Wesco Ins. Co. v. Rich

• Decision Date: 02 December 2021
• Docket Number: CAUSE NO. 1:20CV305-LG-RPM
• Citation: 574 F.Supp.3d 388
• Parties: WESCO INSURANCE COMPANY, Plaintiff v. Edward Eugene RICH and Edward Shayne Rich as Wrongful Death Beneficiaries of Ladonna C. Rich, Deceased; Yasser Sardinas Armesto; DKY Express, LLC ; Sam Freight Solutions, LLC; Dairon M. Lopez; Daimi Ramos; Samuel Ramos Gonzalez; and Prime Property & Casualty Insurance, Inc., Defendants
• Court: U.S. District Court — Southern District of Mississippi

574 F.Supp.3d 388

WESCO INSURANCE COMPANY, Plaintiff

v.Edward Eugene RICH and Edward Shayne Rich as Wrongful Death Beneficiaries of Ladonna C. Rich, Deceased; Yasser Sardinas Armesto; DKY Express, LLC ; Sam Freight Solutions, LLC; Dairon M. Lopez; Daimi Ramos; Samuel Ramos Gonzalez; and Prime Property & Casualty Insurance, Inc., Defendants

CAUSE NO. 1:20CV305-LG-RPM

United States District Court, S.D. Mississippi, Southern Division.

Signed December 2, 2021

David M. Ott, Victoria R. Jones, Bryan Nelson, PA, Hattiesburg, MS, for Plaintiff.

S. Wayne Easterling, S. Wayne Easterling, Attorney, Hattiesburg, MS, Ransom P. Jones, III, Ransom P. Jones, III, Attorney, Leakesville, MS, for Defendants Edward Eugene Rich, Edward Shayne Rich.

MEMORANDUM OPINION AND ORDER GRANTING PRIME'S MOTION FOR JUDGMENT ON THE PLEADINGS

LOUIS GUIROLA, JR., UNITED STATES DISTRICT JUDGE

BEFORE THE COURT are the [25] Motion for Judgment on the Pleadings or Alternatively Motion for Summary Judgment filed by Prime Property & Casualty Insurance, Inc., the [35] Motion to Defer Ruling on Motion for Judgment on the Pleadings or for Summary Judgment filed by Wesco Insurance Company, and the [41] Motion to Stay Proceedings Pending Resolution of Motion filed by Prime. The parties have fully briefed the Motions. After reviewing the submissions of the parties, the record in this matter, and the applicable law, the Court finds that Prime's Motion for Judgment on the Pleadings should be granted. Wesco's Motion to Defer Ruling is denied, and Prime's Motion to Stay is denied as moot.

BACKGROUND

This declaratory judgment action arose out of a July 28, 2018, automobile accident in which a Nissan Sentra driven by Ladonna C. Rich was struck by 2010 Freightliner driven by Dairon Lopez on Interstate 10 in Jackson County, Mississippi. (Compl. at 4, ECF No. 1). Rich was tragically killed in the accident. (Id. ) The Freightliner was owned by Yasser Sardinas Armesto, who is a member of DKY Express, LLC. (Id. ). At the time of the accident, Armesto had allegedly leased the Freightliner to Sam Freight Solutions, LLC. (Id. at 5). Wesco had issued a Commercial Motor Carrier insurance policy to Sam Freight, and Prime had issued Commercial Auto Insurance Policy to DKY Express. (Compl. at 4, ECF No. 1).¹ The Freightliner was not listed as a covered automobile on either policy. (Compl., Exs. A & C, ECF No. 1-1 & 1-2). Both policies contain a Form MCS-90 Endorsement, which provides that the insurer agrees to pay

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 vehicle is specifically described in the policy ....

(Prime's Mot., Ex. G at 32, ECF No. 25-7; Compl., Ex. C at 55, ECF No. 1-3). Each Endorsement also requires the insured to reimburse the insurer for any payment that the insurer "would not have been obligated to make under the provisions of the policy except for the agreement contained in the endorsement." (Id. ).

Ladonna Rich's surviving husband and son, Edward Eugene Rich and Edward Shayne Rich, sued Armesto, DKY Express, Sam Freight, Lopez, and unknown defendants A, B, and C in the Circuit Court of Jackson County, Mississippi. (Compl. at 4, ECF No. 1). Sam Freight's insurer, Wesco, filed the present Complaint for Declaratory Judgment pursuant to Fed. R. Civ. P. 57 and 28 U.S.C. § 2201. It seeks the following declarations:

a. The Wesco policy does not provide coverage for the subject accident.

b. The Prime policy does provide coverage for the subject accident.

c. If the Prime policy does not provide such coverage and the Prime MCS 90 does not apply and Wesco MCS 90 does apply, then Wesco is entitled to a judgment against Samuel Ramos Gonzalez as the owner of Sam Freight and Sam Freight Solutions for all amounts Wesco must pay the Plaintiffs in the [state court lawsuit].

(Id. at 7). Prime filed the present Motion for Judgment on the Pleadings, or in the alternative for Summary Judgment. Wesco has filed a Motion asking the Court to defer its ruling on the Motion so that discovery can be conducted, while Prime has filed a Motion seeking a stay of proceedings pending a ruling on its Motion.

DISCUSSION

"After the pleadings are closed -- but early enough not to delay trial -- a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c).

The standard for deciding a Rule 12(c) motion is the same as a Rule 12(b)(6) motion to dismiss. The court accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff. The plaintiff must plead enough facts to state a claim to relief that is plausible on its face. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).

Guidry v. Am. Pub. Life Ins. Co. , 512 F.3d 177, 180 (5th Cir. 2007) (internal citations and quotation marks omitted).

As explained previously, Prime seeks summary judgment in the event that it is not entitled to a judgment on the pleadings. The Court has not reviewed any evidence or other information outside of the pleadings and exhibits attached to the Complaint. Collins v. Morgan Stanley Dean Witter , 224 F.3d 496, 498 (5th Cir. 2000) ("In considering a motion to dismiss for failure to state a claim, a district court must limit itself to the contents of the pleadings, including attachments thereto."). It is not necessary for the Court to convert Prime's Motion to a Motion for Summary Judgment.

I. WHETHER WESCO HAS STANDING TO FILE A DECLARATORY JUDGMENT ACTION AGAINST PRIME

Since standing has jurisdictional implications, the Court must first consider Prime's argument that Wesco does not have standing to file a declaratory judgment action concerning coverage under Prime's policy. Standing under the Declaratory Judgment Act exists where there is an "actual controversy." 28 U.S.C. § 2201(a) ; see also Hosein v. Gonzales , 452 F.3d 401, 403 (5th Cir. 2006) (explaining that the Fifth Circuit "interprets the § 2201 ‘case of actual controversy’ requirement to be coterminous with Article III's ‘case or controversy’ requirement").

Wesco's declaratory judgment action raises the issue of whether Lopez was hauling goods on behalf of Wesco's insured, Sam Freight, or Prime's insured, DKY Express, or both. Therefore, Wesco has alleged an "actual controversy" under the Declaratory Judgment Act.

Prime also argues that Wesco does not have standing to file a direct action against Prime under Mississippi law. Traditionally, Mississippi barred direct actions filed by injured parties against liability insurers. Poindexter v. S. United Fire Ins. Co. , 838 So. 2d 964, 967 (Miss. 2003). In 2000, the Mississippi rule concerning declaratory judgment actions, Miss. R. Civ. P. 57, was amended to provide, "Where an insurer has denied or indicated that it may deny that a contract covers a party's claim against an insured, that party may seek a declaratory judgment construing the contract to cover the claim." Miss. R. Civ. P. 57(b)(2).

Wesco responds that this lawsuit is governed by federal law, not state law. In diversity cases, federal courts apply state substantive law and federal procedural rules. Camacho v. Ford Motor Co. , 993 F.3d 308, 311 (5th Cir. 2021). The Fifth Circuit has cited Miss. R. Civ. P. 57(b)(2) for the proposition that "Mississippi law prohibits direct actions by third parties against insurance companies, except where the third party brings a declaratory action against an insurer who has denied coverage or has indicated that it may deny coverage." Walker v. FFVA Mut. Ins. Co. , 603 F. App'x 324, 325 (5th Cir. 2015). The court in Walker affirmed the district court's decision on that basis; thus, it appears that the Fifth Circuit would consider state law policies concerning direct actions to be substantive in nature. See id. This court usually applies state law to determine whether a lawsuit is a barred direct action. See, e.g., Sampson v. Miss. Valley Silica Co. , 268 F. Supp. 3d 918, 923 (S.D. Miss. 2017) ; but see Wesco Ins. Co. v. State Auto Prop. & Cas. Ins. Co. , No. 3:20-CV-422-HTW-LGI, 2021 WL 3891084, at *3 (S.D. Miss. Aug. 31, 2021) (holding that Miss. R. Civ. P. 57 should not be considered because Erie R.R. Co. v. Tompkins , 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), required the Court to apply federal law to issues of ripeness and standing).

Nevertheless, the Court finds that the present action is not a "direct action" under Mississippi law. This is not a case in which a tort victim has sued an insurer; rather, one insurer has sued another insurer in an effort to determine which company would be responsible for indemnification in the underlying state court action. The policies behind Mississippi's treatment of direct actions supports this conclusion:

Mississippi's prohibition of direct actions was consistent with its long-standing policy that a jury should not consider the existence of insurance when considering whether an insured is liable in tort. The policy was memorialized in statutory law in former Miss. Code Ann. § 19-7-8. The concern is that introduction of insurance into the tort action will be prejudicial because a jury may be more likely to find the insured liable when the jury is aware that the insured has insurance to cover such liability. Liability insurance should cover the tort liability of the insured. Insurance should not be used as a basis to establish such tort liability. An insured carries liability insurance in the event it is found liable in tort. It should not be found liable in tort merely because it carries liability insurance.

Jeffrey Jackson & D. Jason Childress, Mississippi Insurance Law & Practice § 19:1 (July 2021). These policy issues that formed the basis for Mississippi's stance...