DIRENZO TOWING & RECOVERY, INC., Plaintiff, v. OWNER-OPERATOR INDEPENDENT DRIVERS ASSOCIATION, INC., OWNER-OPERATOR SERVICES, INC., and OOIDA RISK RETENTION GROUP, INC., Defendants.
CIVIL ACTION NO. 4:16-cv-10073-TSH
UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS
March 9, 2018
Hennessy, M.J.
March 9, 2018
Hennessy, M.J.
This action currently addresses the extent of liability coverage under an insurance policy. Plaintiff/counterclaim defendant Direnzo Towing and Recovery, Inc. (“Direnzo“) seeks to reach and apply insurance proceeds from Defendant/counterclaimant OOIDA Risk Retention Group, Inc. (“RRG“), Defendant Owner-Operator Independent Drivers Association, Inc. (“OOIDA“), and Defendant Owner-Operator Services, Inc. (“OOSI“) for towing, recovery, storage, and remediation services Direnzo allegedly provided in connection with a February 2014 motor vehicle accident involving Defendants’ insured, Kings Trucking Corp. (“Kings“). See generally Docket #1-1. Direnzo obtained a default judgment against Kings in Worcester County Superior Court in the amount of $167,700.95 plus interest and costs. See id. at ¶¶ 46-51; Docket #14 at 2. The parties have advanced competing declaratory judgment claims seeking to resolve whether an insurance contract between one or more of the defendants and Kings (“the insurance contract” or
District Judge Hillman has referred Defendants’ motion for summary judgment, Docket #49, to me for a report and recommendation. See Docket #69 (order of reference). Defendants do not specify whether they seek summary judgment on Direnzo‘s declaratory claim, their own declaratory cross-claim, or both, but they do request “a judgment in their favor that they have no duty to indemnify Direnzo” for Direnzo‘s claims against Kings. See Docket #49. Direnzo has opposed the motion, see Docket #70, and Defendants have submitted a reply, see Docket #75. In Direnzo‘s opposition brief, Direnzo requests “[i]n addition, or in the alternative,” that the Court declare Direnzo is entitled to payment from one or more of the defendants. Docket #70 at 21.
In light of the parties’ submissions, and for the reasons that follow, I find that the insurance contract covers most, but not all, of Direnzo‘s costs. I further find that Defendants’ motion is premature as to Direnzo‘s Reach and Apply claims,
I. BACKGROUND
Unless otherwise noted, the following facts in the summary judgment record are not in dispute.
RRG, an insurer, issued commercial automobile liability insurance policy number PL199515386A (the “policy” or the “insurance contract“) to Kings, effective from October 26, 2013 through October 26, 2014. PSOF at 2; DSOF ¶ 1.2 RRG and Direnzo have no contractual relationship, nor has Kings assigned Direnzo any contractual rights. PSOF at 3-4; DSOF ¶¶ 26-27. The parties dispute whether OOSI and OOIDA were parties to the insurance contract, but they agree that RRG issued Kings‘s policy.
A copy of the policy is in the record.3 In relevant part, the policy provided coverage for “all sums an ‘insured’ legally must pay as damages because of . . . ‘property damage’ to which this insurance applies caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto‘. [sic]” Docket #75-3 at 5; see PSOF at 2; DSOF ¶ 1. “‘Property damage’ means damage to or loss of use of tangible property.” Docket #75-3 at 18.
The policy imposed certain duties on Kings in the event of an accident, claim, suit, or loss. Among these, if Kings sustained “a ‘loss’ to a covered ‘auto’ or its equipment,” Kings was required to “[t]ake all reasonable steps to protect the covered ‘auto’ from further damage” and to “keep a record of [its] reasonable expenses for consideration in the settlement of the claim.” Docket #75-3 at 10-11. However, an adjacent provision prohibited Kings from assuming any obligation, making any payment, or incurring any expenses “without [the insurer‘s] prior written consent, except at the ‘insured‘s’ own cost.” Id.
[T]he 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 . . . . 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.
Docket #75-3 at 1; see PSOF at 3; DSOF ¶ 24. The MCS-90 endorsement defined “Public Liability” as “liability for bodily injury, property damage, and environmental restoration.” Docket #75-3 at 1.
Separate from these grants of coverage, the policy also contained several exclusions relevant to this motion. One, labeled the “contractual” exclusion, disclaimed “[l]iability assumed under any contract or agreement“; but this exclusion did not apply to liability that the insured “would have in the absence of the contract or agreement.” Id. at 7. A second provision, labeled the “care, custody or control” exclusion, barred coverage for “‘property damage’ to or ‘covered pollution cost or expense’ involving property owned or transported by the ‘insured’ or [in] the ‘insured‘s’ care custody or control.” Id. at 8. And provision labeled “no benefit to bailee” stated that the insurer “will not recognize any assignment or grant any coverage for the benefit of any person or organization holding, storing or transporting property for a fee regardless of any other provision of this Coverage Form.” Id. at 12. “Property” is not defined in the insurance contract.
B. The Motor Vehicle Accident
On February 28, 2014, a tractor-trailer owned by Kings crashed while travelling eastbound at Exit 11 of Interstate 290 in Worcester, Massachusetts. PSOF at 2; DSOF ¶ 6; see
Direnzo‘s workers observed significant damage at the accident scene. Kings‘s tractor-trailer appeared to have breached a guard rail, run down a slope between the highway and its off-ramp, and crashed onto Southbridge Street. Docket #50-1 at 32 (Direnzo‘s report on its response to the accident, appended to Direnzo‘s state-court complaint in this action). The tractor and trailer had separated, turned over, and sustained heavy damage, with parts, including the vehicle‘s front axle, broken off and lying on Southbridge Street. Id. The trailer‘s brakes were locked in the park position. Id. at 33. Containers of orange juice were ejected from the cargo trailer, littered the scene, and leaked onto the roadway, as did gasoline, engine oil, antifreeze coolant, and battery acid from the vehicle. Id. at 32. The orange juice froze onto the road surface due to severely cold weather. Id. A street light was shorn from its mountings, resulting in exposed live powerlines that rested on the same location as the trailer. Id. at 32. A guardrail and multiple crash attenuating barrels also were damaged. Docket #72 at 3. A police report described the tractor-trailer as a “total loss.” Id.
Direnzo remediated these conditions and recovered the tractor-trailer. See Docket # 50-1 at 32-33. Its workers used “Speedy dry” to contain the fluid leaks. Id. at 32. They drained fuel tanks on the damaged vehicle and disconnected and removed the leaking batteries. Id. They
The record includes an invoice from Direnzo to Kings evidencing that at the accident scene Direnzo performed services valued at approximately seventy-six thousand dollars. See Docket #50-1 at 31. Interest accumulated on the costs Direnzo incurred, and Direnzo also charged Kings three hundred dollars per day for the ongoing storage of Kings‘s tractor-trailer at Direnzo‘s facility. See Docket #12 at 4; Docket #50 at 10 n.3.
C. Procedural History
In July 2014, Direnzo sued Kings, Tropicana Products, Inc., and Sargent Trucking LLC in Worcester Superior Court for payment for the costs it incurred to tow, recover, and store Kings‘s tractor-trailer and to remediate the accident scene. PSOF at 3; DSOF ¶ 10.5 Direnzo‘s claims in that action sounded in contract and quasi-contract and comprised counts of unjust enrichment, breach of contract, quantum meruit, breach of the covenant of good faith and fair dealing, and violation of
In July 2015, the Superior Court allowed Direnzo‘s motion for assessment of damages on Direnzo‘s claims for unjust enrichment, quantum meruit, breach of contract, and breach of the covenant of good faith and fair dealing. PSOF at 3; DSOF ¶ 17. The court awarded Direnzo “the single amount of $167,700.95 together with interest and costs,” as reflected in Direnzo‘s invoice to Kings. PSOF at 3; DSOF ¶ 17. The court did not award judgment on Direnzo‘s
Direnzo initiated the instant action by suing Defendants in Worcester Superior Court in November 2015, seeking damages under a variety of theories as well as declaratory relief establishing that Defendants’ insurance contract with Kings requires Defendants to provide indemnity. See Docket #12 at 2-15. Defendants removed the action to this Court two months later, see Docket #1 at 1, and RRG then advanced a counterclaim seeking a declaratory judgment of no coverage for Direnzo‘s alleged damages, see Docket #7 at 10-16. In response, Direnzo unsuccessfully moved to dismiss RRG‘s counterclaim. See Docket #19; Docket #26. In his order denying dismissal, District Judge Hillman instructed the parties to proceed with discovery only as required to prosecute motions for summary judgment on their declaratory judgment claims. Docket #26. That order remains in effect: discovery respecting Direnzo‘s non-declaratory claims has not taken place.
Defendants filed the instant motion on July 25, 2017, Docket #49, together with a supporting memorandum, Docket #50, and affidavit, Docket #51. Direnzo submitted an
II. STANDARD OF REVIEW
Summary judgment is appropriate when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
“The interpretation of an insurance contract and the application of policy language to known facts present questions of law for the judge to decide.” OneBeacon Am. Ins. Co. v. Commercial Union Assurance Co. of Can., 684 F.3d 237, 242 (1st Cir. 2012) (citations omitted);
Massachusetts law generally requires that an ambiguity in an insurance contract be construed against the drafter, which invariably is the insurer. E.g., Utica Mut. Ins. Co. v. Herbert H. Landy Ins. Agency, Inc., 820 F.3d 36, 42 (1st Cir. 2016) (quoting Metropolitan Prop. & Cas. Ins. Co. v. Morrison, 951 N.E.2d 662, 671 (Mass. 2011)). This principle applies in full measure to actions, like this one, in which a non-party to an insurance contract seeks recovery directly from an insurer pursuant to Massachusetts‘s “reach and apply” statute.6 See, e.g., Bagley v. Monticello Ins. Co., 720 N.E.2d 813, 816 n.2 (Mass. 1999) (quoting Barnstable County Mut. Fire Ins. Co. v. Lally, 373 N.E.2d 966, 968 (Mass. 1978)); Bulyga v. Underwriters at Lloyd‘s, London, 297 N.E.2d 68, 70 (Mass. App. Ct. 1973) (citations omitted). However, when “specific policy language is controlled by statute or prescribed by another authority,” ambiguities are not
III. ANALYSIS
A. Defendants’ Choice-of-Law Argument is Waived
As an initial matter, Defendants argue in their reply brief that New Jersey law, not Massachusetts law, should govern the interpretation of the insurance contract. See Docket #75 at 6-9. I find that Defendants have waived this choice-of-law argument by failing to assert it in their opening brief. See Butler v. Deutsche Bank Trust. Co. Ams., 748 F.3d 28, 36-37 (1st Cir. 2014) (collecting cases) (noting that choice-of-law arguments are waived if “not timely presented before the district court“); see also Gov‘t Emps. Ins. Co. v. Barron Chiropractic & Rehab., P.C., No. 1:16-cv-10642-ADB, 2017 WL 3526255, at *15 n.13 (D. Mass. Aug. 16, 2017) (citing NExTT Sols., LLC v. XOS Techs., Inc., 113 F. Supp. 3d 450, 458 (D. Mass. 2015)) (“[A]rguments raised for the first time in the reply brief are considered waived.“). I also note that until Defendants submitted their reply on the instant motion, both sides operated under the presumption that Massachusetts law governs in this case. See Docket #68 at 4 n.2. Indeed, Defendants’ opening brief in support of this motion relies on Massachusetts law and offers no suggestion that New Jersey law should apply instead. See generally Docket #50. I therefore will apply Massachusetts law in this Report and Recommendation. Cf. OneBeacon Am. Ins. Co., 684 F.3d at 241 (quoting Artuso v. Vertex Pharms., Inc., 637 F.3d 1, 5 (1st Cir. 2011)) (applying Massachusetts law because the parties did so in their legal arguments and noting that “[a]
Having resolved this preliminary question, I now address whether the insurance contract covers Direnzo‘s claims.
B. Direnzo‘s Declaratory Claim
Defendants seek a judgment establishing that the insurance contract does not cover Direnzo‘s costs. I begin by addressing the underlying insurance policy, first by analyzing its “property damage” clause and then by discussing various exclusions and conditions it contains. I then turn to the MCS-90 endorsement appended to the policy.
1. The “Property Damage” Clause Covers Direnzo‘s Damages for Costs for Towing, Remediation, and Recovery, but Not for Storing Kings‘s Tractor-Trailer
The insurance contract provides coverage for “all sums an ‘insured’ legally must pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies7 caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto‘. [sic]” Docket #75-3 at 5. The parties dispute whether this language covers the costs Direnzo incurred as a result of the accident.
Defendants’ opening brief argues that “[r]ecovery, towing, and storage services do not constitute ‘property damage,‘” and urges that Direnzo‘s remedy lies against Kings rather than Kings‘s insurer. See Docket #50 at 10-12. In opposition, Direnzo points to several Massachusetts cases holding that insurance policies for “property damage” cover remediation of
I find that Massachusetts precedent supports Direnzo‘s position that the policy language providing coverage for “all sums an ‘insured’ legally must pay as damages because of . . . ‘property damage‘” covers Direnzo‘s damages for costs it incurred to remediate the accident scene and to recover and tow Kings‘s tractor-trailer. Three Massachusetts cases, cited in both parties’ briefs, support this conclusion.
First, in Big Wheel Truck Sales, Inc. v. Buerman, Civ. No. 2005-1143 (Mass. Super. Ct. Dec. 27, 2007), available at docket number 70-3, the Massachusetts Superior Court found coverage on facts similar to the instant case. There, as here, the insurance policy covered “all sums which the insured shall become legally obligated to pay as damages because of . . . property damage to which this insurance applies.” Docket #70-3 at 6. The insured‘s truck crashed through a guardrail on a highway exit ramp, tipped over, and came to rest on Massachusetts state property. Id. at 1. Diesel fuel, hydraulic fluid, and scrap metal that the truck was hauling were strewn about the Commonwealth‘s land. Id. at 1, 3. Police asked a towing company to respond and clean up the accident scene. Id. at 3. The towing company arrived with multiple pieces of heavy equipment and removed around ten tons of scrap metal. Id. Its workers soaked up fuel from the ground, cut and removed guardrails, righted steel beams, and used cranes to right the tractor-trailer before hauling it to the towing company‘s facility. Id. The towing company then charged the truck‘s owner $150 per day for storing the vehicle. Id. at 4. The insurer paid for costs associated with remediating the diesel fuel spill, but it refused to pay other costs, arguing that the costs were not for “property damage” covered by the insurance
The Superior Court held that the insurance contract covered the towing company‘s towing and recovery services, including righting and towing the tractor-trailer, loading the scrap metal into containers and hauling it away, and cleaning up the leaking chemicals. Id. at 8, 11. In reaching that conclusion, the Superior Court relied in part on Hazen Paper Co. v. U.S. Fid. & Guar. Co., 555 N.E.2d 576 (Mass. 1990), in which the Massachusetts Supreme Judicial Court held that “[w]hen pollution has occurred, cleanup costs are damages within the policy language because in that circumstance the word ‘damages,’ which is not defined in the policy, is ambiguous[,] . . . and the insured is entitled to the benefit of the [interpretation] that is more favorable to it.” 555 N.E.2d at 583 (collecting cases). Citing this analysis, the Superior Court in Buerman held “that the negligent operation of the tractor trailer . . . [that] tipp[ed] over onto another‘s property and deposit[ed] tons of scrap metal thereon has caused damage to that property within the meaning of the subject policy.” Docket #70-3 at 8. The court thus found coverage for the plaintiff‘s towing and remediation services. See id. However, the court concluded that the plaintiff‘s storage charges “d[id] not constitute property damages under the subject policy.” Id.
Second, Sterry Street Towing, Inc. v. Gild Corp., Civ. No. BRCV2011-1176-A (Mass. Super. Ct. Jan. 9, 2013), available at docket number 70-4, also presents similar facts to the instant case. In that case, a tractor-trailer hauling produce overturned on a ramp due to excessive speed, spilling oil, fuel, and produce onto the roadway. Docket #70-4 at 1. The roadway was partially blocked as a result. Id. Police summoned a towing company that recovered the tractor-trailer. Id. at 1-2. As in the instant case, “a substantial portion” of the towing company‘s alleged
Again citing Hazen, the Superior Court held “that the negligent operation of the tractor trailer . . . that tipp[ed] over onto another‘s property[,] obstructing passage and depositing fuel and cargo thereon[,] has caused damage to that property within the meaning of the subject policy.” Id. at 8. As in Buerman, the court noted that “the cost to clean up a site harmed by another‘s negligence is a proper measure for” assessing damages. Id. at 7-8 (citing Black v. Coastal Oil New Eng., 699 N.E.2d 353, 355 (Mass. App. Ct. 1998)). The court again held that the towing company‘s storage charges were not covered by the insurance policy, but concluded that the insurance policy‘s property damage clause covered the towing company‘s “removal of the tractor-trailer, its cargo and fuel from the Commonwealth‘s land.” Id. at 8.
Third, an opinion of the Massachusetts Appeals Court supports the Superior Court‘s reasoning in Buerman and Sterry Street. In Big Wheel Truck Sales, Inc. v. Safety Ins. Co., 81 N.E.2d 826, 2017 WL 1135944 (Mass. App. Ct. Mar. 27, 2017) (table), the court held that the insurance policy at issue did not afford coverage for a towing company‘s costs to recover, remove, and tow a vehicle that crashed into a ditch off the side of a road. Id. at *1, 3.8 While the court did not explicitly find that the insured‘s driver was negligent, it noted that the undisputed
I find Buerman, Sterry Street, and Safety persuasive and conclude that Direnzo‘s costs for towing and recovery are “damages because of . . . ‘property damage.‘” Docket #75-3 at 5. Here, Kings‘s accident caused significant damage to public property. The record indicates that guard railing sustained heavy damage; a light pole fell over, leaving live power cables exposed; hazardous fluids leaked from the truck onto the ground; and the road onto which the tractor-trailer fell after driving off the highway was obstructed. See Docket #50-1 at 32-33; see also Docket #70-6 (sixty-eight photographs depicting this extensive damage and documenting Direnzo‘s work). While Defendants obviously are correct that “recovery and towing services are not ‘property damage,‘” Docket #50 at 9, that assertion misses the point. Kings‘s policy does not only cover property damage per se, but also “damages because of . . . ‘property damage.‘” Docket #75-3 at 5. I find that Direnzo‘s towing, recovery, and remediation services fall within “damages because of . . . ‘property damage.‘”
Defendants cast Buerman and Sterry Street as inapposite because those cases contained explicit findings of negligence by the vehicles’ operators. See Docket #75 at 6. I reject that
Defendants alternatively argue that the phrase “legally obligated to pay as damages” refers to tort damages but not damages in contract, and they point to a number of federal cases so holding in the context of commercial general-liability insurance (“CGL“) policies. See Docket
Assigning the insurance contract‘s language its usual and ordinary meaning, and considering “what a reasonable insured, reading the relevant policy language, would expect to be covered,” e.g., Hakim v. Mass. Insurers’ Insolvency Fund, 675 N.E.2d 1161, 1165 (Mass. 1997), I conclude that the policy‘s language unambiguously covers Direnzo‘s claims.10 Here, public property was damaged and rendered unusable: Southbridge Street was obstructed by the tractor-
2. The “Covered Pollution Cost or Expense” Clause Covers Direnzo‘s Pollution Remediation Services
Although not discussed in the parties’ briefs, a clause in the insurance contract expressly affords coverage for Direnzo‘s remediation of the gasoline, engine oil, antifreeze coolant, and battery acid that leaked from Kings‘s tractor-trailer as a result of the accident. See Docket #50-1 at 32-33. Namely, the policy grants coverage for “all sums [the] ‘insured’ legally must pay as a ‘covered pollution cost or expense’ to which this contract applies, caused by an ‘accident’ and resulting from the ownership, maintenance or use of covered ‘autos‘. [sic]” Docket #75-3 at 5. This coverage only exists when “there is either ‘bodily injury’ or ‘property damage’ to which this insurance applies that is caused by the same ‘accident‘. [sic]” Id.
The contract states that the phrase “covered pollution cost or expense” includes costs or expenses from
fuels, lubricants, fluids, exhaust gases or other similar “pollutants” that are needed for or result from the normal electrical, hydraulic or mechanical functioning of the covered “auto” or its parts, if:
The “pollutants” escape, seep, migrate, or are discharged, dispersed or released directly from an “auto” part designed by its manufacturer to hold, store, receive, or dispose of such “pollutants“; and - The discharge, dispersal, seepage, migration, release, or escape of the “pollutants” is caused directly by such upset, overturn or discharge [of the “auto“].
Id. This language plainly covers Direnzo‘s costs to remediate the various mechanical fluids and chemicals that escaped from the tractor-trailer at the accident scene. See Docket #50-1 at 32-33; Docket #50-1 at 14 (itemizing costs for a “HAZWOPER supervisor”12 and “HAZMAT drum[]“). Because the insurance contract‘s plain language covers these costs, to the extent that Defendants dispute coverage for pollution remediation services,13 I recommend that Defendants’ motion for summary judgment be denied.
3. Policy Exclusions
Defendants also argue that three exclusions within the policy proscribe coverage for Direnzo‘s services. See Docket #50 at 14-17. In response, Direnzo briefly argues in the abstract that public policy considerations support its position and devotes one sentence to arguing, as a general matter, that the exclusions in insurance contracts do not preclude liability “for contractual liability legally incurred by the insured in response to an accident.” Docket #70 at 19 (citations omitted).
I do not take up Direnzo‘s underdeveloped categorical arguments. Cf. Medina-Rivera v. MVM, Inc., 713 F.3d 132, 140-41 (1st Cir. 2013) (quoting Town of Norwood v. Fed. Energy Regulatory Comm‘n, 202 F.3d 392, 405 (1st Cir. 2000)) (citing Muñiz v. Rovira, 373 F.3d 1, 8 (1st Cir. 2004)) (warning that “developing a sustained argument out of . . . legal precedents” is a party‘s job and that “undeveloped arguments” are deemed waived). Instead, I assess the contested contractual exclusions sequentially.
i. The Contractual Liability Exclusion and “Assume No Obligation” Condition Do Not Exclude Direnzo‘s Costs
I begin by applying two policy provisions that precluded coverage for certain liability assumed by Kings to a third party. The first, labeled an exclusion, precluded coverage for any “[l]iability assumed under any contract or agreement.” Docket #75-3 at 7.14 The second, labeled a “loss condition,” id. at 10, instructed that in the event of an accident, claim, suit, or loss, Kings must “[a]ssume no obligation, make no payment [and] incur no expense without [the insurer‘s] prior written consent, except at [Kings‘s] own cost.” Id. at 11. Defendants argue that both provisions defeat Direnzo‘s claims. I analyze the provisions together.
As noted above, it is Defendants’ burden to show that a policy exclusion precludes coverage. See New Fed. Mortg. Corp., 543 F.3d at 11 (citing Talhouni, 604 N.E.2d at 692). I find that Defendants have failed to show that either provision applies here, as there is no evidence that Kings assumed liability under a “contract or agreement” with Direnzo or assumed an obligation, made a payment, or incurred an expense to Direnzo. Rather, the record shows that the Worcester Police Department summoned Direnzo to the accident scene and directed Direnzo‘s workers to recover and haul away Kings‘s tractor-trailer and to otherwise repair damage to public property. Nor does the record contain any evidence that Kings‘s driver
Additionally, I find that neither provision bars recovery insofar as Direnzo seeks damages in quasi-contract. Those damages do not arise from a “contract or agreement,” but rather sound in equity. “[A] ‘quasi-contract’ is not a contract at all, but an obligation imposed by the court to bring about justice and equity, without regard to the intent of the parties and without regard to whether they have an agreement . . . .” 1 Williston on Contracts § 1:6 (4th ed.) (May 2017 update). The quasi-contractual claims in this case also do not rest upon any action taken by Kings to assume an obligation, make a payment, or incur an expense to Direnzo, which responded to the accident scene at the Worcester Police Department‘s request. Accordingly, I find that neither the contractual liability exclusion nor the “assume no obligation” condition applies to Direnzo‘s claims for unjust enrichment or
ii. The “Care, Custody, or Control” Exclusion Does Not Preclude Coverage for Direnzo‘s Costs
Next, the policy‘s “care, custody or control” exclusion barred coverage for “‘[p]roperty damage’ to or [a] ‘covered pollution cost or expense’ involving property owned or transported by the ‘insured’ or [in] the ‘insured‘s’ care custody or control.” Docket #75-3 at 8.15 Defendants submit that this provision precludes coverage for damage to property of which the insured was “in charge” or over which the insured “exercised dominion or control” at the time the damage occurred. See Docket #50 at 16 (citing Trs. of Tufts Univ. v. Comm. Union Ins. Co., 616 N.E.2d 68 (Mass. 1993); Crane Serv. & Equip. Corp. v. U.S. Fid. & Guar. Co., 496 N.E.2d 833 (Mass. App. Ct. 1986)). In their view, because Kings exercised dominion or control over its tractor-trailer when the tractor-trailer sustained damage in the accident, this provision excludes coverage for Direnzo‘s services.
I disagree. Defendants’ argument misapprehends the nature of Direnzo‘s claims. Direnzo does not seek coverage arising from damage to Kings‘s property, but rather seeks compensation for its costs to remediate the extensive damage to public property. Indeed, even Direnzo‘s costs incurred to recover and tow Kings‘s vehicle were not undertaken for Kings‘s sake or at Kings‘s direction, but instead to clear Southbridge Street and the surrounding area of the wreckage that Kings‘s accident created. Direnzo was summoned to the accident scene not by Kings, but by the Worcester Police Department, which directed Direnzo “to safely recover and clean up the spillage of the accident scene.” Docket #50-1 at 32. Further underscoring this point, Direnzo never remediated any damage to Kings‘s tractor-trailer, which remains in the same (or worse) condition than immediately after the accident occurred.
This crucial distinction between the damage to public property and the damage to Kings‘s property is consistent with the analogous Massachusetts cases discussed above. The Superior Court in Buerman and Sterry Street found coverage precisely because in those two cases “there was documented property damage” to a third party‘s property “in the form of debris strewn on the roadway.” Safety Ins. Co., 2017 WL 1135977, at *3 (describing Buerman and Sterry Street). Conversely, the Massachusetts Appeals Court in Safety held that “[t]he mere presence” of a “damaged car on the Commonwealth‘s property” did not constitute “property damage” to a third party, but instead amounted only to property damage to the insured. Id. Here, it is the damage to public property that brings Direnzo‘s services within the ambit of Kings‘s insurance policy. And because Kings neither owned nor exercised dominion or control over the damaged public
iii. The “No Benefit to Bailee” Condition Precludes Coverage for Direnzo‘s Storage Services, but Not Direnzo‘s Other Costs
Finally, the policy contains a provision, labeled a “general condition[],“entitled “No Benefit to Bailee - Physical Damage Coverages.” Docket #75-3 at 11-12.16 It provides: “We will not recognize any assignment or grant any coverage for the benefit of any person or organization holding, storing or transporting property for a fee regardless of any other provision of this Coverage Form.” Id. Defendants again submit that this provision bars coverage for Direnzo‘s claims. See Docket #50 at 17. Again, it is Defendants’ burden to show that this exclusionary language applies. New Fed. Mortg. Corp., 543 F.3d at 11 (citing Talhouni, 604 N.E.2d at 692).
Defendants’ four-sentence argument respecting this provision is near-undeveloped. See Docket #50 at 17; cf. Medina-Rivera, 713 F.3d at 140-41 (quoting Town of Norwood, 202 F.3d at 405) (citing Muniz, 373 F.3d at 8) (warning that “developing a sustained argument out of . . . legal precedents” is a party‘s job and that “undeveloped arguments” are deemed waived). One of Defendants’ two citations merely recites the definition of a bailment. See Goudy & Stevens, Inc. v. Cable Marine, Inc., 924 F.2d 16, 17-18 (1st Cir. 1991) (affirming the denial of summary judgment where a sports fishing yacht sank while bailed to the defendant). The other applies the same contractual language as contained in Kings‘s policy, but does so in the context of rental cars that were crashed, stolen, or vandalized. See Commerce Ins. Co. v. Empire Fire & Marine Ins. Co., 879 N.E.2d 1272, 1273, 1276 (Mass. App. Ct. 2008) (citation omitted) (concluding that
Second, the exclusion refers to a person or organization “holding, storing or transporting property for a fee“; but the policy does not contain a definition of “property.” It is thus unclear whether “property” encompasses Kings‘s tractor-trailer, the cargo Kings was transporting, the personal property of Kings‘s driver, or some combination of these. The absence of a definition of “property” generates ambiguity that the Court must resolve in Direnzo‘s favor. See Hazen Paper Co. 555 N.E.2d at 583 (citations omitted) (holding that because the insurance policy did not define the term “damages,” “the insured is entitled to the benefit of the [interpretation] that is more favorable to it“). For this additional reason, I find that the “no benefit to bailee” condition does not apply.
I note, though, insofar as the policy‘s coverage for “damages because of . . . ‘property damage‘” does not include Direnzo‘s costs to store Kings‘s tractor-trailer at Direnzo‘s facility—as I conclude above, see supra section III.B.1—to the extent that Direnzo‘s storage of the tractor-trailer constitutes “storage . . . [of] property for a fee,” the objective of this condition is achieved.
* * *
In summary, I find as a matter of law that the underlying policy covers Direnzo‘s costs to recover and tow Kings‘s tractor-trailer and to remediate the accident scene. Accordingly, as to all those costs, I recommend that Defendants’ motion be denied. Further, noting that Direnzo‘s opposition brief requests declaratory relief in Direnzo‘s favor, see Docket #70 at 21, and finding that Defendants have “had an adequate opportunity to show that there is a genuine issue [of material fact] and that [their] opponent is not entitled to judgment as a matter of law,” I
I also find as a matter of law that the underlying policy does not cover Direnzo‘s costs to store Kings‘s tractor-trailer at Direnzo‘s facility. As to those costs, I therefore recommend that Defendants’ motion be granted.
4. The MCS-90 Endorsement Presents a Disputed Question of Material Fact
I now turn to the MCS-90 Endorsement attached to Kings‘s insurance policy. As explained below, coverage under this endorsement is triggered only if underlying policy does not cover Direnzo‘s claims. Because I find that the underlying policy does cover Direnzo‘s claims for damages arising from its towing, recovery, and remediation services, I address the scope of the MCS-90 endorsement only in the interest of completeness.
The endorsement provides, in relevant part,
[T]he 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 . . . . 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.
Docket #75-3 at 1. “Public [l]iability means liability for bodily injury, property damage, and environmental restoration.” Id. In turn, “property damage” is defined as “damage to or loss of use of tangible property“; and “environmental restoration” includes “the cost of removal and the cost of necessary measures taken to minimize or mitigate damage to human health, the natural
“The operation and effect of the MCS-90 endorsement is a matter of federal law.” Canal Ins. Co. v. Distrib. Servs., Inc., 320 F.3d 488, 492 (4th Cir. 2003) (collecting cases); see Canal Ins. Co. v. Carolina Cas. Ins. Co., 59 F.3d 281, 282-83 (1st Cir. 1995) (discussing an “ICC endorsement“); see also Lynch v. Yob, 768 N.E.2d 1158, 1161 n.2 (Ohio 2002) (“An MCS-90 endorsement is often referred to as an ICC endorsement . . . .“). This endorsement does not modify the underlying insurance policy; rather, it creates a “suretyship by the insurance carrier to protect the public—a safety net[,] but not insurance[,] . . . [that] simply covers the public when other coverage is lacking.” Carolina Cas. Ins. Co., 59 F.3d at 283. This surety obligation thus “is triggered only when . . . the underlying insurance policy to which the endorsement is attached does not otherwise provide coverage . . . .” Carolina Cas. Ins. Co. v. Yeates, 584 F.3d 868, 878 (10th Cir. 2009) (collecting cases). So if the policy itself covers Direnzo here, then the MCS-90 endorsement does not.
Defendants argue that the endorsement does not cover Direnzo‘s claims by focusing on the endorsement‘s language describing a “final judgment . . . for public liability resulting from negligence.” Docket #75-3 at 1. They emphasize that Direnzo‘s state-court suit, and hence the judgment, against Kings contained no negligence claim, and they cast this fact as fatal to
The parties’ arguments boil down to a disagreement over whether the phrase “resulting from negligence” modifies “final judgment“—requiring that Direnzo‘s state-court judgment against Kings impose negligence liability—or instead modifies “public liability“—affording coverage for Direnzo‘s claims if Direnzo can prove that its damages resulted from Kings‘s negligence. The parties have not cited, and the Court has not found, case law resolving this question.
Interpreting the endorsement‘s plain language, I find that the MCS-90 covers a final judgment that imposes liability resulting from the insured‘s negligence—not merely a negligence judgment entered against the insured. Accordingly, if Direnzo proves in this action that its damages in the form of remediation costs it incurred resulted from Kings‘s negligence, then Kings‘s liability to Direnzo would “result[] from . . . negligence” within the meaning of the MCS-90 endorsement such that the endorsement would apply.
The endorsement‘s history and purpose support this interpretation. “It is well established that the primary purpose of the MCS-90 endorsement is to assure that injured members of the public are able to obtain judgment from negligent authorized interstate carriers.” Forkwar v. Progressive N. Ins. Co., 910 F. Supp. 2d 815, 824 (D. Md. 2012) (quoting Distrib. Servs., Inc., 320 F.3d at 490); accord 9A Steven Plitt et al., Couch on Insurance § 132:54 (3d ed.) (Dec. 2017
Construing the record in Direnzo‘s (i.e., the non-movant‘s) favor, as I am obligated to do on a motion for summary judgment, see LeBlanc, 6 F.3d at 841, Defendants have not shown as a matter of law that Kings‘s liability to Direnzo did not result from Kings‘s negligence. To the contrary, the record indicates that negligence may well have caused the accident from which Direnzo‘s costs arose. As discussed above, a police report documenting the accident notes that Kings‘s driver contributed to the accident by being “[f]atigued/asleep.” Docket #72 at 1. The report also notes that the tractor-trailer was “[t]raveling [s]traight ahead” on a “lighted roadway”
That said, the MCS-90 endorsement does not cover Direnzo‘s damages arising from its storage of Kings‘s tractor-trailer. As set forth above, the endorsement only covers final judgments that impose public liability. “Public liability” is defined as “liability for bodily injury, property damage, and environmental restoration.” Docket #75-3 at 1. Direnzo‘s storage costs do not fall within any of these three categories. First, they plainly do not arise from bodily injury. Second, they also do not constitute environmental restoration—which the endorsement defines as “restitution for the loss, damage, or destruction of natural resources” caused by “the accidental discharge, dispersal, release or escape . . . of any commodity transported by a motor carrier.” Id. And third, I have determined above that Direnzo‘s storage costs, unlike its damages for towing, recovery, and remediation, are not damages arising from property damage. The endorsement thus does not afford coverage for Direnzo‘s costs to store the tractor-trailer at Direnzo‘s facility.
I acknowledge that Direnzo could not have obtained a final negligence judgment against Kings in Superior Court had it attempted to do so. Nonetheless, for the reasons set forth above, I agree with Direnzo that the MCS-90 endorsement could cover its claims in this action, provided that Direnzo can prove that Kings‘s accident resulted from Kings‘s negligence. I therefore recommend that Defendants’ motion for summary judgment as to the endorsement be denied.
Defendants also move for summary judgment on Direnzo‘s reach and apply claims. But Judge Hillman‘s scheduling order constrains the parties only to argue their competing declaratory judgment claims at this stage. See Docket #26. Direnzo‘s reach and apply claims thus are not presently before the Court, and I therefore decline to address them.
D. Direnzo‘s Chapter 93A Claim
Defendants also seek summary dismissal of Direnzo‘s Chapter 93A claim. Pursuant to that claim, Direnzo seeks, among other things, multiple damages, attorney‘s fees, and costs. See Docket #12 at 13-14.
Chapter 93A renders unlawful “[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.”
While my recommendation to grant in part and deny in part Defendants’ summary judgment motion may inform the ultimate resolution of Direnzo‘s Chapter 93A claim, I believe it is prudent to reserve decision on that claim until a more complete record is available. I therefore
E. Direnzo‘s Claims Against OOSI and OOIDA
Finally, Defendants move for dismissal of Direnzo‘s claims against OOSI and OOIDA. Defendants argue that these two defendants are not insurers, are separate entities from RRG, and had no relationship with Direnzo from which liability in this action could arise. See Docket #50 at 8-9. Defendants rely on the affidavit of Kurt Moegle, a Claim Manager for a contractor that provides services for OOIDA members, to this effect. See Docket #51 ¶¶ 1, 10-11.
Direnzo has responded with three arguments against dismissal of its claims against OOSI and OOIDA. First, Direnzo points to documents submitted with Defendants’ motion papers that contain numerous references to OOSI and OOIDA. See Docket #70 at 7. Second, Direnzo impugns the affidavit on which Defendants rely, noting that a claim manager associated with RRG cannot attest to the structures of the other two defendants or to the relationships among the three defendants. Id. And third, Direnzo points out that District Judge Hillman‘s scheduling order has prevented it from conducting discovery concerning the relationships between RRG, OOSI, and OOIDA. Id. at 6-7.
I agree with Direnzo that Defendants’ motion as to OOSI and OOIDA is premature. Direnzo has not yet been able to investigate those parties’ roles respecting the insurance policy due to Judge Hillman‘s scheduling order limiting the parties to discovery on their declaratory judgment claims. See Docket #29. Accordingly, I recommend that the Court deny without prejudice summary judgment as to OOSI and OOIDA pending further discovery.
For the reasons set forth above, I RECOMMEND that Defendants’ Motion for Summary Judgment, Docket #49, be GRANTED IN PART AND DENIED IN PART as follows:
- The motion is GRANTED insofar as I find that the policy does not cover any storage cost incurred by Direnzo once Kings‘s tractor-trailer was deposited at Direnzo‘s secure facility.
- The motion is DENIED insofar as I find that the policy covers all damages for costs Direnzo incurred for the recovery and towing of Kings‘s tractor-trailer and for the remediation of all other property damage at the accident scene. Because I resolve this question as a matter of law, I recommend that summary judgment respecting these damages be GRANTED
SUA SPONTE in Direnzo‘s favor. - Should the District Court reject the foregoing, necessitating consideration of the MCS-90 endorsement, the motion is DENIED insofar as I find that coverage under the MCS-90 endorsement raises a genuine dispute of material fact.
- The motion is DENIED WITHOUT PREJUDICE as to Direnzo‘s Reach and Apply claim, Chapter 93A claim, and claims against OOSI and OOIDA.21
/s/ David H. Hennessy
David H. Hennessy
United States Magistrate Judge