Fairmont Specialty Ins. Co. v. 1039012 Ontario, Inc.
| Decision Date | 19 August 2011 |
| Docket Number | Cause No. 2:10 CV 070 |
| Parties | FAIRMONT SPECIALTY INSURANCE COMPANY, Plaintiff, v. 1039012 ONTARIO, INC, d/b/a HUMMER TRANSPORTATION, LTD., KIMBERLY SPOA-HARTY, AND JESSE HARTY, Defendants. KIMBERLY SPOA-HARTY AND JESSE HARTY, Counter-claimants v. FAIRMONT SPECIALTY INSURACNE COMPANY Counter-Defendant |
| Court | U.S. District Court — Northern District of Indiana |
After being involved in an accident with a tractor-trailer, Defendants Kimberly Spoa-Hoarty and Jesse Harty ("the Hartys") filed suit in state court against 1039012 Ontario Inc, d/b/a Hummer Transportation, Ltd ("Ontario"), the lessee of the tractor-trailer involved in the accident and Hummer Transportation, Inc. ("Hummer"), the lessor of the tractor-trailer.1 A state court juryawarded the Hartys in excess of five million dollars.2 Thereafter, the Hartys sought payment of Ontario's liability under the judgment from Plaintiff, Fairmont Specialty Insurance Co. ("Fairmont"), based upon an MCS-90 endorsement policy issued to Ontario. Fairmont, in turn, filed the present declaratory judgment action wherein it named Ontario, and the Hartys as defendants. Fairmont seeks a declaration that it owes no coverage for the accident by virtue of its MCS-90 endorsement. The Hartys' counterclaimed against Fairmont asserting that it has breached the terms of the MCS-90 endorsement.
Presently before the Court are: (1) Fairmont's Motion for Summary Judgment [DE 42]; (2) The Hartys' Motion for Summary Judgment on the Complaint and Counter-claim [DE 44]; and (3) Fairmont's motion for a default judgment against Ontario, who has not appeared or responded to this suit. [DE 19]3 .
For the following reasons, Fairmont's Motion for Summary Judgment will be DENIED; the Hartys' Motion for Summary Judgment on the Complaint and Counter-Claim will be GRANTED in part and DENIED in part; and the Motion for Default Judgment will be DENIED as MOOT.
Summary judgment is proper when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P 56(c)(2). A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d202 (1986). In determining summary judgment motions, "facts must be viewed in the light most favorable to the nonmoving party only if there is a 'genuine' dispute as to those facts." Scott v. Harris, 550 U.S. 372, 127 S.Ct. 1769, 1776, 167 L.Ed.2d 686 (2007). The party seeking summary judgment has the burden of establishing the lack of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). After "a properly supported motion for summary judgment is made, the adverse party 'must set forth specific facts showing that there is a genuine issue for trial.' " Anderson, 477 U.S. at 255 (quoting Fed R. Civ. P. 56(e)).
On February 17, 2006, Inderjeet Sekhon ("Sekhon") was operating a tractor-trailer westbound on I-94 in Portage, Indiana, when his truck collided with Mrs. Harty's Chrysler Sebring, in which she was also traveling westbound. Sekhon was employed by Ontario at the time of the accident. He was driving the tractor and trailer leased to Hummer by Ontario ("the Freightliner").
The Hartys filed a Complaint in the Porter Superior Court against Hummer and Ontario for the personal injuries Mrs. Harty sustained as a result of the collision. The Hartys alleged that Hummer and Ontario were each separately liable for the negligent maintenance, operation and use of the Freightliner and that each was vicariously liable for the driver's negligence. On January 22, 2008, the Hartys obtained a default judgment as to liability against both Ontario and Hummer as a discovery sanction.5 The case proceeded to trial on damages and a jury awarded the Hartys just over5 million dollars. Final judgment was entered against Ontario and Hummer.6
At the time of the Accident, Hummer was insured by National Continental Insurance Company ("National") with limits of $750,000.7 The National Policy contained an MCS-90
endorsement.8 On behalf of Hummer, National has paid to the Hartys the policy limits under its insurance agreement along with interest on the judgment. (See DE 51). As a result, it has satisfied its responsibility under the insuring agreement and is not a party in the instant action.
For the period of June 27, 2005 to June 27, 2006, Markel Insurance Company of Canada ("Markel") provided certain insurance coverage to Ontario. The Markel policy did not have the Freightliner listed as a covered vehicle. Markel has denied coverage because the Freightliner is not a listed vehicle under its policy and the policy excludes coverage for leased vehicles. Fairmont, by collateral agreement, endorsed the Markel Policy by issuing a Form MCS-90 endorsement effectiveJune 27, 2005, with limits of $1,000,000. That MCS-90 endorsement reads, in relevant part:
In consideration of the premium stated in the policy to which this endorsement is attached, [Fairmont] agrees to pay within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance, or use of motor vehicles subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980 regardless of whether or not each motor vehicle is specifically described in the policy or whether or not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere...It is understood and agreed that no condition, provision, stipulation, or limitation contained in the policy, this endorsement, or any other endorsement thereon, or violation thereof, shall relieve the company from liability or from the payment of any final judgment, within the limits of liability herein described, irrespective of the financial condition, insolvency or bankruptcy of the insured.
(Fairmont MCS-90; DE 45, Exhibit 10).9 The language in the MCS-90 endorsement further provides judgment creditors with a remedy in the event that Fairmont fails to pay a judgment against its insured:
After the Hartys sought payment from Fairmont under its endorsement, Fairmont brought this declaratory judgment action seeking a declaration that it is not responsible for payment to the Hartys under the MCS-90 endorsement, in part, because National has already paid the Hartys under its policy. The Hartys counter-sued to compel payment under the MCS-90 language above, arguingthat Fairmont is liable under the MCS-90 regardless of National's liability. It is to these issues that the court now turns.
Federal law requires common carriers, such as trucking companies, to obtain insurance to cover motor vehicle accidents. Carolina Casualty Ins. Co. v. Yeates, 533 F.3d 1202, 1204 (10th Cir.2008). Related federal regulations require all interstate carriers to maintain insurance or another form of surety "conditioned to pay any final judgment recovered against such motor carrier for bodily injuries to or the death of any person resulting from the negligent operation, maintenance or use of motor vehicles" under the carrier's permit. 49 C.F.R. §§ 387.301(a), 387.7; see also Travelers Ins. Co. v. Transport Ins. Co., 787 F.2d 1133, 1140 (7th Cir.1986) (). To satisfy this insurance requirement, the regulations require the attachment of an MCS-90 endorsement to each insurance policy of the carrier, which guarantees payment in the amount of at least $750,000 per accident. 49 C.F.R. §§ 387.7, 387.9. The endorsement 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. See Auto-Owners Ins. Co. v. Munroe, 614 F.3d 322, 327 (7th Cir. 2010); Carolina Casualty Ins. v. Yeates, 584 F.3d 868, 881 (10th Cir.2009); Minter v. Great Am. Ins. Co. of N.Y., 423 F.3d 460, 470 (5th Cir.2005). Thus, "the payment obligation [under an MCS 90 endorsement] is broader than the policy itself and applies regardless of '"whether or not each motor vehicle is specifically described in the policy,' and despiteany "condition, provision, stipulation, or limitation contained in the policy.'" Auto-Owners, 614 F.3d at 327; Fairmont MCS-90. As explained in Auto-Owners:
The sole question presented in this case is whether the Hartys, by virtue of National's payment of its policy limits, have received all that they are due under the insuring agreements of the various carriers or whether Fairmont's MCS-90 endorsement has additionally been triggered requiring payment to the Hartys. As would be anticipated, Fairmont's position is that because National has paid its policy limits of $750,000, the public liability that is...
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