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Pennsylvania Manufacturers' Association Insurance Co. v. Landon Transport Logistics, LLC

United States District Court, D. Colorado

April 14, 2014

PENNSYLVANIA MANUFACTURERS' ASSOCIATION INSURANCE COMPANY, Plaintiff,
v.
LANDON TRANSPORT LOGISTICS, LLC; THE TOP SHOP, INC., d/b/a American Cabinet & Flooring, Inc.; and LOGISTICS DIRECT, LLC, Defendants.

ORDER FOR DISMISSAL

RICHARD P. MATSCH, Senior District Judge.

This diversity action is an insurance coverage dispute. It arises out of an underlying state court action involving allegations of damages to transported goods.

The Top Shop, Inc. (Top Shop) is a Colorado corporation with its principal place of business in Denver, Colorado. In June 2012, Top Shop entered into an agreement with Logistics Direct, LLC (Logistics), a Colorado limited liability company, for the transportation and delivery of custom-made countertops and related goods from Top Shop's manufacturing facility in Denver to a Top Shop customer near Austin, Texas. Logistics subcontracted the job to Landon Transport Logistics, LLC (Landon), a Texas limited liability company. In June 2012, the goods were loaded onto Landon's truck at Top Shop's facility in Denver. When the goods arrived in Texas, they were damaged.

Top Shop submitted a claim to Logistics. Logistics denied liability on the ground that it did not actually transport the goods.

Top Shop submitted its claim to Landon. During the relevant time period, Landon was an insured under a commercial inland marine insurance policy, Policy Number XXXXXX-XXXXXXXY (the Policy), issued by Pennsylvania Manufacturers' Association Insurance Company (Penn Manufacturers). The Policy provided cargo coverage. Landon tendered the claim to Penn Manufacturers. Penn Manufacturers declined coverage, contending that coverage for Top Shop's claim is excluded by Policy exclusions for "improper packing, or stowage or rough handling" and "improper securement."

In March 2013, Top Shop filed suit against Logistics and Landon in a state court action captioned The Top Shop, Inc. v. Logistics Direct, LLC and Landon Transport Logistics, LLC, Case No. 2013CV030055, in the District Court for Adams County, Colorado (the underlying action). Top Shop's complaint alleged three claims for relief: (1) breach of contract; (2) negligence, and (3) strict liability under the Carmack Amendment, 49 U.S.C. § 14706 et seq. The Carmack Amendment claim was asserted against Landon only.

Initially, Penn Manufacturers refused to provide a defense for Landon in the Top Shop action.

In May 2013, when the Top Shop litigation was pending, Landon filed suit against Penn Manufacturers in a state court action captioned Landon Transport Logistics, LLC v. Pennsylvania Manufacturers' Association Insurance Company, Case Number 2013CV31413, in the District Court for Adams County, Colorado, alleging that Penn Manufacturers breached its insurance obligations under the Policy by refusing to provide a defense or indemnity for Top Shop's claim. Landon's state court complaint alleges three claims for relief against Penn Manufacturers: (1) breach of contract; (2) violations of C.R.S. §§ 10-3-1115 and 1116, and (3) bad faith breach of insurance contract.

Penn Manufacturers answered Landon's complaint and denied liability. Among other defenses, Penn Manufacturers alleged that Landon's claims may be barred or limited by the terms, conditions, and exclusions set forth in the Policy. In September 2013, Penn Manufacturers moved for summary judgment in its favor on all of Landon's claims, arguing that undisputed facts established that Top Shop's claim fell within a Policy exclusion and consequently that Penn Manufacturers had no duty to indemnify or defend Landon. Landon opposed that motion and cross-moved for partial summary judgment, seeking a determination that Penn Manufacturers was obligated to defend Landon in the underlying Top Shop action.

In an order dated November 12, 2013, the state court denied Penn Manufacturers' motion for summary judgment and granted Landon's motion for partial summary judgment. With respect to the duty to defend, the state court held that Top Shop's complaint stated a claim which might fall within coverage of the Policy and thus under Colorado's "complaint rule" (also known as the "four corners rule"), Penn Manufacturers owed Landon a duty of defense.[1] The state court found that disputed issues of material fact precluded entry of judgment with respect to Landon's remaining claims of statutory violations and bad faith breach of the insurance contract.

In compliance with the state court's order, Penn Manufacturers retained defense counsel for Landon and began funding Landon's defense in the underlying Top Shop action.

The Top Shop action was set for trial to commence on January 13, 2014. Landon's breach of contract/insurance bad faith action was temporarily stayed until conclusion of the trial of the underlying Top Shop action.

On January 2, 2014, Penn Manufacturers filed this federal declaratory judgment action against Landon, Top Shop, and Logistics. In its first claim for relief, Penn Manufacturers seeks a determination that it has no duty of indemnification for any adverse judgment against Landon in the underlying Top Shop action. That claim is alleged against all three defendants. Penn Manufacturers' second claim for relief is alleged against Landon only and seeks recovery of the amounts that Penn Manufacturers has expended defending Landon in the underlying Top Shop action.

Shortly after Penn Manufacturers filed this federal action, the underlying Top Shop action was tried to a jury. On January 15, 2014, the jury returned a verdict in favor of Top Shop against Landon. The verdict form informed the jury that the trial court had determined that Top Shop met its burden of proof regarding the Carmack Amendment and asked the jury to answer the following two questions: (1) Had Landon proved by a preponderance of the evidence that Landon was not negligent?; and (2) Had Landon proved by a preponderance of the evidence that Top Shop had improperly loaded ...


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