Opinion
03-CV-5564 (JMR/FLN).
April 27, 2005
ORDER
This matter is before the Court on cross-motions for summary judgment. A state court jury found plaintiff liable for injuries sustained by a third party in a motor vehicle accident. Plaintiff seeks a declaratory judgment holding its insurer, Hermitage Insurance Co. ("Hermitage"), liable for indemnity. Hermitage denies liability for this loss. Having considered the motions, defendant's motion is granted, and plaintiff's motion is denied.
I. Background
A Chevy Tahoe, towing a trailer loaded with wood scraps, traveled along a highway. A piece of the wood flew out of the trailer, striking a mortal blow to a motorcyclist. The question is whether the Hermitage insurance policy covers plaintiff's share of the damages. To answer this question, the Court must consider the insurance policy, two brothers, two small businesses, the Chevy Tahoe, and the trailer.
The brothers are Charles and David Christian. Charles Christian owned the two businesses — EZ Rolloffs, LLC ("EZ Rolloffs"), which manufactured debris-hauling trailers, and Christian Builders, Inc. ("Christian Builders"), a home construction firm. Christian Builders owned the Chevy Tahoe, which David Christian used to do odd jobs for both businesses. David Christian was not formally employed or compensated by either company.
In June, 2002, Charles Christian sold EZ Rolloffs' assets, but retained ownership of the company itself. (Krsul Dec., Ex. E at 27-30.)
Both companies reimbursed David Christian for expenses incurred while driving the Chevy Tahoe on their behalf. (David Christian Depo. at 23-27.)
On May 17, 2001, David Christian drove the Tahoe to EZ Rolloffs' Rogers, Minnesota, headquarters where he saw a trailer loaded with broken pallets and other wood debris. When he was told the debris was either going to be burned or thrown away, he offered to take the wood for recycling. (David Christian Depo. at 15-16.) Workers hitched the trailer to the Tahoe, and David Christian drove off to the recycling site. While in route, a piece of wood flew from the trailer and struck Brian Smith, an oncoming motorcyclist. Mr. Smith died as a result.
Both David Christian and Christian Builders carried automobile insurance. EZ Rolloffs, however, had recently cancelled its auto policy, but retained a Hermitage commercial general liability ("CGL") policy, which was much less expensive than an auto policy.
The CGL policy's Classification Limitation Endorsement limited the insurance to liability arising from the "cutting and welding of steel [and] trailer manufacturing." (Krsul Aff., Ex. Q at EZ000361.) The policy specifically excluded coverage for liability:
arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading and unloading."
(Id. at EZ000350.) The policy defined "auto" as "a land motor vehicle, trailer or semi-trailer designed for travel on public roads, including any attached machinery or equipment." (Id. at EZ000357.)
Defendant learned of the accident on May 23, 2001, when its claim supervisor, Eric Johnson, received a faxed notice from claim broker Russ Ely. The notice said: "Insured borrowed out their trailer for another individual's personal use. Something fell out of the trailer and hit a motorcyclist." (Johnson Dec. Ex. T.) Mr. Johnson later contacted EZ Rolloffs employee Randy Sandeno. Mr. Sandeno told him "that someone that he works with loaned out a trailer to a guy named Dave Christian and as he was driving down the road, something fell off, killing a man driving a motorcycle." (Johnson Dec., Ex. U.)
Plaintiff claims these statements are inadmissible hearsay. Plaintiff is incorrect. The statements are considered for their effect upon the listener; they are not offered to prove the truth of the assertions. Fed.R.Evid. 801(c).
On May 29, 2001, Hermitage sent EZ Rolloffs a letter denying coverage, citing two reasons for the denial. First, Hermitage said its policy insured EZ Rolloffs only for liability arising out of trailer manufacture, not for the use of "trailers loaned out to people for personal use." (Johnson Dec., Ex. V.) Second, Hermitage said the claim resulted from an automobile accident, making the auto exclusion applicable. (Id.) EZ Rolloffs did not respond to the denial letter.
In August, 2001, Brian Smith's estate sued David Christian, Christian Builders, and EZ Rolloffs in Minnesota state court. David Christian and Christian Builders were represented by their respective insurance companies. Hermitage continued to deny coverage under its CGL policy, and therefore declined to defend. EZ Rolloffs did not answer the complaint, and judgment was thereafter entered against it by default, preserving the issue of liability for a jury.
EZ Rolloffs was not originally named as a party; it was added in October, 2002. The amended complaint claimed EZ Rolloffs was liable for negligence in loading the trailer, and for failing to properly secure the load, allowing the wood to escape. (Amended Complaint at ¶ IX.)
The remaining parties went to trial. The state court ruled as a matter of law that David Christian was "the agent of both Christian Builders, Inc. and EZ Rolloff[s] LLC." (Krsul Dec., Ex. DD at 1.) But the court instructed the jury that "[t]he negligence of David Christian in operating the motor vehicle owned by Christian Builders is deemed by law the negligence of Christian Builders." (Supp. Krsul Dec., Ex. HH at 7, and Ex. II at CIVJIG 15.15.)
The court declined to instruct the jury that David Christian's negligent operation of the Tahoe could also be deemed the negligence of EZ Rolloffs. (Compare Supp'l Krsul Dec., Ex. JJ, CIVJIG 15.15 with Supp'l Krsul Dec., Ex. II at CIVJIG 15.15.) Instead, the jury was instructed that "both parties were negligent, David Christian in operating the motor vehicle and EZ Rolloff[s] in loading the bin before it was transported on the highway." (Supp'l Krsul Dec., Ex. HH at 7, and Ex. II at CIVJIG 15.15.)
The jury received a special verdict form asking them to apportion liability between "David Christian, the statutory agent of Christian Builders, Inc., for operating the vehicle on the highway" and "EZ Rolloff[s], LLC for failing to secure the broken wooden pallets in the bin before its transportation on the highway." (Krsul Dec., Ex. DD at 2.) The jury deadlocked on this question.
Faced with the jury's deadlock, Christian Builders, David Christian, and the trustee for the Smith estate stipulated that the court should instruct the jury to split the liability evenly between David Christian and EZ Rolloffs. The court did so. Thus, on March 17, 2003, the jury returned a verdict assigning 50% liability to David Christian for the negligent operation of the Tahoe, and 50% liability to EZ Rolloffs for improperly loading the trailer. The jury awarded $3,040,054.71 in damages.
Judgment was not immediately entered after the verdict. Instead, the parties reached a negotiated settlement in October, 2003, whereby David Christian and Christian Builders, together with their insurers, agreed to pay Smith's estate $2,951,333 in full satisfaction of the verdict. Although EZ Rolloffs did not contribute to the settlement, Christian Builders sought and obtained a judgment for contribution of nearly $1.5 million against EZ Rolloffs. (Christian Aff., Ex. 12.)
Christian Builders paid $673,737; its insurer paid $2,177,596; and David Christian's insurer paid $100,000.
The judgment was based on an October 31, 2003, Notice of Amount Paid in Contribution filed by David Christian and Christian Builders under Minn. Stat. § 548.19. The notice claimed EZ Rolloffs had been adjudicated 50% at fault for the nearly $3 million the parties had paid to satisfy the judgment. As such, they claimed EZ Rolloffs owed them nearly $1.5 million. (Supp'l Krsul Aff., Ex. PP.)
Meanwhile, EZ Rolloffs filed this suit against Hermitage in Minnesota state court claiming breach of contract, and seeking a declaratory judgment that Hermitage had a duty to indemnify. EZ Rolloffs and Christian Builders eventually agreed that, in satisfaction of the contribution claim, EZ Rolloffs would pursue this lawsuit and give any proceeds to Christian Builders. Hermitage removed the case to federal court. Both parties seek summary judgment.
Charles Christian controlled both companies at the time of the settlement.
II. Standard of Review
Summary judgment is appropriate when there are no material facts in dispute and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). Insurance coverage cases are "particularly amenable to summary judgment" because "the interpretation and construction of insurance policies is a matter of law," John Deere Ins. Co. v. Shamrock Indus., 929 F.2d 413, 417 (8th Cir. 1991). Under controlling Minnesota law, an insurance policy's clear and unambiguous language is given its usual and accepted meaning, ambiguous language is construed in favor of coverage, and exclusions are narrowly construed against the insurer. Wanzek Const., Inc. v. Employers Ins. of Wausau, 679 N.W.2d 322, 324-35 (Minn. 2004).
III. Discussion
This case asks: does the auto exclusion apply? EZ Rolloffs argues its underlying liability arises out of two separate but concurrent causes: the improper loading of the trailer, and David Christian's negligent operation of the Chevy Tahoe. Plaintiff admits the first cause falls within the auto exclusion, but maintains the exclusion does not apply to David Christian's negligence because he was not an "insured" under the policy. Thus, plaintiff argues the Tahoe liability did not arise from the use of an auto "owned or operated by or rented or loaned to any insured."
The Court finds Hermitage's other original basis for denying coverage — that the claim fell outside the Classification Limitation Endorsement because the accident occurred while the trailer was loaned out for personal use — is without merit.
Hermitage contends the auto exclusion's plain language bars coverage because EZ Rolloffs' liability does not, in fact, arise from David Christian's negligent operation of the Tahoe. Pointing to the state court's verdict and the judgment for contribution, defendant argues plaintiff's liability arises solely from EZ Rolloffs' negligent loading of the trailer — which plaintiff agrees is excluded from coverage. Alternatively, defendant argues that, even if plaintiff were liable for David Christian's negligent driving, the auto exclusion would apply, because that liability arose from the use of an auto loaned (by Christian Builders) to an insured (EZ Rolloffs).
The Court agrees with defendant on both scores. Thus, the auto exclusion applies to bar coverage, and defendant's motion for summary judgment must be granted.
A. EZ Rolloffs' Liability Arises Only From Improper Trailer Loading
As recounted above, the verdict in the state court action instructed the jury to allocate liability between "David Christian, the statutory agent of Christian Builders, Inc., for operating the vehicle on the highway" and "EZ Rolloff[s], LLC for failing to secure the broken wooden pallets in the bin before its transportation on the highway." (Krsul Dec., Ex. DD at 2.) Notwithstanding this clear language, EZ Rolloffs claims its liability is partially based on David Christian's highway operation of the Tahoe, because the court had previously instructed the jury that David Christian was "the agent of both Christian Builders, Inc. and EZ Rolloff[s], LLC." (Krsul Dec., Ex. DD at 1.)
This argument fails because EZ Rolloffs was not found liable for David Christian's negligence. The state court explicitly declined to use language that would have imposed liability on EZ Rolloffs for David Christian's negligent driving. (Compare Supp'l Krsul Dec., Ex. JJ at CIVJIG 15.15 with Supp'l Krsul Dec., Ex. II at CIVJIG 15.15.) Instead, the court specifically instructed the jury that David Christian's negligence was deemed the negligence of Christian Builders. (Supp. Krsul Dec., Ex. HH at 7 and Ex. II at CIVJIG 15.15.)
The Notice of Amount Paid in Contribution, which underlies plaintiff's current claim, states that EZ Rolloffs "has been adjudicated to be fifty percent (50%) at fault" in the underlying action. (Supp'l Krsul Dec., Ex. PP at 1.) That liability springs in turn from EZ Rolloffs' 50% liability for improperly loading the trailer. Thus, the judgment that created liability here is premised solely on EZ Rolloffs' 50% liability for improperly loading the trailer. The auto exclusion clearly bars coverage for this. Therefore, defendant's policy does not cover this loss, and it has no duty to indemnify plaintiff. Thus, plaintiff's claim must fail.
If, as plaintiff claims, EZ Rolloffs were also liable for David Christian's operation of the Tahoe, then EZ Rolloffs would be obligated for greater than 50% in contribution, since EZ Rolloffs was already solely liable for the 50% of the damages arising from improper loading.
B. Alternatively, the Tahoe was Loaned to EZ Rolloffs, so the Auto Exclusion Applies
If EZ Rolloffs were liable for David Christian's negligent operation of the Tahoe, Hermitage's auto exclusion would still foreclose coverage. The policy explicitly bars coverage for liability arising from the use of any auto "owned or operated by or rented or loaned to any insured." Plaintiff argues the exclusion should not apply to David Christian's operation of the Tahoe because the Tahoe was neither owned nor operated by an insured. The Tahoe was owned by Christian Builders and operated by David Christian, neither of whom is an "insured" under the Hermitage policy. But defendant correctly argues that Christian Builders "loaned" the Tahoe to EZ Rolloffs to haul the debris in the trailer for recycling, making the auto exclusion applicable. Plaintiff denies that this arrangement was a "loan," as that term is usually defined. The Court finds it was a loan.
Because "loaned" is not defined in the policy, the word must be given its plain meaning. The Hermitage policy uses "loaned" as a verb. Some stylists maintain that "loan" should be used only as a noun, preferring "lend" as the verb. See, e.g., William Strunk Jr. E.B. White, The Elements of Style 52 (4th ed. 2000). But Standard American Usage frequently uses "loan" as a verb, and when so used, it is synonymous with "lend," which means:
To give into another's keeping for temporary use on condition that the borrower return the same or its equivalent.Webster's Third New International Dictionary 1293 (1993).
David Christian used the Tahoe to do odd jobs for both of his brother's companies, and he was at times an agent of each. In doing so, he (figuratively) wore two hats: a Christian Builders hat, and an EZ Rolloffs hat. Since the Tahoe was owned by Christian Builders, he usually wore his Christian Builders hat when driving it. When he used the Tahoe to do jobs for EZ Rolloffs, however, he donned his EZ Rolloffs hat. The Tahoe's use in the latter case was a loan — David Christian, as agent for Christian Builders, granted David Christian, as an agent for EZ Rolloffs, temporary permission to use the Tahoe for EZ Rolloffs. There is no term other than "loaned" (besides, perhaps, "lent") that more accurately describes this arrangement.
Or, perhaps, he wore both hats at once.
Plaintiff denies the existence of a loan because there was no "transference of physical possession or control of the vehicle" to EZ Rolloffs. (Response at p. 13.) Plaintiff is incorrect. Under plaintiff's version of the case, David Christian was an agent of EZ Rolloffs. He physically possessed the Tahoe. Plaintiff asks the Court to engage in a fiction under which David Christian is an agent of EZ Rolloffs whose negligent operation of the Tahoe can be imputed to the company, while simultaneously finding he is not an agent who took physical possession of the vehicle on the company's behalf.
Plaintiff can create metaphysical puzzles, but the Court declines to play with them. David Christian drove the Tahoe as an agent for his brother's companies. When he did so on behalf of EZ Rolloffs, the vehicle was covered by a valid insurance policy that contained a valid auto exclusion. The insurance policy was considerably less expensive because the risk of negligent auto operation was excluded. The Court will not contort law or logic to force the excluded coverage back into the policy.
Accordingly, even assuming David Christian to be an agent of EZ Rolloffs at the time of the accident, the Tahoe was loaned to an insured when the accident occurred; the auto exclusion therefore applies.
Because there was no breach of contract, plaintiff's claim for a declaratory judgment must fail as well.
III. Conclusion
As the foregoing demonstrates, Hermitage's auto exclusion applies whether or not David Christian's negligence can be imputed to EZ Rolloffs. Thus, plaintiff has no basis for coverage under its policy with defendant. Accordingly, IT IS ORDERED that:
1. Plaintiff's motion for summary judgment [Docket No. 26] is denied.
2. Defendant's motion for summary judgment [Docket No. 17] is granted.
LET JUDGMENT BE ENTERED ACCORDINGLY.