IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF IOWA WESTERN

GREAT WEST CASUALTY COMPANY,   Plaintiff,   vs.   KIRSCH TRANSPORTATION SERVICES, INC.,   Defendant.

VS

 BARRY M. CREAGAN, Individually; BARRY M. CREAGAN and LAUREN M. CREAGAN, as Natural Parents and Co-Administrators of the Estate of M.C. and as Parents and Natural Guardians of J.C., a Minor; and REBECCA DEGONDEA, as Mother and Natural Guardian of L.D., a Minor,   Counterclaim Plaintiffs,   vs.   GREAT WEST CASUALTY COMPANY,   Counterclaim Defendant.

I. Introduction.

Kirsch Transportation Services, Inc. (“Kirsch”) has secondary insurance with Great West Casualty Company (“Great West”) for situations in which primary insurance obtained by a third party “is not collectible.” Great West argues that the primary insurance is “collectible” when the primary insurer pays full policy limits on behalf of the third party, even if Kirsch itself was not a named insured by that policy. The Court agrees and therefore concludes that Great West does not owe anything to Kirsch or its assignees under the secondary policy.

II. Undisputed Facts.

1. Kirsch-Natex Relationship and Ohio Accident.

Kirsch is a freight brokerage company that hires motor carriers to haul freight for Kirsch’s customers. (ECF 116-2, ¶ 1.) One of the motor carriers with whom it worked was Natex Group, Inc. (“Natex”). (ECF 117-1, ¶ 8.) In August 2016, a driver for Natex was involved in a serious vehicle accident in Ohio while carrying a load brokered by Kirsch. (ECF 116-2, ¶¶ 19–20.) The accident resulted in the filing of personal injury lawsuits against Natex, Kirsch, Walmart, and other defendants in the United States District Court for the Northern District of Ohio. (Id., ¶¶ 20–21.) (For reasons explained below, the plaintiffs in the Ohio personal injury lawsuits are Counterclaim- Plaintiffs here and will be referred to as the “Creagan Plaintiffs.”) The accident also resulted in the filing of at least three separate cases regarding insurance coverage, two in Iowa (including this case) and one in Ohio.

Before discussing the personal injury and insurance coverage cases, it is helpful to understand the relationship between Kirsch and Natex, which was governed by a written Broker- Carrier Agreement. (Id., ¶¶ 9–10.) The Broker-Carrier Agreement required Natex, inter alia, to carry auto liability insurance with a minimum limit of $1,000,000, name Kirsch as an additional insured on the policy, and provide Kirsch with a valid certificate of insurance. (Id.) The Broker- Carrier Agreement further contained a broad indemnity provision requiring Natex to defend, indemnify, and hold Kirsch harmless against any and all losses from Natex’s performance. (ECF 106-8, p. 4, ¶ 4.)

At all relevant times, Natex had an automobile insurance policy with Artisan Truckers and Casualty Insurance Company (“Artisan”). (ECF 116-2, ¶ 11.) The Artisan policy provided Natex with commercial liability insurance with a single limit of liability of $1,000,000 and an “MCS-90 Endorsement” with a $750,000 limit. (Id., ¶ 12.) Kirsch was not a named insured on the Artisan policy. (Id., ¶ 16.) Kirsch did, however, have a separate insurance policy with Great West for “contingent” coverage. (ECF 106-17, pp. 9–10.) This dispute revolves around the proper interpretation of the Great West policy. Relevant provisions of the policy will be discussed in the Legal Analysis section, below.

• Personal Injury and Coverage Litigation Arising Out of the Ohio Accident.

In the personal injury lawsuits in Ohio, the Creagan Plaintiffs pursued negligence claims against Natex and its driver, as well as claims against Kirsch under two theories: (i) vicarious

liability for the alleged negligence of Natex and the driver; and (ii) direct liability for Kirsch’s own alleged negligence in arranging for commercial transportation by an unsafe driver and motor carrier. (ECF 117-1, ¶¶ 6–7.) Kirsch tendered its defense of the Ohio cases to Artisan, which accepted the tender as to the vicarious liability claims against Kirsch. (Id., ¶ 10.) The parties agree Kirsch was not an insured under the Artisan policy for claims of direct negligence. (ECF 116-2, ¶ 17.) Kirsch also tendered its defense in the Ohio personal injury lawsuits to Great West, but the tender was denied. (ECF 117-1, ¶ 16.)

The first coverage-related case arising out of the accident was filed by Great West in the Southern District of Iowa in April 2017. See Great W. Cas. Co. v. Wal-Mart Stores, Inc., 1:17-cv- 00010-JAJ-CFB (S.D. Iowa Apr. 25, 2017). This Court (Jarvey, C.J.) concluded that Kirsch and Walmart did not have coverage for the accident under a Great West commercial general liability policy. See Great W. Cas. Co. v. Wal-Mart Stores, Inc., No. 1:17-CV-00010-JAJ, 2018 WL 8758889, at *5 (S.D. Iowa Mar. 5, 2018). This is not the policy at issue here, and the first Iowa case is relevant solely to provide context. (ECF 117, pp. 13–15.)¹

The second coverage case was an interpleader action filed by Artisan in the Northern District of Ohio in November 2017. (ECF 116-2, ¶¶ 22–23.) The parties disagree on how to characterize Artisan’s position in the interpleader action, with the Creagan Plaintiffs emphasizing that Artisan pled, inter alia, that the Natex truck involved in the accident was not an insured automobile at the time of the accident and thus the only available coverage was the $750,000 from the MCS-90 Endorsement, pursuant to which Artisan owes no duty to defend or indemnify anyone other than Natex. (ECF 107-2, ¶ 23.) Great West, by contrast, asserts that it is a contradiction for an insurer to simultaneously deny coverage and interplead funds. (ECF 116-2, ¶¶ 23–24.) In any event, it is undisputed that Kirsch, like Artisan, argued that: (i) the Artisan policy did not provide coverage for Natex because Natex did not own the vehicle involved in the crash; and (ii) coverage under the Artisan policy was limited to the $750,000 in coverage under the MCS-90 Endorsement. (Id., ¶ 26.) In September 2020, the Northern District of Ohio concluded there was a fact question as to whether the vehicle was covered under the Artisan policy. (Id., ¶ 27.) See also Artisan & Truckers Cas. Co. v. Miller, No. 3:17-CV-2399, 2020 WL 5203478, at *3 (N.D. Ohio Sept. 1, 2020). The Court agreed with Kirsch, however, that Artisan owed a duty of indemnification under the MCS-90 Endorsement for actual judgments against Natex, and no other party, up to $750,000. See id. at *4.

• Artisan’s Payments in the Ohio Interpleader Action.

The parties agree that Artisan ended up paying a significant amount of money to resolve the Ohio interpleader action, but they disagree on how much Artisan paid. Great West alleges that Artisan paid the full $1,000,000 policy limits, but the Creagan Plaintiffs assert that settlement agreements and releases in Great West’s appendix only show payments totaling $822,956.44. (ECF 117-1, ¶ 14.)

The total amount paid by Artisan is important to the disputed legal issues, and thus the Court carefully reviewed the appendix to determine whether there is a genuine issue of material fact as to the amount paid by Artisan. This review yielded two conclusions: first, the releases and settlement agreements indeed show that Artisan essentially exhausted the policy limits of $1,000,000 (with the exact amount being $999,847.12); and second, there is no legitimate basis for the Creagan Plaintiffs to suggest otherwise. The settlement agreements and releases in Great West’s appendix reflect payments from Artisan in the following amounts:

–  $30,000 (ECF 106-15, p. 2);

–  $826,890.24 (id., p. 4);

–  $15,000 (id., p. 9);

–  $2,956.88 (id., p. 12);

–  $15,000 (id., p. 14);

–  $1,619.59 (id., p. 16);

–  $70,000 (id., p. 18);

–  $3,878.90 (id., p. 20);

–  $34,501.51 (id., p. 22).

When these amounts are added together, the total is $999.847.12. Other than the tiny (in context) discrepancy of $152.88, this is consistent with the testimony of Artisan’s corporate representative deponent, who said: “I do know that the million dollars was — was paid out.” (ECF 106-14, p. 13.) The Court therefore concludes there is no genuine dispute of material fact as to whether Artisan exhausted essentially the entirety of the $1,000,000 policy limits.

In the process of reviewing the appendix, the Court was able to identify the discrepancy that led the Creagan Plaintiffs to suggest the releases and settlement agreements only show payments of $822,956.44. On March 19, 2020, Artisan entered into a “Settlement Agreement, Release and Covenant Not to Execute” (hereinafter, the “Creagan Settlement Agreement”) with Barry M. Creagan and Lauren M. Creagan in their representative capacities. (ECF 106-15, pp. 4– 8.) Section 1.3 of the Creagan Settlement Agreement states that Natex and related parties “shall be credited with $826,890.24 herein agreed to be paid.” (Id., p. 4.) Section 2.0 goes on to explain, however, that the settlement would be structured so that injured parties would receive guaranteed monthly payments until 2028 or 2029 pursuant to an annuity with Pacific Life & Annuity Services. (Id., p. 5.) As the Iowa Supreme Court and other courts have recognized, structured settlements like this can be “win-win” for the insurer and injured party because they reduce the upfront cost to the insurer but can increase recovery in the long run for the injured party due to the tax advantages of spreading payments over time. See Thornton v. Am. Interstate Ins. Co., 897 N.W.2d 445, 467 (Iowa 2017) (“[A]n annuity offers a lower up-front cost to the insured, which lowers costs overall and allows win-win settlements. An annuity may offer some tax benefits to the [injured party].”);

W. United Life Assurance Co. v. Hayden, 64 F.3d 833, 839 (3d Cir. 1995) (“[A] structured settlement effectively shelters from taxation the returns from the investment of the lump-sum payment.”).

It is the use of the annuity that leads to the disagreement about how much Artisan “paid.” The Creagan Settlement Agreement states that the upfront cost of the annuity was only

$238,074.90, which, when added to the $411,925.10 that Artisan agreed as part of the same Creagan Settlement Agreement to pay for the injured parties’ attorney’s fees and disbursements, yields a total upfront payment from Artisan of $650,000. (Id., p. 5.) When added to the other payments identified above (not including the $826,890.24), this results in total payments from Artisan of $822,956.88, which is more-or-less what the Creagan Plaintiffs alleged when they said the total payments reflected in the settlement agreements and releases in Great West’s appendix only reflect payments of $822,956.44. The parties’ putative disagreement about whether Artisan paid $1,000,000 or only $822,956.44 is therefore a matter of form versus substance. The record shows that Artisan made settlement payments that exhausted the policy limits of $1,000,000 (minus the $152.88 discrepancy) but only needed to spend $822,956.44 (or, by the Court’s math, $822,956.88) to get there due to the structured nature of one of the settlements.

Here’s the problem: as noted above, the structured settlement was with Barry M. Creagan and Lauren M. Creagan (in their representative capacities), who are two-thirds of the Creagan Plaintiffs in this case. The Creagan Plaintiffs have not raised a genuine factual dispute about whether Artisan exhausted policy limits in the personal injury lawsuits in Ohio in a situation where the only discrepancy in the record (other than the $152.88) results from the agreement of two- thirds of those very same Creagan Plaintiffs to accept a structured settlement that reduced Artisan’s upfront payment.

• Resolution of the Ohio Personal Injury and Coverage Actions.

While the parties litigated coverage issues in the Artisan interpleader action that eventually resulted in Artisan’s policy-limit payment, litigation also continued in the Ohio personal injury lawsuits. In December 2018, the Northern District of Ohio granted judgment as a matter of law for Kirsch on the Creagan Plaintiffs’ direct negligence claims, concluding those claims were preempted by the Federal Aviation Administration Authorization Act. See Creagan v. Wal-Mart Transportation, LLC, 354 F. Supp. 3d 808, 814 (N.D. Ohio 2018). This led to the Creagan Plaintiffs and Kirsch stipulating the following month to the dismissal with prejudice of the vicarious liability claims against Kirsch. (ECF 117-1, ¶ 12.) As a result of the dismissal, Artisan stopped defending Kirsch in the Ohio personal injury lawsuits, as Artisan had accepted the tender of defense only as to the vicarious liability claims, not the direct claims against Kirsch for its own alleged negligence. (Id.)

As to the direct claims, the Creagan Plaintiffs appealed the Northern District of Ohio’s preemption ruling to the Sixth Circuit. (Id., ¶ 15.) See also Creagan v. Wal-Mart Transportation, LLC, No. 3:16-CV-2788, 2020 WL 5203480, at *2 (N.D. Ohio Sept. 1, 2020) (certifying preemption ruling as final judgment for appeal pursuant to Fed. R. Civ. P. 54(b)). In May 2021, while the appeal was pending, Kirsch entered into a settlement agreement with the Creagan Plaintiffs. (ECF 116-2, ¶ 28.) Kirsch agreed to pay $350,000 to the Creagan Plaintiffs and to the entry of judgment against Kirsch in an amount to be determined by a neutral mediator, which ended up being $10,347,944.95. (Id.) Kirsch further agreed to assign its rights under the Great West policy to the Creagan Plaintiffs. (Id., ¶ 29.) In exchange, the Creagan Plaintiffs agreed not to execute the judgment against Kirsch. (Id.) To effectuate the settlement agreement, the Creagan Plaintiffs and Kirsch agreed to have the Sixth Circuit remand the case to the Northern District of Ohio for the entry of judgment. (ECF 117-1, ¶ 15.) Meaning: the Northern District of Ohio’s entry of summary judgment for Kirsch on the Creagan Plaintiffs’ direct negligence claims was vacated, but not because the Sixth Circuit concluded the ruling was wrong on the merits.

In February 2022, Kirsch—by now having entered the settlement agreement with the Creagan Plaintiffs—filed a renewed motion for summary judgment in the Artisan interpleader action. (ECF 116-2, ¶ 30.) In the now-unopposed motion, Kirsch argued that the Artisan policy did not provide coverage for the $10,347,944.95 judgment against Kirsch in the personal injury lawsuits. (Id.) The Northern District of Ohio granted the unopposed motion for summary judgment, holding that “the plain language of the Artisan Policy does not provide coverage for Kirsch” and entering a declaratory judgment that “[t]here is no coverage afforded under the Artisan Policy’s Auto Coverage Part for the Final Judgment entered in the [personal injury lawsuits].” (Id., ¶¶ 31–32.) See also Artisan & Truckers Cas. Co. v. Miller, No. 3:17-CV-3299, 2022 WL 4483195, at *1 (N.D. Ohio Sept. 27, 2022).

The net effect of the Ohio cases is that the Creagan Plaintiffs have a $10,347,944.95 judgment against Kirsch that cannot be collected from Artisan because: (i) Kirsch is not a named insured by the Artisan policy; and (ii) Artisan has already exhausted the policy limits of $1,000,000 anyway (except, possibly, for $152.88).

• Great West’s Policy with Kirsch.

Great West filed this coverage case against Kirsch in April 2018, although it ended up being stayed for several years while the Ohio cases played themselves out. (ECF 20; ECF 21.) Litigation resumed in this Court in early 2022. In light of Kirsch’s assignment of rights in the Great West policy to the Creagan Plaintiffs, the Creagan Plaintiffs were granted leave to substitute as counterclaim-plaintiffs. (ECF 70.) Great West and the Creagan Plaintiffs now cross-move for summary judgment. (ECF 106; ECF 107.) The dispute revolves around the proper interpretation of Kirsch’s policy with Great West, which contains a coverage part entitled, “Commercial Auto Coverage Part – Iowa Motor Carrier Coverage Form,” and an endorsement entitled, “Brokerage Concerns – Broadened Contingent Coverage.” (ECF 116-2, ¶ 4.) The Court will describe and discuss the relevant policy language in the Legal Analysis section, below.

III. Summary Judgement Standards.

Summary judgment is appropriate when there is “no genuine dispute as to any material fact” and the moving party “is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56. A genuine factual issue exists where the issue “can be resolved only by a finder of fact because [it] may reasonably be resolved in favor of either party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). “On a motion for summary judgment, ‘facts must be viewed in the light most favorable to the nonmoving party only if there is a “genuine” dispute as to those facts.’” Ricci v. DeStefano, 557 U.S. 557, 586 (2009) (quoting Scott v. Harris, 550 U.S. 372, 380 (2007)). “Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). Plaintiff “may not rest upon the mere allegations or denials of his pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 248 (omission in original) (quoting a prior version of Fed. R. Civ. P. 56(e)). “Insurance disputes are particularly well suited for summary judgment because the proper construction of an insurance contract is always an issue of law for the court.” Chicago Ins. Co. v. City of Council Bluffs, 713 F.3d 963, 969 (8th Cir. 2013).

IV. Legal Analysis.

1. Choice of Law and Legal Background.

Both sides ask the Court to apply Iowa law, while also acknowledging that there is no true conflict between Iowa law and the law of the other states (Nebraska and Ohio) that arguably might apply. (ECF 106-1, p. 7; ECF 107-1, pp. 5–6.) The Court agrees that Iowa has the “most significant relationship” to the dispute given that the Great West policy at issue uses the “Iowa Motor Coverage Carrier Form for Commercial Auto Coverage” (emphasis added) and the insured party, Kirsch, has its principal place of business here. See Weitz Co., LLC v. Lexington Ins. Co., 982 F. Supp. 2d 975, 982–83 (S.D. Iowa 2013). The Court therefore will apply Iowa law, although it agrees that the outcome would not change under Ohio or Nebraska law.

Under Iowa law, “[t]he cardinal principle in the construction and interpretation of insurance policies is that the intent of the parties at the time the policy was sold must control.” LeMars Mut. Ins. Co. v. Joffer, 574 N.W.2d 303, 307 (Iowa 1998). “Except in cases of ambiguity, the intent of the parties is determined by the language of the policy.” Id. “An ambiguity exists when, after application of our relevant rules of interpretation, a genuine uncertainty results as to which of two or more meanings is proper.” Am. Fam. Mut. Ins. Co. v. Petersen, 679 N.W.2d 571, 576 (Iowa 2004). “When two reasonable interpretations exist, the policy is construed most favorably to the insured.” Id.

• The Great West Policy Does Not Provide Coverage for the Judgment Against Kirsch in the Ohio Personal Injury Lawsuits.The Great West Policy Provides Secondary Coverage for Kirsch on a Contingent Basis for Accidents on Brokered Loads.

The Great West policy states that Great West “will pay all sums an ‘insured’ legally must pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies, caused by an ‘accident’ and resulting from the ownership, maintenance, or use of a covered ‘auto.’” (ECF 106-17, p. 49.) The scope of this coverage obligation is fleshed out in an endorsement entitled, “Brokerage Concerns – Broadened Contingent Coverage” (the “Brokerage Endorsement”). (Id., p. 9.) As explained in the Brokerage Endorsement, coverage applies to “Brokered autos,” which means “an ‘auto’ used by a ‘motor carrier’ under a written Brokerage Agreement with [Kirsch] that requires the ‘motor carrier’ to provide for the transportation of property as arranged by you.” (Id., p. 10.) There is no dispute, at a general level, about what these provisions mean: in certain circumstances, the Great West policy provides insurance coverage for Kirsch when it brokers the hauling of freight by motor carriers like Natex.

It is similarly undisputed that the Great West policy expects and requires motor carriers like Natex to have their own, primary insurance. Section B.1 of the Brokerage Endorsement states that Great West’s coverage does not apply unless, inter alia, “[t]he ‘motor carrier’ is required by written contract with you to carry auto liability insurance on the ‘brokered autos’.” (Id., p. 9.) Section B.1.a further states that “[t]he ‘motor carrier’ is required to furnish you with a certificate of insurance, a copy of the policy or a copy of the endorsement making you an additional insured on the ‘motor carriers’ liability policy.” (Id.) The parties agree—again, at a general level—that these provisions establish that the Brokerage Endorsement provides secondary insurance to Kirsch that is only meant to apply if there is a deficiency in the motor carrier’s primary insurance.

• Great West’s Contingency Coverage Obligation Does Not Apply Because Natex’s Insurance Was “Collectible” (and Indeed Collected).

The parties stop seeing eye-to-eye when it comes to the proper interpretation of Section

B.1.b of the Brokerage Endorsement, which states that Great West’s coverage obligation kicks in if, “[a]t the time of an ‘accident,’ the insurance you [Kirsch] require is not collectible.” (Id.) To understand and evaluate the parties’ respective positions, it is helpful to start with the text of Section B.1 as a whole:

• Covered Autos Liability Coverage provided by the policy for a “brokered auto” applies subject to the following provisions:

1. The “motor carrier” is required by written contract with you to carry auto liability insurance on the “brokered autos”.
   1. The “motor carrier” is required to furnish you with a certificate of insurance, a copy of the policy or a copy of the endorsement making you an additional insured on the “motor carriers” liability policy; and
   1. At the time of an “accident,” the insurance you require is not collectible.

(Id.) The Creagan Plaintiffs argue that insurance “is not collectible” for purposes of Section B.1.b when, as here, Kirsch is not named as an insured under the policy the motor carrier is required to have. To that end, the Creagan Plaintiffs point out that the Northern District of Ohio concluded “the plain language of the Artisan Policy does not provide coverage for Kirsch.” (ECF 107-1, p. 13.) Great West, by contrast, argues that “is not collectible” means the motor carrier’s insurance coverage was not collectible at all in connection with the accident; for example, if Natex inadvertently allowed its coverage to lapse or the insurer became insolvent. Here, because the insurance Natex had under its policy with Artisan was “collectible” to the full $1,000,000 policy limits, Great West argues that its contingent coverage obligation under the Brokerage Endorsement does not apply.

The Court agrees with Great West. When considered as a whole, the purpose of the Brokerage Endorsement is straightforward: to provide secondary insurance for Kirsch in connection with its brokering business in situations where a motor carrier’s primary insurance coverage for some reason fails. This is not an uncommon arrangement, and courts have generally had no difficulty interpreting the word “collectible” in the context of such policies. See, e.g., Kirk v. Univ. Underwriters of Texas Ins. Co., 359 F. App’x 549, 551 (5th Cir. 2010) (concluding the word “collectable” is unambiguous and refers to situations where the primary insurer pays benefits following an accident); Hellman v. Great Am. Ins. Co., 66 Cal. App. 3d 298, 304 (Cal. Ct. App. 1977) (“The clause ‘valid and collectible insurance’ has widespread use in the insurance industry of the United States and has a well established meaning.”). Here, because Artisan paid the full policy limits of $1,000,000 on behalf of Natex in connection with the accident, the Artisan insurance was clearly “collectible.” See Kirk, 359 F. App’x at 551. It follows that the secondary coverage for Kirsch under the Brokerage Endorsement was never triggered. Liberty Mut. Ins. Co. v. Harco Nat. Ins. Co., 990 F. Supp. 2d 194, 206 (D. Conn. 2013) (“The Liberty policy was collectible and, in fact, was collected. The Harco policy, therefore, did not provide primary or excess coverage as related to the Lease Agreement.”).

In arguing otherwise, the Creagan Plaintiffs focus on the words “insurance you require” that come immediately before “is not collectible” in Section B.1.b of the Brokerage Endorsement. The Creagan Plaintiffs argue that the “insurance you [Kirsch] require” refers to the insurance required under the Broker-Carrier Agreement. The Broker-Carrier Agreement, in turn, requires Natex, inter alia, to include Kirsch as a named insured on the Artisan policy. Because Natex did not include Kirsch as a named insured, the Creagan Plaintiffs argue that the “insurance you require” is not “collectible” as to Kirsch because Natex never obtained the “insurance you require” in the first place. Instead, Natex obtained a slightly different form of insurance.

There are at least three fatal problems with this argument. First, it gives the words “insurance you require” a strained and unnatural reading, which is impermissible under Iowa law. See Tropf v. Am. Fam. Mut. Ins. Co., 558 N.W.2d 158, 159 (Iowa 1997) (“We give policy language its plain and ordinary meaning and do not indulge in a strained or unnatural interpretation merely to find ambiguity.”). The Broker-Carrier Agreement required Natex to obtain primary insurance, and Natex indeed obtained such primary insurance. Natex therefore had the “insurance you [Kirsch] require.” The only thing Natex failed to do was name Kirsch as an additional insured. This does not mean, however, that Natex’s insurance did not exist at all, much less that the insurance “is not collectible.” Reading the words “insurance you require” to mean that insurance does not count unless it conforms to every technical requirement of the Broker-Carrier Agreement would exalt form over substance and undermine the parties’ obvious intent when they entered the Brokerage Endorsement. See Int. Power Co. v. Ins. Co. of N. Am., 603 N.W.2d 751, 754 (Iowa 1999) (“The controlling consideration in interpreting insurance policies is the intent of the parties.”).

Second, and relatedly, the Creagan Plaintiffs’ argument misunderstands the purpose of secondary insurance policies like the one at issue here. The Brokerage Endorsement was not intended to provide insurance coverage on top of what the Artisan policy would pay, but rather to give Kirsch contingent coverage that would apply only in the absence of a payout from the Artisan policy. The Creagan Plaintiffs’ argument, if adopted, would render the payout from the Artisan policy irrelevant simply because of Natex’s failure to include Kirsch as a named insured on that policy. This would have the effect of turning Great West’s agreement to provide secondary coverage to Kirsch into something more akin to an agreement to provide primary coverage. The Court will not distort the plain meaning of the words “insurance you require is not collectible” to turn the parties’ relationship into something other than what they agreed it would be. See Kirk, 359 F. App’x at 551 (holding that primary insurance was “collectable” even though it did not fully compensate the injured party).

Third, and lest any doubt remain, the language of Section B.3 of the Brokerage Endorsement unambiguously confirms the parties’ intent not to make Great West liable in circumstances like those present here. Section B.3 states, in relevant part: “Any amount payable under this endorsement shall be reduced by all sums paid by or on behalf of the ‘motor carrier’.” (ECF 106-17, p. 10.) This language reinforces the conclusion that when Section B.1.b talks about whether the “insurance you require” is “collectible,” it is referring to whether the motor carrier has insurance that makes a payment following an accident, irrespective of who is listed as a named insured or whether the insurance policy complies in every technical way with the provisions of the Broker-Carrier Agreement. So long as the motor carrier (Natex) has insurance (Artisan) that makes a payment ($1,000,000) in the event of an accident, the motor carrier has the “insurance you require” for purposes of Section B.1.b.

The Creagan Plaintiffs do not cite any on-point cases holding otherwise, nor was the Court able to locate any on-point cases through independent research. The Court has, however, found significant analogous authority from other jurisdictions supporting Great West’s position. For example, the Fifth Circuit held that the word “collectable” is unambiguous and refers to situations where the primary insurer pays policy limits following an accident, regardless of whether this fully compensates the injured party. Kirk, 359 F. App’x at 551. Other courts have reached the same or similar conclusions. See e,g., Harstead v. Diamond State Ins. Co., 723 A.2d 179, 182 (Pa. 1999); Royal Globe Ins. Co. v. Hartford Acc. & Indem. Co., 485 A.2d 242, 244 (Me. 1984). These cases recognize that primary insurance is obviously “collectible” when it “in fact[] was collected.” Harco Nat. Ins. Co., 990 F. Supp. 2d at 206. The same logic squarely applies here, notwithstanding the Creagan Plaintiffs’ attempt to put a novel spin on the issue by focusing on whether Kirsch was a named insured under the Artisan policy.

• Great West Is Also Entitled to Summary Judgment Based on the Offset Provision in Section B.3 of the Brokerage Endorsement.

The language of Section B.3 of the Brokerage Endorsement also serves as a standalone reason to reject the Creagan Plaintiffs’ position that Great West is liable under the policy. Even if the Court were to adopt their position on what “insurance you require” means under Section B.1.b, the Court still would have to give effect to the last sentence of Section B.3, which states that “[a]ny amount payable under this endorsement shall be reduced by all sums paid by or on behalf of the ‘motor carrier’.” This language is unambiguous, and it means there is a dollar-for-dollar offset in Great West’s favor for the $999,847.12 that Artisan indisputably paid on behalf of Natex. As Great West has a $1,000,000 policy limit under the Brokerage Endorsement, this dollar-for-dollar offset leaves nothing more for Kirsch to recover except possibly $152.88 if the tiny discrepancy in the record is resolved in Kirsch’s favor.

The Creagan Plaintiffs’ complicated argument to the contrary is not persuasive. They argue that the words “payable under this endorsement” require the reader to refer back to the overarching coverage language found in the section of the Great West policy entitled, “Commercial Auto Coverage Part – Iowa Motor Carrier Coverage Form” (hereinafter, “Iowa Motor Carrier Coverage Form”). This section states, inter alia, that Great West “will pay all sums an ‘insured’ legally must pay as damages   ” (ECF 106-17, p. 49.) The Creagan Plaintiffs argue that because the “insured” is Kirsch, the obligation imposed on Great West under the Iowa Motor Carrier Coverage Form is to pay the damages that Kirsch must pay. When, as here, there is a judgment against Kirsch in the amount of $10,347,944.95, the Creagan Plaintiffs argue that the dollar-for-dollar offset in Section B.3 simply reduces Great West’s obligation to $9,347,944.95, not $0. As this is well above policy limits, the Creagan Plaintiffs admit Great West is not required to pay the full amount; nonetheless, they argue Great West must pay the full policy limits of $1,000,000.

The Creagan Plaintiffs’ argument fails at the outset because it does not make sense to interpret the words “payable under this endorsement” to mean “payable under the Iowa Motor Carrier Coverage Form.” Even if the Court concluded otherwise, however, it would not make Great West liable under the policy. True, the Creagan Plaintiffs eventually obtained a judgment against Kirsch in the amount of $10,347,944.95, but it is undisputed that this judgment was for Kirsch’s direct negligence in hiring an unsuitable motor carrier and driver. Great West’s coverage obligation under Section A of the Iowa Motor Carrier Coverage Form only applies, however, to “damages . . . resulting from the ownership, maintenance, or use of a covered ‘auto’.” (Id.) Damages for negligent hiring result from negligent hiring, not from the “ownership, maintenance, or use of a covered ‘auto’.” Thus, to the extent the covering language of the Iowa Motor Carrier Coverage Form is determinative, there would be no coverage in the circumstances presented here.

In any event, the covering language of the Iowa Motor Carrier Coverage Form is not determinative because it defines Great West’s coverage obligations generally, as modified by the specific language of the Brokerage Endorsement. See Sioux City Country Club v. Cincinnati Ins. Co., No. C03-4071-PAZ, 2004 WL 1559705, at *5 (N.D. Iowa June 22, 2004) (“Iowa follows the general rule in contract interpretation that when a contract contains both general and specific provisions on a particular issue, the specific provisions are controlling . . . An insurance policy is a contract that is subject to the general rules of contract analysis.” (internal punctuation and citations omitted)). To that end, there is capitalized and bolded language at the top of the Brokerage Endorsement stating, “THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.” (ECF 106-17, p. 9.) It follows that the determinative coverage language is not found in the Iowa Motor Carrier Coverage Form, but rather Section B.1 of the Brokerage Endorsement. As the Court already explained above, Section B.1 does not provide coverage at all when, as here, the Artisan policy was “collectible” and indeed was collected when Artisan exhausted the $1,000,000 policy limits in the Ohio interpleader action (minus, at most, $152.88). Moreover, even if Section B.1 provided coverage, it would be subject to the dollar-for-dollar offset for the Artisan payments anyway pursuant to Section B.3 because those payments were made “on behalf of the ‘motor carrier’ [Natex].”

V. Conclusion.

The Creagan Plaintiffs’ position fails at two levels. First, Great West’s obligation under the Brokerage Endorsement was never triggered because the “insurance you [Kirsch] require” was “collectible” and indeed was collected when Artisan exhausted its policy limits in the Ohio interpleader action. Second, even if the Artisan policy was not the “insurance you require,” Great West would be entitled to a dollar-for-dollar offset for the Artisan payments anyway pursuant to Section B.3 because those payments were made “on behalf of the ‘motor carrier’ [Natex].” The Court therefore GRANTS Great West’s Motion for Summary Judgment (ECF 106) and DENIES the Creagan Plaintiffs’ Motion for Summary Judgment (ECF 107). The Clerk of Court is directed to enter judgment in favor of Great West and against Kirsch and the Creagan Plaintiffs.

In granting summary judgment for Great West, the Court has not overlooked the possible discrepancy of $152.88 in the amount paid by Artisan. The Court simply concludes that this discrepancy does not preclude the entry of summary judgment because: (a) it appears to be the result of a mathematical anomaly or rounding error, which is not enough in these circumstances to create a genuine issue of disputed fact as to the accuracy of the testimony from the Artisan corporate representative that “the million dollars was — was paid out”; and (b) even if Artisan really did pay only $999,847.88, no reasonable factfinder could conclude that the remaining $152.88 was not also “collectible” for purposes of Section B.1.b of the Brokerage Endorsement had someone noticed the shortfall. The Court therefore grants summary judgment for Great West on the $152.88 discrepancy just as it does in all other respects.

IT IS SO ORDERED.

Dated: November 7, 2023                                                                                                 

STEPHEN H. LOCHER

U.S. DISTRICT JUDGE

Footnotes

1. The Creagan Plaintiffs argue that the first coverage action is also relevant because it shows that Great West should be judicially estopped from raising one of the arguments on which Great West relies here. (ECF 117, pp. 13–15.) The Court disagrees. Because the first coverage case involved a different policy with different provisions, judicial estoppel does not apply. Moreover, Great West’s other arguments would entitle it to summary judgment anyway, and thus the issue of judicial estoppel is immaterial to the outcome.