Philadelphia Indemnity Insurance Company v. FedEx Freight, Inc. et al
ORDER granting 34 Motion for Summary Judgment; denying 36 Motion for Summary Judgment. Signed by Magistrate Judge Charmiane G. Claxton on 11/8/2017. (Claxton, Charmiane)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
FEDEX FREIGHT, INC., DAVID F.
MAGGIE SHORTER, and
ORDER GRANTING PHILADELPHIA INDEMNITY INSURANCE COMPANY’S
MOTION FOR SUMMARY JUDGMENT AND DENYING FEDEX FREIGHT, INC.
AND DAVID RICKMAN’S MOTION FOR SUMMARY JUDGMENT
Before the Court are Plaintiff/Counter-Defendant Philadelphia Indemnity Insurance
Company’s (“Philadelphia”) Motion for Summary Judgment (Docket Entry “D.E.” #34) and
Defendants/Counter-Plaintiffs FedEx Freight, Inc. (“FedEx Freight”) and David F. Rickman’s
(“Rickman”) Motion for Summary Judgment (D.E. #36). The parties have consented to the
jurisdiction of the United States Magistrate Judge. (D.E. #33). For the reasons set forth herein,
Philadelphia’s Motion for Summary Judgment is GRANTED and FedEx Freight and Rickman’s
Motion for Summary Judgment is DENIED.
Background and Findings of Fact
The underlying action arises was filed by Defendants Maggie Shorter and David Shorter
in Tennessee state court against FedEx Freight and Rickman (“State Complaint”). (D.E. #1-1).
The State Complaint alleges that, on or about July 8, 2015, Mrs. Shorter was working as a
security guard for Universal Protection Service, LLC (“Universal”) at a FedEx Freight facility
located at 461 Winchester Road in Memphis, Tennessee.
(State Compl. ¶3)
Complaint alleges that Mrs. Shorter sustained severe and permanent injuries, including the
amputation of her right leg from the knee down and the permanent disfigurement of her left leg,
after being struck by a FedEx Freight vehicle operated by Rickman. (State Compl. ¶¶ 6, 10).
The State Complaint alleges that Ms. Shorter’s injuries were proximately caused by Rickman’s
negligent operation of the FedEx Freight vehicle. (State Compl. ¶ 10). The State Complaint
alleges that FedEx Freight is vicariously liable for Rickman’s negligence under the doctrine of
respondent superior. (State Compl. ¶ 6).
After the State Complaint was filed, FedEx Freight and Rickman tendered the Shorters’
suit to Philadelphia and demanded a defense and indemnification. Philadelphia refused asserting
that the Policy did not cover either. On July 20, 2016, Philadelphia filed a Complaint for
Declaratory Judgment (“Complaint”) in this Court pursuant to 28 U.S.C. §§ 2201-2202 and Rule
57 of the Federal Rules of Civil Procedure (D.E. #1). FedEx Freight and Rickman then filed a
Counter-Complaint under 28 U.S.C. § 2201 and Rule 57 for Declaratory Judgment (D.E. #22).
The Complaint alleges that, prior to the incident complained of in the State Complaint, on or
about November 2013, FedEx Freight and Universal entered into a General Guard Security
Agreement (“Agreement”). (Agreement, filed at D.E. #1-2, at 1, 9). Under the Agreement,
Universal agreed to provide security services for FedEx Freight facilities throughout the United
States. (Agreement at 1). Section 9 of the Agreement, entitled “Indemnification,” provides as
Indemnification. [Universal] agrees to indemnify,
defend and hold harmless FedEx [Freight], its directors, officers,
and employees from any and all liabilities, damages, losses,
expenses, demands, claims, suits, or judgments, including
reasonable attorneys’ fees and expenses, to the extent resulting
from [Universal]’s negligence or willful misconduct in the
performance of its obligations under this Agreement, including, but
not limited to any claim for payment by a subcontractor, agent, or
employee of [Universal]. [Universal]’s obligation to so indemnify,
defend and hold harmless FedEx [Freight] shall survive the
expiration or earlier termination of this Agreement.
(Agreement at 3-4).
Additionally, the Agreement provides that Universal shall “maintain Commercial General
Liability insurance for bodily injury, and property damage, including contractual liability,
products and completed operations; Broad Form Property Damage; Workers Compensation at
statutory limits; Employers Liability Insurance; Personal Injury insurance, and Commercial
Liability insurance if operating automotive vehicles as set out in attached Exhibit C.”
(Agreement at 4, § 10).
Exhibit A to the Agreement provides the Security Guard Responsibilities. (Agreement at
13). Of central importance to the instant case, the Agreement provides in Paragraph 19 as
follows: “For Safety reasons do not walk between double trailers unless Tractor is “shut
off and parking brake is applied. ALL units exiting service center will stop to allow Security
Officer to verify equipment information, record the tractor, trailer(s) and dolly numbers for units
exiting truck gate on truck registration log.” (Exh. A. at 13). Exhibit C to the Agreement further
provides, in pertinent part, as follows:
INSURANCE CERTIFICATE AND POLICIES
Commercial Automobile Liability Insurance
covering [Universal]’s owned, and non-owned and hire vehicles,
naming FedEx [Freight] and affiliated companies, and their
respective officers, directors, and employees as additional insured,
as their interests may appear under the terms of this Agreement,
including bodily injury and property damage endorsements, with a
combined single limit of not less than $1,000,000.00.
(Agreement at Exh. C).
Further, in order to comply with their requirements under the Agreement, Universal
procured a policy of insurance from Philadelphia bearing the policy number PHPK1224836
(“Policy”), which provided commercial auto insurance coverage for a policy period of
September 1, 2014 to September 1, 2015. (D.E. #1-3). There is no dispute that the Policy was in
full force on or about July 8, 2015 when Mrs. Shorter sustained injuries after being struck by the
FedEx Freight truck. (Id.) The Policy issued by Philadelphia to Universal consists of the
Business Auto Declarations and the Business Auto Coverage Form. (Id). The Policy states, in
SECTION II – LIABILITY COVERAGE
We will pay all sums an "insured" legally must pay as damages
because of "bodily injury" or "property damage" to which this
insurance applies, caused by an "accident" and resulting from the
ownership, maintenance or use of a covered "auto".
We have the right and duty to defend any "insured" against a "suit"
asking for such damages or a "covered pollution cost or expense".
However, we have no duty to defend any "insured" against a "suit"
seeking damages for "bodily injury" or "property damage" or a
"covered pollution cost or expense" to which this insurance does
not apply. We may investigate and settle any claim or "suit" as we
consider appropriate. Our duty to defend or settle ends when the
Liability Coverage Limit of Insurance has been exhausted by
payment of judgments or settlements.
1. Who Is An Insured
The following are "insureds":
a. You for any covered "auto".
b. Anyone else while using with your permission a
covered "auto" you own, hire or borrow except:
(1) The owner or anyone else from whom you
hire or borrow a covered "auto".
This exception does not apply if the covered
"auto" is a "trailer" connected to a covered
"auto" you own.
(2) Your "employee" if the covered "auto" is
owned by that "employee" or a member of
his or her household.
(3) Someone using a covered "auto" while he or
she is working in a business of selling,
servicing, repairing, parking or storing
"autos" unless that business is yours.
(4) Anyone other than your "employees",
partners (if you are a partnership), members
(if you are a limited liability company) or a
lessee or borrower or any of their
"employees", while moving property to or
from a covered "auto".
(5) A partner (if you are a partnership) or a
member (if you are a limited liability
company) for a covered "auto" owned by
him or her or a member of his or her
c. Anyone liable for the conduct of an "insured" described
above but only to the extent of that liability.
The insurance does not apply to any of the following:
Liability assumed under any contract or agreement.
But this exclusion does not apply to liability for damages:
a. Assumed in a contract or agreement that is an “insured
contract” provided the “bodily injury” or property
damage” occurs subsequent to the execution of the
contract or agreement; or
b. That the “insured” would have in the absence of the
contract or agreement.
4. Employee Indemnification And Employer’s Liability
“Bodily injury” to:
a. An “employee” of the “insured” arising out of and
in the course of:
(1) Employment by the “insured”; or
(2) Performing the duties related to the conduct
of the “insured’s” business; or
This exclusion applies:
(1) Whether the “insured” may be liable as an
employer or in any other capacity; and
(2) To any obligation to share damages with or
repay someone else who must pay damages
because of the injury.
But this exclusion does not apply to “bodily injury” to
domestic “employees” not entitled to workers’
compensation benefits or to liability assumed by the
“insured” under an “insured contract.”
purposes of the Coverage Form, a domestic “employee”
is a person engaged in household or domestic work
performed principally in connection with a residence
SECTION V – Definitions
A. “Accident” includes continuous or repeated exposure to the
same conditions resulting in “bodily injury” or “property
B. “Auto” means:
1. A land motor vehicle, “trailer” or semitrailer designed for travel
on public roads; or
2. Any other land vehicle that is subject to a compulsory or
financial responsibility law or other motor vehicle insurance law
where it is licensed or principally garaged.
However, “auto” does not include “mobile equipment”.
C. “Bodily injury” means bodily injury, sickness or disease
sustained by a person including death resulting from any of
F. “Employee” includes a “leased worker”. “Employee” does not
include a “temporary worker.”
G. “Insured” means any person or organization qualifying as an
insured in the Who Is An Insured provision of the applicable
coverage. Except with respect to the Limit of Insurance, the
coverage afforded applies separately to each insured who is
seeking coverage or against whom a claim or “suit” is brought.
H. “Insured contract” means:
1. A lease of premises;
2. A sidetrack agreement;
3. Any easement or license agreement, except in connection with
construction or demolition operations on or within 50 feet of a
4. An obligation, as required by ordinance, to indemnify a
municipality, except in connection with work for a municipality;
5. That part of any other contract or agreement pertaining to your
business (including an indemnification of a municipality in
connection with work performed for a municipality)under which
you assume the tort liability of another to pay for “bodily injury”
or “property damage” to a third party or organization. Tort
liability means a liability that would be imposed by law in the
absence of contract or agreement.
6. That part of any contract or agreement entered into, as part of
your business, pertaining to the rental or lease, by you or any of
your “employees”, of any “auto”. However, such contract or
agreement shall not be considered an “insured contract” to the
extent that it obligates you or any of your “employees” to pay for
“property damage” to any “auto” rented or leased by you or any of
An “insured contract” does not include that party of any contract or
b. That pertains to the loan, lease or rental of an “auto”
to you or any of your “employees” if the “auto” is
loaned, lease or rented with a driver; or
c. That holds an organization engaged in the business
of transporting property by “auto” for hire harmless
for your use of a covered “auto” over a route or
territory that person or organization is authorized to
serve by public authority.
J. “Loss” means direct and accidental loss or damage.
N. “Suit” means a civil proceeding in which:
1. Damages because of “bodily injury” or “property
to which this insurance applies, are alleged.
(Policy 2-3, 10).
Additionally, on June 30, 2015, a Certificate of Liability Insurance was issued by Wood,
Gutmann & Bogart to FedEx Freight confirming that it and its affiliated companies, their
respective officers, directors and employees are additional insureds “per the attached
endorsements as required by written contract subject to the terms & conditions of the policy.”
The Blanket Additional Insured Endorsement sets forth as follows:
THIS ENDORSEMENT CHANGES THE POLICY, PLEASE READ IT
Section II – Liability Coverage – A.1. WHO IS AN INSURED provision is
amended by the addition of the following:
e. Any person or organization for whom you are required by an “insured contract”
to provide insurance is an “insured,” subject to the following additional
(1) The “insured contract” must be in effect during the policy period shown in the
Declarations and must have been executed prior to the “bodily injury” or
(2) This person or organization is an “insured” only to the extent you are liable
due to your ongoing operations for that insured, whether the work is performed by
you or for you, and only to the extent you are held liable for an “accident”
occurring while a covered “auto” is being driven by you or one of your
(3) There is no coverage provided to this person or organization for “bodily
injury” to its employees or for “property damages” to its property.
(4) Coverage for this person or organization shall be limited to the extent of your
negligence or fault according to the applicable principles of comparative
negligence or fault.
(5) The defense of any claim or “suit” must be tendered by this person or
organization as soon as practicable to all other insurers which potentially provide
insurance for such claim or “suit.”
(6) The coverage provided will not exceed the lesser of:
(a) The coverage and/or limits of this policy; or
(b) The coverage and/or limits required by the “insured contract.”
(7) A person’s or organization’s status as an “insured” under this subparagraph d
ends when your operations for that “insured” are completed.
All other terms and conditions of this Policy remand unchanged.
Based on these provisions, the parties argue as follows. Philadelphia contends that it has
no duty to defend FedEx Freight and Rickman because neither meet the definition of an
“insured” under Section V, Paragraph A.1.e in the Agreement between Universal and
Philadelphia. Further, Philadelphia contends that it owes no duty to defend or indemnify FedEx
Freight and Rickman because the Agreement does not qualify as an “insured contract” for FedEx
Freight and Rickman to be insured under the Blanket Additional Insured Endorsement.
In contrast, FedEx Freight argues that Section 9 of the Agreement requires Universal to
indemnify FedEx Freight in the event of Universal’s negligence. Because Section 10 of the
Agreement requires Universal to name FedEx Freight as an additional insured, Philadelphia is
required to defend FedEx Freight as an additional insured in an action arising out of Universal’s
negligence. FedEx Freight contends Universal was negligent because Shorter walked between
two trailers when the accident occurred. In addition, FedEx Freight contends that the Blanket
Additional Insured Endorsement is ambiguous and this ambiguity favors indemnification
because, under California law, ambiguous contracts are construed in favor of providing
Summary Judgment Standard and Choice of Law
Under Federal Rule of Civil Procedure 56(c), summary judgment is proper “if the
pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c); see also Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). Further, summary judgment is proper “against a party who
fails to make a showing sufficient to establish the existence of an element essential to that party’s
case, and on which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322
(1986). The moving party can prove the absence of a genuine issue of material fact by showing
that there is a lack of evidence to support the nonmoving party’s case. Id. at 325. This may be
accomplished by submitting affirmative evidence negating an essential element of the
nonmoving party’s claim, or by attacking the nonmoving party’s evidence to show why it does
not support a judgment for the nonmoving party. 10a Charles A. Wright et al., Federal Practice
and Procedure § 2727 (2d ed. 1998).
The movant has the initial burden of “demonstrat[ing] the absence of a genuine issue of
material fact.” Celotex, 477 U.S. at 323. The burden then shifts to the non-moving party to “go
beyond the pleadings” and “designate specific facts showing there is a genuine issue for trial.”
Id. at 324. The “adverse party may not rest upon the mere allegations of denials of [its] pleases,
but . . . must set forth specific facts showing that there is a genuine issue for trial.” Fed. R. Civ.
P. 56(e). A genuine issue for trial exists if evidence would permit a reasonable jury to return a
verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To
avoid summary judgment, the nonmoving party “must do more than simply show that there is
which the metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., 474 U.S.
574, 586 (1986).
Analysis and Conclusion of Law
The disposition of the summary judgment motions in this case relies upon the
interpretation of the Agreement and Policy above. As jurisdiction in this case is based upon
diversity of citizenship, this Court must apply the choice-of-law rules of the forum state of
Tennessee. See Klaxton Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941); Montgomery v.
Wyeth, 580 F.3d 455, 459 (6th Cir. 2009). In insurance coverage disputes, Tennessee follows the
lex loci contractus doctrine, in which the substantive law of the state where the insurance policy
was issued and delivered controls. Nelson v. Nelson, 409 S.W.3d 629, 632 (Tenn. Ct. App.
2013) (citations omitted); Ohio Cas. Ins. Co. v. Travelers Indem. Co., 493 S.W.2d 465, 467
(Tenn. 1973). Philadelphia delivered the Policy to Universal in California. (D.E. #1-3 at 1).
Accordingly, California law applies in interpreting the Policy, which the parties do not dispute.
(D.E. ## 34-2 at 9, 36-1 at 6). The Agreement between FedEx and Universal contains a
contractual provision that states that it “shall be governed by and interpreted in accordance with
the laws of Arkansas.” (Agreement at 6, § 15(d)).
In the instant case, FedEx Freight and Universal entered into the Agreement stating that
Universal would indemnify, defend, and hold harmless FedEx Freight from Universal’s
negligence or willful misconduct.
(Agreement at 3, § 9).
The Agreement provided that
Universal security guards were not to walk between double trailers for safety reasons unless the
tractor was shut off and the parking brake was applied. (Agreement at 13, § 19). The State
Complaint alleges that Mrs. Shorter was working as a Universal security guard when Rickman
stopped his Peterbilt Motors Tractor with two trailers at the guard shack. (State Complaint ¶ 4).
After checking the rear trailer, Mrs. Shorter alleges that she walked between the two trailers to
check the seal number on the trailer directly behind the cab of the Defendant’s truck.” (Id.)
Mrs. Shorter further alleges that Rickman pulled the truck forward while she was between the
two trailers and, although she attempted to move, she was struck and run over by the rear trailer.
(Id.) Thus, according to her allegations in the State Complaint, she violated the guidelines set
forth in the Agreement when she sustained her injuries.
Under Arkansas law, “in order to prevail on a claim of negligence, the plaintiff must
prove that the defendant owed a duty to the plaintiff, that the defendant breached the duty, and
that the breach was the proximate cause of the plaintiff’s injuries.” Robinson Nursing and
Rehabilitation Center, LLC v. Phillips, 519 S.W.3d 291, 302 (Ark. 2017) (citing Branscumb v.
Freeman, 200 S.W.3d 411 (2004)). Here, the Agreement set forth a legal duty of care, which
Mrs. Shorter does not appear to dispute she breached, although Mrs. Shorter’s negligence is not
at issue in this matter.
Yet, as Philadelphia and the Shorters contend, Rickman’s actions should also be analyzed
under the doctrine of comparative fault. “The question of what duty, if any, is owed a plaintiff
alleging negligence is always a question of law and never one for the jury.” Marlar v. Daniel,
247 S.W.3d 473, 508 (Ark. 2007) (Lawhon Farm Supply, Inc. v. Hayes, 870 S.W.2d 729 (1994);
Keck v. American Employment Agency, Inc., 652 S.W.2d 2 (1983)). “Duty is a concept that
arises out of the recognition that relations between individuals may impose upon one a legal
obligation for the other.” Marlar, 247 S.W.3d at 508 (citing Shannon v. Wilson, 947 S.W.2d
349, 356-57 (1997)). Under the Agreement between FedEx Freight and Universal, while Exhibit
A is titled “Security Guard Responsibilities,” it explicitly requires of FedEx Freight employees
that “ALL units exiting service center will stop to allow Security Officer to verify equipment
information, record the tractor, trailer(s) and dolly numbers for units exiting truck gate on truck
registration log.” (Agreement at 13, § 19). It was under these terms that Universal was “willing
and able to perform the services for FedEx [Freight] in accordance with the terms of this
Agreement.” (Agreement at 1, § 2). Thus, Rickman was under a contractual duty to Mrs.
Shorter as well to have stopped his vehicle, turned it off, and secured it with the parking brake
for her to be able to safely perform her security checks. It also appears undisputed that Rickman
breached that duty, although Rickman’s comparative fault is also not at issue in this matter.
In the context of this relationship between Mrs. Shorter, Universal, FedEx Freight, and
Rickman under the Agreement, the Court may turn to the relationship subsequently created
between FedEx Freight, Rickman and Philadelphia under the Policy. The Policy was procured
by Universal as contemplated by Sections 9 and 10 of the Agreement to for Universal to “defend,
indemnify, and hold harmless” FedEx Freight “from [Universal]’s negligence or willful
misconduct in the performance of its obligations under this Agreement, including, but not limited
to any claim for payment by a subcontractor, agent, or employee of [Universal].” (Agreement at
3-4). The Commercial Auto Policy that Universal purchased to meet that obligation defines all
covered autos as well as the liability coverage, including who is an “insured.” (Id. at 1-4).
Under California law, the provisions of an insurance policy “are to be understood in their
ordinary and popular sense . . . unless used by the parties in a technical sense, or unless a special
meaning is given to them by usage.” Cal. Civ. Code § 1644.
For coverage to extend in any manner to FedEx Freight and Rickman under the Policy,
they must meet the definition of an “insured” either under the initial insuring agreement of the
Policy or the subsequently issued Certificate of Liability Insurance with its Blanked Additional
Insured Endorsement pertaining to FedEx Freight and its employees.
The initial insuring
agreement of the Policy defines “Who Is An Insured,” but the three categories clearly do not
apply to FedEx Freight and Rickman (and are not asserted by FedEx and Rickman to apply).
The Blanket Additional Insured Endorsement amends the language of the initial insuring
agreement to add an additional category of persons or organizations that would qualify as an
“insured” under the “Who Is An Insured” provision.
To qualify under that provision, the Agreement between FedEx Freight and Universal
must qualify as an “insured contract.” An “insured contract” is, in pertinent part, “[t]hat part of
any other contract or agreement pertaining to your business . . . under which you assume tort
liability of another to pay for ‘bodily injury’ or ‘property damage’ to a third party or
organization. Tort liability means a liability that would be imposed by law in the absence of any
contract or agreement.” (Policy at 11, § V.H.5). The Policy states that, “[t]hroughout this policy
the words ‘you’ and ‘your’ refer to the Named Insured shown in the Declarations.” (Policy at 1).
The Named Insured shown in the Declarations is “Universal Services of America, Inc. /
Universal Group Holdings, LLC / Universal Midco, LLC.”
Under California law, “[t]he whole of a contract is to be taken together, so as to give
effect to every part, if reasonably practicable, each clause helping to interpret the other.” Cal.
Civ. Code § 1641. Accordingly, taking those provisions together, the plain language of the
Policy states that, to qualify as an “insured contract,” Universal would have to have assumed the
tort liability of a third party. The Agreement does not contain such an assumption of third-party
liability by Universal. Thus, the Agreement does not qualify as an “insured contract” for FedEx
Freight and Rickman to be insured under the Policy.
Further, even if the Agreement were an “insured contract,” the Blanket Additional
Insured Endorsement states that the “person or organization is an ‘insured’ . . . only to the extent
you are held liable for an ‘accident’ occurring while a covered ‘auto’ is being driven by you or
one of your employees.” (Policy at 16). As set forth above, “you” and “your” are defined under
the Policy as Universal. Here, the FedEx Freight truck that caused bodily injury to Mrs. Shorter
was undisputedly being driven by Rickman, who is not one of Universal’s employees. Thus,
coverage would also not extend under the Policy under the Blanket Additional Insured
Endorsement under Section II.e.(4).
For the reasons set forth above, the Court concludes as a matter of law that the Policy
does not obligate Philadelphia Indemnity Insurance Company to furnish legal counsel or
otherwise provide a defense on behalf of David F. Rickman and FedEx Freight, Inc. in the action
filed by the Maggie and David in the Circuit Court of Shelby County, Tennessee bearing the
docket number CT-001593-15. Further, the Court concludes as a matter of law that no coverage
or indemnification is afforded to David F. Rickman and FedEx Freight, Inc. under the policy of
insurance issued by Philadelphia Indemnity Insurance Company to Universal Protection Service,
LLC, policy number PHPK1224836 for the claims and demands made in the above-mentioned
For the reasons set forth herein, Philadelphia’s Motion for Summary Judgment is
GRANTED and FedEx Freight and Rickman’s Motion for Summary Judgment is DENIED.
IT IS SO ORDERED this 8th day of November, 2017.
s/ Charmiane G. Claxton
CHARMIANE G. CLAXTON
UNITED STATES MAGISTRATE JUDGE
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