ALFALFA ELECTRIC COOPERATIVE, INC. v. MID-CONTINENT CASUALTY COMPANY

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ALFALFA ELECTRIC COOPERATIVE, INC. v. MID-CONTINENT CASUALTY COMPANY

2015 OK CIV APP 53

350 P.3d 1276

Case Number: 111581

Decided: 12/19/2014

Mandate Issued: 05/28/2015

DIVISION I

THE COURT OF CIVIL APPEALS OF THE STATE OF OKLAHOMA, DIVISION I

Cite as: 2015 OK CIV APP 53 , 350 P.3d 1276

ALFALFA ELECTRIC COOPERATIVE, INC.,

Plaintiff/Appellee,

v.

MID-CONTINENT CASUALTY COMPANY, an Oklahoma for

Profit Corporation, Defendant/Appellant,

and

Superior Pipeline Company,

L.L.C., an Oklahoma Limited Liability Company, and Triple J. Production, Inc.,

Defendants.

APPEAL FROM THE DISTRICT COURT OF

GARFIELD COUNTY,

OKLAHOMA

HONORABLE TOM NEWBY, TRIAL JUDGE

AFFIRMED

Richard E. Hornbeek, Amber M. Brock, Larry George Cassil, Jr., Hornbeek,

Vitali & Braun, P.L.L.C., Oklahoma City, Oklahoma, for

Plaintiff/Appellee,

Thomas Edward Mullen, Oklahoma City, Oklahoma, for

Defendant/Appellant.

Wm. C. Hetherington, Jr., Vice-Chief Judge:

¶1 In this action for breach of contract, negligence and quantum meruit

Alfalfa Electric Cooperative, Inc. (AEC) filed against Superior Pipeline

Company L.L.C. (Superior), Triple J Production Company, Inc. (Triple J), and

Appellant Mid-Continent Casualty Company (Insurer) for damages to AEC's

transformer and trailer, Insurer appeals a summary adjudication order in favor

of AEC finding the commercial auto policy Insurer issued to Triple J provided

coverage for the alleged damages sought by AEC. We affirm .

STANDARD OF REVIEW

¶2 This appeal is governed by and follows the procedure set forth in Oklahoma

Supreme Court Rule 1.36, 12 O.S. 2011 , ch. 15, app. 1, without appellate

briefing. The appellate standard of review for a trial court's grant of summary

judgment is de novo . Carmichael v. Beller , 1996 OK 48, ¶ 2 , 914 P.2d 1051, 1053 . When one party

is entitled to judgment as a matter of law, i.e. , there are no material

disputed facts, summary judgment will be affirmed. Id .

HISTORY OF CASE

¶3 AEC's second amended petition generally alleged that in February 2010 AEC

agreed to rent Superior a 5,000 KVA trailer mounted transformer on a temporary

basis and Superior agreed to pay a rental fee and assume any and all liability

for the transformer "from the time it was delivered and until it was picked up

by [AEC]." AEC further alleged, as facts common to all "counts': 1) Superior did

not pay any monies owed under the rental agreement, 2) when Superior had

finished working with the transformer, it hired Triple J to return it to AEC, 3)

while Triple J was in route to AEC, a mishap occurred with the trailer hitch on

Triple J's trailer, resulting in damage to the transformer, the transformer

trailer, and a spill of the transformer's fluids "onto the ground," 4) the

incident occurred in Enid, Oklahoma, 5) an undetermined amount of oil leaked

onto the pavement, and a fire was started, and at all times pertinent, 6) Triple

J was a licensed intrastate "private" motor carrier, and Insurer held the

"liability insurance policy covering injuries and property damage as required by

Oklahoma law."

¶4 AEC's second amended petition included the originally-pled two "counts" or

theories of liability against Superior, i.e ., breach of contract and

quantum meruit , and three against Triple J, i.e ., breach of

bailment contract, negligence, "presumption of negligence/res ipsa loquitor."

AEC added Insurer as a defendant and a new theory of liability against Triple J

and Insurer, alleging they were jointly liable for the damages caused by Triple

J based on the insurance policy issued "by [Insurer] pursuant to the applicable

motor carrier regulations."

¶5 Insurer moved for summary judgment, arguing there was no coverage for the

alleged damages due to certain exclusions in Triple J's three separate policies,

i.e ., commercial auto liability, commercial general liability policy, and

inland marine. To support its arguments, Insurer attached AEC's second amended

petition, relevant pages of the three policies, and an affidavit from Insured's

employee, Gary Renneckar, attesting Insurer had three policies with Triple J and

that there was no coverage under the policies. AEC filed a combined response and

cross-motion for summary judgment, attaching Triple J's answers to AEC's first

request for admissions and its first interrogatories, 1 excerpts from Mr. Renneckar's

deposition testimony, and a "certified" copy of Triple J's multi-page commercial

auto liability policy.

¶6 Insurer filed a response opposing AEC's cross-motion and a separate reply

to AEC's response to Insurer's summary adjudication motion. AEC then replied to

Insurer's response to AEC's cross-motion. Three weeks later, the trial court

filed a letter addressed to the parties' counsel which summarized its rulings on

their motions, identified the remaining issues, and directed AEC's counsel to

prepare the order.

¶7 Following the filing of both parties' motion to settle journal entry, the

court filed a "Journal Entry of Judgment" October 3, 2012. The judgment states

the parties' motions were taken under advisement pending receipt of "a certified

copy of the Commercial Auto Liability Policy issued to [Triple J] by [Insurer]

which [it] subsequently provided." 2 It also states the court "considered that Policy in

rendering its decision" and "adopts and includes the Policy as part of the

summary judgment evidence of record." After stating the parties were notified of

its ruling by letter dated Aug 22, 2013, 3 the court denied Insurer's motion for summary

adjudication and granted, in part, AEC's cross-motion, without explanation for

rulings. Six days later, Insurer moved for immediate appeal, which AEC opposed,

and after a hearing, the trial court denied Insurer's certification request by

order filed Jan. 30, 2013.

¶8 The trial court subsequently filed a "Journal Entry of Judgment" on

February 14, 2013, explaining Triple J had confessed liability for the accident

that is the subject of the lawsuit and damages to AEC's property and equipment.

The court also explains his prior decisions to overrule Insurer's motion to

dismiss based on his determination it was a proper party in the case and to

grant summary adjudication in favor of AEC and against Insurer. In the same

judgment, the court finds 1) AEC was entitled to judgment against Triple J and

Insurer, jointly and severally, 2) there was no dispute as to amount of damages,

which totaled $54,712.06, 3) the parties agreed to AEC's entitlement to attorney

fees as the prevailing party in its negligent injury to property action pursuant

to 12 O.S. 2011 § 940, and to the

amount of reasonable fees and costs AEC incurred in prosecuting the action, in

the sum of $27,012.09. That same day, AEC filed a dismissal of any and all of

its claims against the remaining party, Superior, without prejudice to refiling.

Insurer's appeal followed.

ANALYSIS

¶9 Insurer's Petition in Error raises four errors with the trial court's

granting of AEC's cross-motion for summary judgment. Based, in part, on AEC's

dismissal of its claims against Superior, we need not address Insurer's

allegation of error concerning inclusion of damages for rent in the award. 4 Concerning the

remaining three issues, Insurer basically argues the evidentiary materials and

the unambiguous language in Triple J's commercial auto liability (CAL) policy

reveal disputed material facts relating to three separate policy exclusions

applicable to AEC's damages which Insurer argues preclude summary adjudication

in AEC's favor.

¶10 As previously noted, the summary adjudication order on appeal does not

specify any reason(s) for denying Insurer's motion or granting, in part, AEC's

cross motion for summary judgment. In light of the parties' arguments, the order

on appeal implies the trial court's agreement that the Policy's exclusions are

unambiguous, the material facts necessary to apply each of the three policy

exclusions are undisputed, and as a matter of law, neither exclusion applies in

this case to exclude coverage.

¶11 Insurer does not, however, raise any error on appeal with the court's

implied rejection of Insurer's "standing" arguments made in response to AEC's

cross-motion for summary judgment: 1) AEC lacks "standing" to bring a direct

action against Insurer because AEC's alleged damages are to "cargo," for which

47 O.S. 2001 § 230.30(B) requires

the filing of a "cargo" insurance policy or bond and Insurer issued Triple J

only a policy covering public liability and property damage required by 47 O.S. 2001 § 230.30(A), and 2)

motor carrier liability insurers are not proper parties in tort actions

filed against their insureds and can be sued directly only after judgment has

been entered against the motor carrier, citing Fierro v. Lincoln General

Insurance Company , 2009 OK CIV

APP 62 , 217 P.3d 158 .

¶12 In AEC's reply, it argues Insurer had made the "same argument" in its

motion to dismiss and that the trial court correctly denied "based on

long-standing Oklahoma judicial authority." Neither Insurer's motion to dismiss

or the order resolving it is included in the accelerated record. However, the

trial court's denial has record support in the October 3, 2013 Journal Entry of

Judgment, explaining he overruled the dismissal motion, finding Insurer "is a

proper party in this case."

¶13 "Standing refers to a person's legal right to seek relief in a judicial

forum." Fent v. Contingency Review Bd. , 2007 OK 27, ¶ 7 , 163 P.3d 512, 519 . "Standing may be

raised at any stage of the proceeding, and when raised, the party invoking the

court's jurisdiction has the burden of establishing his or her standing."

Wells Fargo Bank N.A. v. Heath , 2012 OK 54, ¶ 12 , 280 P.3d 328, 334 .

¶14 To the extent Insurer's second argument re-urges AEC may not bring a

direct action against Insurer as Triple J's motor carrier liability insurance

carrier and its first argument brings a new challenge to AEC's standing

based on Insurer's alleged non-liability for AEC's alleged damages to "cargo,"

we must address these predicate issues before proceeding with interpretation of

the policy. We begin with Insurer's second argument.

¶15 As relevant here, Insurer issued a Form F to Triple J pursuant to §

230.30(A), part of Oklahoma's Motor Carrier Act of 1995 (the MCA), 47 O.S. § 230.21 et seq .

According to § 230.22(C), the MCA applies "to the transportation of passengers

or property by motor carriers and private carriers , except motor carriers

of household goods and used emigrant movables, over public highways of this

state." (Emphasis added.) Section 230.30(A) mandates "no license shall be issued

by the [Corporation] Commission to any carrier until after the carrier shall

have filed with the Commission a liability insurance policy or bond covering

public liability and property damage ..."

¶16 That section's predecessor, 47

O.S. 2001 § 169, has long been interpreted by the Supreme Court 1) to make a

motor carrier and its insurer "jointly liable" and 2) to allow an injured third

party to bring a direct action against a tortfeasor motor carrier and its

insurer when the liability policy or bond required by § 169 has been filed with

the Oklahoma Corporation Commission (OCC). Diagle v. Hamilton , 1989 OK 137, ¶ 8 , 782 P.2d 1379, 1381 (citing

Enders v. Longmire , 1937 OK

154 , 67 P.2d 12 ). Important

to this issue, the Legislature enacted § 230.30(A) as part of the MCA without

deleting any § 169 language the Supreme Court had previously interpreted to

allow a direct action against a motor carrier and its insurer, i.e ., "the

liability and property damage insurance policy or bond shall bind the obligor

thereunder to make compensation for . . . loss or damage to property ,

resulting from the operation of any carrier for which the carrier is

legally liable."

¶17 In Fierro , another panel of this division of the Court of Civil

Appeals addressed § 230.30(A) of the MCA and found the statute denied a third

party's direct action against the insurer of an interstate motor carrier

whose compulsory public liability policy had been filed in its home state and

not in Oklahoma as required to invoke the MCA. Thus Fierro is factually

distinguishable from the instant case which involves an intrastate motor

carrier, Triple J, about which there is no dispute its § 230.30(A) liability

policy was properly filed with the OCC.

¶18 Insurer also argues § 230.30(A)'s language, i.e ., "after judgment

against the carrier for any damage, the injured party may maintain an action

upon the policy or bond to recover the same, and shall be a proper party to

maintain such action," precludes a direct action against a motor carrier insurer

until entry of judgment against the motor carrier. However, the same

argument regarding this exact language in § 169 was made in Enders v.

Longmire and expressly rejected by the Supreme Court, 1937 OK 154, ¶14-15 , 67 P.2d at 15 .

More importantly, in 1995, the Legislature adopted the same § 169 language when

it enacted § 230.30(A) of the MCA. "Unless a contrary intent appears, if a

statute previously construed by a court of last resort is reenacted in the same

or substantially the same terms, the Legislature is presumed to have been

familiar with the previous construction and to have adopted such construction as

an integral part of the statute." Boswell v. Schultz , 2007 OK 94, ¶ 13 , 175 P.3d 390, 394 . Finding no

contrary intent in § 230.30(A), we affirm the trial court's implied rejection of

Insurer's general standing argument.

¶19 We also reject Insurer's lack of standing argument based on its position

that AEC's alleged damages to its transformer are to "cargo," for which §

230.30(B) mandates "cargo" insurance. The Legislature enacted the MCA to

"regulate transportation by motor carriers and private carriers" for the "public

interest," recognizing the need to require "all motor carriers and private

carriers" 1) to have adequate insurance, 2) to provide service in a safe and

efficient manner, and 3) to prevent "a detrimental impact on the environment" by

the operations of "motor carriers and private carriers." See § 230.22(A)

of the MCA.

¶20 As relevant here, the Legislature vested the OCC with powers "to protect

the shipping and general public by supervising and requiring

insurance of all motor carriers and private carriers" and "to establish there

will be no detrimental environmental impact." § 230.24(A)(2) and § 230.24(A)(4)

of the MCA. The OCC also has the duty "to supervise and regulate motor carriers

in all other matters affecting the relationship between such carriers and the

traveling and shipping public ." § 230.24(A)(5) of the MCA. As part of the

general and shipping public, AEC qualifies as an intended beneficiary of the

MCA's protections. See also Casualty Reciprocal Exchange v. Waggoner Drilling

Company , 1959 OK 43 , 340 P.2d 490 (based on § 169 and

motor carrier's liability policy, the court held the insurer liable to a

non-traveling owner for property damages to a drilling rig during

re-assembly).

¶21 The terms "motor carrier" and "private carrier" are defined by the MCA

with very distinct meanings. As relevant here, a "motor carrier" means "any

person. . . operating upon any public highway for the transportation of

passengers or property for compensation or for hire or for commercial purposes,

and not operating exclusively within the limits of an incorporated city or two

with this state." § 230.23(6) of the MCA. In contrast, "private carrier" means

"any person engaged in transportation upon public highways, of persons or

property or both, but not as a motor carrier ." (Italics added.) §

230.23(9) of the MCA. "Private carrier" also "includes any persons who

transports property by motor vehicle where such transportation is incidental to

or in furtherance of any commercial enterprise of such person, other than

transportation ." Id .

¶22 Unlike the majority of the MCA sections which address "motor carriers and

private carriers," 5 Insurer's argument fails to consider § 230.30(A)'s

mandate for filing a liability policy with the OCC, is directed to "any

carrier," which reference clearly and unambiguously includes both motor carriers

and private carriers. In contrast, § 230.30(B) of the MCA mandates "every

motor carrier " to file a cargo insurance policy covering any goods or

property being transported. Similarly, the MCA also mandates "every motor

carrier , subject to the [MCA], receiving property for transportation in

intrastate commerce" to issue a receipt or bill of lading." § 230.25 of the MCA.

The MCA includes no similar or identical statutory mandates for "private

carriers." Based on our interpretation of § 230.30, in its entirety and with the

MCA as a whole, and in light of its stated intent and purposes, we conclude the

Legislature clearly intended both motor carriers and private carriers to file §

230.30(A) liability insurance policies, whereas the § 230.30(B)'s mandate for

cargo insurance only applies to motor carriers.

¶23 In this case, except for the sole reference in the title of the Form F

attached to the Policy, "Uniform Motor Carrier Bodily Injury and Property Damage

Liability Insurance Endorsement," Insurer has not demonstrated Triple J is a

"motor carrier," as defined by the MCA, to which § 230.30(B)'s requirement for a

cargo insurance applies. Because the evidentiary materials presented to the

trial court support only Triple J's status as a intrastate private carrier, we

affirm the trial court's implied rejection of Insurer's remaining standing

argument.

Rules Applicable to Insurance Policies

¶24 "Interpretation of a policy with its exclusions is a law question,"

unless the facts necessary to apply the decided law question are in

dispute. Wiley v. Travelers Insurance Company , 1974 OK 147, ¶15 , 534 P.2d 1293, 1296 . "A policy of

insurance is a contract and should be construed like any other contract . . .

where not ambiguous, according to its terms." Id ., ¶16. "Parties to

insurance contracts are at liberty to contract for insurance to cover the risks

as they see fit and are bound by terms of the contract." Id . As a result,

"courts will not undertake to rewrite terms [of the insurance contract]."

Id .

¶25 In a dispute over the language of an insurance policy, our first step is

to determine as a matter of law whether the policy language at issue is

ambiguous. See Wynn v. Avemco Ins. Co. , 1998 OK 75, ¶17 , 963 P.2d 572, 575 . If it is not

ambiguous, we accept the language in its plain, ordinary and popular sense.

McDonald v. Schreiner , 2001

OK 58, ¶ 7 , 28 P.3d 574,

577 . "We construe the policy to give a reasonable effect to all of its

provisions." Cranfill v. Aetna Life Ins. Co. , 2002 OK 26, ¶ 5 , 49 P.3d 703, 706 .

¶26 We are also mindful that the "general declaration of insurance . . .

normally determines the insurance carrier's liability, and the insured's

respective rights under the contract by identifying what risks are covered and

excluded by the policy." Dodson v. St. Paul Ins. Co. , 1991 OK 24, ¶ 13 , 812 P.2d 372, 377 (footnote

omitted). "[A]n exclusion . . . eliminates coverage where, were it not for the

exclusion, coverage would have existed" under the insurance policy. Id .,

at n. 11. "Policy exclusions are read seriatim; each exclusion eliminates

coverage and operates independently against the general declaration of insurance

coverage and all prior exclusions by specifying other occurrences not covered by

the policy." Id ., ¶ 13, 812 P.2d at 377 (footnote omitted). "In case of

doubt, exclusions exempting certain specified risks are construed strictly

against the insurer." Id . (footnote omitted). With these rules in mind,

we review the Policy.

The Policy

¶27 As relevant here, Triple J is the named insured listed on the Policy's

Declaration Page, which describes Triple J as a "corporation" that "installs

& repairs oilfield production equipment." The Policy and its endorsements

provides coverage for, inter alia , liability, uninsured motorists, and

motor carrier bodily injury and property damage liability.

¶28 Pursuant to "Section II - Liability Coverage" and subsection A of the

"Business Auto Coverage," Insurer agreed to pay: 1) "all sums an 'insured'

legally must pay as damages because of . . . property damage" and 2) "all sums

an "insured" legally must pay as a "covered pollution cost or expense," that

"are caused by an accident and resulting from the ownership, maintenance or use"

of covered autos.

¶29 "Property damage" is defined by the Policy as "damage to or loss of use

of tangible property," about which there is no dispute the damages to AEC's

transformer and trailer qualify as such damages were caused by an "accident" and

resulted from the use of one of Triple J's covered autos. The Policy also

defines "covered pollution cost or expense" as: 1) "any request, demand . .

.that any 'insured' or others . . . clean up, remove, contain. . .or neutralize.

. .the effects of pollutants,"; or 2) "[a]ny claim or suit by or on behalf of a

governmental entity for damages because of . . . .cleaning up, removing . . .or

neutralizing. . . the effects of pollutants." There is no dispute in this case

that: 1) there were billed costs or expenses associated with the cleanup for the

"spill of fluids from the transformer onto the ground" and/or "the oil that

leaked onto the pavement" or 2) the "fluids" and/or "oil" are "pollutants," as

that term is defined by the Policy.

¶30 The controversy between AEC and Insurer involves the applicability of the

following three exclusions of the Policy's "Business Auto Coverage" section:

B. Exclusions

This insurance does not apply to any of the

following:

****

2. Contractual

Liability imposed 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 .

****

6. Care, custody or Control

" Property damage " or " covered pollution cost or expense "

involving property owned or transported by the "insured" or in the

"insured's" care, custody or control . But this exclusion does not apply

to liability assumed under a sidetrack agreement.

****

11. Pollution

"Bodily injury" or " property damage" arising out of the actual ,

alleged or threatened discharge, dispersal, seepage, migration, release

or escape of " pollutants ":

a. That are, or that are contained in any property that is : 6

(1) Being transported or towed by . . . the covered auto .

(2) Otherwise in the course of transit by or on behalf of the

"insured "; or . . . 7 (Italics added.)

Exclusions B.6. and B.11

¶31 To support the Policy provides no liability coverage for AEC's damages,

Insurer essentially argues there is one undisputed material fact in common to

Exclusions B.6. and B.11. that precludes summary judgment in favor of AEC and

requires summary judgment in its favor - Triple J was transporting and towing

AEC's trailer mounted transformer when it became unattached from Triple J's

hitch.

¶32 AEC admits it originally alleged Triple J was "transporting" the trailer

mounted transformer when it was damaged, but responds to Insurer's motion,

arguing subsequent discovery revealed different circumstances leading to the

incident about which "there is a question of fact . . . precluding summary

judgment." In its cross-motion, AEC argues the inapplicability of the pollution

exclusion B.11. in great detail but does not make any similar argument about

Exclusion B.6.

¶33 We agree there is a common thread in the Policy's Exclusions B.6. and

B.11. by which Insurer attempts to exclude payment for both "property damage

involving property . . . transported by "insured" and "property damages .

. .arising from the actual . . . release or escape of 'pollutants'. . .that are

contained in any property that is being towed or transported by a covered

auto." Relying solely on Gary Renneckar's deposition testimony, AEC argues the

transformer and trailer were no longer being towed or transported when the

hitch malfunctioned . Assuming without deciding that AEC's argument is

correct, AEC has failed to consider an undisputed material fact revealed by the

evidentiary materials, i.e ., Triple J was in physical possession or in

custody of the transformer and trailer when the accident occurred. Application

of that fact alone to the remaining part of Exclusion B.6., "property damage

involving property. . .in the insured's care, custody or control", results in

potential application of that specific exclusion.

¶34 Similarly, it is also undisputed Triple J was between its point of

departure and the final destination 1) when the hitch on its covered vehicle

malfunctioned and ultimately causing the transformer and trailer to overturn and

2) when the pollutants contained in the transformer were released on the ground

and/or pavement. As a result, application of these undisputed facts to the

remaining part of Exclusion B.11.a.2., i.e ., "'property damage' arising

out of the actual. . . release or escape of 'pollutants' . . . that are

contained in any property that is . . .[o]therwise in the course of transit by

or on behalf of the 'insured,'" also implicates this exclusion.

¶35 In light of these undisputed facts, the clear and unambiguous language of

the Policy's Exclusion B.6. and B.11 would appear to support Insurer's position

of no coverage under either exclusion and summary judgment in its favor.

However, because the Policy, as AEC further argues, 8 includes a specific endorsement for

motor carrier public liability insurance (Form F) required by § 230.30, we must

address its effect on the Policy's coverages and exclusions.

¶36 We conclude the trial court's order in favor of AEC is supported by

Oklahoma precedent interpreting § 230.30's predecessor, § 169, as becoming part

of the Policy and controlling over similar policy exclusions. In Casualty

Reciprocal Exchange v. Waggoner Drilling Company , 1959 OK 43 , 340 P.2d 490 , the owner of property

sued a trucking company hired to transport an oil well drilling rig from one

lease to another, seeking damages sustained to the drilling rig's mast while the

trucking company was re-assembling the rig at the delivery point. Similar to the

facts of this case, a malfunction of the trucking company's vehicle caused the

mast to fall to the ground when attempting to raise it with a winch that was

attached to the truck.

¶37 Based on the undisputed evidence, the Court in Waggoner

determined, as relevant here, that 1) the disassembling, loading, unloading, and

reassembling of the oil rig and transportation from one lease to another

"constituted one continuous act of transportation " and 2) even though the

vehicle was off the highway at the time of the resulting damage, the

operation or use of the vehicle in reassembling the rig was "incident to

the transportation of the rig" and "had a proximate and necessary

connection with the operation and use of the vehicle upon the highway

within the meaning of 47 O.S. [1951] § 161-169."

¶38 The insurer in Waggoner , similar to Insurer in this case, argued

the trucking company's insurance policy did not cover the risk. The Court in

Waggoner pointed out that Insured had agreed in the policy filed with the

OCC and covering the trucking company as a "Class B Motor Carrier, 9 "

to pay on behalf of insured all sums which the insured shall become

obligated to pay by reason of the liability imposed upon him by law for

damages because of injury to or destruction of property, including the loss

of use thereof, and caused by accident arising out of the ownership,

maintenance or use of any motor vehicle in the insured's

business."

Considering the exclusion on which the insurer relied to argue the accident

and resulting property damages were not covered by that policy, i.e .,

"damage to or destruction of loss of cargo or property in the possession of

the Insured or for which the Insured is legally responsible as carrier . . .or

bailee . . . ," the Waggoner Court rejected the insurer's argument,

finding;

Under [47 O.S.1951 §] 169, policies such as the one under consideration

shall cover 'loss or damage to property.' This broad statutory provision, of

course, becomes a part of the insurance policy in controversy and

prevails over provisions of the policy to the contrary . Enders v.

Longmire , [ 1937 OK 54 ], 67

P.2d 12 ." (Italics added.)

¶39 Relying on the Waggoner Court's same quote from Enders , the

Court of Civil Appeals in Western Casualty & Surety Co. v. J. R. Adams,

Inc. , 1970 OK CIV APP 4, ¶14 ,

465 P.2d 794, 796 , reached the

same conclusion regarding the insurer's liability to cover property damages to

construction equipment and trailer for which its owner had hired the insured

motor carrier to transport. While "pulling" the equipment and trailer, the

insured motor carrier in Western Casualty negligently drove the owner's

equipment and trailer into a highway overpass causing severe damages to the

equipment. Like Waggoner , the insurer had issued a § 169 liability policy

to a Class B motor carrier and argued its policy's terms excluded coverage to

"injury to or destruction of ***(3)***property in the care, custody, or

control of the insured or property as to which the insured for any

purpose is exercising physical control ." (Emphasis added.) The insurer also

attempted to argue, as a bar to liability, language in the policy's motor

carrier endorsement, "It is agreed and understood that the words 'Damages to

Property' as used in this endorsement shall be construed to cover any and all

property, except property of such insured, or carried in or on the motor

vehicle belonging to or controlled by the insured ." (Emphasis added.) The

Court in Western Casualty affirmed the trial court's judgment in favor of

the plaintiff/property owner, finding "the policy of insurance having been filed

pursuant to the statute, 47 O.S. 1961 , [§] 169, as then in force, the statute

becomes a part of the contract of coverage and the terms of the statute control

as to the character of said coverage." Although differently phrased, the policy

exclusions in Waggoner and Western Casualty each attempted to

eliminate liability coverage for property in the possession or

control and damaged during operation of a motor carrier's business, the

very circumstances for which [§] 169 mandated such coverage.

¶40 Similar to the pre-1995 and 1995 versions of § 169, § 230.30(A) of the

MCA mandates "no license shall be issued by the [Oklahoma Corporation]

Commission to any carrier until after the carrier shall have filed with the

Commission a liability insurance policy or bond covering public liability and

property damage . . ." Identical to the language in § 169 relied on by the Court

in Waggoner , § 230.30(A) mandates "the liability and property damage

insurance policy or bond shall bind the obligor thereunder to make

compensation for . . . loss or damage to property , resulting from the

operation of any carrier for which the carrier is legally liable."

¶41 Further, pursuant to the Form F motor carrier liability endorsement in

this case, Insurer and Triple J agreed that "the certification of the policy, as

proof of financial responsibility under the provisions of any State motor

carrier law. . . amends the policy to provide insurance for automobile

bodily injury and property damage liability in accordance with the provisions

of such law . . . to the extent of the coverage and limits of liability

required thereby." (Emphasis added.)

¶42 Like the owner of the damaged drilling rig in Waggoner and the

owner of damaged construction equipment in Western Casualty , each of whom

sued the respective tortfeasor motor carrier for only property damages, AEC was

not involved in the specific accident with Triple J during which AEC's

transformer and trailer were damaged while being transported by Triple J, who

was undisputedly operating as a motor carrier at the time. Therefore,

Waggoner clearly supports long standing Oklahoma precedent holding motor

carrier liability insurance required by § 169 was intended to protect "the

shipping and general public," not only the traveling public. 47 O.S. 2001 § 162; see also

Tri-State Insurance Company, v. J. O. Hobbs, 1959 OK 143, ¶ 0 , 347 P.2d 226, 227 ; Utilities Ins.

Co. v. Potter, 1940 OK 127 ,

105 P.2d 259 , cert. dismissed 61

S.Ct. 804 , 312 U.S. 662 .

¶43 Further, the regulations mandated for motor carriers and private carriers

by the MCA indicate the Legislature's clear intent for the same protections as

that intended by § 169. See 47

O.S. 2001 § 230.22 ("it is necessary in the 'public interest' to regulate

transportation by motor carriers and privates carriers. . .[and] to recognize

the need of [both carriers] to have adequate insurance. . .[and] to provide

service in a safe and efficient manner.) Our interpretation is also supported by

the similarities in the authority vested in the OCC to enforce these statutes.

See 47 O.S. 2001 § 162 and

47 O.S. 2001 § 230.24.

¶44 Finally, although no exclusion similar to Exclusion B.11. "Pollutants"

was at issue in either Waggoner or Western Casualty , we find

further support for applying Waggoner to that exclusion based on the

Legislature's since-added protection to the MCA, i.e ., "to establish that

operations of [both carriers] will not have a detrimental impact on the

environment." This language clearly and unambiguously provides for joint

liability of motor carriers and their insurers, as in this case, for damages to

the environment arising from the transportation of pollutants or property

containing pollutants.

¶45 Because Exclusions B.6. and B.11. each similarly attempt to eliminate

coverage contrary to § 230.30(A), we conclude, based on Waggoner and the

intent and stated purposes for the MCA, that the Policy's Form F became part of

the Policy and controls over these two exclusions. Albeit for other

grounds, we affirm the court's summary adjudication in favor of AEC based on

Exclusions B.6. and B.11.

Contractual Exclusion

¶46 Insurer argues Exclusion B.2., "[l]iability imposed under any contract or

agreement," provides no coverage "for damages as a result of a contractual

obligation. By cross-motion, AEC argues the same exclusion does not apply,

claiming the bailment between Superior and Triple J is an "insured

contract" 10

which is the first exception to Exclusion B.2. We agree Exclusion B.2. does not

apply.

¶47 Insurer's arguments in its summary judgment and its response to AEC's

cross motion relies on 1) Triple J's admission it had an agreement with Superior

to transport the trailer mounted transformer, and 2) AEC's alleged

failure to present any evidence of its speculation of a "master servant

agreement" or other contract between Triple J and Superior that would constitute

an "insured contract." For application of Exclusion B.2.'s insured contract

exception, AEC contends it has proven beyond dispute the status between Superior

and Triple J as bailor-bailee for which Oklahoma bailment statutes makes the

latter liable to AEC for damages to the bailed property. The trial court agreed

with AEC.

¶48 Insurer cites no supporting authority for its interpretation of Exclusion

B.2. This Court's research discovered no published state or federal court cases

interpreting the identical Exclusion B.2. language, "[l]iability imposed

under any contract or agreement" in any type liability policy. Our research did

disclose other types of contract exclusions with Exclusion B.2.'s same and/or

similar exceptions. The most similar contract exclusion to the exclusion at

issue is "[l]iability assumed under any contract or agreement," or words

to that effect, which version has most commonly been interpreted in the context

of commercial general liability insurance (CGLI) policies. In such policies, the

Texas Supreme Court found a split of authority on its interpretation in

Gilbert Texas Construction, L.P. v. Underwriters at Lloyd's London , 327

S.W.3d 118, 129-133 (2010), with several courts applying the exclusion only to

contracts in which the insured has assumed another's liability, e.g .,

indemnity or hold-harmless agreements, and other courts, including the Texas

Supreme Court, interpreting the exclusion without any such limitation,

i.e ., no coverage for a contract-based claim.

¶49 In 1991, the Oklahoma Supreme Court in Dodson v. St. Paul Ins.

Co. , 1991 OK 24, ¶ 5 , 812 P.2d 372, 374 , interpreted an

exclusion in a CGLI policy almost identical to the version addressed by the

Texas Supreme Court, i.e ., "liability assumed by the Insured under

contract or agreement except an incidental contract." and essentially reached

the same conclusion. 11 The Dodson Court found "no ambiguity" with

the exclusion, either when read alone or with two other exclusions not at issue

in this case, and that it "removes from coverage any cause of action grounded

upon a liability arising 'under contract or agreement except an incidental

contract'." (Emphasis added.)

¶50 The Policy does not define the term "imposed" as used in Exclusion B.2.

As a verb, its common definition is "to cause or to be burdened . . .to force

one to submit. . .[or] to establish or create (something unwanted) in a forceful

way." Webster's Third International Dictionary, p. 1136. Based on Dodson

and the plain and unambiguous terms of Exclusion B.2. in this case, we conclude

it "removes from coverage any cause of action grounded on a liability arising

under contract or agreement," i.e. , contract-based claims. We further

find that Exclusion B.2. applies here unless one of its two exceptions

"reserves coverage," see Dodson , 1991 OK 24, ¶ 14 , or "brings a claim

back into coverage," see Gilbert Texas Construction , 327 S.W.3d at

133 .

¶51 In this case, the contract upon which Insurer solely relies to invoke

Exclusion B.2. to deny coverage to Triple J is the "bailment agreement" with

Superior to return the transformer and trailer back to AEC. It is undisputed

there was no written bailment agreement between those two parties whose terms

would control over one implied by law. Chambers v. Morgan , 1983 OK CIV APP 59 , ¶ 6, 671 P.2d 89 (citing Oklahoma

Petroleum & Gasoline Co. v. Winship , 1921 OK 293 , 200 P. 844 ).

¶52 AEC relies on the same bailment agreement to invoke the first exception

of Exclusion B.2., which exclusion the Policy expressly states "does not apply

to liability for damages . . . a. [a]ssumed in a contract or agreement that is

an 'insured contract' . . ." We can not agree with AEC's interpretation

considering the Policy's definition of "insured contract" begins with "[t]hat

part of any other contract or agreement pertaining to your business. . .under

which you assume the tort liability of another party to pay for . . .'property

damage.'" As we interpret Exception a., in its entirety and with Exclusion B.2.

as a whole, in order to qualify as an "insured contract," Triple J would have

had to 1) expressly assume the tort liability of Superior to pay property

damages to AEC under their rental contract when Triple J and Superior

agreed to the bailment for the transformer and to 2) execute its agreement to

assume Superior's tort liability prior to the property damage

occurrence.

¶53 In this case, Insurer denied AEC's allegation in its second amended

petition that Superior "agreed to . . . assume any and all liability for the

transformer" in its rental contract with AEC, and neither the rental contract

nor other evidentiary support for Superior's alleged assumption is included in

the accelerated record. Further, AEC has not produced any evidentiary support

for the existence of a master service agreement or other contract between Triple

J and Superior which AEC contends might also qualify as an "insured contract."

As cross-movant for summary adjudication on the issue of Insurer's liability

under the Policy, AEC has failed to establish application of exception a. to

Exclusion B.2.

¶54 However, the same may not be said about Exception b. to Exclusion B.2. As

previously noted, Exclusion B.2. does not apply to "liability for damages . . .

b. That the 'insured' would have in the absence of the contract or

agreement ." Aside from the implied bailment agreement, Triple J would be

liable for the property damages to AEC's transformer by general common law

negligence and under Oklahoma's Motor Carrier regulations by virtue of the Form

F attached to the Policy. Therefore, Exclusion B.2. is inapplicable due to

reservation of coverage by Exception b. Having previously concluded the motor

carrier liability endorsement issued to Triple J as required by § 230.30

controls over and replaces Exclusions B.6. and B.11., we find Insurer liable

under the Policy.

CONCLUSION

¶55 The trial court's summary adjudication in favor of AEC is

AFFIRMED .

JOPLIN, P.J., and BUETTNER, J., concur.

FOOTNOTES

1 Per

Triple J's answers to AEC's request for admissions, Triple J admits it "entered

into an agreement with Superior "to transport the transformer back to [AEC]."

Triple J also admitted it was a "bailee" of the transformer during the time

Triple J had possession of the transformer. Per AEC's first interrogatories,

Triple J admits it "has transacted and done business with Superior numerous

times in the past five years," did not enter into a written contract with

[Superior] in regard to the transportation of the KVA trailer mounted

transformer identified in [AEC's] petition," and that the "[v]ehicle used to

transport the trailer mounted transformer. . .[was a] 2000 FL 80 Freightliner."

Triple J denied any use of the transformer while it was in its possession.

According to Triple J, its employee, Justin Frye, spoke and agreed with Superior

that Triple J would be hired to transport the transformer, and its licensed

certified DOT driver Ronald Tharp was driving the covered vehicle to transport

the transformer on March 3, 2010. "[Triple J] verily believes there may have

been both (sic) a trailer brake malfunction resulting in excessive stress to the

trailer hitch."

2 There

is a page missing from the accelerated record, specifically "p. 10 of 12" in

Exhibit 4, Triple J's commercial auto liability policy attached to AEC's

cross-motion for summary judgment. The missing page presumably defines the

policy term, "insured contract," upon which AEC relies to support the

applicability of an exception to the policy's exclusion for contract damages.

This missing page may explain the trial court's need to take the case under

advisement pending receipt of a "certified copy" of the Policy. AEC quoted the

definition of "insured contract" from the Policy in its cross-motion, the

accuracy of which Insurer does not dispute in its response. Uncontroverted

admissions in the brief are acceptable as material supplementing the record.

Deffenbaugh v. Hudson , 1990 OK

37, ¶4 , 791 P.2d 84,

85 .

3 In its

August 22, 2012 letter included in the accelerated record, the trial court found

Insurer's "Commercial Auto Policy" covers Triple J for specified damages

because:

As AEC's bailee, Triple J is responsible for the damages to AEC's property

that occurred while in the control of Triple J. Because of this bailment,

[Insurer's] Policy exclusion of "insured contract" is inapplicable as a carve

out of the contracts exclusion.

Further, the pollution exclusion is inapplicable, as a governmental entity

ordered the clean up. While the bill was sent to AEC, Triple J was the cause of

the bill. [Insurer's] Policy covers the environmental spill cleanup and

testing.

We do not rely on the above ruling due to several inconsistencies. First, the

trial court does not expressly rule out Exclusion B.6. although argued by

Insurer. However, the court's coverage finding partly based on Triple J's

"control" of AEC's property when the damage occurred, alone, triggers that

exclusion and therefore appears inconsistent with both denial of Insurer's

motion and granting of AEC's cross-motion. Further, even if we assume by the

trial court's reference to "Policy exclusion of 'insured contract'" that

he instead meant to say, "Policy exception of 'insured contract,'" his

finding that the latter is " inapplicable as a carve out of the contracts

exclusion" is basically a finding that Exclusion B.2. excludes coverage. This

too would be inconsistent with his denial of Insurer's motion and granting of

AEC's cross-motion.

4 In one

of the four issues listed in Exhibit C of Insurer's Petition in error, it

contends there are "fact issues" regarding "the allegation that part of the

damages were rent when rent is not the type of damages covered by [Insurer's]

Commercial Auto Policy." Those alleged damages were requested by AEC in its

claim solely against Superior "for unpaid monies owed under the contract for

rent of the transformer and use of the trailer between AEC and Superior." The

issue appears to be moot due to AEC's dismissal "any and all of [its] claims

against [Superior]" in the case "without prejudice to future refiling of the

same" on February 14, 2013.

5 See §

230.22 and § 230.24(A)(1-4). However, the MCA refers only to "motor carriers" in

§ 230.25(A) ("every motor carrier . . .receiving property for transportation in

intrastate commerce shall issue a receipt or bill of lading therefor . . .").

Section 230.28(A) separately identifies unlawful conduct in Oklahoma for "any

motor carrier" and for "any private carrier."

6 Under

the B.11. exclusion, the policy further states that "[p]aragraph a. above does

not apply to fuels, lubricants, fluids. . . that are needed for . . .normal

electrical, hydraulic or mechanical functioning of the covered auto or its

parts." This language is clearly inapplicable to the facts of this

case.

7

Paragraph a(3) of the B.11. exclusion, which excludes pollutants "being stored,

disposed of, treated or processed in or upon the covered auto," has no

application to the facts of this case. Because the subject accident undisputedly

occurred on the highway and not at Triple J's place of business, we need not

consider the remaining two paragraphs included in the B.11. exclusion based on

the following explanation within the exclusion:

Paragraphs b. and c. above of this exclusion do not apply to "accidents" that

occur away from premises owned by or rented to an "insured" with respect to

"pollutants" not in or upon a covered "auto" if:

(1) . . .any property in which the "pollutants" are contained are upset,

overturned or damaged as a result of the maintenance or use of a covered "auto";

and

(2) The discharge . . . release or escape of the "pollutants" is caused

directly by such upset, overturn or damage.

8 On page

7 of AEC's Response and cross-motion, it lists the undisputed facts regarding

Insurer's issuance of the motor carrier liability policy to Triple J as a

private carrier. However, page 17 of that same brief is missing from the

accelerated record submitted to this Court. Because the next page contains AEC's

argument for applicability of 47 O.S.

2001 § 230.30(A) in the commercial auto policy Insurer issued to Triple J

and Insurer replies solely to that argument, this Court has not required

Appellant to provide the missing page.

9

Pursuant to 47 O.S. 1951 §

161(b)(1), "Class 'A' motor carriers" included "all motor carriers operating

as common carriers, of persons or property between fixed termini or over a

regular route, even though there be periodic or irregular departures from said

termini or route." Under § 161(b)(2), "Class 'B' motor carriers shall include

all other motor carriers not operating as Class "A" or "C" motor carriers,

whether as private carriers for hire or common carriers for hire, of persons or

property." Section 161(b)(3) defined "Class 'C' motor carriers" as including all

other persons, firms, or corporations, their trustees or receivers, engaged in

the transportation of property in furtherance of any private commercial

enterprise and not operating as a private carrier for hire or as a common

carrier for hire." It appears from these definitions that a "private carrier,"

as currently defined by § 230.22(9) of the MCA, is a combination of B and C

motor carrier classes.

10 As

used in Exclusion B.2., the Policy defines the term "insured contract" as

follows:

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 party to pay for "bodily injury" or "property damage" to a third person

or organization, provided the "bodily injury" or "property damage" is caused, in

whole or in part, by you or those acting on your behalf. Tort liability means a

liability that would be imposed by law in the absence of any contract or

agreement.

11 For

the record, the contractual exclusion interpreted by the Dodson Court is

very similar to the same exclusion in the CGLI Policy Insurer issued to Triple J

and which Insurer also argued excluded coverage for the subject property damage

to AEC's transformer and trailer, i.e. , "[t]his insurance does not apply

to . . . "property damage" for which the insured is obligated to pay damages by

reason of the assumption of liability in a contract or

agreement."

Citationizer © Summary of Documents Citing This Document

Cite

Name

Level

None Found.

Citationizer: Table of Authority

Cite

Name

Level

Oklahoma Court of Civil Appeals Cases

Cite Name Level

1970 OK CIV APP 4 , 465 P.2d 794 , WESTERN CASUALTY AND SURETY CO. v. J.R. ADAMS Discussed

2009 OK CIV APP 62 , 217 P.3d 158 , FIERRO v. LINCOLN GENERAL INSURANCE COMPANY Discussed

1983 OK CIV APP 59 , 671 P.2d 89 , Chambers v. Morgan Discussed

Oklahoma Supreme Court Cases

Cite Name Level

1989 OK 137 , 782 P.2d 1379 , 60 OBJ 2551, Daigle v. Hamilton Discussed

1940 OK 127 , 105 P.2d 259 , 188 Okla. 145 , UTILITIES INS. CO. v. POTTER Discussed

1990 OK 37 , 791 P.2d 84 , 61 OBJ 1018, Deffenbaugh v. Hudson Discussed

1991 OK 24 , 812 P.2d 372 , 62 OBJ 802, Dodson v. St. Paul Ins. Co. Discussed at Length

1937 OK 154 , 67 P.2d 12 , 179 Okla. 633 , ENDERS v. LONGMIRE Discussed at Length

2001 OK 58 , 28 P.3d 574 , 72 OBJ 1959, MCDONALD v. SCHREINER Discussed

1959 OK 43 , 340 P.2d 490 , CASUALTY RECIPROCAL EXCH. v. WAGGONER DRILLING CO. Discussed at Length

1959 OK 243 , 347 P.2d 226 , TRI-STATE INSURANCE COMPANY v. HOBBS Cited

1921 OK 293 , 200 P. 844 , 83 Okla. 146 , OKLAHOMA PETROLEUM & GASOLINE CO. v. WINSHIP Discussed

2002 OK 26 , 49 P.3d 703 , CRANFILL v. AETNA LIFE INS. CO. Discussed

1996 OK 48 , 914 P.2d 1051 , 67 OBJ 1173, Carmichael v. Beller Discussed

2007 OK 27 , 163 P.3d 512 , FENT v. CONTINGENCY REVIEW BOARD Discussed

2007 OK 94 , 175 P.3d 390 , BOSWELL v. SCHULTZ Discussed

2012 OK 54 , 280 P.3d 328 , WELLS FARGO BANK, N.A. v. HEATH Discussed

1974 OK 147 , 534 P.2d 1293 , WILEY v. TRAVELERS INSURANCE COMPANY Discussed

1998 OK 75 , 963 P.2d 572 , 69 OBJ 2620, Wynn v. Avemco Insurance Co. Discussed

Title 12. Civil Procedure

Cite Name Level

12 O.S. 940 , Negligent or Willful Injury to Property - Attorney's Fees and Costs - Offer and Acceptance of Judgment Cited

Title 47. Motor Vehicles

Cite Name Level

47 O.S. 230 .24, Powers and Duties of Corporation Commission Cited

47 O.S. 161 , Repealed by Laws 2009, SB 503, c. 183, § 15, eff. November 1, 2009 Cited

47 O.S. 162 , Authority of Corporation Commission Discussed

47 O.S. 169 , Filing of Certificates of Insurance Coverage as Condition Precedent to Certificate - Actions by Injured Party - Failure to Maintain Coverage Cited

47 O.S. 230 .21, Short Title Cited

47 O.S. 230 .22, Necessity to Regulate Transportation by Motor Carriers and Private Carriers - Revocation of Existing Intrastate Certificates and Permits - Applicability of Provisions - Construction of Act Cited

47 O.S. 230 .30, Issuance of License - Requirement of Insurance - Cargo Insurance Policy or Bond. Discussed at Length