CASES (2022)

MATA V. ARGOS USA, LC

Court of Appeals of Texas, Sixth District, Texarkana

February 9, 2022, Submitted; April 22, 2022, Decided

No. 06-21-00089-CV

Reporter

2022 Tex. App. LEXIS 2639 *; 2022 WL 1193671

MARTIN MATA, AND WIFE ENNA FERNANDEZ MATA INDIVIDUALLY AND FABRIZIO MATA, Appellants v. ARGOS USA LLC, Appellees

Prior History: [*1] On Appeal from the 61st District Court, Harris County, Texas. Trial Court No. 2018-62967-D.

Core Terms

summary judgment, Transportation, summary judgment motion, motor carrier, trial court, hiring, produce evidence, truck, contractors, grant summary judgment, policies, shipper, regulations, deliver, trailer, loads, gross negligence, cause of action, no evidence, Aggregates, grounds, right to control, common-law, genuine issue of material fact, independent contractor, supporting argument, standard of care, no-evidence, vicariously, interstate

Case Summary

Overview

HOLDINGS: [1]-The trial court did not err in granting the company’s summary judgment on the negligence claims under Tex. R. Civ. P. 166a because the claimants did not challenge the finding that at the time of the accident, the company was the shipper, not a motor carrier under the Federal Motor Carrier Safety Regulations (FMCSR). Also, it produced evidence that it did not control, operate, or direct either the logistics company or the operation of the trucking company’s vehicle.

Outcome

Judgment affirmed.

LexisNexis® Headnotes

Civil Procedure > Appeals > Standards of Review > De Novo Review

Evidence > Inferences & Presumptions > Inferences

Civil Procedure > … > Summary Judgment > Summary Judgment Review > Standards of Review

HN1 Standards of Review, De Novo Review

An appellate court’s review of a summary judgment is de novo. Where a trial court’s summary judgment does not specify the ground or grounds on which it was granted, appellate courts uphold the trial court’s judgment if properly supported by any ground asserted in the motion. When reviewing a summary judgment, appellate courts take as true all evidence favorable to a nonmovant, and appellate courts indulge every reasonable inference and resolve any doubts in the nonmovant’s favor.

Civil Procedure > Judgments > Summary Judgment > Burdens of Proof

Civil Procedure > … > Summary Judgment > Burdens of Proof > Movant Persuasion & Proof

Civil Procedure > … > Summary Judgment > Burdens of Proof > Nonmovant Persuasion & Proof

Civil Procedure > … > Summary Judgment > Entitlement as Matter of Law > Genuine Disputes

Civil Procedure > Judgments > Summary Judgment > Entitlement as Matter of Law

HN2 Summary Judgment, Burdens of Proof

To be entitled to traditional summary judgment, a movant must establish there is no genuine issue of material fact so that the movant is entitled to judgment as a matter of law. A defendant who conclusively negates a single essential element of a cause of action or conclusively establishes an affirmative defense is entitled to summary judgment on that claim. Once the movant produces evidence entitling it to summary judgment, the burden shifts to a nonmovant to present evidence raising a genuine issue of material fact. Evidence is conclusive only if reasonable people could not differ in their conclusions.

Labor & Employment Law > Employment Relationships > Independent Contractors

Torts > Vicarious Liability > Independent Contractors > Abnormally Dangerous Activities

Torts > Vicarious Liability > Independent Contractors > Nondelegable Duties

Torts > Vicarious Liability > Independent Contractors > Owners & Possessors of Real Property

Torts > … > Affirmative Duty to Act > Types of Special Relationships > Employers

HN3 Employment Relationships, Independent Contractors

Generally, an employer has no duty to ensure that an independent contractor performs its work in a safe manner. However, if the work itself involves a nondelegable duty, whether inherently dangerous or statutorily prescribed, the employer is generally held liable for an independent contractor’s tortious acts.

Business & Corporate Compliance > … > Transportation Law > Commercial Vehicles > Maintenance & Safety

Torts > Vicarious Liability > Bailees

Torts > Vicarious Liability > Independent Contractors > Nondelegable Duties

Torts > … > Motor Vehicles > Particular Actors, Circumstances, & Liabilities > Motor Carriers

Business & Corporate Compliance > … > Transportation Law > Carrier Duties & Liabilities > State & Local Regulation

HN4 Commercial Drivers & Vehicles, Maintenance & Safety

The Federal Motor Carrier Safety Regulations (FMCSR) creates a nondelegable duty for motor carriers authorized to operate by the Federal Motor Carrier Safety Administration. Where under the FMCSR interstate motor carriers have a legal right and duty to control leased vehicles that are operated for their benefit, the regulations create a statutory employee relationship between the employees of the owner-lessors and the lessee-carriers. As a result, an interstate motor carrier is vicariously liable as a matter of law under the FMCSR for the negligence of its statutory employee drivers.

Business & Corporate Compliance > … > Transportation Law > Commercial Vehicles > Maintenance & Safety

Insurance Law > … > Coverage > Compulsory Coverage > Motor Carriers

Torts > … > Motor Vehicles > Particular Actors, Circumstances, & Liabilities > Motor Carriers

Business & Corporate Compliance > … > Transportation Law > Carrier Duties & Liabilities > State & Local Regulation

HN5 Commercial Drivers & Vehicles, Maintenance & Safety

When analyzing whether a defendant is a motor carrier, a court must focus on the specific transaction at issue, not merely whether a defendant is certified as a motor carrier. This means that possession of a motor carrier license is not determinative of the applicability of the Federal Motor Carrier Safety Regulations (FMCSR); rather, the critical inquiry is what capacity the defendant was acting during the transaction or incident. Federal courts have specifically held that shippers who engage independent contractors to transport goods are not subject to the FMCSR.

Civil Procedure > … > Summary Judgment > Summary Judgment Review > Standards of Review

HN6 Summary Judgment Review, Standards of Review

When, a movant asserts multiple grounds for summary judgment, and a trial court does not specify in an order the ground on which summary judgment was granted, an appellant must negate all grounds on appeal. If the appellant fails to challenge all grounds on which the judgment may have been granted, the appellate court must uphold the summary judgment.

Civil Procedure > Appeals > Appellate Briefs

Civil Procedure > Appeals > Reviewability of Lower Court Decisions > Preservation for Review

Civil Procedure > Appeals > Record on Appeal

HN7 Appeals, Appellate Briefs

The appellate rules require that a brief must contain a clear and concise argument for the contentions made, with appropriate citations to authorities and to the record. Tex. R. App. P. 38.1(i).

Business & Corporate Compliance > … > Transportation Law > Commercial Vehicles > Licensing & Registration

Torts > … > Motor Vehicles > Particular Actors, Circumstances, & Liabilities > Motor Carriers

Transportation Law > Carrier Duties & Liabilities > Definitions

Business & Corporate Compliance > … > Transportation Law > Carrier Duties & Liabilities > State & Local Regulation

HN8 Commercial Drivers & Vehicles, Licensing & Registration

The Texas Regulations apply to commercial motor vehicles’ and hold motor carriers’ responsible for their employees. Texas law defines motor carrier as an individual or other legal entity that controls, operates, or directs the operation of one or more vehicles that transport persons or cargo.

Governments > Courts > Judicial Precedent

HN9 Courts, Judicial Precedent

Appellate courts look to federal case law for guidance.

Business & Corporate Compliance > … > Transportation Law > Carrier Duties & Liabilities > State & Local Regulation

Torts > … > Motor Vehicles > Particular Actors, Circumstances, & Liabilities > Motor Carriers

Insurance Law > … > Coverage > Compulsory Coverage > Motor Carriers

Transportation Law > Carrier Duties & Liabilities > Definitions

HN10 Common Carrier Duties & Liabilities, State & Local Regulation

In analyzing whether a defendant is a motor carrier, appellate courts focus on the specific transaction at issue. Thus, an individual or legal entity is a motor carrier (and therefore responsible for its employees) if it controlled, operated, or directed the operation of the truck during the transaction or incident. At the same time, an entity that instructs the transporter of goods where to pick up and deliver the goods, and that does not control, operate, or direct the operation of the truck, acts as a shipper, not a motor carrier, and is not liable for the torts of the transporter.

Torts > Vicarious Liability > Independent Contractors > Collateral Negligence

Torts > Vicarious Liability > Independent Contractors > Owners & Possessors of Real Property

Torts > … > General Premises Liability > Defenses > Independent Contractors

HN11 Independent Contractors, Collateral Negligence

An employer generally has no duty to ensure that an independent contractor performs its work in a safe manner. Even so, it can be held vicariously liable for its independent contractor’s actions if the owner retains some control over the manner in which the contractor performs the work that causes the damage. But an employer can direct when and where an independent contractor does the work and can request information and reports about the work without assuming vicarious liability.

Business & Corporate Law > … > Establishment > Elements > Application of Agency Law Principles

Business & Corporate Law > … > Establishment > Elements > Right to Control by Principal

Business & Corporate Law > … > Duties & Liabilities > Causes of Action & Remedies > Burdens of Proof

Business & Corporate Law > Agency Relationships > Establishment > Definitions

HN12 Elements, Application of Agency Law Principles

An agent is one who is authorized by a person or entity to transact business or manage some affair for the person or entity. The critical element of an agency relationship is the right to control, and the principal must have control of both the means and details of the process by which the agent is to accomplish his task in order for an agency relationship to exist. Absent proof of the right to control the means and details of the work performed, only an independent contractor relationship is established.

Civil Procedure > Appeals > Standards of Review > Questions of Fact & Law

Torts > Negligence > Elements > Duty

HN13 Standards of Review, Questions of Fact & Law

A legal duty must exist before a defendant can be liable for negligence. Whether a duty exists is a question of law for a court to decide from the facts surrounding the occurrence in question. A company’s internal policies, taken alone, do not establish the standard of care. Likewise, a company’s internal policies or procedures do not create a negligence duty where none would otherwise exist.

Torts > Negligence > Gross Negligence

HN14 Negligence, Gross Negligence

Without a legal duty, a claim for negligence fails. Likewise, without a legal duty there can be no gross negligence. A finding of gross negligence requires a finding that a defendant owed a duty of care to a plaintiff.

Civil Procedure > Appeals > Standards of Review > Reversible Errors

Civil Procedure > … > Summary Judgment > Summary Judgment Review > Standards of Review

HN15 Standards of Review, Reversible Errors

Summary judgments may only be granted upon grounds expressly asserted in the summary judgment motion. Further, granting a summary judgment on a claim not addressed in the summary judgment motion is, as a general rule, reversible error.

Civil Procedure > … > Standards of Review > Harmless & Invited Errors > Harmless Error Rule

Civil Procedure > … > Summary Judgment > Summary Judgment Review > Standards of Review

HN16 Harmless & Invited Errors, Harmless Error Rule

The harmless error rule applies to summary judgments. For that reason, although a trial court errs in granting a summary judgment on a cause of action not expressly presented by written motion, the error is harmless when the omitted cause of action is precluded as a matter of law by other grounds raised in a case. Thus, a summary judgment may be affirmed even though the motion omitted one of multiple causes of action, when the omitted ground was intertwined with, and precluded by, a ground addressed in the motion.

Counsel: For Martin Waldomero Mata, Enna Fernandez Mata, and Fabrizio Mata, Appellant: Scott Rothenberg, David Sheller.

For Southern Crushed Concrete, Inc., Travis Body and Trailer, Inc., Spiritual Logistics LLC. et al., Appellee: Richard Mosher, Michael Walter Magee, Kathryn Lynn Brown Ward, Walter F. “Trey” Williams.

For Argos USA, L.L.C., Appellee: Richard A. Harwell, Fernando Pablo Arias, Meredith Livermore.

Judges: Before Morriss, C.J., Stevens and Carter,^* JJ. Memorandum Opinion by Justice Stevens.

Opinion by: Scott E. Stevens

Opinion

MEMORANDUM OPINION

On the afternoon of April 3, 2018, another driver lost control of his vehicle and struck the passenger side of Martin Mata’s vehicle, forcing him into a lane of traffic occupied by a tractor-trailer owned by Efrain Lozano d/b/a Lozano Trucking (Lozano) and driven by Luis Hernandez. Martin’s vehicle struck the right quarter panel of Lozano’s trailer, became lodged underneath the trailer, and was dragged until Hernandez could stop the vehicle. As a result, Martin and his family (collectively the Matas) sued, among others, Lozano, Hernandez, Spiritual Logistics LLC (Logistics), River [*2] Aggregates LLC (Aggregates), and Argos USA LLC (Argos USA) for the injuries they allegedly suffered as a result of the accident.¹ The Matas appeal the summary judgment in favor of, and the dismissal of all of their claims against, Argos USA. For the reasons stated, we affirm the trial court’s summary judgment and dismissal of all the Matas’ claims against Argos USA.

I. Background

In their live petition, the Matas alleged that Lozano and Hernandez negligently caused the Matas’ injuries because they failed to equip their trailer with side underride guards, were speeding, failed to timely apply the brakes, failed to properly maintain the brakes on their vehicles, and failed to take a thirty-minute break in eight hours. They alleged (1) that Argos USA was vicariously liable for the negligent acts and omissions of Lozano and Hernandez under the Federal Motor Carrier Safety Regulations (FMCSR) and the Texas Transportation Code, (2) that it was liable for the negligent hiring of Lozano and Hernandez both at common law and under the FMCSR and the Texas Transportation Code because Logistics was its agent, (3) that it had assumed a duty to ensure the safety of Lozano’s tractor/trailer by [*3] its internal safety policies, (4) that it was negligent per se because it violated the FMCSR and the Texas Transportation Code, and (5) that its actions also constituted gross negligence.

Argos USA filed a traditional motion for summary judgment as to the Matas’ negligence claims against it, and both a traditional and no-evidence motion for summary judgment as to their claim for gross negligence. In its motion, Argos USA asserted that it owed no duty to the Matas under the FMCSR because (1) the tractor/trailer was not involved in interstate commerce and (2) Argos was a shipper of the property being transported, not a transporter of the property. It also asserted that it was not a motor carrier under the Texas Transportation Code because it did not control, operate, or direct the operation of Lozano’s tractor/trailer or its driver. As to the Matas’ common-law negligence claims, Argos USA asserted that it did not owe the Matas a duty because (1) neither Logistics nor Lozano was its agent, (2) it did not control or have the right to control the means and details of how the work was performed by Logistics or Lozano, (3) it was not an employer of Lozano or Hernandez, and (4) it did not have [*4] a statutory or regulatory duty to maintain or monitor Lozano’s tractor/trailer. Regarding the Matas’ claim for gross negligence, Argos USA asserted that (1) it had no duty to the Matas, (2) since it was not negligent, gross negligence was precluded, and (3) there was no evidence that its acts or omissions involved an extreme risk or that it was subjectively aware of an extreme risk. Argos USA also moved to sever the Matas’ claims against it from the remainder of the case after the trial court granted its summary judgment motion.

In their response to the motion for summary judgment, the Matas argued that (1) Argos USA did not show, as a matter of law, that it was entitled to summary judgment on the Matas’ common-law negligent hiring claim; (2) Argos USA had a duty to hire competent independent contractors; (3) Argos USA breached that duty by failing to investigate Logistics and Lozano; (4) Argos USA had a duty to investigate safety practices of Logistics; (5) Argos USA failed to follow its own safety policies; and (6) failure to follow its own policies was some evidence of gross negligence. The Matas also argued that Argos USA was vicariously liable for Logistics’s and Lozano’s negligence [*5] since they were Argos USA’s agents by virtue of it having its own Department of Transportation (DOT) number and choosing to confer its authority onto Logistics, using Logistics to arrange for trucks on a daily basis for eight years, and requiring that deliveries arrive at Argos USA’s facility at a certain time.

After Argos USA filed a reply to the Matas’ response and objected to some of the evidence that the Matas filed in support of their response, and after the Matas filed sur-replies and additional evidence, the trial court granted Argos USA’s summary judgment motion, dismissed all the Matas’ claims against Argos USA, and severed the Matas’ claims against Argos USA from the original lawsuit.

II. Standard of Review

HN1 “Our review of a summary judgment is de novo.” Reg’l Specialty Clinic, P.A. v. S.A. Randle & Assocs., P.C., 625 S.W.3d 895, 900 (Tex. App.—Houston [14th Dist.] 2021, no pet.) (citing Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005)). “Because the trial court’s summary judgment does not specify the ground or grounds on which it was granted, we uphold the court’s judgment if properly supported by any ground asserted in the motion.” Id. (citing Carr v. Brasher, 776 S.W.2d 567, 569 (Tex. 1989)). “When reviewing a summary judgment, we take as true all evidence favorable to the nonmovant, and we indulge every reasonable inference and resolve any doubts in the nonmovant’s favor.” Id. (citing Dorsett, 164 S.W.3d at 661).

HN2 “To [*6] be entitled to traditional summary judgment, a movant must establish there is no genuine issue of material fact so that the movant is entitled to judgment as a matter of law.” Id. (citing Tex. R. Civ. P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009)). “A defendant who conclusively negates a single essential element of a cause of action or conclusively establishes an affirmative defense is entitled to summary judgment on that claim.” Id. (citing Frost Nat’l Bank v. Fernandez, 315 S.W.3d 494, 508-09 (Tex. 2010)). “Once the movant produces evidence entitling it to summary judgment, the burden shifts to the nonmovant to present evidence raising a genuine issue of material fact.” Id. at 900-01 (citing Walker v. Harris, 924 S.W.2d 375, 377 (Tex. 1996)). “Evidence is conclusive only if reasonable people could not differ in their conclusions.” City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005)).

III. Argos USA Produced Sufficient Evidence to Entitle It to Summary Judgment

In their first and second issues, the Matas complain that the trial court erred in granting summary judgment on the issue of duty based on the applicability of federal and state statutes and regulations and on the Matas’ common-law agency and negligent hiring causes of action because Argos USA purportedly relied on a no-evidence standard, rather than the traditional summary judgment standard. Although the Matas brief these issues together, we will address [*7] them separately.

A. Argos USA’s Liability Under the Federal Regulations

In support of its motion for summary judgment, Argos USA produced evidence that showed that, when it had a load of sand or aggregate it needed delivered to its plant, it would contact Logistics and give it the quantity it needed and would instruct it where the loads were to be delivered. Although Argos USA opened at 6:00 a.m. and had a time after which it would not receive loads, it did not direct Logistics what time to deliver the loads. Logistics acted as a broker and contacted available trucking companies to obtain and deliver the loads, but Argos USA never gave it qualifications for the trucks or directed its operational activity. Argos USA also did not provide Logistics with any direction or requirements as to finding drivers. When Argos USA hired Logistics to deliver sand from Aggregates, it never specified the equipment to use or which trucking company to use. In addition, on the day of the accident, Lozano was operating under his own DOT number.

Argos USA also produced evidence that Lozano never received any instruction from Argos USA and that Logistics, not Argos USA, told it where to pick up the load. Other [*8] than instructing Lozano where to unload at its plant, Argos USA did not tell Logistics how to do its job or give it any instruction regarding the maintenance of its vehicles. When Logistics contacted Lozano to deliver loads for Argos USA, it told Lozano the day to deliver the loads, but did not tell it the time of day to deliver them. It was Lozano’s option on how many loads it would accept to deliver in a day. Argos USA’s evidence also showed that it did not have a written contract with Logistics and that it never had a contract with Lozano. Lozano’s representative also testified that it did not know if it would have put side underride guards on its trailer if Argos USA had requested it do so, since Argos USA had no control over its vehicles.

In addition, Argos produced evidence that it hired Logistics as a broker to engage trucking companies to haul sand and aggregate it had purchased from Aggregates in Conroe, Texas, to its plant in Tomball, Texas. It also produced undisputed evidence that, on the date of the accident, Logistics hired Lozano to haul the sand from Aggregates to Argos USA’s plant in Tomball.

HN3 “Generally, an employer has no duty to ensure that an independent contractor [*9] performs its work in a safe manner.” Fifth Club, Inc. v. Ramirez, 196 S.W.3d 788, 791 (Tex. 2006) (citing Lee Lewis Constr., Inc. v. Harrison, 70 S.W.3d 778, 783 (Tex. 2001)). However, “if the work itself involves a nondelegable duty, whether inherently dangerous or statutorily prescribed,” the employer is “generally held liable for an independent contractor’s tortious acts.” Id. at 795.

HN4 The FMCSR creates a nondelegable duty for “motor carriers authorized to operate by the Federal Motor Carrier Safety Administration.” Rodriguez v. Panther Expedited Servs., Inc., No. 04-17-00291-CV, 2018 Tex. App. LEXIS 5857, 2018 WL 3622066, at *6 (Tex. App.—San Antonio July 31, 2018, pet. denied) (mem. op.) (citing Morris v. JTM Materials, Inc., 78 S.W.3d 28, 38 (Tex. App.—Fort Worth 2002, no pet.); 49 C.F.R. § 376.1). “[B]ecause under the FMCSR interstate motor carriers have a legal right and duty to control leased vehicles that are operated for their benefit, the regulations create a statutory employee relationship between the employees of the owner-lessors and the lessee-carriers.” Id. (citing Motloch v. Albuquerque Tortilla Co., 454 S.W.3d 30, 37 (Tex. App.—Eastland 2014, no pet.)). As a result, “an interstate motor carrier is vicariously liable as a matter of law under the FMCSR for the negligence of its statutory employee drivers.” Id. (citing Morris, 78 S.W.3d at 39).

HN5 Nevertheless, “the Texas Supreme Court has held that when analyzing whether a defendant is a motor carrier, a court must focus on the specific transaction at issue, not merely whether a defendant is certified as a motor carrier.” Id. (citing Gonzalez v. Ramirez, 463 S.W.3d 499, 506 (Tex. 2015) (per curiam) (citing Camp v. TNT Logistics Corp., 553 F.3d 502, 507 (7th Cir. 2009); Harris v. Velichkov, 860 F.Supp.2d 970, 979 (D. Neb. 2012), aff’d, Harris v. FedEx Nat’l LTL, 760 F.3d 780 (8th Cir. 2014))). This means that “possession of a motor carrier license is [*10] not determinative of the applicability of the regulations; rather, the critical inquiry is what capacity the defendant was acting during the transaction or incident.” Id. (citing Camp, 553 F.3d at 507). “Federal courts have specifically held that shippers who engage independent contractors to transport goods are not subject to the FMCSR.” Id. (citing Harris, 860 F.Supp.2d at 979; Caballero v. Archer, Civil Action No. SA-04-CA-561-OG, 2007 U.S. Dist. LEXIS 12271, 2007 WL 628755, at *4 (W.D. Tex. Feb. 1, 2007) (order)).

In its traditional motion for summary judgment, Argos USA asserted that the FMCSR was not applicable on two bases: (1) the transportation of the goods did not involve interstate commerce and (2) in this transaction, Argos USA was a shipper, not a motor carrier. On appeal, the Matas contend that the trial court erred in granting summary judgment on their claims based on Argos USA’s alleged duties under the FMCSR because Argos USA relied on the Texas Supreme Court’s holding in Gonzalez v. Ramirez that the FMCSR applies “only to transportation in interstate commerce,” 463 S.W.3d 499, 502 (Tex. 2015) (per curiam), and that Argos USA argued that there was no evidence that Lozano was hired to transport property across state lines. The Matas argue that, because in Gonzalez, the court was addressing a no-evidence summary judgement, and Argos USA only argued no evidence for this basis, the trial court erred in [*11] granting summary judgment on this claim.

In their brief on appeal, the Matas do not challenge the other basis for summary judgment on the claims based on the inapplicability of the FMCSR to Argos USA, i.e., that, in this incident, it was a shipper, not a transporter. HN6 “When, as in the present case, a movant asserts multiple grounds for summary judgment, and the trial court does not specify in the order the ground on which summary judgment was granted, the appellant must negate all grounds on appeal.” Heritage Gulf Coast Props., Ltd. v. Sandalwood Apartments, Inc., 416 S.W.3d 642, 653 (Tex. App.—Houston [14th Dist.] 2013, no pet.) (citing Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex. 1995); Lewis v. Adams, 979 S.W.2d 831, 833 (Tex. App.—Houston [14th Dist.] 1998, no pet.)). “If the appellant fails to challenge all grounds on which the judgment may have been granted, the appellate court must uphold the summary judgment.” Id. (citing Lewis, 979 S.W.2d at 833; Fields v. City of Tex. City, 864 S.W.2d 66, 68 (Tex. App.—Houston [14th Dist.] 1993, writ denied)). Because the trial court could have based its summary judgment on the undisputed evidence that showed that, at the time of the accident, Argos USA was the shipper,² not a motor carrier under the FMCSR, which was not challenged on appeal, we must affirm the summary judgment on the Matas’ claims based on any duty arising under the FMCSR.

To the extent that the Matas’ brief can be construed as a challenge to the legal sufficiency of the evidence supporting the trial court’s summary judgment on these claims, the Matas [*12] do not mention the evidence produced by Argos USA or analyze how the evidence was insufficient, do not cite any authority that would support an argument that the evidence was insufficient, and do not offer any citations to the record that would support a complaint that the evidence produced by Argos USA was insufficient. HN7 However, our appellate rules require that “[t]he brief must contain a clear and concise argument for the contentions made, with appropriate citations to authorities and to the record.” Tex. R. App. P. 38.1(i). As a result, we conclude that any complaint that the evidence is legally insufficient is inadequately briefed and waived. See Rahman v. Foster, No. 05-16-01042-CV, 2018 Tex. App. LEXIS 1966, 2018 WL 1373890, at *2 (Tex. App.—Dallas Mar. 19, 2018, no pet.) (mem. op.); Brown v. Bank of Am., N.A., No. 01-14-00725-CV, 2015 Tex. App. LEXIS 8529, 2015 WL 4760201, at *5-6 (Tex. App.—Houston [1st Dist.] Aug. 13, 2015, no pet.) (mem. op.); Teter v. Comm’n for Lawyer Discipline, 261 S.W.3d 796, 799 (Tex. App.—Dallas 2008, no pet.); Smith v. Comm’n for Lawyer Discipline, 42 S.W.3d 362, 363-64 (Tex. App.—Houston [14th Dist.] 2001, no pet.).³

B. Argos USA’s Liability Under the Texas Transportation Code

In Gonzalez, the Texas Supreme Court also considered whether a shipper can be liable as a motor carrier under the Texas Transportation Code and its accompanying regulations. The court noted that “Texas has adopted many—but not all—parts of the Federal Regulations, as well as their federal interpretations.” Gonzalez, 463 S.W.3d at 503 (citing 37 Tex. Admin. Code § 4.11(a), (b)(3)).⁴ HN8 “The Texas Regulations apply to ‘commercial motor vehicles’ and hold ‘motor carriers’ responsible for their ’employees.'” Id. (citing 37 Tex. Admin. Code § 4.11(a); 49 C.F.R. §§ 387.1, 390.3(a), 390.11, 391.1, 396.1). “Texas law defines [*13] ‘motor carrier’ in pertinent part as ‘an individual . . . or other legal entity that controls, operates, or directs the operation of one or more vehicles that transport persons or cargo.'” Id. (quoting Tex. Transp. Code Ann. § 643.001(6); 37 Tex. Admin. Code § 4.11(b)(1)).

HN10 “In analyzing whether a defendant is a motor carrier, we focus on the specific transaction at issue.” Id. at 504 (citing Camp, 553 F.3d at 507; Velichkov, 860 F.Supp.2d at 979). Thus, an individual or legal entity is a “motor carrier” (and therefore responsible for its “employees”) if it “‘control[led], operate[d], or direct[ed]’ the operation of the truck” during the transaction or incident. Id. (quoting Tex. Transp. Code Ann. § 643.001(6)). At the same time, an entity that instructs the transporter of goods where to pick up and deliver the goods, and that does not control, operate, or direct the operation of the truck, acts as a shipper, not a motor carrier, and is not liable for the torts of the transporter. See id. at 505-06.

In their first issue, the Matas also challenge the trial court’s summary judgment on their claims based on liability under the Texas Transportation Code. The Matas assert that the trial court erred because Argos USA relied on Gonzalez, a no-evidence summary judgment case, and included a statement in its argument that there was no evidence that it controlled, operated, or [*14] directed the operation of Lozano’s truck. However, the Matas do not explain how reliance on the law governing the liability of motor carriers and non-liability of shippers under the Texas Transportation Code as set forth in Gonzalez is improper in a traditional summary judgment motion, and they cite no authority holding that it is improper. Further, in their brief, the Matas do not mention any of the evidence produced by Argos USA in support of its summary judgment motion, and they ignore Argos USA’s argument in its motion that it was not acting as a motor carrier at the time of the accident, but as a shipper, and therefore was not liable under the Texas Transportation Code and its regulations. Finally, Argos USA produced evidence that it did not control, operate, or direct either Logistics or the operation of Lozano’s truck and that, at the time of the accident, it was a shipper. The Matas fail to explain how the trial court erred in granting the traditional motion for summary judgment simply because Argos USA also pointed out that there was no evidence to the contrary. The Matas also do not cite any authority supporting an argument that it would be error to grant summary judgment under these [*15] circumstances.

For the reasons stated, we find that the trial court did not err in granting Argos USA’s summary judgment on the Matas’ claims based on liability under the FMCSR and the Texas Transportation Code. We, therefore, overrule the Matas’ first issue.

C. Argos USA’s Liability Under the Common Law

HN11 As stated earlier, an employer generally “has no duty to ensure that an independent contractor performs its work in a safe manner.” Fifth Club, Inc., 196 S.W.3d at 791. Even so, it “can be held vicariously liable for its independent contractor’s actions if the owner retains some control over the manner in [*16] which the contractor performs the work that causes the damage.” Gonzalez, 463 S.W.3d at 506 (citing Fifth Club, Inc., 196 S.W.3d at 791). But an employer “‘can direct when and where an independent contractor does the work and can request information and reports about the work’ without assuming vicarious liability.” Id. (quoting Fifth Club, Inc., 196 S.W.3d at 792).

HN12 “An agent is one who is authorized by a person or entity to transact business or manage some affair for the person or entity.” Coleman v. Klockner & Co. AG, 180 S.W.3d 577, 588 (Tex. App.—Houston [14th Dist.] 2005, no pet.) (citing Townsend v. Univ. Hospital-University of Colo., 83 S.W.3d 913, 921 (Tex. App.—Texarkana 2002, pet. denied)). “The critical element of an agency relationship is the right to control, and the principal must have control of both the means and details of the process by which the agent is to accomplish his task in order for an agency relationship to exist.” Id. (citing Townsend, 83 S.W.3d at 921). “Absent proof of the right to control the means and details of the work performed, only an independent contractor relationship is established.” Id. (citing Happy Indus. Corp. v. Am. Specialties, Inc., 983 S.W.2d 844, 852 (Tex. App.—Corpus Christi 1998, pet. dism’d w.o.j.)).⁶

In their second issue, the Matas assert that the trial court erred in granting summary judgment on their common-law claims based on duty, agency, and negligent hiring because Argos USA relied on Gonzalez, a no-evidence summary judgment case, and included a statement in its argument that there was no evidence that it had any control over the performance of the work of Logistics [*17] or Lozano. The Matas’ brief ignores the extensive argument by Argos USA in its summary judgment motion that the evidence showed that it did not control or have a right to control the means and details of the work of Logistics or Lozano and its reliance on authorities other than Gonzalez. In fact, in this portion of the summary judgment motion, Argos USA did not rely on Gonzalez. The Matas also do not mention in their brief any of the evidence produced by Argos USA in support of its summary judgment motion. Finally, the Matas fail to explain how the trial court erred in granting the traditional summary judgment when Argos USA produced evidence that it did not control and did not have the right to control the means and details of the work of either Logistics or Lozano, simply because Argos USA also pointed out that there was no evidence to the contrary. The Matas also do not cite authority supporting an argument that it would be error to grant summary judgment under these circumstances.

Since the Matas’ second issue has not shown any trial court error, we overrule it.

In their third issue, the Matas assert that summary judgment on their common-law claims was improper because there were genuine issues of material fact that preclude summary judgment. The Matas point to the following evidence:

1. Argos USA retained Logistics to obtain trucks and drivers since 2013 to deliver raw materials, sometimes as often as eight to ten deliveries per day.⁸

2. Argos USA’s own safety policies set forth in a document entitled “Road Safety Best Practices Guideline” regarding the hiring of contractors (a) acknowledged the safety risks inherent in hiring contactors, (b) required contractors to comply with pre-selection requirements, and (c) required contractors hired for off-site [*19] transportation to have a safety management process for road safety that included that its vehicles pass inspections and that it repair any found defects.

3. The testimony of Jesse Belmon, Argos USA’s safety representative that (a) Argos USA had not adopted the safety standards for contractors, (b) that he had not addressed risks regarding contractors, (c) that Argos USA had not applied the road safety elements in pre-selecting contractors, (d) that he did not know if Lozano had a road safety policy, and (e) that he did not know whether Argos USA had a system to find and repair defects in contractor’s vehicles.⁹

4. Testimony that Argos USA did not require an application from Logistics.

The Matas argue that, because there was evidence that Argos USA recognized the risk of hiring outside contractors but did not follow its own safety policies in hiring them, this was sufficient to create a genuine issue of material fact as to whether Argos USA was negligent and grossly negligent.

HN13 “A legal duty must exist before a defendant can be liable for negligence.” Entex, A Div. of Noram Energy Corp. v. Gonzalez, 94 S.W.3d 1, 4 (Tex. App.—Houston [14th Dist.] 2002, pet. denied) (citing Reeder v. Daniel, 61 S.W.3d 359, 364 (Tex. 2001)). “Whether a duty exists is a question of law for the court to decide from the facts surrounding the occurrence in question.” Id. [*20] (citing Thapar v. Zezulka, 994 S.W.2d 635, 637 (Tex. 1999)). A company’s internal policies, taken alone, do not establish the standard of care. FFE Transp. Servs., Inc. v. Fulgham, 154 S.W.3d 84, 92 (Tex. 2004). Likewise, a company’s internal policies or procedures “do not create a negligence duty where none would otherwise exist.” Entex, 94 S.W.3d at 10 (citing Jacobs-Cathey Co. v. Cockrum, 947 S.W.2d 288, 291-92 (Tex. App.—Waco 1997, writ denied); Estate of Catlin v. Gen. Motors Corp., 936 S.W.2d 447, 451 (Tex. App.—Houston [14th Dist.] 1996, no writ)).

For that reason, even assuming that the “Road Safety Best Practices Guideline” is properly before us,¹⁰ it is not sufficient by itself to create a duty on the part of Argos USA toward the Matas. Nevertheless, the Matas argue that the affidavits of their experts established that duty, the standard of care, and Argos USA’s breach of duty. The Matas cite us to the entire initial affidavit of its expert, Brian K. Jones, consisting of approximately eighteen pages, and to Jones’s entire supplemental affidavit with its attachments, consisting of almost 300 pages, without identifying which pages contain the relevant portions. We have reviewed Jones’s initial affidavit and have determined that it does not mention Argos USA at all and expresses no opinion as to its duty, the applicable standard of care, or any breach of duty by Argos USA. Our review of Jones’s supplemental affidavit reveals that it quotes at length from the “Road Safety Best Practices Guideline,” but [*21] only expresses the opinion that Argos USA was in violation of its own policies and procedures and that it failed to comply with the objective stated in the policies. Jones does not express an opinion regarding Argos USA’s duty, the standard of care, or Argos USA’s breach of any duty.

Even indulging every reasonable inference in favor of the Matas, this evidence only shows that Argos USA may have had internal safety policies regarding the hiring of contractors that it failed to follow. Because a company’s internal safety policies do not establish a standard of care or duty, this evidence is insufficient to raise a genuine issue of material fact of any duty on the part of Argos USA. HN14 Without a legal duty, a claim for negligence fails. See Fulgham, 154 S.W.3d at 92-93; Entex, 94 S.W.3d at 9-11. Likewise, without a legal duty there can be no gross negligence. See Shell Oil v. Humphrey, 880 S.W.2d 170, 174 (Tex. App.—Houston [14th Dist.] 1994, writ denied) (a finding of gross negligence requires a finding that the defendant owed a duty of care to the plaintiff). We, therefore, overrule the Matas’ third issue.

Finally, although the Matas do not designate it as one of their issues on appeal, in their discussion of the first two issues, the Matas argue that the trial court erred in granting summary judgment on all their common-law [*22] claims because Argos USA did not specifically identify each of the claims in its motion for summary judgment. The Matas argue that, in their live petition, they asserted the following claims that were not addressed in the motion for summary judgment:

1. Argos USA “had a common law duty to keep the roads safe for the general public”;

2. Argos USA “voluntarily assumed a duty to Lozano to require a safe truck”;

3. Argos USA should have warned Lozano to “install side underride guards in or about 2014”;

4. Argos USA owed a duty to the Matas to “make the trailer safer by equipping it with automatic brake adjusters, working brake lights and side underride guards”; and

5. Argos USA had a non-delegable duty to direct “Lozano truck to operate in a safe condition while it was on their property.”

HN15 As the Matas point out, “[s]ummary judgments . . . may only be granted upon grounds expressly asserted in the summary judgment motion.” G & H Towing Co. v. Magee, 347 S.W.3d 293, 297 (Tex. 2011) (per curiam) (citing Tex. R. Civ. P. 166a(c)). Further, “[g]ranting a summary judgment on a claim not addressed in the summary judgment motion . . . is, as a general rule, reversible error.” Id. (citing Chessher v. Sw. Bell Tel. Co., 658 S.W.2d 563, 564 (Tex. 1983) (per curiam)).

HN16 However, in G & H Towing, the court also recognized that the harmless error rule applies to [*23] summary judgments. Id. For that reason, “[a]lthough a trial court errs in granting a summary judgment on a cause of action not expressly presented by written motion, . . . the error is harmless when the omitted cause of action is precluded as a matter of law by other grounds raised in the case.” Id. at 297-98 (citing Withrow v. State Farm Lloyds, 990 S.W.2d 432, 437-38 (Tex. App.—Texarkana 1999, pet. denied)). Thus, a summary judgment may be affirmed even though the “motion omitted one of multiple causes of action, when the omitted ground was intertwined with, and precluded by, a ground addressed in the motion.” Id. at 297 (citing Zarzosa v. Flynn, 266 S.W.3d 614, 621 (Tex. App.—El Paso 2008, no pet.); Withrow, 990 S.W.2d at 437-38; Vogel v. Travelers Indem. Co., 966 S.W.2d 748, 754-55 (Tex. App.—San Antonio 1998, no pet.); Cissne v. Robertson, 782 S.W.2d 912, 918 (Tex. App.—Dallas 1989, writ denied)).

A review of the Matas’ live petition shows that their assertion of each of the omitted causes of action was based on their allegations that Argos USA had the right to control the safety features of Lozano’s truck, that Argos USA had a duty because of its agency relationship with Logistics, or that Argos USA had non-delegable duties under the FMCSR and the Texas Transportation Code. As a result, each of these causes of action was intertwined with, and precluded by, grounds asserted in the motion upon which the trial court granted summary judgment. Id. For that reason, we find that any error by the trial court in granting summary judgment on the causes of action [*24] omitted from the summary judgment motion was harmless. Id. at 298.

IV. Conclusion

For the reasons stated, we affirm the trial court’s summary judgment and dismissal of all the Matas’ claims against Argos USA.

Scott E. Stevens

Justice

Date Submitted: February 9, 2022

Date Decided: April 22, 2022

End of Document

^*Jack Carter, Justice, Retired, Sitting by Assignment

¹Originally appealed to the Fourteenth Court of Appeals, this case was transferred to this Court by the Texas Supreme Court pursuant to its docket equalization efforts. See Tex. Gov’t Code Ann. § 73.001. We are unaware of any conflict between precedent of the Fourteenth Court of Appeals and that of this Court on any relevant issue. See Tex. R. App. P. 41.3.

²In its summary judgment motion addressing this ground, Argos USA did not make a no-evidence argument, but, rather, it argued that the evidence showed that it was a shipper. In their response to the motion for summary judgment, the Matas did not address this issue.

³Even if the Matas had properly challenged the sufficiency of the evidence and challenged Argos USA’s ground that the FMCSR did not apply to it because at the time of the accident it was a shipper, not a motor carrier, we would find that Argos USA produced sufficient evidence to entitle it to summary judgment on that ground.

⁴HN9[] “Accordingly, we look to federal case law for guidance.” Gonzalez, 463 S.W.3d at 503 n.10 (citing R.R. St. & Co. v. Pilgrim Enters., Inc., 166 S.W.3d 232, 241 (Tex. 2005)).

⁵Even if the Matas had properly challenged the sufficiency of the evidence supporting the trial court’s summary judgment on its claims based on Argos USA’s alleged liability under the Texas Transportation Code, we would find that Argos USA produced sufficient evidence that it did not control, operate, or direct either Logistics or the operation of Lozano’s truck; that, at the time of the accident, it was a shipper, not a motor carrier; and that, as a matter of law, it was not liable under the Texas Transportation Code.

⁶In their live petition, the Matas alleged that Logistics was the agent of Argos USA, that Logistics as an agent of Argos USA was negligent in hiring and retaining Lozano, and that Argos USA was liable for the actions of its agent. They also alleged a cause of action for the negligent hiring of Lozano based on its alleged non-delegable duties under the FMCSR and the Texas Transportation Code that we have previously discussed. The Matas also allege liability under Sections 402, 411, 424, and 427 for the negligent hiring of Lozano. However, because Logistics hired Lozano, not Argos USA, this theory of liability also appears to rest on either Logistics being the agent of Argos USA or Argos USA being a motor carrier under the FMCSR and the Texas Transportation Code in regard to the accident.

⁷Even if the Matas had properly challenged the sufficiency of the evidence supporting the trial court’s summary judgment on its common-law claims, we would find that Argos USA produced sufficient evidence that Logistics was its independent contractor, that Lozano was Logistics’s independent contractor, and that Argos USA did not have actual control or the right to control Logistics’s or Lozano’s performance of their work. For that reason, we would find that, as a matter of law, Argos USA was not liable to the Matas for the torts of Logistics or Lozano and that it owed no duty to the Matas to ensure that Logistics and Lozano performed their work safely.

⁸Although the Matas point to this evidence, they fail to analyze how this fact would create any liability for Argos USA for the torts of Logistics.

⁹Belmon also testified that he had never seen the “Road Safety Best Practices Guideline” before his deposition. By affidavit, he also testified that the document was not a manual in use by Argos USA and that the manual apparently originated with an Argos entity in Colombia.

¹⁰In the trial court, Argos USA objected to the admission of this document because it lacked authentication. The trial court did not rule on that objection. On appeal, the parties dispute whether Argos USA’s objection to the Matas’ proffered authentication was an objection as to its form, which is waived if not ruled on by the trial court, or an objection to its substance, which is not waived by the lack of a trial court ruling. See Wakefield v. Wells Fargo Bank, N.A., No. 14-12-00686-CV, 2013 Tex. App. LEXIS 14018, 2013 WL 6047031, at *2 (Tex. App.—Houston [14th Dist.] Nov. 14, 2013, no pet.) (mem. op.). Because the result will be the same whether we consider the evidence or not, we need not decide the nature of the objection.

KNIGHTBROOK INS. CO. V. SANCHEZ

Knightbrook Ins. Co. v. Sanchez

Superior Court of New Jersey, Appellate Division

April 25, 2022, Argued; May 16, 2022, Decided

DOCKET NO. A-1115-20

Reporter

2022 N.J. Super. LEXIS 65 *; 2022 WL 1529637

KNIGHTBROOK INSURANCE COMPANY, Plaintiff-Respondent, v. CAROLINA TANDAZO-CALOPINA and JOSE SANCHEZ, Defendants, and LIBERTY INSURANCE CORPORATION,¹ Defendant-Appellant.

Subsequent History: [*1] Approved for Publication May 16, 2022.

Prior History: On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-1056-20.

Core Terms

coverage, personal injury action, insurer, cooperate, appreciable, variable, declaratory judgment action, disclaim, confirmed, insurance company, substantial rights, irretrievably, deposition, driver, insurance policy, summary judgment, date of the accident, failure to cooperate, assigned counsel, coverage issue, injury claim, withdrawing, defending, assigned, defenses, notice, rights

Case Summary

Overview

HOLDINGS: [1]-Insurer was not entitled to a declaratory judgment that the insurer owed no indemnity or defense for claims presented by any party in connection with an automobile accident as a result of its insured’s breach of the insurance policy by the insured’s failure to cooperate with the investigation of the claims and the defense of the litigation because the insurer failed to demonstrate appreciable prejudice to be entitled to disclaim the insured’s coverage. There were no issues concerning the insurer’s ability to determine coverage for the insured as the insurer determined that the insured’s vehicle was insured on the date of the accident and the policy covered the claims in the personal injury action, and the insurer failed to demonstrate that it was unable to defend against personal injury claims due to the insured’s refusal to cooperate in the personal injury action.

Outcome

Judgment reversed.

LexisNexis® Headnotes

Civil Procedure > Appeals > Standards of Review > De Novo Review

Civil Procedure > … > Summary Judgment > Summary Judgment Review > Standards of Review

Civil Procedure > … > Summary Judgment > Entitlement as Matter of Law > Genuine Disputes

HN1 Standards of Review, De Novo Review

An appellate court will review a trial judge’s decision on a motion for summary judgment de novo. A motion for summary judgment must be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law. R. 4:46-2(c).

Insurance Law > … > Property Insurance > Obligations > Cooperation With Carriers

Insurance Law > Liability & Performance Standards > Notice to Insurers > Prejudice to Insurers

Insurance Law > … > Obligations of Parties > Policyholders > Duty to Cooperate

HN2 Obligations, Cooperation With Carriers

New Jersey requires a showing of prejudice before a contract of insurance may be avoided. The Supreme Court of New Jersey has held it would be unfair for an insured to lose insurance coverage when there is no likelihood the insurer was prejudiced by a policy breach. The carrier may not forfeit the bargained-for protection unless there are both a breach of the notice provision and a likelihood of appreciable prejudice. “Appreciable prejudice” has been extended to situations wherein an insured breaches a contractual duty to cooperate with an insurer. The insurer bears the burden of demonstrating appreciable prejudice.

Insurance Law > Liability & Performance Standards > Notice to Insurers > Prejudice to Insurers

HN3 Notice to Insurers, Prejudice to Insurers

To determine whether an insurer suffered appreciable prejudice based on an insured’s breach of the duties under an insurance policy, a court must consider two variables: first, whether substantial rights have been irretrievably lost as a result of the insured’s breach; and second, the likelihood of success of the insurer in defending against the accident victim’s claim had there been no breach.

Insurance Law > Liability & Performance Standards > Notice to Insurers > Prejudice to Insurers

HN4 Notice to Insurers, Prejudice to Insurers

To the extent there is any ambiguity in applying the two variables to determine whether an insurer suffered appreciable prejudice based on an insured’s breach of the duties under an insurance policy, an insurer’s satisfaction of either variable is sufficient to establish appreciable prejudice to disclaim any obligation to provide coverage to an insured.

Insurance Law > Claim, Contract & Practice Issues > Estoppel & Waiver > Burdens of Proof

Insurance Law > … > Property Insurance > Obligations > Cooperation With Carriers

Insurance Law > Liability & Performance Standards > Notice to Insurers > Prejudice to Insurers

HN5 Estoppel & Waiver, Burdens of Proof

Under the first variable to determine whether an insurer suffered appreciable prejudice based on an insured’s breach of the duties under an insurance policy, an insurer must demonstrate an irretrievable loss of substantial rights based on the insured’s breach of the insurance policy. The first variable applies to an irretrievable loss of substantial rights related to coverage determinations by an insurer. To conclude otherwise would render the second variable under the appreciable prejudice prong redundant. Clearly, the two variables are intended to address different aspects of appreciable prejudice.

Counsel: Connell Foley LLP, attorneys for appellant (William P. Krauss, of counsel and on the briefs).

Delany Law, PC, attorneys for respondent (Stephen T. Kulp, of counsel and on the brief).

Judges: Before Judges Sabatino, Rothstadt, and Mayer.

Opinion by: MAYER

Opinion

The opinion of the court was delivered by

MAYER, J.A.D.

Defendant Liberty Insurance Corporation (Liberty) appeals from a November 20, 2020 order granting summary judgment to plaintiff KnightBrook Insurance Company (KnightBrook). The motion judge concluded KnightBrook “owe[d] no indemnity or defense for claims presented by any party in connection with the instant June 27, 2013 accident as a result of [its insured]’s deliberate failure to cooperate with the investigation of the claim and the defense of the litigation resulting in breach of the KnightBrook Insurance Company [p]olicy.” We reverse.

We provide the facts from the summary judgment motion record in extensive detail to provide context for the issue on appeal. In this matter, we consider whether KnightBrook validly disclaimed coverage for its insured, defendant Carolina [*2] Tandazo-Calopina (Calopina), arguing it suffering appreciable prejudice based on Calopina’s failure to cooperate as required under KnightBrook’s policy.

In August 2012, KnightBrook issued a commercial automobile policy providing liability coverage for Calopina’s vehicle associated with her taxi business. KnightBrook’s policy contained a provision, known as the duty of an insured to cooperate, governing the duties of an insured in the event of an accident, claim, injury, or suit. Under this provision, Calopina had a contractual obligation to notify KnightBrook of any accident, cooperate and assist KnightBrook in matters relevant to any claim or suit, submit to examination, and provide statements under oath. KnightBrook’s policy notified Calopina that “[f]ailure to comply with these (or other conditions) can alter or void our obligations under this policy.”

On June 27, 2013, Calopina’s taxi rear ended a 1993 Chevy wagon driven by defendant Jose Sanchez (Sanchez).² According to the police report, Calopina stated she “attempt[ed] to brake, but her brakes failed, causing her to rear end” Sanchez’s car. Immediately after the accident, Sanchez complained of numbness throughout his body and emergency [*3] medical services transported him to a local hospital.

At the hospital, Sanchez reported pain in his neck, back, and right hip. He also complained of a headache. The hospital discharged Sanchez the same day, giving him pain medication and advising he follow-up with his primary care doctor.

In testimony provided under oath, Sanchez described the accident. Sanchez was stopped at a red light at the moment of impact. There were no brake sounds prior to Sanchez hearing and feeling what he described as a “pung.” Although Sanchez wore a seatbelt, his chest struck the steering wheel.³ Sanchez described being knocked out for a second or two after the impact. He remained seated in his car after the collision and Calopina came to his driver’s side window. According to Sanchez, Calopina explained she was talking to her passengers, got distracted, and lacked sufficient time to brake. After speaking with Calopina, Sanchez got out of his car and took pictures of the damage to both cars. The road where the accident occurred had a posted speed limit of twenty-five miles per hour. However, Sanchez testified people routinely exceeded the posted speed limit, travelling between thirty and forty miles per hour. [*4]

Shortly after the collision, KnightBrook received notice of the accident.⁴ According to internal notes from KnightBrook’s claims department dated August 12, 2013, KnightBrook contacted Sanchez and obtained the name of his attorney. The notes further indicated KnightBrook reserved an amount of money for property damage to Sanchez’s car, identified as “rear end damage/possible total loss,” and Sanchez’s bodily injury claim.⁵ KnightBrook’s notes confirmed Calopina’s car was fully insured on the date of the accident.

Another KnightBrook document, dated June 28, 2014 and entitled “File Summary and Review,” confirmed Calopina’s car was insured on the date of the accident and there were no coverage issues. The File Summary and Review indicated Sanchez signed medical authorizations for KnightBrook to verify his accident-related treatment with various medical providers.

In a July 28, 2014 internal note from KnightBrook’s claims department, the insurance company received an estimate of $418.27 to repair the damage to Sanchez’s car. The same note included the name of Sanchez’s attorney and counsel’s contact information. According to this note, Sanchez’s attorney related his client suffered injuries [*5] to his neck, low back, and right hip and received orthopedic and chiropractic treatment for those injuries. The note reiterated there were no coverage issues.

In September 2014, Sanchez filed a personal injury action against Calopina (personal injury action). On October 26, 2014, Calopina’s father accepted service of the complaint. Calopina did not notify KnightBrook she was served with the complaint. Nor did she provide a copy of the complaint to KnightBrook.

However, KnightBrook obtained a copy of the complaint in the personal injury action because it sent a letter to Calopina asking her to contact its claims adjuster.⁶ KnightBrook also assigned counsel to represent Calopina in the personal injury action. In a November 5, 2014 letter, based on the repair estimate for Sanchez’s car, KnightBrook informed Sanchez’s attorney the matter involved “a very minor impact.”

Calopina’s assigned counsel filed an answer in the personal injury action and propounded discovery. In April 2015, Calopina’s counsel responded to Sanchez’s interrogatories. Calopina’s attorney took Sanchez’s deposition on August 11, 2015.

On December 22, 2015, KnightBrook sent a letter to a person Calopina designated to receive [*6] communications.⁷ The letter advised KnightBrook would handle Calopina’s defense in the personal injury action under a “strict [r]eservation of [r]ights” based on Calopina’s “continued refusal to cooperate with [assigned] defense counsel.” Nothing in the reservation of rights letter suggested a dispute concerning coverage for the accident.

The reservation of rights letter also informed Calopina her deposition would be conducted on December 30, 2015 pursuant to a court order and a “Spanish interpreter [would] be provided . . . .” The letter stated, “[s]hould you fail to contact [assigned defense counsel] immediately, we will be forced to consider withdrawing your defense and coverage for this claim.” Calopina did not appear for her court-ordered deposition. About one week later, based on her failure to appear at the deposition, Sanchez’s attorney filed a motion to bar Calopina’s testimony at trial.

In a January 13, 2016 letter, KnightBrook informed Calopina it was withdrawing her defense in the personal injury action and would not provide coverage for the accident. The letter confirmed Calopina rejected KnightBrook’s efforts to gain her cooperation through “[p]hone calls, letters and [KnightBrook’s] [*7] private investigator[].” Because Calopina violated the conditions of her insurance policy by refusing to cooperate and failing to appear for her court-ordered deposition, KnightBrook declared Calopina forfeited coverage for the personal injury action. About a week later, Sanchez’s attorney obtained a court order barring Calopina’s trial testimony in the personal injury action.

Because Calopina no longer had insurance coverage, Sanchez filed an amended complaint asserting a claim for uninsured motorist (UM) benefits against his insurance carrier, Liberty. Liberty moved for summary judgment, arguing Sanchez failed to prove Calopina was uninsured and, therefore, Liberty had no obligation to provide UM coverage. The judge denied Liberty’s motion, finding Liberty’s obligation to pay UM benefits depended on whether KnightBrook validly forfeited Calopina’s insurance coverage.

As a result, all counsel in the personal injury action, including Calopina’s assigned attorney, agreed to dismiss that litigation. Upon dismissal of the personal injury action, Sanchez intended to file a declaratory judgment action against KnightBrook to resolve the coverage issues. On July 27, 2018, Sanchez’s counsel [*8] signed and filed a voluntary stipulation of dismissal without prejudice in the personal injury action.

In June 2019, Sanchez filed a declaratory judgment action against KnightBrook, seeking a judicial determination KnightBrook had an obligation to defend and indemnify Calopina (2019 declaratory judgment action). In addition, Sanchez reasserted his personal injury claims against Calopina and his demand for UM coverage against Liberty. Liberty and Calopina filed answers in the 2019 declaratory judgment action.⁸

In February 2020, KnightBrook filed its own declaratory judgment action, requesting the court validate its disclaimer of insurance coverage based on Calopina’s failure to cooperate (2020 declaratory judgment action).⁹ In August 2020, KnightBrook moved for summary judgment in the declaratory judgment actions. Liberty and Sanchez opposed KnightBrook’s motion.

The motion judge heard the arguments of counsel on November 20, 2020. In an oral decision, the judge found KnightBrook established appreciable prejudice and was entitled to disclaim coverage based on Calopina’s failure to cooperate in the personal injury action. The judge explained KnightBrook met its burden by demonstrating it [*9] irretrievably lost substantial rights as a result of Calopina’s breach of the conditions of the insurance policy. She also concluded Calopina’s failure to cooperate negatively affected the likelihood of success in defending Calopina in the personal injury action. In granting KnightBrook’s motion for summary judgment, the judge “declar[ed] that KnightBrook ha[d] no duty to provide coverage to [Calopina], or to indemnify [Calopina] against the claims being made against her in the underlying action in [the] Superior Court . . . .”

The judge made the following factual findings regarding Calopina’s refusal to cooperate in the personal injury action. The judge found Calopina failed to notify KnightBrook of the accident, failed to forward a copy of the complaint to KnightBrook, failed to respond to letters sent to her by KnightBrook, failed to appear for deposition on four occasions, and failed to speak with her assigned counsel. The judge explained Calopina’s testimony was barred in the personal injury action, causing KnightBrook to suffer prejudice.¹⁰ The judge also relied on the letters from KnightBrook to Calopina advising her it reserved the right to decline coverage and withdraw its representation [*10] in the personal injury action if Calopina refused to cooperate.

The judge found Calopina’s refusal to cooperate in the personal injury action deprived KnightBrook of the following:

[the] rights to explore defenses, to call witnesses, to be able to assert whether or not they would be able to [t]ake other action, join parties if necessary. . . . They were deprived of the opportunity to obtain available facts, information, to determine what strategy, how they would proceed in the lawsuit to obtain additional discovery that perhaps they would have discovered as a result of [Calopina’s] cooperation. They were deprived of having a witness who would assist them at trial, and at any proceeding, in whatever their strategy was in defending their client. They couldn’t assert certain defenses without her cooperation. They couldn’t determine . . . the manner in which they would proceed in the lawsuit without [Calopina’s] cooperation.

The judge found nothing in the record established a language barrier preventing Calopina from cooperating with KnightBrook. Nor did the judge find any evidence that Calopina “requested an accommodation because of a language barrier . . . .”

While the judge found KnightBrook [*11] suffered appreciable prejudice, the judge stated, “there is no issue before the [c]ourt as to whether [Calopina] was covered . . . . KnightBrook has acknowledged that . . . .” KnightBrook has not challenged this aspect of the motion judge’s ruling.

On appeal, Liberty argues the judge erred in granting summary judgment because KnightBrook failed to demonstrate appreciable prejudice to be entitled to disclaim Calopina’s coverage. We agree and reverse.

HN1[] We review a trial judge’s decision on a motion for summary judgment de novo. Branch v. Cream-O-Land Dairy, 244 N.J. 567, 582, 243 A.3d 633 (2021). A motion for summary judgment must be granted “if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law.” R. 4:46-2(c).

HN2[] New Jersey requires “a showing of prejudice before a contract of insurance may be avoided.” Pfizer, Inc. v. Emps. Ins. of Wausau, 154 N.J. 187, 206 (1998). In Cooper v. Government Employees Insurance Co., 51 N.J. 86, 94, 237 A.2d 870 (1968), our Supreme Court held it would be unfair for an insured to lose insurance coverage where there is no likelihood the insurer was prejudiced by the policy breach. In Cooper, the Court concluded “the carrier may not forfeit the bargained-for protection unless [*12] there are both a breach of the notice provision and a likelihood of appreciable prejudice.” Ibid. We extended “appreciable prejudice” to situations where an insured breaches a contractual duty to cooperate with an insurer.¹¹ See Solvents Recovery Serv. v. Midland Ins. Co., 218 N.J. Super. 49, 55, 526 A.2d 1112 (App. Div. 1987). The insurer bears the burden of demonstrating appreciable prejudice. Ibid.

HN3[] To determine whether an insurer suffered appreciable prejudice based on the insured’s breach of the duties under an insurance policy, a court must consider two variables: “first, ‘whether substantial rights have been irretrievably lost’ as a result of the insured’s breach, and second, ‘the likelihood of success of the insurer in defending against the accident victim’s claim’ had there been no breach.” Hager v. Gonsalves, 398 N.J. Super. 529, 536, 942 A.2d 160 (App. Div. 2008) (quoting Sagendorf v. Selective Ins. Co. of Am., 293 N.J. Super. 81, 93, 679 A.2d 709 (App. Div. 1996)).

We must determine whether Calopina’s failure to cooperate in the personal injury action entitled KnightBrook to disclaim coverage and withdraw its defense and indemnification of Calopina. There appears to be uncertainty among our courts regarding application of the Hager variables to establish appreciable prejudice sufficient to disclaim coverage. HN4[] To the extent there is any ambiguity in applying the two Hager variables, we conclude an insurer’s satisfaction of either variable is sufficient [*13] to establish appreciable prejudice to disclaim any obligation to provide coverage to an insured.

HN5[] Under the first variable, an insurer must demonstrate an irretrievable loss of substantial rights based on the insured’s breach of the insurance policy. Ibid. Although not expressly stated in Hager, or any other case addressing appreciable prejudice, we conclude the first variable applies to an irretrievable loss of substantial rights related to coverage determinations by an insurer. To conclude otherwise would render the second variable under the appreciable prejudice prong redundant. Clearly, the two variables in Hager were intended to address different aspects of appreciable prejudice. KnightBrook’s argument conflates the two variables, rendering the second Hager variable superfluous.

The facts in Hager support this distinction between the two variables. In Hager, the insurer sought information to confirm whether the driver of the insured vehicle involved in an accident was covered under the insurance policy. Id. at 537. Before assigning an attorney to defend against the injured party’s claims, the insurer needed to confirm whether the driver of the insured vehicle had the owner’s permission to drive the car on the date [*14] of the accident. Ibid. The insurer was unable to confirm permissive use of the insured car because the car’s driver and the car’s owner completely refused to cooperate with the insurer in providing any information. Ibid.

In Hager, we rejected the insurance carrier’s appreciable prejudice argument under the second variable based on the police report and witness statement ascribing responsibility for the accident to the driver of the insured car. Id. at 536-37. However, we held the insured’s total failure to cooperate resulted in appreciable prejudice under the first variable because the insurance company was unable “to determine whether the policy issued to [the insured] provided coverage to [the driver]” as a permissive user of the insured car. Id. at 537. Thus, we concluded the insurance company “‘irretrievably lost’ the opportunity to ascertain the true facts relating to whether [the driver] had permission to use [the insured]’s truck, which entitled [the insurer] to disclaim coverage for the . . . accident.” Id. at 536-37.

Similarly, in Sagendorf, we addressed the insurance company’s irretrievable loss of substantial rights in the context of a coverage determination. 293 N.J. Super. at 95-96. In Sagendorf, the insurance company denied coverage, contending the insured [*15] plaintiffs’ late notice of the claim rendered it unable to investigate and evaluate coverage for environmental contamination claims. Id. at 95. We held the issues raised by the insurance company, regarding groundwater pollution and cleanup, were “coverage issues that [were] not affected by [the] plaintiffs’ late notice” of the claims. Id. at 96. Because the insurance company pointed to no evidence linking the plaintiffs’ failure to give timely notice of the claims with any ensuing prejudice, we held the plaintiffs were entitled to coverage. Ibid.

KnightBrook contends it suffered appreciable prejudice because it irretrievably lost substantial rights under Hager‘s first variable. We disagree. As we previously noted, the first variable deals with the loss of a substantial right in the context of a coverage determination. Here, there are no issues concerning KnightBrook’s ability to determine coverage. During argument before the motion judge, KnightBrook admitted there were no coverage issues. Even without KnightBrook’s acknowledgement of coverage, there is sufficient evidence in the motion record confirming the availability of coverage for Sanchez’s injuries.

Here, internal notes from KnightBrook’s claims department [*16] in 2013 and 2014, as well as KnightBrook’s 2014 File Summary and Review, confirmed coverage for Calopina’s car on the date of the accident.¹² In 2014, based on its confirmation of coverage, KnightBrook assigned counsel to represent Calopina in the personal injury action. From 2013 until December 2015, KnightBrook never indicated its defense of Calopina in the personal injury action was subject to a reservation of rights. In December 2015, after Calopina failed to cooperate, KnightBrook first indicated it was defending Calopina under a strict reservation of rights and would consider withdrawing its defense and indemnification if Calopina continued to refuse to cooperate. On this record, it is undisputed KnightBrook determined Calopina’s vehicle was insured on the date of the accident and the policy covered the claims in the personal injury action. Therefore, KnightBrook failed demonstrate appreciable prejudice under the first Hager variable to disclaim coverage.

We next consider whether KnightBrook presented evidence to support a finding of appreciable prejudice under the second Hager variable — the likelihood of KnightBrook’s success in defending against Sanchez’s personal injury claims had Calopina [*17] not breached the cooperation clause in its insurance policy. Based on the detailed facts recited above, we are satisfied KnightBrook failed to demonstrate it is unable to defend against Sanchez’s personal injury claims due to Calopina’s refusal to cooperate in the personal injury action. Additionally, KnightBrook pointed to no facts or legal theories precluding defenses in the personal injury action.

There is ample evidence on this record to allow KnightBrook to defend against the claims in the personal injury action on the issues of liability, medical causation, and damages. KnightBrook has photographs of the damage to both vehicles taken immediately after the accident. It also has the repair estimate for Sanchez’s car, indicating the necessary work to be less than $500. Additionally, KnightBrook obtained the police report containing statements made by Sanchez and Calopina immediately after the accident. The police report further noted Sanchez went to the hospital from the accident scene in an ambulance. KnightBrook has copies of the hospital records, indicating Sanchez complained of neck, back, and hip pain but was discharged the same day, given pain medication, and told to follow [*18] up with a primary care doctor. KnightBrook also has Sanchez’s post-accident treatment records and his medical history, including information regarding an accident ten years before the 2013 accident. KnightBrook obtained the foregoing information despite Calopina’s refusal to cooperate.

In determining KnightBrook suffered no appreciable prejudice under the second Hager variable, we emphasize there is no court order barring Calopina’s testimony in the consolidated declaratory judgment actions. According to the judiciary’s Automated Case Management System, Calopina is represented by KnightBrook’s assigned counsel in the consolidated declaratory judgment actions and the trial is presently scheduled for August 8, 2022. Thus, Calopina may testify and bolster KnightBrook’s defenses on the issue of liability. Calopina may be able to provide information at trial about the rate of speed of her car prior to the collision, the severity of the impact between the cars, and the property damage, if any, to her car. Notwithstanding Calopina’s ability to testify in the consolidated declaratory judgment actions, based on the facts gleaned from the summary judgment record, we are uncertain whether her testimony [*19] would be useful to KnightBrook’s defenses on liability and damages.

Based on these facts, KnightBrook has not suffered appreciable prejudice to warrant disclaiming coverage. Calopina remains a named defendant in the consolidated declaratory judgment actions, is represented by counsel assigned through KnightBrook, and is permitted to testify at trial. Nothing precludes KnightBrook’s ability to obtain additional facts and information to defend against Sanchez’s personal injury claims.

Reversed. We do not retain jurisdiction.

End of Document

¹Improperly plead as Liberty Mutual Insurance Company.

²Calopina had three passengers in her taxi at the time of the accident — a woman and two children. Because Calopina’s passengers left the scene of the accident prior to the arrival of the police, their identities are unknown.

³Sanchez’s 1993 Chevy wagon lacked front airbags because automobile manufacturers were required to install airbags only for new cars sold after 1998.

⁴The record lacks information explaining how KnightBrook obtained information regarding the accident.

⁵The dollar amount KnightBrook reserved for Sanchez’s property damage and personal injury claims is redacted.

⁶While not indicated in the record, we presume KnightBrook received a copy of the pleading from Sanchez’s attorney.

⁷There is a suggestion in the record that Calopina did not read, speak, or understand English and may have designated someone on her behalf to respond to inquiries regarding the accident.

⁸KnightBrook retained a different law firm to represent Calopina in the 2019 declaratory judgment action.

⁹In a February 25, 2020 consent order, the two declaratory judgment actions were consolidated.

¹⁰The only order barring Calopina from testifying at trial related to the personal injury action filed in 2014, which was dismissed without prejudice in 2018. There is nothing in the record indicating Calopina is barred from testifying in either declaratory judgment action.

¹¹It is undisputed Calopina breached the duty to the cooperate clause in KnightBrook’s insurance policy.

¹²KnightBrook’s documents confirming insurance coverage for Calopina’s car pre-dated the filing of the Sanchez personal injury action.