Bits & Pieces

Groat v. Global Hawk Ins. Co.

United States District Court,

N.D. New York.

Warren A. GROAT and Victoria Groat, Plaintiffs,

GLOBAL HAWK INSURANCE COMPANY (RRG), Defendant.

No. 1:11–CV–1412.

Sept. 12, 2012.

James E. Hacker, Esq., Thomas J. Higgs, Esq., Hacker Murphy, LLP, Latham, NY, for Plaintiffs.

Joseph Donato, Esq., Morgan Melhuish Abrutyn, New York, NY, for Defendant.

MEMORANDUM—DECISION and ORDER

DAVID N. HURD, District Judge.

I. INTRODUCTION

*1 Plaintiffs Warren Groat and his wife (collectively “plaintiffs” or “Groats”) brought this action seeking a judgment for $611,325.60 plus interest pursuant to the Motor Carrier Act of 1980, as amended, 49 U.S.C. §§ 13101–14901, and for breach of an arbitration contract executed in the course of underlying personal injury litigation. Jurisdiction exists pursuant to 28 U.S.C. § 1332, as the parties have diverse citizenship.

Plaintiffs moved for summary judgment. Defendant opposed and cross-moved for summary judgment. Plaintiffs replied. Oral argument was heard in Utica, New York, on September 7, 2012.

II. BACKGROUND

Defendant Global Hawk Insurance Company (“Global Hawk”) issued a commercial motor vehicle insurance policy to non-party R–Man Logistics, Inc. (“R–Man”) to be effective October 26, 2007, to October 26, 2008. The policy included an MCS– 90 endorsement, as required by the federal Motor Carrier Act for truckers operating in interstate commerce. In part, the MCS– 90 endorsement provided, in keeping with the purpose of the Motor Carrier Act, that essentially nothing would relieve Global Hawk from liability if a judgment was obtained against the insured, R–Man, for public liability relating to operation of covered motor vehicles. The MCS– 90 endorsement states:

It is understood and agreed that no condition, provision, stipulation, or limitation contained in the policy, this endorsement or any other endorsement thereon, or violation thereof, shall relieve the company from liability or from the payment of any final judgment within the limits of liability herein described, irrespective of the financial condition, insolvency or bankruptcy of the insured.

Compl. Ex. A at 9–10 FN1 (“MCS– 90”). The policy required R–Man to provide driver data to Global Hawk, which must approve the drivers. The policy listed current drivers. In addition, R–Man submitted driver data for additional drivers, on February 8, 2008, and July 17, 2008.

FN1. Exhibit A to the Complaint is the policy with the MCS– 90 endorsement. For ease of reference, citations will be to the ECF page numbers.

R–Man added Carlos Victoria (“Victoria”) as a driver. However, R–Man never submitted driving record data for him as the insurance policy requires.

According to Global Hawk, it would not have approved Victoria as an added driver FN2 because of his poor driving record. He had prior accidents, had his commercial driver’s license suspended, and received at least three convictions for driving with a suspended driver’s license.

FN2. While it is unclear the exact date that Victoria became a driver for R–Man, there is no question that it was after the policy was issued. See Deft.’s Mem. at 7 (stating that “Global Hawk would never have consented to the addition of Mr. Victoria as an authorized driver….”); Bain Decl. ¶ ¶ 10–12 (stating “Global Hawk would not have consented to the addition of Mr. Victoria as an authorized driver ….“; “[h]ad Global Hawk known that R. Man Logistics, Inc., was allowing non-endorsed drivers to operate its vehicles it would have cancelled the policy ….“; “[h]ad Global Hawk known that R. Man Logistics, Inc., was allowing Carlos Victoria to operate its vehicles it would have cancelled the policy….”); Deft.’s L.R. 7.1 Statement of Material Facts ¶¶ 9–11 (same).

On July 28, 2008, Victoria, while driving an R–Man truck, was involved in an accident with Warren Groat. Plaintiffs brought an action in New York State Supreme Court, Columbia County for negligence and loss of consortium, against R–Man and Victoria. Global Hawk sent a reservation of rights letter to R–Man dated August 8, 2008, but defended the lawsuit. According to Global Hawk, R–Man and Victoria did not participate in the defense of the suit as is required by the policy.

The state Supreme Court granted partial summary judgment on liability in favor of the Groats on August 24, 2010. The damages award was determined by an arbitrator, pursuant to a contract entered into between the Groats and Global Hawk (by defense counsel), then confirmed by the state court on November 4, 2011. On November 8, 2011, Global Hawk denied coverage on two grounds: (1) because it was not informed of and did not approve Victoria as a driver, the policy was void ab initio; and (2) R–Man and Victoria failed to aid in the defense of the suit as the policy required. Meanwhile, Global Hawk filed a declaratory judgment action seeking rescission of the policy in California state court on October 26, 2011. Bains Decl. Ex. G (Dkt. No. 9–9). The basis upon which Global Hawk sought rescission in the California case was failure ot R–Man and Victoria to aid in defense of the Groats’ negligence suit (without mentioning failure to obtain approval of Victoria as a driver). Id. On November 29, 2011, the New York state court filed a judgment against R–Man and Victoria, and in favor of plaintiffs, in the amount of $611,325.60. Global Hawk has declined to satisfy the judgment for the above-stated reasons. This action followed.

III. DISCUSSION

A. Summary Judgment Standard

*2 Summary judgment must be granted when the pleadings, depositions, answers to interrogatories, admissions and affidavits show that there is no genuine issue as to any material fact, and that the moving party is entitled to summary judgment as a matter of law. Fed.R.Civ.P. 56; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509–10 (1986). The moving party carries the initial burden of demonstrating an absence of a genuine issue of material fact. Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552 (1986). Facts, inferences therefrom, and ambiguities must be viewed in a light most favorable to the nonmovant. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356 (1986).

When the moving party has met the burden, the nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts.” Id. at 586, 106 S.Ct. at 1356. At that point, the nonmoving party “must set forth specific facts showing that there is a genuine issue for trial.” Fed.R.Civ.P. 56; Liberty Lobby, Inc., 477 U.S. at 250, 106 S.Ct. at 2511; Matsushita Elec. Indus. Co., 475 U.S. at 587, 106 S.Ct. at 1356. To withstand a summary judgment motion, sufficient evidence must exist upon which a reasonable jury could return a verdict for the nonmovant. Liberty Lobby, Inc., 477 U.S. at 248–49, 106 S.Ct. at 2510; Matsushita Elec. Indus. Co., 475 U.S. at 587, 106 S.Ct. at 1356.

B. Analysis

Plaintiffs contend that Global Hawk is obligated to pay the state court judgment based upon the MCS– 90 endorsement which nullifies any conditions or limitations in the policy. Defendant, in disclaiming coverage, relies upon R–Man’s failure to designate drivers (specifically Victoria) for Global Hawk’s approval and failure to cooperate in defense of the negligence action. Defendant’s argument is that R–Man’s failure to designate Victoria as a driver was a material misrepresentation permitting it to rescind the policy (and accompanying MCS– 90 endorsement) under California Insurance Code § 331. FN3

FN3. Defendant conceded at oral argument that it was not relying upon non-cooperation as a basis for rescinding the policy under California law. This concession is at odds with Global Hawk’s California state court suit seeking rescission, based solely upon non-cooperation. Moreover, the failure to cooperate by R–Man and Victoria was clearly a subsequent violation of the policy and not a misrepresentation at the outset made to obtain the policy. In any event, given Global Hawk’s concession, only failure to designate Victoria as a driver is considered.

The plain language of the MCS– 90 endorsement provides that Global Hawk will pay “any final judgment recovered against [R–Man] for public liability resulting from negligence in the operation” of its insured vehicles subject to the Motor Carrier Act. MCS– 90 at 9. The MCS– 90 endorsement also explicitly negates any condition or limitation in the policy that would (absent the endorsement) permit Global Hawk to disclaim liability.

Federal law is applicable to the MCS– 90 endorsement. Pierre v. Providence Washington Ins. Co., 99 N.Y.2d 222, 231 (2002); Global Hawk Ins. Co. v. Century–Nat’l Ins. Co., 203 Cal.App. 4th 1458, 1464 (Cal.Ct.App.2012). In order to recover under an MCS90 endorsement, an injured party need only prove that the injury resulted from an accident caused by negligence and that “a judgment was entered implicating the coverage provisions of the policy and [ MCS– 90] endorsement.” Pierre, 99 N.Y.2d at 231; Green v. Royal Indem. Co., No. 93Civ4335, 1994 WL 267749, at *4 (S.D.N.Y. June 15, 1994) (noting that only a judgment and negligence must be shown to impose liability). Moreover, it need only be shown that someone was negligent; it is not necessary that the insured was negligent. Pierre, 99 N.Y.2d at 231; Green, 1994 WL 267749, at *4.

*3 The parties agree that Global Hawk issued the insurance policy with the MCS– 90 endorsement to R–Man. Further, it is undisputed that plaintiffs received a judgment against R–Man and Victoria to compensate them for injuries suffered in an accident caused by Victoria’s negligence. Accordingly, the Groats are entitled to payment from Global Hawk of the final judgment recovered from R–Man and Victoria, see MCS– 90 at 9, unless some other provision of law precludes such entitlement.

Global Hawk contends, in support of its cross motion for summary judgment, that under California law, it is entitled to rescind the policy ab initio (and along with it the MCS– 90 endorsement) because of a material misrepresentation made by R–Man; that is, failure to submit Victoria as a driver as required by the policy. Plaintiffs acquiesce to application of California law to the policy.

Under California law, concealment entitles an insurer to rescind a policy of insurance, whether the concealment is intentional or unintentional. Cal. Ins.Code § 331 (West 2005). In the making of a contract, if a false misrepresentation as to a material point was made, the contract may be rescinded “from the time the representation becomes false.” Id. § 359. Materiality is subjective, depending only upon the effect the misrepresentations had on the insurer. Imperial Cas. & Indem. Co. v. Sogomonian, 198 Cal.App.3d 169, 179 (Cal.Ct.App.1988) (citing Cal. Ins.Code § 334). Additionally, asking specific questions on an application “is in itself usually sufficient to establish materiality as a matter of law.” Id. Thus, an insurance policy rescinded for material misrepresentations on the application “will avoid liability even on pending claims.” Id. at 182. In sum, “an insurer may rescind the contract of insurance ab initio for a material misrepresentation” regardless of intent. Barrera v. State Farm Mut. Auto. Ins. Co., 71 Cal.2d 659, 666 n.4 (Cal.1969).

The allegedly material misrepresentation made by R–Man that, according to Global Hawk, entitles it to rescind the policy was the failure to notify it that Victoria became a driver. Global Hawk has adduced evidence that the policy included a list of approved drivers and required R–Man to supplement the list if it intended to add a driver. It has also put forth the declaration of Pawandip Bains, its policy underwriter, who stated that had R–Man submitted Victoria as a proposed driver, Global Hawk would not have consented to endorsement of Victoria as a driver under the policy, and, in fact, it would have cancelled the policy had it known Victoria was driving R–Man’s vehicles. Bains Decl. ¶¶ 9–12 (Dkt. No. 12–4). According to Global Hawk, under the standard set forth above it is entitled to void the policy ab initio.

Global Hawk’s evidence appears on its face to support ab initio rescission of the policy. Plaintiffs’ argument in opposition, that even if the policy is rescinded ab initio the federal MCS– 90 endorsement remains effective, also appears to recognize that defendant’s evidence of a material misrepresentation would entitle it to rescind the policy ab initio. The parties overlook that, under California law, a material misrepresentation must have been made in the procurement of the insurance policy to entitle the insurer to rescission ab initio.

*4 Every case cited by Global Hawk regarding ab initio rescission under California law pertains to a prior misrepresentation, made in the procurement of the policy.FN4 In Sogomonian, “defendants made material false statements in their application,” entitling plaintiff to rescission. 198 Cal.App.3d at 182. The Sogomonian Court recognized that the California Insurance Code prescribed a “statutory scheme which reflects a deliberate distinction between ‘rescission’ and ‘cancellation.’ “ Id. (citing Barrera, 71 Cal.2d at 663–64).

FN4. It is noted that none of these cases involve an MCS– 90 endorsement.

Further, independent research revealed no cases addressing a question of rescission other than those in which an allegedly material misrepresentation was made in an application for a policy upon which the insurer relied. See, e.g., Carolina Cas. Ins. Co. v. RDD, Inc., 685 F.Supp.2d 1052, (N.D.Cal.2010) (finding that defendants’ materially false answers on an application for insurance entitled plaintiff insurer to rescission under California law (emphasis added)); Admiral Ins. Co. v. Debber, 442 F.Supp.2d 958, 966 (E.D.Cal.2006) (stating that pursuant to the California Insurance Code, “a material misrepresentation or concealment in an insurance application … entitles the insurer to rescind the insurance policy ab initio (emphasis added)), aff’d, 295 Fed. Appx. 171 (9th Cir.2008); LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co., 156 Cal.App. 4th 1259, 1270 (Cal.Ct.App.2007) (explaining that in a rescission case, misrepresentations in the application need not be intentional (emphasis added)). Again, it is noted that these cases did not involve an MCS– 90 endorsement.

The issue in Barrera was whether an insurer could rescind a policy, after a third-party was injured, for a misrepresentation in the application where, for 1–1/2 years, it negligently failed to discover the misrepresentation. 71 Cal.2d at 662. The court precluded the insurer from defending a suit for payment of the judgment based upon the insurer’s own negligent failure to investigate the application. Id. at 663. Although the issue it faced in Barrera was the duty of an insurer to investigate an application within a reasonable time, the Supreme Court of California noted that insurance code sections 331, 338, and 359 “all involve false statements or material omissions in the procurement of the policy.” Id. at 664 n.3 (emphasis added).

In Mirich v. Underwriters at Lloyd’s London, 64 Cal.App.2d 522 (Cal.App.1944), also cited by Global Hawk, the insurer sought rescission based on false statements in the insured’s application. Id. at 524. The court found the insurer entitled to rescind the policy where the insured made a material misrepresentation in his application for the insurance policy upon which the insurer relied in issuing the policy. Id. at 527.

Contrary to the facts in the cases relied upon by the defendant, here R–Man’s failure to designate Victoria as a driver was made after the policy (with MCS– 90 endorsement) was issued. This was a violation of the policy’s requirement to do so. However, it was not a misrepresentation made to procure the policy. In other words, rather than a prior misrepresentation on the application for insurance, R–Man’s failure was a subsequent violation of the already-issued policy. Therefore, the cases cited by defendant regarding prior misrepresentations made to procure policies of insurance are inapposite.

IV. CONCLUSION

Global Hawk issued an insurance policy to R–Man with an MCS– 90 endorsement. Pursuant to the MCS– 90 endorsement, the Groats are entitled to recover payment of the judgment they obtained against R–Man and Victoria. Global Hawk’s attempt to rescind the policy (and with it the MCS– 90 endorsement) fails because R–Man made no prior misrepresentation or concealment in order to obtain the insurance policy. Rather, R–Man subsequently violated the policy by failing to designate Victoria as a driver. Although a prior concealment may entitle an insurer to rescission of the policy under California law, a subsequent violation of an already-issued policy (such as what R–Man did) does not.

*5 Accordingly, it is

ORDERED that

1. Plaintiffs’ motion for summary judgment is GRANTED;

2. Defendant’s cross motion for summary judgment is DENIED;

3. The Clerk is directed to enter judgment in favor of plaintiffs Warren A. Groat and Victoria Groat and against defendant Global Hawk Insurance Company (RRG) in the amount of $611,325.60, with interest from November 29, 2011; and

4The above judgment may be satisfied by the defendant Global Hawk Insurance Company (RRG) submitting proof that it has satisfied the New York judgment in favor of the plaintiffs Warren A. Groat and Victoria Groat and against R–Man Logistics, Inc. and Carlos Victoria in the sum of $611, 325.60 entered on November 29, 2011.

IT IS SO ORDERED.

MARK N. MUSIAL, IN HIS CAPACITY AS THE ADMINISTRATOR OF THE ESTATE OF JAMES SURRENA, DECEASED; AND SAMANTHA DOLINSKY, AS NEXT FRIEND OF JACOB ANTHONY DAVID DOLINSKY APPELLANTS/CROSS-APPELLEES v. PTC ALLIANCE CORPORATION; ROY MARSHALL; AND KEITH GILKEY APP

MARK N. MUSIAL, IN HIS CAPACITY AS THE ADMINISTRATOR OF THE ESTATE OF JAMES SURRENA, DECEASED; AND SAMANTHA DOLINSKY, AS NEXT FRIEND OF JACOB ANTHONY DAVID DOLINSKY APPELLANTS/CROSS–APPELLEES

PTC ALLIANCE CORPORATION; ROY MARSHALL; AND KEITH GILKEY APPELLEES/CROSS–APPELLANTS

NO. 2011–CA–001365–Mr AND NO.2011–CA–001481–Mr

Court of Appeals of Kentucky.

AUGUST 24, 2012

APPEAL AND CROSS–APPEAL FROM CHRISTIAN CIRCUIT COURT HONORABLE JOHN L. ATKINS, JUDGE ACTION NO. 08–CI–00269

BEFORE: CAPERTON, LAMBERT, AND NICKELL, JUDGES.

NOT TO BE PUBLISHED

OPINION

AFFIRMING

LAMBERT, JUDGE:

In this appeal arising from a wrongful death action, Mark N. Musial, as the administrator of the Estate of James Surrena, deceased, and Samantha Dolinsky, as next friend of Jacob Anthony David Dolinsky, (collectively, “the appellants”) have appealed from the December 27, 2010, summary judgment of the Christian Circuit Court in favor of PTC Alliance Corporation, Roy Marshall, and Keith Gilkey (collectively, “the PTC Alliance defendants”). This order was made final and appealable upon the entry of a subsequent order on July 20, 2011. The PTC Alliance defendants have also cross-appealed from the November 15, 2010, order denying their motion to amend their answer to the complaint. This order was also made final and appealable by the July 20, 2011, order. We have considered the record and the parties’ arguments in their respective briefs, and we affirm.

This action arose with the filing of a complaint on February 19, 2008, by the appellants following the death of James Surrena on January 11, 2007. At the time of his death, Surrena worked as a truck driver for Haslage Fleet Service, Inc. (Haslage). Haslage leased a 1996 International Tractor and a Transcraft TL–2000 flatbed trailer from Great American Lines. The flatbed trailer was equipped with a front end structure device, which was designed and manufactured by Fontaine Trailer Company in 1999 and then installed on the trailer. At the time the complaint was filed, it was believed that the device was intended to protect the driver from shifting cargo by preventing the cargo from breaking through the cab of the truck.

On January 9, 2007, Surrena was directed by his employer to pick up two loads of pipe the following day at the PTC Alliance plant in Hopkinsville, Kentucky. PTC Alliance employee Roy Marshall loaded all of the pipes onto the flatbed trailer, and Surrena secured it with straps. The pipes were of different sizes and lengths and were bundled. The bundles were bound by metal straps. Once loaded, Surrena was to take one load to Castle Metals in Illinois and the other load to Sodus Hardcrome in Michigan.

During the morning of January 11, 2007, Surrena was driving the tractor trailer on Interstate 65 near Indianapolis in Marion County, Indiana when he applied the brakes on his truck. At that time, the pipes shifted, hit the front end structure device, continued through the cab sheet metal, hit Surrena, and ultimately killed him.

On August 2, 2007, Mark Musial was appointed personal representative of Surrena’s estate by order of the Probate Court of Lorain County, Ohio. At the time of his death, Surrena had three children, one of whom was still a minor; namely, Jacob Anthony David Dolinsky. Surrena or his estate incurred medical, funeral, burial, administration and attorney fees, and lost wages. On February 19, 2008, Musial and Jacob’s mother, Samantha Dolinsky, both in their representative capacities, filed suit against PTC Alliance, PTC Alliance plant manager Keith Gilkey, Great American Lines, and Fontaine Trailer Company, as well as the unknown person at PTC Alliance who was responsible for loading the trailer. FN Double They sought damages against the PTC Alliance defendants for negligence and wrongful death pursuant to the Kentucky Wrongful Death Act, Kentucky Revised Statutes (KRS) 411.130, based upon their failure to meet their duty of reasonable care in the configuration and loading of the pipes on the flatbed trailer, which created a latent defect that manifested when Surrena was driving in Indiana. They alleged that this negligence was the proximate cause of Surrena’s death and the subsequent damages. The appellants alleged negligence and wrongful death against Great American for breaching its duty to use reasonable care in inspecting the front end structure device. Against Fontaine Trailer, the appellants alleged negligence and strict products liability for its design and manufacture of the front end structure device because it failed in its purpose of protecting Surrena from the intrusion of the pipes into the cab. FN Double In addition to these allegations, the appellants claimed that the actions of the defendants constituted gross negligence and requested punitive damages. For purposes of this opinion, we shall focus our attention, in large part, on the claims against the PTC Alliance defendants.

PTC Alliance and Gilkey filed an answer to the complaint, FN Double listing as defenses, in part, the failure to state a claim upon which relief could be granted, lack of jurisdiction by reason of the Kentucky Motor Vehicle Reparations Act, and negligence or contributory fault on the part of Surrena. In March 1998, PTC Alliance also filed a notice to remove the case to the United States District Court for the Western District of Kentucky, Paducah Division, based upon diversity. The District Court ultimately remanded the case back to the Christian Circuit Court due to lack of diversity.

The appellants moved to file a first amended complaint in August 2008 to name an additional defendant to the lawsuit; namely, Road Gear Truck Equipment, LLC, which company allegedly designed, manufactured, or sold the front end structure device. FN Double The appellants moved to file a second amended complaint in October 2008 to add Randi & Associates Corp. d/b/a Trans Spec and/or d/b/a Trailer America as a defendant due to its potential liability. FN Double The appellants also named the “John Doe” defendant from the original complaint as Roy Marshall, as he had been identified by PTC Alliance as a person with a role in arranging for the transportation of, or loading or stacking of, the pipes at issue in this suit. The second amended complaint was filed on October 10, 2008, and the appellants specifically alleged wrongful death and negligence against Marshall. The PTC Alliance defendants each filed an answer to the second amended complaint, stating similar defenses including lack of jurisdiction due to the Kentucky Motor Vehicle Reparations Act and Surrena’s own negligence and his failure to adequately secure the pipes.

On January 9, 2009, the court entered an agreed docket control order and discovery plan, in which the matter was set for a two-week trial to commence on March 1, 2010. The agreed order included how discovery would proceed, and that discovery would be completed by December 31, 2010. Furthermore, other parties (if any) and amendments to pleadings (if any) were to be filed by June 1, 2009. The agreed docket control order was amended by agreement several times thereafter. PTC Alliance filed for bankruptcy protection in Delaware, and notified the court and parties in October 2009. Once the automatic bankruptcy stay was lifted in December 2009, the court entered another agreed order on February 4, 2010, continuing the March trial date and vacating the current docket control order and discovery plan. On July 21, 2010, the court entered an agreed docket control order and discovery plan, which provided that all discovery was to be completed by September 30, 2010, amendments to pleadings were due by March 12, 2010 (which date had already passed by the time the order was entered), scheduled a pre-trial conference for December 16, 2010, and scheduled a two-week trial to begin on February 14, 2011.

On October 29, 2010, the PTC Alliance defendants moved the court to amend their answers to the complaints pursuant to Kentucky Rules of Civil Procedure (CR) 15 to assert the exclusive remedy defense under the Kentucky Workers’ Compensation Act. They cited to Thornton v. Carmeuse, 346 S.W.3d 297 (Ky.App.2010), a recent Court of Appeals decision that addressed the applicability of workers’ compensation “up the ladder” defense to a manufacturer shipping goods through a federally-regulated motor carrier. The appellants objected to the motion to amend, noting that pursuant to the docket control order, amendments to pleadings were due on or before March 12, 2010, meaning that the motion was filed almost eight months after the cutoff date, and that the PTC Alliance defendants failed to establish excusable neglect pursuant to CR 15.01. By order entered November 15, 2010, the circuit court denied the motion to amend because the deadline to file an amended pleading had long past and the reasons cited for relief from that order were not persuasive.

On November 15, 2010, the PTC Alliance defendants filed a motion for summary judgment pursuant to CR 56, stating that they were entitled to a judgment in their favor because they had no duty in tort to Surrena, who was a common carrier not excluded by the shipper from the loading process. They also argued that there was no evidence to support a claim of negligence against Gilkey. In the attached memorandum, they cited to Rector v. General Motors Corp., 963 F.2d 144 (6 th Cir.1992) (the Rector rule), to assert that a shipper does not owe a duty to a carrier’s employee unless the shipper has exclusive control of the loading process. They discussed the rule announced in United States v. Savage Truck Line, Inc., 209 F.2d 442 (4 th Cir.1953) (the Savage rule), as well as the explanation of this rule and the exception to it in Decker v. New England Public Warehouse, Inc., 749 A.2d 762 (Me.2000). Based upon these rules of law, the PTC Alliance defendants argued that they, as shippers, could not be held liable because they did not have exclusive control over the loading process and because Marshall’s failure to follow proper loading procedures related to distribution of the load over the wooden blocking and “belly-loading” the pipes too far from the ends of the trailer was observable and observed by Surrena. In addition, Fontaine Trailer and Great American both moved for summary judgment on various grounds.

In response to the PTC Alliance defendants’ motion, the appellants asserted that Surrena had nothing to do with loading the pipes; he merely placed the straps onto the tubing Marshall had already loaded onto the trailer. As such, they argued that Rector was distinguishable, or that an issue of material fact existed with regard to whether PTC Alliance employees’ actions constituted exclusive control and with regard to what Surrena and Marshall observed. During the December 16, 2010, hearing, the court orally ruled on most of the pending summary judgment motions, as well as other evidentiary motions, and it specifically granted the PTC Alliance defendants’ motion for summary judgment. In so ruling, the court stated that Rector controlled the decision.

On December 27, 2010, the circuit court entered a written order memorializing its oral ruling granting the PTC Alliance defendants’ motion for summary judgment, holding as follows: “These defendants are shippers and cannot be liable in tort to the plaintiff’s decedent, James Surrena, a common carrier who was not excluded from the loading process; and there is no evidence to support a claim for negligence against Keith Gilkey.” The order was not made final or appealable.

On July 20, 2011, the circuit court entered a final judgment, noting that the appellants’ remaining claims had been settled and that the settlement had been approved by the probate court on June 21, 2011. Because all of the claims had been resolved by either summary judgment or settlement, the court made all prior judgments final and appealable. This appeal by the appellants and the cross-appeal by the PTC Alliance defendants follow.

On appeal, the appellants contend that the circuit court erred in applying Rector to the facts of this case, and that the circuit court should have applied the shipper exception set forth in Savage. The PTC Alliance defendants, on the other hand, contend that the law as set forth in Rector applies in this case, and that the circuit court did not err in granting summary judgment in their favor. In their protective cross-appeal, the PTC Alliance defendants contend that the circuit court should have permitted them to amend their answers in order to plead an additional affirmative defense.

Our standard of review in this case is well-settled:

The standard of review on appeal when a trial court grants a motion for summary judgment is “whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law.” The trial court must view the evidence in the light most favorable to the nonmoving party, and summary judgment should be granted only if it appears impossible that the nonmoving party will be able to produce evidence at trial warranting a judgment in his favor. The moving party bears the initial burden of showing that no genuine issue of material fact exists, and then the burden shifts to the party opposing summary judgment to present “at least some affirmative evidence showing that there is a genuine issue of material fact for trial.” The trial court “must examine the evidence, not to decide any issue of fact, but to discover if a real issue exists.” While the Court in Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky.1991),] used the word “impossible” in describing the strict standard for summary judgment, the Supreme Court later stated that that word was “used in a practical sense, not in an absolute sense.” Because summary judgment involves only legal questions and the existence of any disputed material issues of fact, an appellate court need not defer to the trial court’s decision and will review the issue de novo. [Citations in footnotes omitted.]

Lewis v. B & R Corp., 56 S.W.3d 432, 436 (Ky.App.2001).

The appellants do not contend that any disputed issues of material fact exist; FN Double rather, they argue that summary judgment was unwarranted, citing to Paintsville Hosp. Co. v. Rose, 683 S.W.2d 255, 256 (Ky.1985), for the following statement of the law:

The proper function for a summary judgment in a case of this nature “is to terminate litigation when, as a matter of law, it appears that it would be impossible for the respondent to produce evidence at the trial warranting a judgment in his favor and against the movant.” Roberson v. Lampton, Ky., 516 S.W.2d 838, 840 (1974). It is only proper where the movant shows that the adverse party could not prevail under any circumstances. Kaze v. Compton, Ky., 283 S.W.2d 204 (1955).

They contend that with the record construed in their favor and under the proper application of the law, summary judgment should not have been granted.

The circuit court held that Rector, supra, applied in this case and absolved the PTC Alliance defendants of any liability. In Rector, the Sixth Circuit U.S. Court of Appeals, construing Kentucky law, reviewed a grant of summary judgment in a case where the carrier’s driver/employee was injured while unloading gears that the shipper had loaded onto a truck and which had spilled onto the floor of the tractor trailer. The issue was framed by the Court of Appeals as “whether a shipper owes a duty to a common carrier or its employees to load cargo into the carrier’s vehicle in a reasonably safe manner.” Rector, 963 F.2d at 146. The Court noted:

While the case law nationally on this issue is sparse, it appears that, “[a]s a general rule, the carrier has the primary duty to load and unload goods or inanimate freight shipped in less than carload lots, and is liable for damages resulting from its failure to perform that duty in a proper manner.” 13 Am.Jur.2d Carriers § 319 (1964) (emphasis added) (footnote omitted)[.]

Rector, 963 F.2d at 146.

However, the Court recognized “that courts have, in certain circumstances, found a shipper liable to a consignee of goods for injuries resulting from unloading where the shipper undertook the loading of the cargo.” Id. at 147 (emphasis in original). Furthermore, “it would be illogical to hold a carrier liable to a consignee of the goods where it was the shipper, rather than the carrier, who had exclusive control over the manner in which the goods were loaded.” Id. (emphasis in original). Under the circumstances of that case, though, the Court held that:

under Kentucky law, a shipper would not be held liable for the injuries of a common carrier’s employee sustained while the employee unloaded the shipper’s goods from the common carrier’s vehicle where it was not shown that the shipper had exclusive control over loading the cargo.

Id. The Court pointed out that the carrier loaded the gears onto the truck, that the driver did not inspect the load, and that the carrier was in a position to know how the cargo had been loaded.

In their brief, the appellants contend that Rector does not apply to this case for three reasons: 1) Surrena was not the employee of a common carrier; 2) he was not injured while he was unloading the shipper’s goods; and 3) the appellants made some showing that the shipper had exclusive control over the loading of the cargo. In conjunction with this argument, the appellants urge this court to apply the shipper exception rule as set forth in Savage, supra, and hold that because the defect in the loading of the pipes was latent, PTC Alliance as the shipper is liable. The PTC Alliance defendants argue that the Rector rule should apply. We hold that under either rule, the appellants cannot succeed.

Regarding the first argument, that Surrena was not an employee of a common carrier, we must agree with the PTC Alliance defendants that the appellants are not entitled to raise this argument on appeal, never having raised this particular argument before the circuit court.

This Court has long held that a party may not argue one theory to the trial court and then a different theory to an appellate court, which is “without authority to review issues not raised in or decided by the trial court.” Ten Broeck Dupont, Inc. v. Brooks, 283 S.W.3d 705, 734 (Ky.2009). Recently, in Fischer v. Fischer, 348 S.W.3d 582 (Ky.2011), this Court refused to consider an appellee’s argument, which while similar to one made to the trial court, was not specifically argued to the trial court. As we noted, “when a movant states specific grounds … to the trial court, the court rules on those grounds. The court’s decision, then, is essentially a denial of the movant’s specific argument—of the grounds argued.” The Court reiterated, “Specific grounds not raised before the trial court, but raised for the first time on appeal will not support a favorable ruling on appeal.” Id.

Giddings & Lewis, Inc. v. Industrial Risk Insurers, 348 S.W.3d 729, 743–44 (Ky.2011). Because the appellants did not raise any argument relating to whether Surrena worked for a “common carrier” before the circuit court so as to allow that court the opportunity to address the question, they may not do so now in this appeal. According, we shall decline to consider this argument.

Likewise, we disagree with the other two arguments the appellants make regarding Rector. It makes no difference that the injury in Rector came about during the unloading process; any issues there were with the cargo were related to the loading process, as was the case here. We also disagree that the appellants made any showing that PTC Alliance, as the shipper, had exclusive control over the loading of the cargo in this case. On the contrary, the evidence shows that Surrena was involved to some extent in the loading process, including placing the straps on the bundled pipes, which would have come after the pipes were loaded on the trailer, but was still part of the process. Furthermore, Surrena observed the whole process as Marshall was loading the pipes onto the trailer, and he still signed the bill of lading and accepted the load.

Pursuant to the law as set forth in Rector, we must agree with the circuit court that the PTC Alliance defendants did not owe a duty to Surrena, and therefore cannot be held liable, because they did not have exclusive control over the loading of the pipes. Rather, Surrena played a part in the loading process. Therefore, because the shipper in this case did not have exclusive control of the loading process, the general rule as set forth in Rector would apply, and the carrier retains liability for the resulting damages. We note that Rector represents the most recent statement of Kentucky law on this area of the law.

We reach the same result if Savage were to be applied. In Savage, the Fourth Circuit Court of Appeals held as follows:

The primary duty as to the safe loading of property is therefore upon the carrier. When the shipper assumes the responsibility of loading, the general rule is that he becomes liable for the defects which are latent and concealed and cannot be discerned by ordinary observation by the agents of the carrier; but if the improper loading is apparent, the carrier will be liable notwithstanding the negligence of the shipper.

Savage, 209 F.2d at 445. In Decker, supra, the Supreme Judicial Court of Maine extensively addressed the Savage rule, stating, in part:

The rule propounded in Savage typically assigns to the carrier, here R.D. Roy and its drivers, the ultimate duty of care to ensure proper loading of cargo it carries…. The policy behind the Savage rule is well founded. The everyday practice and understanding in the trucking industry, as aptly reflected in the federal regulations on the subject, reflect that carriers logically should have the final responsibility for the loads they haul. No shipper, such as NEPW, can force a driver to accept a load that the driver believes is unsafe. See 49 C.F.R. § 392.9(b)(1) (2000). By the same token, a driver must take responsibility for the safety of his or her cargo by inspecting and securing the load. See § 392.9(b)(2). The Savage rule does not absolve shippers from all responsibility as they bear the onus when cargo has been loaded improperly and that defect is latent. The Savage rule simply extends the industry’s reasonable understanding to negligence suits involving carriers and shippers.

Decker, 749 A.2d at 766–67 (footnotes omitted). Specifically regarding the exception set out in the rule, the Decker court observed:

The exception to the general rule laid out by Savage occurs when the shipper loads cargo negligently and those loading defects are latent and concealed so that a reasonable inspection of the load by the carrier will not uncover the shipper’s negligence. See Symington v. Great Western Trucking Co., 668 F.Supp. 1278, 1282 (S.D.Iowa 1987). Additionally, some courts have cautioned that, “[w]hat is patent may depend in part upon the experience of the observer.” Alitalia v. Arrow Trucking Co., 977 F.Supp. 973, 984 (D.Ariz.1997). The Savage rule does not demand abnormal scrutiny from carriers. It matters little if an extensive carrier inspection would have uncovered the shipper’s negligent loading if a reasonable inspection by the carrier did not disclose the problem.

Decker, 749 A.2d at 767.

In the present case, we must agree with the PTC Alliance defendants that no latent defects were present that were unobserved by Surrena during the loading process. Rather, Surrena had been trained on proper loading configurations and distribution, and how to inspect his trailer to insure the cargo was loaded and secured properly. Testimony established that Surrena approved Marshall’s decision to “belly-load” the pipes in the center of the trailer as well as the location, when the proper method to load pipes was end-to-end rather than stacked up in the center. Accordingly, we must hold that because no latent defect existed, the carrier retained its duty of care and liability.

For the foregoing reasons, we affirm the summary judgment of the Christian Circuit Court in favor of the PTC Alliance defendants. Accordingly, the cross-appeal is rendered moot.

ALL CONCUR.

BRIEFS FOR APPELLANTS/CROSS–APPELLEES: Andrew M. Greenwell Corpus Christi, Texas BRIEFS FOR APPELLEES/CROSS–APPELLANTS: James A. Sigler C. Thomas Miller Paducah, Kentucky

FNDouble. The unknown person was later identified as Roy Marshall.

FNDouble. The appellants’ products liability claim for the design and manufacture of the front end structure design was later dropped when it was determined that the device was meant only to protect the cargo, not the driver, and this claim became one for failure to warn and instruct of potential dangers.

FNDouble. Roy Marshall had not yet been named as a defendant in the lawsuit.

FNDouble. Road Gear was dismissed with prejudice from the suit by agreed order entered February 24, 2009.

FNDouble. All claims against Randi & Associates were dismissed by order entered September 16, 2010.

FNDouble. The appellants appear to argue that factual issues exist regarding whether a latent defect was present due to PTC Alliance’s failure to follow its loading policies and procedures and whether PTC Alliance had exclusive control over the loading policies and procedures. We disagree that these are disputed issues because the appellants did not present any affirmative evidence to rebut the facts as presented by the PTC Alliance defendants. See Wymer v. J.H. Properties, Inc., 50 S.W.3d 195, 199 (Ky.2001).