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Falls Lake National Insurance Co. v. Martinez

United States District Court, W.D. Virginia, Roanoke Division

August 1, 2016

FALLS LAKE NATIONAL INSURANCE COMPANY, Plaintiff,
v.
ISRAEL MARTINEZ, JR., et al., Defendants.

          MEMORANDUM OPINION

          Hon. Glen E. Conrad Chief United States District Judge

         In this insurance coverage dispute, Falls Lake National Insurance Company ("Falls Lake") seeks a declaratory judgment that it has no obligation to defend or indemnify Israel Martinez, Jr., Salinas Express, LLC ("Salinas Express"), and SMC Transport, LLC ("SMC") in connection with a separate personal injury action that Brandon Lester filed against Martinez, Salinas Express, SMC, and others in this court. See Lester v. SMC Transport, LLC, No. 7:15-cv-00665 (W.D. Va.) (the "underlying personal injury action"). The case is presently before the court on Falls Lake's motions for partial dismissal of defendants Lester's and Anthony Ray Shifflett's counterclaims, as well as Falls Lake's motion to stay the underlying personal injury action while the instant action is pending. For the reasons set forth below, the motions for partial dismissal will be granted and the motion to stay will be denied.

         Factual Background

         I. The Underlying Personal Injury Action

         Before sunrise on October 26, 2015, Lester was traveling southbound on Interstate 81 ("I-81") at approximately mile marker 158.10 in Botetourt County, Virginia. At approximately the same time, Martinez was operating a tractor registered to and owned by SMC (the "SMC Tractor"), while towing a disabled tractor leased to Salinas Express (the "Salinas Express Tractor"). Martinez then proceeded to make a u-turn out of a rest stop's entrance ramp onto 1-81. At the time, Roy Salinas, who was traveling with Martinez at the time, was giving directions and signals to Martinez in order to effectuate this maneuver.

         According to Lester's complaint, the entrance ramp is located past a small rise on 1-81, which obscured its existence from drivers until they were almost adjacent to it. As he was making a u-turn, Martinez proceeded to block the southbound traffic lanes on 1-81. Lester then collided with the SMC Tractor. Lester's disabled vehicle was subsequently hit from behind by another truck, which was driven by Shifflett and owned by CTWWM, Inc. d/b/a Carter's ("Carter's"). Lester was ejected from the vehicle and sustained severe bodily injuries.

         Lester's amended complaint contains nine separate counts against Martinez, Salinas Express, and SMC. These counts include claims for negligence, willful and wanton negligence, negligent entrustment, negligent hiring, negligence per se, placard liability, and constructive fraud. Lester seeks compensatory damages in the amount of $7, 500, 000.00 and punitive damages in the amount of $350, 000.00.

         On July 8, 2016, Salinas Express filed a third party complaint against Shifflett and Carter's, seeking indemnification or, in the alternative, contribution in the event that Salinas Express has to pay any damages to Lester.

         II. The Insurance Policies

         Falls Lake issued a commercial vehicle motor carrier liability policy to Salinas Express, Policy No. ST44000306, for the policy period of May 29, 2015 to May 29, 2016 (the "Salinas Express Policy"). Defendant United Specialty Insurance Company ("United") issued a commercial vehicle motor carrier liability policy to SMC, Policy No. MAT-0003400-3088, with an effective date of September 11, 2015 (the "SMC Policy"). The Salinas Express Policy obligates Falls Lake to "pay all sums an 'insured' legally must pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies." Ex. A to Compl. § II(A), Docket No. 1-2. The Salinas Express Policy further states that Falls Lake "will have the right and duty to defend any 'insured' against a 'suit' seeking such damages...." Id. However, the Salinas Express Policy provides that "[r]egardless of the number of covered 'autos', 'insureds', premiums paid, claims made or vehicles involved in the 'accident', the most [Falls Lake] will pay for the total of all damages ... resulting from any one 'accident' is the Limit of Insurance for Covered Autos Liability Coverage shown in the Declarations." Id. at § II(C). The "Limit of Insurance for Covered Autos Liability Coverage" is set at $1, 000, 000.00. Further, "[a]ll 'bodily injury' [and] 'property damage' ... resulting from continuous or repeated exposure to substantially the same conditions will be considered as resulting from one 'accident'." Id. Finally, the Salinas Express Policy asserts that "[n]o one will be entitled to receive duplicate payments for the same elements of 'loss'" under this plan. Id.

         III. The Instant Action

         After the underlying personal injury action was initiated by Lester, Falls Lake commenced this action, requesting a declaratory judgment that it does not have the obligation to defend Martinez, Salinas Express, or SMC, or indemnify the parties for any judgment that they might be required to pay in the underlying personal injury action. According to the complaint, United has also asserted that it has no duty to defend or indemnify the defendants in the underlying personal injury action.

         Lester and Shifflett each filed answers to the complaint, in which they assert counterclaims that Falls Lake has a combined exposure of $2, 000, 000.00 in connection with the underlying personal injury action. Specifically, they argue that the limit of insurance in the Salinas Express Policy is $1, 000, 000.00 per covered auto, and that both the Salinas Express Tractor and the SMC Tractor were covered autos, for a combined exposure of $2, 000, 000.00 in connection "with the accident at issue" in the underlying personal injury action. Lester Answer at 11, Docket No. 21; see also Shifflett Answer at 7, Docket No. 23 ("The [Salinas Express] Policy affords $1, 000, 000 of primary liability coverage to the Salinas Express Tractor and an additional $1, 000, 000 of primary liability coverage to the SMC Tractor, as an additional covered auto[.]"). Falls Lake subsequently moved for partial dismissal of both counterclaims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, as well as a motion to stay the underlying personal injury action while the instant action is pending. The court held a hearing on the motions on July 19, 2015. The motions have been fully briefed and are now ripe for disposition.

         Standard ...


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