FORKWAR v. EMPIRE FIRE MARINE INS. CO

hey do?

A: The address is 620 Cady, C-A-D-Y, Drive, Fort Washington, Maryland. It's a trucking company, logistics.

Q: Was J J Logistics in existence in November, 2004?

A: Yes, it was.

Q: Were you president of J J Logistics in November 2004?

A: Yes, I was.

Q: Do you keep the records, is that your job, to make sure the records are kept in the ordinary course of business and are clear and true and all that stuff?

A: Yes.

Q: So you are the custodian of those records?

A: Yes.

Q: You do know Hameed Mahdi, is that correct?

A: Yes, I do.

Q: Can you tell the jury what relationship if any Hameed Mahdi had at any time with J J Logistics, Incorporated?

A: Well, Hameed Mahdi, he's an independent contractor. He had his own truck and he worked for J J occasionally in the past.

Q: Was Mr. Mahdi an independent contractor for J J Logistics in November 2004?

A: No.

Q: Did he have any ongoing business relationship with J J Logistics in November 2004?

A: Not as I can recollect.

Q: You are aware that in November 2004 Mr. Mahdi got into a collision with a vehicle being operated by Augustine Forkwar, the plaintiff in this matter, correct?

A: Yes.

Q: While Mr. Mahdi was operating the vehicle involved in this collision, was Mr. Mahdi at the time of the collision under dispatch by J J Logistics, Inc.?

A: No.

Q: Was Mr. Mahdi in any way acting within the scope of and in furtherance of the interest of J J Logistics, Inc. at the time of that collision with Mr. Forkwar on November 26, 2004?

A: No.

Q: Mr. Mahdi has indicated to someone at J J Logistics that at the time of the collision he was driving to a shop to get to or otherwise tend to some tires that he had to deal with, is that correct?

A: It's been a long time. I would imagine it could have been.

Q: You did answer the interrogatories, correct? I'm going to offer these to you to see if I could refresh your recollection. Could you read to yourself the answer to Interrogatory No. 11.

Q: Sir, having reviewed that document, does it refresh your recollection as to whether or not there was a point in time that Mr. Mahdi indicated to someone at J J Logistics that at the time of the collision he was doing something to attend to his tires on his vehicle?

A: It could have been, you know. I have two other people in my office besides me that he could have, you know.

Q: And your answer was he told J J Logistics he was driving to a shop to get tires or attend to tires at the time of the collision, correct?

A: It could be correct, yes.

Q: Who owned the truck that Mr. Mahdi was operating on November 2[6], 2004?

A: He owned the truck. He was an independent contractor.

Q: And the tru[c]k had J J Logistics written on it, is that right?

A: No. The truck might would have had a sticker or something on it. We used stickers and stuff to put on the truck with our name and our MC number.

Q: But that doesn't change the understanding between you and Mr. Mahdi with regard to his relationship with you, correct?

A: Well, I don't understand what you're saying.

Q: I mean the fact that his truck said J J Logistics, Inc. on it on a sticker doesn't change the contractual relationship with Mr. Mahdi that established that he was an independent contractor acting on his own behalf, he is not under a dispatch is not otherwise acting on your behalf, you being J J Logistics?

A: That's true.

MR. BLUMENTHAL: I have no other questions, Your Honor.

MR. WAMPLER: I don't have any questions of this witness at this time.

Id., Ex. C (1-59:18 — 1-60:18, 1-61:2 — 1-62:1, 6 — 9, 19 — 1-64:3).

After Mr. Johnson's testimony, J J Logistics moved for summary judgment. On behalf of Mr. Forkwar, Mr. Blumenthal responded.

MR. BLUMENTHAL: I can tell the Court that there would be nothing in addition from Mr. Forkwar with regard to that issue, and of course that — the other evidence with regard to negligence and with regard to Mr. Mahdi, but with regard to the question whether Mr. Mahdi was acting on his own behalf for his own purposes or for purposes of J J Logistics, that's the extent of our evidence. And if Your Honor would let me close as to that part of the case, I would do so with the intention of offering additional evidence otherwise.

Id., Ex. C (1-64:13 — 22). Judge Mittelstaedt asked the bailiff to escort the jury out of the courtroom. The discussion between Judge Mittelstaedt and counsel continued in open court.

MR. BLUMENTHAL: Your Honor, I could close. I have nothing further against J J Logistics. I don't think it's fair to keep Mr. Wampler and his client in here at this point, given the state of the evidence, particularly since Mr. Mahdi didn't show up and we hoped he would. I can close at this time. I would intend to reopen as to the negligence of Mr. Mahdi.

THE COURT: All right. I'm wondering why you didn't just dismiss J J, because in your opening you pretty much indicated there was no liability that could be claimed against J J. So why did we even do this?

MR. BLUMENTHAL: Had Mr. Mahdi shown up today, I'll tell you two reasons. First, had Mr. Mahdi shown up today it might have been an entirely different matter. That's one.

THE COURT: All right. But he didn't show up.

MR. BLUMENTHAL: He didn't, and I'm now dealing with it in the reality of today, which changed when Mr. Mahdi didn't show up, because he may have. So I could not go forward today for that reason.

Second, we talked about discovery. I got handed the independent contractor agreement this morning from Mr. Wampler. I didn't have that before today. I'm not raising these things, but that impacts how this thing occurred.

Third, most importantly, my understanding of joint tort feasor analysis is if I dismiss as against a potential joint tort feasor, when I proceed against Mahdi and hope down the road to involve Zurich in this thing, they can come back and say you dismissed out joint tort feasor.

MR. WAMPLER: I don't think it's a joint tort feasor issue. I think it's vicarious liability.

THE COURT: I agree with you. Either he's the agent or he's not the agent, and if he's not it is not a joint tort feasor situation.

MR. BLUMENTHAL: I want to be able to go back against Zurich and say there's been in open court, there's been a decision about what Mahdi was doing, you elected not to be a part of that, the decision went against you, now that it's been litigated you need to answer to what's unfolded. And I couldn't do that by agreement or otherwise, but I sure can close at this time, Your Honor, with the intention of reopening.

And at that point Mr. Wampler, I'm sure, has a motion that I at this point can't oppose.

THE COURT: What's your motion?

MR. WAMPLER: If he is closing at this time it would be a motion for judgment. There's no evidence at all that my client was the principal and Mr. Mahdi was his agent at the time of this accident.

THE COURT: All right. Under Count 2, respondeat superior claim against J J Logistics, Incorporated, the Court finds that the plaintiff has failed to establish a prima facie case of agency against J J Logistics and that they failed to show that Mr. Mahdi was operating the vehicle on behalf of J J Logistics or in the furtherance of J J Logistics' business. So therefore judgment is granted in favor of J J Logistics, Inc. as to Count 2.

Id., Ex. C (1-67:16 — 1-69:15, 23 — 1-70:5).

With the dismissal of J J Logistics, Judge Mittelstaedt inquired about Counts III and IV against New Hampshire Insurance Company. Mr. Blumenthal explained that he had filed a line of dismissal without prejudice as to those counts. Judge Mittelstaedt then noted that the remaining count is Count I against Mr. Mahdi.

When the jury returned to the courtroom, Judge Mittelstaedt explained that judgment had been entered in favor of J J Logistics. Mr. Blumenthal then proceeded with the case against Mr. Mahdi.

On December 4, 2008 the jury returned a verdict in favor of Mr. Forkwar and against Mr. Mahdi. The jury awarded Mr. Forkwar the sum of $180,756.76. See Pl.'s Mem., Exs. 1 (2-30:12 — 2-32:25), 3.

Twenty days after the jury's verdict, Mr. Blumenthal sent the following letter to Matthew Peterson, Claims Adjuster for Empire.

As you are aware, your insured, Mr. Hameed Mahdi, was involved in a motor vehicle accident with our client, Mr. Augustine Forkwar, on November 26, 2004. On January 18, 2005, Empire Fire and Marine Insurance Company made the unilateral decision that Mr. Mahdi was "under dispatch" for J J Logistics, Inc. at the time of the incident and elected to deny coverage in this matter. (See the January 18, 2005, correspondence from C.J. Mather attached hereto).

A lawsuit was initiated in this matter on October 26, 2006, naming your insured and J J Logistics, Inc. as defendants. Your company elected not [to] provide a defense for your insured, again, based on the unilateral decision that he was "under dispatch" for J J Logistics, Inc. (See the October 26, 2006, correspondence from Mark Balus to Hameed Mahdi attached hereto).

When service of process was perfected on Mr. Mahdi on August 1, 2008, a copy of the Affidavit of Service was forwarded to you and I requested at that time that an attorney be assigned and that I be contacted to discuss the upcoming trial. (See the October 13, 2008, correspondence to Mr. Mark Balus attached hereto (internal attachments omitted)). On October 27, 2008, a member of my staff, Mr. Gregory Emrick, spoke with you, at which time you indicated that the decision of January 18, 2005, stood and Empire Fire and Marine Insurance Company would not be participating in the litigation.

On November 19, 200[8], I sent a demand for policy limits, which was to be accepted by December 2, 2008. (See the November 19, 2008, correspondence attached hereto). I did not receive a response by the required deadline.

On December 3 and 4, 2008, this case was tried before the Honorable Crystal D. Mittelstaedt and a jury. During the course of trial, Mr. Marcus Johnson, President of J J Logistics, Inc., testified that Mr. Mahdi was not under dispatch for J J Logistics, Inc. at the time of the subject occurrence. The jury determined that Mr. Mahdi was negligent in the operation of his vehicle, and awarded Mr. Forkwar $18[0],756.[76] in damages as to defendant, Mahdi. There was no such finding or award as to defendant, J J Logistics, Inc. (See the Judgment attached hereto).

Under Maryland law, Empire Fire and Marine Insurance Company had a duty to defend Mr. Mahdi in this case. The Maryland Court of Appeals stated that "an insurer has a duty to defend when there exists a `potentiality that the claim could be covered by the policy.' Under the potentiality rule, the insurer will be obligated to defend more cases than it will be required to indemnify because the mere possibility that the insurer will have to indemnify triggers the duty to defend." Litz v. State Farm Fire Cas. Co., 346 Md. 217, 224 (1997) (citations omitted).

In short, the question whether your company would be required to pay for Mr. Mahdi's negligent actions was [] contested in this case and "[i]f there is a possibility, even a remote one, that the plaintiffs' claims could be covered by the policy, there is a duty to defend." Id. at 231. Having elected to ignore these obligations, you may not now be heard to call into question the jury's findings.

Empire Fire and Marine Insurance Company's decision to refuse Mr. Mahdi a defense, its failure to settle this matter within policy limits, and a judgment against your insured requires that your company satisfy the judgment in its entirety, plus interests and costs. ( See State Farm Mut. Aut. Ins. Co. v. Schlossberg, 82 Md. App. 45, 64 (1990)).

Accordingly, I ask that you forward a draft in the amount of $18[0],756.[76] plus interest at the legal rate (10%) calculated to the date the draft is received by my office.

I thank you for your anticipated attention to this matter. . . .

Pl.'s Mem., Ex. 11 (Letter from Blumenthal, Esq. to Peterson of 12/24/08 at 1-2).

JURISDICTION AND VENUE

Subject matter jurisdiction is based on diversity of citizenship pursuant to 28 U.S.C. § 1332. Mr. Forkwar resides in Hyattsville, Prince George's County, Maryland. See Compl. Declaratory J. (Document No. 2). Empire is organized under the laws of Nebraska with its principal place of business in Illinois. "Empire is a wholly owned subsidiary of Zurich American Insurance Company, a New York corporation. Zurich American Insurance Company is a wholly owned subsidiary of Zurich Holding Company of America, Inc., a Delaware corporation. Zurich Holding Company of America, Inc. is a 99.8711% owned subsidiary of Zurich Insurance Company, a Swiss corporation." Document No. 3 at 1.

Pursuant to 28 U.S.C. § 1391 venue is proper in this district because a substantial part of the events or omissions giving rise to the claim occurred in this district. The Court notes Empire removed this case from state court to federal court. See Document No. 1.

STANDARD OF REVIEW

A motion for summary judgment will be granted only if there exists no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In other words, if there clearly exist factual issues "that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party," then summary judgment is inappropriate. Anderson, 477 U.S. at 250; see also Pulliam Inv. Co. v. Cameo Properties, 810 F.2d 1282, 1286 (4th Cir. 1987); Morrison v. Nissan Motor Co., 601 F.2d 139, 141 (4th Cir. 1979); Stevens v. Howard D. Johnson Co., 181 F.2d 390, 394 (4th Cir. 1950). The moving party bears the burden of showing that there is no genuine issue as to any material fact. Fed.R.Civ.P. 56(c); Pulliam Inv. Co., 810 F.2d at 1286 (citing Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th Cir. 1979)).

When ruling on a motion for summary judgment, the court must construe the facts alleged in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962); Gill v. Rollins Protective Servs. Co., 773 F.2d 592, 595 (4th Cir. 1985). A party who bears the burden of proof on a particular claim must factually support each element of his or her claim. "[A] complete failure of proof concerning an essential element . . . necessarily renders all other facts immaterial." Celotex Corp., 477 U.S. at 323.

On those issues where the nonmoving party will have the burden of proof, it is that party's responsibility to confront the motion for summary judgment with an affidavit or other similar evidence. Anderson, 477 U.S. at 256. However, "`[a] mere scintilla of evidence is not enough to create a fact issue.'" Barwick v. Celotex Corp., 736 F.2d 946, 958-59 (4th Cir. 1984) (quoting Seago v. North Carolina Theaters, Inc., 42 F.R.D. 627, 632 (E.D.N.C. 1966), aff'd, 388 F.2d 987 (4th Cir. 1967), cert. denied, 390 U.S. 959 (1968)). There must be "sufficient evidence favoring the non-moving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (citations omitted).

When faced with cross-motions for summary judgment, the Court must consider "each motion separately on its own merits to determine whether either of the parties deserves judgment as a matter of law." Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (internal quotation marks omitted). The Court applies the same standard of review. Monumental Paving Excavating, Inc. v. Penn. Mfrs. `Ass'n Ins. Co., 176 F.3d 794, 797 (4th Cir. 1999) (citing ITCO Corp. v. Michelin Tire Corp., 722 F.2d 42, 45 n. 3 (4th Cir. 1983) ("The court is not permitted to resolve genuine issues of material fact on a motion for summary judgment — even where . . . both parties have filed cross motions for summary judgment.") (emphasis omitted), cert. denied, 469 U.S. 1215 (1985)).

ANALYSIS A. Whether the doctrine of collateral estoppel is applicable

Empire did not defend Mr. Mahdi at the state court trial because its investigation revealed Mr. Mahdi was "under dispatch" for J J Logistics. Under the "Business Use exclusion" provision, Empire's policy does not cover accidents resulting in bodily injury or property damage when the insured is operating the vehicle in furtherance of another's business, in this instance, J J Logistics. Mr. Forkwar contends Empire is collaterally prohibited from re-litigating this issue.

Defendant, Empire would have this Court decide the question whether Mahdi was engaged in a business or nonbusiness use of his vehicle at the time of the subject occurrence. Collateral estoppel acts to bar Defendant from re-litigating this issue as it is an issue that Defendant, Empire could have, and indeed, was contractually obligated to have litigated when it was taken up by a judge and jury in the prior adjudication.

During the motions hearing counsel for Empire cited the case of Brohawn v. Transamerica Insurance Co., 276 Md. 396, 347 A.2d 842 (1975) in support of Empire's decision not to defend Mr. Mahdi. "Even if a tort plaintiff does not allege facts which clearly bring the claim within or without the policy coverage, the insurer still must defend if there is a potentiality that the claim could be covered by the policy." Brohawn, 276 Md. at 408, 347 A.2d at 850. Based on its internal investigation, the nationwide use of the "Business Use exclusion" provision and multiple state and federal courts construing the "Business Use exclusion" provision as unambiguous, Empire determined there was not a potentiality that the claim would be covered by Mr. Mahdi's non-trucking policy. "[T]he rule has been justified on the theory that the insurer's duty to defend extends only to claims covered by the policy and that "[i]f the declaration does not allege a liability within the coverage of the policy the insurance company is not required to defend." Eastern Shore Fin. Res. Ltd. v. Donegal Mut. Ins. Co., 84 Md. App. 609, 622, 581 A.2d 452, 459 (1990) (quoting Thomas v. American Universal Ins. Co., 80 R.I. 129, 93 A.2d 309, 312 (1952); see also Boyle v. National Cas. Co., 84 A.2d 614 (D.C. 1951)).

Pl.'s Mem. at 8.

Empire rejects Mr. Forkwar's assertion that collateral estoppel bars any challenge to the judgment entered in favor of J J Logistics in the underlying state court action.

Empire was neither a party nor in privity with as party to the Underlying Action, and did not have a fair opportunity to be heard in the Underlying Action. In addition, based upon Plaintiff's litigation tactics in the Underlying Action with regard to J J Logistics' relationship with Mahdi, and the fact that J J Logistics' motion for judgment was unopposed, Plaintiff can hardly argue that there was a final judgment as to J J Logistics' role "on the merits" in the Underlying Action. Furthermore, collateral estoppel cannot prevent Empire from re-litigating the question of whether Mahdi was "in the business of" J J Logistics because it had no opportunity to appeal the judgment in the Underlying Action. Finally, the relevant issue decided in the Underlying Action, i.e., whether J J Logistics was liable for the Accident based upon a common law theory of respondeat superior, is not identical to the issue that is dispositive of Empire's lack of a coverage obligation, i.e., that Mahdi was operating the tractor "in the business" of J J Logistics.

Def.'s Mem. at 10.

Since this Court's jurisdiction is based on diversity of citizenship, the principles outlined in Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78 (1938) require the application of Maryland law to substantive law questions. To determine the preclusive effect, if any, of the state court judgment in favor of J J Logistics, this Court must apply Maryland law. A four part test must be satisfied in order for collateral estoppel to be applicable.

1. Was the issue decided in the prior adjudication identical with the one presented in the action in question?

2. Was there a final judgment on the merits?

3. Was the party against whom the plea is asserted a party or in privity with a party to the prior adjudication?

4. Was the party against whom the plea is asserted given a fair opportunity to be heard on the issue?

Colandrea v. Wilde Lake Cmty. Ass'n, 361 Md. 371, 391, 761 A.2d 899, 909 (2000) (citing Washington Suburban Sanitary Comm'n v. TKU Assocs., 281 Md. 1, 18-19, 376 A.2d 505, 514 (1977)). The Court shall now consider whether each element is satisfied in light of the facts of this case.

In the prior adjudication Mr. Forkwar's First Amended Complaint consisted of four counts: (a) negligence against Mr. Mahdi, (b) respondeat superior against J J Logistics, Inc., (c) breach of contract against New Hampshire Insurance Company, Mr. Forkwar's insurer and (d) another breach of contract against New Hampshire Insurance Company. At trial J J Logistics moved for judgment on Count II which the state court granted. As to Counts III and IV Mr. Forkwar filed a line of dismissal without prejudice. The jury returned a verdict in favor of Mr. Forkwar and against Mr. Mahdi concerning Count I, negligence.

Mr. Forkwar contends the issue in the prior state court adjudication and the issue in the present litigation before this Court are identical.

Inasmuch as Defendant, Empire is contractually obligated to indemnify Mahdi for negligent acts while operating his vehicle for a non-business use, the resolution of the question whether Mahdi was in fact engaged in a nonbusiness use of his vehicle is dispositive of the instant litigation.

Pl.'s Mem. at 9.

At the close of Plaintiff's evidence as to the issue of agency, Defendant, J J Logistics, Inc. moved for judgment. The Court granted its motion. In short, the issue of whether Mahdi was operating his vehicle for a business or non-business use was decided in the prior adjudication.

Id. at 11 — 12 (citation omitted) (footnote omitted).

Empire rejects Mr. Forkwar's assertion that the resolution of the respondeat superior claim in the prior adjudication is dispositive of the coverage issue in the present litigation.

[A] party seeking to prevail on a common law claim for respondeat superior must demonstrate a much greater level of control by an employer than what Empire must prove here to demonstrate that Mahdi was operating his tractor "in the business of" J J Logistics. Because the standards are different, the judgment obtained by J J Logistics in the Underlying Action cannot be binding on Empire here.

Def.'s Mem. at 13.

[With regard to the "Business Use exclusion" provision in the policy issued by Empire], as long as Mahdi was operating his vehicle in furtherance of the commercial interests of J J Logistics, the exclusion is applicable. The issue was not being litigated in the Underlying Action. Thus, the judgment in the Underlying Action cannot serve as a basis to argue that collateral estoppel bars Empire from litigating the issue of the applicability of the business use exclusion here.

Id. at 15.

The Court concurs with Defendant. In asserting a claim of respondeat superior Mr. Forkwar needed to demonstrate in the prior adjudication that Mr. Mahdi was an employee or agent of J J Logistics, that at the time of the accident Mr. Mahdi was performing duties as the employee of J J Logistics, that J J Logistics is responsible for the acts of its employee Mr. Mahdi, and that J J Logistics controlled and directed the work Mr. Mahdi performed. Oaks v. Connors, 339 Md. 24, 30-31, 660 A.2d 423, 426 (1995). No such evidence was presented during the prior adjudication. To the contrary the evidence presented during the prior adjudication was that Mr. Mahdi was an independent contractor for J J Logistics. See Def.'s Mem., Ex. B (Independent Contractor Agreement of 9/12/03 between J J Logistics Inc. and Mr. Mahdi). The doctrine of r espondeat superior is not applicable to an independent contractor.

Moreover the issue of whether a principal-agent relationship existed between J J Logistics and Mr. Mahdi is different from whether the "Business Use exclusion" provision of Empire's policy would preclude coverage of Mr. Mahdi's use of the vehicle at the time his vehicle struck Mr. Forkwar's. The Court of Special Appeals of Maryland has found the "Business Use exclusion" provision of Empire's policy is not ambiguous. Empire Fire Marine Ins. Co. v. Liberty Mut. Ins. Co., 117 Md. App. 72, 100 n. 14, 699 A.2d 482, 495 n. 14 (1997). In Maryland "when an insurance policy which apparently has had a nationwide use and has been judicially constructed in many states, the parties to the insurance agreement adopt the policy with the uniform judicial construction accorded." Id. at 96, 699 A.2d at 493 (citing Stanley v. American Motorists Ins. Co., 195 Md. 180, 73 A.2d 1 (1950)). Other courts have construed the "Business Use exclusion" provision of the insurance for non-trucking use, specifically the phrase "used in the business of anyone to whom the `auto' is leased or rented[,]" Def.'s Mem., Ex. A at 28, as "clearly refer[ring] to occasions when the truck is being used to further the commercial interests of the lessee." Empire Fire Marine Ins. Co. v. Brantley Trucking, Inc., 220 F.3d 679, 682 (5th Cir. 2000). That meaning of the "Business Use exclusion" provision of the non-trucking policy will be applied by this Court. In conclusion the Court finds Mr. Forkwar fails to establish the first element of collateral estoppel under Maryland law.

For the second element of collateral estoppel Mr. Forkwar must demonstrate there was a final judgment on the merits. Mr. Forkwar argues that, by the state court entering judgment in favor of J J Logistics, this action is tantamount to a final judgment on the merits. Pl.'s Mem. at 12. Specifically Mr. Forkwar contends the state court decided, with its judgment in favor of J J Logistics, that Mr. Mahdi was operating his truck for a non-business purpose and therefore Empire, as the insurer of Mr. Mahdi when operating his vehicle for a non-business purpose, must satisfy the judgment entered in favor of Mr. Forkwar and against Mr. Mahdi.

Empire argues the final judgment from the state court was limited to the issue of respondeat superior, not whether at the time of the accident, Mr. Mahdi, an independent contractor, was operating his tractor in the business of J J Logistics or not. This Court concurs.

When Mr. Wampler, counsel for J J Logistics, moved for judgment in the prior proceeding, Mr. Wampler asserted, "There's no evidence at all that my client was the principal and that Mr. Mahdi was his agent at the time of this accident." Def.'s Mem., Ex. C (Tr. 1-69:13 — 15). The state court made the following findings.

[T]he Court finds that [Mr. Forkwar] has failed to establish a prima facie case of agency against J J Logistics and that [Mr. Forkwar] failed to show that Mr. Mahdi was operating the vehicle on behalf of J J Logistics or in the furtherance of J J Logistics' business. So therefore judgment is granted in favor of J J Logistics, Inc., as to Count 2 [Respondeat Superior].

Id., Ex. C (Tr. 1-69:24 — 1-70:5).

The state court's finding that Mr. Mahdi was not operating the vehicle on behalf of J J Logistics is based on the only evidence presented, the testimony of J J Logistics' principal, Marcus Johnson. During argument on J J's motion for judgment, Mr. Forkwar's counsel acknowledged receiving, that morning of the trial, a copy of the independent contractor agreement between Mr. Mahdi and J J Logistics. See id., Ex. C (Tr. 1-68:11 — 13). The state court entered a final judgment on the merits in favor of J J Logistics but that judgment pertains to Count II, a respondeat superior claim, not to whether the "Business Use exclusion" provision of Empire's policy is applicable. The Court thus finds Mr. Forkwar fails to establish the second element of collateral estoppel.

"Was the party against whom the plea is asserted a party or in privity with a party to the prior adjudication?" Colandrea, 361 Md. at 391, 761 A.2d at 909, is the third element of collateral estoppel Mr. Forkwar must establish. Mr. Forkwar asserts, if Empire had defended its insured (Mr. Mahdi), Empire would, as a party to the action, had the right to examine witnesses, present evidence and file an appeal if an unfavorable decision was rendered. In the alternative Mr. Forkwar claims that Empire was in privity with Mr. Mahdi, a party to the action, because as the insurer Empire had an obligation to defend Mr. Mahdi.

Empire denies that it is either a party to the prior state court proceeding or in privity with a party to the prior state court proceeding. "It is beyond dispute that Empire was not a party to the Underlying Action and that it neither participated in nor controlled the Underlying [A]ction." Def.'s Mem. at 11. With regard to privity with a party to the prior adjudication, Empire contends Mr. Forkwar improperly relies on Lake v. Jones, 89 Md. App. 579, 598 A.2d 858 (1991). "In Lake the insurer filed a subrogation action and was therefore `standing in the shoes' of its insured. Thus, the Court found that there was privity between the insurer and insured. Here, Empire's interest in proving the applicability of the Business Use exclusion is divergent from Mahdi's interest that coverage be found to be applicable." Def.'s Mem. at 12. The Court concurs. Empire was neither a party in the prior adjudication nor in privity with a party to the prior adjudication. Mr. Forkwar fails to establish the third element.

The final element Mr. Forkwar must prove for collateral estoppel to preclude Empire from re-litigating the issue decided by the state court is, "[w]as the party against whom the plea is asserted given a fair opportunity to be heard on the issue?" Colandrea, 361 Md. at 391, 761 A.2d at 909. Mr. Forkwar notes that Empire resisted repeated requests, by three distinct parties in the prior adjudication, of honoring its contractual obligation to defend Mr. Mahdi. Pl.'s Mem. at 13. An insurer, such as Empire, has a duty to defend when there exists the potentiality that the policy will cover the claim.

Under the potentiality rule, the insurer will be obligated to defend more cases than it will be required to indemnify because the mere possibility that the insurer will have to indemnify triggers the duty to defend." Litz v. State Farm Fire Cas. Co., 346 Md. 217, 22[5] (1997) (Citation[] omitted). That there existed a potentiality that a finder of fact could find that Mahdi was operating his vehicle for a non-business purpose cannot be credibly questioned. Defendant, Empire's failure to defend Mahdi is inexplicable.

Pl.'s Mem. at 14.

Mr. Forkwar further asserts that if this Court finds Empire's "Business Use exclusion" provision is applicable, Mr. Mahdi is render uninsured contrary to Maryland law. Relying upon Salamon v. Progressive Classic Insurance Co., 379 Md. 301 (2004), Empire owes Mr. Mahdi at least the statutory minimum level of coverage. Thus Empire had a duty to defend Mr. Mahdi. See Pl.'s Mem. at 14-15.

Empire acknowledges receiving multiple requests from Mr. Forkwar to appoint counsel for Mr. Mahdi and appear at the state court trial. These requests by Mr. Forkwar are not however substitutes for "Empire having the opportunity to litigate its coverage defenses in the Underlying Action." Def.'s Mem. at 11. Empire contends, since it was not a party at the prior proceeding, it did not have a full and fair opportunity to litigate the issue of whether Mr. Mahdi was operating his tractor in the business of J J Logistics when the accident occurred. Moreover Empire asserts J J Logistics' motion for judgment was not only unopposed but encouraged by Mr. Forkwar. In short the issue of the application of the "Business Use exclusion" provision of Empire's policy was neither actually litigated nor fully adjudicated in the prior proceeding. Id. at 12.

Additionally Empire argues Mr. Forkwar's reliance on Salamon is misplaced. The Salamon case concerns a personal automobile insurance policy covering the use of a personal automobile. In this case Empire's commercial policy provided coverage to Mr. Mahdi when Mr. Mahdi was not using the tractor in the business of another entity. When Mr. Mahdi was using his tractor in the business of another entity such as J J Logistics, under federal law J J Logistics was responsible for any accident that occurred.

[U]nlike in Salamon, where enforcement of the so called "pizza exclusion" would have rendered the negligent driver uninsured, here, J J Logistics was required by law to maintain insurance to provide coverage in this exact scenario. The fact that [Mr. Forkwar] failed to explore this issue in the Underlying Action, and failed to challenge J J Logistics about the fact that Mahdi was driving under J J Logistics' I.C.C. numbers at the time of the accident, and was driving the tractor while it was leased to J J Logistics, does not require Empire to provide coverage where it was specifically excluded.

Def.'s Mem. at 17.

In his reply Mr. Forkwar argues that he conducted his trial consistent with the information he received during the discovery process. "Nothing was produced that was inconsistent with Defendant, J J Logistics, Inc.'s position as it developed at trial." Pl.'s Reply at 2. In its Reply Empire notes, "[i]n both his sworn response to the questionnaire and in his recorded statement, Mahdi stated that at the time of the accident, his tractor was leased to J J." Def.'s Reply at 2. Empire further asserts, "Empire's investigation revealed that, as construed by multiple courts across both state and federal jurisdictions, Mahdi was operating his tractor in the business of J J, an entity to whom it was leased, at the time of the accident. Therefore, the `Business Use' exclusion in the Empire policy applied, and Empire had no duty to defend or indemnify Mahdi." Id.

The Court finds, based on Empire's internal investigation that Mr. Mahdi was operating the tractor in the business of J J Logistics at the time of the accident, Empire declined to defend Mr. Mahdi. Because Empire declined to defend Mr. Mahdi and thus did not enter its appearance at the prior proceeding, Empire was not given an opportunity to be heard on the issues of the applicability of the "Business Use exclusion" provision. Mr. Forkwar has failed to establish the fourth and final element for collateral estoppel to bar Empire from litigating the issue of coverage. The Court therefore finds Empire is not collaterally estopped by the state court's judgment in favor of J J Logistics.

B. Whether the "Business Use" exclusion provision applies to Mr. Forkwar's claim

Empire argues that, at the time of the accident, Mr. Mahdi was operating the tractor in the business of J J Logistics, and therefore pursuant to the "Business Use exclusion" provision of the non-trucking policy, Empire is not responsible for providing coverage. Empire is thus entitled to summary judgment.

In his Reply Mr. Forkwar contends, because Mr. Mahdi was traveling toward a food establishment to purchase a meal when the accident occurred, Mr. Mahdi was engaged in the non-business use of his tractor. Moreover, because Mr. Mahdi had not been told what load he would be hauling and because he had not punched in at the Giant warehouse, Mr. Mahdi was engaged in the non-business use of his tractor when the accident occurred. "Mahdi had not been engaged in the business of J J Logistics, Inc. since he punched the clock and left his last assignment at Giant. He did not intend to again engage in its business until after he ate his lunch, and would not only begin doing so after he again punched the clock in at Giant." Pl.'s Reply at 5. In short, Mr. Forkwar asserts Mr. Mahdi was engaged in the non-business use of his tractor and therefore the "Business Use exclusion" provision of Empire's policy is not applicable.

In its Reply Empire contends, although Mr. Mahdi did not have the trailer attached to his tractor at the time of the accident, he was nonetheless furthering the interest of J J Logistics by traveling toward the Giant warehouse to pick up a load for delivery, even though Mr. Mahdi had not yet reached his destination when the accident occurred. The fact that Mr. Mahdi planned to stop and purchase lunch before arriving at the Giant warehouse and additionally the fact that Mr. Mahdi had not yet punched in at the Giant warehouse are irrelevant. The fact remains, when Mr. Mahdi began operating his tractor on November 26, 2004, he was furthering the business interest of J J Logistics with the scheduled pick up of a load at the Giant warehouse. Therefore the "Business Use exclusion" provision applies.

The Court has reviewed several cases on this issue and finds the case law supports Empire's assertions. In the case of Mahaffey v. General Security Insurance Co., 543 F.3d 738 (5th Cir. 2008), Wynn, on behalf of First Coast Intermodal Service ("First Coast") had hauled a load from Kentucky to Louisiana. After delivering the load Wynn called the First Coast dispatcher and was advised to take the rest of the night off and call First Coast in the morning to learn if another load needed to be delivered. Wynn decided to drive to a motel for the night. On his way to the motel Wynn's tractor was involved in an accident with a vehicle operated by Mahaffey. Wynn had a policy with Redland Insurance Company ("Redland") at the time of the accident. The Redland policy provided coverage for Wynn's tractor under certain circumstances. The coverage had a series of endorsements and exclusions including a non-trucking use endorsement. That endorsement excluded coverage when the covered vehicle was used to carry property in any business or used in the business of anyone to whom the vehicle is rented.

The Court of Appeals for the Fifth Circuit determined that Wynn was operating his tractor in the business of First Coast at the time of the accident. "Wynn was furthering First Coast's commercial interests to have a driver on standby and available to take a load the next day, regardless of whether one actually became available." Mahaffey, 543 F.3d at 743. The Fifth Circuit further observed, "driving to a motel far from home in order to sleep to be adequately rested, when asked to remain in the area to see if a load becomes available, is a work-related function for a commercial driver because commercial drivers are required to have a certain number of rest hours between hauls." Id.

The facts of Auto-Owners Insurance Co. v. Redland Insurance Co., 549 F.3d 1043 (6th Cir. 2008) are similar to Mahaffey. On behalf of Everhart Trucking, Gale drove a load from Ohio to Michigan. Upon completing his delivery late that night, Gale left a voice mail message informing Everhart Trucking that he finished his delivery and would now find a place to sleep for the night. Gale indicated he would do more work for Everhart Trucking the following day but requested that the assignment not be too early in the morning. While driving toward his destination that night, Gale fell asleep behind the wheel of his tractor, colliding with another vehicle, killing the driver. At the time of the accident Gale had a policy with Redland. When Gale and his employer were sued, Redland denied coverage and refused to defend Gale and his employer. The other carrier tendered a defense, settled the suit, obtained an assignment of claims from Gale and his employer and then filed a lawsuit against Redland alleging breach of its duty to defend.

Considering the "in the business" exclusion of Redland's policy issued to Gale, the Court of Appeals for the Sixth Circuit noted that Gale "was not engaged in some frolic and detour, heading somewhere for his own purpose and no other" at the time of the accident. Auto-Owners, 549 F.3d at 1045. The Sixth Circuit pointed out that other courts have found a driver is operating "in the business" of a carrier when the driver is traveling in the vehicle to find a place to sleep. Second, the Sixth Circuit commented about Gale's anticipation of receiving instructions from the carrier about another load the following morning. "Reasonably anticipating an order for the next day, positioning oneself for an order for the next day or getting some necessary sleep after a long day all serve the commercial interests of a motor carrier." Id. at 1046. The Sixth Circuit affirmed the lower court's judgment.

In the case of Empire Fire and Marine Insurance Co. v. Brantley Trucking, Inc., 220 F.3d 679 (5th Cir. 2000), Harris, a driver, had arrived the night before at the Blue Flash Express ("Blue Flash") terminal yard waiting for cargo to transport the following morning. While waiting for that cargo, Harris decided to have his truck serviced. After leaving the service center to return to the Blue Flash yard, Harris' truck collided with another vehicle.

There were two insurance policies in effect at the time of the accident. Blue Flash had an insurance policy with Reliance National Indemnity Company ("Reliance") covering Blue Flash as a transporter for trucking operations. Harris, individually, had a policy with Empire Fire and Marine Insurance Company ("Empire") that provided coverage for non-trucking operations of Harris' truck. Empire's policy contained a "Business Use exclusion" provision. The Fifth Circuit found the "Business Use exclusion" provision of Empire's non-trucking policy is plain. The Fifth Circuit determined

The portion of the exclusion which we are concerned with in this case "while the covered `auto' is used in the business of anyone to whom the `auto' is leased or rented[]" — clearly refers to occasions when the truck is being used to further the commercial interests of the lessee. This was precisely the case here, where Harris was only biding his time while the cargo loaded, had the truck maintenanced, and was en route back to Blue Flash's yard to pick up the load when the accident occurred.

Id. at 682 (citations omitted).

The Fifth Circuit found the undisputed facts demonstrated Harris' actions were in furtherance of the business of Blue Flash. The Fifth Circuit noted however "[a]lthough Harris' actions were placed within Blue Flash's commercial interests, had he been out pursuing leisurely engagement, he would not be `in the business of' Blue Flash." Id. (citation omitted).

Returning to the facts of this case Mr. Mahdi was neither "pursuing leisurely engagement" nor "engaged in some frolic and detour, heading somewhere for his own purpose and no other" when his truck collided with Mr. Forkwar's vehicle. Mr. Mahdi had received instructions from J J Logistics to pick up a load at the Giant warehouse. Although Mr. Mahdi had decided to stop for a meal before reporting to the Giant warehouse, the only reason why Mr. Mahdi was operating his vehicle at the time of the accident was in furtherance of J J Logistics' business.

The "Business Use exclusion" provision of Mr. Mahdi's non-trucking policy is identical to the "Business Use exclusion" provision of Mr. Harris' non-trucking policy in the Brantley Trucking case. Empire is the insurer of Mr. Mahdi and was the insurer of Mr. Harris in the Brantley Trucking case. As noted previously this Court finds the language of the "Business Use exclusion" provision is plain and unambiguous. Moreover the Court finds the "Business Use exclusion" provision of Mr. Mahdi's policy applies and Empire is not required to indemnify Mr. Forkwar.

CONCLUSION

For the foregoing reasons the Court finds there are no genuine issues as to any material fact and Empire is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). An Order will be entered separately.

September 20, 2010

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