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Direnzo Towing & Recovery, Inc. v. Owner-Operator Independent Drivers Association, Inc.

United States District Court, D. Massachusetts

March 9, 2018



          David H. Hennessy United States Magistrate Judge.

         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 “the insurance policy”) requires that one or more of the defendants provide indemnity in this action.[1] See Docket #1-1 at 13-14 (Direnzo's claim); Docket #7 at 10-15 (RRG's counterclaim). Direnzo also has advanced non-declaratory claims; but per District Judge Hillman's scheduling order, those other claims are not before the Court. See Docket #26.

         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, Chapter 93A claim, and claims against OOSI and OOIDA. I therefore RECOMMEND that Defendants' motion be GRANTED IN PART AND DENIED IN PART as set forth below.

         I. BACKGROUND

         Unless otherwise noted, the following facts in the summary judgment record are not in dispute.

         A. The Insurance Policy

         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.

         The policy also contained an endorsement known as Form MCS-90 (the “MCS-90 endorsement”). PSOF at 3; DSOF ¶ 24. That endorsement provided, again 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; 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 Docket #72 at 3. While the record does not resolve what caused the accident, a police report stated that the vehicle's driver contributed to the accident by being “[f]atigued/asleep.”[4] Docket #72 at 1. At the request of the Worcester Police Department, see Docket #7-2 ¶ 3 (an affidavit of Direnzo's president submitted by Defendants in support of the instant motion), Direnzo dispatched workers to the accident scene and provided towing, recovery, storage, and remediation services, PSOF at 2; DSOF ¶ 7.

         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 then set about clearing the wreckage from the scene, which required the use of winches and other heavy machinery. Id. at 33. They arranged for the streetlight's power source to be cut off in order to safely recover the trailer. Id. at 32-33. The also had to cage the trailer's breaks and remove a break canister before the trailer could be towed. Id. at 33. The trailer's roof had to be removed to ensure it would not fall from Direnzo's tow truck while the trailer was in transit to Direnzo's facility. Id. Aside from a damaged recovery strap, Direnzo did not suffer any damage to its own property. PSOF at 2; DSOF ¶ 7-8; see Docket #50-1 at 33. It eventually towed Kings's tractor-trailer from the accident scene to a secure facility. PSOF at 2; DSOF ¶ 7-8.

         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 Massachusetts General Laws Chapter 93A. PSOF at 3; DSOF ¶¶ 11-12. In December 2014, on Direnzo's motion, Kings was defaulted. PSOF at 3; DSOF ¶ 13. An “Affidavit as to Damages” in support of Direnzo's motion for default stated that Kings's final balance to Direnzo totaled $167, 700.95. PSOF at 3; DSOF ¶ 14. Direnzo's motion for assessment of damages against Kings described that amount as a “sum certain” evidenced by an invoice itemizing the services Direnzo performed. PSOF at 3; DSOF ¶ 15.

         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 Chapter 93A claim.

         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 opposition with supporting exhibits on November 3, 2017. Docket #70. And Defendants filed a reply brief with additional exhibits on November 30, 2017. Docket #75.


         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.” Fed.R.Civ.P. 56(a). Once a party properly supports its motion for summary judgment, the burden then shifts to the non-movant, who “may not rest on mere allegations or denials of his pleading, but must set forth specific facts showing there is a genuine issue for trial.” Barbour v. Dynamics Research Corp., 63 F.3d 32, 37 (1st Cir. 1995) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986)). Moreover, the Court is “obliged to []view the record in the light most favorable to the nonmoving party, and to draw all reasonable inferences in the nonmoving party's favor.” LeBlanc v. Great Am. Ins. Co., 6 F.3d 836, 841 (1st Cir. 1993). In so doing, the Court must ignore mere “conclusory allegations, improbable inferences, and unsupported speculation.” Sullivan v. City of Springfield, 561 F.3d 7, 14 (1st Cir. 2009) (quotation omitted). If the summary judgment movant “has had an adequate opportunity to show that there is a genuine issue and that his opponent is not entitled to judgment as a matter of law, ” the Court may enter summary judgment in the non-movant's favor sua sponte. Nat'l Expositions, Inc. v. Crowley Maritime Corp., 824 F.2d 131, 133-34 (1st Cir. 1987) (quoting 10A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 2720, at 34 (1983)) (emphasis omitted) (collecting cases); see Fed.R.Civ.P. 56(f)(1).

         “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); accord New Fed. Mortg. Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 543 F.3d 7, 11 (1st Cir. 2008) (applying Massachusetts law). The Court must assign the insurance contract's terms their ordinary meanings and “consider what an objectively reasonable insured, reading the relevant policy language, would expect to be covered.” Gandor v. Torus Nat'l Ins. Co., 140 F.Supp.3d 141, 144-45 (D. Mass. 2015) (quoting A.W. Chesterton Co. v. Mass. Insurers Insolvency Fund, 838 N.E.2d 1237, 1250 (Mass. 2005)) (citing Finn v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 896 N.E.2d 1272, 1277 (Mass. 2008)). “Under Massachusetts law, the insured bears the burden of demonstrating that a claim falls within a policy's affirmative grant of coverage.” OneBeacon Am. Ins. Co., 684 F.3d at 242 (citing Markline Co. v. Travelers Ins. Co., 424 N.E.2d 464, 465 (Mass. 1981)). Conversely, “[i]t is the insurer's burden to show the applicability of a particular exclusion.” New Fed. Mortg. Corp., 543 F.3d at 11 (citing Hanover Ins. Co. v. Talhouni, 604 N.E.2d 689, 692 (Mass. 1992)).

         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 automatically resolved in favor of the insured. Utica Mut. Ins. Co. v. Herbert H. Landy Ins. Agency, Inc., 820 F.3d 36, 42 (1st Cir. 2016) (quoting Mass. Insurers Insolvency Fund. v. Smith, 458 Mass. 561, 565 (2010)); see Cardin v. Royal Ins. Co. of Am., 476 N.E.2d 200, 203 (Mass. 1985).

         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] diversity court is free to honor the parties' reasonable agreement regarding which state's law applies”).

         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 applies[7] 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 damage to the property of a third party. See Docket #70 at 11-13. Defendants argue in reply that the contract's ...

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