Environmental Cleanup Inc v. Ruiz Transport LLC
ORDER granting  ECI's Motion for Summary Judgment; denying 32 Global Hawk's Motion for Summary Judgment, as more fully set out. Signed by Honorable David L. Russell on 5/12/17. (jw)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
ENVIRONMENTAL CLEANUP INC.,
RUIZ TRANSPORT, LLC,
GLOBAL HAWK INSURANCE CO.,
Case No. CIV-15-867-R
Before the Court are cross motions for summary judgment, Docs. 32 & 35, and the
matter is fully briefed. Docs. 36, 42, & 43. For the reasons that follow, summary judgment
is entered in favor of Plaintiff.
The lone issue before the Court is whether Garnishee Global Hawk Insurance Co.
must reimburse Plaintiff Environmental Cleanup, Inc. (ECI) for cleanup services ECI
performed at the request of Defendant Ruiz Transport. ECI believes it is entitled to
reimbursement, while Global Hawk disagrees. Both parties have moved for summary
judgment. The specific dispute is whether Global Hawk is liable under the surety obligation
included in the policy it issued to Ruiz Transport. Ruiz Transport and Global Hawk
included the surety obligation in the insurance contract in order to comply with the Motor
Carrier Act, a federal law governing trucking companies like Ruiz Transport.
Congress enacted the Motor Carrier Act of 1980 (MCA), Pub.L. No. 96–296, 94
Stat. 793, “to deregulate the trucking industry, increase competition, reduce entry barriers,
and improve quality of service.” Carolina Casualty Ins. Co. v. Yeates, 584 F.3d 868, 873
(10th Cir. 2009). And in no small part, the MCA was meant to “address abuses that had
arisen in the interstate trucking industry which threatened public safety, including the use
by motor carriers of leased or borrowed vehicles to avoid financial responsibility for
accidents that occurred while goods were being transported in interstate commerce.” Canal
Ins. Co. v. Distribution Servs., Inc., 320 F.3d 488, 489 (4th Cir. 2003). To that end, the
MCA and subsequent regulations promulgated by the Federal Motor Carrier Safety
Administration now require interstate motor carriers to obtain “a special endorsement . . .
providing that the insurer will pay within policy limits any judgment recovered against the
insured motor carrier for liability resulting from the carrier’s negligence, whether or not
the vehicle involved in the accident is specifically described in the policy. Yeates, 584 F.3d
at 874 (citing Ill. Cent. R.R. v. Dupont, 326 F.3d 665, 666 (5th Cir. 2003)). The
endorsement guarantees that commercial motor carriers are “willing and able to comply
with . . . [certain] minimum financial responsibility requirements.” 49 U.S.C. §
The motor carrier proves this “requisite financial responsibility in one of three
ways—(1) by an MCS-90 endorsement, (2) by a surety bond, or (3) by self-insurance.”
Yeates, 584 F.3d at 874; 49 U.S.C. § 31139(f)(1)(A); 49 C.F.R. § 387.7(d)(1). Many
carriers opt for the MCS-90 endorsement, which is why every liability insurance policy
issued to motor carriers of interstate commerce contains the MCS-90 endorsement. Herrod
v. Wilshire Ins. Co., 499 Fed. Appx. 753, 755 (10th Cir. 2012). The endorsement is
essentially a surety obligation; it provides that the motor carrier’s insurer “agrees to pay,
within the limits of liability described herein, any final judgment recovered against the
insured for public liability resulting from negligence in the operation, maintenance or use
of motor vehicles subject to the financial responsibility requirements of . . . the [MCA]”
whether or not the vehicle involved in the accident is specifically described in the policy.
49 C.F.R. § 387.15; Doc. 35, Ex. 1. That said, the MCS-90 endorsement does not create a
windfall for the motor carrier or alter the terms of the insurance policy’s other coverage
limits, since “[a] motor carrier may be required to reimburse the MCS-90 insurer for any
payout the insurer would not otherwise have been obligated to make.” Carolina Cas. Ins.
Co. v. Yeates, 584 F.3d 868, 879 (10th Cir. 2009).
The question is whether the MCS-90 endorsement on Ruiz Transport’s insurance
policy applies, thus entitling ECI to compensation for the substantial remediation services
it performed for Ruiz. Global Hawk issued the insurance policy to Ruiz on June 13, 2014,
and the policy was still in effect on May 26, 2015. Doc. 32, Ex. 1. That day, Ruiz Transport
was hauling transformers from Mexico to Kansas when the tractor pulling the trailers was
involved in a single-vehicle accident, spilling hundreds of gallons of transformer oil and
diesel fuel on the highway and surrounding areas. Id.; Doc. 35, at 4. On Ruiz’s request,
ECI performed remediation services over a four-day period: it allegedly shipped samples
of contaminated soil to a testing site, removed and delivered several tons of contaminated
soil to a disposal facility, and subsequently swapped out the contaminated soil for several
tons of uncontaminated soil—all to the tune of approximately $112,000. Doc. 35, at 2.
ECI sued Ruiz Transport after it refused to pay. And when Ruiz Transport did not
respond, the Court entered a default judgment in favor of ECI in the amount of
$126,431.10. Doc. 12. ECI then commenced this post-judgment garnishment proceeding
against Global Hawk, arguing that the MCS-90 endorsement entitled it to reimbursement.
Doc. 16. In ECI’s view, the endorsement’s coverage limit of $750,000—as required under
the MCA, 49 U.S.C. § 31139(b)(2)—clearly covers the judgment rendered against Ruiz
Transport. The endorsement expressly provides that the insurer agrees to pay for final
judgments recovered against the insured for public liability resulting from the negligent
operation of covered vehicles. Doc. 35, Ex. 1. The endorsement specifically defines public
liability to include environmental restoration. And environmental restoration is broadly
restitution for the loss, damage, or destruction of natural
resources arising out of the accidental discharge, dispersal,
release, or escape into or upon the land . . . of any commodity
transported by a motor carrier. This shall include the cost of
removal and the ocst of necessary measures taken to minimize
or mitigate damage to human health, the natural environment,
fish, shellfish, and wildlife.
In other words, ECI contends this is precisely the type of accident contemplated by the
MCS-90 Endorsement. Global Hawk, however, disagrees. It argues that the MCS-90
endorsement does not apply and ECI is entitled to recover only $10,000— the coverage
limit for pollution liability under Ruiz’s purchased policy. Doc. 32, Ex. 1, at 42.
II. Summary Judgment Standard
Summary judgment is proper if the pleadings, the discovery and disclosure materials
on file, and any affidavits show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. The Court
“view[s] the evidence and draw[s] reasonable inferences therefrom in the light most
favorable to the nonmoving party.” Sanders v. Sw. Bell Tel., L.P., 544 F.3d 1101, 1104
(10th Cir. 2008) (internal quotation marks omitted).
Arguing that the MCS-90 endorsement does not apply, Global Hawk hangs its hat
on a single decision, Carolina Cas. Ins. Co. v. Yeates, in which the Tenth Circuit set forth
the—according to Global Hawk, exclusive—circumstances that trigger an insurance
company’s surety obligation under the MCS-90 endorsement. 584 F.3d 868 (10th Cir.
In contrast to this case, the motor carrier in Yeates held two insurance policies. Id.
at 871. One of those policies was issued by State Farm, who quickly tendered the policy
limit of $750,000 to plaintiffs after they were involved in a head-on collision with the truck
that was specifically covered by the State Farm policy. Id. The question was the amount,
if any, owed by Carolina Casualty Insurance Company, who had issued a general liability
policy that covered a variety of commercial claims but not the specific truck involved in
the accident. Id. While plaintiffs’ negligence case was pending in state court, Carolina
Casualty sought a declaratory judgment that it was not liable under the general policy. Id.
at 872. Relying on earlier circuit precedent, the district court denied relief. Id.
On appeal, the Tenth Circuit reversed, finding that the MCS-90 endorsement—and
thus Carolina Casualty’s surety obligation—was not triggered because
The MCS-90 endorsement only applies where: (1) the
underlying insurance policy to which the endorsement is
attached does not provide coverage for the motor carrier’s
accident, and (2) the motor carrier’s insurance coverage is
either not sufficient to satisfy the federally-prescribed
minimum levels of financial responsibility or is non-existent.
Id. (emphasis in original).
This, Global Hawk contends, are the only circumstances under which the MCS-90
applies. First and foremost, the policy to which the MCS-90 endorsement attached cannot
already provide coverage for the accident. And here, the MCS-90’s underlying insurance
policy does provide coverage for the spilled oil and fuel—up to $10,000 for “pollution
liability.” Doc. 32, Ex. 1, at 42. Because it has already remitted this $10,000 to plaintiffs,
Global Hawk insists it satisfied its obligation and ECI is therefore on the hook for the
remaining $102,000 it incurred in cleaning up the spill. After all, the Tenth Circuit
specifically noted that “[i]t would make no sense to jump to the insurer’s MCS-90
endorsement obligation” where the underlying insurance policy already covers the
accident. 584 F.3d at 884.
Yeates, however, does not excuse Global Hawk’s surety obligation. And a
conclusion to the contrary would make little sense. Start with Yeates’s obvious differences
from this case: the motor carrier there had two insurance policies, one of which required
State Farm to tender $750,000—coincidentally the coverage limit of the MCS-90
endorsement—to the plaintiffs. 584 F.3d at 871. Simply put, the plaintiffs had been made
whole—and had received the amount they would have if only the policy with the MCS-90
endorsement applied. Yeates, in short, did not deal with the glaring problem that ECI faces
here: is the MCS-90 endorsement triggered where the underlying policy applies but is
grossly inadequate to cover a plaintiff’s damages?
Global Hawk contends that ECI construes Yeates’s holding too narrowly. Yeates
could not have merely addressed situations where multiple insurance policies were at play:
Not only did the court hold that the MCS-90 “simply covers the public when other coverage
is lacking,” but it did so while citing two cases that did not involve multiple insurers or
insurance policies. Id. at 878. Neither of these cases, though, suggest Global Hawk can
shirk its surety obligation. In fact, in both of the cases the insurance company provided
coverage pursuant to the MCS-90 endorsement and neither address the question of
insufficient coverage ECI faces here. The first case, T.H.E. Ins. Co. v. Larsen Intermodal
Servs., Inc., decided an insurance company could seek reimbursement from its insured after
it paid the plaintiffs’ claims as required by the MCS-90 endorsement. 242 F.3d 667, 670
(5th Cir. 2001). Likewise, Harco Nat. Ins. Co. v. Bobac Trucking Inc. held that even though
an insurer paid to settle its insured’s liability in accordance with the MCS-90 endorsement,
the endorsement did not obligate the insurere to defend the insured on the underlying tort
claim. 107 F.3d 733, 736–737 (9th Cir. 1997). In short, neither of Global Hawk’s cited
cases bear on this issue.
More than anything, the underlying rationale of both the MCA and Yeates suggests
the MCS-90 endorsement applies here. As Yeates noted, the very purpose of the MCA is
to “assure that motor carriers maintain an appropriate level of financial responsibility for
motor vehicles operated on public highways.” Yeates, 584 F.3d at 881 (citing 42 U.S.C. §
387.1). Because the MCS-90 endorsement “is a surety in the event judgment against the
carrier is for some reason unsatisfied,” its purpose is “clearly implicated” where “the carrier
fails to maintain insurance (or sufficient insurance) on a truck involved in an accident and
fails to pay out of its own pocket for its liability to the injured party.” Id. at 880–881. “The
endorsement in this circumstance would effectuate a minimum level of recovery for the
injured party from the MCS-90 provider.” Id. at 881. If the MCA’s concern is unsatisfied
judgments and injured plaintiffs, it is difficult to see how excusing Global Hawk from its
surety obligation does not frustrate that very purpose.
Perhaps that is why nowhere in Yeates does the Tenth Circuit hold that an insurer
can avoid its obligations under the MCS-90 endorsement by conceding that its issued
policy provides coverage—but only to a limit that leaves the public liability judgment
largely unsatisfied. If that were the case, there would be little to stop an insurance company
from arguing the issued policy always provides some coverage, no matter how meager, in
order to escape the MCA surety obligation. If Yeates offers anything to this case, it is a
clear picture of the Tenth Circuit’s understanding of the MCS-90 endorsement—which it
specifically noted “ensure[s] the collectability of a judgment,” serves as “a safety net in the
event other insurance is lacking,” and “guarantee[s] a source of recovery in the event the
motor carrier negligently injures a member of the public on the highways.” 584 F.3d at
875, 878. Given this, it is no surprise Yeates remarked that “the endorsement may be
implicated where the sum of all liability coverage applicable to a motor carrier's accident
is insufficient to meet the financial responsibility minimums.” Id. at 885. Of course, it used
the example of when the motor carrier’s multiple insurance policies have policy limits that
are nonetheless too low in the aggregate. Id. But the same rationale applies to situations
where the coverage limit for the only policy at issue is also too low. And without belaboring
the point, this rationale is not unique to the Tenth Circuit. See, e.g., T.H.E. Ins. Co., 242
F.3d at 672 (noting that the MCS-90’s purpose is “to assure that injured members of the
public [are] able to obtain judgments collectible against negligent authorized carriers”); see
also Nat. Indep. Truckers Ins. Co. v. Gadway, 860 F.Supp.2d 946, 954 (D. Neb. 2012)
(clarifying that “[a]n MCS-90 insurer’s duty to pay a judgment arises not from any
insurance obligation, but from the endorsement’s language guaranteeing a source of
recovery in the event the motor carrier negligently injures a member of the public on the
highways”); Real Legacy Assur. Co. v. Santori Trucking, Inc., 560 F. Supp. 2d 143, 147
(D.P.R. 2008) (explaining that the MCS-90 endorsement “simply covers the public when
other coverage is lacking).
Nor does the Court agree with Global Hawk’s contention that the MCS-90
endorsement actually requires it to pay only the $10,000 limit for pollution liability. It
argues that if the MCS-90 endorsement applies, this essentially alters the terms of the
original insurance policy—which the MCS-90 endorsement specifically precludes by
including its legally required language that “all terms, conditions, and limitations in the
policy to which the endorsement is attached shall remain in full force and effect as binding
between the insured and the company.” 49 C.F.R. § 387.15; Doc. 32, Ex. 1. Even Yeates
noted that despite the endorsement, “the underlying insurance policy remains in force on
its original terms as between the motor carrier and the respective insurance company.” 584
F.3d at 882.
Applying the MCS-90 endorsement, though, does not alter the terms of the policy
or increase Global Hawk’s actual liability. The endorsement is no more than a surety
obligation, which is why it provides that “[t]he insured agrees to reimburse the company
for any payment made by the company . . . that the company would not have been obligated
to make under the provisions of the policy except for the agreement contained in the
endorsement.” Yeates, at 881 (citing 49 C.F.R. § 387.15); Doc. 32, Ex. 1. In other words,
“[t]he peculiar nature of the MCS–90 endorsement grants the judgment creditor the right
to demand payment directly from the insurer, and simultaneously grants the insurer the
right to demand reimbursement from the insured.” Canal Ins. Co. v. Underwriters at
Lloyd's London, 435 F.3d 431, 442 (3d Cir. 2006). Consequently, the endorsement
“presents neither a windfall for the motor carrier, nor does it alter the motor carrier's
coverage under its other insurance policies.” Yeates, 584 F.3d at 879. If Global Hawk
believes the policy would not otherwise obligate it to compensate ECI for the remediation
services, it is more than free to seek reimbursement from Ruiz.
In conclusion, ECI’s Motion for Summary Judgment [Doc. 35] is GRANTED, and
Global Hawk’s Motion for Summary Judgment [Doc. 32] is DENIED. Judgment against
Global Hawk will be entered in the amount of $126,431.10, less the $10,000 that Global
Hawk has already paid to ECI, for a total of $116,431.10.
IT IS SO ORDERED this 12th day of May 2017.
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