JOHN R. TUNHEIM, District Judge.
This is a declaratory judgment action brought by plaintiff Canal Insurance Company ("Canal") against defendant Great West Casualty Company ("Great West"). The underlying facts giving rise to this action involve a trucking accident. Douglas Amundson Trucking ("DAT") had arranged for Tim Bartness, doing business as TB Trucking (collectively, "Bartness") to pick up and deliver a load of cargo for a third party. Bartness caused the accident while delivering this load. At the time of the accident, Bartness was driving a 2007 Kenworth truck that he was in the process of purchasing under a lease-to-purchase agreement with DAT. Bartness is a federally licensed motor carrier and was insured by Canal at the time of the accident. DAT is a federally licensed motor carrier as well as a federally licensed broker, and was insured at the time of the accident by Great West.
Great West brings a motion for summary judgment on the issue of coverage, arguing that Great West has no coverage obligations for liabilities arising from the accident. Because material issues of fact remain regarding whether Bartness was an insured under the Great West insurance policy, the Court will deny Great West's motion.
DAT is a freight hauling company based in North Dakota that is licensed to operate as a federal motor carrier
DAT transports cargo using trucks and drivers provided by independent owner-operators. (Amundson Dep. 10:21-22.) These owner-operators lease their trucks to DAT, and operate under DAT's federal motor carrier authority while transporting loads on DAT's behalf. (Id. 68:17-69:1.) DAT's owner-operators lease their trucks to DAT pursuant to lease agreements which specify that DAT "shall have exclusive possession[,] control and use of the equipment, and shall assume full responsibility to the public, the shippers, and to all state and federal regulatory bodies or authorities having jurisdiction, during the entire period of the agreement." (Novotny Aff., Ex. 8 at 2; see also Amundson Dep. 66:21-24.) Additionally, the agreements provide that "the equipment is under the direction and control of [DAT]." (Novotny Aff., Ex. 8 at 2.) DAT is responsible for insuring its owner-operators. (Amundson Dep. 67:21-24.) When owner-operators lease their trucks to DAT they display DAT's federal motor carrier numbers on their trucks. (Id. 68:2-5.) Owner-operators also provide logs of their time and maintenance records to DAT. (Id. 68:6-11.)
DAT also transports cargo as a broker. When DAT brokers with a driver, the driver is responsible for providing insurance and federal operating authority. (Id. 71:5-9.) In a brokering situation, the driver may have his own insurance and be licensed as a federal motor carrier, or the driver may have insurance and operating authority through another carrier. (Id. 12:10-15.) Essentially, DAT finds the load, the driver transports the load, and then the driver pays DAT a percentage of the amount received for hauling the load as a finder's fee. (Id. 12:14-16.)
Between 2006 and 2008 Bartness drove a truck for DAT as a DAT employee.
In December 2008, shortly after Bartness obtained his own federal motor carrier authority, DAT and Bartness entered into a lease agreement (the "Lease") whereby Bartness leased from DAT a 2007 Kenworth truck (the "Kenworth") that Bartness had previously operated as an employee of DAT. (Id. 76:7-12; Novotny Aff., Ex. 7.)
The Lease provided Bartness with an option to purchase the Kenworth at the end of its the thirty-nine-month term, stating that "[s]o long as no Event of default has occurred and is continuing at the expiration of the Minimum Term, [Bartness] shall have the option to (i) purchase the Equipment at fair value; (ii) negotiate an extension of the Lease; or (iii) return the Equipment to [DAT]." (Novotny Aff., Ex. 7 at 9, 12.) While the Lease was in effect, title to the Kenworth "remain[ed] with DAT at all times," and Bartness had "no right, title, or interest therein except as expressly set forth in this Lease." (Id., Ex. 7 at 9.)
Under the Lease, Bartness was responsible for maintaining and inspecting the Kenworth as well as paying taxes. (Id., Ex. 7 at 5; Amundson Dep. 91:22-93:1.) The Lease did, however, require Bartness to make the truck, as well as Bartness' driving log, maintenance, and other records "available for inspection by [DAT]'s representatives." (Novotny Aff., Ex. 7 at 4.) The Lease also required Bartness to "at [his] own expense acquire and maintain during the term hereof, such insurance, in such form and under such policies as shall be satisfactory to [DAT]" including all risk property insurance and comprehensive public liability insurance providing "coverage for any bodily injury, death, or property damage which may be caused by or related to the Equipment or its operation in amounts satisfactory to [DAT]. Such language shall name [DAT] as an additional insured." (Id., Ex. 7 at 5.)
After obtaining his own federal motor carrier authority and entering into the Lease, Bartness began hauling loads for DAT. DAT contends that these loads were carried pursuant to DAT's broker authority. (Amundson Dep. 72:10-73:13.) DAT and Bartness did not enter into a written agreement discussing their broker/carrier arrangement, but DAT's owner testified that he and Bartness had a verbal understanding that DAT would be brokering loads to Bartness. (Id. 72:10-73:13.) Bartness and DAT never entered into an owner-operator lease agreement. (Id. 69:2-5.)
When Bartness transported cargo for DAT he used his own operating authority and placed his own "TB Trucking" placard on the Kenworth. (Id. 62:13-16, 77:21-24.) Before allowing Bartness to haul loads, DAT required Bartness to submit proof of his insurance and operating authority. (Id. 73:14-20, 75:25-76:6.) DAT was aware that Bartness passed an entry-level audit conducted by the federal government six months after obtaining his operating authority. (Id. 76:20-77:16.)
While driving under his own motor carrier authority Bartness was responsible for inspecting and maintaining the Kenworth, as well as keeping records of inspections and maintenance. (Id. 91:22-92:10.) DAT fronted Bartness money for fuel and controlled the amount of fuel he could purchase each day, but Bartness reimbursed DAT for fuel expenses. (Id. 29:6-30:4.) Bartness was required to maintain driving logs and his driver qualification file, obtain physicals, and comply with federally mandated substance abuse testing. (Id. 93:5-23.) Additionally, Bartness purchased insurance for, and paid taxes on, the Kenworth. (Id. 92:24-93:3.) In his application for insurance, Bartness listed DAT as an additional insured for auto liability coverage, and indicated that DAT's relationship to Bartness was one of "broker." (Novotny Aff., Ex. 2 at 16.) Bartness also indicated in his application for insurance from Canal that his business class was "For Hire Trucking." (Id., Ex. 2 at 13.) However, the "Description of Operations" portion of the Truckers Underwriting Report accompanying his insurance policy, indicated that Bartness' operations did not include "for hire," "brokerage," or "owner-operator," but did include "contract" work. (Id., Ex. 2a at 2.) Prior to the accident, Bartness kept the Kenworth at his home. (Amundson Dep. 91:3-7.)
Pursuant to the Lease, Bartness obtained commercial automobile insurance from Canal (the "Canal Policy") that was in effect from December 24, 2008, to December 24, 2009. (Novotny Aff., Ex. 2 at 3.)
The Canal Policy provides $1,000,000 in liability coverage, under which Canal promises 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'." (Id., Ex. 2 at 23, 29.) Bartness d/b/a TB Trucking is the named insured on the Canal Policy, and is the only driver listed on the policy's "Driver Schedule" endorsement. (Id. Ex. 2 at 3, 22.)
With respect to what individuals and entities are covered by the liability insurance, the Canal Policy, in combination with a Truckers Endorsement, provides:
The following are "insureds":
(Id., Ex. 2 at 29, 56.)
The Canal Policy also contains an "Other Insurance" provision, which, as modified by the Truckers Endorsement, provides
(Id., Ex. 2 at 36, 56.)
DAT had commercial general liability insurance through Great West pursuant to a policy in effect from June 1, 2009, to June 1, 2010 (the "Great West Policy"). (Novotny Aff., Ex. 1 at 3.) Great West agreed 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'." (Id., Ex. 1 at 82.) DAT is the named insured on the Great West Policy. (Id., Ex. 1 at 16.)
The Great West Policy coverage form, together with an endorsement, defines "insureds" as
(Id., Ex. 1 at 74, 82.)
The Great West Policy provides $1,000,000 of liability coverage for covered autos. (Id., Ex. 1 at 18.) The Great West Policy defines covered autos as (1) "specifically described autos" which are those autos listed in item three of the declarations; (2) "hired autos only" which include "only those `autos' you lease, hire, rent or borrow"; and (3) "nonowned autos only" which include "only those `autos' you do not own, lease, hire, rent or borrow that are used in connection with your business." (Id., Ex. 1 at 18-19, 80.) The Kenworth is not listed in the schedule of autos which comprises the list of "specifically described autos." (Id., Ex. 1 at 5-15.)
The Great West Policy also contains a Transportation Broker or Freight Forwarder Operations Liability Exclusion Endorsement (the "Broker Endorsement") which states that "Liability Coverage shall not apply to transportation broker or freight forwarder operations of the `insured'." (Id., Ex. 1 at 73.)
With respect to other insurance, the Great West Policy provides:
(Id., Ex. 1 at 91.)
On or about December 1, 2009, DAT received a telephone call from Tri-Campbell, Inc. ("Tri-Campbell") regarding transporting a load of potatoes from a farm in North Dakota to various locations in the Midwest. (Amundson Dep. 42:7-11.) DAT ran approximately three to five loads a week for Tri-Campbell. (Id. 50:20-51:3.) Typically when DAT received a call from Tri-Campbell, DAT would review its availability for "owner/operators, company trucks, outside carriers, [and] independent carriers" to determine whether it had the capacity to haul that load. (Id. 45:25-46:4.) When Tri-Campbell called in December, DAT determined it had a truck available and agreed to take the load. (Id. 46:14-21.) When DAT agreed to haul the load, it did not designate a particular truck, and DAT's owner testified that Tri-Campbell did not care whether a DAT employee or another trucker hauled the load "as long as the load is covered," and the driver was qualified. (Id. 47:10-18.)
On December 1, 2009, Tri-Campbell faxed a Load Confirmation Sheet (the "LCS") to DAT reflecting that DAT had agreed to provide transportation for the potatoes. (Novotny Aff., Ex. 9 at 2.) DAT described the LCS as a "binding contract between a shipper and a carrier." (Amundson Dep. 44:18-21.) The LCS stated the pickup date, delivery date, stops, and compensation to be paid on the load. (Novotny Aff., Ex. 9 at 2.) Additionally, the LCS listed DAT as the "carrier" and listed Tammy Rudnik from Tri-Campbell as the "broker." (Id.) The LCS further provided that it governed the movement of freight "between `Broker' and `Contract Carrier,'" and that "[i]t is agreed that [DAT] and [DAT's] driver are responsible for all shortages, damages, and any late delivery fees assessed to [Tri-Campbell] due to failure to deliver when due." (Id.) Pursuant to this language "[DAT] ha[d] responsibility to get the load to its . . . destination as it appeared on the [LCS]." (Amundson Dep. 45:3-10.) Other than the LCS and bills of lading, no other written agreement defined Tri-Campbell's relationship to either DAT or Bartness. (Novotny Aff., Ex. 4 (Dep. of William Campbell ("Campbell Dep.") 15:21-16:6); Amundson Dep. 45:11-17.)
Although DAT's owner could not remember the precise sequence of events related to the December 1, 2009 load, he testified based on his typical practices that after receiving the LCS, DAT would have contacted Bartness and notified him of the availability of a load. (Amundson Dep. 47:24-48:10.) At that point, Bartness could have accepted or declined the load. (Id. 48:11-13.) Because Bartness accepted, DAT would have told him verbally when and where to pick up the load. (Id. 48:18-23, 49:6-16.) DAT would also have coordinated with Bartness regarding which of DAT's trailers Bartness should use for the load. (Id. 52:16-21.) Bartness would then have received the bills of lading directly from Tri-Campbell when he picked up the load, setting forth the specific delivery instructions. (Id. 50:1-8.)
After picking up the load of potatoes on December 1, 2009, Bartness was involved in an accident with two other vehicles that resulted in injuries to three individuals. (Aff. of Curtis D. Ruwe, Ex. 1 at 3-4, Dec. 21, 2012, Docket No. 20; Novotny Aff., Ex. 12 at 3-4.) Bartness called DAT to alert it that he had been in an accident. (Amundson Dep. 52:22-24.) DAT requested that law enforcement deliver the potatoes to its warehouse, and DAT found a different truck to finish hauling the load. (Id. 55:2-8.)
DAT did not contact Great West about the December 1, 2009 accident because DAT had suffered no damage to its trailer or the cargo. (Id. 98:25-99:5.) After the accident, DAT reviewed its SAFER system profile, a website which gathers information about federal motor carriers such as accidents and failed roadside inspections. (Id. 97:3-12.) DAT's SAFER system profile listed the December 1, 2009 accident as one chargeable to DAT as a carrier. (Id.) DAT contacted the Federal Motor Carrier Safety Administration's North Dakota office to have the profile corrected because DAT believed that Bartness, not DAT, had been acting as a carrier for the load, and the accident was subsequently removed from DAT's profile. (Id. 97:17-98:9.) DAT did not provide any documentation of the accident, its own motor carrier authority, or Bartness' motor carrier authority in order to have the accident removed from its profile. (Id. 97:24-98:3.)
Bartness contacted Canal after the accident. (Novotny Aff., Ex. 10.) According to Canal's claim notes, Bartness communicated that he was "working under his own authority" and in the process of purchasing the Kenworth "thus there was no lease agreement and no other viable insurance." (Id., Ex. 10 at 2-3.) Although DAT's placards were allegedly not displayed on the truck at the time of the accident, (Amundson Dep. 80:17-20), the police report contained DAT's not Bartness' federal operating number, (Novotny Aff., Ex. 10 at 3).
Canal sent Bartness a reservation of rights letter on March 9, 2010, stating that "[o]ur review of this matter reveals that one or more of the allegations of the claim against [Bartness] may not be covered under the above Canal policy. (Novotny Aff., Ex. 11 at 2.) The letter further stated that "[o]ur investigation to date of the subject claim or loss has revealed that you were operating under the authority of, for the benefit of, being paid by, lease[d] to and under the direction and control of [DAT]," and therefore concluded that the Canal Policy provided only excess coverage. (Id., Ex. 11 at 3.) In a March 11, 2010 letter Canal indicated that "[e]vidently, we have a double broker situation. TriCampbell [as the original broker] then brokered to [DAT] who brokered to Insured." (Id., Ex. 12 at 2.) On October 25, 2010, Canal sent a letter to Great West admitting that the Canal Policy provided coverage for the accident, but contending that coverage under the Great West Policy was primary. (Id., Ex. 13.)
On March 30, 2011, Canal filed a complaint in this Court seeking declaratory judgment against Bartness, DAT,
Summary judgment is appropriate where there are no genuine issues of material fact and the moving party can demonstrate that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). A fact is material if it might affect the outcome of the suit, and a dispute is genuine if the evidence is such that it could lead a reasonable jury to return a verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A court considering a motion for summary judgment must view the facts in the light most favorable to the non-moving party and give that party the benefit of all reasonable inferences to be drawn from those facts. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
It is undisputed that Minnesota law applies to the interpretation of the insurance policies in this case.
In determining whether coverage exists "general principles of contract interpretation apply." Lobeck v. State Farm Mut. Auto. Ins. Co., 582 N.W.2d 246, 249 (Minn. 1998). The goal of insurance policy interpretation is to give effect to the parties' intent. Eng'g & Constr. Innovations, Inc. v. L.H. Bolduc Co., 825 N.W.2d 695, 704 (Minn. 2013). The Court must construe the terms of the policy "according to what a reasonable person in the position of the insured would have understood the words to mean." Canadian Universal Ins. Co. v. Fire Watch, Inc., 258 N.W.2d 570, 572 (Minn. 1977). Unambiguous language must be given its plain and ordinary meaning. Henning Nelson Constr. Co. v. Fireman's Fund Am. Life Ins. Co., 383 N.W.2d 645, 652 (Minn. 1986). A policy is ambiguous if its language "is susceptible to two or more reasonable interpretations," Carlson v. Allstate Ins. Co., 749 N.W.2d 41, 45 (Minn. 2008), and ambiguous language is construed in favor of the insured, see Bobich v. Oja, 104 N.W.2d 19, 24 (Minn. 1960). Whether an insurance policy is ambiguous is a question of law for the Court. Columbia Heights Motors, Inc. v. Allstate Ins. Co., 275 N.W.2d 32, 34 (Minn. 1979). Additionally, the Court construes an insurance policy as a whole. Watson v. United Servs. Auto. Ass'n, 566 N.W.2d 683, 692 (Minn. 1997).
As an initial matter, the Court finds that the Canal Policy provides coverage for the accident. The Canal Policy provides that Canal will 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.'" The Kenworth is specifically listed as a covered auto. Additionally Bartness is the named insured, and is an insured for purposes of the accident because the Canal Policy insures the named insured "for any covered `auto.'"
The Court must determine next whether the Great West Policy provides coverage to Bartness for the December 1, 2009 accident.
It is clear that Bartness is someone else, other than DAT, and that Bartness had permission from DAT to use the Kenworth, therefore the Court will address only the two remaining requirements.
The term "hire" is not defined in the Great West Policy. "When an insurer fails to define a coverage term, it is not entitled to a strict or limited definition that differs from the ordinary definition in order to avoid providing coverage." Kresse v. Home Ins. Co., 765 F.2d 753, 755 (8
Id. Additionally, the County required Kresse to use a particular truck for the job. Id. at 755-56. Based on these facts, the Eighth Circuit concluded that a material issue of fact remained regarding whether Kresse had been hired by the County, and therefore determined that summary judgment was inappropriate. Id. at 756.
Courts generally consider the level of control an entity exerts over a truck for purposes of determining whether that truck was "hired" by the entity. See U.S. Fid. & Guar. Co. v. Heritage Mut. Ins. Co., 230 F.3d 331, 335 (7th Cir. 2000) (determining whether the entity had hired trucks by considering whether the entity maintained the trucks and paid for fuel, paid drivers directly for the amount of material they hauled, dictated the routes of the drivers, or otherwise exerted control over the drivers); Toops v. Gulf Coast Marine Inc., 72 F.3d 483, 487-88 (5th Cir. 1996) (considering whether the hiring entity (1) furnished fuel or otherwise maintained the truck; (2) required the trucks to be a certain size or required a certain number of loads per day; (3) selected individual drivers; (4) could fire drivers; (5) assumed control of the truck or driver by directly loading or unloading). Additionally, whether the driver owned the truck and whether the driver hauled for other businesses, suggesting that the driver is an independent contractor and therefore not hired by the hauling entity, is a relevant consideration. Finally, of particular importance to the hiring inquiry is whether the entity could demand a particular vehicle — otherwise courts have concluded that the entity is merely "hiring" the service and not the "auto" as required by the language of the insurance policy. See Occidental Fire & Cas. Co. of N. Am. v. Westport Ins. Corp., No. 02-8923, 2004 WL 2028616, *9 (E.D. Pa. Sept. 10, 2004).
The Court finds that summary judgment on this record is inappropriate as a genuine issue of fact remains regarding whether DAT hired the Kenworth. A number of factors indicate that the Kenworth may not have been a hired auto. For example, DAT did not provide routes or directions to Bartness, did not maintain the Kenworth, and did not load or unload the truck. Additionally, the Truckers Underwriting Report accompanying the Canal Policy indicated that Bartness' operations did not include "for hire" work.
A number of other factors, however, suggest that DAT did hire the Kenworth. DAT fronted the cost of fuel and restricted the amount of fuel Bartness could purchase for any particular trip. DAT also selected the trailer that Bartness would use. Pursuant to the lease, DAT had the right to inspect Bartness' truck as well as Bartness' maintenance and driver logs. DAT also required Bartness to provide DAT with proof of insurance, which suggests a level of control over the manner in which Bartness operated his truck and ultimately delivered the load. Additionally, Bartness indicated in his application for insurance from Canal that his business class was "For Hire Trucking." The record also reflects that Bartness never hauled for any entity other than DAT. Furthermore, although by default, when DAT hired Bartness it was hiring a particular driver and truck, because Bartness used only the Kenworth. Based upon these facts, the Court concludes that summary judgment on the issue of whether the Kenworth is a covered auto under the Great West Policy is inappropriate.
Therefore, the Court finds that material issues of fact remain regarding whether Bartness was an insured under the Great West Policy. Because a reasonable jury could conclude that DAT hired the Kenworth, Bartness could qualify as insured and therefore be entitled to coverage under the Great West Policy. Accordingly, the Court will deny Great West's motion for summary judgment.
This case will be placed on the Court's next available trial calendar.
Based on the foregoing, and all the files, records, and proceedings herein,
More importantly, whether DAT was acting as a broker is not dispositive on the question of whether DAT leased, hired, rented, or borrowed the Kenworth. None of these terms in the Great West Policy defining a covered auto contain a reference to "broker," and the Court must interpret the plain language of the insurance policy. See Carolina Cas. Ins. Co. v. Ins. Co. of N. Am., 595 F.2d 128, 138 (3d Cir. 1979) ("[W]here the case is concerned with responsibility as between insurance carriers, and not with the federal policy of protecting the public, [Interstate Commerce Commission] considerations are not determinative, and a court should consider the express terms of the parties' contracts." (internal quotation marks omitted)).
