Canal Ins. Co. v. Xmex Transp., LLC

• Decision Date: 04 March 2014
• Docket Number: No. EP–13–CV–156–KC.,EP–13–CV–156–KC.
• Citation: 1 F.Supp.3d 516
• Court: U.S. District Court — Western District of Texas
• Parties: CANAL INSURANCE COMPANY, Plaintiff, v. XMEX TRANSPORT, LLC, et al., Defendants.

1 F.Supp.3d 516

CANAL INSURANCE COMPANY, Plaintiff,

v.XMEX TRANSPORT, LLC, et al., Defendants.

No. EP–13–CV–156–KC.

United States District Court,

W.D. Texas,

El Paso Division.

Signed March 4, 2014.

George T. Jackson, Bush & Ramirez LLC, Houston, TX, for Plaintiff.

Stewart W. Forbes, Forbes & Forbes, Christopher Robert Johnston, Firth Johnston Bunn Kerr, James F. Scherr, El Paso, TX, Langdon Milton Smith, III, Jim S. Adler & Associates, Houston, TX, for Defendants.

ORDER

KATHLEEN CARDONE, District Judge.

On this day, the Court considered Defendant Jessica Lopez's Motion to Dismiss or Abate Plaintiff's Suit for Declaratory Judgment, ECF No. 43 (the “Motion”) in the above-captioned case (the “Case”). For the reasons set forth herein, the Motion is DENIED.

I. BACKGROUND

The Case arose from the deaths of Lorenzo Munoz (“Munoz”) and Roger Franceware (“Franceware”) (collectively “Decedents”) in a single-vehicle tractor-trailer accident on or about August 17, 2010. See Compl., ECF No. 1, ¶ ¶ 19–32; ECF No. 1–5 at 6–7; ECF No. 1–7 at 4. The Decedentswere traveling in a 2007 International truck bearing Vehicle Identification Number 2HSCNSCR57C432761 (the “Truck”) which veered off Interstate 20 in Mitchell County, Texas, crashed, and caught fire. See id.

The survivors of each Decedent filed lawsuits in Texas state court (the “State Court Litigation”) alleging that numerous parties associated with the Truck are liable for Decedents' personal injuries and wrongful deaths under various legal theories.¹ The posture of the State Court Litigation as of the inception of the Case was as follows:

Jessica Lopez (“Lopez”) brought the first underlying lawsuit (the “Lopez Lawsuit”) as administratrix of Franceware's estate and as next friend of his minor children A.F. and J.F.O. The Lopez Lawsuit alleges that Munoz was driving the Truck; that Moore Freight Service, Inc. (“Moore”), XMEX Transport, LLC (“XMEX”), and/or Charles “Chip” Strader (“Strader”) were in control of the Truck; ² and that A–Z Trailers, Inc. (“A–Z”), Dykes & Dykes Trailers, Inc. (“Dykes & Dykes”), Goal Transports, Inc. d/b/a/ Calvin K. Transportation, LLC (“Goal Transports”) and Jose M. Gomez (“Gomez”) were the owners, operators, lessors, and/or lessees of the trailer. See generally ECF No. 1–9. Rosa Franceware, Franceware's widow, intervened in the Lopez Lawsuit in her own capacity and as next friend of Franceware's minor child E.L.F., alleging that Munoz was driving the Truck; that Moore owned the Truck; and that Lorenzo Munoz was an employee of Moore. See generally ECF No. 1–8.

Munoz's widow Lorena Munoz and his daughter Virginia Munoz brought the second underlying lawsuit (the “Munoz Lawsuit”). Lorena Munoz sued individually, on behalf of Munoz's estate, and as next friend of his minor children L.M. and C.M. The Munoz Lawsuit alleges that Munoz was employed at the time of the accident by one or more of Moore, A–Z, XMEX, Strader, and/or Transportes Americanos; that Moore owned the Truck tractor, which was leased to Transportes Americanos; that A–Z and/or Goal Transports owned, maintained, and serviced the trailer, which was leased to Trans Front, Inc. (“Trans Front”) and SMTC Mex–Hold; that Trans Front and SMTC Mex–Hold arranged for the loading and transporting of the trailer; and that the “truck may have been driven by Roger Franceware.” See ECF No. 1–5 at 6–7. Rosa Franceware intervened in the Munoz Lawsuit, alleging, as she did in the Lopez Lawsuit, that Munoz was driving the Truck; that Moore owned the Truck; and that Lorenzo Munoz was an employee of Moore. See ECF No. 1–3, at 3.

On May 7, 2013, Plaintiff Canal Insurance Company (“Canal”) instituted the Case by filing a Complaint for Declaratory Judgment, ECF No. 1 (the “Complaint”).³All of the Defendants in the Case are parties to the State Court Litigation. Compare Compl. ¶¶ 1–16, with ECF No. 1–5 at 2, and ECF No. 1–9 at 1–2. All the parties to the State Court Litigation, except Moore, are defendants in the Case. See id.⁴ Canal is not a party to the State Court Litigation. See ECF No. 1–5 at 2, ECF No. 1–9 at 1–2.

Canal alleges that it issued a vehicular insurance policy to XMEX numbered PIA06033700 (the “Policy”) on August 6, 2010. See Compl. ¶ 33; Policy, ECF No. 1–10. Canal further alleges that XMEX, Strader, A–Z, Dykes & Dykes, and Goal Transports have demanded that Canal provide a defense and indemnify them and XMEX's alleged driver in the State Court Litigation. Compl. ¶ 44. Canal asserts that it has no duty under the Policy or any endorsements thereto to defend or indemnify any of those parties, Munoz, or Franceware (collectively the “Alleged Insureds”). Compl. ¶ 44. Canal therefore seeks, among other things, declarations that no coverage is afforded under the Policy for the claims made in the State Court Litigation, and that it need not provide a defense to the Alleged Insureds in the State Court Litigation. See Compl. 12.

In brief, and to paraphrase, Canal alleges that the Policy affords no coverage to the Alleged Insureds for the following reasons:

a) only vehicles owned by the insured and described in the declarations are covered by the Policy, but the Truck was not owned by XMEX nor described in the declarations;

b) the Policy contains an “employee exclusion” for bodily injuries to employees of the insured arising in the course of their duties, and the underlying lawsuits allege or claim that the Decedents were employed by XMEX;

c) the Policy contains a “fellow employee exclusion” for bodily injuries arising in the course of a fellow employee's performance of their duties, and the underlying lawsuits allege or claim that the Decedents were employed by XMEX;

d) Decedents were statutory employees of XMEX under 49 C.F.R. § 390.5 because they were engaged in transportation activities on behalf of XMEX, thus the employee exclusion and fellow employee exclusion bar coverage;

e) the Policy contains an “occupant hazard exclusion” for bodily injuries sustained by any person in the vehicle, and the underlying lawsuits allege that Decedents were in the Truck;

f) the Policy defines an insured as the named insured and “anyone else using with your permission a covered auto you own, hire, or borrow,” but none of the Alleged Insureds (other than XMEX) was a named insured or was using a covered auto;

g) the underlying lawsuits include a cause of action sounding in strict product liability, which the Policy does not cover; h) the Policy's MCS–90 endorsement does not apply to injury or death of the insured's employees in the course of their employment, and the underlying lawsuits allege or claim that the Decedents were employed by XMEX;

i) the MCS–90 endorsement applies only to operations of the named insured if it was a “for-hire motor carrier operating motor vehicles transporting property in interstate or foreign commerce at the time of the accident,” but upon information and belief, those conditions are not met.

See Compl. ¶¶ 33–43.

By the Motion, Lopez requests that the Court dismiss the Case, as the Court may do at its discretion under the Declaratory Judgment Act, 28 U.S.C. § 2201(a). In the alternative, Lopez requests that the Court abate the Case in deference to the State Court Litigation. See Mot. 1. Lorena and Virginia Munoz have joined in and adopted by reference Lopez's arguments. See ECF No. 45. Canal has filed a Response to the Motion, ECF No. 47 (“Response”), to which Lopez has filed a Reply, ECF No. 48 (“Reply”).

II. DISCUSSIONA. Standard

The Declaratory Judgment Act, 28 U.S.C. § 2201, provides in pertinent part that “[i]n a case of actual controversy within its jurisdiction ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). In Orix Credit Alliance v. Wolfe, 212 F.3d 891, 895 (5th Cir.2000), the Fifth Circuit set forth three inquiries that district courts must make to determine whether to adjudicate a declaratory judgment action: first, whether the case is justiciable; second, whether the court has authority to grant declaratory relief; and third, whether the court should exercise its discretion to decide the action. See id.; AXA RE Prop. & Cas. Ins. Co. v. Day, 162 Fed.Appx. 316, 319–21 (5th Cir.2006) (citations omitted).

The parties assert that the Case is justiciable and that the Court has the authority to grant relief. See Compl. ¶¶ 17, 45–46; Mot. ¶¶ 1–3. The Court agrees. First, for the Case to be justiciable, there must be an actual controversy between the parties. See28 U.S.C. § 2201(a). “As a general rule, an actual controversy exists where a substantial controversy of sufficient immediacy and reality exists between parties having adverse legal interests.” Orix Credit Alliance, 212 F.3d at 896 (quotation marks and citation omitted). Courts routinely hold that controversies over whether an insurer must defend and indemnify its insured in other litigation are of sufficient immediacy and reality to be justiciable. See, e.g., Day, 162 Fed.Appx. at 319, Allstate Texas Lloyds v. Sawyer, No. 3:07–CV–0360–G, 2007 WL 2471057, at *2 (N.D.Tex. Aug. 31, 2007) (citations omitted). The Court accordingly finds that the Case presents a justiciable controversy. Second, the Court lacks the authority to grant relief only if the following three conditions are met: “(1) the declaratory defendant previously filed a cause of action in state court; (2) the state case involved the same issues as those in the federal court; and (3) the district court is prohibited from enjoining the state proceedings under [the Anti–Injunction Act].” Sherwin–Williams Co. v. Holmes Cnty., 343 F.3d 383, 388 n. 1 (5th Cir.2003) (citation omitted). The Anti–Injunction Act does not apply when there is no pending state court action between the federal declaratory plaintiff and any of the declaratory defendants. See id....