Falls Lake Nat'l Ins. Co. v. Martinez, Civil Action No. 7:16CV00075

• Decision Date: 22 December 2016
• Docket Number: Civil Action No. 7:16CV00075
• Court: U.S. District Court — Western District of Virginia
• Parties: FALLS LAKE NATIONAL INSURANCE COMPANY, Plaintiff, v. ISRAEL MARTINEZ, JR., et al., Defendants.

FALLS LAKE NATIONAL INSURANCE COMPANY, Plaintiff, v. ISRAEL MARTINEZ, JR., et al., Defendants.

Civil Action No. 7:16CV00075

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA ROANOKE DIVISION

December 22, 2016

MEMORANDUM OPINION

By: Hon. Glen E. Conrad Chief United States District Judge

In this insurance coverage dispute, Falls Lake National Insurance Company ("Falls Lake") seeks a declaratory judgment that it has no obligation to indemnify Israel Martinez, Jr., Salinas Express, LLC ("Salinas Express"), or SMC Transport, LLC ("SMC") in connection with a personal injury action that Brandon Lester filed against Martinez, Salinas Express, SMC, and others in this court. See Lester v. SMC Transport, LLC, No. 7:15CV00665 (W.D. Va.) (the "underlying personal injury action"). The case is presently before the court on cross-motions for partial summary judgment filed by Falls Lake, Lester, and United Specialty Insurance Company ("United Specialty"). For the reasons set forth below, Falls Lake's motion will be granted in part and denied in part, Lester's motion will be granted, and United Specialty's motion will be denied.

Background

I. The Underlying Personal Injury Action

Before sunrise on October 26, 2015, Lester was traveling southbound on Interstate 81 in Botetourt County. At approximately the same time, Martinez was operating a semi-tractor owned by and registered to SMC (the "SMC Tractor"), a commercial motor carrier based in Texas. The SMC Tractor had been driven to Virginia to pick up a disabled semi-tractor utilized by Salinas Express (the "Salinas Express Tractor"), another commercial motor carrier based in Texas. The disabled tractor had been left in the parking lot of a rest stop adjacent to the interstate.

Martinez, Roy Salinas ("Roy"), and Eddie Lozano used the SMC Tractor to tow a third tractor (the "Lozano Tractor") to Virginia, so that Lozano could deliver the goods that remained in the trailer attached to the disabled Salinas Express Tractor. Upon arriving at the rest stop, the Lozano Tractor was unhooked from the SMC Tractor and then used to deliver the remaining goods. The Salinas Express Tractor was then hooked up to the SMC Tractor, so that it could be towed back to Texas.

Just before 6:00 a.m., Martinez and Roy attempted to leave the rest stop in the SMC Tractor with the Salinas Express Tractor in tow. To do so, Martinez drove north, on the entrance ramp to the rest stop, so that he could make a U-turn onto southbound I-81. In attempting to make the U-turn, Martinez caused the SMC Tractor, towing the Salinas Express Tractor, to block at least the right lane of travel.

At the same time, Lester approached the entrance ramp to the rest stop while traveling in the right lane. He was unable to stop or maneuver his vehicle in time to avoid hitting the SMC Tractor. A second vehicle, operated by Anthony Shifflett, then struck Lester's vehicle.

On December 9, 2015, Lester filed the underlying personal injury action against SMC, Martinez, Salinas Express, and Shifflett. On September 2, 2016, the court ruled on a number of motions filed by the parties in that action, including Lester's motion for partial summary judgment. As is relevant in the instant action, the court ruled that Martinez and Roy were employees of Salinas Express at the time of the accident, that they were acting within the scope of their employment, and, thus, that Salinas Express is "vicariously liable for [their] negligent conduct." Lester v. SMC Transport, LLC, No. 7:15CV00665, 2016 U.S. Dist. LEXIS 118946, at*27-28 (W.D. Va. Sept. 2, 2016). Although Lester also moved for partial summary judgment on the issue of whether SMC is vicariously liable for the negligence of Martinez and Roy, the court denied that motion on the basis that a reasonable jury could find that Martinez and Roy were not agents of SMC.

II. The Insurance Policies

A. The Policy Issued by Falls Lake

At the time of the accident, Salinas Express was insured under a motor carrier liability policy issued by Falls Lake (the "Falls Lake Policy"), under which the Salinas Express Tractor was a "covered 'auto.'" The Falls Lake Policy obligates Falls Lake to "pay all sums an 'insured' legally must pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies, caused by an 'accident' and resulting from the ownership, maintenance or use of a covered 'auto.'" Falls Lake Motor Carrier Coverage Form § II(A), Docket No. 1-2. Section II(A)(1) of the Falls Lake Policy defines "Who Is An Insured." That section provides, in pertinent part, as follows:

The following are "insureds":

a. You for any covered "auto".

b. Anyone else while using with your permission a covered "auto" you own, hire or borrow except:

(1) The owner or any "employee", agent or driver of the owner, or anyone else from whom you hire or borrow a covered "auto".

(2) Your "employee" or agent if the covered "auto" is owned by that "employee" or agent or a member of his or her household.

. . .

e. Anyone liable for the conduct of an "insured" described above but only to the extent of that liability.

However, none of the following is an "insured":

(1) Any "motor carrier" for hire or his or her agents or "employees", other than you and your "employees":

(a) If the "motor carrier" is subject to motor carrier insurance requirements and meets them by a means other than "auto" liability insurance . . . .

Id. at § II(A)(1).

In addition to the scheduled vehicles for which the Falls Lake Policy provides coverage, the policy lists three types of vehicles which "are also covered 'autos' for Covered Autos Liability Coverage." Id. at § I(C). Those vehicles include "Temporary Substitute Autos," specifically:

Any "auto" you do not own while used with the permission of its owner as a temporary substitute for a covered "auto" you own that is out of service because of its:

a. Breakdown;

b. Repair;

c. Servicing;

d. "Loss"; or

e. Destruction.

Id. at § I(C)(3).

B. The Policy Issued by United Specialty

During the time period at issue, SMC was insured under a motor carrier liability policy issued by United Specialty (the "United Specialty Policy"). It is undisputed, however, that the SMC Tractor was not listed on the United Specialty Policy's schedule of covered autos at the time of the accident, and, thus, that it was not insured under that policy. Accordingly, there is no liability coverage under the United Specialty Policy for the underlying accident.

The United Specialty Policy contains an MCS-90 endorsement.¹ That endorsement provides, in pertinent part, as follows:

In consideration of the premium stated in the policy to which this endorsement is attached, the insurer (company) [United Specialty] agrees to pay, within the limits of liability described herein, any final judgment recovered against the insured [SMC] 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 and whether or not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere. Such insurance as is afforded, for public liability, does not apply to injury or death of the insured's employees while engaged in the course of their employment or property transported by the insured, designated as cargo. 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.

However, all terms, conditions, and limitations in the policy to which the endorsement is attached shall remain in full force and effect as binding between the insured and the company. The insured agrees to reimburse the company for any payment made by the company on account of any accident, claim, or suit involving a breach of the terms of the policy, and for any payment that the company would not have been obligated to make under the provisions of the policy except for the agreement contained in this endorsement . . . .

United Specialty MCS-90 Endorsement at 2, Docket No. 65-8.

III. The Instant Action

After the underlying personal injury action was commenced by Lester, Falls Lake brought this action seeking a declaratory judgment that it does not have a duty to indemnify Salinas Express, Martinez, or SMC with respect to any claims asserted against them as a result of the accident. The declaratory judgment action is now before the court on cross-motions forpartial summary judgment filed by Lester, United Specialty, and Falls Lake. Lester urges the court to conclude that Salinas Express is entitled to liability coverage under the Falls Lake Policy. United Specialty urges the court to conclude that its insured, SMC, is entitled to liability coverage under the Falls Lake Policy. Falls Lake, on the other hand, moves the court to conclude that coverage is not owed to Salinas Express, SMC, Martinez, or Roy.²

Standard of Review

An award of summary judgment 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 determining whether a genuine dispute of material fact exists, the court must "view the facts and all justifiable inferences arising therefrom in the light most favorable to the nonmoving party." Libertarian Party of Va. v. Judd, 718 F.3d 308, 313 (4th Cir. 2013); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). "When faced with cross-motions for summary judgment, [courts] consider each motion separately on its own merits to determine...