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BNSF Logistics, LLC v. Pennsylvania Manufacturers Association Insurance Co.

United States District Court, W.D. Arkansas, Fayetteville Division

February 22, 2017



          Timothy L. Brooks, JUDGE

         Currently before the Court are two Motions for Summary Judgment, which have now been fully briefed and are ripe for decision. One Motion was filed by Defendant Pennsylvania Manufacturers Association Insurance Company ("PMAIC") and the otherwas filed by Defendant National Indemnity Company ("NIC"). In deciding these Motions, the Court reviewed the following:

PMAIC's Motion for Summary Judgment (Doc. 34), Brief in Support (Doc. 35), and Statement of Facts (Doc. 36); Plaintiff BNSF Logistics, LLC's ("BNSF") Response in Opposition (Doc. 41) and Statement of Facts (Doc. 42); and PMAIC's Reply (Doc. 46); and
NIC's Motion for Summary Judgment (Doc. 37), Brief in Support (Doc. 38), and Statement of Facts (Doc. 39); BNSF's Response in Opposition (Doc. 43) and Statement of Facts (Doc. 44); and NIC's Reply (Doc. 47).

         For the reasons explained herein, the Court GRANTS both Motions.

         I. BACKGROUND

         This lawsuit stems from a single-vehicle accident involving a tractor-trailer that was carrying infant formula from Michigan to Arizona. The infant formula was manufactured by Abbott Laboratories ("Abbott") and shipped from its facility in Michigan. The tractor-trailer was driven by an employee of Third Party Defendant Saint Trans, Inc. ("Saint Trans"), which is a transportation company. On December 17, 2014, while the tractor-trailer was in transit, somewhere around Las Cruces, New Mexico, the truck overturned, and the infant formula spilled out onto the highway and surrounding area.

         To understand the parties' relationship to the issues here, it is necessary to explain exactly how Abbott's infant formula ended up in Saint Trans' tractor-trailer. Beginning in October of 2014, Abbott entered into a "Third Party Logistics Provider Agreement" with Plaintiff BNSF, (Doc. 34-1), through which BNSF agreed to serve as Abbott's property broker. This role required BNSF to arrange for the transportation of Abbott's products across state lines, by contracting with motor carriers that would agree to transport the products to their assigned destinations, while "exercis[ing] standard industry shipping and material handling practices to protect Abbott product integrity." Id. at p. 3.

         Here, BNSF hired a transportation company called Red Rose Trans, Inc. ("Red Rose") to perform the delivery. BNSF had previously entered into a Carrier Agreement (Doc. 34-3) with Red Rose that stated, quite explicitly, that Red Rose agreed it would "not broker, interline, co-broker, assign or trip lease loads with another party and shall transport all tendered loads ... on equipment insured, placarded and controlled by [Red Rose]." Id. at p. 1. Red Rose also agreed "to transport all shipments provided under this Agreement without delay, " to "furnish all equipment necessary or required for the performance of its obligations, " to "utilize only competent, able and licensed personnel, " and to "have full control of such personnel." Id. In addition, Red Rose understood it was "to be named on the bill of lading as the carrier of record" and was to submit a signed proof of delivery to BNSF, as well as any invoices." Id.

         Red Rose then entered into a "Spot Contract" with BNSF for the delivery of the infant formula. See Doc. 34-4. This Spot Contract set forth the particulars of the delivery, including the date and time that Red Rose's driver would collect the cargo from Abbott in Sturgis, Michigan, and the expected date and time the cargo was to arrive at the Central Arizona Distribution Center in Casa Grande, Arizona. Id. at p. 1. According to the Spot Contract, Red Rose's driver was required to sign the bill of lading, and the bill of lading was to list Red Rose as the carrier. Id. at p. 2. Also, the Spot Contract reminded Red Rose that it was not permitted to "re-broker, sub-broker, subcontract, assign, interline, or warehouse any shipments hereunder without the prior written consent from [BNSF]." Id. at p. 2.

         As the reader has surely surmised, Red Rose did not transport the infant formula on that ill-fated day. Instead, in apparent disregard of both the Carrier Agreement and the Spot Contract, Red Rose subcontracted the delivery to another trucking company, Saint Trans, whose driver picked up the formula from Abbott, signed the bill of lading, and proceeded to drive the product to Arizona, along the way overturning his tractor-trailer and causing the cargo to be strewn across the New Mexico highway.

         After the accident, BNSF asked both Red Rose and Saint Trans to pay Abbott directly for the damaged cargo, but both companies refused. So BNSF assumed primary responsibility and paid Abbott the full amount of its loss, totaling $121, 523.32, and pursued both Red Rose and Saint Trans for reimbursement. It turned out that both trucking companies were insured. Saint Trans was insured by Defendant PMAIC, to whom notice was provided on January 8, 2015, of the accident and the resulting damage to the cargo.

         On January 27, 2015, PMAIC's agent sent a letter to Saint Trans denying coverage, but offering the following caveat:

This Denial of Coverage is not exclusive but is rather the specific reasons of which PMAIC is presently aware. By virtue of this correspondence, PMAIC intends to reserve their rights on all grounds, not only those set forth in this letter. PMAIC expressly reserves the right to supplement, amend, modify or expand this Denial of Coverage for any additional reason as it may apply to any new facts or circumstances.
In the event you have any other information or documentation, which you want us to consider, immediately forward such information to our office. In the event any additional information or documentation would suggest that coverage would be afforded under the Terms and Conditions of this Policy, PMAIC expressly reserves the right to ...

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