Real Legacy Assur. Co. v. Santori Trucking, Inc.

• Decision Date: 11 June 2008
• Docket Number: Civil No. 05-1394(GAG).
• Citation: 560 F.Supp.2d 143
• Court: U.S. District Court — District of Puerto Rico
• Parties: REAL LEGACY ASSURANCE CO. a/k/a Royal & Sun Alliance Insurance Puerto Rico, Inc., Plaintiff, v. SANTORI TRUCKING, INC., et al., Defendants.

Page 143

560 F.Supp.2d 143

REAL LEGACY ASSURANCE CO. a/k/a Royal & Sun Alliance Insurance Puerto Rico, Inc., Plaintiff, v. SANTORI TRUCKING, INC., et al., Defendants.

Civil No. 05-1394(GAG).

United States District Court, D. Puerto Rico.

June 11, 2008.

Amancio Arias-Guardiola, San Juan, PR, for Plaintiff.

Jose J. Santos-Mimoso, San Juan, PR, for Defendants.

OPINION AND ORDER

GUSTAVO A. GELPI, District Judge.

Plaintiff Real Legacy Assurance Company d/b/a Royal & Sun Alliance Insurance (Puerto Rico), Inc. ("Royal") filed suit against Santori Trucking, Inc. ("Santori") seeking reimbursement of costs its incurred in responding to a gasoline spill. Royal bases its right to reimbursement on a mandatory endorsement attached to the trucker's insurance policy it issued to Santori. Santori denies that it has an obligation to reimburse Royal. Royal now moves for summary judgment (Docket No. 42) and seeks an order declaring that Royal is entitled to recover from Santori any amount paid to respond to the gasoline spill. Royal further seeks an order awarding it no less than $1,322,134.44, the cleanup and environmental costs Royal paid in responding to the spill. Santori seeks a declaratory judgment that Royal is not entitled to reimbursement (Docket No. 53).

After reviewing the relevant facts and applicable law, the court GRANTS Royal's motion for summary judgment (Docket No. 42). The court further DENIES Santori's request for summary judgment (Docket No. 53).

I. Summary Judgment Standard

Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "An issue is genuine if it may reasonably be resolved in favor of either party at trial, and material if it posses[es] the capacity to sway the outcome of the litigation under the applicable law." Iverson v. City of Boston, 452 F.3d 94, 98 (1st Cir.2006) (alteration in original) (citations and internal quotation marks omitted).

II. Factual Background

On January 21, 1999, Royal issued insurance policy number CLP2075300884 in favor of Santori. The one-year policy included a coverage limit of $1,000,000.00 per occurrence. It also contained a total pollution exclusion. Santori did not purchase what is commonly referred to as the Pollution Liability-Broadened Coverage Endorsement, which would have provided some pollution-related coverage.

Santori qualifies as a motor carrier and, therefore, must adhere to the rules and regulation of the Motor Carrier Act of 1980, 49 U.S.C. § 13906 ("MCA"). MCA regulations mandate that all entities receiving payment to haul others' property across state lines or transporting hazardous substances have a MCS-90 endorsement attached to any liability policy. See 49 C.F.R. § 387.15. The MCS-90 Endorsement states in pertinent part:

In consideration of the premium stated in the policy to which this endorsement is attached, the insurer (the company) 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 and 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 to 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 that the company would not have been obligated to make under the provisions of the policy except for the agreement contained in this endorsement.

Id. (ILLUSTRATION I). The endorsement defines "public liability" as "liability for bodily injury, property damage, and environmental restoration." Id. "Environmental restoration" means:

Restitution for the loss, damage, or destruction of natural resources arising out of the accidental discharge, dispersal, release or escape into or upon the land, atmosphere, watercourse, or body of water, of any commodity transported by a motor carrier. This shall include the cost of removal and the cost of necessary measures taken to minimize or mitigate damage to human health, the natural environment, fish, shellfish, and wildlife.

Id. The policy Royal issued to Santori contained the required MCS-90 Endorsement.

On July 25, 1999, a Santori truck traveling in Yabucoa, Puerto Rico overturned and spilled approximately 8,000 gallons of gasoline into adjacent land owned by the Conservation Trust of Puerto Rico ("the Conservation Trust"). On August 12, 1999, the Puerto Rico Environmental Quality Board ("EQB")¹ ordered Santori and its owner to take immediate steps to detain, regulate, and remediate the spill and its adverse effects. The EQB's administrative order required Santori to immediately perform environmental studies and submit its results to the EQB's Land Contamination Regulation Program. The EQB also ordered Santori to reimburse the $3,160.00 in costs it incurred. Santori began some cleanup work but stopped due to a dispute with its insurance company. A subsequent EQB order threatened fines because of Santori's noncompliance with the prior order. Royal eventually paid various suppliers and environmental cleanup companies to clean, remove, and remediate the spilled gasoline, to prepare the EQB-ordered studies, and to reforest the spill-affected areas. In total, Royal paid $1,322,132.44 to comply with the EQB order issued against Santori. Santori directly hired some of these suppliers and cleanup companies for whose services Royal paid. Royal sent correspondence to Santori reserving its right to seek reimbursement from Santori of the amounts paid to clean the spill.

The Conservation Trust filed a complaint against Santori, Royal, and others on April 27, 2000. The parties submitted to the court a settlement agreement pursuant to which Royal paid $50,000.00 to the Conservation Trust. The agreement and payment settled all claims brought in the complaint.

Royal requested reimbursement from Santori for $1,000,000.00, the policy's coverage limit, of the settlement and cleanup costs, invoking the MCS-90 endorsement as the basis for its request. Santori has refused to reimburse Royal and claims it is under no obligation to do so.

III. Discussion

Royal's summary judgment motion seeks a judgment ordering Santori to reimburse Royal for all expenses it incurred pursuant to the MCS-90 endorsement. More specifically, Royal seeks a judgment of not less than $1,322,134.44, which represents the cleanup costs it incurred. Santori denies that it has any obligation to reimburse Royal. Alternatively, Santori argues that if a right to reimbursement does exist. Royal may recover only the $50,000.00 paid to settle the claims filed by the Conservation Trust. The relevant law reveals that Royal's position is sound but with a caveat. The court holds that Royal is entitled to reimbursement from Santori but only in the amount of $1,000,000.00, the policy's per occurrence limit.²

A. Right to Reimbursement

In support of its summary judgment motion, Royal contends that the MCS-90 endorsement works a surety bond and entitles Royal to recover from Santori any payments made pursuant to the endorsement. Santori argues that the endorsement operates as traditional insurance and, therefore, does not entitle Royal to reimbursement. The question of whether a right to reimbursement exists under the MCS-90 endorsement presents a pure question of law appropriate for resolution at the summary judgment stage. The court agrees with Royal's analysis of the legal question presented. Accordingly, the court holds that Royal has the right to seek reimbursement from Santori for any costs incurred pursuant to the MCS-90 endorsement. The MCS-90 endorsement's plain language, the purpose behind the endorsement, and federal case law interpreting the endorsement support the court's holding.

The plain, unambiguous language of the MCS-90 endorsement recognizes the insurer's right of reimbursement. The endorsement states, in pertinent part, "The insured agrees to reimburse the company ... 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." 49 C.F.R. § 387.15 (ILLUSTRATION I); see also See Canal Ins. Co. v. Distribution Servs., Inc., 176 F.Supp.2d 559, 565 (E.D.Va.2001) ("[The insured's] reimbursement obligation is ... consistent with ... the language ... of the MCS-90 endorsement."). The endorsement also states, "[A]ll 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 [insurer]." 49 C.F.R. § 387.15 (ILLUSTRATION I). Pursuant to this language, the MCS-90 does not otherwise alter the limits or exclusions of the underlying insurance contract. Santori's interpretation of the endorsement would require the court to ignore its unambiguous language and clear mandates. In recognizing Royal's right to reimbursement, the...