Source Logistics, Inc. v. Certain Underwriters at Lloyd's of London Subscribing to Policy No. Na041790u

• Decision Date: 10 March 2010
• Docket Number: No. CA 09–936.,CA 09–936.
• Parties: SOURCE LOGISTICS, INC., Appellant v. CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON SUBSCRIBING TO POLICY NO. NA041790U, Appellees.
• Court: Arkansas Court of Appeals

2010 Ark. App. 239

374 S.W.3d 232

SOURCE LOGISTICS, INC., Appellant

v.CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON SUBSCRIBING TO POLICY NO. NA041790U, Appellees.

No. CA 09–936.

Court of Appeals of Arkansas.

March 10, 2010.

Kenneth S. Hixson, Fayetteville, for appellant.

Mark Winfield Dossett, Jeffrey Michael Fletcher, Davis, Clark, Butt, Carithers & Taylor, PLC, Fayetteville, for appellee.

DAVID M. GLOVER, Judge.

[Ark. App. 1]Appellant, Source Logistics, purchased a cargo-insurance policy and an unattended-truck/trailer endorsement from appellee, Lloyd's of London. Thereafter, one of Source Logistics' trailers was stolen from a warehouse parking lot. The trailer was later recovered by the police, with only a portion of the cargo missing; however, the owner refused to accept the remaining cargo because of the uncertainty of the food product's safety after having been stolen. Source Logistics, therefore, submitted a claim to Lloyd's for the cargo in the amount of $22,323.70. Lloyd's denied the claim, basing its denial on the fact that the warehouse parking lot was not under constant surveillance and that Source Logistics did not lock and remove the keys from the stolen trailer. The case was presented to a jury, which returned a general verdict in favor of Lloyd's. Source Logistics raises two points of appeal, challenging [Ark. App. 2]the trial court's rulings on three jury instructions: 1) the trial court erred in giving jury instruction AMI Civ. 106A (Adverse Inference), and 2) the trial court erred in refusing to give proffered instructions AMI Civ. 2412(Contract Interpretation—General Rule—Ambiguity in Language) and AMI Civ. 2424 (Contract Interpretation—Construction Against One Who Drafted Contract). We affirm.

Standard of Review

In Williams v. First Unum Life Ins. Co., 358 Ark. 224, 229, 188 S.W.3d 908, 911 (2004), our supreme court explained:

We first address our standard of review. This court has consistently held that a party is entitled to a jury instruction when it is a correct statement of the law and when there is some basis in the evidence to support giving the instruction. See, e.g., Southern Farm Bureau Cas. Ins. Co. v. Daggett, 354 Ark. 112, 118 S.W.3d 525 (2003). Moreover, this court will not reverse a trial court's refusal to give a proffered instruction unless there was an abuse of discretion. Id. Finally, we have said that it is not error for the trial court to refuse a proffered jury instruction, when the stated matter is correctly covered by other instructions. Id.

“A trial court abuses its discretion when it acts improvidently or arbitrarily in making a finding. See Bonds v. Lloyd, 259 Ark. 557, 535 S.W.2d 218 (1976). See generally Hogan v. Holliday, 72 Ark.App. 67, 31 S.W.3d 875 (2000), (holding that a trial court abuses its discretion by acting thoughtlessly and without due consideration).” Wal–Mart Stores, Inc. v. U.S. Fidelity & Guar. Co., 77 Ark.App. 217, 224, 76 S.W.3d 895, 900 (2002).

Factual History

Source Logistics, Inc., is a motor carrier located in Russellville, Arkansas. It transports frozen-food products from commercial warehouses to various prison facilities across the [Ark. App. 3]country. Source Logistics purchased a truck-cargo insurance policy from Lloyd's, which provided coverage for the period November 20, 2005, to November 20, 2006, and an unattended-truck/trailer endorsement.

Source Logistics purchased the unattended-truck/trailer endorsement because it routinely left several loaded trailers unattended at Commercial Distribution Center, a warehouse in Dallas, Texas. The trailer that was the subject of the insurance claim was left at this warehouse for loading on Friday, December 9, 2005. CDC employees loaded the trailer with cargo on Sunday morning, December 11, 2005, after which it was left unattended in accordance with a standing agreement between Source Logistics and CDC. Sometime during the night of December 11, or the early morning hours of December 12, the loaded Source Logistics trailer was stolen from the warehouse lot.

The parties stipulated that the cargo policy contained the following language:

INSURING AGREEMENT

In consideration of the premium paid hereon ... the Underwriters at Lloyds of London hereby agree to indemnify the insured, named in the Schedule, for all risks of physical loss or damage from an external cause to lawful cargo in, and, or on, a truck whilst in their care, custody or control in the ordinary course of transit, including loading and unloading.... This insurance being subject to all the provisions, exclusions, terms and conditions contained in the policy.

(Emphasis added.) In addition, the unattended-truck/trailer endorsement provided in pertinent part:

In consideration of the additional premium charged, it is hereby noted and agreed that, ... this policy is extended to include losses to cargo directly resulting from forcible and/or violent entry to unattended trucks, subject to such trucks having all their openings closed, securely locked and all keys removed....

[Ark. App. 4]No coverage is provided hereunder for loss of or damage to cargo in and/or on trailers or semi trailers which are detachedfrom power units, unless such trailers or semi trailers are

i) garaged in a building or

ii) parked in a fully enclosed yard which is securely closed and locked, or

iii) under constant surveillance, or

iv) on a guarded lot

AND

the trailer or semi trailer has all the openings closed and securely locked with keys removed and the period that the trailer or semi trailer is detached from the power unit does not exceed 72 consecutive hours (Sundays and holidays excluded) from the time of detachment from the covered truck or tractor.

(Emphasis added.) The italicized portions of the cargo policy and the endorsement are pertinent to the insurance claim asserted by Source Logistics and denied by Lloyd's. Additional facts will be discussed as they pertain to each instruction.

The Giving of AMI Civ. 106A

For its first point of appeal, Source Logistics contends that the trial court abused its discretion in giving Jury Instruction AMI Civ. 106A, which provides:

Where relevant evidence is within the control of the party in whose interest it would naturally be to produce it, and that party fails to do so without satisfactory explanation, you may draw the inference that such evidence would have been unfavorable to that party.

The trial court restricted the use of the instruction to Source Logistics' payroll records, which were not produced at trial. Source Logistics contends that its payroll information was not [Ark. App. 5]relevant because it made no difference to the insurance claim whether or not it had a driver present during the loading of the trailer on Sunday morning. Lloyd's counters that the instruction was appropriate because the unproduced payroll records were relevant to establish “care, custody, and control,” a condition precedent for coverage, and also because the payroll records went to the credibility of Tim Hill, Source Logistics' president. We find no abuse of discretion in the trial court's decision to give this instruction.

In Slaughter v. Capitol Supply Co., Inc., 2009 Ark. 221, 7, 306 S.W.3d 432, 436, our supreme court discussed AMI Civ. 106A:

We are cited to Saliba v. Saliba, 178 Ark. 250, 255–56, 11 S.W.2d 774, 776 (1928), where this court stated that an instruction similar to AMI 106A was proper where the defendant in a personal injury case arising from an automobile accident, who was driving the car, and who knew whether the injury was caused as alleged by putting the car in reverse, was present in court at the trial but did not testify. This court concluded in Saliba that the defendant's testimony would not have been trivial or cumulative because the question was whether defendant's car was put in reverse, and the defendant was the driver. Id. In Saliba, the plaintiff showed that the defendant had knowledge relevant to the cause and chose not to testify. La'Ronda conversely alleges that because Brenntag and Sherwood's witnesses held positions of significant authority, they must have had significant knowledge. We note that Brenntag's witness, its vice-president of production, and Sherwood's witness, an in-house engineer, were deposed, and their depositions were introduced into evidence and read at trial. La'Ronda fails to show that the witnesses had knowledge beyond that revealed in their depositions. We also note that while La'Ronda argues that the “failure of a party present to testify at trial supports such an instruction,” neither witness she complains of was present at trial.

Instruction 106A provides that where relevant evidence is in the control of a party in whose natural interest it would be to produce it, and the party does not produce it, an inference may be found that the evidence was unfavorable. La'Ronda identifies no relevant evidence that was in the possession of the witnesses that they would have naturally been expected to produce that was not disclosed in their depositions. Rather, she asserts that the witnesses were beyond the subpoena power of the circuit court, and that, because the two witnesses were deposed before trial and did not appear at trial, an inference must arise that their cross-examination would have been unfavorable to appellees. No such inference arises under the [Ark. App. 6]common law set out in Saliba, supra, or under AMI 106A. What gives rise to the inference is identified relevant evidence in the possession of a party in whose interest it is to produce it and who fails to do so without satisfactory explanation. Volunteer Transp., Inc. v. House, 357 Ark. 95, 101, 162 S.W.3d 456, 459 (2004); Cox v. Farrell, 292 Ark. 177, 182, 728 S.W.2d 954, 956 (1987). The circuit court did not abuse its discretion in refusing to instruct the jury on AMI 106A. See Williams v. First Unum Life Ins. Co., 358 Ark. 224, 188 S.W.3d 908 (2004).

(Emphasis added.) The “Note on Use” for AMI Civ. 106A provides...