Coverage - Central Analysis Bureau

Lancer Ins. Co. v. Jet Exec. Limousine Serv.

United States District Court for the Northern District of Georgia, Atlanta Division

July 14, 2022, Decided; July 14, 2022, Filed

CIVIL ACTION FILE NO. 1:19-CV-3024-TWT

Reporter

2022 U.S. Dist. LEXIS 125649 *

LANCER INSURANCE COMPANY, Plaintiff, v. JET EXECUTIVE LIMOUSINE SERVICE, INC., et al., Defendants.

Core Terms

coverage, insured, endorsement, Policies, summary judgment, interstate, Transportation, travel, journey, intrastate, genuine issue of material fact, argues, declaration, provisions, trip, continuity, lists, interstate commerce, statutory minimum, cross motion, Undisputed, passengers, Parties, rented, material fact, motor carrier, broker, Reply, hotel, coverage obligation

Counsel: [*1] For Jet Executive Limousine Service, Inc., Defendant: Wesley Clements Taulbee, LEAD ATTORNEY, Taulbee, Rushing, Snipes, Marsh & Hodgin, LLC, Statesboro, GA; James Townshend Budd, PRO HAC VICE, Mabry & McClelland, LLP, Atlanta, GA.

For Philadelphia Indemnity Insurance Company, Defendant: Kim M. Jackson, LEAD ATTORNEY, David Russell Smith, Bovis, Kyle, Burch & Medlin, LLC, Atlanta, GA.

For Cooper-Global Chauffeured Transportation, Inc., Defendant: Gerald B. Kline, Taylor English Duma LLP, Atlanta, GA; William Gordon Leonard, Continuum Legal Group LLP, Atlanta, GA.

For Steven Hoppenbrouwer, Defendant: James Townshend Budd, PRO HAC VICE, Mabry & McClelland, LLP, Atlanta, GA.

For Kent Plowman, Defendant: Brooks P. Neely, Zagoria Law firm, Atlanta, GA; Myrece Rebecca Johnson, Rebecca Beane, Swift, Currie, McGhee & Hiers, LLP, Atlanta, GA.

For Thomas Matthesen, Defendant: Arthur Bryan Baer, LEAD ATTORNEY, The Baer Law Firm, Atlanta, GA.

For Sahil Raina, Robin Raina, Defendants: James Franklin Cook, Jr., LEAD ATTORNEY, Drew Eckl & Farnham LLP, Atlanta, GA; Jeremy Hayes, Boling Rice, LLC, Cumming, GA.

For Wesley Hudson, Brian Dill, Defendants: Davis Kingsley Loftin, Jeffrey Norman Mykkeltvedt, LEAD [*2] ATTORNEYS, Mykkeltvedt & Loftin, LLC, Atlanta, GA; Joe A. King, Jr., Joseph D. Aiello, LEAD ATTORNEYS, PRO HAC VICE, Morris, King & Hodge, P.C., Huntsville, AL.

For Georganna Gullia, Defendant: Barry Goodman, PRO HAC VICE, Goodman & Goodman, LLP, Atlanta, GA; Michael D. Goodman, Goodman & Goodman, Atlanta, GA; Titus Thomas Nichols, Nichols Injury Law, P.C., Marietta, GA.

For Joseph Best, Defendant: Peter A. Law, LEAD ATTORNEY, Denise Hoying, E. Michael Moran, Law & Moran, Atlanta, GA.

For Jessica Barnes, Defendant: Jeff P. Shiver, LEAD ATTORNEY, Shiver Hamilton, LLC -Atl, Atlanta, GA; Alan J. Hamilton, Darrell Wayne Hinson, Shiver Hamilton LLC, Atlanta, GA.

For John Mason, Defendant: Bradley W. Pratt, LEAD ATTORNEY, Pratt Clay, LLC, Atlanta, GA; Charles L. Clay, Jr., LEAD ATTORNEY, Pratt Clay, LLC, Atlanta, GA; Wesley Clements Taulbee, LEAD ATTORNEY, Taulbee, Rushing, Snipes, Marsh & Hodgin, LLC, Statesboro, GA.

For Kenny Strickler, Defendant: Michael K. Beard, LEAD ATTORNEY, Marsh, Rickard & Bryan, P.C., Birmingham, AL; W. Andrew Bowen, LEAD ATTORNEY, Middleton, LLC, Savannah, GA; Paul W. Painter, III, Bowen Painter, LLC, Savannah, GA.

For Tim Sheehy, Defendant: Joseph A. Fried, Nathan [*3] A. Gaffney, LEAD ATTORNEYS, Briant G. Mildenhall, Fried Goldberg LLC, Atlanta, GA.

For Scott Armstrong, Alan Cooling, Defendants: Alexander Vida Salzillo, LEAD ATTORNEY, Waldon Adelman Castilla Hiestand & Prout, Atlanta, GA; Terry Dale Jackson, LEAD ATTORNEY, PRO HAC VICE, Terry D. Jackson, P.C., Atlanta, GA; Stephen G. Lowry, Harris Lowry Manton, LLP – S. Ga, Savannah, GA.

Judges: THOMAS W. THRASH, JR., United States District Judge.

Opinion by: THOMAS W. THRASH, JR.

Opinion

OPINION AND ORDER

This is a declaratory judgment action. It is before the Court on the Plaintiff’s Motion for Summary Judgment [Doc. 237], the Defendants Jessica Barnes and Joseph Best’s Cross Motion for Summary Judgment [Doc. 248], and the Defendant Cooper-Global Chauffeured Transportation, Inc.’s Cross Motion for Summary Judgment [Doc. 264]. For the reasons set forth below, the Plaintiff’s Motion for Summary Judgment [Doc. 237] is GRANTED in part and DENIED in part, the Defendants Jessica Barnes and Joseph Best’s Cross Motion for Summary Judgment [Doc. 248] is GRANTED in part and DENIED in part, and the Defendant Cooper-Global Chauffeured Transportation, Inc.’s Cross Motion for Summary Judgment [Doc. 264] is GRANTED in part and DENIED in part. [*4]

I. Background

On April 5, 2018, a 2011 Freightliner Motor Coach (“the Motor Coach”) was involved in a single-vehicle accident on Interstate 20 in Columbia County, Georgia. (Pl.’s Statement of Undisputed Material Facts in Supp. of Pl.’s Mot. for Summ. J. ¶ 1.) The Motor Coach was owned by the Defendant Jet Executive Limousine Service, Inc. (“Jet”) and was carrying 18 passengers and the driver, Stephen Hoppenbrouwer. (Id. ¶¶ 1-2.) Jet insured the Motor Coach through the Defendant Philadelphia Indemnity Insurance Company. (Id. ¶ 4.) Though there are factual disputes regarding the specifics, the Defendants claim that their reservation of the Motor Coach was made through the Defendants Cooper-Global Chauffeured Transportation, Inc. (“Cooper-Global”) and Hennessy Transportation, Inc. (“Hennessy”), which then referred the reservation to Jet to accommodate the passengers’ specific request. (Defs. Barnes and Best’s Statement of Add’l Fact in Opp’n to Pl.’s Mot. for Summ. J. ¶ 2-4.)

Cooper-Global and Hennessy had five insurance policies issued by the Plaintiff, Lancer Insurance Company (“Lancer”), at the time of the accident. (Pl.’s Statement of Undisputed Material Facts in Supp. of Pl.’s Mot. [*5] for Summ. J. ¶ 5.) Lancer issued Hennessy two commercial auto liability policies, “the Hennessy Primary Policy” and “the Hennessy Excess Policy.” (Compl., Exs. 5 & 6.) Lancer issued Cooper-Global three different policies: “the Cooper-Global Primary Policy,” “the Cooper Global Excess Policy,” and a commercial general liability policy (“the CGL Policy”). (Id., Ex. 1-3.) An endorsement to the CGL Policy names Hennessy as an additional insured. (Id., Ex. 3, at 6.) The Plaintiff filed this suit seeking declaratory relief that these five Policies do not obligate it to provide coverage for any claims resulting from the accident. (Compl. at 13.) The Parties have filed cross motions for summary judgment on these claims, which the Court evaluates below.

II. Legal Standard

Summary judgment is appropriate only when the pleadings, depositions, and affidavits submitted by the parties show no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The court should view the evidence and draw any inferences in the light most favorable to the nonmovant. Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970). The party seeking summary judgment must first identify grounds that show the absence of a genuine issue [*6] of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The burden then shifts to the nonmovant, who must go beyond the pleadings and present affirmative evidence to show that a genuine issue of material fact exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).

III. Discussion

The Plaintiff raises several arguments in favor of its Motion for Summary Judgment. First, the Plaintiff argues that the Hennessy Policies and the Cooper-Global Excess Policy do not impose a duty to defend upon it because the accident did not involve a vehicle covered under the Policies. (Pl.’s Br. in Supp. of Pl.’s Mot. for Summ. J., at 16-20.) Second, the Plaintiff argues that the CGL Policy’s Auto Exclusion precludes coverage of the accident. (Id. at 20-22.) Finally, the Plaintiff argues that the MCS-90B Endorsement of the Cooper-Global Excess Policy does not apply because the bus was completing an intrastate trip. (Id. at 24-25.) After the Plaintiff filed its Motion for Summary Judgment, many of the Defendants responded individually and filed their own Cross-Motions for Summary Judgment. Several Defendants presented their own arguments while adopting additional arguments of their fellow Defendants, particularly those arguments made by Jessica Barnes and Joseph Best. The result is a mosaic [*7] of overlapping arguments presented in different manners. Rather than address each responsive brief separately, the Court will evaluate each disputed Policy in turn, noting specific arguments made by the Parties when necessary to avoid any unwarranted repetition.

A. The Cooper-Global Primary Policy

In its Complaint, the Plaintiff seeks a declaration that it has no obligation to provide coverage under the Cooper-Global Primary Policy. (Compl. at 13.) However, it is undisputed that the Plaintiff has already tendered the Policy’s limit to resolve the claims against its insureds. (Pl.’s Statement of Undisputed Material Facts in Supp. of Pl.’s Mot. for Summ. J. ¶ 55.) Further, the Plaintiff implicitly abandons its claims for such a declaration in its briefing. (Pl.’s Br. in Supp. of Pl.’s Mot. for Summ. J., at 26.) As a result, there is no genuine issue of material fact that the Plaintiff is not entitled to a declaration that it has no coverage obligation under the Cooper-Global Primary Policy.

B. The CGL Policy

The Plaintiff issued Cooper-Global the CGL Policy, which obligated the Plaintiff to “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ [*8] or ‘property damage’ to which this insurance applies.” (Compl., Ex. 4, at 12.) An endorsement to the CGL Policy lists Hennessy as an additional named insured under the CGL Policy. (Id., Ex. 4, at 6.) In support of its motion, the Plaintiff directs the Court to a “standard auto exclusion” included in the Policy which it argues bars coverage of this accident. (Pl.’s Br. in Supp. of Pl.’s Mot. for Summ. J., at 20.) This provision excludes coverage for “‘[b]odily injury’ or ‘property damage’ arising out of the ownership, maintenance, use or entrustment to others of any aircraft, ‘auto’ or watercraft owned or operated by or rented or loaned to any insured.” (Compl., Ex. 4, at 15.) Further, the exclusion notes that it “applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured” if the harms resulted from the “use or entrustment to others of any” automobile “owned or operated by or rented or loaned to any insured.” (Id.) The Plaintiff argues that this exclusion applies to the allegations in the underlying lawsuits regarding the accident. (Pl.’s Br. in Supp. of Pl.’s Mot. for [*9] Summ. J., at 20-22.) The Defendants contest this assessment because the Motor Coach was not “owned or operated or rented or loaned to any insured.” (Defs. Barnes & Best’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 22-23; Def. Cooper-Global’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 15.) In reply, the Plaintiff notes that Georgia courts read auto exclusions broadly, and because these “claims are inextricably linked to the use of an auto[,]” the exclusion must apply. (Pl.’s Reply Br. in Supp. of Pl.’s Mot. for Summ. J. [Doc. 278], at 21.)

By its plain language, the CGL Policy applies to the accident here absent a valid exclusion. The Plaintiff appears to concede as much by focusing its argument exclusively on the auto exclusion. Under Georgia law, the insurer has the burden of proving an exclusion applies. See York Ins. Co. v. Williams Seafood of Albany, Inc., 223 F.3d 1253, 1255 (11th Cir. 2000) (citing Nationwide Mut. Fire Ins. Co. v. Rhee, 160 Ga. App. 468, 471, 287 S.E.2d 257 (1981)). To satisfy its burden, it must show that the injuries alleged in the underlying lawsuits arose out of the use of an auto owned, operated, rented by, or leased to an insured. Clearly, the injuries caused by the accident arose out of the use of an “auto” as defined in the Policy.¹ The question before the Court is whether that auto was owned, operated, rented by, or [*10] leased to an insured.

To answer this question, the Court must first determine who is insured under the CGL Policy, which is covered in Section II of the Policy. Beyond Cooper-Global and Hennessy as corporations, the CGL Policy includes “your ’employees’, . . . but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business.” (Compl., Ex. 4, at 21.)

Given these broad definitions, the Court must determine whether the Motor Coach’s driver, Hoppenbrouwer, is an insured here, as the Parties dispute whether he qualifies as a Cooper-Global or Hennessy employee. The Plaintiff argues that the underlying lawsuits “allege that Hoppenbrouwer operated the Motor Coach as an employee of Hennessy and Cooper-Global.” (Pl.’s Br. in Supp. of Pl.’s Mot. for Summ. J., at 21.). In response, the Defendants characterize the underlying suits as alleging “that Cooper-Global and Hennessy are vicariously liable for Jet/Hoppenbrouwer’s negligence and/or independently liable for their own negligence in selecting and entrusting Hoppenbrouwer to drive” the Motor Coach. (Defs. Barnes & Best’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 22; see also Def. [*11] Sheehy’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 8 (arguing that Hoppenbrouwer was an independent contractor for Cooper-Global and Hennessy, rendering them liable through the CGL Policy).)

In the end, it is not necessary to sort out the exact basis for any liability of Cooper-Global and Hennessy for the actions of Hoppenbrouwer. If he was an insured employee, coverage is excluded under the auto exclusion. If there is vicarious liability under any plausible theory against the named insureds Cooper-Global and Hennessy arising out of the operation of the Motor Coach, coverage is excluded under the auto exclusion. Video Warehouse, Inc. v. S. Tr. Ins. Co., 297 Ga. App. 788, 790-91, 678 S.E.2d 484 (2009) (“The point is, for liability to attach to Video Warehouse under this particular complaint, the employee had to be acting within the scope of his employment or performing duties related to the conduct of Video Warehouse’s business. Yet, if the employee was so acting or was performing such duties, then by definition he was an ‘insured’ under the policy, and under the exclusionary clause, the policy expressly excluded from coverage bodily injury arising out of the use of an automobile owned or operated by such an insured.”). If he was not an insured, there is no coverage under [*12] the policy to begin with. Id. at 791. Therefore, the Plaintiff is entitled to summary judgment with respect to coverage under the CGL Policy.

C. The Cooper-Global Excess Policy

The Parties dispute whether several provisions of the Cooper-Global Excess Policy trigger coverage obligations for the Plaintiff. The Court addresses each of these disputed provisions and endorsements individually.

i. The Motor Coach is Not a Covered Vehicle

In many of the responsive briefs, the Defendants argue that the Motor Coach is a covered vehicle under the Cooper-Global Excess Policy. As discussed above, the Plaintiff concedes that the Cooper-Global Primary Policy could provide coverage of the Motor Coach. (Pl.’s Br. in Supp. of Pl.’s Mot. for Summ. J., at 12-13.) The Defendants argue that the Cooper-Global Excess Policy is a “follow-form” policy as it relates to the Primary Policy, and without an explicit exclusion of coverage, the Motor Coach remains covered under the Excess Policy. (Defs. Barnes & Best’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 16-19; Defs. Hudson & Dill’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 8-14.) The Plaintiff points to a provision in the Cooper-Global Excess Policy dictating that any [*13] conflicting or differing provisions between the two policies give way to the provisions of the Excess Policy. (Pl.’s Reply Br. in Supp. of Pl.’s Mot. for Summ. J., at 3-7.) The Defendants respond by claiming that any conflict that exists between the two Policies is too narrow to eliminate coverage of hired vehicles. (See, e.g., Defs. Barnes & Best’s Reply Br. in Supp. of Defs.’ Cross Mot. for Summ. J., at 3-5.)

Because the resolution of this dispute relies on the interaction between the two Cooper-Global Policies, a summary of the Policies is necessary. The Cooper-Global Primary Policy contains a “Schedule of Coverages and Covered Autos.” (Compl., Ex. 2, at 4.) This Schedule lists a series of coverage options alongside the “Covered Autos,” the coverage limits, and the premiums owed for each option. (Id.) Only those coverage options with a premium charge listed next to it are included in the Policy. (Id.) There are four coverage options with premiums charged: “Liability;” “Uninsured Motorists;” “Physical Damage Specified Causes of Loss Coverage;” and “Physical Damage Collision Coverage.” (Id.) The group of “Covered Autos” under each coverage are indicated by numbers which are defined [*14] in the “Business Auto Coverage Form.” (Compl., Ex. 2, at 4, 64.) All coverages except for “Liability” have only one number—7—listed under the “Covered Autos.” The “Business Auto Coverage Form” shows that 7 stands for the vehicles “described in Item Three of the Declarations[.]” Item Three of the Declarations contains a list of ninety-two vehicles. (Id., Ex. 2, at 5-7.) Thus, all applicable coverages except for the “Liability” coverage apply only to these ninety-two vehicles. The “Liability” coverage applies to three categories of vehicles, listed as “7, 8, 9.” (Id., Ex. 2, at 4.) According to the policy, “8” indicates coverage for vehicles that the insured “lease[s], hire[s], rent[s], or borrow[s].” (Id., Ex. 2, at 64.) “9” indicates coverage for vehicles the insured “do[es] not own, lease, hire, rent, or borrow that are used in connection with [the insured’s] business.” (Id.) Thus, the “Liability” coverage under the Cooper-Global Primary Policy extends beyond the vehicles owned by Cooper-Global and includes unlisted vehicles used in connection with Cooper-Global’s business. And, as discussed above, Lancer has already tendered this Policy’s limit to resolve the claims against its insureds. [*15]

The Defendants argue that the Cooper-Global Excess Policy is a “follow form” policy because of the following language included in the preamble of the “Commercial Excess Liability Coverage Form”:

The insurance provided under this Coverage Part will follow the same provisions, exclusions and limitations that are contained in the applicable “controlling underlying insurance”, unless otherwise directed by this insurance. To the extent such provisions differ or conflict, the provisions of this Coverage Part will apply.

(Id., Ex. 3, at 11.) The Defendants then direct the Court to the “Schedule of Covered Autos,” which identifies twenty-three vehicles as covered autos. (Id., Ex. 3, at 5.) Because the Cooper-Global Excess Policy lists these twenty-three vehicles but does not explicitly exclude coverage for vehicles included under groups “8” and “9” from the Primary Policy, the Defendants argue that this excess coverage applies to those leased and non-leased vehicles used in connection with Cooper-Global’s business. (Defs. Barnes & Best’s Br. in Opp’n to Pl.’s Mot. for Summ. J, at 17-19.) The Defendants also argue that the Policy is at least ambiguous and must be construed against the Plaintiff [*16] and in favor of coverage. (Id. at 19-21.)

The Defendants rely heavily on the absence of an explicit exclusion of the non-owned vehicles covered under the Primary Policy. However, such an exclusion is not necessary here, as the Cooper-Global Excess Policy clearly limits coverage to the twenty-three vehicles specifically identified in the policy. The Cooper-Global Primary and Excess Policies detail the coverages provided through different formats. The Primary Policy lists several different types of coverages and then uses a numeric code to describe the “Covered Autos” to convey this information on one page. (Compl., Ex. 2, at 4.) On the other hand, the Excess Policy only details one type of coverage. (Id., Ex. 3, at 3.) Rather than numeric codes, the Excess Policy includes a “Schedule of Covered Autos for Auto Liability.” (Id., Ex. 3, at 5.) As the text above this list of vehicles states in bolded type, “THIS ENDORSEMENT CHANGES THE POLICY.” (Id.) Here, it seems clear that that the “Schedule of Covered Autos for Auto Liability” in the Excess Policy conflicts with the “Covered Autos” indicated by numeric codes in the Primary Policy. As a result, the Court finds that the collection of Covered [*17] Autos listed in the Primary Policy as “7, 8, 9” gives way to the schedule of Covered Autos under the Excess Policy, and that the Motor Coach does not fall within the Excess Policy’s Covered Autos.

The Defendants argue that only the two lists of vehicles conflict in the two Policies, and therefore the list in the Excess Policy’s schedule should merely replace the list of ninety-two vehicles in the Primary Policy. But that argument assumes these lists represent identical categories, which is incorrect. While the Excess Policy’s schedule lists the covered autos under the Policy, the Primary Policy’s schedule of vehicles merely defines the vehicles included in “Specifically Described ‘Autos'” of the Policy’s Business Auto Coverage Form. (Id., Ex. 2, at 4-7, 64.) Because these lists define different terms within the relevant policies, the Defendants cannot argue that the specific vehicles listed in each Policy constitute the full extent of the differences between the Policies. Both Policies define the set of covered autos differently, and because the Motor Coach is not listed in the Excess Policy’s covered autos, its coverage is not triggered here.

ii. The MCS-90B Endorsements Provide No [*18] Coverage Here

Anticipating an argument by the Defendants, the Plaintiff argues that the Cooper-Global Excess Policy’s MCS-90B Endorsement does not apply to the accident here. (Pl.’s Br. in Supp. of Pl.’s Mot. for Summ. J., at 24-25.) The MCS-90B Endorsement is a means of complying with federal insurance regulations for motor carriers:

An MCS-90 endorsement to an automotive insurance policy obligates an insurer to cover an insured’s negligence involving vehicles subject to the financial responsibility requirements of the Motor Carrier Act. The Motor Carrier Act, in turn, creates minimum levels of financial responsibility for the transportation of property by motor carrier within the United States.

Grange Indem. Ins. Co. v. Burns, 337 Ga. App. 532, 533, 788 S.E.2d 138 (2016) (citation, quotation marks, and alterations omitted). In essence, an MCS-90 endorsement² “creates a suretyship, which obligates an insurer to pay certain judgments against the insured arising from interstate commerce activities, even though the insurance contract would have otherwise excluded coverage.” Id. at 534 (citation and quotation marks omitted). The Plaintiff argues that because the route in this case was entirely contained to Georgia, the MCS-90B endorsement does not apply here. (Pl.’s Br. in [*19] Supp. of Pl.’s Mot. for Summ. J., at 24.) This argument is supported by the statute granting the Secretary of Transportation authority to enforce certain minimum coverage amounts for motor carriers:

The Secretary of Transportation shall prescribe regulations to require minimum levels of financial responsibility sufficient to satisfy liability amounts established by the Secretary covering public liability and property damage for the transportation of passengers for compensation by motor vehicle in the United States between a place in a State and—

(A) a place in another State;

(B) another place in the same State through a place outside of that State; or

49 U.S.C. § 31138(a)(1); see also Canal Ins. Co., 625 F.3d at 249 (holding that the character of the journey at the time of the loss determines the MCS-90 endorsement’s applicability and noting that its position is the majority view).

In response, the Defendants raise several arguments. Several Defendants claim that the endorsement “applies to all federally authorized carriers regardless of” whether the trips occurred in interstate or intrastate travel. (Defs. Hudson & Dill’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 17; see also Def. [*20] Strickler’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 22.) Further, they argue that the endorsement should be construed and applied liberally to serve the legislative intent behind the requirements. (Defs. Hudson & Dill’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 17.) Alternatively, the Defendants Armstrong and Cooling appear to concede that the endorsement requires the trip to be interstate in nature, arguing that the trip here was merely one leg in an interstate trip for individuals traveling from outside Georgia to attend the Masters. (Defs. Armstrong & Cooling’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 4-7.) The Defendants cite Eleventh Circuit case law from a different context that describes intrastate legs of interstate journeys as falling within the meaning of “interstate commerce.” (Id. at 5-6.)

The Eleventh Circuit has acknowledged its case law on MCS-90 endorsements is sparse, and it has not opined on whether such endorsements only cover incidents that occur during interstate journeys. Nat’l Specialty Ins. Co. v. Martin-Vegue, 644 F. App’x 900, 906 (11th Cir. 2016). Here, the Court adopts the majority view that the MCS-90B endorsement’s applicability is determined by whether the vehicle is engaged in interstate travel at the time of the loss, as [*21] this view most closely aligns with the statutory text requiring such endorsements. See 49 U.S.C. § 31138(a)(1); see also Nat’l Specialty Ins. Co., 644 F. App’x at 907 n.9 (adopting, because the parties agreed, the perspective that “the time of the accident is the relevant focal point” in determining certain characteristics that would invoke the MCS90 endorsement).

Having determined the majority view controls here, the Court must assess whether the Motor Coach’s journey between Atlanta and Augusta was an interstate or intrastate trip. In other contexts, the Eleventh Circuit has provided the general rule that “trips within a single state are made in interstate commerce when they are part of a practical continuity of movement of the goods in interstate commerce.” Abel v. S. Shuttle Servs., Inc., 631 F.3d 1210, 1215 (11th Cir. 2011) (quotation marks omitted). For example, in Abel, the Eleventh Circuit held that a shuttle company that transported individuals to and from several Florida airports without leaving the state engaged in interstate commerce. Id. at 1216. Several conditions were critical to the Panel’s analysis: (1) the shuttle passengers had mostly flown from or were about to fly to other states or countries; (2) travelers often boarded these shuttles with tickets purchased in packages that included airfare and hotel accommodations; [*22] and (3) these packages resulted from an arrangement between the shuttle company and online travel companies. Id. at 1216-17. The Eleventh Circuit also cited case law that held “the lack of coordination with other transportation” providers could render a journey “purely intrastate.” Id. at 1216 (quotation marks omitted) (citing Packard v. Pittsburgh Transp. Co., 418 F.3d 246, 258 (3d. Cir. 2005)).

Ultimately, this Court finds that the relevant journey here constituted intrastate travel because there was no practical continuity of movement or evidence of coordination between transportation providers. First, regarding the practical continuity of movement, the undisputed facts show that the Motor Coach’s planned route was from the Atlanta hotel to the Masters Tournament in Augusta. (Pl.’s Statement of Undisputed Material Facts in Supp. of Pl.’s Mot. for Summ. J. ¶ 3.) The Defendants argue that the Motor Coach’s journey must be “viewed as part of overall, continuous interstate travel” because the Defendants’ “trips began and terminated outside Georgia[.]” (Defs. Armstrong & Coolings’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 6; see also Defs. Barnes and Best’s Response to Pl.’s Statement of Undisputed Material Facts in Supp. of Pl.’s Mot. for Summ. J. ¶ 3.) The Defendants urge [*23] this Court to read the endorsement liberally to align its coverage with the “evident purpose” of the federal requirement. (Defs. Hudson & Dill’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 23.) However, the Court is not entitled to construe “interstate commerce” more broadly than precedent allows. The fact that the Defendants experienced the Motor Coach route as merely one leg of their trip to Augusta is not determinative of whether the Motor Coach maintained the practical continuity of their journey. Such a finding would massively expand activities that fall within interstate travel, rendering every outing taken by out-of-state tourists interstate commerce. Instead, the Court finds there is no practical continuity of movement between the Defendants’ interstate journeys to arrive in Atlanta and the Defendants’ intrastate journey from the Atlanta hotel to Augusta. In essence, the arrival at the Atlanta hotel interrupts the Defendants’ practical continuity of movement in interstate travel.

Second, and related to the practical continuity of movement, there was no coordination between the interstate and intrastate transportation providers. Evidence in the record indicates that the Motor [*24] Coach passengers were invited to the Masters by an accounting firm, Cherry Bekaert, and were responsible for their own travel from the Atlanta airport to the hotel. (Thompson Dep., at 34:1-5.) Once the passengers were at the hotel, Cherry Bekaert arranged for bus travel to Augusta with Hennessy. (Defs. Armstrong & Cooling’s Add’l Material Facts ¶ 78.) This lack of coordination highlights this disconnect between the Defendants’ interstate and intrastate travel. Because these two legs of the journey were not coordinated and did not represent a practical continuity of movement, the Motor Coach’s journey was purely intrastate travel, and the Cooper-Global Excess Policy’s MCS-90B endorsement therefore does not apply here.

iii. The Form F Endorsements Do Not Apply to Cooper-Global

The Parties make similar arguments regarding the Form F endorsements attached to Hennessy and Cooper-Global’s Policies. As some of the Defendants describe it, a “Form F Endorsement is an intrastate version of an MCS-90B Endorsement[.]” (Defs. Armstrong & Cooling’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 12.) The Form F endorsements at issue here are largely identical to those evaluated in Ross v. Stephens, 269 Ga. 266, 269, 496 S.E.2d 705 (1998). In that case, the [*25] Supreme Court of Georgia found that such an endorsement indicates an agreement “that the insurer would pay the statutory minimum to a party injured by [an insured’s] vehicle not specifically identified in the insurance policy.” Id. Georgia’s Public Service Commission (“PSC”) has set the statutory minimum at $100,000 per claimant and up to $500,000 per incident involving a vehicle with a seating capacity of over twelve passengers. See Ga. Comp. R. & Regs. 515-16-11-.03. The Plaintiff argues that because it already offered to tender $1.5 million under the Cooper-Global Primary Policy, the Form F endorsement imposes no additional obligation. (Pl.’s Br. in Supp. of Pl.’s Mot. for Summ. J., at 25.)

The Defendants raise a variety of arguments in response to the Plaintiff’s view of the Form F endorsement. Several Defendants argue that Georgia law requires payment of the full policy amount under Form F, not just the statutory minimum. (Defs. Armstrong & Cooling’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 14.) Further, these Defendants argue that the Plaintiff’s tender of $1.5 million under Cooper-Global’s Primary Policy does nothing to relieve Hennessy of its Form F obligations. (Id. at 16.) Other Defendants argue Hennessy [*26] must pay the statutory minimum of $500,000 under the Form F endorsements. (Defs. Hudson & Dill’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 23-27.)

The Defendants imply that Cooper-Global’s tender of its Primary Policy limit extinguishes its Form F liability. (Id. at 26 (“Allowing Hennessy to escape payment simply because Cooper-Global had already tendered an offer would create perverse incentives on the part of the insurers of motor carriers to attempt to wait each other out.”); see also Defs. Armstrong & Cooling’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 16 (“Lancer’s tender for Cooper Global of its $1.5 million auto policy limits does nothing for Hennessy in the face of the verdicts[.]”).) This implication aligns with the Supreme Court of Georgia’s view that when the statutory minimum is paid to an injured party, Georgia’s “public policy is achieved by the assurance to the motoring public of existence of the financial compensation the PSC has deemed minimally necessary[,] . . . and the insurer has provided no more than the liability coverage it agreed to provide the motor common carrier.” Ross, 269 Ga. at 708. As determined above, the Plaintiff’s tender under the Cooper-Global Primary Policy provides [*27] coverage as to this accident for at least $1.5 million. This amount exceeds the Form F endorsement minimum and satisfies the public policy of compensating victims to the extent determined by the PSC. Cf. Nat’l Specialty Ins. Co., 644 F. App’x at 906-07 (finding that MCS-90 endorsements do not apply where a carrier’s other insurance coverage provides compensation equal to or greater than the statutory minimum). Thus, the Plaintiff’s tender under the Cooper-Global Primary Policy extinguishes any Form F endorsement coverage under the Cooper-Global Excess Policy.

As a result of the above analyses, none of the disputed provisions or endorsements of the Cooper-Global Excess Policy are triggered by this accident. Therefore, there is no genuine issue of material fact that the Plaintiff is entitled to summary judgment on its declaratory claim that is owes no coverage under the Cooper-Global Excess Policy here.

D. The Hennessy Policies

The Hennessy Policies receive much less attention in the briefing than Cooper-Global’s Policies. For example, the Defendants Barnes and Best only address the Cooper-Global Policies, and most Defendants adopt this briefing as their own. (See Defs. Barnes & Best’s Br. in Opp’n to Pl.’s Mot. for Summary Judgment, [*28] at 5 (noting that Lancer issued five policies to Cooper-Global and Hennessy but only the three Policies issued to Cooper-Global “unambiguously provide coverage”).) The Plaintiff cites provisions of the Hennessy Policies that define the covered vehicles and notes that the Policies do not include the Motor Coach. (Pl.’s Br. in Supp. of Pl.’s Mot. for Summ. J., at 16-18.) None of the Defendants argue to the contrary.

The only arguments implicating the Hennessy Policies are related to the Policies’ Form F endorsements. (Defs. Hudson & Dill’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 23-27; Defs. Armstrong & Cooling’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 12-16.) The Defendants argue that the tender of $1.5 million under the Cooper-Global Primary Policy does nothing to alleviate Hennessy’s Form F liability under its own Policies. (See, e.g., Defs. Hudson & Dill’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 25-26.) In response, the Plaintiff argues that Hennessy is covered under Cooper-Global’s Primary Policy. To support this contention, the Plaintiff points to the Cooper-Global Primary Policy’s definition of the insureds³ and an expert report stating that if Cooper-Global and Hennessy [*29] merged on February 1, 2018, Cooper-Global’s insurance would cover Hennessy. (Pl.’s Reply Br. to Defs. Armstrong & Cooling’s Br. in Opp’n to Pl.’s Mot for Summ. J., at 18; Pl.’s Reply Br. to Defs. Hudson & Dill’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 15.) However, the Plaintiff points to no evidence indicating a merger between the companies occurred on February 1, 2018, beyond the pleadings. Indeed, one of the Plaintiff’s filings concedes that “there is conflicting evidence regarding whether Cooper-Global and Hennessy merged.” (Pl.’s Response to Defs. Hudson & Dill’s Statement of Add’l Fats ¶ 10.) Further, the Plaintiff does not point to a specific provision of the Cooper-Global Primary Policy’s definitions that would include Hennessy. Unlike the CGL Policy, which explicitly includes both Cooper-Global and Hennessy as named insureds, the Cooper-Global Policy does not name Hennessy. Because there appears to be a genuine dispute as to whether the two companies merged before the accident, and because there is no other evidence suggesting Hennessy is a named insured under the Cooper-Global Excess Policy, Cooper-Global’s tender of $1.5 million does not alleviate Hennessy’s Form F liability. [*30]

The Plaintiff relies exclusively on this tender to relieve Hennessy’s Form F liability. Because none of the other Policies trigger any coverage as to Hennessy, there is insufficient coverage to meet the statutory minimum of $500,000. Thus, the Form F endorsements of the Hennessy Policies are triggered by the accident, and there is no genuine issue of material fact that the Plaintiff is not entitled to a declaration that it has no coverage obligations under the Hennessy Policies.

E. The Defendants’ Remaining Arguments Fail

i. O.C.G.A. § 33-24-14 Does Not Preclude Reliance on Exclusions

The Defendants Hudson and Dill claim that the Plaintiff “failed to prove” it delivered the Policies to Cooper-Global prior to the accident, and that under Georgia law, such a failure renders the Plaintiff unable to rely upon exclusions in those Policies. (Defs. Hudson & Dill’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 14-15.) However, the Defendants point to no evidence in the record suggesting the Policies were not delivered to Cooper-Global. Instead, the Defendants place the burden on the Plaintiff to prove such delivery was made and insist that “whether Cooper-Global [] received the policy is an issue of disputed [*31] f^act to be decided by a jury[.]” (Id. at 15.) Bare accusations that the delivery did not occur are insufficient at this stage in the proceedings to create a genuine issue of material fact. As a result, Georgia law does not prevent the Plaintiff from relying on exclusions within the Policies here.

ii. The Defendants Fail to Present Evidence of Dual Agency

The Defendants Robin and Sahil Raina argue that a dual agent for the Plaintiff and its insureds was responsible for the purchase of these Policies. (Defs. Raina & Raina’s Br. in Opp’n to Pl.’s Mot. for Summ. J., at 3-4.) The Raina Defendants point to evidence in the record that the Plaintiff paid Cooper-Global and Hennessy’s insurance broker a percentage on their policy purchases. (Rose Dep. at 41:5-8.) However, under Georgia law, insurance brokers “are generally considered the agent of the insured, not the insurer.” Eur. Bakers, Ltd. v. Holman, 177 Ga. App. 172, 173, 338 S.E.2d 702 (1985). Insurance brokers may be considered agents of the insurer under two circumstances: first, “if the plaintiff brings forth evidence that the insurer granted the agent or broker authority to bind coverage on the insurer’s behalf[;]” and second, “if an insurer holds out an independent agent as its agent and an insured justifiably [*32] relies on such representation.” Popham v. Landmark Am. Ins. Co., 340 Ga. App. 603, 606, 798 S.E.2d 257 (2017) (quotation marks omitted). The Raina Defendants rely solely on the Plaintiff’s payment to the insurance broker in arguing there remains a genuine issue of material fact as to dual agency. Under Georgia law, this is insufficient. Without evidence in the record indicating the Plaintiff’s grant of authority to bind it or the Plaintiff’s holding out of the broker as an agent, the Raina Defendants’ argument fails.

IV. Conclusion

In summary, there is no genuine issue of material fact that the Plaintiff is entitled to a declaration that it has no coverage obligations under the Cooper-Global Excess Policy and the CGL Policy. There is also no genuine issue of material fact that the Plaintiff is not entitled to a declaration that it has no coverage obligations under the Cooper-Global Primary Policy and the Hennessy Policies. As a result, the Plaintiff’s Motion for Summary Judgment [Doc. 237] is GRANTED in part and DENIED in part, the Defendants Jessica Barnes and Joseph Best’s Cross Motion for Summary Judgment [Doc. 248] is GRANTED in part and DENIED in part, and the Defendant Cooper-Global Chauffeured Transportation, Inc.’s Cross Motion for Summary Judgment [Doc. [*33] 264] is GRANTED in part and DENIED in part. Because the Court has decided these motions without the need for oral argument, the pending motions for oral argument [Docs. 250 & 254] are DENIED as moot. The Clerk is directed to enter a final judgment in favor of the Plaintiff declaring that there is no coverage for the accident described in the Complaint with respect to the Cooper-Global Excess Policy and the CGL Policy.

SO ORDERED, this 14th day of July, 2022.

/s/ Thomas W. Thrash, Jr.

THOMAS W. THRASH, JR.

United States District Judge

¹“Auto” is broadly defined in the CGL Policy to include any “land motor vehicle . . . designed for travel on public roads. (Compl. Ex. 4, at 24.)

²MCS-90 endorsements apply to motor carriers that transport property, while MCS-90B endorsements apply to motor carriers of passengers. Compare 49 C.F.R. § 387.7 with 49 C.F.R. § 387.31. Federal appellate courts have found that their MCS-90 precedents control their MCS-90B interpretations and vice versa. See, e.g., Canal Ins. Co. v. Coleman, 625 F.3d 244, 249 n.7 (5th Cir. 2010)

³The Plaintiff’s briefing cites to Doc. 102 for this contention, but that docket entry is a motion to appear pro hac vice. Instead, the Court assumes that the Plaintiff intended to cite to Doc. 1-02, which is the Cooper-Global Primary Policy.

Wesco Ins. Co. v. Brad Ingram Constr.

United States District Court for the Northern District of California

June 15, 2022, Decided; June 15, 2022, Filed

Case No. 21-cv-05682-WHO

Reporter

2022 U.S. Dist. LEXIS 111041 *; __ F.Supp.3d __

WESCO INSURANCE COMPANY, Plaintiff, v. BRAD INGRAM CONSTRUCTION, Defendant.

Core Terms

dust, pollutant, pollution exclusion, debris, asbestos, insured, truck, summary judgment, loaded, duty to defend, contaminant, layperson, exposure, allegations, pesticides, cleanup, spread, coverage, irritant, environmental pollution, chemicals, hazardous, ceiling, dispersal, airborne, apartment building, Merriam-Webster, scraping, parties, Courts

Counsel: [*1] For Wesco Insurance Company, a Delaware corporation, Plaintiff: Daniel N Katibah, LEAD ATTORNEY, Nielsen Katibah LLP, San Rafael, CA USA; James Christian Nielsen, Nielsen Katibah LLP, San Rafael, CA USA; Megan Winter Wendell, Nielsen Katibah LLP, San Rafael, CA USA.

For Brad Ingram Construction, doing business as Brad Ingram Construction, Inc., Defendant: SAMUEL Fayette BARNUM, LEAD ATTORNEY, Law Offices of Samuel F. Barnum APC, San Rafael, CA USA.

Judges: William H. Orrick, United States District Judge.

Opinion by: William H. Orrick

Opinion

ORDER GRANTING IN PART AND DENYING IN PART CROSS-MOTIONS FOR SUMMARY JUDGMENT

Re: Dkt. Nos. 20, 22

Before me are cross-motions for summary judgment on a single issue: whether plaintiff Wesco Insurance Company (“Wesco”) owes a duty to defend Brad Ingram Construction (“Ingram”) against a lawsuit arising from the cleanup of the 2018 Camp Fire. The central question is the applicability of the pollution exclusion provision in Ingram’s insurance policy. The toxic dust left behind by the wildfire falls within the policy’s definition of “pollutant.” It was released when workers loaded and unloaded debris into the truck that hauled it out of the burn zone. Given the heavy regulation of the [*2] cleanup effort evidenced by the hazardous materials gear worn by those involved, a reasonable layperson would consider the release of toxic dust in this context to be environmental pollution. The underlying matter thus falls within the pollution exclusion provision, meaning that Wesco does not owe a duty to defend. Wesco’s motion for summary judgment is GRANTED; Ingram’s is DENIED.

BACKGROUND

I. FACTUAL BACKGROUND

The events giving rise to this litigation trace back to the devastating Camp Fire that destroyed the city of Paradise, California, killing dozens of people and razing thousands of buildings in its path. The fire left behind millions of pounds of toxic debris, prompting the state of California to embark on a massive cleanup effort. See Wesco Mot. for Summ. J. (“Wesco MSJ”) [Dkt. No. 20] 1:23-25. The California Department of Resources, Recycling, and Recovery (“CalRecycle”) hired Ceres Environmental Services (“Ceres”) as one of three prime contractors coordinating the cleanup of unincorporated areas outside of Paradise. See id. at 5:4-9. In turn, Ceres hired different subcontractors to carry out the work, including Garlow Transport (“Garlow”), a trucking company. Id. at 1:26-27. [*3] A Garlow employee named Richard Vargas worked on the project during the summer of 2019, driving “hundreds of loads of debris from work sites to hazardous waste dumps.” Id. at 1:27-2:1.

Vargas alleges that “because the debris was known to be a health hazard,” CalRecycle “recognized that the nature of the material being handled at the cleanup required added emphasis on safety.” See Stipulation (“Stip.”) [Dkt. No. 21], Ex. B (“Vargas Compl.”) ¶ 15.¹ Specifically, Vargas contends that CalRecycle recognized “the potential that toxins could become airborne during debris removal.” Id. ¶ 16. As a result, CalRecycle conducted safety daily meetings, required decontamination zones where workers suited on and off, and set up air monitoring stations to monitor for airborne toxins. Id. ¶¶ 15-16. It also “had an expectation that on-site crews would wear the proper safety equipment.” Id. ¶ 15.

Over the summer, Vargas drove to the site, where workers loaded debris into his truck, stirring up clouds of dust that entered the vehicle through its ventilation system. Id. ¶ 22. Once the truck was loaded, Vargas stepped into the dust in order to tarp the load before driving it to the designated waste facility. [*4] Id. ¶ 23. Once there, Vargas would get out of the truck, remove the tarp, and dump the load, again exposing him to the dust. Id. Although the on-site workers who loaded Vargas’s truck wore hazardous material suits and respirators, Vargas was not provided nor told that he needed “any type of respiratory protection.” Id. ¶ 22.

Over the course of the summer, Vargas became ill. In the fall of 2019, he was “unexpectedly diagnosed with sarcoidosis, a disabling immune disease linked to exposure to environmental toxics.” See id. ¶ 3. Before this diagnosis, Vargas “had never previously had any similar type of health problem.” Id. ¶ 25.

Vargas sued Ceres and CalRecycle in August 2020, alleging that they did not protect him from the “clouds of toxic dust” during the loading and unloading of his truck in part by failing to provide any respiratory protection, take steps to suppress the dust, or warn of the need to avoid such exposure. See id. ¶¶ 32, 40, 50. As a result, Vargas alleges, he was exposed to harmful levels of toxic dust that caused his sarcoidosis. Id. ¶¶ 33, 41, 53.

On September 30, 2020, Ceres filed a cross-complaint against Garlow and another subcontractor, Ingram, seeking indemnity [*5] for the damages sought by Vargas. See Stip., Ex. C ¶ 8. The cross-complaint did not raise new allegations; rather, it relied on those made in Vargas’s initial complaint, which it attached as an exhibit. See id. ¶ 9.

On December 8, 2020, Ingram tendered the cross-complaint to Wesco, its insurer. See Stip., Ex. D. On January 15, 2021, Wesco sent Ingram a letter disclaiming its duty to defend, in part asserting that the matter fell within the policy’s “total pollution exclusion endorsement.” Stip., Ex. F. Ingram challenged the disclaimer, which Wesco later affirmed. Stip., Exs. G, H.

II. THE POLICY

Wesco issued a commercial general liability insurance policy to Ingram, effective from April 1, 2019, through April 1, 2020. Stip., Ex. A (“Policy”) at 161.² The provisions relevant to the motions at hand are as follows:

Coverage A states that Wesco

will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. [Wesco] will have the right and duty to defend the insured against any “suit” seeking those damages. However, [Wesco] will have no duty to defend the insured against any “suit” seeking damages [*6] for “bodily injury” or “property damage” to which this insurance does not apply.

Id. at 043.

The policy defines “bodily injury” as “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.” Id. at 055.³ But the policy excludes coverage of

“[b]odily injury” or “property damage” which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time.

Id. at 081 (modifying the standard pollution exclusion language at 045).⁴ It defines “pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.” Id. at 057.

III. PROCEDURAL BACKGROUND

Wesco filed this lawsuit on July 23, 2021, seeking declaratory judgment that it owed no duty to defend or indemnify Ingram against the cross-complaint. See Dkt. No. 1. The parties agree that the sole issue presented in the litigation was “whether Wesco’s pollution exclusion bars coverage, and thus exempts Wesco from a duty to defend the Vargas [*7] lawsuit.” See Wesco MSJ at 8:1-3 (citing Dkt. No. 12); Ingram MSJ at 7:6-7.

In April and May of 2022, the parties filed cross-motions for summary judgment on this question. See Dkt. Nos. 20, 22. I heard arguments from the parties on June 8, 2022.

LEGAL STANDARD

Summary judgment on a claim or defense is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). In order to prevail, a party moving for summary judgment must show the absence of a genuine issue of material fact with respect to an essential element of the non-moving party’s claim, or to a defense on which the non-moving party will bear the burden of persuasion at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). Once the movant has made this showing, the burden then shifts to the party opposing summary judgment to identify “specific facts showing there is a genuine issue for trial.” Id. at 324. The party opposing summary judgment must then present affirmative evidence from which a jury could return a verdict in that party’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).

On summary judgment, the court draws all reasonable factual inferences in favor of the non-movant. Id. at 255. In deciding a motion for summary judgment, “[c]redibility [*8] determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.” Id. However, conclusory and speculative testimony does not raise genuine issues of fact and is insufficient to defeat summary judgment. See Thornhill Publ’g Co., Inc. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979).

DISCUSSION

An insurer’s duty to defend is “broader than the duty to indemnify”; it “may owe a duty to defend its insured in an action in which no damages ultimately are awarded.” Montrose Chem. Corp. v. Superior Court, 6 Cal. 4th 287, 295, 24 Cal. Rptr. 2d 467, 861 P.2d 1153 (1993) (citation omitted). Whether an insured owes such a duty is “assessed at the very outset of the case” by comparing the complaint’s allegations and the policy’s terms. See Hartford Cas. Ins. Co. v. Swift Distrib., Inc., 59 Cal. 4th 277, 287, 172 Cal. Rptr. 3d 653, 326 P.3d 253 (2014). The duty also exists “where extrinsic facts known to the insurer suggest that the claim may be covered.” Id. (citation omitted). “[T]he existence of a duty to defend turns not upon the ultimate adjudication of coverage under its policy . . . but upon those facts known by the insurer at the inception of a third-party lawsuit. Hence, the duty may exist even where coverage is in doubt and ultimately does not develop.” Montrose, 6 Cal. 4th at 295 (citation and quotation marks omitted).

“While the duty to defend is broad, it is not unlimited; it is measured by the nature and kinds of risks [*9] covered by the policy.” Swift, 59 Cal. 4th at 288 (citing Waller v. Truck Ins. Exch., Inc., 11 Cal. 4th 1, 19, 44 Cal. Rptr. 2d 370, 900 P.2d 619 (1995)). An insurer and insured have different burdens when seeking declaratory relief regarding a duty to defend. Id. As the California Supreme Court has stated:

To prevail, the insured must prove the existence of a potential for coverage, while the insurer must establish the absence of any such potential. In other words, the insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot.

Montrose, 6 Cal. 4th at 300 (emphasis in original).

“Interpretation of an insurance policy is a question of law and follows the general rules of contract interpretation.” MacKinnon v. Truck Ins. Exch., 31 Cal 4th 635, 647, 3 Cal. Rptr. 3d 228, 73 P.3d 1205 (2003) (citing Waller, 11 Cal. 4th at 18). Under California law, the parties’ mutual intention at the time the contract is formed governs interpretation. See Cal. Civ. Code § 1636. To determine this intent, “[t]he rules governing policy interpretation require us to look first to the language of the contract in order to ascertain its plain meaning or the meaning a layperson would ordinarily attach to it.” Waller, 11 Cal. 4th at 18. Courts consider the “clear and explicit meaning of these provisions, interpreted in their ordinary and popular sense, unless used by the parties in a technical sense or a special meaning is given to them by usage.” Swift, 59 Cal. 4th at 288 (citation and [*10] quotation marks omitted). Courts “must also interpret the language in context, with regard to its intended function in the policy.” Id. (citation omitted).

Courts have grappled with pollution exclusions similar, if not identical, to the one at hand. The California Supreme Court thoroughly explained the history and varying interpretations of such exclusions in one of the state’s seminal cases on the issue, MacKinnon. See 31 Cal. 4th at 643-47. Courts in California have considered pollution exclusions in the context of pesticides sprayed at apartment buildings, silica dust created during sandblasting operations, asbestos disturbed during the scraping of “popcorn” ceilings, dirt and rocks placed in creek beds, and chemicals that seeped into groundwater. See, e.g., id. at 639; Garamendi v. Golden Eagle Ins. Co., 127 Cal. App. 4th 480, 483, 25 Cal. Rptr. 3d 642 (2005); The Villa Los Alamos Homeowners Ass’n v. State Farm Gen. Ins. Co. (“Villa Los Alamos”), 198 Cal. App. 4th 522, 527 (2011); Ortega Rock Quarry v. Golden Eagle Ins. Co., 141 Cal. App. 4th 969, 979-80, 46 Cal. Rptr. 3d 517 (2006); California v. Allstate Ins. Co., 45 Cal. 4th 1008, 1016, 90 Cal. Rptr. 3d 1, 201 P.3d 1147 (2009).

The parties have not pointed me toward any case law interpreting such an exclusion’s applicability to injuries allegedly arising from toxic matter left behind by a wildfire. But the law that does exist points to three primary issues. First, is the toxic dust that allegedly caused Vargas’s sarcoidosis a “pollutant” as defined by the policy? Second, was his injury caused by the pollutant’s “release” or “dispersal”? Third, do the allegations amount [*11] to an “act of pollution,” which is covered by the exclusion, or an “ordinary act[] of negligence involving toxic chemicals,” which is not. See MacKinnon, 31 Cal. 4th at 639, 654. I address each in turn.

I. “POLLUTANT”

Vargas alleges that he was exposed to “clouds of toxic dust” during the loading and unloading of the debris that he hauled away from the Camp Fire site, and that he developed sarcoidosis from that exposure. See, e.g., Vargas Complaint ¶¶ 32-33, 41.⁵ The first question is whether that toxic dust is a “pollutant” as defined by the insurance policy.

The policy defines a “pollutant” as “any solid . . . irritant or contaminant, including . . . waste.” Wesco MSJ at 9:9-14. Wesco asserts that toxic dust is undeniably a pollutant.

Ingram contends that “waste” means sewage, pointing to the California Court of Appeal’s interpretation of the term used in an identical pollution exclusion in Griffin Dewatering Corporation v. Northern Insurance Company of New York, 176 Cal. App. 4th 172, 204, 97 Cal. Rptr. 3d 568 (2009). See Ingram MSJ at 19:7-12. Moreover, it argues that the final sentence of the definition—”Waste includes materials to be recycled, reconditioned or reclaimed”—signals that “‘waste’ refers to ‘industrial byproducts,’ not organic matter that might have caused contamination,” such as dust and debris created by a natural event Id. [*12] at 19:14-20.

But the toxic dust need not be “waste” to be a pollutant. The policy defines “pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” Policy at 057 (emphasis added). “Any” is ordinarily understood to be an expansive term; the Merriam-Webster dictionary defines it as “one or some indiscriminately of whatever kind” or “unmeasured or unlimited in amount, number, or extent.” Any, Merriam-Webster, https://www.merriam-webster.com/dictionary/any (last visited June 14, 2022). And the word “including” does not limit pollutants to “waste”—or any other matter on the list. “Including” is generally not understood to be a limiting term, nor is it defined as one. Merriam-Webster defines “include” as “to take in or comprise as part of a whole or group.” Include, Merriam-Webster, https://www.merriam-webster.com/dictionary/include (last visited June 14, 2022). In this context, a layperson would understand the word as indicating some (but not all) examples of pollutants—a non-exhaustive list of solid, liquid, gaseous or thermal irritants or contaminants. Importantly, she would understand, based [*13] on the word “including,” that the list did not exclude other matters—for example, dust.

MacKinnon cautions courts not to be held hostage by the dictionary definitions of key terms in the pollution exclusion, however. See 31 Cal. 4th at 649 (“Although examination of various dictionary definitions of a word will no doubt be useful, such examination does not necessarily yield the ‘ordinary and popular’ sense of the word if it disregards the policy’s context.”). It instructs the court to “put itself in the position of a layperson and understand how he or she might reasonably interpret the exclusionary language.” Id.

A layperson would interpret “toxic dust” to be an irritant or contaminant. Dust on its own can irritate a person or contaminate an area; allegedly toxic dust even more so. This reading is supported by other California courts that also recognized dust as a pollutant as defined by pollution exclusions. See, e.g., Cold Creek Compost, Inc. v. State Farm Fire & Cas. Co., 156 Cal. App. 4th 1469, 1486, 68 Cal. Rptr. 3d 216 (2007) (holding that dust from a compost facility that spread to area homes was a pollutant); Garamendi, 127 Cal. App. 4th at 485-86 (holding that silica dust fell within the “broad definition of ‘any solid, liquid, gaseous, or thermal irritant or contaminant'” and was identified in federal regulations as an air contaminant).

Considering the [*14] policy exclusion’s expansive language, the general understanding of dust as an irritant or contaminant, and other courts’ interpretation of dust as a pollutant, in this context a layperson would understand toxic dust to be a pollutant as defined by the policy.⁶

II. “RELEASE”

The next question is whether Vargas’s injury was caused by the “actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape” of that toxic dust. See Policy at 081. The parties focus on two of those actions: “release” and “dispersal.” See Wesco MSJ at 9:15-16; Ingram MSJ at 16:4-9.

Two cases are particularly helpful here. MacKinnon examined “release” in the context of pesticides sprayed at an apartment building. 31 Cal. 4th at 639-40. The court first turned to the Webster’s Dictionary definition: “the act of liberating or freeing: discharge from restraint.” Id. at 650. It determined that the word “release” (and “escape,” which was also at issue) “connote some sort of freedom from containment” and that it “would be unusual to speak of the normal, intentional application of pesticides as a ‘release’ or ‘escape’ of pesticides.” Id. at 651.

In Villa Los Alamos, the question was whether asbestos was “released” during the scraping [*15] of acoustical “popcorn” ceilings in an apartment building. 198 Cal. App. 4th at 527. The Court of Appeal held that it was, writing that a reasonable insured would understand a release to occur when “the scraping of acoustical ceiling material freed asbestos from containment” and the asbestos “became airborne and spread” throughout the building and onto its exterior grounds. Id. at 540. The court noted that widespread dispersal was not necessary for a release to occur, as there was “no safe level of exposure to asbestos.” Id.

Ingram’s overarching argument is that in order for a pollutant to be released, it must move from a contained to uncontained state under MacKinnon, and because the toxic dust was never contained, it could not be released. See Ingram MSJ at 19:23-20:15. It points to various dictionary entries defining “contain” as to “confine” or “have within,” and “containment” as “the act of containing: restraint, constraint, control.” Ingram Reply [Dkt. No. 26] 2:1-3:5. According to Ingram, there was no such restraint, constraint, or control of the toxic dust, as it was “freestanding on open ground” until the removal work began. See Ingram MSJ at 16:4-7.

Wesco points to Villa Los Alamos to argue that the toxic dust was released [*16] because it was disturbed during the cleanup operation. See Wesco MSJ at 9:21-10:1. According to Wesco, the toxic debris “was going nowhere absent massive cleanup operations.” See Wesco Reply [Dkt. No. 25] 8:1-4. It then argues that the dust was a byproduct of that debris “and thus by definition had been contained within the mountains of removed debris.” Id. at 8:4-7.

The underlying allegations mirror the release of the asbestos in Villa Los Alamos. Vargas contends that as workers loaded debris into his truck, “they stirred up clouds of dust, which then came into [his] truck through its ventilation system.” Vargas Compl. ¶ 22; see also ¶ 24 (describing “the dust clouds created during the loading of [his] truck”). Moving the debris is akin to scraping the ceiling; both caused the pollutant at issue to become airborne and spread. In Villa Los Alamos, the asbestos spread inside and around the apartment building. 198 Cal. App. 4th at 540. At the work site, the toxic dust spread around and inside Vargas’s truck. Vargas Compl. ¶ 23. Moreover, like the asbestos in Villa Los Alamos, the allegations in Vargas’s complaint indicate that there was no safe level of exposure to the toxic dust, as shown by the protective [*17] gear that workers wore and air monitoring stations located around the worksite. See id. ¶¶ 15-16.

Ingram looks to MacKinnon, but the dictionary definitions that Ingram offers are not dispositive. Whether the dust was contained within the debris or sitting on top of it is a distinction without a difference—moving the debris (and thereby causing the dust to become airborne and spread) allegedly caused Vargas’s injury, as did scraping the ceiling (and thereby causing the asbestos to become airborne and spread) in Villa Los Alamos. Accordingly, a layperson would consider the toxic dust “released” as alleged in Vargas’s complaint.⁷

III. “ACT OF POLLUTION”

The critical question set forth in MacKinnon is whether the alleged injury arises from an event “commonly thought of as pollution”—i.e., “environmental pollution” or an “act of pollution.” See 31 Cal. 4th at 653-54. The MacKinnon court drew a distinction between injuries resulting from environmental pollution, which fall within pollution exclusions, and “ordinary acts of negligence involving toxic chemicals,” which do not. See id. at 639. Otherwise, the court held, the literal reading of pollution exclusions could yield absurd and unreasonable results. See id. at 650. It offered some examples:

The application [*18] of iodine onto a cut through an eyedropper may be literally characterized as a discharge or release of an irritant. . . . A child’s accidental ingestion of a pesticide or other toxic substance negligently left in an empty soft drink bottle would be barred. Yet few if any would think of these injuries as arising from “pollution” in any recognizable sense of that term.

Id. The court further noted that the terms “discharge, dispersal, release or escape,” when used alongside “pollutant,” “commonly refer to the sort of conventional environmental pollution at which the pollution exclusion was primarily targeted.” Id. at 653. In order to determine whether a pollution exclusion applies—whether the injury arose from environmental pollution or an ordinary act of negligence involving a harmful substance—the court “must attempt to put itself in the position of a layperson and understand how he or she might reasonably interpret the exclusionary language.” See id. at 649.

MacKinnon acknowledged that “terms such as ‘commonly thought of as pollution,’ or ‘environmental pollution,’ are not paragons of precision, and further clarification may be required.” Id. at 654. In evaluating the case at hand, the court admitted that “pesticides may [*19] be pollutants under some circumstances.” See id. However, it ultimately concluded that the pollution exception did not apply, as a reasonable policyholder would not think that the “normal application of pesticides around an apartment building in order to kill yellow jackets,” although negligent, was an act of pollution. See id.

In Villa Los Alamos, the Court of Appeal held that releasing asbestos by scraping ceilings was not akin to an “ordinary” act of spraying pesticides. 198 Cal. App. 4th at 537. Several factors played into the court’s decision. First, it cited the awareness of both the homeowners’ association and contractor that the ceiling contained asbestos. See id. Next, given the strict regulation of “renovation or demolition activity which disturbs asbestos-containing constructional materials,” the court noted that it was “highly unlikely that a homeowner, on his or her own, could remove acoustical ‘popcorn’ ceiling containing asbestos without violating a myriad of laws.” See id. at 538. Conversely, a homeowner could, on her own, purchase and apply pesticides at her home to kill insects. See id. at 537-38. In addition, the court considered the spread of the asbestos—which “instantly became a health hazard” upon release—throughout [*20] the building and surrounding grounds, parking lots, and street. Id. at 540. Taken together, the court held, “the release of asbestos here would comport with the common understanding of the word ‘pollute.'” Id.

Again, the matter at hand parallels Villa Los Alamos. Vargas alleges that CalRecycle and the contractors, including Ceres, knew that the debris was hazardous and that airborne toxins were a concern, as indicated by the decontamination zones, air monitoring stations, and workers who wore protective equipment. See Vargas Compl. ¶¶ 15-16, 18. That last detail is particularly important. Since workers were provided protective equipment and required to wear it while handling the debris to avoid exposure to any dust, a reasonable layperson would consider the activities that released that dust as hazardous.

Vargas’s complaint also alleges that the cleanup effort was subject to “regulations to ensure appropriate worker protections,” including one aimed at preventing “atmospheric contamination.” See Vargas Compl. ¶ 30 (citing Cal. Code Regs. tit. 8, § 5144). Moreover, like the asbestos in Villa Los Alamos, the efforts to prevent workers’ exposure to the dust—again, as shown by the protective equipment and air monitoring stations—indicates [*21] that there was no safe level of exposure to the toxic dust. Id. ¶¶ 15-16; see also 198 Cal. App. 4th at 540. And, as I have already explained, the workers’ actions spread the dust—not only in and around Vargas’s truck at the work site, but also to the disposal location. See Vargas Compl. ¶ 23.

Taking all of this into account, a reasonable layperson would understand that the release of toxic dust clouds during the removal of debris left behind by a wildfire was an act of pollution rather than an ordinary act of negligence involving toxic chemicals. Releasing toxic dust during a massive cleanup effort is not the same as spraying pesticides around an apartment building to kill yellow jackets. It is more akin to the silica dust that was an “incidental byproduct” of the industrial operation in Garamendi, the dust and odor that spread to other properties in Cold Creek, and the asbestos that was released in Villa Los Alamos—all of which were deemed acts of pollution falling within pollution exclusions. See Garamendi, 127 Cal. App. 4th at 486; Cold Creek, 156 Cal. App. 4th at 1471; Villa Los Alamos, 198 Cal. App. 4th at 540.

Ingram makes two additional arguments that merit brief attention. First, it contends that the pollution exclusion does not apply to toxic exposure in the workplace. See Ingram MSJ at 16:10-17:17. Garamendi appears to foreclose this. [*22] Although the procedural posture differed in Garamendi—it focused on applications for orders to show cause why the insurance claims should not be allowed, not summary judgment—the court took no issue with the alleged injuries arising from the underlying plaintiffs’ exposure to silica dust “at and throughout their employment.” See 127 Cal. App. 4th at 483-84. Ingram cites no California authority countering Garamendi.

Next, Ingram argues that the pollution exclusion does not apply to toxic exposure that occurs during the remediation of hazardous substances. Ingram MSJ at 17:19-18:20. It relies solely on a case from Louisiana in making this point. See id. But Ingram overreads that decision as it relates to the pollution exclusion. The court held that because the plaintiff was injured “by entering the area” where chemicals were contained, and because those chemicals had not been discharged, dispersed, or released, or otherwise escaped, a pollution exclusion did not apply. See Sandbom v. BASF Wyandotte, Corp., 674 So. 2d 349, 363-64 (La. Ct. App. 1996). It did not, as Ingram asserts, declare that pollution exclusions did not apply to cleanup efforts. And in any case, a state court decision from Louisiana is not binding here.

Wesco has shown that the underlying claim cannot fall within the policy coverage because [*23] the alleged acts giving rise to Vargas’s injury—the release of toxic dust—constitute environmental pollution under MacKinnon and its progeny. Ingram has failed to show a potential for coverage—i.e., that this was an ordinary act of negligence. Under Montrose, Wesco has met its burden. See 6 Cal. 4th at 300. Ingram has not.

Wesco’s motion for summary judgment is GRANTED and Ingram’s is DENIED. The toxic dust is a pollutant as defined by the policy and was released when the workers loaded the debris into Vargas’s truck. Beyond dictionary definitions and the case law, a reasonable layperson would understand that the release of toxic dust during the removal of debris left behind by a wildfire was environmental pollution. The pollution exclusion therefore applies. Wesco does not owe Ingram a duty to defend in the underlying action.

CONCLUSION

Judgment shall be entered in favor of Wesco and against Ingram in accordance with this Order.

IT IS SO ORDERED.

Dated: June 15, 2022

/s/ William H. Orrick

William H. Orrick

United States District Judge

End of Document

¹Wesco and Ingram stipulated to the admissibility, authenticity, and foundation of several documents for the purposes of determining their cross-motions for summary judgment, including the insurance policy at issue, Vargas’s complaint, Ceres’s cross-complaint, and correspondence between Ingram and Wesco regarding the Vargas lawsuit. See Dkt. No. 21.

²The page numbers reference the Bates numbers.

³The parties agree that, as alleged, Vargas suffered a “bodily injury” implicating Coverage A. See Wesco MSJ at 8:21-23; Ingram Mot. for Summ. J. (“Ingram MSJ”) [Dkt. No. 22] 3:8-10.

⁴I will refer to this as “the pollution exclusion.”

⁵The parties do not dispute that because Ceres’s cross-complaint included no new allegations and instead attached Vargas’s complaint as an exhibit, the allegations within Vargas’s complaint are relevant to the motions at hand. See Wesco MSJ at 7:2-11; Ingram MSJ at 5:24-6:2.

⁶Ingram also argues that the pollution exclusion does not apply because sarcoidosis may be caused by factors other than chemical exposure, such as bacteria, viruses, or genetics. See Ingram MSJ at 13:1-14:12 (citing Barnum Decl., Ex. A). But an insured “may not trigger the duty to defend by speculating about extraneous ‘facts’ regarding potential liability.” Gunderson v. Fire Ins. Exch., 37 Cal. App. 4th 1106, 1114, 44 Cal. Rptr. 2d 272 (1995). As alleged, Vargas was in “excellent health” before he worked on the cleanup project, and developed sarcoidosis as a result of the dust exposure. See Vargas Compl. ¶¶ 3, 33, 41. Ingram cannot speculate otherwise. Even if the dust exposure only partially caused Vargas’s sarcoidosis, the pollution exclusion applies to bodily injury “which would have not occurred in whole or part but for” the alleged “discharge, dispersal, seepage, migration, release or escape” of a pollutant. See Policy at 081.

⁷Because the dust was released as required to trigger the pollution exclusion, I need not determine whether it was also dispersed. The exclusion requires only one of the causal mechanisms be present. See Policy at 081 (listing the “actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at any time”) (emphasis added).