Philadelphia Indemnity Insurance Company v. Bogel

269 A.3d 992

PHILADELPHIA INDEMNITY INSURANCE COMPANY, Intervenor,

v.Kathryn E. BOGEL; Patrick Nugent; Kenneth Bogel; Amanda Elise Rainey; Kristlyn Araujo; Joseph Johnson; Cassady Araujo-Johnson, Minor, by her next friends, Joseph Johnson and Kristlyn Araujo; Leland Johnson, Minor, by his next friends, Joseph Johnson and Kristlyn Araujo; Felix; Johnson, Minor, by his next friends, Joseph Johnson and Kristlyn Araujo; Dana Christianson; Dean DiPietro; Cecilia Peterson ; Lauren Latchford; Kelly McGarvey; John Smith; Yaron Miller ; Barbara Oliveira ; Jeffrey Darrion Siler; Sarah Pitcock ; Carol Rethemeyer; David Rethemeyer; Rebecca Seward; Mark Spires; Christopher Spyrzynski; Amy Stanton; Michael Stanton; Jacinto Vera; Rita Vera; and Sarah Heaton, Wendy J. Gigler, Plaintiffs,

v.Jolly Trolley Transportation Service, LLC, t/a Jolly Trolley ; a/k/a Jolly Trolley of Rehoboth Beach ; Jolly Trolley Limousine Service LLC, t/a Jolly Trolley; a/k/a Jolly Trolley of Rehoboth Beach; formerly known as Jolly Trolley Car Service, LLC; Transit U., Inc., t/a Jolly Trolley; a/k/a Jolly Trolley of Rehoboth Beach; David O. Hastings; Christine D. Hastings, David Turner Hastings, and Thomas Bernard Dowd, Defendants.

C.A. NO. K18C-09-024 JJC

Superior Court of Delaware.

Submitted: October 1, 2021

Decided: December 6, 2021

Michael J. Malkiewicz, Esquire, and Robert J. Taylor, Esquire, BARROS, MCNAMARA, MALKIEWICZ AND TAYLOR, P.A., Dover, Delaware; and Stephen A. Markey, III, Esquire (pro hac vice), and Amy M. Orsi, Esquire (pro hac vice), LAW OFFICES OF MARKEY AND ORSI, Towson, Maryland, Attorneys for the Bogel Plaintiffs.

Scott E. Chambers, Esquire, SCHMITTINGER AND RODRIGUEZ, Dover, Delaware; and Irwin R. Kramer, Esquire (pro hac vice), and James M. Connolly, Esquire (pro hac vice), KRAMER AND CONNOLLY, Reisterstown, Maryland, Attorneys for Plaintiff Wendy Gigler.

Daniel Bennett, Esquire, MINTZER, SAROWITZ, ZERIS, LEDVA AND MEYERS, LLP, Wilmington, Delaware, Attorney for the Defendants, Transit U, Inc., Jolly Trolley Transportation Services, LLC, David O. Hastings, Christine D. Hastings, David T. Hastings, and Thomas Dowd.

Jeffrey A. Young, Esquire, YOUNG AND MCNELIS, Dover, Delaware, Attorney for the Defendant, Jolly Trolley Limousine Service, LLC and Transit U, Inc.

Bruce W. McCullough, Esquire, BODELL BOVE LLC, Wilmington, Delaware; and Ronald P. Schiller, Esquire (pro hac vice), Matthew N. Klebanoff, Esquire (pro hac vice), and Thomas N. Brown, Esquire (pro hac vice), HANGLEY ARONCHICK SEGAL PUDLIN AND SCHILLER, Philadelphia, Pennsylvania, Attorneys for Intervenor Philadelphia Indemnity Insurance Company.

Clark, R. J.

This case arises from a 2016 accident on U.S. Route 1 Southbound, south of Dewey Beach, Delaware. When transporting thirty-one passengers to a wedding reception, a trailer marketed as the "Jolly Trolley" flipped and severely injured many of its passengers.

The insurance company that intervenes in this case insured two of the several defendants. Close to the eve of trial, the company withdrew its defense of those two defendants. Then, absent the insurance company's participation, the plaintiffs and defendants settled the case through consent judgments in the combined amount of $6.1 million.

This decision addresses the insurance company's obligation to pay those consent judgments in favor of twenty-nine injured plaintiffs (the plaintiffs and defendants who settled are hereinafter collectively referred to as the "Settling Parties"). The Settling Parties seek full summary judgment and a declaration that the insurance company must pay up to $5 million to satisfy unpaid portions of the judgments. In response, the insurance company opposes full summary judgment. It seeks partial summary judgment, however, on a single issue. It requests a declaration that it need not pay the judgment on behalf of one of its two named insureds.

To decide these cross-motions, the Court must examine three issues. First, the Court must determine whether a $5 million commercial policy requires the company to provide indemnity coverage for the vehicles involved in the accident. That question turns on whether the policy's Commercial Automobile Elite Endorsement (the "Elite Endorsement") expands coverage to require the insurer to pay.

Second, if the "Elite Endorsement" did not expand the insurer's coverage obligation to indemnify its insureds, the Court must examine a federal motor carrier endorsement (the "MCS-90B" or "federal endorsement") to the policy. That endorsement may require the insurance company to perform as a surety and pay the judgment notwithstanding the lack of indemnity coverage.

Third, if either the Elite Endorsement or the MCS-90B applies, the Court must determine if the consent judgments are enforceable against the insurance company. To do so, the Court must determine whether its insureds consented to the judgments fraudulently, collusively, or in bad faith.

For the reasons below, the plain language of the policy controls the first two steps of the Court's analysis. First, the Elite Endorsement does not provide coverage for the $6.1 million in consent judgments. As to the second step, the MCS-90B nevertheless requires the insurance company to pay up to $5 million to satisfy the consent judgments entered against one of its insureds. Because the insurance company identifies no material issue of fact that supports its claim that the Settling Parties fraudulently, collusively, or in bad faith settled the matter, the consent judgments are valid and enforceable against the insurance company.

I. RELEVANT BACKGROUND

The cross-motions address coverage issues that arose during an underlying personal injury suit. To decide these motions, the Court must consider the facts of record in the underlying tort case ("Part I" of the litigation) and supplemental facts developed during discovery in the coverage portion of the case ("Part II" of the litigation). Furthermore, many of the facts of record relevant to the Court's coverage decision arise from the procedural actions taken by the parties at the end of Part I. Finally, as necessary background, the Court will describe the two relevant policy endorsements. The language in the Elite Endorsement controls the first question. The language of the MCS-90B, and the federal regulations that create it, answer the second question.

A. The Summary Judgment Record and Procedural History

The recited facts are those included in the summary judgment record. Because there are cross-motions that implicate different issues, the Court recites the corresponding facts of record in the light most favorable to the non-moving party as to each issue.

On October 1, 2016, Defendant Thomas Dowd drove a Jolly Trolley van and trailer with thirty-one wedding guests southbound on Coastal Highway between Dewey Beach and the Indian River Inlet. Mr. Dowd intended to drive the passengers to a wedding reception at the Indian River Life Saving Station. When doing so, he accelerated to approximately forty miles per hour. At that point, the trailer holding the passengers began to fishtail. It then flipped. The accident injured many of the passengers, some severely.

Prior to the day of the accident, the wedding planner had contracted with Defendant Transit U. Inc. ("Transit") to transport the guests on the Jolly Trolley. At the time of the accident, the three defendant business entities traded collectively as "Jolly Trolley." Those related entities included (1) Transit, (2) Jolly Trolley Limousine Service, LLC ("Limo"), and (3) Jolly Trolley Transportation Service, LLC ("Transportation"). The Hastings family, David O. Hastings, Christine D.L. Hastings, and David T. Hastings (collectively the "Hastings") were the stockholders of Transit. Transit, in turn, was the sole member of the other two defendant limited liability companies, Limo and Transportation.

Transit negotiated all contracts, paid bills, and maintained the joint office space used by the three business-entity defendants. Transit also maintained a website on behalf of itself and the other two businesses. Transit also employed the drivers for all three entities. Transit leased vehicles from Transportation and Limo to fulfill many of its contracts.

On the day of the accident, Transit leased the Jolly Trolley van and trailer from Transportation. Mr. Dowd, as Transit's employee, drove the Jolley Trolley that day. Limo did not directly or indirectly participate in the events culminating in the accident.

Three insurance carriers provided potential coverage for this incident. First, National Indemnity Company ("NICO") insured Transit and Transportation with a $1 million liability policy. Second, Trumble Insurance Company provided the van's driver, Mr. Dowd, with $30,000 in coverage. The third carrier, Philadelphia Indemnity Insurance Company ("PIIC") provided two of the Jolly Trolley entities (Transit and Limo) with $5 million in liability coverage.

The PIIC policy provided indemnity and defense coverage to Transit and Limo for scheduled vehicles only. The policy did not list the van and trailer involved in the accident. The Settling Parties, however, contend that the policy's Elite Endorsement expands PIIC's obligation to provide coverage to Transit and Transportation for the accident.

Furthermore, the PIIC policy imposes a separate suretyship obligation upon PIIC to cover non-scheduled vehicles. The parties do not dispute that the MCS-90B endorsement that attaches to the policy may require PIIC to pay judgments on behalf of Limo. Among the defendants, however, Limo had the most questionable liability. In fact, other than possible alter ego liability (not cognizable in a court of law), there is no evidence of record supporting that Limo contributed to the accident or the injuries in this case. Accordingly, the central dispute in this case turns on whether the MCS-90B covers Transit.

By July 2018, the defendants’ broker had provided notice to PIIC regarding the injured parties’ claims. At that point, PIIC...