United Financial Casualty Company v. Mid State Logistics LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

UNITED FINANCIAL CASUALTY No. 4:21-CV-00177

COMPANY,

(Chief Judge Brann)

Plaintiff,

v.

MID STATE LOGISTICS and

CHARLES E. RANKIN,

Defendants.

MEMORANDUM OPINION

JUNE 10, 2022

This insurance coverage dispute emerges from a May 2018 semi-trailer

accident. At the time, Charles Rankin and Clay Rosebrooks were team-driving on

Interstate 4 in Longwood, Florida—Rankin at the wheel, Rosebrooks in the

sleeper—when they careened into the guardrail and overturned. To recover damages

for his resulting injuries, Rosebrooks and his wife sued Rankin and the trucking

company, the McClure, Pennsylvania-based Mid State Logistics, in the Court of

Common Pleas of Snyder County, Pennsylvania. Just over a year later, Mid State

Logistics’ commercial auto insurer, United Financial Casualty Company, sought a

declaration from this Court on its duty to defend Mid State Logistics and Rankin in

the state court suit.

Under its insurance agreement with Mid State Logistics, United Financial

Casualty does not have to defend and indemnify Mid State Logistics against claims

brought by an “employee.” The parties agree that, though undefined in the

agreement, this term is governed by 49 C.F.R. § 390.5, which provides that an

employee is anyone “who is employed by an employer and who in the course of his

or her employment directly affects commercial motor vehicle,” before then

clarifying that “[s]uch term includes a driver of a commercial motor vehicle

(including an independent contractor while in the course of operating a commercial

motor vehicle) . . . .”

So when Rosebrooks, an independent contractor, swapped spots with Rankin

did he cease to be an employee? This Court finds that he did not.

I. LEGAL STANDARD

This question comes before the Court through United Financial Casualty’s

motion for summary judgment on its complaint seeking declaratory judgment

regarding the scope of it and Mid State Logistics’ insurance agreement.1 Each legal

standard is addressed in turn.

A. Summary Judgment Standard

Under Federal Rule of Civil Procedure 56, summary judgment is appropriate

if “the movant shows that there is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.”2 Material facts are those “that

could alter the outcome” of the litigation, “and disputes are ‘genuine’ if evidence

exists from which a rational person could conclude that the position of the person

with the burden of proof on the disputed issue is correct.”3 A defendant “meets this

standard when there is an absence of evidence that rationally supports the plaintiff’s

case.”4 Conversely, to survive summary judgment, a plaintiff must “point to

admissible evidence that would be sufficient to show all elements of a prima facie

case under applicable substantive law.”5

The party requesting summary judgment bears the initial burden of supporting

its motion with evidence from the record.6 When the movant properly supports its

motion, the nonmoving party must then show the need for a trial by setting forth

“genuine factual issues that properly can be resolved only by a finder of fact because

they may reasonably be resolved in favor of either party.”7 The nonmoving party

will not withstand summary judgment if all it has are “assertions, conclusory

allegations, or mere suspicions.”8 Instead, it must “identify those facts of record

which would contradict the facts identified by the movant.”9

2 Fed. R. Civ. P. 56(a).

3 EBC, Inc. v. Clark Bldg. Sys., Inc., 618 F.3d 253, 262 (3d Cir. 2010) (quoting Clark v. Modern

Grp. Ltd., 9 F.3d 321, 326 (3d Cir. 1993)).

4 Clark, 9 F.3d at 326.

5 Id.

6 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

7 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).

8 Betts v. New Castle Youth Dev. Ctr., 621 F.3d 249, 252 (3d Cir. 2010).

9 Port Auth. of N.Y. and N.J. v. Affiliated FM Ins. Co., 311 F.3d 226, 233 (3d Cir. 2002) (quoting

In assessing “whether there is evidence upon which a jury can properly

proceed to find a verdict for the [nonmoving] party,”10 the Court “must view the

facts and evidence presented on the motion in the light most favorable to the

nonmoving party.”11 Moreover, “[i]f a party fails to properly support an assertion of

fact or fails to properly address another party’s assertion of fact as required by Rule

56(c),” the Court may “consider the fact undisputed for purposes of the motion.”12

Finally, although this Court “need consider only the cited materials, . . . it may

consider other materials in the record.”13

B. Declaratory Judgment and the Court’s Role in Interpreting

Insurance Agreements

The Declaratory Judgment Act provides that “[i]n case of actual controversy

within its jurisdiction . . . any court in the United States, upon the filing of an

appropriate pleading, may declare the rights and other legal relations of any

interested party seeking such declaration, whether or not further relief is or could be

sought.”14 Included in this power is the right of a court to determine whether an

insurer has a duty to defend an underlying action—and if there is no duty to defend,

there can be no duty to indemnify.15

10 Liberty Lobby, 477 U.S. at 252 (quoting Schuylkill & Dauphin Imp. Co. v. Munson, 81 U.S.

442, 448 (1871)).

11 Razak v. Uber Techs., Inc., 951 F.3d 137, 144 (3d Cir. 2020).

12 Fed. R. Civ. P. 56(e)(2); see also Weitzner v. Sanofi Pasteur, Inc., 909 F.3d 604, 613–14 (3d

Cir. 2018).

13 Fed. R. Civ. P. 56(c)(3).

14 28 U.S.C. § 2201(a).

15 ACandS, Inc. v. Aetna Cas. & Sur. Co., 666 F.2d 819, 823 (3d Cir. 1981); Sapa Extrusions,

Under Pennsylvania law, “[a] court’s first step in a declaratory judgment

action concerning insurance coverage is to determine the scope of the policy’s

coverage.”16 In doing so, this Court faces a question of law—the interpretation of an

insurance contract—and must endeavor “to ascertain the intent of the parties as

manifested by the language of the written instrument.”17 I must read the policy as a

whole and construe the contract “in accordance with the plain meaning of the

terms.”18 If the language of a policy is clear and unambiguous, I must enforce that

language; ambiguous language, however, must be construed against the insurer and

in favor of the insured.19

“After determining the scope of coverage, the court must examine the

complaint in the underlying action to ascertain if it triggers coverage.”20 “It is well

established that an insurer’s duties under an insurance policy are triggered by the

language of the complaint against the insured.”21 Under this approach, the “question

of whether a claim against an insured is potentially covered is answered by

comparing the four corners of the insurance contract to the four corners of the

complaint.”22 This principle, known as the four-corners rule, holds that “[a]n insurer

16 General Accident Ins. Co. of Am. v. Allen, 547 Pa. 693 (1997).

17 Am. Auto. Ins. Co. v. Murray, 658 F.3d 311, 320 (3d Cir. 2011).

18 Id.

19 Id. at 321.

20 Allen, 547 Pa. at 706.

21 Kvaerner Metals Div. of Kvaerner U.S., Inc., 908 A.2d 888, 896 (Pa. 2006).

22 Lupu v. Loan City, LLC, 903 F.3d 382, 389 (3d Cir. 2018) (internal quotation marks omitted)

is obligated to defend its insured if the factual allegations of the complaint on its face

encompass an injury that is actually or potentially within the scope of the policy.”23

Pennsylvania provides for no exception to this rule.24

II. FACTS

The on-the-ground facts are simple: Rankin and Rosebrooks were driving

donuts from Shippensburg, Pennsylvania to Lakeland, Florida, when at 3:58 a.m. on

May 3, 2018, with Rosebrooks in the sleeper, they crashed into a guard rail and

overturned, allegedly because of Rankin’s negligent driving.25

The business and employment structures that underlie the movement of goods

across our roadways, however, trend wonky. And this case is no exception. When

Rankin, working for either Mid State Logistics or Rosebrooks—the fact remains in

dispute—careened into the guardrail, he was driving a vehicle owned by

Rosebrooks, which Rosebrooks in turn leased to Mid State Logistics.26 Under their

agreement, Rosebrooks was “responsible for providing his own workers

compensation insurance, employment and income taxes, etc.,” and he also assumed

“complete responsibility” for any of his own drivers or employees.27 While for its

23 Jerry’s Sport Ctr., 2 A.3d at 541 (citations omitted).

24 Lupu, 903 F.3d at 391 (quoting Burchick Constr. Co., Inc. v. Harleysville Preferred Ins. Co.,

2014 WL 10965436, at *8 (Pa. Super. 2014)) (“Pennsylvania courts have identified no

exception to the time-honored rule”); Kiely on Behalf of Feinstein v. Phila. Contributionship

Ins. Co., 206 A.3d 1140, 1146 (Pa. Super. 2019) (“We do not consider extrinsic evidence.”

(citations omitted)).

25 Doc. 12-6 at 6–7 (Third Amended Complaint).

26 Doc. 6-1 ¶¶ 6, 12; Doc. 12-4 ¶¶ 6, 12.

part, Mid State Logistics acknowledged that it had “a legal obligation and

responsibility to maintain liability and cargo insurance coverage for the protection

of the public as required by Federal Highway Administration regulations.”28

At the time of the accident, Mid State Logistics met this obligation through a

United Financial Casualty-issued Progressive Commercial Auto Policy.29 The policy

broadly provides that “if [Mid State Logistics] pay[s] the premium for liability

coverage for the insured auto involved, [United Financial Casualty] will pay

damages, other than punitive or exemplary damages, for bodily injury, property

damage, and covered pollution cost or expense . . . . [and] will settle or defend, at

[United Financial Casualty’s] option, any claim or lawsuit for damages covered by

this Part I.”30

But United Financial Casualty’s coverage obligations are cabined by

exclusions, a few of which are relevant here. First, the agreement’s Auto Form

provides that coverage—and therefore the duty to defend—does not extend to

“Bodily injury to . . . [a]n employee of any insured arising out of or within the course

28 Doc. 6-1 ¶ 7; Doc. 12-4 ¶ 7; see also Doc. 1-1 at 17.

29 Doc. 6-1 ¶ 16; Doc. 12-4 ¶ 16. The parties note that Clay Rosebrooks is not listed as one of

the ten rated drivers under the policy. United Financial Casualty contends that the name “Clay

Borne” was intended to identify Rosebrook, whose full name is Clayborne George

Rosebrooks, Jr., and emphasizes that the semi-trailer involved in the accident, a 2004

Kenworth that Rosebrooks leased to Mid State Logistics, is listed on the policy declarations.

Doc. 6-1 ¶¶ 18–19. While he admits that the policy identifies Rosebrooks semi-trailer, Rankin

denies that “Clay Borne” refers to Rosebrooks and contends that this driver information

should have been updated. Doc. 12-4 ¶¶ 18–19. This poor record keeping does not, in my

mind, impact the outcome one way or the other.

of . . [t]hat employee’s employment by any insured; or . . . [p]erforming duties

related to the conduct of any insured’s business . . . .”31 Second, this same Form

provides that United Financial Casualty need not cover “Bodily injury to . . . a

fellow employee of an insured injured while within the course of their employment

or while performing duties related to the conduct [Mid State Logistics’] business.”32

And finally, the agreement includes the federally mandated MCS-90 Endorsement,

which provides that the “insurance as is afforded for public liability, does not apply

to injury to or death of the insured’s employees while engaged in the course of their

employment . . . .”33

III. ANALYSIS

Despite the expansive coverage carve-outs for harm caused to employees—as

opposed to members of the broader driving public—the policy does not, as I noted

at the outset, define the term.34 Still, this undefined term creates no controversy in

one respect: the parties agree that a Federal Motor Carrier Safety Administration

regulation controls the agreement.35 The disagreement is instead about whether

Rosebrooks meets the section’s strictures.

Tile 49 C.F.R. § 390.5’s defines “employee” across three sentences. It begins

broadly: “Employee means any individual, other than an employer, who is employed

31 Doc. 6-1 ¶ 23; Doc. 12-4 ¶ 23.

32 Id.

33 Doc. 6-1 ¶¶ 28–29; Doc. 12-4 ¶¶ 28–29.

34 Doc. 6-1 ¶ 25; Doc. 12-4 ¶ 25,

by an employer and who in the course of his or her employment directly affects

commercial motor vehicle safety.” The second and third sentence then provide

context. One notes inclusions: “Such term includes a driver of a commercial motor

vehicle (including an independent contractor while in the course of operating a

commercial motor vehicle), a mechanic, and a freight handler.” The other provides

exclusions: “Such term does not include an employee of the United States, any State,

any political subdivision of a State, or any agency established under a compact

between States and approved by the Congress of the United States who is acting

within the course of such employment.”

In arguing that Rosebrooks was not an employee under the regulation, Rankin

emphasizes the second sentence. He contends that the Complaint alleges that

Rosebrooks was an independent contractor and that he was not “in the course of

operating” the semi-trailer, as he was asleep in the cabin when the accident

occurred.36 So based his construction of the regulation—where an independent

contractor is only considered an employee when they are operating a commercial

motor—the policy’s employee exclusion does not apply.37

United Financial Casualty, however, contends that this approach is myopic,

overemphasizing—or outright misinterpreting—the negative implications of the

examples provided in the second sentence, while giving no weight to the words

36 Doc. 12-5 at 9–15; see Doc. 12-6 at 7.

provided in the first. In its view, Rosebrooks is either an employee because he was

employed by Mid State Logistics and directly affected commercial motor vehicle

safety (thus satisfying the requirements set out in the first sentence). Or he is an

employee because he was operating the semi-trailer as a sleeping member of a team-

driving duo (thus satisfying the requirements of the second sentence under a more

cabined approach).38

The parties’ arguments are nothing new. While this interpretative issue has

not yet been addressed in this District, or in this Circuit, a host of other courts have

tackled it. Some have sided with Rankin.39 But still more have favored United

Financial Casualty’s approach.40 And so does this Court.

38 Doc. 7 at 16–17.

39 Pouliot v. Paul Arpin Van Lines, Inc., 292 F. Supp. 2d 374, 376–79, 385 (D. Conn. 2003)

(finding that an independent contractor, who was injured while unloading truck, was not

operating a motor vehicle and therefore was not an employee under § 390.5); Walker v.

Transportation Int’l Movers, Inc., 2007 WL 4180698, at *1–2, *4 (D. Or. Nov. 21, 2007),

adopting report and recommendation, (citing Pouliot, 292 F. Supp. 2d at 377–83) (finding

that an independent contractor, who was alleged to have punched another driver during an

argument outsider a customer’s house, was not operating a vehicle and therefore was not an

employee under § 390.5); Great W. Cas. Co. v. Nat’l Cas. Co., 53 F. Supp. 3d 1154, 1181–

82 (D. N.D. 2014) (Miller, M.J) (finding that, while the case was determined on state law

grounds, an independent contractor, who was standing by while his trailer was being repaired,

was not operating a vehicle and therefore was not as an employee under § 390.5), aff’d on

other grounds, 807 F.3d 952 (8th Cir. 2015).

40 Ooida Risk Retention Group, Inc. v. Williams, 579 F.3d 469, 471, 474–76 (2009) (finding that

both members of a driving team, despite one also qualifying as an employer, were employees

under § 390.5); Consumers Cnty. Mut. Ins. Co. v. P.W. & Sons Trucking, Inc., 307 F.3d 362,

363–64, 367, 367 n.8 (5th Cir. 2002) (finding that an independent contractor member of a

driving team, who was injured while off-duty in the sleeper, was an employee under § 390.5);

White v. Excalibur Ins. Co., 599 F.2d 50, 53 (5th Cir. 1979) (finding that both members of a

driving team, whether resting or at the wheel, are statutory employees during the drive); Canal

Ins. Co. v. Moore Freight Servs., Inc., 2015 WL 3756840, at *4 (E.D. Tenn. June 16, 2015)

(finding that an independent contractor, who died of heart failure while inspecting smoking

brakes on the side of the highway, was operating a commercial vehicle under § 390.5);

The decisions that Rankin marshals in support of his position can be traced to

Pouliot v. Paul Arpin Van Lines.41 There, the court considered a claim involving an

independent contractor who was rendered a paraplegic when a device fell on him

while he was unloading a truck.42 Whether he could recover damages through his

suit or would instead be limited to recover under Rhode Island’s worker

compensation scheme hinged on his status under § 390.5.43 In finding that he did not

qualify as an employee, the court reasoned that independent contractors are

employees only when operating a commercial motor vehicle.44 The court appears to

reach this result by applying negative-implication canon to the regulation’s second

sentence, which provides that the term “includes a driver of a commercial motor

vehicle (including an independent contractor while in the course of operating a

Mar. 27, 2015) (finding that an independent contractor, who was injured at a loading station

when metal pipes fell from the trailer and struck him, was an employee under § 390.5 because

he “was working as a truck driver . . . at the time of the incident”); Lancer Ins. Co. v. Newman

Specialized Carrier, 903 F. Supp. 2d 1272, 1274, 1280–81(N.D. Ala. 2012) (declining to

follow Pouliot, 292 F. Supp. 2d 374, and finding that an independent contractor, who was

injured while unloading cargo from his tractor trailer, was an employee under § 390.5 because

he was “hired as a driver of a commercial vehicle”); United Fin. Cas. Co. v. Abe Hershberger

& Sons Trucking LTD, 2012 WL 457715, at *1, *5–6 (Ohio Ct. App. Feb. 14, 2012) (declining

to follow Pouliot, 292 F. Supp. 2d 374, because § 390.5’s plain language does not limit “an

independent contractor’s status as a statutory employee to times when the individual is

actually operating a commercial motor vehicle” and finding that an independent contractor,

who was injured as a passenger in an accident while training a new driver, was an employee

under the regulation); Basha v. Ghalib, 2008 WL 3199464, at *1 (Ohio Ct. App. Aug. 7, 2008)

(finding that an independent contractor team driving member, who was injured in an accident

while he was in the passenger seat, was an employee under § 390.5).

41 292 F. Supp. 2d 374.

42 Id. at 376.

43 Id. at 378–79.

commercial motor vehicle) . . . .”45 In short, the parenthetical inclusion implies the

exclusion of all other things independent contractor.46 I respectfully disagree.

Like many other courts, I find it difficult to square Pouliot’s bifurcating

reading with one of the statute’s primary purposes: eliminating the distinction

between independent contractors and employees to ensure that injured members of

the public are not left without a recovery because of chicanerous corporate

structuring.47 But that alone is not a sin.

As I see it, the Pouliot approach fails because it misinterprets the word

“include”—as in, “Such term includes a driver of a commercial motor vehicle

(including an independent contractor while in the course of operating a commercial

45 Id. (citing 49 C.F.R. § 390.5); see A. Scalia & B. Garner, Reading Law: The Interpretation of

Legal Texts 107–11 (2012) (Scalia & Garner) (describing the negative-implication canon). I

say appears to apply because the Court does not state that it is using of the canon outright.

Still, the language of the decision and the outcome of its interpretation leave little doubt. See

Scalia & Garner 107 (“The critical portion of § 390.5 reads as follows:

‘Employee . . . includes a driver of a commercial motor vehicle (including an independent

contractor while in the course of operating a commercial motor vehicle)’. . . . This sentence

reveals critical information about how this regulation should be interpreted. . . . The language

of the regulation is clear—the ‘independent contractor’ is treated as an ‘employee’ under this

section when certain conditions are satisfied. Specifically, independent contractors are

deemed ‘employees’ while in the course of operating a commercial motor vehicle.”).

46 See Scalia & Garner 107 (“Virtually all the authorities who discuss the negative-implication

canon emphasize that it must be applied with great caution, since its application depends so

much on context. Indeed, one commentator suggests that it is not a proper canon at all but

merely a description of the resulted gleaned from context. That goes too far. Context

establishes the conditions for applying the canon, but where those conditions exist, the

principle that specification of the one implies the exclusion of the other validly describes how

people express themselves and understand verbal expression.”).

47 Abe Hershberger & Sons, 2012 WL 457715, at *4 (quoting P.W. & Sons, 307 F.3d at 366)

(citing Perry v. Harco Nat’l Ins. Co., 129 F.3d 1072, 1075 (9th Cir. 1997)) (“Several federal

courts have held that [§] 390.5 eliminated the common law distinction between employees

and independent contractors ‘to discourage motor carriers from using the independent

motor vehicle) . . . .”48 The Pouliot court treated the term as exhaustive, not

exemplary.49 And this is an error; “the word include does not ordinarily introduce an

exhaustive list,” that task is instead left to words like “‘consists of’ or ‘comprises.’”50

So the negative-implication canon—which is appropriate “only when . . . the thing

specified . . . can reasonably be thought to be an expression of all that shares in the

grant”—is inapplicable because “includes” is, presumptively, not an expression of

all.51 Thus, under the plain meaning of the second sentence, we can say,

affirmatively, that an independent contractor operating a commercial motor vehicle

is an employee, but nothing more.

Now, some courts have found that a person need not be driving to be operating

the semi-trailer.52 But under my reading of the regulation, this is not a question that

48 49 C.F.R. § 390.5 (emphasis added). I’ll also note that I find it an odd fit to read a negative

implication into a sentence of inclusions when the next sentence acts to exclude. See id.

(“Such term does not include an employee of the United States, any State, any political

subdivision of a State, or any agency established under a compact between States and

approved by the Congress of the United States who is acting within the course of such

employment.”).

49 Pouliot, 292 F. Supp. 2d at 378–79.

50 Scalia & Garner 107.

51 Id. at 132; see, e.g., Fed. Land Bank of St. Paul. v. Bismarck Lumber Co., 314 U.S. 95, 100

(1941) (“the term ‘including’ is not one of all-embracing definition, but connotes simply an

illustrative application of the general principle”).

52 While in Pouliot the court reasoned that operating was synonymous with driving, neither that

case nor its progeny considered team-driver accidents. See Pouliot, 292 F. Supp. 2d at 374;

Walker, 2007 WL 4180698, at *1–2; Great West Cas. Co., 53 F. Supp. 3d at 1181–82. And

based on the parties’ submissions, it appears that courts that have considered this fact pattern

have unanimously found that independent contractors riding along in the passenger seat or in

the sleeper are operating the motor vehicle. Ooida Risk Retention Group, Inc. 579 F.3d at 471,

474–76; P.W. & Sons Trucking, Inc., 307 F.3d at 363–64, 367, 367 n.8; White, 599 F.2d at

53; Abe Hershberger & Sons Trucking LTD, 2012 WL 457715, at *1, *5–6; Basha, 2008 WL

3199464, at *1. So even if this Court adopted a more restrained reading, it would still find

must be answered. Rosebrooks’ employee status is settled by the qualifications

posited in § 390.5’s first sentence: Do his pleadings show that he was employed by

an employer? And do they further show that he directly affected commercial motor

vehicle safety in the course of his employment?53

The answer to both questions here is yes. Rosebrooks’ pleadings show that he

was employed by Mid State Logistics and was injured while serving as one-half of

the driving team—a role that inarguably impacts commercial motor vehicle safety.54

As a result, Rosebrooks is an employee under 49 C.F.R. § 390.5. United Financial

Casualty Company therefore has no duty to defend or indemnify Rankin or Mid State

Logistics under the commercial auto policy. An appropriate Order follows.

BY THE COURT:

s/ Matthew W. Brann

Matthew W. Brann

United States District Judge

distinction sought to be drawn between a driver on duty and operating the vehicle and a driver

on duty and sitting on the right hand seat or asleep in the rest compartment is specious. Wright

was not in a position comparable to being ‘at home asleep in his own bed.’ He was part of the

two-man team actually engaged in operating the vehicle on Superior's business. The team is

indispensable to continual vehicle operation for federal law generally permits each driver to

work only ten hours at a time and then to obtain at least eight hours of rest. . . . The activities

of each of the pair during a single driving stint, including his rest period, are clearly within

the course of his employment.”).

53 See 49 C.F.R. § 390.5 (“Employee means any individual, other than an employer, who is

employed by an employer and who in the course of his or her employment directly affects

commercial motor vehicle safety.”); Jerry’s Sport Ctr., 2 A.3d at 541 (“An insurer is obligated

to defend its insured if the factual allegations of the complaint on its face encompass an injury

that is actually or potentially within the scope of the policy.”).

54 Doc. 12-6 at 6 (“10. At the above stated time and place, Plaintiff, Clay Rosebrooks, was a

passenger in the 2004 Kenworth tractor-trailer truck in his capacity as an off-duty,