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PI&I Motor Express, Inc. v. RLI Insurance Co.

United States District Court, N.D. Ohio, Eastern Division

December 27, 2019

PI&I MOTOR EXPRESS, INC., et al., Plaintiffs,
RLI INSURANCE COMPANY, et al., Defendant.



         This matter is before the Court on a motion for judgment on the pleadings filed by Defendant RLI Insurance Company (“RLI”) on July 8, 2019. ECF Dkt. #13. Plaintiffs PI&I Motor Express, Inc., Elite Leasing, Inc., Joseph Kerola, Sr., Pamela Kerola, and JWK Bros., Inc. (collectively “Plaintiffs”) filed an opposition brief on August 6, 2019. ECF Dkt. #18. Both parties filed subsequent reply briefs. ECF Dkt. #s 19, 21, 27. For the following reasons, the Court DENIES Defendant RLI's motion for judgment on the pleadings (ECF Dkt. #13), GRANTS Plaintiffs' motion to amend to add a reformation claim, and DENIES Plaintiffs' alternative request to convert the instant motion into one for summary judgment (ECF Dkt. #18).


         This case concerns insurance coverage for an underlying personal injury lawsuit (“Underlying Lawsuit”) in Allegheny County, Pennsylvania, in which Plaintiffs were named as defendants. In the Underlying Lawsuit, plaintiff Ryan Marshall, Sr. (“Marshall”) sought to recover damages for personal injuries he sustained when a pipe that was being loaded onto a truck fell and crushed his legs. The injuries were so severe that Marshall's legs required amputation. See ECF Dkt. #13 at 2, #18 at 9.

         Plaintiffs, in the instant case, seek defense and indemnity for the Underlying Lawsuit under a policy of commercial general liability insurance that RLI issued to Plaintiff PI&I Motor Express, Inc. (“Motor Express”). RLI defended Plaintiffs in the Underlying Lawsuit under a reservation of rights, and the Underlying Lawsuit has since been settled. ECF Dkt. #13 at 2; #18 at 15; #23.

         A. Parties and Factual Background

         Plaintiff Motor Express is a registered Ohio for-profit corporation that operates a full-service truck and motor carrier business throughout the United States. ECF Dkt. #1-1 at ¶¶3, 16; #13 at 2; #18 at 10. Plaintiffs Elite Leasing, Inc. (“Elite”) and JWK Bros., Inc. (“JWK”) are Ohio corporations, and are affiliates of Motor Express. ECF Dkt. #1-1 at ¶¶ 4-5; #13 at 2. Plaintiff Joseph Kerola, Sr. is president of Motor Express, general manager of Elite, and president of JWK, and Plaintiff Pamela Kerola is Joseph Kerola's wife. ECF Dkt. #1-1 at ¶¶6-7; #13 at 2.

         Dura-Bond Industries (“Dura-Bond”) manufactures and stores large industrial pipes at its facility in Duquesne, Pennsylvania, and it outsources its on-site hauling needs, which fluctuates daily. ECF Dkt. #18 at 10 (citing ECF Dkt. #4-2 at 13, 23). Plaintiffs clarified that Dura-Bond typically used Robert Wallace for its on-site hauling needs. ECF Dkt. #18 at 10 (citing ECF Dkt. #4-2 at 12-14); see ECF Dkt. #4-2 at 8. Around 2007, Wallace entered into an independent contract agreement with Motor Express and began to run his trucks under Motor Express' operating authority. ECF Dkt. #18 at 10 (citing ECF Dkt. #4-3 at 22). Trucks operating under Motor Express' operating authority are driven by independent contractor drivers, drivers of the trucking companies, or drivers provided by professional-employer organizations. ECF Dkt. #18 at 10 (citing ECF Dkt. #1-1 at 6 ¶18). Pursuant to its federal and state regulatory requirements, Motor Express must screen and approve drivers and provide certain safety information and instruction for trucks to be driven under its operating authority. Drivers must also sign an independent contractor agreement which requires drivers to provide their own insurance. ECF Dkt. #18 at 10 (citing ECF Dkt. #1-1 at 6 ¶19; #4-2 at 8-9).

         Dura-Bond hired Motor Express to move freight around its facility using trucks bearing the Motor Express placard and operating under Motor Express' Federal Motor Carrier operating authority. ECF Dkt. #1-1 at ¶ 21; #13 at 3; #18 at 10. Dura-Bond worked directly with Wallace on its daily hauling needs. ECF Dkt. # 18 at 10 (citing ECF Dkt. #4-2 at 12; #4-3 at 23). At times, Wallace did not have sufficient drivers to handle Dura-Bond's workload. In such a case, Wallace would bring in a third party for drivers, including Sam Russell Trucking (“Russell Trucking”). Id. (citing ECF Dkt. #4-2 at 11; #4-3 at 25). Russell Trucking also had an independent contracting agreement with Motor Express to operate its trucks under Motor Express' operating authority. Id. at 11 (citing ECF Dkt. #1-1 at 6 ¶22). Under this arrangement, among other things, Motor Express leased trucks from Russell Trucking to perform the work required by Dura-Bond at its facility. ECF Dkt. #13 at 3 (citing ECF Dkt. #1-1 at 6 ¶22). Motor Express received weekly logs, invoiced Dura-Bond, and then paid Wallace (or third parties such as Russell Trucking) a percentage of the sum received from Dura-Bond. Id. (citing ECF Dkt. #4-2 at 13).

         Ryan Marshall (the underlying plaintiff) was a former Dura-Bond employee, and applied with Russell Trucking to drive its trucks as an independent contractor. ECF Dkt. 13 at 3; #18 at 11; #1-1 at 7 ¶23. Motor Express screened Marshall and approved him as a driver with Russell Trucking for purposes of the work at Dura-Bond, subject to training by Russell Trucking. ECF Dkt. 13 at 3 (citing ECF Dkt. #1-1 at 7 ¶23); #18 at 11. Marshall signed a Driver Lease Agreement with Russell Trucking wherein Marshall noted that he was an independent contractor who was leasing one of Russell trucking's trucks and that he was responsible for securing his own workers compensation coverage. ECF Dkt. #18 at 11 (citing ECF Dkt. #1-1 at 7 ¶24). On or about May 27, 2014, Marshall began driving Russell Trucking's trucks under Motor Express' operating authority. ECF Dkt. #18 at 11 (citing ECF Dkt. #1-1 at 7 ¶¶23-26; #4-2 at 4, 6).

         After his training was completed, Marshall's assigned job at the Dura-Bond facility was to drive truckloads of Dura-Bond pipe across the facility grounds. ECF Dkt. #13 at 3; 18 at 11 (both citing ECF Dkt. #1-1 at ¶ 26). Marshall received his assignments and pay from Russell Trucking, and on-site Dura-Bond personnel[1] instructed Marshall where to transport the loads. Motor Express was not involved in these daily operations and did not pay Marshall. ECF Dkt. #18 at 11 (citing ECF Dkt. #1-1 at ¶ 26; #4-3 at 16).

         On June 27, 2014, while working at the Dura-Bond facility, Marshall sustained injuries that permanently disabled him. ECF Dkt. #13 at 3; #18 at 11. Marshall was standing outside his truck while Dura-Bond personnel loaded pipe onto the truck with a forklift. When a Dura-Bond employee was backing up in the forklift, he bumped into a pipe and the load fell, hitting Marshall and crushing his legs, which had to be amputated. ECF Dkt. #13 at 3; #18 at 11 (both citing ECF Dkt. #1-1 at 7 ¶27).

         Marshall filed several workers' compensation claim administrative petitions against Motor Express, Russell Trucking, and the Pennsylvania Uninsured Employers Guaranty Fund (“UEGF”). ECF Dkt. #13 at 3; #18 at 11-12; #1-1 at 8 ¶29. The UEGF filed a petition to join Dura-Bond to the proceedings, which were consolidated into a single proceeding. ECF Dkt. #13 at 3; #18 at 12; #1-1 at 8 ¶29. Marshall also filed a lawsuit in state court asserting tort liability against Motor Express, Dura-Bond, Wallace, and Russell Trucking and others. ECF Dkt. #18 at 12 (citing ECF Dkt. #1-1 at 9 ¶¶34-36).

         B. Pennsylvania Workers Compensation Proceedings

         The Administrative Law Judge (“ALJ”) in the workers' compensation proceeding found Russell Trucking to be Marshall's immediate employer. However, unbeknownst to Motor Express, Russell Trucking did not have workers compensation insurance. ECF Dkt. #13 at 3; #18 at 12 (citing ECF Dkt. #1-1 at 8 ¶30; #4-2 at 18). The ALJ further found both Motor Express and Dura-Bond to be Marshall's “statutory employers, ” which finding the Pennsylvania Workers' Compensation Appeal Board affirmed. ECF Dkt. #13 at 3; #18 at 12-13; #1-1 at 8 ¶31; #4-3 at 28-29.

         The instant Complaint states that neither Russell Trucking nor Motor Express carried workers compensation insurance in Pennsylvania, but Dura-Bond did. Thus, Dura-Bond, as required by law, has been paying for Marshall's workers compensation claim. ECF Dkt. #1-1 at 8 ¶32. Dura-Bond subsequently asserted a right of indemnity against Motor Express in a civil action in Pennsylvania for the workers compensation costs and expenses it paid to Marshall related to the accident. Id. at 9 ¶33. The status of this suit is unknown.

         C. Underlying Lawsuit: Pennsylvania Civil Action

         Marshall also filed a civil action in Pennsylvania state court against Motor Express and certain related individuals and affiliates, Russell Trucking, Wallace, and Dura-Bond. Marshall sought compensatory and punitive damages for his injuries. The civil action was stayed pending the Workers Compensation Proceeding. ECF Dkt. #18 at 14 (citing ECF Dkt. #1-1 at 9 ¶¶34-36). According to a joint status report filed on September 6, 2019, the parties settled the Underlying Lawsuit during a mediation. ECF Dkt. #23.

         D. RLI Policy

         RLI is an Illinois for-profit insurance company that issues various insurance policies to entities around the United States and in Ohio. ECF Dkt. #1 at 1; #1-1 at 3 ¶8. RLI issued a policy (“RLI Policy”[2]) of commercial general liability insurance to Motor Express for the period from June 1, 2014 to June 1, 2015, under which Plaintiffs seek defense and indemnity for the Underlying Lawsuit. ECF Dkt. #13 at 5; #18 at 15. A copy of the RLI Policy was attached to RLI's Answer and Counterclaim, and therefore, constitute part of the pleadings. ECF Dkt. #13 at 5 (citing Fed. R. Civ. P 10(c)); ECF Dkt. #4-1; see also ECF Dkt. #1-1 (RLI Policy was also attached to the notice of removal). The parties dispute which individuals and entities are insured under the RLI Policy and the Court will address these arguments and specific facts more in depth later in this decision.

         E. Federal Case

         On April 4, 2019, Plaintiffs filed a Complaint in the Court of Common Pleas in Trumbull County, Ohio, which contained seven counts against Defendants RLI and TrueNorth Companies, L.C. (“TrueNorth”). ECF Dkt. #1-1. The Complaint alleges the following counts: (1) declaratory judgment against RLI; (2) anticipatory breach of contract against RLI; (3) negligent misrepresentation against TrueNorth; (4) professional negligence/negligent procurement against TrueNorth; (5) breach of fiduciary duty against TrueNorth; (6) breach of contract against TrueNorth; and (7) unjust enrichment against TrueNorth. Id. By stipulation of the parties, Plaintiffs dismissed with prejudice their instant claims against Defendant TrueNorth after having settled, leaving RLI as the remaining defendant and Counts One and Two pending. ECF Dkt. #s 23, 28, 29.

         On May 6, 2019, RLI removed the case from the Court of Common Pleas to the United States District Court for the Northern District of Ohio. ECF Dkt. #1. On that same day, RLI filed an Answer and Counterclaim against all Plaintiffs. ECF Dkt. #4. On June 6, 2019, the parties consented to the exercise of jurisdiction by a United States Magistrate Judge. ECF Dkt. #9.

         RLI filed the instant motion for judgment on the pleadings on July 8, 2019. ECF Dkt. #13. Plaintiffs filed a response brief in opposition to the motion on August 6, 2019. ECF Dkt. #18. On August 20, 2019, RLI filed a reply brief. ECF Dkt. #19. With permission from the Court, Plaintiffs filed a sur-reply on August 27, 2019, and RLI filed a response to Plaintiffs' sur-reply on September 10, 2019. ECF Dkt. #s 21, 27.


         Federal Civil Rule 12(c) provides that “[a]fter the pleadings are closed - but early enough not to delay the trial - a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). A court reviews a Rule 12(c) motion for judgment on the pleadings under the same standard as a motion to dismiss under Rule 12(b)(6). Fritz v. Charter Twp. of Comstock, 592 F.3d 718, 722 (6th Cir. 2010); Jackson v. Prof'l Radiology Inc., 864 F.3d 463, 465-66 (6th Cir. 2017); Boulger v. Woods, 917 F.3d 471, 478 (6th Cir. 2019).

         Thus, “[f]or purposes of a motion for judgment on the pleadings, all well-pleaded material allegations of the pleadings of the opposing party must be taken as true, and the motion may be granted only if the moving party is nevertheless clearly entitled to judgment.” McGlone v. Bell, 681 F.3d 718, 728 (6th Cir. 2012) (quoting JPMorgan Chase Bank, N.A., v. Winget, 510 F.3d 577, 581 (6th Cir. 2007)). Although a complaint need not contain “detailed factual allegations, ” it does require more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, a complaint survives a motion to dismiss if it “contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662 (2009) (internal quotations omitted). “[A] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Hensley Mfg. v. ProPride, Inc., 579 F.3d 603, 609 (6th Cir. 2009) (quoting Iqbal, 556 U.S. at 678). A motion for judgment on the pleadings “is granted when no material issue of fact exists and the party making the motion is entitled to judgment as a matter of law.” JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577, 582 (6th Cir. 2007) (quoting Paskvan v. City of Cleveland Civil Serv. Comm'n, 946 F.2d 1233, 1235 (6th Cir.1991)).


         Defendant RLI attacks both Counts One and Two that remain pending against RLI, which is the only remaining Defendant in the instant case. RLI's defenses are also reiterated in its Counterclaim against Plaintiffs. Essentially, RLI argues that, based on the Workers Compensation adjudication, Plaintiffs are collaterally estopped from arguing that the underlying plaintiff, Marshall, was not an employee of Motor Express, and, consequently, due to his “employee” status, RLI argues that the Employee Exclusion of the RLI Policy precludes coverage. ECF Dkt. #4 at 9; #13 at 9, 11. RLI further contends that it has no duty to defend or indemnify Plaintiffs in the Underlying Lawsuit. ECF Dkt. #4 at 10; #13 at 15-16.

         B. Employee Exclusion under RLI Policy

         1. Collateral Estoppel

         The parties agree that Ohio law governs the interpretation of the RLI Policy in the instant insurance claim, whereas Pennsylvania law governed the Workers Compensation adjudication and the Underlying Lawsuit. See ECF Dkt. #13 at 15 n.3; #18 at 18. However, RLI asserts that Pennsylvania law governs the “workers compensation issues, ” specifically Marshall's employment status. ECF Dkt. #13 at 15 n.3; #19. RLI relies heavily on Pennsylvania case law to conclude that, because the ALJ in the workers compensation proceeding determined that Motor Express was one of Marshall's “statutory employers, ” Marshall is therefore an “employee” of Motor Express under the RLI Policy, which excludes coverage for “bodily injur[ies]” to an insured's “employee.” ECF Dkt. #13 at 9; see ...

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