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KAPLAN TRUCKING COMPANY, PLAINTIFF-APPELLANT vs. GRIZZLY FALLS INC., ET AL

KAPLAN TRUCKING COMPANY, PLAINTIFF-APPELLANT vs. GRIZZLY FALLS INC., ET AL., DEFENDANTS-APPELLEES

 

No. 104148

 

COURT OF APPEALS OF OHIO, EIGHTH APPELLATE DISTRICT, CUYAHOGA COUNTY

 

2017-Ohio-926; 2017 Ohio App. LEXIS 902

 

 

March 16, 2017, Released

March 16, 2017, Journalized

 

 

COUNSEL: FOR APPELLANT: Marcia E. Hurt, Cleveland, Ohio.

 

FOR WESTCHESTER FIRE INSURANCE COMPANY, APPELLEES: Geoffrey A. Belzer, Wilson, Elser, Moskowitz, Edelman & Dicker L.L.P., Chicago, Illinois.

 

FOR GRIZZLY FALLS INC.: Steve Barrett, Pisgah, Alabama.

 

JUDGES: BEFORE: Laster Mays, J., Jones, P.J., and Blackmon, J. LARRY A. JONES, SR., P.J., and PATRICIA ANN BLACKMON, J., CONCUR.

 

OPINION BY: ANITA LASTER MAYS

 

OPINION

 

JOURNAL ENTRY AND OPINION

ANITA LASTER MAYS, J.:

[*P1]  Plaintiff-appellant Kaplan Trucking Company (“Kaplan”) appeals the trial court’s grant of summary judgment in favor of defendant-appellee Westchester Fire Insurance Company (“Westchester”). After a thorough review of the record, we find that genuine issues of material fact exist, and the trial court erred in granting summary judgment. The matter is reversed and remanded.

 

  1. BACKGROUND AND FACTS

[*P2]  Kaplan is an Ohio based national freight hauling and brokerage company. On April 5, 2010, Kaplan entered into a brokerage agreement with Grizzly Falls, Inc., an Alabama trucking company (“Grizzly”), to haul cargo owned by independent third parties (“Contract”). The Contract [**2]  included a clause indemnifying Kaplan against any and all losses, damages, and expenses relating to the loading, handling, transportation, unloading, or delivery of shipments, including the full value of the cargo involved, fees, and costs. Section 14 of the Contract required that Grizzly carry liability insurance for loss or damage to cargo for an amount not less than $100,000, and for Kaplan to be named an additional insured under the policy.

[*P3]  Grizzly secured a cargo policy (“Policy”) through insurance broker Kunkel & Associates, Inc. (“Kunkel”). Kunkel secured the Policy, issued by Westchester as the insurer, through Westrope & Associates (“Westrope”), a producer and broker for Westchester. Insurance documents delivered to Grizzly by Westrope included:

 

(1) the insurance binder, a contract for temporary insurance pending issuance of the Policy;

(2) the insurance covernote (“Covernote”), issued on Westrope letterhead, listing Westchester as the insurer and Kunkel as the producer, and setting forth general terms encompassing the business relationship between Westrope and Kunkel;

(3) an insurance premium invoice, on a Westrope form, listing the premium amount and the percentage deduction for Kunkel’s [**3]  commission; and

(4) a contact list for Policy services, listing Westrope personnel. No Westchester personnel were listed as contacts. summary judgment in favor of plaintiff.

 

 

[*P4]  The Policy term was for the period of June 9, 2012 to June 8, 2013. The Policy covered cargo damage or theft under the cited conditions; however, coverage did not extend to cargo transported by vehicles that were not listed on the Policy schedule (“Schedule”). The failure to notify Westchester of a change of vehicle within 30 days of the triggering event resulted in a denial of coverage.

[*P5]  Grizzly supplied Kaplan with a Certificate of Insurance (“Certificate”) identifying Kaplan as the certificate holder, Kunkel as the producer, Westchester as the cargo insurer, and Progressive Insurance Company (“Progressive”) as the automobile liability insurer. The Certificate also provided that, for the holder of the Certificate to qualify as an additional named insured, the underlying policy must include an additional insured endorsement.

[*P6]  On March 26, 2013, Grizzly was involved in an accident while transporting three excavators pursuant to the Contract. The cargo was deemed to be a total loss. Kaplan asserts that Westchester [**4]  agreed with the cargo owner that $105,824.40 was a reasonable value for the loss, and Kaplan remitted the sum to the cargo owner.

[*P7]  Kaplan demanded reimbursement from Grizzly. Grizzly filed a claim with Westchester, who denied coverage on June 6, 2013. Several months prior to the accident, Grizzly had purchased the truck involved in the accident to replace the truck listed on the Schedule. Grizzly advised Kunkel, who contacted Progressive, but failed to notify Westchester. As a result, the truck was excluded from coverage.

[*P8]  Kaplan filed suit against Grizzly and Westchester on May 8, 2014, alleging breach of contract by Grizzly, and equitable subrogation as to Westchester. Based on Westchester’s status as insurer, its direct involvement with the cargo owner in determining the loss value, and subsequent refusal to pay the claim, Kaplan declared entitlement as a successor, or subrogor, to Grizzly under the Policy.

[*P9]  On December 4, 2014, default judgment was granted against Grizzly for $105,824.40, plus attorney fees of $8,060.25, statutory interest from the date of judgment and costs. On February 19, 2015, Kaplan filed a “supplemental complaint” against Westchester pursuant to R.C. 3929.06(A)(2), which provides [**5]  that a judgment creditor of an insured, who has not received payment within 30 days of the judgment, may file a supplemental complaint against the insurer to obtain payment of the judgment amount.

[*P10]  On July 31, 2015, Kaplan filed an amended supplemental complaint adding Kunkel as a party, and a negligence claim against Westchester and Kunkel regarding Kunkel’s failure to advise Westchester of the change of vehicles under the policy. Kaplan subsequently dismissed Kunkel pursuant to Civ.R. 41(A).

[*P11]  Westchester filed for summary judgment on September 14, 2015. In addition to reliance on the Policy and related documents, Westchester argued that, based on the terms of a producer agreement between Westchester and Westrope, and case law interpreting R.C. 3929.27,1 Westrope did not act as Westchester’s agent.

 

1   [HN1] R.C. 3929.27 provides that a person who solicits and procures insurance is considered the agent of the entity who issues the policy.

[*P12]  Kaplan filed a cross-motion for summary judgment on November 25, 2015. The trial court granted summary judgment for Westchester stating:

 

There is no factual dispute that both Grizzly and its insurance broker, Kunkel, failed to timely notify Westchester or its alleged agent, Westrope, of Grizzly’s newly acquired vehicle within the applicable period stated in the policy. Even assuming that Westrope had authority as [**6]  an agent of Westchester to bind Westchester to the terms of the Westrope letter, no reasonable mind could conclude that the Westrope letter altered the terms of the policy between Westchester and Grizzly, such that Grizzly could update its policy with Westchester simply by informing Kunkel of a change in vehicles.

Because the 2000 Mack Truck was not covered under the policy for the 03/26/2013 accident, Westchester did not breach an obligation to pay Grizzly under the policy. Therefore, judgment is rendered in favor of defendant Westchester Fire Insurance Company and against plaintiff Kaplan Trucking Company.

 

 

[*P13]  This appeal ensued.

 

  1. ASSIGNMENT OF ERRORS

[*P14]  Kaplan offers the following five assignments of error in support of its argument that the trial court erred in granting summary judgment for Westchester:

 

  1. The trial court erred as a matter of law in failing to construe the facts presented by plaintiff in opposition to Westchester’s motion for
  2. The trial court erred as a matter of law in failing to find that reasonable minds could find that Westrope was the agent of Westchester when Westrope communicated with Grizzly about the Policy.

III. The trial court erred as a matter of law when [**7]  it concluded that Westrope’s communications with Grizzly altered the terms of the Policy.

  1. The trial court erred as a matter of law in failing to apply principles of estoppel to facts showing that Westchester caused Grizzly to direct notice of a change in vehicle to Kunkel.
  2. The trial court erred as a matter of law when it found that Grizzly’s notice to Kunkel was insufficient to bind Westchester.

 

 

 

 

III. STANDARD OF REVIEW

[*P15]  Our standard of review for summary judgment appeals is de novo:

 

[HN2] We review the trial court’s decision on summary judgment de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 1996 Ohio 336, 671 N.E.2d 241 (1996). In so doing, we use the same standard as the trial court. Lorain Natl. Bank v. Saratoga Apts., 61 Ohio App.3d 127, 129, 572 N.E.2d 198 (9th Dist.1989). [HN3] The party moving for summary judgment bears the initial burden of apprising the trial court of the basis of its motion and identifying those portions of the record which demonstrate the absence of a genuine issue of fact on an essential element of the nonmoving party’s claim. Dresher v. Burt, 75 Ohio St.3d 280, 293, 1996-Ohio-107, 662 N.E.2d 264 (1996). Once the moving party meets its burden, the burden shifts to the nonmoving party to set forth specific facts demonstrating a genuine issue of material fact exists. Id. To satisfy this burden, the nonmoving party must submit evidentiary materials showing a genuine dispute over material facts. PNC Bank, N.A. v. Bhandari, 6th Dist. Lucas No. L-12-1335, 2013-Ohio-2477, ¶ 9. [**8]

 

 

Lillie & Holderman v. Dimora, 8th Dist. Cuyahoga No. 100989, 2015-Ohio-301, ¶ 9.

[*P16]  It is further axiomatic that the following elements must be established to support a grant of summary judgment:

 

[HN4] The motion for summary judgment may only be granted when the following are established: (1) that there is no genuine issue as to any material fact; (2) that the moving party is entitled to judgment as a matter of law; and (3) that reasonable minds can come to but one conclusion, and that conclusion is adverse to the party against whom the motion for summary judgment is made, who is entitled to have the evidence construed most strongly in its favor. Harless v. Willis Day Warehousing Co., 54 Ohio St.2d 64, 67, 375 N.E.2d 46 (1978); Civ.R. 56(C).

 

 

Id.

 

  1. ANALYSIS

 

  1. Assignment of Errors I, II, III and V

[*P17]  We combine our analysis of assignment of errors I, II, III, and V, for purposes of judicial economy. Each of the cited errors constitute elements of the overarching issue of whether the trial court erred in denying summary judgment, and failing to construe the facts most favorably for Kaplan, by finding that: (1) Westrope was not the agent of Westchester when it communicated with Grizzly about the Policy; (2) notice to Kunkel was not notice to Westchester, (3) Westrope’s communications did not alter the terms of the Policy, [**9]  and (4) Grizzly’s notice to Kunkel did not bind Westchester.

[*P18]  Synopsized, Kaplan obtained a default judgment against Grizzly for breach of contract for the cargo damages remitted to the cargo owner. Kaplan also sued Westchester for equitable subrogation to Grizzly’s rights under the Policy. Thirty days after obtaining the judgment, Kaplan filed a supplemental complaint to recover the judgment amount from Westchester pursuant to R.C. 3929.06, a codification of common law subrogation:

 

  • 3929.06 — Rights of judgment creditor of insured tortfeasor; binding legal effect of judgment between insurer and insured.

(A)(1) If a court in a civil action enters a final judgment that awards damages to a plaintiff for injury, death, or loss to the person or property of the plaintiff or another person for whom the plaintiff is a legal representative and if, at the time that the cause of action accrued against the judgment debtor, the judgment debtor was insured against liability for that injury, death, or loss, the plaintiff or the plaintiff’s successor in interest is entitled as judgment creditor to have an amount up to the remaining limit of liability coverage provided in the judgment debtor’s policy of liability insurance [**10]  applied to the satisfaction of the final judgment.

(2) If, within thirty days after the entry of the final judgment referred to in division (A)(1) of this section, the insurer that issued the policy of liability insurance has not paid the judgment creditor an amount equal to the remaining limit of liability coverage provided in that policy, the judgment creditor may file in the court that entered the final judgment a supplemental complaint against the insurer seeking the entry of a judgment ordering the insurer to pay the judgment creditor the requisite amount. Subject to division (C) of this section, the civil action based on the supplemental complaint shall proceed against the insurer in the same manner as the original civil action against the judgment debtor.

 

 

Id.

[*P19]  Westchester countered with a coverage defense as provided by R.C. 3929.06(C)(1):

 

In a civil action that a judgment creditor commences in accordance with divisions (A)(2) and (B) of this section against an insurer that issued a particular policy of liability insurance, the insurer has and may assert as an affirmative defense against the judgment creditor any coverage defenses that the insurer possesses and could assert against the holder of [**11]  the policy in a declaratory judgment action or proceeding under Chapter 2721. of the Revised Code between the holder and the insurer.

 

 

(Emphasis added.) Id.

[*P20]  [HN5] An insurance policy is a contract, the construction of which is to be interpreted using the rules of contract construction. Andrews v. Nationwide Mut. Ins. Co., 8th Dist. Cuyahoga No. 97891, 2012-Ohio-4935, ¶ 14. Except where language in the policy indicates otherwise, phrases and words are to be construed based on their plain and ordinary meaning. Id. at ¶ 15. Ambiguities are construed liberally in favor of the insured. Id. at ¶ 16. Contrary to Kaplan’s assertion that the type of vehicle is irrelevant because the Policy premium was “per vehicle,” it remains undisputed that the plain language of the Policy extends coverage to a scheduled vehicle. Id. at ¶ 15.2

 

2   Kaplan argues that the proper inquiry is whether the insurer suffered prejudice by the failed notice, and asks that we apply the analysis set forth in Ferrando v. Auto-Owners Mut. Ins. Co., 98 Ohio St.3d 186, 2002-Ohio-7217, 781 N.E.2d 927 (notice and consent to settle in uninsured motorist claim requires inquiry into prejudice to the insurer before coverage denial.) However, Kaplan makes this argument for the first time before this court. We decline to consider this issue, “as[HN6]  [a] party who fails to raise an argument in the court below waives his or her right to raise it here.” State ex rel. Zollner v. Indus. Comm. of Ohio, 66 Ohio St.3d 276, 278, 1993 Ohio 49, 611 N.E.2d 830 (1993).

[*P21] [HN7]  “‘The notice provision of an insurance policy creates a condition precedent, non-compliance with which precludes recovery by the insured.'” Id. at ¶ 20, quoting Am. Emps. Ins. Co. v. Metro Regional Transit Auth., 12 F.3d 591, 592 (6th Cir.1993), citing Kornhauser v. Natl. Sur. Co., 114 Ohio St. 24, 4 Ohio Law Abs. 90, 150 N.E. 921 (1926).

[*P22]  It is undisputed that Grizzly notified Kunkel of the vehicle change in September 2012, that Kunkel notified Progressive regarding the change for purposes of the vehicle liability policy, but that Kunkel admittedly failed to notify Westrope or Westchester. As a result, in order for Grizzly’s notice to be effective against Westchester, [**12]  we must determine whether, viewing the evidence in a light most favorable to Kaplan, there is a genuine issue of material fact as to the agency relationship between Kunkel, Westrope, and Westchester. [HN8] “Notification given to an agent is effective as notice to the principal if the agent has actual or apparent authority to receive the notification.” Restatement of the Law 3d, Agency, Section 5.02 (2006).

[*P23]  Kaplan asserts two sources of agency liability, common law and statutory. We begin with the codification.

[*P24]  R.C. 3929.27 provides:

 

  • 3929.27 Solicitor agent of company.

A person who solicits insurance and procures the application therefor shall be considered as the agent of the party, company, or association thereafter issuing a policy upon such application or a renewal thereof, despite any contrary provisions in the application or policy.

 

 

Westchester denies applicability, contending that Kaplan misconstrues the language and the case law because the statute applies only to the solicitation process, and not to ongoing performance.

[*P25]  Kaplan cites Damon’s Missouri, Inc. v. Davis, 63 Ohio St.3d 605, 590 N.E.2d 254 (1992), for the premise that the statute codifies the common law agency of an insurance agent, and the agency relationship only relates to the solicitation process. In Damon’s, William J.F. Davis (“Davis”) an independent insurance [**13]  agent, was also the president of Affiliated Risk Managers Agency, Inc. (“Affiliated”), a company that provided insurance brokering services for several insurers including Fireman’s Fund Insurance Companies, Inc. (“Fireman’s”). Damon’s had used Davis as its insurance broker for several years in providing coverage for new locations.

[*P26]  A fire occurred, and Damon’s filed a claim. Davis and Fireman’s agreed to cover Damon’s losses, leaving Davis, Affiliated, and Fireman’s to determine the question of whether, at the time that Davis interpreted Damon’s fire insurance needs, Davis was acting as Fireman’s agent.

[*P27]  The court’s consideration included R.C. 3929.27:

 

[HN9] [R.C. 3929.27] is a codification of the common-law rule that “the acts of an agent within the scope of what he is employed to do and with reference to a matter over which his authority extends are binding on his principal.” Saunders [v. Allstate Ins. Co.] 168 Ohio St. 55, 58-59,151 N.E.2d 1 (1958), was designed to protect an insured by imputing conduct of a soliciting agent to the principal, the insurer.

 

 

Id. at 609.

[*P28]  However, the court determined that the analysis did not end there, because the court went on to find that the statute is not determinative of the scope of authority:

 

However, while R.C. 3929.27 identifies the insurance company as the [**14]  party chargeable with any responsibility for knowledge or acts of its soliciting agent, this section is not determinative of the scope of the agent’s authority. Stuart v. Natl. Indemn. Co., 7 Ohio App.3d 63, 68, 7 Ohio B. 76, 454 N.E.2d 158 (8th Dist.1982).

 

 

Id.

[*P29]  The court determined that Davis was not an agent under R.C. 3929.27 because the “mere consultation of the potential insured * * * is not tantamount to ‘solicitation.'” Id. The court also addressed the distinction between insurance brokers, exclusive insurance agents, and independent exclusive agents:

 

[HN10] “An ‘insurance broker’ is one who acts as middleman between the insured and the insurer, and who solicits insurance from the public under no employment from any special company and who, upon securing an order, places it with a company selected by the insured, or, in the absence of such a selection, with a company selected by himself; whereas an ‘insurance agent’ is one who represents an insurer under an employment by it. Whether a person acts as a broker or agent is not determined by what he is called but is to be determined from what he does. In other words, his acts determine whether he is an agent or a broker.”

 

 

Id. at 610, quoting 3 Couch, Insurance, Section 25:93, at 442-443 (2d Ed.1984).

[*P30]  [HN11] Where the agent is independent or a broker, the agent may be an agent [**15]  for the insured:

 

Accordingly, we hold that while an insurance broker (or independent insurance agent) is investigating the insurance requirements of his or her customer, the potential insured, such broker is not an agent for a particular insurer. However, an insurance broker becomes an agent for a particular insurer when: (1) the broker notifies its customer that he or she intends to place the customer’s insurance coverage with a particular insurer; or (2) the broker accepts an application for insurance on behalf of the customer.

 

 

Id. at 612. The court determined that at the time Davis was determining the insurance needs of Damon’s, he was Damon’s agent, because the act did not fall under the R.C. 3929.27 agency umbrella.

[*P31]  We find that Damon’s is instructive, but not determinative. The facts of the instant case involve consideration of the agency relationship at the time the Policy was purchased that is specifically covered by R.C. 3929.27, as well as agency status at the time of notice.3

 

3   R.C. 3929.27 does not make the broker an agent for all purposes. Klika v. Glenview Ins. Agency, 8th Dist. Cuyahoga No. 36522, 1978 Ohio App. LEXIS 9378, *9 (Jan. 12, 1978). However, we also consider the purpose of the statute, which is to protect the insured during the procurement process. Damon’s at 609.

[*P32]  [HN12] Agency authority may be express or implied:

 

[HN13] “Express authority is that authority which is directly granted to or conferred upon the agent or employee in express terms by the principal, and it extends only to such powers as the principal [**16]  gives the agent in direct terms; and the express provisions are controlling where the agency is expressly conferred * * *” Master Consol. Corp. v. BancOhio Natl. Bank, 61 Ohio St. 3d 570, 575 N.E.2d 817 (1991).

[HN14] An agent’s implied authority may also arise from the principal’s express delegation of actual authority. Unless its extent is expressly limited by the principal, implied authority is that authority which is incidental and necessary for the agent to carry into effect the powers expressly conferred upon him by the principal. Damon’s Missouri, Inc. v. Davis, 63 Ohio St.3d 605, 608, 590 N.E.2d 254 (1992) (citing Spengler v. Sonnenberg, 88 Ohio St. 192, 200-201, 102 N.E. 737 (1913). [HN15] An agent acting within the scope of his actual authority, expressly or impliedly conferred, has the power to bind the principal. Saunders v. Allstate Ins. Co., 168 Ohio St. 55, 58-59, 151 N.E.2d 1 (1958).

 

 

Republic Waste Servs. of Ohio Hauling v. Pepper Pike Props., 8th Dist. Cuyahoga No. 81525, 2003-Ohio-1348, ¶ 18-20.

[*P33]  [HN16] The common law doctrine of apparent authority is an additional form of agency, that focuses on the third party’s understanding:

 

Even if no actual authority has been given, the principal may be held liable if the principal appeared to give authority to the agent [apparent authority]. A principal may be liable to a third party for the acts of the principal’s agent, even though the agent had no actual authority, if the principal has by his words or conduct caused the third party to reasonably believe that the agent had the requisite authority to bind the principal. Miller v. Wick Bldg. Co., 154 Ohio St. 93, 95-96, 93 N.E.2d 467 (1950).

 

 

Id. at ¶ 21. [HN17] The test for apparent authority [**17]  is whether the complaining party “acting as a reasonable person, would believe the agent had authority based on all the circumstances.” Young v. Internatl. Bhd. of Locomotive Engineers, 114 Ohio App. 3d 499, 506, 683 N.E.2d 420 (8th Dist.1996), citing Shaffer v. Maier, 68 Ohio St.3d 416, 419, 1994 Ohio 134, 627 N.E.2d 986 (1994).

[*P34]  The trial court held in this case that “no reasonable mind could conclude that the Westrope letter altered the terms of the policy between Westchester and Grizzly, such that Grizzly could update its policy with Westchester simply by informing Kunkel of a change in vehicles.” However, an interpretation of apparent authority does not require a determination that the communication served as an amendment of the Policy. Conversely, the question is whether evidence exists that may reasonably be construed to indicate that a party appeared to have authority to bind. Id.

[*P35]  Westchester contends that the producer agreement with Westrope expressly disclaims agent liability:

 

To the extent permitted by applicable law, and irrespective of the Producer’s license designation, the Producer’s relationship to the Company under this contract is that of insurance broker and not the Company’s agent. It is understood and agreed that the insured is primarily the direct client of the retail or sub-producer and that the Producer may conduct business entirely through [**18]  a sub-producer for transactions subject to this Amendment.

 

 

As Westchester concedes, R.C. 3929.27 specifies that Westrope served as Westchester’s agent for purposes of the statute. The producer agreement, however, is not determinative on the issue of apparent authority as to third parties.

[*P36]  Westrope delivered the Westchester policy binder and insurance Covernote to Kunkel. The Covernote is issued on Westrope’s letterhead, and lists Kunkel as the producer, Grizzly as the insured, and Westchester as the insurer. Westrope issued invoices to Kunkel on Westrope forms. The premium payable by Grizzly is $1,050, 10 percent of which is the commission payment to Kunkel, leaving a payment of $945 on the stated Policy premium of $1,050.

[*P37]  The Westrope document entitled “Westrope Account Service Team — Motor Truck Cargo” advises the recipient to “[p]lease attach [this contact list] to your policy file.” The document states, “[i]n addition to your Broker, [the] following is a list of people that are available for your servicing needs. By forwarding items to the proper person, we can provide you with the most efficient service for your account.” Each listed contact is for Westrope personnel, including endorsement changes, and [**19]  claims, “[the claims] department is responsible for notification of claims and working with your claims representatives. They act as the liaison between our agency and the company.”

[*P38]  The Westchester Policy contact information reveals only a contact source for reporting claims, an area also covered by the Westrope contact list. Westchester argues the Policy expressly states that, for changes to the Policy, “contact us.” There is no accompanying contact information. In light of the Westrope contact list provided, and the lack of similar contact information from Westchester, the directive to “contact us” does not serve as exclusionary language as to Westrope.

[*P39]  Thus, viewed in a light most favorable to Kaplan, there is a genuine issue of material fact as to Westrope’s authority to bind Westchester, so that notice to Westrope equates to notice to Westchester. See Miller, 154 Ohio St. 93, 96, 93 N.E.2d 467; Harless, 54 Ohio St.2d 64, 67, 375 N.E.2d 46; Civ.R. 56(C). However, for Westchester to be bound by the failure of Kunkel to notify, the record must support the extension of apparent authority to Kunkel.

[*P40]  The record does not reflect the existence of a producer agreement between Westchester and Kunkel limiting the agency relationship, or whether Westrope and Kunkel entered in such an [**20]  agreement. The premium invoice was issued by Westrope to Kunkel, the Westrope contact document advises Grizzly, that “[i]n addition to your Broker,” the listed Westrope personnel are responsible for Grizzly’s servicing needs. In the appellate brief, Westchester describes Kunkel as Westrope’s subagent. The certificate of insurance was issued by Kunkel identifying Westchester as the insurer.

[*P41]  Instructive here as to subagency and liability:

 

[HN18] It is a universal rule of the law of agency that one who accepts an agency is responsible to his principal for the acts of his subagents, if he employs agents to work under him; and the act of any such subagent is regarded as the act of the agent himself, performed by the subagent for the benefit of the agent directly. Indirectly, of course, the act may be for the benefit of the principal, as was intended in this instance.

The true conception of such a relationship is to establish an agency within an agency; that is, the subagent is the agent of the general agent, who is in fact his principal in many respects.

 

 

State ex rel. Gray v. Alward, 44 Ohio App. 281, 287, 18 Ohio Law Abs. 225, 185 N.E. 560, 38 Ohio L. Rep. 125 (5th Dist.1933). See also Restatement of the Law 3d, Agency, Section 1.04 (2006) (a subagent appointed by an agent with actual or apparent authority has two principals, the appointing agent and that agent’s principal.) [**21]

[*P42]  The email exchange between Kunkel and Westrope presents a question as to authority. Grizzly contacted Kunkel with the apparent belief that notice to Kunkel was notice to the insurer. Kunkel contacted Westrope, indicating Kunkel’s understanding that notice to Westrope was notice to the insurer. Westrope, in turn, contacted Westchester, and informed Kunkel of Westchester’s determination that coverage would be effective as of that date. These factors support the existence of material facts as to the relationship between the parties.

[*P43]  We find that there is a genuine issue of material fact on the scope of the agency relationship between the parties, required to determine the sufficiency of the notice. We disagree with the lower court findings on this issue.

 

  1. Assignment of Error IV — Estoppel

[*P44]  The final assigned error is the trial court’s failure to find that estoppel applies, also known as the two innocent party rule:

 

[HN19] The two innocent party rule states that if one of two innocent parties must suffer a loss, the loss must be borne by the party who could have prevented the loss or the party who rendered the injury possible. Hillside Dairy Co. v. Cleveland Trust Co., 142 Ohio St. 507, 53 N.E.2d 499 (1944); Edgar v. Haines, 109 Ohio St. 159, 141 N.E. 837, 21 Ohio L. Rep. 350 (1923); Wilson v. Hicks, 40 Ohio St. 418, 1884 Ohio LEXIS 370 (1884); Thomas v. Fields, 8th Dist. Cuyahoga No. 26517, 1964 Ohio App. LEXIS 616, 94 Ohio L. Abs. 48, 196 N.E.2d 103 (Jan. 30, 1964); Koslen v. Lippincott Distrib. Co., 8th Dist. Cuyahoga Nos. 15406, 15417, and 15418, 1936 Ohio Misc. LEXIS 1017, 22 Ohio L. Abs. 417 (Aug. 7, 1936). [**22]  This rule applies even if there was no positive fault, but will especially apply if the losing party’s carelessness contributed to the loss. Wilson, supra. The two innocent parties rule is based upon the principal of equitable estoppel.

 

 

Delorean Cadillac v. Weaver, 8th Dist. Cuyahoga No. 71827, 1997 Ohio App. LEXIS 4533,*13 (Oct. 2, 1997).

[*P45]  Kaplan cites this court’s holding in Thomas. In Thomas, Dependable Service, Inc. (“Dependable”), a “procurer” of insurance, solicited Raymond Fields (“Fields”) to sell him automobile coverage. The insurance application, signed by Fields and listing Dependable as “producer of record,” was submitted to the Ohio Motor Vehicle Assigned Risk Plan (“Plan”), who assigned Beacon Mutual Indemnity Company (“Beacon”) to issue the insurance. Id. at *3.

[*P46]  Thomas financed the insurance purchase through a company affiliated with Dependable. Thomas went to the office to make the final annual premium installment payment and was informed that he owned $19.70, though he had already paid a total of $75. He refused to pay and asked to see the original contact person who was not only unavailable at the time, but failed to respond to any telephone calls. In the meantime, Dependable notified Beacon that the insurance was cancelled due to a sale of the automobile, information [**23]  that was wholly untrue.

[*P47]  Thomas learned that he no longer had insurance when he was involved in an accident, and his claim was denied. Dependable canceled the policy without authority or right, and Beacon canceled the policy without inquiry to Dependable or to Thomas:

 

[HN20] When one of two innocent persons must suffer loss, the loss must fall on him whose conduct brought about the situation or placed it within the power of a third person to cause the loss. 20 Ohio Jurisprudence (2d), 526, Estoppel and Waiver, Section 58.

 

 

Id. at *10. The judgment was affirmed in favor of Thomas.

[*P48]  A similar issue is presented here as to whether in light of the conduct by and relationship between the parties, the denial of coverage should be estopped. Therefore, our finding that there are genuine issues of material fact requiring reversal and remand to the trial court also opens the door for the trial court’s consideration of the estoppel argument. [HN21] “[T]he determination of whether a person is an agent is usually a question of fact for a jury.” Damon’s, 63 Ohio St.3d 605, 612, 590 N.E.2d 254. Arrow Internatl., Inc. v. Rolls-Royce Motors, Inc., 8th Dist. Cuyahoga Nos. 50305 and 50341, 1986 Ohio App. LEXIS 6437, *8 (Apr. 17, 1986).

 

  1. CONCLUSION

[*P49]  We find that, when viewed in a light most favorable to Kaplan, there are genuine issues [**24]  of material fact as to the actual, implied, or apparent agency of Westchester, Westrope and Kunkel, as well as the equitable principle of estoppel. This case is reversed and remanded for proceedings pursuant to our decision.

It is ordered that the appellant recover from appellees costs herein taxed. The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate issue out of this court directing the common pleas court to carry this judgment into execution.

A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure.

ANITA LASTER MAYS, JUDGE

LARRY A. JONES, SR., P.J., and

PATRICIA ANN BLACKMON, J., CONCUR

EASTERN AIR EXPRESS, INC., and GEMAIR, INC., Plaintiffs, vs. FEDEX FREIGHT, INC

EASTERN AIR EXPRESS, INC., and GEMAIR, INC., Plaintiffs, vs. FEDEX FREIGHT, INC., Defendants.

 

CASE NO. 0:16-cv-60367-WPD

 

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA

 

2017 U.S. Dist. LEXIS 29010

 

 

February 27, 2017, Decided

February 28, 2017, Entered on Docket

 

 

COUNSEL:  [*1] For Eastern Air Express, Inc., Gemair, Inc., Plaintiffs: Jason Goldstein, Richard L. Richards, LEAD ATTORNEY, Richards Goldstein LLP, Coral Gables, FL; Joshua A. Saval, LEAD ATTORNEY, Richards and Associates, Coral Gables, FL.

 

For Fedex Freight, Inc., Defendant: Edwina Victoria Kessler, Catri Holton Kessler & Kessler, Fort Lauderdale, FL.

 

JUDGES: WILLIAM P. DIMITROULEAS, United States District Judge.

 

OPINION BY: WILLIAM P. DIMITROULEAS

 

OPINION

 

ORDER GRANTING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

THIS CAUSE is before the Court upon Defendant FedEx Freight, Inc.’s Motion for Summary Final Judgment (the “Motion”) [DE 20], filed herein on December 9, 2016. On February 24, 2017, the Court held oral argument on the Motion. The Court has carefully considered the Motion [DE 20], Plaintiffs’ Response [DE 26], and Defendant’s Reply [DE 29], and is otherwise fully advised in the premises.

 

  1. BACKGROUND

The parties to this action are Plaintiff Eastern Air Express, Inc. (“Eastern”) and Gemair, Inc. (“Gemair”) (collectively, “Plaintiffs”) and Defendant FedEx Freight, Inc. (“FedEx” or “Defendant”). Plaintiff has brought this action pursuant to 49 U.S.C. § 14706 et. seq., the Carmack Amendment, to recover damages arising from the transportation of a reconditioned aircraft [*2]  engine. See [DE 1-2]. Eastern leased an airplane owned by Gemair. [DE 21 ¶¶ 2-3]. When the plane’s engine needed repairs, Gemair authorized Eastern to coordinate the transport of the engine from Ft. Lauderdale, FL to Terre Haute, IN for repair by Turbines, Inc. (“Turbines”). [DE 21 ¶¶ 4-6]. Eastern engaged Echo Global Logistics (“Echo”) to facilitate transportation. [DE 1-2 ¶10]. Echo chose FedEx as the carrier to transport the engine. [DE 21 ¶ 9].

Turbines and Gemair reached a deal for Gemair to purchase a reconditioned engine (the “Engine”) from Turbines instead of repairing the engine that was sent. [Id. ¶ 10]. Again, Gemair authorized Eastern to coordinate the transport of the Engine, this time from Terre Haute, IN to Ft. Lauderdale, FL. [Id. ¶11]. Eastern utilized Echo’s services to facilitate transport, and again Echo selected FedEx as the carrier. [Id. ¶ 12]. The Engine was delivered to Ft. Lauderdale, and an Eastern employee signed FedEx’s delivery receipt; Eastern’s employee did not note any damage or exceptions on the delivery receipt. [DE 25 AT 6 ¶ 11]. After the FedEx driver left, Plaintiffs noticed damage to the Engine’s shipping container and to the Engine itself. [Id. ¶ 12]. Plaintiffs [*3]  contacted Echo to begin the claims process. [Id. ¶ 13]. Plaintiffs did not fully recover for the lost value of the damaged engine; instead, they recovered $550.43 ($245 for damages at $0.50 per pound–engine weighed 490 pounds; and $305.43 in refunded freight charges). [DE 21 ¶ 17; DE 25 ¶ 17].Defendant argues that Plaintiffs were bound by an agreement between FedEx and Echo that limited liability to the lower of $0.50 per pound per package, or $10,000 per incident. [DE 21 ¶ 17].

This action was initiated by Plaintiffs on December 17, 2015 and removed to this Court on February 25, 2016. See [DE 1]. Plaintiffs assert a claim against FedEx for damages based on the Carmack Amendment. On December 9, 2016, Defendant filed the instant Motion [DE 20], seeking summary judgment.

 

  1. STANDARD OF REVIEW

Under Rule 56(a), “[t]he court shall grant summary judgment 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.” Fed. R. Civ. P. 56(a). The movant bears “the stringent burden of establishing the absence of a genuine issue of material fact.” Suave v. Lamberti, 597 F. Supp. 2d 1312, 1315 (S.D. Fla. 2008) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986)).

“A fact is material for the purposes of summary judgment only if it might affect the outcome of the suit under the governing law.” [*4]  Kerr v. McDonald’s Corp., 427 F.3d 947, 951 (11th Cir. 2005) (internal quotations omitted). Furthermore, “[a]n issue [of material fact] is not ‘genuine’ if it is unsupported by the evidence or is created by evidence that is ‘merely colorable’ or ‘not significantly probative.'” Flamingo S. Beach I Condo. Ass’n, Inc. v. Selective Ins. Co. of Southeast, 492 F. App’x 16, 26 (11th Cir. 2013) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)). “A mere scintilla of evidence in support of the nonmoving party’s position is insufficient to defeat a motion for summary judgment; there must be evidence from which a jury could reasonably find for the non-moving party.” Id. at 26-27 (citing Anderson, 477 U.S. at 252). Accordingly, if the moving party shows “that, on all the essential elements of its case on which it bears the burden of proof at trial, no reasonable jury could find for the nonmoving party” then “it is entitled to summary judgment unless the nonmoving party, in response, comes forward with significant, probative evidence demonstrating the existence of a triable issue of fact.” Rich v. Sec’y, Fla. Dept. of Corr., 716 F.3d 525, 530 (11th Cir. 2013) (citation omitted).

 

III. DISCUSSION

 

  1. The Carmack Amendment

The Carmack Amendment created a uniform scheme of carrier liability for loss or damage to goods transported in interstate commerce. A.I.G. Uruguay Compania de Seguros, S.A. v. AAA Cooper Transp., 334 F.3d 997, 1003 (11th Cir. 2003) (citing U.S.C. § 14706(a)(1)). In order to establish a prima facie case under the Carmack Amendment, Plaintiff must show by a preponderance of the evidence that: “(1) the goods were delivered to the carrier in good condition[;] (2) the goods arrived [*5]  at the destination in damaged condition[;] and (3) a specified amount of damages resulted.” Id. (citing Fine Foliage of Fla., Inc. v. Bowman Transp., Inc., 901 F.2d 1034, 1037 (11th Cir.1990)).

The Carmack Amendment is a strict liability statute. UPS Supply Chain Sols., Inc. v. Megatrux Transp., Inc., 750 F.3d 1282, 1285-86 (11th Cir. 2014). “When a shipper shows delivery of goods to a carrier in good condition and non-delivery or delivery in a damaged condition, there arises a prima facie presumption of liability.” Id. (citing Chesapeake & O. Ry. Co. v. A.F. Thompson Mfg. Co., 270 U.S. 416, 422-23, 46 S. Ct. 318, 70 L. Ed. 659, (1926); A.I.G., 334 F.3d at 1003).1

 

1   Once plaintiff establishes a prima facia case, “the burden shifts to the carrier to prove (1) that it was free from negligence, and (2) that the damage to the cargo was caused by one of five excusable factors.” A.I.G., 334 F.3d at 1003. (citing Fine Foliage, 901 F.2d at 1039).

 

  1. First Element of Carmack Amendment Claim: Whether Goods Were Delivered to Carrier in Good Condition

Defendant argues that Plaintiffs fail to meet their burden on the first element of a Carmack Amendment claim by failing to provide evidence that the Engine was transferred to FedEx in good condition at the time it was picked up for transport. Plaintiff has the initial burden to show that the cargo was transferred to the carrier in good condition. Missouri Pac. R.R. Co. v. Elmore & Stahl, 377 U.S. 134, 84 S. Ct. 1142, 12 L. Ed. 2d 194 (1964). If the shipped cargo that was damaged en route was placed in a sealed container2, as in this case, then the carrier had no ability to ascertain the contents of the shipment at the time it was picked up for transport. Therefore, “reliable, substantial circumstantial evidence of condition will suffice to prove a prima facie case.” A.I.G., 334 F.3d at 1004.

 

2   A shipment is considered to be in a “sealed” container if its contents are not visible and open to inspection at the time that the carrier takes possession for purposes of transport. Spartus Corp. v. S/Syafo, 590 F. 2d 1310 (5th Cir. 1979). The Eleventh Circuit has adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to the close of business on September 30, 1981. See Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1207 (11th Cir. 1981).

Defendant avers that neither Plaintiffs nor any of their employees had personal knowledge of the condition of the Engine as they did not inspect the Engine prior to shipment and were not present [*6]  when the Engine was packaged into a sealed container. Furthermore, Defendant asserts that assuming arguendo that the Engine was in good condition at the time it was picked up by FedEx, the delivery receipt indicates that the Engine arrived in that same good condition.3 The Court finds that Defendant is not entitled to summary judgment on this issue because there is a triable issue of fact concerning the Engine’s condition at the time FedEx picked up the package for transport.

 

3   The delivery receipt contains the following language “[s]hipment received in apparent good order with wrap intact unless otherwise noted.” [25-9]. An Eastern employee signed the delivery receipt and did not note any damage at that time.

Plaintiffs argue that Turbines is an FAA-certified repair station that is required to submit a Form FAA 8130-3 when reconditioning an aircraft engine. The 8130-3 certifies that the repair station repaired the Engine, tested it, and found it to be airworthy according to FAA operational standards. [DE 25-3]. Defendant cites a lack of evidence regarding the condition of the Engine when FedEx picked up the shipment, but the Court finds the Form FAA 8130-3 is “reliable, substantial evidence” that the Engine was in good condition when it left Turbines. Plaintiffs, as the nonmoving party, have come forward “with significant, probative evidence demonstrating the existence of a triable issue of fact.” Rich, 716 F.3d at 530.

Defendant states that [*7]  the 8130-3 is inadmissible hearsay and the deposition and affidavit testimony of Eastern’s director of maintenance are not sufficient to authenticate the contents of the FAA form. “The general rule is that inadmissible hearsay ‘cannot be considered on a motion for summary judgment.'” Macuba v. Deboer, 193 F.3d 1316, 1322 (11th Cir. 1999)(citations omitted). However, “a district court may consider a hearsay statement in passing on a motion for summary judgment if the statement could be ‘reduced to admissible evidence at trial’ or ‘reduced to admissible form.'” Id. At trial, Plaintiffs could present the 8130-3 as a record of regularly conducted activity and authenticate the document with a qualified witness. See Fed. R. Evid. 803. Defendant has not shown the absence of a genuine issue of material fact concerning the condition of the engine when FedEx picked up the shipment. Therefore, Defendant is not entitled to summary judgment on this issue.

 

  1. Affirmative Defense to Carmack Amendment Claim: Limitation of Liability

Plaintiffs argue that FedEx has not limited its liability under the Carmack Amendment . Defendant seeks summary judgment on this issue, arguing that their liability limitation satisfies the statute’s requirements. The “default posture” of the Carmack Amendment is full liability on the carrier; carriers can limit liability to an amount less than actual value for [*8]  lost or damaged goods only by following specific requirements. UPS Supply Chain Sols., Inc. v. Megatrux Transp., Inc., 750 F.3d 1282, 1287 (11th Cir. 2014).

In order to limit its liability for damage to the cargo, the shipper must agree to the limitation in writing. 49 U.S.C. § 11706(a), (c), § 14101(b). The carrier may limit liability “to a value established by written or electronic declaration of the shipper or by written agreement between the carrier and shipper if that value would be reasonable under the circumstances surrounding the transportation.” 49 U.S.C. § 14706(c)(1)(A). Further, the carrier must provide “to the shipper, on request of the shipper, a written or electronic copy of the rate, classification, rules, and practices upon which any rate applicable to a shipment, or agreed to between the shipper and the carrier, is based.” 49 U.S.C. § 14706(c)(1)(B)(emphasis added).

The Eleventh Circuit uses a four-prong test to determine if the Carrier effectively limited liability under the Carmack Amendment; the Carrier must: “(1) maintain a tariff within the prescribed guidelines of the Interstate Commerce Commission; (2) obtain the shipper’s agreement as to his choice of liability; (3) give the shipper a reasonable opportunity to choose between two or more levels of liability; and (4) issue a receipt or bill of lading prior to moving the shipment.” Bio-Lab, Inc. v. Pony Exp. Courier Corp., 911 F.2d 1580, 1582 (11th Cir. 1990).

 

  1. Prong 2: Whether There was an [*9] Agreement Between Plaintiffs and FedEx to Limit Liability

The first prong has been largely eliminated due to statutory changes. “Instead, carriers are now required to provide shippers on request with a written or electronic copy of the rates, classifications, rules, or practices applicable to the shipment or agreed to between the shipper and carrier.” See UPS Supply Chain Solutions, Inc. v. Megatrux Transp., Inc., 750 F.3d 1282 (2014) at n.3 (citing Werner, 554 F.3d at 1326 n.6) (emphasis added). Therefore, the Court begins its analysis with prong two of the Eleventh Circuit test.

As a preliminary matter, there are three agreements discussed by the parties. The first is the Carrier Contract Agreement (“CCA”) entered into by Echo and FedEx in 2012 [DE 21-2], three years before Plaintiffs dealings with Echo. The second is Echo’s Terms and Conditions which were sent to Eastern’s director of maintenance, and signed by him, when Eastern used Echo’s services to ship the first engine to Turbines. [DE 21-9; DE 21 ¶¶ 7-8; DE 25 ¶¶ 7-8]. Plaintiffs argue that Echo’s Terms and Conditions concern a credit agreement, which was never entered into by Plaintiffs, and in any event the Terms and Conditions were sent in reference to the first transaction with Echo for shipment of Gemair’s engine to Turbines, [*10]  not for the second transaction involving the shipment of the reconditioned Engine purchased from Turbines. [DE 21-9; DE 25-2 at 28-29]. Finally, there is the Bill of Lading [21-4], completed by Echo–which is disputed by Plaintiffs.

The Court finds that Plaintiffs cannot reasonably dispute that Echo created the Bill of Lading [DE 21-4]. Plaintiffs argue that Echo asked Plaintiffs questions regarding the Engine shipment, which information may have been used to complete the Bill of Lading, but Plaintiffs have no personal knowledge of who completed the Bill of Lading and they did not receive a copy of it until after FedEx delivered the Engine; additionally, the CCA states that FedEx will provide the Bill of Lading while Echo’s Terms and Conditions state that the customer will prepare the Bill of Lading or Echo will prepare the Bill of Lading on behalf of the customer. [DE 25 at 2 ¶ 13; DE 25 at 5 ¶ 4; DE 26 at 9-10]. Defendant provides FedEx’s interrogatories and Eastern’s director of maintenance’s deposition testimony to show that Echo prepared the Bill of Lading. [DE 29 FN 3].

In the face of sworn testimony indicating that Echo used information provided by Plaintiffs to create the Bill [*11]  of Lading [DE 27-1: p.24: 10-20], plus FedEx’s sworn interrogatory [DE 27: Answer to interrogatory 3] stating that “Echo created the Bill of Lading[,]” Plaintiffs’ statements that they did not actually witness preparation of the Bill of Lading and did not see it until after delivery are insufficient to create a disputed fact. Therefore, the Court finds the record evidence supports that Echo, Plaintiffs’ agent, created the Bill of Lading [DE 21-4].

Defendant argues that Plaintiffs are bound by the CCA [DE 21-2] and that it references FedEx’s Tarriff [DE 21-3]. The record evidence shows that the CCA, [DE 21-2], references the Tariff stating that “[t]his Agreement is governed by the rates and provisions of the below listed tariffs. . . FXF 100 – Series Rules.” [DE 21-2 at 11]. The Tariff designates that used or reconditioned articles for which no value is declared4 are subject to “Carrier’s maximum liability” which “shall not exceed 50 cents per pound per package or $10,000 per incident, whichever is lower.” [DE 21-3 at 15].

 

4   The Bill of Lading [21-4] provided the following language “Where the rate is dependent on value, shippers are required to state specifically in writing the agreed or declared value of the property as follows: ‘The agreed or declared value of the property is specifically stated by the shipper to be not exceeding     per    .'” These boxes were left blank. Note, however, that even if those boxes had been filled in, FedEx’s Tariff provides a strict cap of $10,000 in coverage for reconditioned goods.

The CCA provides the same limitation, indicating that “[u]sed items are limited to a recovery value of $0.50 per pound per package or $10,000 per incident, whichever is lower.” [*12]  [DE 21-2 at 3]. However, the CCA also states that the agreement “applies only on the Carrier’s standard transportation services and accessorial services and does not apply on special transportation services offered by the carrier such as, but not limited to, guaranteed or expedited services. FXF 100 (Series) Rules Tariff will apply on all shipments for which special transportation services are requested.” [DE 21-2 at 12](emphasis added). The Bill of Lading states that the shipment is “Guaranteed Plus by 5pm 3/18/15.” [DE 21-4]. Therefore, this shipment may be a “special transportation service” since it is “guaranteed,” making the liability limitations in the CCA inapplicable to this transaction. However, even if the liability limitations in the CCA do not apply, the Tariff applies “on all shipments for which special transportation services are requested,” and the Tariff provides the identical liability limitation for used goods.

Plaintiffs aver that they never agreed to limit FedEx’s liability through the CCA. According to Plaintiffs, they “never saw the [CCA] before this litigation and neither Fedex nor Echo ever provided the Plaintiffs any document referencing the [CCA].” [DE 26 at [*13]  2]. Plaintiffs argue that the CCA cannot be a part of the contract of carriage between Plaintiffs and FedEx because Plaintiffs never assented to the CCA and never even knew of its existence.

To determine if Plaintiffs are bound by the CCA, the Court turns to Eleventh Circuit precedent. In Werner Enterprises, Inc. v. Westwind Maritime Intern., Inc., the Court found that

 

[c]arriers do not need to investigate upstream contracts. They are entitled to assume that the party entrusted with goods may negotiate a limitation of liability. To hold otherwise would defeat the principle of efficiency that motivated the Kirby holding. Moreover, this again produces an equitable result. The cargo owner retains the option to sue the intermediary who failed to protect itself by negotiating a liability limitation. 554 F.3d 1319, 1325 (11th Cir. 2009).

 

 

The Court relied on the proposition set out in Kirby that “[w]hen an intermediary contracts with a carrier to transport goods, the cargo owner’s recovery against the carrier is limited by the liability limitation to which the intermediary and carrier agreed.” Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14, 33, 125 S. Ct. 385, 160 L. Ed. 2d 283 (2004). In Werner, like in this case, the Carrier entered an agreement with an intermediary (the shipper’s agent) which incorporated the carrier’s tariff, and [*14]  the Court found that agreement bound the shipper. Werner, 554 F.3d at 1325-26.

Based on Werner, the Court could find that Plaintiffs are bound by the terms of the CCA, which states the Tariff and limits liability as to used goods. However, that finding is not necessary to determine that FedEx and Plaintiffs, through their agent Echo, had an agreement to limit liability.5

 

5   The Court does not address Echo’s Terms and Conditions document [DE 25-1] which appears to connected to a credit application and was provided in relation to a separate brokered shipment. This document creates a chain too attenuated to link Plaintiffs to the CCA and FedEx’s Tariff. Note, however, that Plaintiffs state that Echo’s Terms and Conditions do not reference the Tariff, but the record evidence runs counter to that statement. [DE 25 at 5 ¶ 3]. Echo’s Terms and Conditions [DE 21-9] reference the carrier’s tariff several times and emphasizes that the cargo owner should “[p]lease contact ECHO for more details regarding carrier insurance or carrier liability.” [DE 21-9].

The Bill of Lading warns that “Liability Limitation for loss or damage in this shipment may be applicable See [the Carmack Amendment]”. [DE 21-4]. Furthermore, the Bill of Lading references FedEx’s Tariff by stating that “rates, classifications and rules that have been established by the carrier are available to the shipper, on request. . . .” Echo, as Plaintiffs’ agent, bound Plaintiffs to FedEx’s Tariff. Plaintiffs cannot complain that they did not have actual knowledge of FedEx’s Tariff that was incorporated by reference into the Bill of Lading prepared by their agent. See Swift Textiles, Inc. v. Watkins Motor Lines, Inc. 799 F.2d 697, 704 (11th Cir. 1986); see also Siren, Inc. v. Estes Express Lines, 249 F.3d 1268, 1271-73 (11th Cir. 2001)(collecting cases). Therefore, Defendant has met the second prong in the 4-part test to limit liability.

 

III. Prong 3: Whether FedEx gave Plaintiffs a Reasonable Opportunity to Choose Between Two or More Levels of Liability

In opposition to the Motion for Summary Judgment, Plaintiffs [*15]  argue that Defendant failed to meet the third element in the test for limiting liability under the Carmack Amendment–give the shipper a reasonable opportunity to choose between two or more levels of liability–the Court disagrees.

The only agreement, according to Plaintiffs, between FedEx and Plaintiffs is the Bill of Lading. If that is true and the CCA does not apply to Plaintiffs, then the Bill of Lading alone is sufficient to link Plaintiffs to FedEx’s Tariff, which supplies an opportunity to choose different levels of liability.

Plaintiffs also argue the Tariff of 50 cents per pound is not reasonable for a reconditioned engine that is deemed airworthy, so it runs afoul of the Carmack Amendment because it fails to designate a limitation value that “would be reasonable under the circumstances surrounding the transportation.” See 49 U.S.C. § 14706(c)(1)(A). The Court finds this argument unpersuasive. FedEx provided up to $5.00 per pound of coverage for reconditioned goods, subject to the $10,000 cap; Echo, as Plaintiffs’ agent, chose not to select the additional coverage. [DE 21-3 at 15].6

 

6   FedEx Tariff states that “[w]hen the Consignor or Consignee requests EXCESS LIABILITY COVERAGE for used or reconditioned articles exceeding 50 cents per pound per package and describes the articles as used or reconditioned on the original Bill of Lading: . . . Consignor or Consignee will indicate on original Bill of Lading in the designated area . . . that excess liability coverage of $4.50 per pound per package has been requested for the used or reconditioned articles. When combined with the standard maximum liability of $0.50 per pound per package, the total allowable coverage . . . shall be $5.00 per pound per package. If Consignor or Consignee is using a Bill of Lading form where no designated area is provided, Consignor or Consignee shall indicate on the original Bill of Lading in the description of articles section: ‘Excess liability coverage requested in the amount of $4.50 per pound per package.’. . . In no event shall Carrier’s maximum liability for used or reconditioned articles exceed the actual value of $5.00 per pound per package . . . with a maximum of $10,000 per incident.” [DE 21-3 at 15](emphasis added).

In Werner, the agreement between the intermediary and the carrier incorporated the carrier’s tariff, [*16]  which limited the carrier liability to a set amount unless the shipper or the shipper’s agent selected higher coverage. Werner, 554 F.3d at 1325-29. Similarly, the CCA, entered into between Echo and FedEx incorporates the Tariff, but even if the CCA does not apply to Plaintiffs, the Bill of Lading prepared by Echo references the Tariff.

The agreement in Werner gave the shipper the opportunity to elect full liability coverage by completing steps listed in the tariff, paying an increased freight rate, and obtaining the carrier’s authorization in writing. Id. FedEx’s Tariff provides the same opportunity, and according to this Circuit’s precedent, Plaintiffs are bound by the Tariff by the CCA and/or the Bill of Lading prepared by their agent, both of which reference the Tariff.

 

  1. Prong 4: Whether a receipt or bill of lading was issued prior to moving the shipment

The Court has already determined that Echo created the Bill of Lading. Though Plaintiffs contend they did not see the Bill of Lading prior to shipment, their agent prepared the Bill of Lading, and Turbines’ employee signed the Bill of Lading under “SHIPPER SIGNATURE/DATE.” Therefore, the Court finds that the Bill of Lading was issued prior to moving the [*17]  shipment. Since all four prongs of the Eleventh Circuit test have been satisfied, the Court grants summary judgment in favor of Defendant on the affirmative defense of liability limitation.

 

  1. CONCLUSION

Accordingly, it is ORDERED AND ADJUDGED that Defendant’s Motion for Summary Judgment [DE 20] is GRANTED IN PART as set forth above; the Court will separately enter a final judgment.

DONE AND ORDERED in Chambers at Fort Lauderdale, Broward County, Florida this 27th day of February, 2017.

/s/ William P. Dimitrouleas

WILLIAM P. DIMITROULEAS

United States District Judge

 

FINAL JUDGMENT AND ORDER CLOSING CASE

THIS CAUSE is before the Court upon the Court’s Order Granting in Part Defendant’s Motion for Summary Judgment, entered separately today. Pursuant to Federal Rule of Civil Procedure 58(a), the Court enters this separate final judgment.

Accordingly it is hereby ORDERED AND ADJUDGED as follows:

 

  1. Judgment is entered in favor of Defendant;
  2. Plaintiff shall recover nothing from Defendant;
  3. The Clerk is hereby directed to CLOSE this case and DENY any pending motions as moot.

 

 

DONE AND ORDERED in Chambers at Fort Lauderdale, Broward County, Florida this 27th day of February, 2017.

/s/ William P. Dimitrouleas

WILLIAM P. DIMITROULEAS

United [*18]  States District Judge

© 2017 Central Analysis Bureau