United States District Court,

S.D. New York.

ALLIANZ CP GENERAL INSURANCE COMPANY LTD., Plaintiff,

v.

BLUE ANCHOR LINE, Transpac Container Systems Ltd., Kuehne & Nagel, Inc.,

Kuehne & Nagel, N.V., Kuehne & Nagel Thailand, Inc., Distribution Express,

Inc., Defendants.

May 7, 2004.

MEMORANDUM AND ORDER

BUCHWALD, J.

Plaintiff, Allianz CP General Insurance Company Ltd. (“Allianz”) brings this action against Blue Anchor Line (“Blue Anchor”), also sued herein as Transpac Container System Ltd., Kuehne & Nagel, Inc. (“K & N”), Kuehne & Nagel, N.V. (“K & N N.V.”), Kuehne & Nagel Thailand, Inc. (“K & N Thailand”) (collectively, the “K & N defendants”) and Distribution Express, Inc. (“Distribution Express”) (collectively, the “defendants”) alleging damage during the transportation from Bangkok, Thailand to Mt. Vernon, Ohio of a power turbine motor owned by its insured, Tractabel Engineering International (“Tractabel”). Presently before the Court is defendant Distribution Express’ motion to dismiss plaintiff’s amended complaint, defendant Distribution Express’ motion for summary judgment, and the K & N defendants’ and Blue Anchor’s motion for summary judgment (the “K & N motion”). For the reasons stated below, Distribution Express’ motion to dismiss is denied, its motion for summary judgment is granted, and the K & N motion is granted.

BACKGROUND

In December 2000, Tractabel, the assured of Allianz, entered into a freight forwarding contract with defendant K & N N.V. whereby K & N N.V. agreed to handle all of the transportation of various shipments to and from a power plant being built in Thailand by Tractabel. Tractabel and K & N N.V. thus entered into a transportation contract which consisted of a purchase order and an annexed Service Requisition, dated December 15, 2000.

The first shipment to be moved by K & N N.V. was a turbine power wheel that was being sent from the Thailand plant to Rolls-Royce in Mt. Vernon, Ohio. The shipment was sub-contracted by K & N N.V. to defendant Transpac Container System Ltd., which does business under the trade name Blue Anchor Line. Blue Anchor issued its own Combined Transport bill of lading (the “Bill of Lading”) covering the goods from Thailand to Ohio, inclusive.

The power wheel left Bangkok in a sealed container on December 25, 2000 on board the ocean vessel APL Garnet, which carried it to Los Angeles. When it arrived in Los Angeles, the power wheel was transferred back into the custody of K & N N.V., at which point K & N N.V. transferred the power wheel to an inland U.S. trucker, Distribution Express. Distribution Express then issued its own bill of lading covering the transportation from California to Ohio. Distribution Express designated seventy-two year old Keith Keeran as its driver for the journey.

On January 23, 2000, while en route from Los Angeles to Mt. Vernon, Mr. Keeran became ill and was involved in a traffic accident. Mr. Keeran contacted Steve Williams, the president of Distribution Express, approximately one hour before the accident and advised Mr. Williams that he was feeling ill. The parties are in dispute as to whether Mr. Keeran then voluntarily decided to continue driving. Plaintiff claims that Mr. Williams instructed Mr. Keeran to drive another 100 to 150 miles despite his illness, while Distribution Express alleges that Mr. Williams left to Mr. Keeran the decision of whether to pull over immediately or proceed to the closest truck stop to wait for a replacement driver and that Mr. Keeran stated he felt well enough to proceed to the nearest truck stop.

Whether Mr. Keeran offered to keep driving or was ordered to do so, he ultimately hit an overpass, and the truck and its contents were engulfed by fire. The power wheel was completely destroyed. Although it is not at issue in this case, Mr. Keeran died from the injuries he sustained in the accident.

Plaintiff paid its assured, Tractabel, $1,145,023.00 as a result of the accident and has now commenced this subrogated recovery action. On January 22, 2002, plaintiff filed its first complaint in relation to this accident and named Blue Anchor, the K & N defendants and Distribution Express as defendants. On February 27, 2002, by Notice of Discontinuance, plaintiff voluntarily dismissed its complaint pursuant to Rule 41(a)(1) of the Federal Rules of Civil Procedure (“Fed. R. Civ.P.”). Plaintiff filed a second complaint on March 21, 2002, but on February 4, 2003, the action was terminated with respect to defendant Distribution Express pursuant to a stipulation. On September 23, 2003, plaintiff filed a third complaint, which included Blue Anchor and the K & N defendants, as well as Distribution Express.

DISCUSSION

I. Distribution Express’ Motion to Dismiss

A. Motion to Dismiss Standard

In considering a motion to dismiss, we accept as true all material factual allegations in the complaint. Levy v. Southbrook Int’l Invs., Ltd., 263 F.3d 10, 14 (2d Cir.2001). We may grant the motion only where “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Still v. DeBuono, 101 F.3d 888, 891 (2d Cir.1996) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). In addition to the facts set forth in the complaint, we may also consider documents attached thereto and incorporated by reference therein, Automated Salvage Transp., Inc. v. Wheelabrator Envtl. Sys., Inc., 155 F.3d 59, 67 (2d. Cir.1998), as well as matters of public record. Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 75 (2d Cir.1998).

B. Rule 41(a)(1)

Rule 41 of the Federal Rules of Civil Procedure provides that a voluntary dismissal “operates as an adjudication upon the merits when filed by a plaintiff who has once dismissed in any court of the United States or of any state an action based on or including the same claim.” Fed.R.Civ.P. 41(a)(1). Distribution Express argues that since plaintiff voluntarily dismissed its first complaint on February 27, 2002, plaintiff’s second and subsequent dismissal of Distribution Express on February 4, 2003 operates as an adjudication upon the merits in favor of Distribution Express and that it must therefore be dismissed from the current action. Plaintiff argues that the “two dismissal rule” which Distribution Express advocates does not apply where one of the dismissals is by stipulation.

Under Rule 41(a)(1), a plaintiff may dismiss an action without prejudice only when a notice of dismissal is filed before the defendant files an answer or motion for summary judgment, and only if plaintiff had never previously dismissed an action based on or including the same claim. See Cooter & Gell v. Hartmarx Corporation, 496 U.S. 384, 394, 110 S.Ct.2447, 2455 (1990). If the plaintiff invokes Rule 41(a)(1) a second time in an action based on or including the same claim, the action must be dismissed with prejudice. See id.

In the present case, plaintiff’s first dismissal was unilaterally made by notice by the plaintiff, and the second dismissal was pursuant to a stipulation. The plain language of Rule 41(a)(1) makes clear that the “two dismissal rule” applies only when the second dismissal is a dismissal by notice under Rule 41(a)(1)(i). See Fed.R.Civ.P. 41(a)(1). The third action will thus not be barred where the second dismissal was pursuant to a stipulation under Rule 41(a)(1)(ii), as it was in this case. [FN1] See Poloron Prods, Inc. v. Lybrand Russ. Bros. & Montgomery, 534 F.2d 1012, 1017 (2d Cir.1976) (stating that the two dismissal rule does not apply where one of the first two dismissals is not unilateral); [FN2] Cornell v. Chase Brass & Copper Co., 48 F.Supp. 979, 981, aff’d, 142 F.2d 157 (2d Cir.1944)(stating that even three dismissals, where stipulated to be “without prejudice” do not trigger the two dismissal rule; nothing prevents the parties from agreeing to dismiss multiple times without prejudice).

FN1. Federal Rule of Civil Procedure 41(a)(1)(ii) states that an action may be dismissed by the plaintiff without an order of the court by “filing a stipulation of dismissal signed by all parties who have appeared in the action.”

FN2. Distribution Express argues that Poloron, 534 F.2d 1012 (2d Cir.1976) is inapposite because in that case, it was the first dismissal, rather than the second that was by stipulation. This argument is flawed, however, as the reasoning behind Poloron is that the risk of abuse is reduced where one of the two dismissal is pursuant to a stipulation.

Because the second dismissal in this case was pursuant to a stipulation under Rule 41(a)(1)(ii), the two dismissal rule does not apply, and Distribution Express’ motion to dismiss on this ground is denied.

II. Defendants’ Motions for Summary Judgment

In addition to Distribution Express’ motion to dismiss the amended complaint, also before the Court are the following additional motions: (1) Distribution Express’ motion for summary judgment dismissing all claims against it based on the bill of lading that governed transportation of the power wheel; (2) motions by Blue Anchor and Distribution Express to limit any liability they are found to possess to $500 per package for plaintiff’s loss to cargo; and (3) a motion on behalf of the K & N defendants to dismiss the claims against them entirely.

Defendant Distribution Express argues that under the bill of lading that governed the transportation of the power wheel, plaintiff is precluded from suing it and may only proceed against the K & N defendants. Further, Distribution Express argues, if plaintiff is permitted to proceed with its claims, the amount plaintiff may recover, if any, is limited by the bill of lading which was entered between Blue Anchor and Tractabel (the “Bill of Lading”) to $500 per package. Defendant Blue Anchor echos the argument by Distribution Express that any recovery plaintiff may obtain is limited under the governing bill of lading as described by Distribution Express. Finally, the K & N defendants assert that plaintiff has no basis to bring this suit against them because the amended complaint does not allege that the K & N defendants had any role in the damage to the goods, nor does it demonstrate a basis for personal jurisdiction over them.

A. Summary Judgment Standard

Summary judgment is properly 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 and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). The Federal Rules of Civil Proceduremandate the entry of summary judgment “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial .”Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In reviewing the record, we must assess “the evidence in the light most favorable to the party opposing the motion, and resolve ambiguities and draw reasonable inferences against the moving party.” Frito- Lay, Inc. v. LTV Steel Co. (In re Chateaugay Corp.), 10 F.3d 944, 957 (2d Cir.1993). In order to defeat such a motion, the non-moving party must affirmatively set forth facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). An issue is “genuine … if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. at 248 (internal quotation marks omitted).

B. Maintaining Claims Against Distribution Express

Distribution Express argues that the Bill of Lading, which was entered into between Blue Anchor and Tractabel expressly prevents Allianz from pursuing any claims against it. Plaintiff responds that any limitation of liability in the Bill of Lading is preempted by the Carmack Amendment to the Interstate Commerce Act of 1887, 49 U.S .C. § 14706, which provides shippers with a statutory right to recover for the actual loss to their property caused by any of the carriers of their shipment.

1. Application of the Carmack Amendment

“The Carmack Amendment governs the liability of common carriers for goods lost or damaged during a shipment in interstate commerce.” See Ford v. Allied Van Lines, Inc., No. 96 Civ. 2598, 1997 WL 317315 at *2 (D. Conn. June 3, 1997). It also applies to determine motor truck carrier liability involving transportation between “the United States and a place in a foreign country to the extent the transportation is in the United States.” 49 U.S.C. § 13501. Where a shipment involves transportation from a foreign country, “the domestic leg of the journey will be subject to the Carmack Amendment as long as the domestic leg is covered by a separate bill or bills of lading.” Swift Textiles v. Warkin Motor Lines, 799 F.2d 697, 701 (11th Cir.1986), cert. denied, 480 U .S. 935 (1987). However, where the bill of lading governing the shipment is a “through bill of lading,” the Carmack Amendment is inapplicable. SeeInsurance Co. of North America v. S/S Transworld Bridge, No. 92 Civ. 7375, 1994 WL 75249 at *7 n. 6 (S.D.N.Y. Mar. 7, 1994) (stating that “[w]hether the terms of a bill of lading apply to inland carriage turns in part on whether the bill is a through bill of lading. If so, the Carmack Amendment, and the regulations promulgated pursuant to it, do not apply.”); Capital Converting Equipment, Inc. v. Lep Transport, Inc., 965 F .2d 391, 394 (7th Cir.1992) (stating that “[b]ecause such a ‘through’ bill of lading includes no separate domestic segment …, the Carmack Amendment is inapplicable.”).

A “through bill of lading is one which governs the entire course of transport and applies to the connecting carriers despite the fact that they are not parties to the contract.” Toshiba Internat’l Corp. v. M/V “Sealand Express”, 841 F.Supp. 123, 128 (S.D.N.Y.1994) (citing Capital Converting, 965 F.2d at 394); see also Missouri K. & T.R. Co. v. Ward, 244 U.S. 383 (1917) (defining a “through bill of lading” as “a bill of lading with the final delivery destination of the goods noted thereon, although transportation of the goods may extend over the lines of connecting carriers.”). “A bill of lading issued in a foreign country to govern a shipment throughout its transportation from abroad to its final destination in the United States is termed a ‘through bill of lading.” Capital Converting, 965 F.2d at 394. Whether a bill of lading is a through bill of lading is predominantly factual question. See Insurance Co. of North America, 1994 WL 75249 at *7. In making this determination, “the relevant indicia include whether the final destination is designated thereon, the method by which the connecting carriers are compensated and, more generally, the conduct of those carriers.” Toshiba Internat’l., 841 F.Supp. at 128.

Contrary to plaintiff’s assertions, the Carmack Amendment does not apply to the shipment because the Blue Anchor Bill of Lading, which governed the entire shipment, was a through bill of lading. The Blue Anchor Bill of Lading designated Ohio as the final destination, as well as the point of origin, Bangkok, Thailand. Additionally, the terms of the Bill of Lading contemplated the inland transportation of the goods to Ohio. Plaintiff’s insured paid the ocean carrier for all transportation charges and did not enter into a separate agreement with Distribution Express providing for separate consideration for the inland transportation. The combination of these facts supports the conclusion that the Blue Anchor Bill of Lading was a through bill of lading which governed the entire transportation of goods and applied to all connecting carriers even though they were not parties to the contract. See Commercial Union Insurance Co. v. Forward Air, Inc., 50 F.Supp.2d 255 (S.D.N.Y.1999).

In response, plaintiff argues that because Distribution Express issued its own inland bill of lading, the Carmack Amendment applies to the interstate portion of the shipment. Plaintiff has pointed to case law holding that where a shipment originates in a foreign country, the “domestic leg of the journey will be subject to the Carmack Amendment as long as the domestic leg is covered by a separate bill or bills of lading.” New York Marine & General Insurance Co. v. S/S Ming Prosperity, 920 F.Supp. 416, 425 (S.D.N.Y.1996). However, this same case also explains that “[t]he [Carmack] Amendment, however, does not apply where a through bill of lading covers the entire course of an international journey.” Id.; see also Sompo Japan Insurance of America v. Union Pacific Railroad Company, No. 03 Civ. 1604, 2003 WL 22510361 at *1 (S.D.N.Y. Nov. 5, 2003) (upholding limitation of liability found only in the through bill of lading, with respect to the inland carrier, despite the fact that a separate bill of lading was issued for the inland portion of the carriage).

Moreover, “unless the connecting carrier has received consideration for the bill of lading in addition to that which flowed under the bill of lading issued by the initiating carrier, the Carmack Amendment makes such second bill of lading void.” Mexican Light & Power Co. v. Texas Mexican Ry. Co., 331 U.S. 731 (1947); S.C. Johnson v. Louisville & Nashville Railroad Co., 695 F.2d 253 (7th Cir.1982) (finding bill of lading which was issued by connecting carrier, in addition to the through bill of lading, void for lack of consideration). Given that the shipper here, Tractabel did not enter a separate agreement with Distribution Express providing for separate consideration from the shipper to Distribution Express, it is evident that the Blue Anchor Bill of Lading governed the entire transportation.

2. Liability of Distribution Express Under the Terms of the Blue Anchor Bill of Lading

Because the Carmack Amendment does not apply to the shipment in this case, the Court must decide whether, under the governing Bill of Lading, Distribution Express is relieved of potential liability to the shipper or its subrogee. Distribution Express relies on the following language in paragraph 17(c) of the Bill of Lading for the proposition that it is not amenable to suit by plaintiff: “[t]he Merchant undertakes that no claim shall be made against any Participating Carrier, against any servant, agent or subcontractor of the Carrier … which imposes or attempts to impose upon any of them any liability whatsoever in connection with the Goods….” See Declaration of Barbara Sheridan (“Sheridan Decl.”) Ex. I. Plaintiff did not, however, address the effect of paragraph 17(c) of the Bill of Lading as an alternative to its argument that the Carmack Amendment does not apply to this case.

The Bill of Lading defines “Participating Carrier” as “any other water carrier, including those performing transshipment or relay, feeder or towage services, or any land carrier or air carrier performing any stage of the carriage provided for herein.” Id. at ¶ 1.3. Under the definition in the Bill of Lading, Distribution Express, a land carrier that performed a stage of the transportation provided for in the Bill of Lading, qualifies as Participating Carrier. As a Participating Carrier in the subject transportation, Distribution Express is entitled to the benefit of the limitation of liability in paragraph 17(c) of the Bill of Lading. Under paragraph 17(c), plaintiff is prevented from “impos[ing] or attempt[ing] to impose upon any [Participating Carrier] any liability whatsoever in connection with the Goods.” Id. Plaintiff thus may not proceed with its claims against Distribution Express and Distribution Express’ motion for summary judgment is granted with respect to all claims asserted against it. [FN3]

FN3. Plaintiff argues that public policy should prevent Distribution Express from benefitting from any limitation of liability because Distribution Express engaged in seriously culpable conduct when it allowed or instructed an ill, elderly employee to continue driving despite his physical state. However, plaintiff has failed to present any admissible evidence supporting its contention. Rather, plaintiff cites only inadmissible hearsay testimony to support its allegations of intentional conduct.

“Hearsay” is defined as a “statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.” Riisna v. ABC, Inc., 219 F.Supp.2d 568 (S.D.N.Y.2002). For its allegations that Distribution Express engaged in culpable conduct, plaintiff relies exclusively on the testimony of Mr. Keeran’s two daughters, neither of whom was present during the subject trip nor privy to conversations between Mr. Keeran and Distribution Express. Because their testimony is based solely on conversations with others and it is offered to prove the truth of the matters asserted therein, it constitutes hearsay. For the purpose of a summary judgment motion, hearsay is inadmissible and may not be considered. See Federal Rule of Civil Procedure 56(e). Since plaintiff is thus unable to prove the conduct alleged, its argument that public policy prohibits limiting Distribution Express’ liability is without merit.

C. Limitation of LiabilityBlue Anchor

While Blue Anchor concedes that it is not entirely shielded from liability under the Bill of Lading like Distribution Express, it has moved to limit any liability it is found to possess to $500 per package, as described in the Bill of Lading. Blue Anchor argues that in addition to the terms laid out in the Bill of Lading, the Carriage of Goods by Sea Act (“COGSA”), 46 U.S.C. § 1300 et. seq . also applies to the entire shipment at issue to limit its liability. Plaintiff argues that there can be no such limitation of liability because the obligations of Blue Anchor are governed by the Carmack Amendment, rather than the Bill of Lading or COGSA.

The Carriage of Goods by Sea Act typically governs maritime shipments occurring from port to port. See id.;Watermill Export, Inc. v. MV Ponce, 506 F.Supp. 612, 613 (S.D.N.Y.1981) (stating that COGSA applies to “contracts of carriage relating to shipments between United States ports and foreign ports.”). Parties may, in addition, contractually agree to make COGSA the governing body of law for the inland portion of a multi-modal transport. See Toshiba International Corp. v. M/V Sea-Land Exp., 841 F.Supp. 123, 125 (stating, “the provisions of COGSA may contractually be extended past the time of discharge of the cargo from the ship…. It is also well-settled that the protections of COGSA and other provisions of the bill of lading may contractually be extended to third party agents of the carrier, such as inland carriers”) (citations omitted); Russell Stover Candies, Inc. v. Double VV, Inc., No. 97 Civ. 2144, 1997 WL 809205 at *11 (D.Kan. Dec. 30, 1997) (finding that bills of lading at issue extended provisions of COGSA to inland carrier who carried goods to final destination).

One method by which parties may extend the applicability of COGSA is through the inclusion of a “U.S. Clause” in their contract, which specifically states that COGSA shall govern the entire transportation. See Sompo Japan Insurance of America v. Union Pacific Railroad Company, No. 03 Civ. 1604, 2003 WL 22510361 at *2-3 (S.D.N.Y. Nov. 5, 2003); see also Colgate Palmolive Co. v. S/S Dart Canada, 724 F.2d 313, 314 (2d Cir.1983) (stating that the provisions of COGSA may contractually be extended past the time of the discharge of the cargo from the ship). The parties included a U.S. Clause in the Bill of Lading in this case. Paragraph 28.1 of the Bill of Lading reads:

If this Express Cargo Bill covers the Carriage of Goods to or from ports of United States of America this Express Cargo Bill shall be subject to United States Carriage of Goods by Sea Act (USA COGSA), which shall be incorporated herein, and the provisions of said Act shall govern before loading and after discharge and throughout the entire time the Goods are in the custody of the Carrier.

Sheridan Decl. Ex. I at ¶ 28.1. Plaintiff argues that although the Bill of Lading has a U.S. Clause, this clause is contractually secondary to General Provision 1.1 of the Bill of Lading. Clause 1.1, plaintiff argues, mandates that any compulsory national law, in this case the Carmack Amendment, be applied to the shipment at issue, notwithstanding anything inconsistent in the Bill of Lading. Plaintiff’s interpretation is unsupported. In fact, a recent decision, Sompo Japan Insurance of America v. Union Pacific Railroad Company, No. 03 Civ. 1604, 2003 WL 22510361 at *1 (S.D.N.Y. Nov. 5, 2003), held to the contrary. In Sompo, the plaintiff argued that clause 5 of the applicable bill of lading, which stated that provisions in national or international law which “cannot be departed from,” overrode the contract’s U.S. Clause and thus rendered the Carmack Amendment, rather than COGSA applicable to the shipment at issue. The Court there stated:

It is clear from the plain meaning of Clause 5(1)(b)(1) that only provisions in national or international law that “cannot be departed from” are applicable to this carriage. The Carmack Amendment is not such a law. Indeed, numerous cases recognize that the Carmack Amendment may be departed from by contract and supplanted by the COGSA to the detriment of the merchant.

Id. at *3. [FN4] Accordingly, through the U.S. Clause, Blue Anchor extended the terms of COGSA to the inland portion of the shipment in this case, and the limitation of liability therein applies to limit the liability of Blue Anchor to $500 per package. [FN5] Therefore, to the extent they exceed $500 per package, plaintiff’s claims against Blue Anchor are dismissed.

FN4. It is worth noting that the plaintiff in Sompo was represented by the same counsel that represents plaintiff in this case. Plaintiff’s counsel now attempts to make the same argument that it unsuccessfully advanced before the same court in Sompo, yet plaintiff omitted any reference to the Sompo decision in its Memorandum. Where a lawyer knows of controlling legal authority directly adverse to the position of the client, the lawyer should inform the tribunal of its existence unless the adversary has done so. See United States v. Gaines, 295 F.3d 293, 302 (2d Cir.2002) (citing N.Y. Comp.Codes R. & Regs. tit. 22, § 1200.37(b)(1) [DR 7-106].

FN5. COGSA states: (5) Amount of liability; valuation of cargo. Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading….

46 U.S.C. § 1304. Plaintiff’s insured, Tractabel, had an opportunity to declare a value on the front of the Bill of Lading but declined to do so. The face of the Bill of Lading explicitly states, “NO VALUE DECLARED.” See Sheridan Decl. Ex. I. Additionally, Louis Loosens, a former Tractabel employee who arranged the shipment in this case, testified that he intended that no value be declared on the Bill of Lading because Tractabel had its own insurance for the cargo. See Delcaration of Ernest H. Gelman (“Gelman Decl.”) Ex. B at 23:5-24:13. Accordingly, the limitation of liability in COGSA applies to this shipment.

D. Liability of K & N Defendants

Plaintiff has conceded that this action should be dismissed as to K & N, Inc. and K & N Thailand, Inc. because “discovery has shown that … [they] merely acted in this matter only as agents of Kuehne & Nagel N.V.” Plaintiff’s Memorandum of Law in Opposition to Defendants’ Motions for Summary Judgment (“Pl.Mem.”) at 8. With respect to K & N N.V., plaintiff argues that the issue of liability is governed by the contract that was entered between K & N N.V. and Tractabel, under which K & N N.V. agreed to be “fully responsible” for all cargo losses. K & N N.V. responds that plaintiff’s claim against it is futile because plaintiff has provided no basis for this Court to exercise personal jurisdiction over it with respect to the contract at issue.

New York law controls the issue of personal jurisdiction in this case. See United Trading Co. v. M.V. Sakura Reefer, No. 95 Civ. 2846, 1996 WL 374154 at *3 (S.D.N.Y. July 2, 1996) (stating that in determining whether a federal district court has personal jurisdiction over a party in a maritime case, the law of the forum state applies) (citations omitted). Under New York C.P.L.R. § 301, “a foreign corporation is subject to general jurisdiction in New York if the corporation is ‘doing business’ in the state.” Jacobs v. Felix Bloch Erban Verlag Ver Bunhe Film und Funk KG, 160 F.Supp .2d 722, 731 (S.D.N.Y.2000). K & N N.V. is a Belgian entity which alleges that it has no presence in New York state or even the United States. It was neither the carrier nor the carrier’s agent on the Bill of Lading. Moreover, plaintiff has suggested no basis on which jurisdiction exists, nor has it even addressed K & N N.V.’s jurisdictional defense. Finally, there is no evidence in the record that K & N N.V. is doing or has done any business in New York state. Accordingly, even if plaintiff has a viable contract claim against K & N N.V., it cannot be asserted in this Court. Therefore, plaintiff’s claims against the K & N defendants are dismissed.

Conclusion

For the reasons stated above, Distribution Express’ motion to dismiss is denied and the motions of all defendants for summary judgment are granted. Plaintiff is directed to submit a judgment on notice. [FN6]

FN6. The only claim in this case which has not been made the subject of one of the pending motions is a cross-claim for contribution by defendant Blue Anchor against cross-defendant Distribution Express. In light of the resolution of plaintiff’s claims against defendants, Blue Anchor is directed to inform the Court whether it intends to actively pursue its cross-claim against Distribution Express or whether the parties can resolve this issue on their own.

IT IS SO ORDERED.

United States District Court,

N.D. Texas, Dallas Division.

Darrell D. MINTER, as Receiver, Plaintiff,

v.

GREAT AMERICAN INSURANCE COMPANY OF NEW YORK f/k/a American National Fire

Insurance Company, Defendant,

v.

AON RISK SERVICES OF TEXAS, INC., Third-Party Defendant.

MEMORANDUM OPINION AND ORDER

KINKEADE, J.

Several motions are currently pending before the Court, including summary judgment motions filed by each party in this matter. As a preliminary matter, the Court makes the following rulings: Plaintiff’s Motion to Strike Defendant’s Motion for Summary Judgment is DENIED; the parties’ Agreed Motion to Modify Transition Order and Briefing Deadlines is GRANTED, and the parties’ responsive filings with regards to the motions for summary judgment are deemed timely filed; Plaintiff’s Motion to File Supplemental Briefing is DENIED; and Plaintiff’s Motion to Amend/Correct Complaint is DENIED.

Regarding the motions for summary judgment, having considered the merits of the motions, and for the reasons stated below, Defendant’s Motion for Summary Judgment is GRANTED; Plaintiff’s Motion for Partial Summary Judgment is DENIED; and Third-Party Defendant’s Motion for Summary Judgment is DENIED as moot.

I. Background

Plaintiff Darrell D. Minter, as Receiver (“Minter”) of Jerry Lee Largent’s (“Largent”) assets, brings this suit against Defendant Great American Insurance Company of New York f/k/a American National Fire Insurance Company (“Great American”) to recover damages in connection with a substantial judgment obtained by Grant Morris (“Morris”) against Largent on August 25, 2000.

The underlying case involved a collision which occurred the night of November 9, 1996, in the City of Bridgeport, Wise County, Texas. That night, Largent, who was driving an eighteen-wheeler truck, caused a collision to occur between his vehicle and Morris’ vehicle (“the accident”). Largent was intoxicated at the time of the collision, and subsequently pleaded guilty of the offense of driving while intoxicated.

At the time of the accident, Largent was employed by Hammer Trucking, Inc. (“Hammer”). The truck which Largent was driving at the time of the accident was owned by Hammer, which had leased the truck to JTM Materials, Inc. (“JTM”). On or about August 29, 1996, St. Paul Fire & Marine Insurance Company (“St.Paul”) issued a business auto policy, a trucker’s liability policy and a commercial general liability insurance policy to JTM. JTM also held a policy affording excess insurance and/or umbrella coverage issued by Great American in March of 2000. Both policies were in effect at the time of the accident.

Morris filed suit against Largent in Wise County on May 7, 1997 to recover for his personal injuries suffered as a result of the accident. Plaintiff in this case claims that although Great American had actual notice of the accident, it did not offer a defense of Largent, as required by the Great American policy. Instead, Largent defended himself pro se.

The case was tried before a jury on August 14, 2000. At the close of Morris’ case-in-chief, the district court issued a directed verdict in Morris’ favor. The district court submitted only three questions to the jury: (1) the amount of damages suffered by Mr. Morris; (2) whether Largent and Hammer acted with malice; and (3) the amount of exemplary damages to be awarded against Largent and Hammer. Based on the jury’s answers, the district court issued its final judgment on August 25, 2000, in which it awarded Morris actual damages jointly and severally against Largent and Hammer in the amount of $2,633,169.66, plus $869,306.62 in pre-judgment interest. Additionally, the court assessed exemplary damages against Largent for $1,650,000, and Hammer for $300,000. The district court entered a post-judgment interest rate of ten percent.

On May 18, 2001, the 43rd District Court of Parker County, Texas, entered an order turning over several of Largent’s assets to Minter. Included in those assets were Largent’s claims or causes of action against St. Paul and Great American for their conduct in connection with the case Morris filed against Largent, including claims based on (1) St. Paul’s or Great American’s handling or mishandling of the defense of Largent’s claims; (2) the insurance policies issued to JTM by St. Paul or Great American; (3) St. Paul’s or Great American’s bad faith in handling Largent’s claims; (4) St. Paul’s or Great American’s unfair insurance practices regarding Largent’s claims; and (5) St. Paul’s or Great American’s potential liability under the Texas Deceptive Trade Practices Act for their handling of Largent’s claims.

Minter sued St. Paul in state court for St. Paul’s conduct in the state court action against Largent. St. Paul and Minter settled the controversy for $1,900,000, which exhausted St. Paul’s policy obligations to JTM and Hammer. Minter seeks the money still outstanding from the state court’s final judgment against Largent and Hammer from Great American, alleging that Great American had a duty to defend Largent and provide coverage for the accident which injured Morris.

Great American brought its third-party complaint against Third-Party Defendant AON Risk Services of Texas, Inc. (“AON”), stating that if this Court determines that Great American is liable to Minter for its conduct in the underlying case against Largent, then AON is liable to Great American in contract and tort for failing to give Great America notice of the suit against Largent. As this is a diversity action under 28 U.S.C. § 1332(a), and the underlying events occurred in Texas, it is undisputed that Texas law applies.

II. Summary Judgment Standard

Summary judgment is appropriate when the pleadings, affidavits and other summary judgment evidence show that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2551, 91 L.Ed.2d 265 (1986). The moving party bears the burden of identifying those portions of the record it believes demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 322-25, 106 S.Ct. at 2551-54. Once a movant makes a properly supported motion, the burden shifts to the nonmovant to show that summary judgment should not be granted; the nonmovant may not rest upon allegations in the pleadings, but must support the response to the motion with summary judgment evidence showing the existence of a genuine fact issue for trial. Id. at 321-25, 106 S.Ct. at 2551-54; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255-57, 106 S.Ct. 2505, 2513- 14, 91 L.Ed.2d 202 (1986). All evidence and reasonable inferences must be viewed in the light most favorable to the nonmovant. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962).

III. Whether Coverage Exists Under the Great American Policy

Great American argues that Largent was not covered by the Great American policy at the time of the accident. Under Texas law, an insured has the burden of establishing coverage under the policy. See Performance Autoplex II Ltd. v. Mid-Continent Cas. Co., 322 F.3d 847, 854 (5th Cir.2003). As receiver of Largent’s assets, Plaintiff bears the burden of showing coverage as Largent would. If coverage is established, the insurer bears the burden of showing that an exclusion applies. See id. Mere disagreement by the parties over the interpretation of a provision does not make the provision ambiguous or create a question of fact. See id.

The Great American policy contains the following provisions under Section II, entitled “Who Is An Insured”:

B. Each of the following is also an “Insured”:

1. Your employees, other than your executive officers, but only for acts within the scope of their employment by you….

5. Any other person or organization who is insured under any policy of “Underlying Insurance.” The coverage afforded such “Insureds” under this policy will be no broader than the “Underlying Insurance” except for this policy’s Limit of Insurance.

It is undisputed that the St. Paul policy provides the “underlying insurance” reference in paragraph 5. Therefore, if Largent is covered by the Great American policy, it is either as an employee of JTM acting within the scope of his employment or as a person otherwise covered under the St. Paul policy.

A. Largent was acting outside the scope of his employment.

The trial court in the underlying case granted a no evidence motion for summary judgment in favor of JTM on the issue of whether Largent was acting within the course and scope of his employment when the accident occurred. In Morris v. JTM Materials, Inc. and DCV, Inc., 78 S.W.3d 28 (Tex.App.-Fort Worth 2002, no pet.), the Fort Worth Court of Appeals reviewed the decision of the trial court. Its holding affirmed the ruling of the trial court that Largent was not acting within the scope of his employment at the time of the accident, simply stating that “there is no evidence in record that [Largent] was in the course and scope of his employment when the accident occurred.” Id. at 48. The court based its decision on the fact that Largent went on a personal errand when he went to his sister’s house, thus rebutting any presumption that he was acting within the course and scope of his employment at the time of the accident. See id.

Because the issue of whether Largent was acting within the course and scope of his employment has already been determined by the Fort Worth Court of Appeals, the doctrine of collateral estoppel prevents the Court from reconsidering the issue. Collateral estoppel applies if four conditions are met: (1) the issue in the subsequent action must be identical to the issue litigated in the prior action; (2) the issue must have been fully and vigorously litigated in the earlier action; (3) the issue must have been necessary to support the judgment in the previous case; (4) there must be no special circumstances that would render preclusion inappropriate or unfair. See Sport Supply Group, Inc. v. Columbia Cas. Co., 335 F.3d 453, 458 n. 4 (5th Cir.2003). The party seeking to invoke collateral estoppel has the burden of proving the elements of the doctrine. See Welch v. Hrabar, 110 S.W.3d 601, 606 (Tex.App.-Houston [14th Dist.] 2003, pet. denied).

Each of the four elements applies in this case. First, the issue of whether Largent was an employee of JTM acting within the scope of his employment was decided by the Fort Worth Court of Appeals and is presently before this Court. Second, Largent contested that he was acting within the course and scope of his employment by presenting an affidavit which the court of appeals took into account. Additionally, the issue of whether Largent was acting within the course and scope of his employment was necessary to the court’s granting summary judgment in JTM’s favor on the issue of JTM’s liability to Morris on the common law doctrine of respondeat superior. Finally, the Court finds no special circumstances that would render the application of collateral estoppel unfair. Therefore, collateral estoppel applies, and as a matter of law Largent was not acting within the course and scope of his employment.

Plaintiff contends that even if Largent was not actually acting within the scope of his employment, he was a statutory employee of JTM, and as such, should be “deemed” as acting within the scope of his employment at the time of the accident. Plaintiff bases his argument on the “Endorsement for Motor Carrier Policies of Insurance for Public Liability Under Sections 29 and 30 of the Motor Carrier Act of 1980” (“the MCS-90 endorsement”) included in the St. Paul policy. The MCS-90 endorsement must be attached to any liability policy issued to a registered motor carrier pursuant to 49 U.S.C. § § 13906(a)(1), 31139(b)(2) and 49 C.F.R. § 387. See T.H.E. Ins. Co. v. Larsen Intermodal Services, Inc., 242 F.3d 667, 670 (5th Cir.2001).

The MCS-90 endorsement required St. Paul to pay, up to $1,000,000, “any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980 regardless of whether or not … such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere.” Essentially, the MCS-90 endorsement requires an insurer to pay a victim of an insured’s negligence, whether or not the insured was acting within the scope of its employment or not. See Price v. Westmoreland, 727 F.2d 494, 496 (5th Cir.1984) (holding that an interstate carrier is vicariously liable as a matter of law for a driver’s negligence and that the traditional common-law principles of respondeat superior do not apply).

The Fort Worth Court of Appeals held that due to the MCS-90 endorsement, JTM was vicariously liable as a matter of law for Largent’s negligence if it was an interstate carrier, whether or not he was acting within the scope of his employment. See Morris, 78 S.W.3d at 43. Nevertheless, section II.B.1 of the Great American policy explicitly states that only the following are insured: “Your employees, other than your executive officers, but only for acts within the scope of their employment by you.” Therefore, even if Largent is considered a statutory employee of JTM, the express terms of the Great American policy–a policy separate and independent of the St. Paul policy–require that the employee must be acting within the scope of his employment in order for coverage to exist under section II.B.1. Accordingly, the MCS-90 endorsement does not establish coverage for Largent under section II.B.1 of the Great American policy.

Because Largent was not acting within the course and scope of his employment, he cannot be considered a covered insured based upon section II.B.1 of the Great American policy. Therefore, Plaintiff can only meet his burden of establishing coverage under the Great American policy through section II.B.5, which says that if Largent is insured under the St. Paul policy, he is an insured under the Great American policy.

B. Whether Coverage Exists Under the St. Paul Policy

Plaintiff argues that coverage exists based on four independent grounds: (1) the “permissive user” clause in the St. Paul policy; (2) the “Exclusive Use” clause in the JTM-St. Paul policy; (3) the “TE 99-16 endorsement” attached to the St. Paul; and (4) the “MCS-90 endorsement” attached to the St. Paul policy. The Court will analyze each ground in turn.

1. The Permissive User Clause

In the St. Paul policy, under the section titled “Who Is An Insured,” the policy states that anyone, “while using with your permission a covered auto you own, hire, or borrow,” is covered by the St. Paul policy. Plaintiff contests that Largent used the truck with JTM’s permission, meaning Largent is covered under the JTM policy.

Under Texas law, that clause in the St. Paul policy makes Largent an “omnibus insured” if he used the vehicle with the permission of JTM. See Old American County Mut. Fire Ins. Co. v. Renfrow, 90 S.W.3d 810, 817 (Tex.App.-Fort Worth 2002, no pet.). For the purposes of the clause at issue, permission means consent to use the vehicle at the time and place in question and in a manner authorized by the named insured, either express or implied. See id. (internal citation omitted) (emphasis added). Express permission to operate a vehicle must be affirmatively stated, while implied permission may be inferred from a course of conduct or a relationship between the parties in which there is mutual acquiescence or lack of objection which signifies consent. See Royal Indem. Co. v. H.E. Abbot & Sons, Inc., 399 S.W.2d 343, 345 (Tex.1966).

In order to meet his burden of establishing coverage, Plaintiff first points to the underlying judgment, which states that “Jerry Lee Largent had permission to use the equipment involved in the collision on November 9, 1996,” and “Hammer Trucking, Inc. had given such permission to Jerry Lee Largent to use that equipment.” However, collateral estoppel does not prevent the Court from considering the issue. As discussed above, one of the requirements necessary for collateral estoppel to apply is that the issue must have been fully and vigorously litigated in the prior case. The Court will give prior adjudication of an issue estoppel effect only if it was adequately deliberated and firm. See Mower v. Boyer, 811 S.W.2d 560, 562 (Tex.1991). Factors the Court considers in making this determination include whether (1) the parties were fully heard and (2) the court supported its decision with a reasoned opinion. See id. As stated above, the party wishing to invoke collateral estoppel has the burden of presenting sufficient evidence to show that the doctrine is applicable. See Welch, 110 S.W.3d at 606.

The evidence before the Court demonstrates that Morris’ case against Largent was barely contested, let alone “vigorously litigated.” Largent’s only participation in the underlying trial against him was as a witness for Morris. Largent failed to respond to Morris’ motion for partial summary judgment, did not participate in the pretrial hearing, jury selection, opening and closing statements, or cross examination of Morris’ witnesses, and the only answer filed in Morris’ lawsuit was by the attorney who originally represented Hammer, who eventually withdrew from the case. Additionally, the state court’s judgment did not explain how it reached its holding that Largent had Hammer’s permission to operate the truck at the time of the accident. Taking this evidence into account, Plaintiff has not met his burden of demonstrating that the issue was fully and fairly litigated in the underlying case. Accordingly, the Court is not collaterally estopped from analyzing the issue here.

Plaintiff argues that even if collateral estoppel does not apply, the evidence shows that Largent had JTM’s permission to use the vehicle pursuant to the vehicle lease between Hammer and JTM. In the lease, Hammer, as Owner-Operator Lessor, assumed the responsibility of maintaining the vehicle which was leased to JTM, as the Company Lessee. Through the lease, JTM granted permission to Hammer and its employees to maintain the truck, which gave Hammer the right to ask Largent to perform duties regarding the maintenance of the truck.

At the state court trial, Largent testified, and Great American does not contradict, that Largent was instructed by Hammer to have the truck at Hammer’s maintenance yard by Sunday, November 10, 1996, so that maintenance work could be performed on it. Therefore, Largent did have express permission to drive the truck to Hammer’s yard at the time and place in question and in a manner authorized by Hammer. Instead of driving the truck to Hammer’s yard, however, Largent testified that he drove the truck to his sister’s house in order to ask her to follow him to Hammer’s yard, then give him a ride back to his home. When Largent arrived at his sister’s house, he discovered she was not there, so he decided to drive the truck back to his home. It was then that the accident occurred.

Driving to his sister’s house was outside the scope of the permission expressly granted to Largent, as he was only given express permission to take the truck to the maintenance yard. Additionally, Largent had been drinking when he drove the truck to his sister’s house, which Hammer and JTM expressly prohibited its drivers from doing. Therefore, at the time of the accident, Largent did not have express permission to either take part in a personal errand or operate the vehicle under the influence of alcohol. Because express permission necessarily requires the company’s consent to use the vehicle at the time and place in question and in a manner authorized by the owner, Largent met neither requirement, and therefore was not acting within the scope of any express permission at the time of the accident.

Without express permission, the only other way Plaintiff can establish coverage under the permissive user clause is through the implied permission of JTM and Hammer to operate the truck at the time and place of its operation, and in the manner he operated it. Implied permission may be inferred from a course of conduct or a relationship between the parties in which there is mutual acquiescence or lack of objection which signifies consent. See Royal Indem. Co., 399 S.W.2d at 345. Plaintiff does not present any evidence that Hammer or JTM, through mutual acquiescence or lack of objection, ever allowed Largent to drive the truck while intoxicated. Therefore, Plaintiff has not established that Largent had implied permission to operate the vehicle at the location of the accident or in an intoxicated state at the time of the accident.

Although Largent did not act within the parameters of the express permission granted him by JTM and Hammer, if his deviation from that permission was only a “minor deviation,” coverage would not be precluded under the St. Paul policy. See Renfrow, 90 S.W.3d at 815. Under the “minor deviation” rule, protection will be afforded unless the use is a material or gross violation of the terms of the initial permission. See id. In analyzing a case under the minor deviation rule, the Court takes into account the extent of the deviation in actual distance or time, the purposes for which the vehicle was given, and other factors necessary to determine whether the deviation was “minor” or “material.” See id. at 816 (internal citations omitted).

Largent deviated from the express permission granted to him by driving to his sister’s house while intoxicated. Had Largent only driven the truck to his sister’s house, the deviation might have been minor, as the trip was allegedly related to his bringing the truck in for maintenance at Hammer’s request. However, Largent’s operation of the truck while intoxicated was so far outside of the express permission granted to him by JTM and Hammer that his deviation was material as a matter of law. See James v. Vigilant Ins. Co., 674 S.W.2d 925, 927 (Tex.App.-Amarillo 1984, writ ref’d n.r.e.) (holding that a court may conclude that a deviation is minor as a matter of law, material as a matter of law, or that a fact issue exists as to the extent of the deviation). Plaintiff cannot rely on the “minor deviation” rule to establish coverage.

Therefore, as Plaintiff has the burden of establishing coverage, the lack of evidence of any permission granted to Largent is fatal to his attempt to establish coverage under the permissive user clause of the St. Paul policy. If coverage is to exist in this case, it must be on other grounds.

2. The Exclusive Use Clause

In addition to the permissive user clause, Plaintiff argues that another portion of the “Who Is An Insured” section establishes that the St. Paul policy covered Largent. The section reads:

d. the owner or anyone else from whom you hire or borrow a covered auto that is not a trailer while the covered auto:

(1) Is being used exclusively in your business as a trucker, and

(2) Is being used pursuant to operating rights granted to you by a public authority.

In order to be covered under this section, then, Largent must be either the owner of the truck or “anyone else” from whom JTM hired or borrowed the truck from.

Plaintiff offers no evidence that Largent owned the truck which was leased to JTM, or that he had any sort of interest in it whatsoever. As Plaintiff has the burden of establishing coverage, some evidence must be submitted to the Court to satisfy his burden. Plaintiff fails to do so here.

3. The TE 9916 Endorsement

Additionally, Plaintiff argues that an endorsement added to the St. Paul policy, the TE 9916 endorsement, establishes that Largent is a covered insured under the St. Paul policy. The endorsement states that “[w]hile any covered auto described in the Schedule or in the Declaration is rented or leased to you and is being used by or for you, its owner or anyone else from whom you rent or lease it is an insured but only for that covered auto.”

As is the case with the exclusive use clause in the St. Paul policy, Plaintiff offers no evidence that Largent owned the truck which was leased to JTM, or that he had any sort of interest in it whatsoever. As Plaintiff has the burden of establishing coverage, some evidence must be submitted to the Court to satisfy this burden. Plaintiff fails to do so here.

4. The MCS-90 Endorsement

Plaintiff’s final attempt at establishing coverage relies on the MCS-90 endorsement attached to the St. Paul policy. As discussed above, while Largent’s prospective status as a statutory employee does not affect his coverage under section II.B.I of the Great American policy, section II.B.5 of the policy affords coverage to “[a]ny other person or organization who is insured under any policy of ‘Underlying Insurance.” ‘

Plaintiff laboriously cites a plethora of authority to support the proposition that the MCS-90 endorsement causes Largent to be a statutory employee of JTM, and thus operates as additional insurance coverage for an insured. However, the case law interpreting the MCS-90 endorsement clearly establishes the error of Plaintiff’s position. The purpose of the MCS-90 endorsement is not to offer more insurance to employees of an insured, but to protect the public. The Fifth Circuit Court of Appeals has stated that the endorsement creates a suretyship by the insurer to protect the public–a safety net–which simply covers the public when other coverage is lacking. See T.H.E., 242 F.3d at 672 (citing Canal Ins. Co. v. Carolina Cas. Ins. Co., 59 F.3d 281, 283 (1st Cir.1995).

Recognizing the policy justifications behind the MCS-90 endorsement, the Fifth Circuit in T.H.E. held that the endorsement accomplishes its purposes by reading out clauses in the policy which would limit the ability of a third party victim to recover from his loss. See T.H.E., 242 F.3d at 673. However, the court went on to state that there is no need for or purpose served by the reading out of clauses insofar as it affects the insured or other insurers who “clamor for part or all of the coverage.” Id. In its decision, the court noted the language of the MCS-90 endorsement, which states that “all terms, conditions, and limitations in the policy to which the endorsement is attached shall remain in full force and effect as binding between the insured and the company.” Therefore, the Fifth Circuit held that when the protection of an injured member of the public is not at stake, the MCS-90 endorsement and the relevant federal regulations do not address coverage for the purpose of disputes between the insured and the insurer. See id. Indeed, the court unequivocally stated that the MCS-90 endorsement does not alter the existing policy obligations between the insured and an insurer. See id. at 674.

In this case, Plaintiff is suing Great American as a receiver of Largent’s assets, and thus from Largent’s shoes in his claims against Great American. As noted above, the MCS-90 endorsement attached to the St. Paul policy clearly states that “all terms, conditions, and limitations in the policy to which the endorsement is attached shall remain in full force and effect as between the insured and the company.” Therefore, the MCS-90 endorsement does not expand the insurance coverage as to Largent. According to the terms of the MCS-90 endorsement, it only serves to protect the public “from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980.” The lack of an independent basis of coverage through the MCS-90 endorsement is also evident in the fact that the endorsement requires an insured to reimburse the insurer for any payment that the insurer would not have been obligated to pay except for the agreement contained in the MCS-90 endorsement. See T.H.E., 242 F.3d 667.

Therefore, while the MCS-90 endorsement provides coverage to injured third- parties in instances where no coverage would otherwise exist, the endorsement does not act as an independent basis for coverage for Largent under the St. Paul policy. As the relationship between Largent and St. Paul is not affected by the MCS-90 endorsement, Minter, as receiver, has not met his burden of establishing coverage under the Great American policy simply because the MCS-90 endorsement was attached to the St. Paul policy.

Therefore, Plaintiff has failed to meet his burden of establishing coverage for Largent under the Great American policy on any ground.

IV. The Effect of No Coverage

Plaintiff claims that Great American is liable to him, as receiver of Largent’s assets, for breach of the Great American policy, indemnity under the policy, bad faith, malice, violating article 21.21 of the Texas Insurance Code and the violating the Texas Deceptive Trade Practices Act. Great American’s motion seeks summary judgment on all of Plaintiff’s causes of action, arguing that without coverage, Plaintiff cannot prevail in this case.

Without coverage under the policy, Great American had no duty to defend Largent, even if it had notice of the underlying state court action, which Great American disputes. See Gulf States Ins. Co. v. Alamo Carriage Service, 22 F.3d 88, 90 (5th Cir.1994) (holding that if the insurance policy did not cover the insured’s injury or damage, then the insurer did not owe a duty to defend). Without a duty to defend, there exists no duty to indemnify. See American Nat. General Ins. Co. v. Ryan, 274 F.3d 319, 324 (5th Cir.2001) (holding that under Texas law, if an insurer does not have a duty to defend an insured, then the insured does not have a duty to indemnify the insured). Because Largent was not covered under the Great American policy, Plaintiff cannot recover damages assessed against Largent in the underlying state court action from Great American. Therefore, Great American is entitled to summary judgment as a matter of law on Plaintiff’s contractual causes of action against Great American.

Plaintiff’s extracontractual causes of action against Great American for bad faith, malice, violations of article 21.21 of the Texas Insurance Code, and violations of the Deceptive Trade Practices Act must also fail. Under Texas law, an insurer is liable for a breach of the common law duty of good faith and fair dealing if the insurer knows or should know that it is reasonably clear that a claim is covered, but rejects the claim anyway. See Universe Life Ins. Co. V. Giles, 950 S.W.2d 48, 56 (Tex.1997). The question of whether an insurer has acted in bad faith by denying or delaying payment of a claim after the insurer’s liability becomes reasonably clear is a question for the fact-finder. See id. However, as a matter of law a plaintiff cannot prevail on a bad faith theory of liability if a claim is not covered by the policy in question. See Ghoman v. New Hampshire Ins. Co., 159 F.Supp.2d 928, 935-36 (N.D.Tex.2001) (citing Republic Ins. Co. V. Stoker, 903 S.W.2d 338, 341 (Tex.1995)). Because Plaintiff has not met his burden of establishing coverage, he cannot prevail on his bad faith or malice claims. Therefore, Great American is entitled to summary judgment on each of those claims as a matter of law.

Plaintiff also alleges that Great American violated article 21.21 of the Insurance Code and the DTPA. It is well-settled Texas law that extra- contractual tort claims based on the Texas Insurance Code and the DTPA require the same predicate for recovery as common law bad faith causes of action. See Watson v. State Farm Lloyds, 56 F.Supp.2d, 734, 736 (N.D.Tex.1999) (citing Higginbotham v. State Farm Mut. Auto. Ins. Co., 103 F.3d 456, 460 (5th Cir.1997)). As such, an insured cannot prevail on his article 21.21 or DTPA claims if the court concludes that the insured has no cause of action for breach of the duty of good faith and fair dealing. See Watson, 56 F.Supp.2d at 736. Therefore, because this Court finds that as a matter of law that Plaintiff has no basis for a claim based on Great American’s bad faith, Great American is also entitled to summary judgment on the Plaintiff’s article 21.21 and DTPA claims.

V. Conclusion

For the reasons stated above, Defendant’s motion is GRANTED, Plaintiff’s Motion is DENIED, and Third-Party Defendant’s Motion is DENIED as moot. Judgment shall enter that Plaintiff take nothing in his claims against Great American.