula, supra, 84 N.Y.2d at 523, 620 N.Y.S.2d at 313, where “conduct-regulating rules have the prophylactic effect of governing conduct to prevent injuries from occurring. ‘If conflicting conduct-regulating laws are at issue, the law of the jurisdiction where the tort occurred will generally apply because that jurisdiction has the greatest interest in regulating behavior within its borders’ (Cooney v. Osgood Mach., 81 N.Y.2d 66, 72, 595 N.Y.S.2d 919, 612 N.E.2d 277 [1993]),” Padula, supra, 84 N.Y.2d at 522, 620 N.Y.S.2d at 313.

In personal injury actions, New York generally applies the law of the jurisdiction in which the injury occurred, see Cooney v. Osgood Machinery, Inc., 81 N.Y.2d 66, 595 N.Y.S.2d 919 (1993); Neumeier, supra, 31 N.Y.2d 121, 335 N.Y.S.2d 64; that would be Ontario and Canadian law here.

Under Neumeier, where the Plaintiffs are residents of one state (here, New York), the Defendants a second state (here, Georgia or Delaware, the state of incorporation), and the accident occurred in a third jurisdiction (the Province of Ontario), for loss allocation matters Neumeier’s third rule applies and the law of the site of the accident generally applies “but not if it can be shown that displacing that normally applicable rule will advance the relevant substantive law purposes without impairing the smooth working of the multistate system or producing great uncertainty for litigants,” Neumeier, supra, 31 N.Y.2d at 128, 335 N.Y.S.2d at 70; In re Air Crash Near Clarence Center, N.Y., 983 F. Supp.2d 249, 253-54 (W.D.N.Y. 2013) (Skretny, C.J.) (see Docket No. 19, Pls. Memo. at 12-13; Docket No. 16, Defs. Memo. at 2, 6).

3. Piercing the Corporate Veil in Ontario and New York
Under New York law “the doctrine of piercing the corporate veil is typically employed by a third party seeking to go behind the corporate existence in order to circumvent the limited liability of the owners and to hold them liable for some underlying corporate obligation,” In Matter of Morris v. New York State Dep’t of Tax. & Fin., 82 N.Y.2d 135, 140-41, 603 N.Y.S.2d 807, 810 (1993) (footnote omitted). “The concept of piercing the corporate veil is a limitation on the accepted principles that a corporation exists independently of its owners, as a separate legal entity, that the owners are normally not liable for the debts of the corporation, and that it is perfectly legal to incorporate for the express purpose of limiting the liability of the corporate owners,” id., 82 N.Y.2d at 140, 603 N.Y.S.2d at 810 (citation omitted).

*5 As Defendants note (Docket No. 16, Defs. Memo. at 4), Plaintiffs as the parties seeking to pierce a corporate veil bear “a ‘heavy burden’ of demonstrating complete domination by the parent and that such domination was the instrument of fraud or otherwise resulted in inequitable consequences,” Christensen v. SBM Indus., Inc., 9 F. App’x 52, 53 (2d Cir. 2001) (summary Order); TNS Holdings, Inc. v. MKI Sec. Corp., 92 N.Y.2d 335, 339, 680 N.Y.S.2d 891, 893 (1998). Evidence only of domination by one corporation of another, even identical shareholders, officers, and directors, does not warrant piercing the second corporation, see Spano v. V&J Nat’l Enterp. LLC, 264 F. Supp.3d 440, 451 (W.D.N.Y. 2017) (Wolford, J.). Additional evidence of fraud, inequity, or misfeasance is required, id. “Indeed, even the fact that corporations have identical controlling stockholders, officers, and directors does not, by itself, warrant disregard of the separate corporate entities,” Bagel Bros Maple v. Ohio Farmers, Inc., 279 B.R. 55, 65 (Bankr. W.D.N.Y. 2002) (Kaplan, Bankr. J.) (quotations and citations omitted).

“The party seeking to pierce the corporate veil must establish that the owners, through their domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party such that a court in equity will intervene,” Morris, supra, 82 N.Y.2d at 142, 603 N.Y.S.2d at 811 (citations omitted).

Here, Plaintiffs are New York State residents, Defendants are Delaware corporations headquartered in Georgia but licensed to do business in New York and the accident occurred in Ontario. The parties dispute whether Ontario (as Defendants urge) or New York (as Plaintiffs argue) law applies. If the standards for piercing the corporate veil are the same in Ontario and New York law, then there is no conflict and either jurisdiction’s law applies.

The parties agree that Ontario and New York law regarding piercing the corporate veil are substantially similar (Docket No. 16, Defs. Memo. at 6; Docket No. 19, Pls. Memo. at 15). Under Ontario law, to pierce a corporate veil, the party needs to allege that the corporation was formed “for an illegal, fraudulent or improper purpose. But it can also be pierced if when incorporated those in control expressly direct a wrongful thing to be done,” Mitchell v. Lewis, 2016 ONCA 903, at *7 (Ont. Ct. App. 2016) (Docket No. 16, Defs. Memo. at 6). Under New York law, piercing the corporate veil requires a fraudulent, wrongful, or unjust act (id. at 4-5), see, e.g., Spano, supra, 264 F. Supp.3d at 451.

Thus, under New York choice of law rules, there is no substantive dispute. For convenience, this Court will cite to New York law regarding piercing the corporate veil.

4. Agency of Subsidiary to Parent
As noted by the United States District Court for the Southern District of New York, “at the motion to dismiss stage, the question ‘is not whether plaintiffs have proved the existence of an agency relationship, merely whether they should have the chance to do so,’ ” In re South African Apartheid Litig., 617 F. Supp.2d 228, 273 (S.D.N.Y. 2009), mandamus denied, 727 F.3d 174 (2d Cir. 2013); In re Parmalat Secs. Litig., 501 F. Supp.2d 560, 588 (S.D.N.Y. 2007) (Docket No. 19, Pls. Memo. at 8).

Under New York law, “a parent company will not be held liable for the torts of its subsidiary unless it can be shown that the parent exercises complete dominion and control over the subsidiary,” (Docket No. 19, Pls. Memo. at 8), holding that the plaintiff failed to establish material issue of fact whether that defendant “so controlled the operations of the subsidiary company that it should be held liable for the negligence of the delivery truck driver,” Montes Serrano v. New York Times Co., 19 A.D.3d 577, 578, 797 N.Y.S.2d 135, 136 (2d Dep’t 2005) (Docket No. 19, Pls. Memo. at 8).

*6 Under Ontario law, a subsidiary is not liable as an alter ego unless the subsidiary is under the complete control of the parent and the subsidiary is “nothing more than a conduit used by the parent to avoid liability,” Gregorio v. Intrans-Corp., 18 O.R.3d 527, ¶ 28 (Ont. Ct. App. 1994) (Docket No. 21, Defs. Reply Memo. at 8).

5. Leave to Amend
Plaintiffs alternatively seek leave to replead if there are deficiencies with the Complaint (Docket No. 19, Pls. Memo. at 18). Under Federal Rule of Civil Procedure 15(a), amendment of pleadings after the time to do so as of right requires either consent of all parties or by leave of the Court. The parties here have not indicated Defendants’ consent to an amendment and Plaintiffs have not submitted a proposed amendment. Motions for leave to amend the Complaint are to be freely given when justice requires. Granting such leave is within the sound discretion of the Court. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962); Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971). “In the absence of any apparent or declared reason–such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.–the leave sought should, as the rules require, be ‘freely given.’ ” Foman, supra, 371 U.S. at 182 (quoting Fed. R. Civ. P. 15(a)).

B. Parties’ Contentions
Defendants moved for judgment dismissing the Complaint under Federal Rule of Civil Procedure 12(c). They argue that Plaintiffs have not alleged a fraudulent, wrongful, or unjust act that would allow piercing the corporate veil of CCR-Canada to reach Defendants under either New York or Canadian law (Docket No. 16, Defs. Memo. at 1, 4-6). To Defendants, Plaintiffs’ theory is that CCR-Canada is vicariously liable for the collision by its driver, Rappazzo, and Plaintiffs then impute this vicarious liability to Defendants Coke and CCR by piercing CCR-Canada’s corporate veil (see Docket No. 1, Ex. B, Compl. ¶ 41).

In response, Plaintiffs argue liability due to CCR-Canada’s agency for Coke and CCR (Docket No. 19, Pls. Memo. at 6, 8-9). They contend that the Complaint alleges the piercing of CCR-Canada’s corporate veil to reach Defendants (id. at 10-11). They next argue that New York law (rather than Ontario) applies (id. at 12-16). They cite four Canadian cases on the principal liability for its agent’s actions (Docket No. 19, Pls. Memo. at 16, 17, Exs.) as an alternative argument that, under Canadian law, CCR-Canada was agent for Defendants, as it would be under New York agency law (id. at 16-17).

Alternatively, if this Court requires further specificity for their agency or corporate veil arguments, Plaintiffs seek leave to amend the Complaint (id. at 18).

In reply, Defendants argue that Plaintiffs’ agency argument also is insufficiently pled, that any factual allegations fail to plausibly allege a cause of action (Docket No. 21, Defs. Reply Memo. at 1, 2, 4). As a Motion to Dismiss, they contend that this Court need not accept Plaintiffs’ legal conclusions (id. at 3). Defendants renew their contention that Plaintiffs have not pled piercing the corporate veil of CCR-Canada (id. at 6). Defendants refute the existence of any agency relationship was alleged between Coke, CCR, and CCR-Canada (id. at 3-6). The choice of law need not be resolved for this motion, but Defendants alternatively offer that the applicable jurisdiction’s law is Ontario’s or Canadian law (id. at 1, 6-7).

*7 Defendants did not take a position on possible amendment of the Complaint, although by moving to dismiss under Rule 12(c) implies that they would object to amendment.

C. Piercing CCR-Canada’s Corporate Veil to Reach Defendants

1. Choice of Law
The parties agree (Docket No. 16, Defs. Memo. at 6; Docket No. 19, Pls. Memo. at 15) that Ontario (or Canadian) law and New York law are similar for piercing the corporate veil. Under New York’s choice of law principles, New York substantive law regarding piercing the corporate veil applies.

2. Piercing CCR-Canada’s Corporate Veil under New York Law
Plaintiffs have not named CCR-Canada (or Rappazzo) as a Defendant. Instead, they sue Coke and CCR, arguing that Rappazzo’s vicarious liability from CCR-Canada extends to these Defendants because of their ownership and control of CCR-Canada.

Applying New York piercing the corporate veil law, Plaintiffs fail to allege that CCR-Canada’s incorporation was a product of fraud, misconduct, or was an unjust act to warrant piercing CCR-Canada’s corporate veil. Despite Plaintiffs alleging close corporate affiliation between Defendants and CCR-Canada, even the internal disregard by Coke of the corporate distinctions between its subsidiaries CCR and CCR-Canada, Plaintiffs do not allege this arrangement was the product of fraud or misconduct or results in an unjust act.

Plaintiffs did not meet the standard they cited for piercing the corporate veil, that is showing that CCR-Canada “was dominated as to the transaction attacked and that such domination was the instrument of fraud or otherwise result in wrongful or inequitable consequences” (Docket No. 19, Pls. Memo. at 10, citing TNS Holdings, supra, 92 N.Y.2d at 339, 680 N.Y.S.2d at 893), see Morris, supra, 82 N.Y.2d at 141, 603 N.Y.S.2d at 810. While Plaintiffs assert Defendants’ ownership of CCR-Canada, they fail to meet their heavy burden of demonstrating that this complete domination by Defendants was the instrument of fraud or other wrongdoing or Defendants’ control extended to Rappazzo’s driving CCR-Canada’s truck on the Queen Elizabeth Way. The arguments Plaintiffs raise in support of piercing (id. at 11) is the objection to application of Ontario law (or potentially litigating this case in Ontario) rather than the relationships between the corporate Defendants and CCR-Canada to show that the corporate nature of CCR-Canada should be disregarded. If deemed an unjust act, it only arises from the differences of law between Ontario and New York and not from Defendants’ action. Defendants’ internal disregard of the corporate form of CCR-Canada by allegedly treating it as a “segment” of Coke without more does not establish a basis for this Court to disregard CCR-Canada’s incorporation. Coke and CCR are entitled to establish wholly owned subsidiaries, such as CCR-Canada, to keep Defendants at arm’s length from CCR-Canada’s obligations.

Again, as Plaintiffs point out (id., citing Morris, supra, 82 N.Y.2d 135, 141, 603 N.Y.S.2d at 810), piercing a corporate veil is dependent upon the facts and circumstances alleged. Here, Plaintiff James Giarla was hit by a truck owned by CCR-Canada and driven by one of its employees, Rappazzo. Plaintiffs generally allege that corporate parents CCR and Coke owned and operated CCR-Canada, now arguing that Defendants “completely dominated CCR-Canada in all phases of its operation” (id. at 11). The Complaint, however, alleges the ownership and global operation of Coke (Docket No. 1, Ex. B, Compl. ¶¶ 16-19, 25-26, 27-29, 64-81), including CCR operating a fleet of trucks and other vehicles for distribution and delivery of beverage products (id. ¶ 80). They fail to allege fraud, misconduct that alleges that CCR-Canada’s incorporation was in effect a sham and the real operators are Defendants.

*8 Defendants’ motion (Docket No. 16) for judgment on the pleadings under Rule 12(c) dismissing Plaintiffs’ allegations of piercing the corporate veil of CCR-Canada is granted.

D. Agency Liability
Plaintiffs alternatively argues that principles of agency extend liability to Defendants for the actions of CCR-Canada (Docket No. 19, Pls. Memo. at 7-9), also contending under Canadian law that the principal is liable for torts committed within the authority of its agent (id. at 16), Keddie v. Canada Life Assur. Co., 1999 BCCA 541 (B.C. Ct. App. 1999) (id. at 16, Ex. A).

Defendants reply that, under applicable Canadian law, a subsidiary is an agent of the parent company only if the subsidiary is the “alter ego” of the parent (Docket No. 21, Defs. Reply Memo. at 8). Defendants distinguish corporate agency from employer-employee agency Plaintiffs implicitly relied upon (Docket No. 21, Defs. Reply Memo. at 8).

1. Choice of Law
Plaintiffs cite to Canadian law for its similarity to New York law that generally a principal is responsible for the acts of its agent (Docket No. 19, Pls. Memo. at 16-17, Ex. A). Two of the four Canadian cases cited (and opinions reproduced by Plaintiffs) are from the British Columbia Court of Appeal, Thiessen v. Clarica Life Ins. Co., 2002 BCCA 501 (B.C. Ct. App. 2002); Keddie, supra, 1999 BCCA 541 (B.C. Ct. App. 1999). Although citing British Columbia cases, Plaintiffs fail to explain whether British Columbia law of agency would be the same as in Ontario to make these precedents relevant in this case. Keddie and Thiessen are further distinguished because they involved allegations that an insurance broker was acting as an agent for the insurance company, Keddie, supra, 1999 BCCA 541, at 13-23, 23 (distinguishing between agency and being a broker); Thiessen, supra, 2002 BCCA 501, at 2 (issue is “who is to bear the risk of a defalcating life insurance representative”).

The two other cases they cited are from the Supreme Court of Canada, Bazley v. Curry, 2 R.C.S. 534 (1999); 671122 Ontario Ltd. v. Sagaz Indus. Canada Inc., 2 R.C.S. 983 (2001). Bazley held that an employer is vicariously liable for the actions of its employee, there the sexual assault by the employee, 2 R.S.C. at 563, 543-63. Citing Bazley, the Canadian Supreme Court in 671122 Ontario Ltd. denied defendant’s vicarious liability for the acts of its independent consultant, 2 R.S.C. at 988, 995-96. These cases support extending liability for Rappazzo’s actions to CCR-Canada in the employment context, but they fail to further extend that liability to Defendants as the corporate parent of CCR-Canada.

Plaintiffs do not cite Canadian or Ontario cases involving subsidiaries and the parent corporation’s liability for their actions as agents for the parent. Plaintiffs have not addressed the liability of a subsidiary to the parent. They merely allege the CCR-Canada is the wholly owned subsidiary of Coke (Docket No. 1, Ex. B, Compl. ¶ 27).

Defendants cite to Gregorie v. Intrans-Corp., supra, 18 O.R.3d 527 (Ont. Ct. App.
1994), that a subsidiary will not be found to be the alter ego of the parent corporation “unless the subsidiary is under the complete control of the parent and is nothing more than a conduit used by the parent to avoid liability,” id. ¶ 28 (Docket No. 21, Defs. Reply Memo. at 8).

*9 The parties have not concluded that Ontario and New York agency laws are substantially similar. But comparing the cited provisions of these jurisdictions’ law on agency, both are similar. Ontario and New York agency laws both rest upon the degree of control by the parent corporation over the subsidiary to conclude that the subsidiary also acts as an agent for the parent.

Ontario agency law provides that a subsidiary will not be found to be the alter ego of the parent corporation “unless the subsidiary is under the complete control of the parent and is nothing more than a conduit used by the parent to avoid liability,” Gregorie v. Intrans-Corp., supra, 18 O.R.3d 527, ¶ 28 (id.); see Aluminum Co. of Canada Ltd. v. Toronto (City), [1944] S.C.F. 267, 271 (¶ 16) (S.C.C. 1944); Kentucky Fried Chicken Canada v. Scott’s Food Servs., Inc., 35 B.L.R. (2d) 21, at ¶¶ 59-62 (Ont. Gen. Div. 1997) (subsidiary held not alter ego or agent of parent corporation even though parent controlled long-term decisions and budget of subsidiary, subsidiary ran substantial day-to-day operations), rev’d on different grounds, 118 O.A.C. 357 (Ont. Ct. App. 1998).

New York agency law requires an allegation that the parent corporation “so controlled the operations of the subsidiary company that it should be held liable for the negligence of the delivery truck driver,” Montes Serrano, supra, 19 A.D.3d at 578, 797 N.Y.S.2d at 136 (Docket No. 19, Pls. Memo. at 8).

At the threshold and under New York choice of law principles, there is no conflict. Both New York and Ontario determine that a subsidiary’s agency exists from the control by the parent corporation over the subsidiary. On choice of law principles, absent a conflict between these two jurisdictions’ agency laws, New York law applies.

2. Agency Law
Thus, under New York agency law, the corporate subsidiary can be shown to be the agent of the parent either by the subsidiary doing all the business that the parent could do or the subsidiary was a “mere department” of the parent (Docket No. 19, Pls. Memo. at 8). Four factors to establish a subsidiary is a “mere department” is common ownership with the parent; financial dependency of the subsidiary to the parent; degree of parent’s involvement in the selection and assignment of subsidiary executive personnel and failure to observe corporate formalities; and the degree of the parent’s control of the subsidiary’s marketing and operational policies. Darden v. DaimlerChrysler N. Am. Holding Corp., 191 F. Supp. 2d 382, 387, 388 (S.D.N.Y. 2002) (id.); see also Kentucky Fried Chicken Canada, supra, 35 B.L.R. (2d) 21, at ¶ 59 (Ontario agency law has six factors who owns profits, who provides day-to-day operation of subsidiary, who was the “brains behind” the day-to-day operation, who made policy and financial decisions, whether profits were directly traceable to the skill and direction of the parent, and whether control by parent was constant or merely periodic, citing Smith, Stone & Knight Ltd. v. Birmingham (City), 4 All E.R. 116 (Eng. K.B. 1939)).

Agency also is manifested if the parent corporation gives actual authority to the subsidiary to act on its behalf, Fletcher v. Atex, Inc., 68 F.3d 1451, 1461-62 (2d Cir. 1995) (see Docket No. 21, Defs. Reply Memo. at 4), or apparent authority where one can see acts of the parent corporation which reasonably give an appearance of authority for the subsidiary to conduct the transaction, id. at 1462 (quoting Greene v. Hellman, 51 N.Y.2d 197, 204, 433 N.Y.S.2d 75, 80 (1980)).

*10 Plaintiffs argues that they allege sufficiently that CCR-Canada is the agent of Defendants (id. at 9). Defendants deny that Plaintiffs alleged facts that CCR-Canada is a mere department of Defendants or that CCR-Canada had no independent functioning (Docket No. 21, Defs. Reply Memo. at 8).

Plaintiffs, however, have not alleged CCR-Canada had the actual authority from Defendants to act as their agents. The Complaint also does not allege the appearance of Defendants’ authorizing CCR-Canada to act on their behalf to allege apparent authority.

Plaintiffs allege that Coke is the world’s largest beverage company that operates “a worldwide system with subsidiaries across the globe, many of which are wholly-owned subsidiaries” (Docket No. 1, Ex. B, Compl. ¶¶ 8, 10), marketing and distributing products throughout New York and Ontario (among other places) through its global distribution system (id. ¶ 12). In 2010, Coke acquired Coca Cola Enterprises, the bottler, and thus directly owned 100% of Coca-Cola Refreshments (later renamed CCR) (id. ¶¶ 16, 17, 18, 19). CCR-Canada allegedly is the wholly owned subsidiary of CCR (id. ¶ 27) and in turn Coke (id. ¶ 28).

Plaintiffs allege that CCR “operated in Canada through the CCR-CANADA unit” (id. ¶ 29). In establishing jurisdiction in New York State, Plaintiffs claim that Coke, as the parent, “exercises control over its subsidiaries, CCR and CCR CANADA, which is so pervasive, controlling and continuous as part of the Defendant [Coke’s] organizational structure and system that the said subsidiaries’ corporate independence from the parent company is essentially non-existent” (id. ¶ 56). They claim common ownership, interlocking directorates, and executive management of CCR and CCR-Canada with Coke (id. ¶ 64). They conclude that CCR-Canada was under the direction and complete control of Defendants (id. ¶ 69).

Although they make the above allegations of this complete control by Defendants of CCR-Canada, Plaintiffs fail to allege one factor to establish agency, that Coke and CCR select CCR-Canada’s management.

Thus, Defendants’ Motion for Judgment (Docket No. 16) pursuant to Rule 12(c) to dismiss the agency claims in the Complaint (and the entire Complaint) is granted.

E. Leave to Amend
Plaintiffs alternatively ask for leave to replead their Complaint (Docket No. 19, Pls. Memo. at 18). If needed, they offer to amend to specify principal-agency or piercing the corporate veil (id.). Again, Defendants took no position on this alternative; Defendants have only voiced their objection to them remaining as parties in this case.

Before this Court are the questions can Plaintiffs amend to allege agency claims and whether an unspecified amendment to “adequately set for the plaintiff’s claims against the defendants” (id.) would be futile, which Plaintiffs deny (id.). Plaintiffs have not provided a proposed Amended Complaint or state the basis for amendment but offers to amend to specify piercing the corporate veil or principal-agency relationship. They have not stated whether their clarifying amendment would add CCR-Canada as a Defendant.

Absent an amendment stating that CCR-Canada’s incorporation was fraudulent or created to conduct wrongdoing (especially leading to the truck accident at issue here), a further amendment alleging piercing the corporate veil here would be futile.

*11 As for an amended pleading specifying the agency relationship, the original Complaint elaborates on the corporate organization and relationships between Defendants and CCR-Canada but fails to allege Defendants’ role in the management and operation of CCR-Canada.

Again, “the question ‘is not whether plaintiffs have proved the existence of an agency relationship, merely whether they should have the chance to do so,’ ” In re South African Apartheid Litig., supra, 617 F. Supp.2d at 273. It would not be futile for Plaintiffs to amend their Complaint to try to state an agency relationship between Defendants and CCR-Canada. If the facts warrant, Plaintiffs could allege the day-to-day operations of CCR-Canada and show whether Defendants so control CCR-Canada to render it an agent for these principal corporations. Leave to amend to specify the agency relationship between Defendants and CCR-Canada (see Docket No. 19, Pls. Memo. at 18) is granted.

Plaintiffs have fourteen (14) days from entry of this Order to file and serve their Motion for Leave to Amend the Complaint with the proposed Amended Complaint and a redline/strikeout version comparing the original pleading with the proposal, see W.D.N.Y. Loc. Civ. R. 15(b).

IV. Conclusion
Plaintiffs here cannot reach non-party CCR-Canada by suing the named Defendants here. Defendants’ Motion for Judgment (pursuant to Rule 12(c) (Docket No. 16)) to Dismiss this case is granted.

Plaintiffs’ alternative seeking leave to amend (Docket No. 19, Pls. Memo. at 18) to further specify piercing the corporate veil of CCR-Canada would be futile and is denied. Leave to amend (id.) to specify the agency relationship between Defendants and CCR-Canada (Docket No. 19, Pls. Memo. at 18), however, is granted; Plaintiffs have fourteen (14) days from filing this Order to file motion for leave to amend with proposed Amended Complaint.

V. Orders
IT IS HEREBY ORDERED, that Defendants’ Motion to Dismiss (Docket No. 16) is GRANTED.

IT IS FURTHER ORDERED, that leave to amend this Complaint (see Docket No. 19, Pls. Memo. at 18) is GRANTED.

SO ORDERED.

Dated: March 23, 2021

Buffalo, New York
s/William M. Skretny

WILLIAM M. SKRETNY

United States District Judge
All Citations
Slip Copy, 2021 WL 1110397

Footnotes

1
In support of motion, Defendants submit their attorney’s Affirmation, exhibit (state court Summons and Complaint), and Memorandum of Law, Docket No. 16; and in reply, they submitted their Reply Memorandum, Docket No. 21. In opposition, Plaintiffs submit their Memorandum of Law with exhibits, Docket No. 19.
Defendants then moved to stay discovery, Docket No. 25, which Magistrate Judge Foschio granted, Docket No. 28.

2021 WL 1089418

United States District Court, D. Kansas.
PENN-STAR INSURANCE COMPANY, Plaintiff,
v.
J&J PILOT CARS, LLC, R&H LOGISTICS, INC., GARY LEE PLUMMER, and RICHARD R. SMITH, Defendants.
Case No. 20-2433-JAR-TJJ
|
03/22/2021

JULIE A. ROBINSON, CHIEF UNITED STATES DISTRICT JUDGE

MEMORANDUM AND ORDER
*1 Plaintiff Penn-Star Insurance Company (“Penn-Star”) brings this declaratory judgment action to determine whether it has a duty to defend and indemnify Defendants in underlying litigation pending in Wilson County, Kansas state court relating to an accident that damaged a highway overpass. Before the Court is Defendants R&H Logistics, Inc.’s and Richard R. Smith’s Motions for Judgment on the Pleadings (Docs. 16, 23). Also before the Court is Plaintiff’s Motion for Leave to File Sur-Reply (Doc. 34). The motions are fully briefed and the Court is prepared to rule. For the reasons explained below, Plaintiff’s motion for leave to file surreply is granted; Defendants’ motions for judgment on the pleadings are denied.

I. Standard
The standard for a motion for judgment on the pleadings under Fed. R. Civ. P. 12(c) is the same as that applied to a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6).1 To survive a motion to dismiss brought under Rule 12(b)(6), a complaint must contain factual allegations that, assumed to be true, “raise a right to relief above the speculative level” and must include “enough facts to state a claim to relief that is plausible on its face.”2 “Mere ‘labels and conclusions’ and ‘a formulaic recitation of the elements of a cause of action’ are insufficient.”3 The court must accept the nonmoving party’s factual allegations as true and may not dismiss on the ground that it appears unlikely the allegations can be proven.4

The Supreme Court has explained the analysis as a two-step process. First, the court “must take all the factual allegations in the complaint as true, [but is] ‘not bound to accept as true a legal conclusion couched as a factual allegation.’ ”5 Thus, the court must determine if the allegations are factual and entitled to an assumption of truth, or merely legal conclusions that are not entitled to an assumption of truth.6 Second, the court must determine whether the factual allegations, when assumed true, “plausibly give rise to an entitlement to relief.”7 “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”8

Finally, if the Court on a Rule 12(c) motion looks to matters outside the pleadings, it generally must convert the motion to a Rule 56 motion for summary judgment.9 However, the Court may consider documents that are referred to in the complaint if they are central to the plaintiff’s claim and the parties do not dispute their authenticity.10 Here, the Court considers the documents attached to the Complaint: the insurance policy and pleadings from the underlying litigation.11 The Court does not consider the photograph attached to Plaintiff’s response.12

II. Factual Allegations
*2 The following facts are either alleged in the Complaint or taken from the documents attached thereto. The well-pled facts alleged in the Complaint are assumed to be true for purposes of deciding this motion.

On July 19, 2019, Julie L. Lorenz, Secretary of the Kansas Department of Transportation (“KDOT”), filed a Petition for Damages against R&H Logistics, Inc. (“R&H”) and Richard R. Smith (collectively, the “R&H parties”), in the District Court of Wilson County (the “Underlying Lawsuit”). The Secretary alleges that on July 19, 2017, Smith was operating R&H’s 2012 Kenworth truck transporting a 13,000-gallon water tank,13 traveling westbound on U.S. 400 highway in Wilson County, Kansas under a superload permit issued by KDOT. When Smith drove under the U.S. 75 highway overpass, the top of the water tank struck the bottom of the overpass, causing damage. The Secretary alleges that the R&H parties failed to comply with the superload permit, which required R&H to exit U.S. 400 highway at the U.S. 75 highway overpass, and then re-enter U.S. 400 highway at the next westbound entrance after U.S. 75 highway. The Secretary alleges a claim for negligence with damages in excess of $900,000.

On May 29, 2020, the R&H parties filed a Third-Party Petition in the Underlying Lawsuit asserting claims against J&J Pilot Cars, LLC (“J&J”) and Gary Plummer (collectively, the “J&J parties”). The R&H parties assert the load they were transporting on July 19, 2017 originated in Fort Scott, Kansas and its destination was Sawyer, Oklahoma. They allege that R&H contracted with J&J to provide escort services for R&H’s superload; J&J assigned Plummer to operate the escort car, which was also assigned a permit by the Secretary. The R&H parties allege that Plummer was driving ahead of Smith and knew that the superload was required to exit at the U.S. 75 highway overpass, yet Plummer neither exited nor alerted Smith to exit, despite both vehicles being equipped with CB radios that allowed them to communicate during the trip. Therefore, the R&H parties allege that the J&J parties were negligent and proximately caused the overpass damage:
[T]he proximate cause of any damage to the US-75 Highway overpass above US-400 Highway was [the J&J parties’] failure to take the exit from US-400 Highway to bypass the US-75 Highway overpass while traveling in front of Smith and their failure to alert Smith to take the exit from US-400 Highway to bypass the US-75 overpass before Smith reached the overpass.”14

Penn-Star issued Commercial General Liability (“CGL”) Policy No. PAC7125381 (“the Policy”), with a policy period of February 23, 2017 to February 23, 2018, to J&J. At all relevant times, Plummer was an insured under the Policy. The Policy provides for coverage as follows:
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. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply….
*3 b. This insurance applies to “bodily injury” and “property damage” only if:
(1) The “bodily injury” or “property damage” is caused by an “occurrence”….15

The Policy provides an exclusion for “Aircraft, Auto Or Watercraft,” which applies to:
“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 or loaned to any insured. Use includes operation and “loading and unloading.”
This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the “occurrence” which caused the “bodily injury” or “property damage” involved the ownership, maintenance, use or entrustment to others of any aircraft, “auto” or watercraft that is owned or operated by or rented or loaned to any insured….16

The Policy contains several endorsements that change the Policy. The auto exclusion endorsement changes the policy by deleting the “Aircraft, Auto, Or Watercraft” exclusion “in its entirety and replac[ing] it with the following,” in pertinent part:
This insurance does not apply to:
“Bodily injury” or “property damage” arising out of the ownership, maintenance use by any person or entrustment to others, of any aircraft, “auto”, or watercraft.
This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the “occurrence” which caused the “bodily injury” or “property damage” involved an aircraft, “auto”, or watercraft. Use includes operation and “loading or unloading”.
This exclusion does not apply to:
….
(4) “Bodily injury” or “property damage” arising out of the operation of any of the equipment listed in paragraph f.(2) or f.(3) of the definition of “mobile equipment”.17
The Policy also contains an exclusion for “Mobile Equipment,” which applies to, in pertinent part, “ ‘property damage’ arising out of…[t]he transportation of ‘mobile equipment’ by an ‘auto’ owned or operated by or rented or loaned to any insured.”18

Under Section V of the Policy, “auto” is defined as:
a. A land motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment; or
b. Any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged.
However, “auto” does not include “mobile equipment”.19 The term “property damage,” is defined as “[p]hysical injury to tangible property,
including all resulting loss of use of that property.”20 An “occurrence” is “an accident.”21 And “suit” is defined as: “a civil proceeding in which damages because of ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ to which this insurance applies are alleged.”22 “Mobile equipment” is defined as:
*4 [A]ny of the following types of land vehicles, including any attached machinery or equipment:
a. Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public roads;
….
d. Vehicles, whether self-propelled or not, maintained primarily to provide mobility to permanently mounted: (1) Power cranes, shovels, loaders, diggers or drills; or (2) Road construction or resurfacing equipment such as graders, scrapers or rollers;
….
However, “mobile equipment” does not include any land vehicles that are subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged. Land vehicles subject to a compulsory or financial responsibility law or other motor vehicle insurance law are considered “autos”.23

Penn Star seeks a declaratory judgment that it has no duty to defend or indemnify under the Policy because the Third-Party Petition in the Underlying Lawsuit asserts a claim for “property damage” “arising out of” the “ownership, maintenance or use by any person” of “any…auto,” which is excluded from coverage by the Policy’s auto exclusion endorsement.

III. Discussion
The R&H Defendants move for judgment on the pleadings, arguing that as a matter of law, Penn-Star has a duty to defend and indemnify under the Policy. “A federal court exercising diversity jurisdiction must apply the choice of law rules of the state in which it sits.”24 “In Kansas, the construction of a contract is governed by the law of the state in which the contract was made.”25 “A contract is made where the last act necessary for its formation occurs.”26There is no dispute here that the insurance contract was made in Missouri and should be interpreted under Missouri law.

Under Missouri law, an insurer’s duty to defend “arises if the allegations in the petition and/or the facts the insurer knew or were reasonably apparent to the insurer at the outset of the case are potentially covered by the insurance policy.”27 Thus, the “duty to defend arises only from potential coverage based on facts: (1) alleged in the petition; (2) the insurer knows at the outset of the case; or (3) that are reasonably apparent to the insurer at the outset of the case.”28 If “there is no duty to defend, there is no duty to indemnify.”29 Where the insurer seeks to avoid coverage based on an exclusion, it bears the burden to show the exclusion applies.30 “Where the pleadings show on their face the exclusion’s applicability, the insurer’s burden is met.”31

*5 The interpretation of an insurance contract is a question of law.32 The same rules apply to insurance contracts as other contracts.33 The Court is required to read the contract as a whole, giving the language its plain and ordinary meaning.34 If the language of the insurance contract is unambiguous, it is enforced as written.35 But if “[a]n insurance policy is ambiguous ‘when, due to duplicity, indistinctness, or uncertainty in the meaning of the words used, the policy is reasonably open to different constructions,” the language is construed against the insurer.36 “To test whether the language used in the policy is ambiguous, the language is considered in the light in which it would normally be understood by the lay person who bought and paid for the policy.”37 “Mere disagreement over the interpretation of the terms of a contract does not create an ambiguity.”38 The Court should not “unreasonably distort the language of a policy or exercise inventive powers for the purpose of creating an ambiguity when none exists.”39 Exclusionary clauses are interpreted strictly against the insurer.40

The Complaint seeks declaratory relief on the basis that the auto exclusion endorsement in the Policy excludes coverage. Defendants argue that the auto exclusion endorsement is ambiguous when applied to the water tank hauled by R&H’s truck; when the endorsement is read in conjunction with the “auto” and “mobile equipment” definitions, it is ambiguous and should therefore be subject to a “reasonable expectation” analysis. Plaintiff responds that this case does not involve “mobile equipment” and R&H’s truck and J&J’s escort car fit squarely within the unambiguous definition of “auto.” The Court carefully considers the language of the auto exclusion endorsement below in determining that Plaintiff sufficiently pleads that it applies based on the facts alleged in the Underlying Lawsuit.

A. “Arising out of” and “Use”
Defendants insist that the endorsement containing the auto exclusion, when read in conjunction with the definitions of “auto” and “mobile equipment” is uncertain and confusing, and that a reasonable insured would expect that the water tank the truck was carrying in this case would be covered by the Policy because it falls under the “mobile equipment” definition, and is therefore exempt from the auto exclusion. Plaintiff responds that the endorsement applies to both J&J’s escort car and R&H’s truck, relying on the “arising out of…the use…of any auto” language in the endorsement. Thus, before the Court can address the “auto” or “mobile equipment” definitions, it must first consider how the language “arising out of the use of any auto” should be construed under Missouri law.

1. Defendants’ Motion for Leave to File a Surreply
*6 Defendants’ original brief contains no analysis about the “arising out of” or “use” language in the endorsement. Nor does it explain why the water tank should be considered for purposes of the insurance coverage analysis in this case. Plaintiff’s response correctly focuses on the “arising out of” and “use” Policy language, and cites to Missouri caselaw construing those provisions. Plaintiff contends that the overpass damage here did not “arise out of” the “use” of the water tank, which was merely passive cargo attached to the truck. Plaintiff argues the damage arose out of the use of the other two vehicles—traveling under the overpass despite the permits’ instructions to exit the highway. For the first time in the reply, Defendants propose the Court utilize the so-called Appleman test,41 to determine whether liability arises out of the “use” of a vehicle, citing an unpublished Michigan Court of Appeals decision.42 Given this new analysis, Plaintiff moves for leave to file a surreply to address this limited issue.

Surreplies require leave of court and are only granted under “rare circumstances.”43 “For example, when a moving party uses their reply to present new material—i.e., new evidence or new legal arguments—and if the court relies on that new material, it should give the nonmoving party an opportunity to respond.”44 While it is true that citing a new case in reply to support a legal theory included in an opening brief does not warrant a surreply,45 Defendants go well beyond new case citations. Defendants’ opening brief presumes without analysis that the water tank is the only relevant instrumentality of the property damage alleged in the Underlying Lawsuit. Only after Plaintiff’s response that the “mobile equipment” definition is irrelevant because it denied coverage based on the Policy’s “arising out of” and “use” language as applied to the two vehicles involved in the accident did Defendants provide authority and analysis on any legal test that purportedly resolves this issue. This is a new argument and Plaintiff is granted leave to file a surreply to address it. The Court therefore considers the surreply attached to Plaintiff’s motion for leave in resolving this issue.

2. “Arising out of”
Turning to the language of the endorsement, it excludes ‘ “property damage’ arising out of the ownership, maintenance or use by any person or entrustment to others, of any aircraft, ‘auto’, or watercraft.”46 There is no need to determine whether this language is ambiguous; such a “determination is not required where the policy language has already been judicially defined.”47As the Missouri Court of Appeals explained in Walden v. Smith, “Missouri courts have judicially defined both ‘arising out of’ and ‘use,’ ” thus, “[t]he judicial definitions assigned to these policy terms are controlling.”48

Because this is a diversity case, absent controlling precedent, the Court “must attempt to predict how the state’s highest court would resolve the issue.”49 Instead of aiding the Court in this endeavor, Defendants ask the Court to rely on a test used by Michigan courts, and incorrectly argue that Missouri courts apply the same test to “analyze automobile coverage issues.”50 Michigan courts apply the Appleman test to determine whether there was a sufficient causal connection between an injury and the use of a motor vehicle:
*7 1. The accident must have arisen out of the inherent nature of the automobile, as such; 2. The accident must have arisen within the natural territorial limits of an automobile, and the actual use, loading, or unloading must not have terminated; 3. The automobile must not merely contribute to cause the condition which produces the injury, but must, itself, produce the injury.51
Defendants incorrectly assert that Missouri courts apply this three-part test. The cases they cite for this proposition say no such thing.52 Instead, they generally discuss Missouri’s interpretation of the “arising out of” policy language at issue here.53 Indeed, many Missouri cases discuss this policy language, as catalogued in the Walden decision.54 The Court declines Defendants’ invitation to apply Michigan law. Instead, the Court predicts that the Missouri Supreme Court would follow Walden and the cases discussed therein when construing the terms “arising out of” and “use” in this endorsement.55

The “arising out of” language in the Policy requires a “causal relationship…between the accident or injury and the ownership, maintenance, or use of that vehicle.”56 “Arising out of” insurance language has been interpreted by Missouri courts broadly to mean “originating from” or “having its origins in” or “growing out of” or “flowing from.”57 It is
more expansive than the words “caused by”….When the former phrase is used in a liability policy, an unbroken chain of events need not be established but rather a simple casual [sic] relationship must exist between the accident or injury and the activity of the insured. The causation standard is not elevated to the strict “direct and proximate cause” standard of general tort law.58
As in Walden, the “arising out of” language in this endorsement requires a causal relationship between the property damage (“flowing from,” “growing out of,” etc.) and the “use” of any “auto.”59

3. “Use”
*8 Plaintiff does not contend that the exclusion applies to “ownership” or “maintenance” of any “auto.” There appears no dispute that application of the endorsement turns on whether there was “use” of “any auto.” Although “use” is not separately defined in this Policy, the endorsement states that “[u]se includes operation and ‘loading and unloading.’ ” Neither party contends that the “loading and unloading” part of this definition is at issue here.

The court in Walden collected Missouri caselaw interpreting the term “use” in the context of similar policy provisions and explained that it “is a broad term which includes within its scope any means by which a vehicle may be employed or put into service consistent with its nature as a vehicle including, but not limited to, the operation of, driving of, or riding in a vehicle.”60 When construed together with the term “arising out of,” Walden set forth several “[c]learly established legal principles…[to] assist in defining the outer parameters of the required causal relationship.”61 The court explained:
The requirements that a vehicle’s use be the
“instrumentality” of an injury, and that an injury arise out of an “inherent use of a vehicle” simply reinforce that a causal relationship must exist between injury and use of a vehicle. For an accident causing injury to “arise out of the use” of a vehicle, the purpose for which the vehicle is being employed must be consistent with the vehicle’s inherent nature, and must create a condition which contributes to cause the accident. “ ‘Automobile insurance contracts protect against liability for accidents arising out of the ‘use’ of vehicle (sic) but they cannot be held to protect against liability for accidents where the use of the automobile was not connected with the accident or the creation of a condition that caused the accident.’ ”
Missouri cases have thus consistently determined whether an accident causing injury “arises out of the use” of a vehicle by evaluating the extent to which the particular use of the vehicle contributed to create a condition that caused the accident at issue.62

Defendants argue, in the context of applying Michigan’s test, that the accident did not arise out of the use of J&J’s escort car or R&H’s truck. They argue that the Third-Party Petition’s allegations against the J&J parties relates to their professional escort duties and that the property damage did not arise out of “the inherent transportation function of their vehicles as such.”63 The Court disagrees. The Third-Party Petition alleges that J&J proximately caused the overpass damage by failing to take the exit at U.S. 400 highway “while traveling in front of Smith” and failing to alert Smith to take the exit before he reached the overpass. The use of the escort car (“traveling” ahead of R&H’s truck) created the condition (the truck following the escort car under the overpass) that contributed to cause the occurrence. Similarly, the use of the R&H truck (driving and hauling the water tank) created the condition (the water tank passing under the overpass and striking it) that contributed to cause the occurrence. These vehicles were not merely the “situs” of the property damage—the overpass damage happened while Smith and Plummer were using the vehicles for their intended purpose, and their use created the condition that allegedly caused the overpass damage.64

*9 This Court need only determine whether Plaintiff sufficiently alleged in its Complaint that it does not have a duty to defend or indemnify under the Policy because an exclusion applies. Here, Plaintiff pleads that the allegations in the Third-Party Petition demonstrate that the endorsement applies because the property damage arose out of the use of the R&H truck or the escort car, or both.65 Plaintiff sufficiently pleads that the “arising out of” and “use” language in the endorsement unambiguously applies to these two vehicles. Defendants fail to advance any argument that the cargo was in “use” at the time of the occurrence.66

B. Definitions of “Auto” and “Mobile Equipment”
Defendants do not dispute that J&J’s escort car and R&H’s truck meet the Policy’s definition of “auto” because they are each “[a] land motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment.”67 That definition appears to plainly include attached equipment such as the water tank, although neither party addresses that. Therefore, the Court need not consider the “mobile equipment” definition, or whether the exclusion applies to the water tank to decide Defendants’ motion. Plaintiff pleads sufficient facts to support its claim that the exclusion applies to the escort car or the truck based on the plain meaning of the words used in the endorsement and definition of “auto.” Because the Court is to determine ambiguity in light of the specific facts of the case, this should end the inquiry.68

Nonetheless, the Court addresses Defendants’ argument that the endorsement is ambiguous on its face, even if it is not ambiguous as applied to the facts alleged in the Underlying Lawsuit. The definition of “auto” states that “mobile equipment” is not an “auto,” and is separately defined. The “mobile equipment” definition provides that it does not include vehicles that are subject to financial responsibility laws. Neither the “mobile equipment” definition nor financial responsibility laws are at issue in this case. Yet, according to Defendants, the interplay between the auto exclusion, the endorsement, and the definitions are confusing and uncertain; thus, the endorsement should be deemed ambiguous and construed in light of the insured’s reasonable expectations.

Defendants argue that the Policy requires the insured to take too many steps to determine whether a vehicle qualifies as “mobile equipment,” pointing to the fact that the endorsement superseded the original auto exclusion, and then cross-references multiple definitions, one of which itself contains an exception. But “[d]efinitions, exclusions, conditions and endorsements are necessary provisions in insurance policies. If they are clear and unambiguous within the context of the policy as a whole, they are enforceable.”69 The mere fact that the Policy requires an insured to cross-reference definitions does not mean the endorsement is ambiguous.

*10 Next, Defendants suggest that the mobile equipment exclusion renders the endorsement confusing and uncertain because it applies to property damage “arising out of…[t]he transportation of ‘mobile equipment’ by an ‘auto’ owned or operated by or rented or loaned to any insured.”70 Because the policy recognizes that “mobile equipment” is typically “transported by another vehicle not connected to J&J Pilot Cars,” Defendants suggest that the water tank was “mobile equipment.” There are several glaring problems with this argument. First, it fails to explain how the language of the exclusions and definitions is facially confusing or uncertain. Defendants’ assertion that the auto exclusion endorsement is ambiguous is limited to its application to the water tank, an application this Court has found to be misplaced. Second, while the Court is required to read the language in the context of the policy as a whole, the mobile equipment exclusion has not been invoked by Plaintiff to deny coverage. The “mobile equipment” definition, not the exclusionary provision, plainly controls the meaning of “mobile equipment” in the definition of “auto,” yet Defendants conflate the exclusion and definition for purposes of their ambiguity argument. Defendants fail to point to any provision of the “mobile equipment” definition that makes the Policy facially ambiguous. Finally, Defendants fail to explain why the mobile equipment exclusion would create a reasonable expectation of coverage given that it is an exclusionary provision. The Court finds no compelling reason to find that the language of the auto exclusion endorsement is facially ambiguous on the basis of language in the mobile equipment exclusion.

This leaves Defendants’ request that the Court follow Penn-Star Insurance Co. v. Zenith Insurance Co., a federal court decision construing the same policy under California law.71 In that case, Penn-Star argued it had no duty to defend or indemnify in an underlying wrongful death case stemming from a collision between an automobile and its insured tractor that was pulling a tillage disc.72 The issue was whether the auto exclusion applied either because the tractor, despite being farm equipment, was excluded from coverage because it was subject to financial responsibility laws and therefore not “mobile equipment,” or because the other automobile involved in the collision was an “auto” used by “any person.”73

The Eastern District of California, applying California law, found that the provision in Penn-Star’s auto exclusion endorsement limiting coverage for “mobile equipment” was ambiguous and unenforceable; therefore, it rejected Penn-Star’s assertion that the auto exclusion barred coverage for the tractor.74 Specifically, it determined that “the provisions limiting coverage for ‘mobile equipment’ in the Penn-Star policy are not conspicuous, plain, or clear as a matter of law.”75 The court further found no support for Penn-Star’s claim that the auto exclusion applied because “the state court plaintiffs—who were not associated with, employed by, or otherwise connected to [the insured]—were traveling in an ‘auto.’ ”76 The court found such an interpretation turned the exclusion into an “unusual and unfair limitation[ ] of coverage that defeat[s] the insured’s reasonable expectation of coverage.”77 In sum, the court determined that,
Penn-Star policy’s auto exclusion is not plain and clear enough to defeat Golden Labor’s reasonable expectation that it was covered for claims arising out of its alleged negligence with respect to using, operating, and/or training others to use the tractor involved in the collision at issue here. Accordingly, the court rejects Penn-Star’s interpretation of its auto exclusion and finds that Penn-Star may not rely on that interpretation to preclude coverage.78

The Court agrees with Defendants that Zenith is neither binding nor applicable to the facts of this case. The Court is not bound by the Zenith decision since it construes this policy language under California law, not Missouri law. And Zenith considered this Policy language as applied to a tractor that was subject to the “mobile equipment” definition. As explained above, that definition plays no role in this case. Because the court’s holding in Zenith was limited to the positions taken by Penn-Star in that case—different positions than it takes in this case—it does not persuade this Court to find that the auto exclusion endorsement, as applied here, is ambiguous and unenforceable as a matter of law.

*11 In sum, the Court finds that the language in the Policy’s auto exclusion endorsement, as supplemented by the definition of “auto,” is unambiguous as applied to the allegations in the Underlying Lawsuit. Plaintiff sufficiently pleads that it has no duty to defend or indemnify because this exclusion applies and, therefore, the motion for judgment on the pleadings is denied.

IT IS THEREFORE ORDERED BY THE COURT that Defendants R&H Logistics, Inc.’s and Richard R. Smith’s Motions for Judgment on the Pleadings (Docs. 16, 23) are denied. Plaintiff’s Motion for Leave to File Sur-Reply (Doc. 34) is granted. Plaintiff shall file the surreply attached to its motion for leave within seven (7) days.

IT IS SO ORDERED.

Dated: March 22, 2021

S/ Julie A. Robinson

JULIE A. ROBINSON

CHIEF UNITED STATES DISTRICT JUDGE
All Citations
Slip Copy, 2021 WL 1089418

Footnotes

1
Colony Ins. v. Burke, 698 F.3d 1222, 1228 (10th Cir. 2012).

2
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

3
Estate of Lockett ex rel. Lockett v. Fallin, 841 F.3d 1098, 1107 (10th Cir. 2016) (quoting Twombly, 550 U.S. at 555).

4
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 556).

5
Id. (quoting Twombly, 550 U.S. at 555).

6
Id. at 678–79.

7
Id. at 679.

8
Id. at 678.

9
Fed. R. Civ. P. 12(d); GFF Corp. v. Associated Wholesale Grocers, 130 F.3d 1381, 1384–85 (10th Cir. 1997).

10
See Alvarado v. KOB-TV, LLC, 493 F.3d 1210, 1215 (10th Cir. 2007); GFF Corp., 130 F.3d at 1384–85.

11
See Docs. 1-1, 1-2, 1-3.

12
Doc. 32-1.

13
Defendants refer to this as a “water truck” in their briefs. The pleadings in the Underlying Lawsuit refer to it as a water tank. See Doc. 1-2 ¶ 14.

14
Doc. 17-2 ¶ 41.

15
Doc. 1-3 at 20, § I, Coverage A, ¶ 1.a.

16
Id. at 23, § I, Coverage A, ¶ 2.g

17
Id. at 50.

18
Id. at 23, § I, Coverage A, ¶ 2.h(1).

19
Id. at 32, § V, ¶ 2.

20
Id. at 34, § V, ¶ 17.

21
Id. at 34, § V, ¶ 13.

22
Id. at 35, § V, ¶ 18.

23
Id. at 33–34, § V, ¶ 12 (emphasis added).

24
Phila. Indem. Ins. Co. v. Kan. City Home Care, Inc., 139 F. Supp. 2d 1194, 1197 (D. Kan. 2001) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)).

25
Id. (citing Simms v. Metro. Life Ins. Co., 685 P.2d 321, 324 (Kan. Ct. App. 1984)).

26
Found. Prop. Invs., LLC v. CTP, LLC, 159 P.3d 1042, 1046 (Kan. Ct. App. 2007) (citation omitted).

27
Endurance Am. Specialty Ins. Co. v. Brown, –F. Supp. 3d–, 2020 WL 6947519, at *5 (W.D. Mo. Mar. 19, 2020) (citing Allen v. Cont’l W. Ins. Co., 436 S.W.3d 548, 552 (Mo. 2014) (en banc)).

28
Allen, 436 S.W.3d at 553.

29
Brown, 2020 WL 6947519, at *3 (quoting Trainwreck W. Inc. v. Burlington Ins. Co., 235 S.W.3d 33, 44 (Mo. Ct. App. 2007)).

30
Id. (citing Superior Equip. Co. v. Md. Cas. Co., 986 S.W.2d 477, 482 (Mo. Ct. App. 1998)).

31
Id. (citing Ira E. Berry, Inc. v. Am. States Ins. Co., 563 S.W.2d 514, 516 (Mo. Ct. App. 1978)).

32
Gohagan v. Cincinnati Ins. Co., 809 F.3d 1012, 1015 (8th Cir. 2016) (citing McCormack Baron Mgmt. Servs., Inc. v. Am. Guar. & Liab. Ins. Co., 989 S.W.2d 168, 171 (Mo. 1999)).

33
Todd v. Mo. United Sch. Ins. Council, 223 S.W.3d 156, 160 (Mo. 2007) (en banc).

34
Mendota Ins. Co. v. Lawson, 456 S.W.3d 898, 903 (Mo. Ct. App. 2015); see also Harrison v. MFA Mut. Ins. Co., 607 S.W.2d 137, 142 (Mo. 1980) (en banc) (“[W]here language in an insurance contract is unequivocal, it is to be given its plain meaning notwithstanding the fact that it appears in a restrictive provision of a policy.”).

35
Blumer v. Auto. Club Inter-Ins. Exch., 340 S.W.3d 214, 218 (Mo. Ct. App. 2011) (citing Heringer v. Am. Family Mut. Ins. Co., 140 S.W.3d 100, 102 (Mo. Ct. App. 2004)).

36
Id. (quoting Miller v. O’Brien, 168 S.W.3d 109, 115 (Mo. Ct. App. 2005)) (citing Heringer, 140 S.W.3d at 102–03).

37
Id. (quoting Herringer, 140 S.W.3d at 103).

38
Mendota Ins. Co., 456 S.W.3d at 903 (citing Thiemann v. Columbia Pub. Sch. Dist., 338 S.W.3d 835, 840 (Mo. Ct. App. 2011)).

39
Endurance Am. Specialty Ins. Co. v. Brown, –F. Supp. 3d–, 2020 WL 6947519, at *3 (W.D. Mo. Mar. 19, 2020) (quoting Todd v. Mo. United Sch. Ins. Council, 223 S.W.3d 156, 163 (Mo. 2007) (en banc)).

40
Adams v. Certain Underwriters at Lloyd’s of London, 589 S.W.3d 15, 27 (Mo. Ct. App. 2019) (citing Centermark Props., Inc. v. Home Indem. Co., 897 S.W.2d 98, 100–01 (Mo. Ct. App. 1995)).

41
Doc. 33 at 2–6.

42
See, e.g., Grange Ins. Co. of Mich. v. MS Escort Truck Servs., LLC, Nos. 338260, 338262, 338277, 338279, 2018 WL 3186230, at *4–5 (Mich. Ct. App. June 28, 2018).

43
COPE v. Kan. State Bd. of Educ., 71 F. Supp. 3d 1233, 1238 (D. Kan. 2014) (citation omitted).

44
James v. Boyd Gaming Corp., –F. Supp. 3d–, 2021 WL 794899, at *5 (D. Kan. Mar. 2, 2021) (first citing Green v. New Mexico, 420 F.3d 1189, 1196 (10th Cir. 2005); then citing Doebele v. Sprint/United Mgmt. Co., 342 F.3d 1117, 1139 n.13 (10th Cir. 2003); and then citing EEOC v. Int’l Paper Co., No. 91-2017-L, 1992 WL 370850, at *10 (D. Kan. Octo. 28, 1992)).

45
See id.

46
Doc. 1-3 at 50.

47
Walden v. Smith, 427 S.W.3d 269, 274 (Mo. Ct. App. 2014) (citing Am. Fam. Ins. Co. v. Wemhoff, 972 S.W.2d 402, 405 (Mo. Ct. App. 1998)).

48
Id.

49
See Royal Maccabees Life Ins. Co. v. Choren, 393 F.3d 1175, 1180 (10th Cir. 2005) (citing FDIC v. Schuchmann, 235 F.3d 1217, 1225 (10th Cir. 2000)).

50
Doc. 33 at 2.

51
Grange Ins. Co. of Mich. v. MS Escort Truck Servs., LLC, Nos. 338260, 338262, 338277, 338279, 2018 WL 3186230, at *4 (Mich. Ct. App. June 28, 2018) (quoting Thornton v. Allstate Ins. Co., 391 N.W.2d 320, 323 (Mich. 1986)).

52
See Ryder Truck Rental, Inc. v. U.S. Fidelity & Guar. Co., 527 F. Supp. 666, 669 (E.D. Mo. 1981); Schmidt v. Utils. Ins. Co., 182 S.W.2d 181, 183 (Mo. 1944).

53
Ryder Truck Rental, Inc., 527 F. Supp. at 669; Schmidt, 182 S.W.2d at 183.

54
Walden v. Smith, 427 S.W.3d 269, 274–83 (Mo. Ct. App. 2014) (collecting cases).

55
Oddly, neither party cited nor discussed this decision. Although Walden involved an automobile insurance policy, its coverage provision uses the same language as the auto exclusion in this CGL Policy. See id. at 273. The Walden court collected cases addressing this language in the context of both coverage and exclusionary provisions, including several of the cases discussed by the parties in their briefs. Id. at 274–85.

56
Ryder Truck Rental, Inc., 527 F. Supp. at 669.

57
See Colony Ins. Co. v. Pinewoods Enters., Inc., 29 F. Supp. 2d 1079, 1083 (E.D. Mo. 1998); Walton Const. Co. v. Liberty Mut. Fire Ins. Co., No. 09-0706-CV-W-ODS, 2010 WL 4625734, at *2 (W.D. Mo. Nov. 8, 2010).

58
Colony Ins. Co., 29 F. Supp. 2d at 1083 (first citing Martin v. Cameron Mut. Ins. Co., 763 S.W.2d 710, 711 (Mo. Ct. App. 1989); then citing Bituminous Cas. Corp. v. Aetna Life & Cas. Co., 599 S.W.2d 516, 518 (Mo. Ct. App. 1980); and then citing Ryder Truck Rental, Inc., 527 F. Supp. at 669).

59
See Walden, 427 S.W.3d at 276.

60
Id. at 277.

61
Id. at 277–79.

62
Id. at 279 (quoting Bituminous Cas. Corp. v. Aetna Life & Cas. Co., 599 S.W.2d 516, 519 (Mo. Ct. App.
1980) (emphasis omitted)).

63
Doc. 33 at 3–4 (quoting Grange Ins. Co. of Mich. v. MS Escort Truck Servs., LLC, 2018 WL 3186230, at *5 (Mich. Ct. App. June 28, 2018)).

64
Cf. Cameron Mut. Ins. Co. v. Ward, 599 S.W.2d 13, 14 (Mo. Ct. App. 1980) (finding vehicle was merely the “situs” of the accidental discharge of a rifle that caused the injury); Pope v. Stolts, 712 S.W.2d 434, 435–36 (Mo. Ct. App. 1986) (finding insufficient causal connection between the use of a “jump vehicle” to jump start a stalled vehicle and injuries to the plaintiff caused by an uninsured motorist crossing lanes of travel); Steelman v. Holford, 765 S.W.2d 372, 375 (Mo. Ct. App. 1989) (finding auto exclusion in homeowner’s policy did not apply where vehicle was the situs of a firearm discharge; the use of the vehicle was temporally and spatially related, but not causally); Ward v. Int’l Indem. Co., 897 S.W.2d 627, 6289 (Mo. Ct. App. 1995) (finding injuries from drive-by- shooting did not arise out of the use of a vehicle because it was merely the situs of the cause of the injury).

65
See Ryder Truck Rental, Inc. v. U.S. Fidelity & Guar. Co., 527 F. Supp. 666, 669 (E.D. Mo. 1981) (“[V]irtually every jurisdiction which has addressed the question has held that an accident involving a tractor-trailer unit ‘arises out of’ the use of both, regardless of which part of the unit was actually involved in the accident.”).

66
Defendants assert that the water tank was in fact a water truck, and that the water truck is “the equipment that needs to be considered when determining whether Penn-Star can avoid coverage under its ‘auto exception.’ ” Doc. 33 at 5. As discussed earlier, the Court must evaluate Plaintiff’s duty to defend and indemnify based on what is alleged in the underlying pleadings. Moreover, even assuming that the cargo was a water truck, Defendants fail to provide any cogent argument demonstrating its “use” caused the property damage in this case.

67
Doc. 1-3 at 32, § V, ¶ 2.a.

68
See Strader v. Progressive Ins., 230 S.W.3d 621, 624 (Mo. Ct. App. 2007).

69
Todd v. Mo. United Sch. Ins. Council, 223 S.W.3d 156, 163 (Mo. 2007) (en banc).

70
Doc. 1-3 at 23, § I, Coverage A, ¶ 2.h(1).

71
436 F. Supp. 3d 1367 (E.D. Cal. 2020).

72
Id. at 1371.

73
Id. at 1375.

74
Id. at 1377–78.

75
Id. at 1379.

76
Id. at 1380.

77
Id.

78
Id. at 1383 (emphasis added).