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Dark Horse Express, LLC v. Lancer Insurance Co.

United States District Court, M.D. Tennessee, Nashville Division

September 11, 2017

DARK HORSE EXPRESS, LLC, Plaintiff, Counter-Defendant,
v.
LANCER INSURANCE COMPANY, Defendant, Counter-Plaintiff.

          MEMORANDUM OPINION AND ORDER

          MARVIN E. ASPEN, DISTRICT JUDGE:

         Plaintiff Dark Horse Express, LLC (“Dark Horse”) alleges Defendant Lancer Insurance Company (“Lancer”) has in bad faith and in breach of its contractual duties refused to provide insurance coverage for loss suffered to certain cargo Dark Horse was responsible for shipping. Presently before us are the parties' cross-motions for summary judgment. (Dkt. Nos. 37, 46.) Also before us is Lancer's motion for oral argument on its motion for summary judgment. (Dkt. No. 69.) For the reasons stated below, we grant Lancer's motion for summary judgment, deny Dark Horse's motion for partial summary judgment, and deny Lancer's motion for oral argument as moot.

         BACKGROUND

         I. FACTUAL BACKGROUND

         Unless otherwise stated, the facts described herein are undisputed and taken from the parties' Local Rule 56.01 submissions. (See Pl.'s SOF (Dkt. No. 49); Def.'s SOF (Dkt. No. 37-17).) On May 6, 2014, Dark Horse entered into a carrier transportation agreement (“the agreement”) with Peachtree Freight Logistics, LLC, who did so on behalf of Performance Food Group Customized Distribution and other Performance Food Group Entities (“PFG”). (Def.'s SOF ¶¶ 3-4.) The agreement is the only contract between PFG and Dark Horse, and it covered all dealings between PFG and Dark Horse. (Id. ¶ 6.) In September 2014, PFG hired Dark Horse to transport a load of meat from Standard Meat Company in Dallas, Texas to PFG in Lebanon, Tennessee. (Id. ¶ 19.) Dark Horse's driver picked up the meat from Standard Meat Company on September 10, 2014. (Id. ¶¶ 21, 24.) After picking up the load, the driver stayed the night in a motel and left the loaded tractor-trailer outside. (Id. ¶¶ 25, 27.) The driver fell asleep in the motel room and the tractor-trailer was gone when he awoke. (Id. ¶¶ 27-28; Green Dep. (Dkt. No. 37-8) at Pg. ID#: 612.)

         On September 11, 2014, Dark Horse's owner, Jeff Hickman, checked the GPS tracking device in the tractor-trailer and found that the truck had not left Dallas. (Def.'s SOF ¶ 33.) Hickman called the Dallas Police Department and requested they locate the tractor-trailer and check on the driver. (Id. ¶ 35.) The police found the tractor-trailer in the Dallas area with the refrigerated trailer still running and padlocked. (Id. ¶ 36.) The police impounded Dark Horse's tractor, but the loaded trailer was sent to one of PFG's warehouses. (Id. ¶ 38.) On September 12, 2014, a United States Department of Agriculture (“USDA”) employee inspected the trailer and found that the meat products were not contaminated or adulterated, and thus could be released into commerce for consumption. (Id. ¶¶ 39-45.) After the USDA inspection, PFG performed an inventory of the load and found that $34, 755.88 worth of meat was missing from the trailer. (Id. ¶ 51.)

         On September 17, 2014, PFG informed Lancer that its customer refused to accept the cargo “due to the loss of control of the load during transportation.” (Dkt. No. 45-8.) That same day, Lancer sent PFG a letter acknowledging PFG's cargo claim for over $260, 000, and stating that it was handling the claim, subject to a full reservation of rights, on Dark Horse's behalf. (Dkt. No. 45-9.) Lancer then facilitated a salvage sale of the remaining meat to Front Street Commodities Corp. for $53, 500, which it paid to PFG. (Def.'s SOF ¶¶ 52-53, 55.) Dark Horse's counsel sent a letter to Lancer that same day demanding it pay PFG's claim for $262, 788.42, less the $53, 500 received from the sale of the meat. (Id. ¶ 57.) Lancer's counsel responded via letter on January 15, 2015, informing Dark Horse that it did not believe PFG's cargo had sustained any loss and that “Lancer has no obligation to pay a cargo claim until the legal liability of Dark Horse is established.” (Dkt. No. 37-15 at 2.) Lancer further stated that it would “defend Dark Horse if suit is filed against it related to the cargo claim.” (Id.) On March 2, 2017, Dark Horse began independently making voluntary payments to PFG. (Pl.'s SOF ¶ 12.) Dark Horse paid PFG at least $156, 000. (Id.) Lancer never consented to Dark Horse voluntarily paying or settling the cargo claim with PFG. (Def.'s SOF ¶ 64.) To date, Lancer has not formally allowed or denied Dark Horse's cargo claim. (Pl.'s SOF ¶ 24.)

         II. INSURANCE POLICY PROVISIONS

         The insurance contract between Lancer and Dark Horse is comprised of two primary sections: the Motor Carrier Coverage Form and the Cargo Endorsement. (Ins. Policy (Dkt. No. 37-3) at Pg. ID#: 516, 523.) The Motor Carrier Coverage Form is the primary portion of the policy.[1] The Motor Carrier Coverage Form provides, in relevant part, insurance coverage for legal liability losses for injuries to third-parties caused by an accident with one of Dark Horse's covered automobiles (Ins. Policy, Section II.A, at Pg. ID#: 523) and physical damage and physical losses sustained by Dark Horse's covered automobiles (Ins. Policy, Section IV.A, at Pg. ID#: 529). The Cargo Endorsement is an addition to the Motor Carrier Coverage Form. (Ins. Policy, Section VII, at PG ID#: 517.) The Cargo Endorsement provides insurance coverage for “‘loss' to Cargo while in an Insured's custody or control in the ordinary course of transit.” (Id., Section VII.A.) The Cargo Endorsement defines cargo in relevant part as “[g]oods or merchandise for which an ‘insured' is legally liable under tariff documents, bills of lading or shipping receipts, and while in or on a covered ‘auto.'” (Ins. Policy, Section VII.A.I at Pg. ID#: 517.)

         III. PROCEDURAL HISTORY

         On November 5, 2015, Dark Horse filed suit against Lancer in state court, alleging common law breach of contract and bad faith refusal to pay loss pursuant to Tennessee Code Annotated § 56-7-105. (Dkt. No. 1-1.) Lancer removed the case to federal court on December 14, 2015. (Dkt. No. 1) Lancer filed a counter-claim on December 15, 2015, requesting a declaratory judgment concluding that: (1) Lancer is not required to indemnify Dark Horse for the undamaged Cargo; (2) Lancer is not required to indemnify Dark Horse because Dark Horse's legal liability has not been established; (3) coverage under the insurance policy is excluded based on the criminal acts of Dark Horse's employee; (4) Dark Horse has failed to fully cooperate with Lancer in its investigation into the cargo loss; and (5) Dark Horse has failed to satisfy conditions precedent for coverage under the insurance policy. (Dkt. No. 6 at Pg. ID#: 27-33.) Lancer filed its motion for summary judgment on Dark Horse's claims on December 16, 2016, arguing it is entitled to judgment as a matter of law because Dark Horse's legal liability to PFG for the cargo has never been established by a judgment at trial, which is a condition precedent for coverage under the policy. (Dkt. Nos. 1, 37.) Dark Horse moved for partial summary judgment on February 15, 2017, arguing we should dismiss Lancer's defenses to coverage under the insurance policy and in addition, find both that there was a direct, physical loss to the cargo as required by the policy, and that Dark Horse's legal liability to PFG under the agreement was limited to $300, 000. (Dkt. No. 46.)

         LEGAL STANDARD

         Summary judgment is proper only when “there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.” Fed R. Civ. P. 56(a). A genuine issue for trial exists when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510 (1986). The moving party has the burden to identify “those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553 (1986) (internal quotation marks omitted). Once the moving party meets its burden of production, the nonmoving party “may not rest upon the mere allegations or denials of the adverse party's pleading, ” but rather “must set forth specific facts showing that there is a genuine issue [of material fact] for trial.” Fed.R.Civ.P. 56(e). In deciding whether summary judgment is appropriate, we must accept the nonmoving party's evidence as true, and draw all inferences in that party's favor. See Anderson, 477 U.S. at 255, 106 S.Ct. at 2513. Because the parties have filed ...


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