United States District Court, W.D. Arkansas, Fayetteville Division
MEMORANDUM OPINION AND ORDER
Timothy L. Brooks, JUDGE
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).
reasons explained herein, the Court GRANTS
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.
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.
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."
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.
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.
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.
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 ...