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Falls Lake National Ins. Co. v. Martinez

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

December 22, 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 indemnify Israel Martinez, Jr., Salinas Express, LLC ("Salinas Express"), or SMC Transport, LLC ("SMC") in connection with a personal injury action that Brandon Lester filed against Martinez, Salinas Express, SMC, and others in this court. See Lester v. SMC Transport, LLC, No. 7:15CV00665 (W.D. Va.) (the "underlying personal injury action"). The case is presently before the court on cross-motions for partial summary judgment filed by Falls Lake, Lester, and United Specialty Insurance Company ("United Specialty"). For the reasons set forth below, Falls Lake's motion will be granted in part and denied in part, Lester's motion will be granted, and United Specialty's motion will be denied.

         Background

         I. The Underlying Personal Injury Action

         Before sunrise on October 26, 2015, Lester was traveling southbound on Interstate 81 in Botetourt County. At approximately the same time, Martinez was operating a semi-tractor owned by and registered to SMC (the "SMC Tractor"), a commercial motor carrier based in Texas. The SMC Tractor had been driven to Virginia to pick up a disabled semi-tractor utilized by Salinas Express (the "Salinas Express Tractor"), another commercial motor carrier based in Texas. The disabled tractor had been left in the parking lot of a rest stop adjacent to the interstate.

         Martinez, Roy Salinas ("Roy"), and Eddie Lozano used the SMC Tractor to tow a third tractor (the "Lozano Tractor") to Virginia, so that Lozano could deliver the goods that remained in the trailer attached to the disabled Salinas Express Tractor. Upon arriving at the rest stop, the Lozano Tractor was unhooked from the SMC Tractor and then used to deliver the remaining goods. The Salinas Express Tractor was then hooked up to the SMC Tractor, so that it could be towed back to Texas.

         Just before 6:00 a.m., Martinez and Roy attempted to leave the rest stop in the SMC Tractor with the Salinas Express Tractor in tow. To do so, Martinez drove north, on the entrance ramp to the rest stop, so that he could make a U-turn onto southbound 1-81. In attempting to make the U-turn, Martinez caused the SMC Tractor, towing the Salinas Express Tractor, to block at least the right lane of travel.

         At the same time, Lester approached the entrance ramp to the rest stop while traveling in the right lane. He was unable to stop or maneuver his vehicle in time to avoid hitting the SMC Tractor. A second vehicle, operated by Anthony Shifflett, then struck Lester's vehicle.

         On December 9, 2015, Lester filed the underlying personal injury action against SMC, Martinez, Salinas Express, and Shifflett. On September 2, 2016, the court ruled on a number of motions filed by the parties in that action, including Lester's motion for partial summary judgment. As is relevant in the instant action, the court ruled that Martinez and Roy were employees of Salinas Express at the time of the accident, that they were acting within the scope of their employment, and, thus, that Salinas Express is "vicariously liable for [their] negligent conduct." Lester v. SMC Transport. LLC. No. 7:15CV00665, 2016 U.S. Dist. LEXIS 118946, at *27-28 (W.D. Va. Sept. 2, 2016). Although Lester also moved for partial summary judgment on the issue of whether SMC is vicariously liable for the negligence of Martinez and Roy, the court denied that motion on the basis that a reasonable jury could find that Martinez and Roy were not agents of SMC.

         II. The Insurance Policiesj

         A. The Policy Issued by Falls Lake;

         At the time of the accident, Salinas Express was insured under a motor carrier liability policy issued by Falls Lake (the "Falls Lake Policy"), under which the Salinas Express Tractor was a "covered 'auto.'" The Falls Lake 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, caused by an 'accident' and resulting from the ownership, maintenance or use of a covered 'auto.'" Falls Lake Motor Carrier Coverage Form § 11(A), Docket No. 1-2. Section 11(A)(1) of the Falls Lake Policy defines "Who Is An Insured." That section provides, in pertinent part, as follows:

         The following are "insureds":

a. You for any covered "auto".
b. Anyone else while using with your permission a covered "auto" you own, hire or borrow except:
(1) The owner or any "employee", agent or driver of the owner, or anyone else from whom you hire or borrow a covered "auto".
(2) Your "employee" or agent if the covered "auto" is owned by that "employee" or agent or a member of his or her household.
e. Anyone liable for the conduct of an "insured" described above but only to the extent of that liability.
However, none of the following is an "insured":
(1) Any "motor carrier" for hire or his or her agents or "employees", j other than you and your "employees":
(a) If the "motor carrier" is subject to motor carrier insurance requirements and meets them by a means other than "auto" liability insurance ....

Id. at § II(A)(1).

         In addition to the scheduled vehicles for which the Falls Lake Policy provides coverage, the policy lists three types of vehicles which "are also covered 'autos' for Covered Autos Liability Coverage." Id. at § I(C). Those vehicles include "Temporary Substitute Autos, " I specifically:

Any "auto" you do not own while used with the permission of its owner as al temporary substitute for a covered "auto" you own that is out of service ...

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