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Spirit Commercial Auto Risk Retention Group, Inc. v. Kailey

United States District Court, E.D. Missouri, Eastern Division

July 10, 2017

SPIRIT COMMERCIAL AUTO RISK RETENTION GROUP, INC., Plaintiff(s),
v.
MIKE KAILEY, et al., Defendant(s).

          MEMORANDUM AND ORDER

          E. RICHARD WEBBER SENIOR UNITED STATES DISTRICT JUDGE.

         This matter comes before the Court on Spirit Commercial Auto Risk Retention Group, Inc.'s Motion for Summary Judgment [ECF No. 63], Lisa Vazquez-Kailey's Motion for Summary Judgment [ECF No. 67], and Mike Kailey's Motion for Summary Judgment [ECF No. 74].

         I. BACKGROUND

         On July 14, 2015, Plaintiff Spirit Commercial Auto Risk Retention Group, Incorporated (“Spirit”) filed a complaint for declaratory judgment against Defendants Lisa Vazquez-Kailey (“Vazquez-Kailey”), Mike Kailey doing business as Kailey Truck Line (“Kailey”), and Vikram Shah (“Shah”), asking this Court to determine if Spirit is required to defend or indemnify Kailey and Shah in connection with any claims asserted against them in a separately filed lawsuit pursuant to an auto liability insurance policy issued by Spirit to Kailey.[1] The underlying lawsuit in this matter was filed by Vazquez-Kailey against Kailey and Shah on March 13, 2015, and is presently pending before Judge Ronnie L. White in this District.[2]

         In this matter, the parties have filed three summary judgment motions, all requesting the Court determine whether the auto liability insurance policy (“the policy”) covers the claims in the underlying lawsuit. The undisputed facts are as follows.

         Gurpreet Kailey (“the decedent”), husband of Vazquez-Kailey, was killed in a vehicle collision on April 20, 2014. ECF No. 69, ¶ 1; 76 ¶ 1. The decedent was a passenger in the sleeper berth of a commercial tractor-trailer, owned by Kailey and driven by Shah. ECF No. 69, ¶ 1; 76 ¶ 1. In 2015, Vazquez-Kailey brought a lawsuit against Kailey and Shah alleging negligent selection and retention of an independent contractor, negligent entrustment, and negligence for the death of the decedent. ECF No. 69, ¶ 2; 76 ¶ 2. At the time of the collision, Kailey was insured under the policy, No. CAC0001201402CA, issued by Spirit, for the time period March 21, 2014, to March 21, 2015. ECF No. 64 ¶ 8; 75¶ 8; 69, ¶ 3; 76 ¶ 3. The policy included coverage for the tractor and trailer operated by Shah at the time of the collision. ECF No. 69, ¶ 4; 76 ¶ 4. The policy contains a general grant of coverage and two exclusions at issue in this matter. ECF No. 69, ¶¶ 5, 8; 76 ¶¶ 5, 8. It also contains a MCS-90 Endorsement.[3] ECF No. 69, ¶ 11; 76 ¶ 11.

         Kailey Truck Line (“KTL”) is an assumed name for a motor carrier sole-proprietorship owned by Kailey that hauls vegetables from California to New York and household goods from the East coast to California. ECF No. 69, ¶¶ 13, 14; 76 ¶¶ 13, 14. The home office is located in Las Vegas, Nevada, but Kailey used a friend's California address to secure cheaper license plates for his commercial trucks. ECF No. 69, ¶ 16; 76 ¶ 16. In April 2014, KTL had six or seven drivers. ECF No. 69, ¶ 17; 76 ¶ 17. Most drivers were paid by the trip; some were paid by mileage. ECF No. 69, ¶ 19; 76 ¶ 19. All KTL drivers operated under Kailey's Department of Transportation number. ECF No. 69, ¶ 21; 76 ¶ 21.

         The decedent began working for Kailey in July 2013 and Shah began in September or October 2013. ECF No. 69, ¶¶ 24, 27; 76 ¶¶ 24, 27. Shah and the decedent drove regular routes together as a driving team in the same truck. ECF No. 64, ¶ 4; 75 ¶ 4. They each entered into a Driver/Carrier Agreement with Kailey. ECF No. 69, ¶¶ 29, 30; 76 ¶¶ 29, 30. The agreements provided: the driver would pay a $1, 000 deductible in the event of an accident; the driver would be charged $0.60 per mile for leaving an assigned area without being dispatched; the driver could not use KTL checks or comcards for personal use without prior authorization; the driver was responsible for the load, cargo invoices, costs associated with overheating, freezing or other damage, and for replacing any KTL equipment lost, stolen, misplaced, or damaged; KTL was not responsible for costs incurred during layover periods, including motels or food; each driver was responsible for paying all FICA, social security taxes, and other employment-related taxes to federal and state governments, but KTL would provide at 1099 at the end of a year; and drivers must give two weeks' notice upon termination of the agreement. ECF No. 64, ¶ 22; 69, ¶ 32; 76 ¶ 32. These agreements were intended to be the entire agreement between the driver and KTL, there were no other contracts. ECF No. 69, ¶¶ 31, 34; 76 ¶¶ 31, 34.

         Beyond having a commercial driver's license and a road test, KTL drivers had to pass any insurance guidelines. ECF No. 69, ¶ 39; 76 ¶ 39. KTL did not carry workers' compensation coverage. ECF No. 69, ¶ 36; 76 ¶ 36. Kailey and Shah both believe driving a truck requires a certain degree of skill. ECF No. 69, ¶ 40; 76 ¶ 40. KTL's business depended on the drivers' ability to move freight; it was integral to the business. ECF No. 64, ¶ 26; 75 ¶ 26.

         Shah did not know the difference between an employee and an independent contractor and does not recall Kailey referring to him as either term. ECF No. 69, ¶¶ 45, 46; 76 ¶¶ 45, 46. Kailey stated in his deposition the drivers were independent contractors. ECF No. 74, ¶ 23; 82 ¶ 23. He also stated when drivers were not driving a load for him, they can work with someone else without asking his permission, because they are their own bosses. ECF No. 74, ¶ 24; 82 ¶ 24.

         Kailey did not have any separate company policies on driving time beyond federal regulations. ECF No. 69, ¶ 50; 76 ¶ 50. Drivers turned in the logbooks for review by Kailey, who reviewed them to confirm they did not drive over the hours allowed, slept while off-duty, conducted vehicle inspections, and complied with other government regulations. ECF No. 38, ¶ 4; 69, ¶ 51; 75 ¶ 38; 76 ¶ 51. After each trip, Kailey would collect from the drivers weigh tickets, bills of lading, log books, vehicle inspection reports, and receipts for maintenance expenses. ECF No. 64, ¶ 39; 75 ¶ 39. He would also speak with them regarding following the rules if a company policy had not been followed. ECF No. 64, ¶ 40; 75 ¶ 40. The practice was to give verbal and written warnings before termination for log book violations. ECF No. 64, ¶ 41; 75 ¶ 41.

         Drivers did not receive any paid leave, only unpaid leave. ECF No. 69, ¶ 53; 76 ¶ 53. Shah would notify Kailey in advance if he was going to take time off for vacation. ECF No. 64, ¶ 42; 75 ¶ 42. A driver could refuse to take a given load at any time without fear of losing additional loads. ECF No. 69, ¶ 54; 76 ¶ 54. Payment was made per trip. ECF No. 69, ¶ 56; 76 ¶ 56. If a truck broke down causing a delay, drivers were not paid extra for any lost time. ECF No. 69, ¶ 58; 76 ¶ 58. The decedent and Shah purchased their own global positioning system, which was not monitored by Kailey. ECF No. 69, ¶¶ 61, 62; 76 ¶¶ 61, 62. Kailey had not charged a driver for leaving an assigned area in seventeen years. ECF No. 69, ¶ 63; 76 ¶ 63.

         Drivers could keep trucks wherever they were; the decedent kept the truck he used near his apartment. ECF No. 69, ¶¶ 64, 65; 76 ¶¶ 64, 65. Drivers were required to check in with Kailey every morning and evening and in the case of an emergency. ECF No. 64, ¶ 30; 75 ¶ 30. Drivers could be charged $25 for failing to call and check in. ECF No. 69, ¶ 66; 76 ¶ 66. During these calls, Kailey would ask the drivers how they were doing, where they were, and how the vehicle was operating. ECF No. 64, ¶ 30; 75 ¶ 30. Drivers would call Kailey when the trucks needed repairs. ECF No. 69, ¶ 70; 76 ¶ 70. Kailey would also advise the drivers on which route was better based on the weather. ECF No. 64, ¶ 28; 75 ¶ 28. Kailey paid for all fuel and repair expenses for the trucks, and if drivers used their own funds, they would be reimbursed. ECF No. 69, ¶ 71; 76 ¶ 71. Drivers were given a credit card for fuel expenses for use at Pilot and Flying J stations which could not be used at any other gas station. ECF No. 64, ¶ 36; 75 ¶ 36. Shah and the decedent performed routine maintenance such as oil changes, brake repairs, adding new tires, and kept a maintenance log for Kailey. ECF No. 64, ¶ 37; 75 ¶ 37.

         The three summary judgment motions filed all concern the same issues which focus on whether the decedent and Shah were ...


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