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Environmental Cleanup Inc. v. Ruiz Transport, LLC

United States District Court, W.D. Oklahoma

May 12, 2017

ENVIRONMENTAL CLEANUP INC., Plaintiff,
v.
RUIZ TRANSPORT, LLC, Defendant, and GLOBAL HAWK INSURANCE CO., Garnishee.

          ORDER

          DAVID L. RUSSELL UNITED STATES DISTRICT JUDGE.

         Before the Court are cross motions for summary judgment, Docs. 32 & 35, and the matter is fully briefed. Docs. 36, 42, & 43. For the reasons that follow, summary judgment is entered in favor of Plaintiff.

         I. Background

         The lone issue before the Court is whether Garnishee Global Hawk Insurance Co. must reimburse Plaintiff Environmental Cleanup, Inc. (ECI) for cleanup services ECI performed at the request of Defendant Ruiz Transport. ECI believes it is entitled to reimbursement, while Global Hawk disagrees. Both parties have moved for summary judgment. The specific dispute is whether Global Hawk is liable under the surety obligation included in the policy it issued to Ruiz Transport. Ruiz Transport and Global Hawk included the surety obligation in the insurance contract in order to comply with the Motor Carrier Act, a federal law governing trucking companies like Ruiz Transport.

         Congress enacted the Motor Carrier Act of 1980 (MCA), Pub.L. No. 96-296, 94 Stat. 793, “to deregulate the trucking industry, increase competition, reduce entry barriers, and improve quality of service.” Carolina Casualty Ins. Co. v. Yeates, 584 F.3d 868, 873 (10th Cir. 2009). And in no small part, the MCA was meant to “address abuses that had arisen in the interstate trucking industry which threatened public safety, including the use by motor carriers of leased or borrowed vehicles to avoid financial responsibility for accidents that occurred while goods were being transported in interstate commerce.” Canal Ins. Co. v. Distribution Servs., Inc., 320 F.3d 488, 489 (4th Cir. 2003). To that end, the MCA and subsequent regulations promulgated by the Federal Motor Carrier Safety Administration now require interstate motor carriers to obtain “a special endorsement . . . providing that the insurer will pay within policy limits any judgment recovered against the insured motor carrier for liability resulting from the carrier's negligence, whether or not the vehicle involved in the accident is specifically described in the policy. Yeates, 584 F.3d at 874 (citing Ill. Cent. R.R. v. Dupont, 326 F.3d 665, 666 (5th Cir. 2003)). The endorsement guarantees that commercial motor carriers are “willing and able to comply with . . . [certain] minimum financial responsibility requirements.” 49 U.S.C. § 13902(a)(1).

         The motor carrier proves this “requisite financial responsibility in one of three ways-(1) by an MCS-90 endorsement, (2) by a surety bond, or (3) by self-insurance.” Yeates, 584 F.3d at 874; 49 U.S.C. § 31139(f)(1)(A); 49 C.F.R. § 387.7(d)(1). Many carriers opt for the MCS-90 endorsement, which is why every liability insurance policy issued to motor carriers of interstate commerce contains the MCS-90 endorsement. Herrod v. Wilshire Ins. Co., 499 Fed.Appx. 753, 755 (10th Cir. 2012). The endorsement is essentially a surety obligation; it provides that the motor carrier's insurer “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 . . . the [MCA]” whether or not the vehicle involved in the accident is specifically described in the policy. 49 C.F.R. § 387.15; Doc. 35, Ex. 1. That said, the MCS-90 endorsement does not create a windfall for the motor carrier or alter the terms of the insurance policy's other coverage limits, since “[a] motor carrier may be required to reimburse the MCS-90 insurer for any payout the insurer would not otherwise have been obligated to make.” Carolina Cas. Ins. Co. v. Yeates, 584 F.3d 868, 879 (10th Cir. 2009).

         The question is whether the MCS-90 endorsement on Ruiz Transport's insurance policy applies, thus entitling ECI to compensation for the substantial remediation services it performed for Ruiz. Global Hawk issued the insurance policy to Ruiz on June 13, 2014, and the policy was still in effect on May 26, 2015. Doc. 32, Ex. 1. That day, Ruiz Transport was hauling transformers from Mexico to Kansas when the tractor pulling the trailers was involved in a single-vehicle accident, spilling hundreds of gallons of transformer oil and diesel fuel on the highway and surrounding areas. Id.; Doc. 35, at 4. On Ruiz's request, ECI performed remediation services over a four-day period: it allegedly shipped samples of contaminated soil to a testing site, removed and delivered several tons of contaminated soil to a disposal facility, and subsequently swapped out the contaminated soil for several tons of uncontaminated soil-all to the tune of approximately $112, 000. Doc. 35, at 2.

         ECI sued Ruiz Transport after it refused to pay. And when Ruiz Transport did not respond, the Court entered a default judgment in favor of ECI in the amount of $126, 431.10. Doc. 12. ECI then commenced this post-judgment garnishment proceeding against Global Hawk, arguing that the MCS-90 endorsement entitled it to reimbursement. Doc. 16. In ECI's view, the endorsement's coverage limit of $750, 000-as required under the MCA, 49 U.S.C. § 31139(b)(2)-clearly covers the judgment rendered against Ruiz Transport. The endorsement expressly provides that the insurer agrees to pay for final judgments recovered against the insured for public liability resulting from the negligent operation of covered vehicles. Doc. 35, Ex. 1. The endorsement specifically defines public liability to include environmental restoration. And environmental restoration is broadly defined as

restitution for the loss, damage, or destruction of natural resources arising out of the accidental discharge, dispersal, release, or escape into or upon the land . . . of any commodity transported by a motor carrier. This shall include the cost of removal and the ocst of necessary measures taken to minimize or mitigate damage to human health, the natural environment, fish, shellfish, and wildlife.

Id.

         In other words, ECI contends this is precisely the type of accident contemplated by the MCS-90 Endorsement. Global Hawk, however, disagrees. It argues that the MCS-90 endorsement does not apply and ECI is entitled to recover only $10, 000- the coverage limit for pollution liability under Ruiz's purchased policy. Doc. 32, Ex. 1, at 42.

         II. Summary Judgment Standard

         Summary judgment is proper if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. The Court “view[s] the evidence and draw[s] reasonable inferences therefrom in the light most favorable to the nonmoving party.” Sanders v. Sw. Bell Tel., L.P., 544 F.3d 1101, 1104 (10th Cir. 2008) (internal quotation marks omitted).

         III. ...


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