United States District Court, D. New Mexico
MEMORANDUM OPINION AND ORDER
matter comes before the Court on Plaintiff National American
Insurance Company's (NAICO) Motion for Summary Judgment,
filed December 19, 2017, seeking summary judgment on its
claim for reformation of an insurance contract, and Defendant
National Casualty Company's (NCC) Motion for Summary
Judgment, filed January 16, 2018, seeking dismissal of
NAICO's reformation claim and summary judgment on
NCC's counterclaim for subrogation. (Docs. 68 and 74).
NCC filed its response to NAICO's Motion on February 7,
2018, and its reply in support of its own Motion on March 7,
2018. (Docs. 80 and 90). NAICO filed its response to
NCC's Motion on February 21, 2018, and its reply in
support of its own Motion on March 7, 2018. (Docs. 82 and
88). Although served, Defendant Nicholas Montano (Montano)
never appeared in this case. Defendants ABC Concrete Mfg.
Co., Inc. (Concrete), and ABC Concrete Mfg. Co., Inc. d/b/a
ABC Septic Systems, Inc., take no position on the motions.
(Docs. 68 and 74). The Court has diversity jurisdiction over
this action pursuant to 28 U.S.C. § 1332.
considering the submissions and arguments of the parties, the
record, and the applicable law, the Court denies NAICO's
Motion for Summary Judgment (Doc. 68) on its reformation
claim and grants-in-part NCC's Motion for Summary
Judgment (Doc. 74). NAICO's reformation claim fails and
NCC is entitled to subrogation as explained below.
declaratory judgment action arises out of the August 7, 2014,
accident between Montano, who was driving a 2007 Freightliner
tractor-trailer (VIN #1FUJA6CKX7LW28215) owned by Concrete
and leased to ABC Septic Systems, Inc. (Septic), and
non-parties Alan and Nina Nelson (collectively, “the
Nelsons”). (Doc. 5) at ¶¶ 14-15. The accident
occurred in California. Id. Montano kept logs at the
time of the accident under the Septic name because he was
engaged in the for-hire transportation of property. The
Nelsons filed suit against Septic and Montano in California
on February 5, 2015 (Underlying Lawsuit). (Doc. 5) at ¶
Murray (Murray), owner of Concrete and Septic, which he
believed to be separate legal entities, contacted NCC, the
insurance carrier for Septic, regarding the Underlying
Lawsuit. NCC timely provided a defense to Septic and Montano.
April 17, 2015, underlying defense counsel, retained by NCC,
sent a tender of defense letter to NAICO demanding that NAICO
defend and indemnify Septic in the Underlying Lawsuit. (Doc.
74) at ¶ 10; (Doc. 82) at 3. NAICO received that letter
on April 20, 2015. (Doc. 74-1) at 18 (May 11, 2015 letter
from NAICO to underlying defense counsel). NAICO rejected the
tender of defense on May 11, 2015, on the basis that
NAICO's policy was never intended to cover the
Freightliner and NCC's policy was primary. Id.
NAICO and NCC participated in a mediation of the Underlying
Lawsuit on January 6, 2015, and resolved that case for $850,
000.00. (Doc. 74) at ¶ 49; (Doc. 82) at 3. Each insurer
contributed fifty percent (50%) of the settlement monies.
Each insurer reserved all rights vis-à-vis the
settlement and any declaratory judgment action. Id.
filed its Amended Complaint for Declaratory Judgment,
Equitable Indemnification, Subrogation and Reimbursement for
Recovery of Damages on March 10, 2016. (Doc. 5). Count I
seeks reformation of the insurance contract between NAICO and
Concrete based on mutual mistake. Counts II and III seek
complete equitable indemnification and subrogation,
respectively, as well as reimbursement from NCC of the $425,
000.00 that NAICO contributed to settle the Underlying
filed its Answer and Counterclaim on April 13, 2016. (Doc.
12). NCC seeks equitable contribution from NAICO of the cost
of defense and property damage settlement in the Underlying
Lawsuit. NCC also seeks the cost of defense and settlement
arising from a July 8, 2014, accident (July 2014 Accident)
that involved a tractor-trailer owned by Concrete, leased to
Septic, and operated under the Septic name. Murray notified
NCC of the July 2014 Accident. NCC timely defended Septic and
settled the case. (Doc. 74) at ¶ 45; (Doc. 82) at 3.
NAICO was not notified of the July 2014 Accident, however,
until after the case settled. On January 3, 2018, NCC
stipulated that it did not seek reimbursement for the
physical damage payment made following the July 2014
Accident. (Doc. 70).
now moves for summary judgment on its reformation and
reimbursement claims, while NCC moves for summary judgment on
all of NAICO's claims and on NCC's equitable
Standard of Review
judgment is appropriate if there is no genuine dispute as to
a material fact and the movant is entitled to judgment as a
matter of law. Fed.R.Civ.P. 56(a). “When applying this
standard, [the Court] view[s] the evidence and draw[s]
reasonable inferences therefrom in the light most favorable
to the nonmoving party.” Scull v. New Mexico,
236 F.3d 588, 595 (10th Cir. 2000) (internal quotation marks
omitted). The movant bears the initial burden of showing the
absence of a genuine issue of material fact, then the burden
shifts to the non-movant to provide evidence of a genuine
issue of material fact. Celotex Corp. v. Catrett,
477 U.S. 317, 325 (1986); Bacchus Indus., Inc. v. Arvin
Indus., Inc., 939 F.2d 887, 891 (10th Cir. 1991). A fact
is “material” if, under the governing law, it
could influence the outcome of the lawsuit, and
“genuine” if a reasonable jury could return a
verdict for the non-movant. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986); Hardy v. S.F.
Phosphates Ltd. Co., 185 F.3d 1076, 1079 (10th Cir.
1999); Kaul v. Stephan, 83 F.3d 1208, 1212 (10th
Cir. 1996) (citation omitted). A party cannot avoid summary
judgment simply by resting upon the mere allegations or
denials of his pleadings. Bacchus Indus., Inc., 939
F.2d at 891.
Material Facts and Reasonable Inferences Viewed in the
Light Most Favorable to the
relevant times, Murray and his wife owned and operated
Concrete in Farmington, New Mexico. (Doc. 68) at ¶ 12;
(Doc. 80) at ¶ 12. Concrete has been in business for
over thirty years fabricating concrete barriers and other
materials. (Doc. 68) at 66 (Concrete Commercial Insurance
Application). Concrete had and maintains
“private” authority from the Federal Motor
Carrier Safety Administration (FMCSA) to ship its own goods
on semis (26, 000 gross pounds) across state lines. (Doc.
68) at 41-42 (Dep. D. Murray, 133:19-134:1); (Doc. 80-1) at
26 (Dep. D. Murray, 73:7-22); see also (Doc. 80-1)
at 33 (FMCSA Information on Concrete as of October 23, 2016).
Murray also owned Septic, which he considered a separate,
distinct company from Concrete. (Doc. 68) at 42 (Dep. D.
Murray, 134:2-17) (Murray stating his belief that Concrete
and Septic were separate entities and only Septic could haul
for-hire). Septic was authorized by FMCSA to conduct
“for-hire” interstate trucking to haul products
other than its own for a fee. See (Doc. 80-1) at 39
(SAFER Snapshot of Septic showing “Auth. For
Hire” and “Interstate”).
leased its vehicles to Septic. (Doc. 68) at 96-99 (Truck
lease and service agreement); see also (Doc. 80-1)
at 28 (Dep. D. Murray, 100:9-22) (Murray stating that
Concrete leased all vehicles to Septic). All of the drivers
for Septic received W-2s from Concrete. (Doc. 68) at 40 (Dep.
D. Murray, 110:1-5) (Murray stating same). Concrete used the
same vehicles to haul its own products under its private
authority. (Doc. 80-1) at 29 (Dep. D. Murray, 117:10-19)
(Murray stating that all vehicles hauled for both companies
and used appropriate logs depending on for-hire status).
During the relevant period, any time Concrete's product
was delivered and Murray did not procure a back-haul load (a
for-hire shipment back to the Farmington area), the trucking
was conducted under Concrete's private authority and the
drivers logged their time on Concrete log sheets. (Doc. 68)
at 36 (Dep. D. Murray, 72:22-73:6) (Murray stating that
Concrete only hauled its own product under its private
authority). Any time a for-hire load was hauled during the
outbound or return trip, the trucking was done under
Septic's for-hire authority, using Septic log sheets.
Id. (Murray stating that Septic hauled all loads
involving for-hire trucking). Again, the trucks were the
and Septic had two separate federal tax numbers and two
separate registration numbers with the United States
Department of Transportation, Septic was a “dba”
name of Concrete. Id. at 27 (Dep. D. Murray,
28:16-22) (Murray stating that he understood Concrete and
Septic to be separate legal entities), 29 (Dep. D. Murray,
36:25-37:5) (Murray stating that Septic and Concrete had
different tax ID numbers), 38 (Dep. D. Murray at 79:9-16)
(Murray stating that he has come to know that Concrete and
Septic are not legally separate entities). However, the
ownership, management, and the physical location of Concrete
and Septic were the same, and Murray filed only one tax
return. Id. at 29 (Dep. D. Murray, 36:22-24) (Murray
stating he filed one tax return for Concrete and Septic).
testified that, based on his understanding of Concrete and
Septic as separate legal entities, he procured two separate
insurance policies. (Doc. 68) at 26 (Dep. D. Murray,
24:23-25:1). Murray stated he intended NAICO's policy to
insure all of Concrete's activities, and NCC's policy
to insure all of Septic's activities. Id. at 44
(Dep. D. Murray, 146:17-25).
November 2012 Murray contacted Woods Insurance Services, Inc.
(Woods) to procure a commercial auto policy and commercial
general liability policy for Concrete. Id. at ¶
1; (Doc. 74) at ¶ 31. Commercial lines agent Nichole
Cottington, an employee of Woods, began making inquiries on
Concrete's behalf. Cottington emailed EMC Insurance on
November 8, 2012, requesting a quote for Concrete and
describing the business as follows:
74-1) at 43 (highlighting in original) (email from N.
Cottington to A. Gill). The EMC Insurance underwriter
responded to Cottington on November 10, 2012, declining the
auto coverage and indicating that Septic and Concrete may be
the same entity. Id. at 45 (email from A. Gill to N.
sent a version of the same email to Linda Scott, an
underwriter with NAICO, on November 26, 2012. (Doc. 68) at 47
(email from N. Cottington to L. Scott). Cottington did not
refer Scott to the FMCSA website or provide any additional
information. Id. On its insurance application to
NAICO, Concrete listed its mailing address as “ABC
Septic Systems, Inc.” Id. at 45 (Concrete
Commercial Insurance Application).
relevant times, NAICO and Woods operated under an
“Agency/Company Agreement” by which Woods had
“the authority to solicit, receive and transmit
applications for insurance contracts for which a commission
is specified, ” and under which Woods agreed to
“[b]ind and execute insurance contracts subject to the
underwriting rules and regulations of [NAICO].” (Doc.
74-1) at 35-37 (NAICO/Woods agency agreement).
agreed to write the Concrete policy and issued policy number
MP10570030 as a Symbol 1, all autos, policy effective
February 9, 2013, through February 9, 2014. NAICO renewed
that policy as policy number MP10570130, effective February
9, 2014, through February 9, 2015. (Doc. 74-1) at 28 (NAICO
Business Auto Declarations for Concrete). For the commercial
auto portion of the policy, NAICO received a premium of $10,
501.00. (Doc. 74-1) at 27 (NAICO Common Policy Declarations
admits that it did not run Concrete through the FMCSA
SAFER system, which would have disclosed that
Concrete and Septic were the same company. (Doc. 74-1) at 48
(NAICO Answers to Requests for Admission). Glaetta Ray,
NAICO's underwriting supervisor, admits that NAICO failed
to follow internal protocols during the underwriting and
renewal process. (Doc. 74-1) at 51 (Dep. G. Ray, 32:8-12 (Ray
stating NAICO should have pulled SAFER report because
underwriter aware Concrete operated in interstate commerce)).
Marshall, the NAICO underwriter on the Concrete account,
admits that she was aware Concrete was operating as a motor
carrier in interstate commerce when Concrete applied for
insurance. (Doc. 74-1) at 56 (Dep. A. Marshall, 25:6-22
(Marshall stating she understood Concrete had five semis
delivering its product throughout the United States and
intended to insure this risk)), 54 (Dep. G. Ray, 95:25-96:6
(Ray stating NAICO aware it was insuring Concrete for
interstate trucking based on Concrete's location in the
Four Corners area)). Marshall further admits that NAICO
intended to insure Concrete for “any interstate
operations that it may engage upon or in.” (Doc. 68) at
51 (Dep. A. Marshall, 53:11-19) (Marshall stating NAICO
intended to insure Concrete for interstate operations).
March 2013 NAICO conducted a Loss Control Survey to determine
Concrete's risk profile. (Doc. 80-1) at 11 (Mar. 11,
2013, Loss Control Survey). The Loss Control Survey makes
abundantly clear that Concrete operated in interstate
commerce, crossing into at least four different states.
policy issued to Concrete, NAICO included a description of
the different ...