Sompo Japan Insurance Company of America v. Action Express LLC et al

Filing 33

ORDER GRANTING DEFENDANT MOTION FOR SUMMARY JUDGMENT 20 by Judge Dean D. Pregerson . (lc). Modified on 5/14/2014 (lc).

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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SOMPO JAPAN INSURANCE
COMPANY OF AMERICA,

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Plaintiff,
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v.

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ACTION EXPRESS, LLC,

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Defendant.
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Case No. CV 13-02046 DDP (JCGx)
ORDER GRANTING DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT
[Dkt. No. 20]

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Before the court is Defendant Action Express, LLC (“Action

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Express”)’s Motion for Summary Judgement, or in the Alternative,

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for Partial Summary Judgement. (Dkt. No. 20.) The motion is fully

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briefed and suitable for decision without oral argument. Having

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considered the parties’ submissions, the court adopts the following

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order.

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I.

Background
The instant suit is a subrogation action by an insurer, Sompo

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Japan Insurance Company of America (“Sompo”), against a motor

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carrier, Action Express, arising from a stolen shipment of

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electronics that Sompo insured.

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In January 2008, Kenwood U.S.A. (“Kenwood”) hired Daylight

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Transportation (“Daylight”) to transport electronics from Long

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Beach, California to Doral, Florida. (Defendant’s Statement of

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Uncontroverted Facts (“SUF”), Dkt. No. 22, ¶ 1.) Daylight, in turn,

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contracted with Action Express to complete the transportation of

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the cargo. (See SUF ¶ 4.) While Action Express was transporting the

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electronics to Doral, Florida, the tractor trailer containing the

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cargo was stolen from a truck stop in Wildwood, Florida. (Id.

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¶ 5.)

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Kenwood claims the cargo that was lost during the theft was

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valued at $103,094.80. (Id. ¶ 6.) Kenwood filed a claim against

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Daylight for the loss. (Id. ¶ 7.) Daylight settled with Kenwood by

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paying Kenwood $30,700. (Id. ¶ 8.) This amount corresponds to the

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maximum amount recoverable under a limitation of liability

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provision in the Kenwood-Daylight contract, which limited liability

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to $25.00 per pound per package subject to a maximum of $100,000

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per shipment. (Id. ¶ 3, 8.) Action Express reimbursed to Daylight

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the $30,700 settlement paid to Kenwood.

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(Id. ¶ 9.)

Kenwood was insured against the loss of the cargo by Plaintiff

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Sompo. Pursuant to this insurance policy, Sompo paid Kenwood

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$82,704.28 to settle the loss claim. (Id. ¶ 10.) This amount

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apparently corresponds to 110% of the alleged value of the stolen

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Cargo (Sompo’s maximum liability under the insurance policy) less

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$30,700 (the amount of Kenwood’s settlement with Daylight).

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In the instant suit, Sompo brings a subrogration action

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against Action Express under 49 U.S.C. § 14076, the Carmack

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Amendment, to recover the $82,704.28 it paid Kenwood under the

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policy, plus prejudgment interest and costs. (See First Amended

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Complaint at 3.)

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Defendant Action Express moves for summary judgment, or in the

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alternative, partial summary judgment, inter alia on the grounds

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that (1) Sompo is precluded under the doctrine of superior equities

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from pursuing a subrogation claim against Action Express, and (2)

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Kenwood, and therefore Sompo as subrogee, is contractually

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prohibited from recovering more than $30,700 and Daylight has

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already paid Kenwood this maximum recoverable sum. (See Motion at

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8.)

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II.

Legal Standard
Summary judgment is appropriate where the pleadings,

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depositions, answers to interrogatories, and admissions on file,

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together with the affidavits, if any, show “that there is no

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genuine dispute as to any material fact and the movant is entitled

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to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A party

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seeking summary judgment bears the initial burden of informing the

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court of the basis for its motion and of identifying those portions

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of the pleadings and discovery responses that demonstrate the

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absence of a genuine issue of material fact. See Celotex Corp. v.

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Catrett, 477 U.S. 317, 323 (1986). All reasonable inferences from

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the evidence must be drawn in favor of the nonmoving party. See

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Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 242 (1986). If the

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moving party does not bear the burden of proof at trial, it is

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entitled to summary judgment if it can demonstrate that “there is

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an absence of evidence to support the nonmoving party's case.”

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Celotex, 477 U.S. at 323.
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Once the moving party meets its burden, the burden shifts to

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the nonmoving party opposing the motion, who must “set forth

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specific facts showing that there is a genuine issue for trial.”

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Anderson, 477 U.S. at 256. Summary judgment is warranted if a party

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“fails to make a showing sufficient to establish the existence of

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an element essential to that party's case, and on which that party

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will bear the burden of proof at trial.” Celotex, 477 U.S. at 322.

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A genuine issue exists if “the evidence is such that a reasonable

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jury could return a verdict for the nonmoving party,” and material

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facts are those “that might affect the outcome of the suit under

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the governing law.” Anderson, 477 U.S. at 248. There is no genuine

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issue of fact “[w]here the record taken as a whole could not lead a

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rational trier of fact to find for the nonmoving party.” Matsushita

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Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

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It is not the court's task “to scour the record in search of a

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genuine issue of triable fact.” Keenan v. Allan, 91 F.3d 1275, 1278

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(9th Cir.1996). Counsel has an obligation to lay out their support

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clearly. Carmen v. San Francisco Sch. Dist., 237 F.3d 1026, 1031

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(9th Cir.2001). The court “need not examine the entire file for

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evidence establishing a genuine issue of fact, where the evidence

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is not set forth in the opposition papers with adequate references

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so that it could conveniently be found.” Id.

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III. Discussion
Action Express contends that Sompo is precluded from bringing

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its subrogation claim against it under the doctrine of superior

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equities. The court agrees.

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“Subrogation is defined as the substitution of another person

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in place of the creditor or claimant to whose rights he or she

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succeeds in relation to the debt or claim.” Fireman's Fund Ins. Co.

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v. Maryland Casualty Co, 65 Cal.App.4th 1279, 1291 (1998). “In the

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insurance context, subrogation takes the form of an insurer's right

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to be put in the position of the insured for a loss that the

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insurer has both insured and paid. When an insurance company pays

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out a claim on a property insurance policy, the insurance company

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is subrogated to the rights of its insured against any wrongdoer

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who is liable to the insured for the insured's damages.” State Farm

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Gen. Ins. Co. v. Wells Fargo Bank, N.A., 143 Cal.App.4th 1098, 1106

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(2006) (quotation marks and citations omitted). An insurer, in its

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role as subrogee, has no greater rights than those possessed by its

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insured, and its claims are subject to the same defenses. See

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Liberty Mut. Ins. Co. v. Fales, 8 Cal.3d 712, 717 (1973)

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“While the insurer by subrogation steps into the shoes of the

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insured, that substitute position is qualified by a number of

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equitable principles. . . . The most restrictive principle is the

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doctrine of superior equities, which prevents an insurer from

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recovering against a party whose equities are equal or superior to

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those of the insurer.” State Farm, 143 Cal.App.4th at 1106-07

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(citing inter alia Meyers v. Bank of America Nat. Trust & Savings

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Ass’n, 11 Cal.2d 92, 102-103 (1938). The requirement that an

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insurer demonstrate superior equities to those of any third party

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from whom it seeks recovery in a subrogation action derives in part

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from the fact that the insurer has been paid a premium to assume

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the risk of loss. See id. at 1110. In California, the doctrine of

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superior equities applies in all cases of equitable or conventional
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subrogation, regardless of the source of the insurer’s claim. See

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id. at 1109 (citing inter alia Meyers, 11 Cal.2d at 101–103; Jones

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v. Aetna Casualty & Surety Co., 26 Cal.App.4th 1717, 1724 (1994)).

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In general, an insurer may seek recovery from the “direct

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cause of the loss (e.g., a dishonest employee, burglar, or fire

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starter) or the direct cause of the loss (e.g., a bank, alarm

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company, or contractual indemnitor)”. Id at 1113. In the case of a

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claim against the direct cause of a loss, “an innocent insurer will

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always have superior equities.” Id. The analysis may be more

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complicated when weighing the equities of third parties who did not

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directly cause the loss but whose conduct contributed to or

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permitted the loss, as the third party’s degree of responsibility

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for the loss varies from case to case. See id.

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for the insurer to pursue a valid subrogation action, the third

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party against whom such an action is brought must always be “guilty

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of some wrongful conduct which makes his equity inferior” to that

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of the insurer. Golden Eagle Ins. Co. v. First Nationwide Fin.

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Corp., 26 Cal.App.4th 160, 171 (1994).

However, in order

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Action Express contends that Sompo has failed to create a

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triable issue of material fact as to any wrongful conduct by Action

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Express relative to the loss. (See Mot. at 13; Reply at 5.)

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Sompo asserts that the theft of its cargo was caused by Action

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Express’s negligence in failing to take adequate protections to

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safeguard the cargo. (See Opposition at 10.)

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In general, subrogation rights may be invoked against a third

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party that indirectly causes a loss by failing to adhere to certain

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proscribed procedures which could have avoided the loss. See In

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Barclay Kitchen, Inc. v. California Bank, 208 Cal.App.2d 347 (1962)
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(allowing insurer’s subrogation claim against insured’s bank where

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the bank’s deviation from its standard procedures enabled insured’s

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employee to carry out embezzlement scheme); Hartford Fire Ins. Co.

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v. Riefolo Constr. Co., Inc., 81 N.J. 514 (1980) (allowing surety’s

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subrogation claim against third party bank where bank’s employees

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failed to verify the validity of a forged check); State Farm, 143

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Cal.App.4th at 788, 801 (allowing insurer’s subrogation claim

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against owner of apartment complex adjacent to insureds’

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condominium where apartment owner’s failure to provide fire

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resistant trash container and safety instructions to tenants

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contributed to the spread of a fire started by ashes deposited by a

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tenant in trash container, damaging insureds’ property).

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Here, however, unlike the circumstances in Barclay, Hartford,

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and State Farm, the insurer, Sompo, has failed to allege any facts

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or point to any evidence tending to demonstrate that Action Express

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failed to adhere to any proscribed safety procedures or was

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otherwise guilty of wrongful conduct that contributed to the loss.

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The only relevant allegations in Sompo’s First Amended Complaint

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are as follows:

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8.

En route to the final destination, on or about February
4, 2012, Defendants, and each of them, stopped at a truck
stop located at 493 W SR, Wildwood, Florida. During this
intermission of delivery, the subject cargo was, due to
lack of safeguards by Defendants, stole.

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Defendants, and each of them, failed to deliver the
subject cargo as a result of a theft at 493 W SR 44,
Wildwood, Florida.

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(First Amended Complaint ¶ 8, 9.) Sompo does not describe, in the

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FAC or its Opposition to the present Motion, what safeguards it

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believes Action Express failed to employ.

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The only evidence Sompo cites in support of its contention

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that Action Express was negligent in failing to safeguard the cargo

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against theft is a police report concerning the theft. (See

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Plaintiff’s Statement of Genuine Issues in Support of its

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Opposition, ¶¶ 19, 20; Segura Decl. Ex. B at 36-39 (Police

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Report).) Sompo refers to the police report only generally, without

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identifying any aspect of the report supporting its contention that

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Action Express acted negligently. A review of the police report

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finds no basis for Sompo’s contention. The report states in

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relevant part only that the driver of the truck informed the

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investigating officer that he parked the truck at a truck stop,

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locked the vehicle, took the vehicle’s keys with him as he and

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another occupant went to purchase some items and take a shower, and

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returned 30 minutes later to find that the truck and trailer were

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missing.1 (Segura Decl. Ex. B at 37.) Nothing in the report appears

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to support a finding that Action Express acted negligently or

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failed to follow proscribed safeguards to prevent theft.

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The relevant passage of the police report states as follows:
[The driver] stated that he drove a white freightliner
with a white 53' trailer (registration number for the
trailer KVY3617L) into the parking lot of the Pilot at
approximately 11:30 hours, and backed ito a parking spot
located behind the Pilot. He advised the truck was an
owner operator but could not provide the owner’s
information. He stated that the truck had the words
Action Express in red letters on the doors, and had the
number 305 on the front fenders. He stated that he
entered the Pilot with Omar to purchase some items and
take showers. He stated that he locked the doors and had
the keys in his possession. He stated they were in the
store approximately 30 minutes. [The driver] stated he
then returned to the parking lot and truck and trailer
was [sic] missing.
(Segura Decl. Ex. B at 37.)
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The absence of evidence tending to show Action Express engaged

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in wrongful conduct is fatal to Sompo’s subrogation claim because,

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lacking such evidence, there is no basis on which to find that

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Sompo’s equities are superior to those of Action Express.

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In light of this conclusion, the court does not reach Action

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Express’s additional arguments in support of its motion for summary

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judgment.

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IV.

Conclusion
For the reasons stated herein, Action Express’s Motion for

Summary Judgement is GRANTED.

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IT IS SO ORDERED.

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Dated: May 14, 2014
DEAN D. PREGERSON
United States District Judge

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