United Financial Casualty Company v. Morales

598 F.Supp.3d 1167

UNITED FINANCIAL CASUALTY COMPANY, Plaintiff,

v.Diana MORALES d/b/a Roberg Trucking, Todd M. Lopez, as Personal Representative of the Estate of Erick Eduardo Avila-Grado, Decedent, Yulma Fernandez-Renteria, as Next Friend of Erick Adrian Avila-Fernandez, Dilan Steeven Avila-Fernandez and Yahir Eduardo Avila-Fernandez, minor children, Maria Guadalupe Grado-Sanchez, Patrick Smith, and WPX Energy Permian, LLC, Defendants.

No. CIV 20-0867 RB/CG

United States District Court, D. New Mexico.

Filed April 5, 2022

Meena H. Allen, Kerri Lee Allensworth, Allen Law Firm, LLC, Albuquerque, NM, for Plaintiff.

Chad Inderman, Pedro Leyva, Glasheen, Valles, Inderman & DeHoyos LLP, Lubbock, TX, for Defendant Patrick Smith.

MEMORANDUM OPINION AND ORDER

ROBERT C. BRACK, SENIOR UNITED STATES DISTRICT JUDGE

Plaintiff United Financial Casualty Company (UFCC) issued a New Mexico Commercial Auto Policy to Defendant Diana Morales d/b/a Roberg Trucking (Morales or Roberg Trucking). On July 18, 2018, Roberg Trucking was hired to send a truck to skim oil from water tanks at WPX Energy Permian, LLC's Saltwater Disposal Facility (SWDF). Roberg Trucking sent employee Erick Avila-Grado to the SWDF. Avila-Grado drove a truck with an attached trailer, both of which were covered by the Policy. At the job site, Avila-Grado exited the truck and trailer, went onto a catwalk, and placed a gauge line into a water tank. The gauge line was not attached to the truck or trailer. Because Avila-Grado failed to ground the gauge line, an explosion occurred, killing Avila-Grado and injuring Defendant Patrick Smith.

Relevant here, Smith filed a lawsuit against Roberg Trucking and others in state court. UFCC is defending Roberg Trucking under a reservation of rights and filed a declaratory judgment action in this Court seeking a determination of whether the Policy obligates it to defend or indemnify Roberg Trucking. UFCC previously moved for summary judgment on the basis that the accident was excluded from coverage under the Policy's "Operations Exclusion." The Court denied the motion, because UFCC failed to meet its burden to show that the exclusion applied.

UFCC now moves for summary judgment a second time and argues that because Smith has stipulated that the gauge line was not attached to the truck or trailer, the accident did not arise out of the ownership, maintenance or use of the insured autos and, therefore, coverage is excluded. Smith disagrees and argues that Avila-Grado's use of the gauge line was a foreseeable use of the insured vehicle and thus the accident falls within the Policy. Having considered the parties’ arguments and relevant law, the Court finds that the accident did not arise out of the use of the insured autos, and thus coverage is excluded. UFCC's motion for summary judgment will be granted.

UFCC also moves for default judgment against Morales, who has not entered an appearance or answered this lawsuit. The Court will grant default to UFCC.

I. Factual Background

On July 18, 2018, Roberg Trucking had been contracted to skim oil from water tanks at the SWDF. (Doc. 84-A at 2.) The SWDF site includes, in relevant part, a well and eight waste water tanks. (Id. at 5.) "The well at the site produces a mixture of waste water and oil which accumulates in the [eight] waste water tanks." (Id. ) "This mixture of water and oil creates pads (waste oil and mold) which" must be periodically removed by a process called skimming. (Id. ) "The oil which accumulates on top of the water is skimmed off by vacuum trucks such as the one used by Roberg Trucking." (Id. ) The parties agree that before a vacuum truck driver can skim off the oil, s/he must use a gauge line to measure how much oil needs to be skimmed. (See Docs. 102 at 8; 105 at 6.)

Avila-Grado, Roberg Trucking's employee, drove a truck and attached tanker¹ to the SWDF to skim oil from the tanks. (See Doc. 84-A at 2, 5.) Avila-Grado exited his truck and walked onto a catwalk adjacent to a water tank. (See, e.g. , id. at 2, 7.) He opened the tank and inserted a gauge line. (Id. at 3, 7.) "The gauge line was not attached to the tanker trailer or the truck." (Doc. 97 at 2.) Contrary to required procedure, Avila-Grado failed to ground the gauge line. (See Doc. 84-A at 3, 7; see also Doc. 74-C at 1, 13.) Other workers on site at the time confirmed that Avila-Grado did not ground the gauge line. One worker said, "I never saw the gauge line the truck driver was using being grounded. It would have been easy to tell if the gauge was grounded, it has a long line (grounding wire) coming from it."² (Doc. 84-A at 7; see also Doc. 74-C at 12 ("the grounding line was hanging from the gauge line not attached (unbonded) to anything.").) When Avila-Grado placed the ungrounded gauge line into the water tank, workers heard a whistling noise, and then the tank exploded. (See Doc. 74-C at 13.) "After the first tank exploded, the other seven tanks began to explode in sequence." (Id. ) Avila-Grado was killed in the explosion, and Smith was severely injured. (Id. at 8–9, 13–14.)

UFCC insured Roberg Trucking under a Commercial Auto Policy that was in effect on the date of the accident. (See Docs. 1-A.) The relevant portions of the Policy include:

GENERAL DEFINITIONS

...

1. "Accident " means a sudden, unexpected and unintended event, or a continuous or repeated exposure to that event, that causes bodily injury or property damage.

2. "Auto " means a land or motor vehicle or trailer designed for travel on public roads, or any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state or province where it is licensed or principally garaged. It does not include mobile equipment. Self-propelled vehicles with the following types of permanently attached equipment are autos, not mobile equipment:

...

c. air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well-servicing equipment.

...

15. "Trailer " includes a semi trailer and any piece of equipment used to convert a semi-trailer to a full trailer while it is attached to the semi-trailer.

...

PARI I – LIABILITY TO OTHERS

INSURING AGREEMENT – LIABILITY TO OTHERS

Subject to the Limits of Liability, if you pay the premium for liability coverage for the insured auto involved, we will pay damages, other than punitive or exemplary damages, for bodily injury, property damage, and covered pollution cost or expense, for which an insured becomes legally responsible because of an accident arising out of the ownership, maintenance or use of that insured auto....

We will settle or defend, at our option, any claim or lawsuit for damages covered by this Part I....

(Docs. 1-A at 6, 9–10 (some bolding omitted).)

Smith filed suit to recover for personal injuries against Roberg Trucking and others in state court on April 8, 2020. (See Doc. 1-B.) "UFCC is defending Roberg Trucking under a reservation of rights" in the state suit. (Doc. 1 (Compl.) ¶ 46.)

II. Legal Standards

Summary judgment is appropriate when the Court determines "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; see also Garrison v. Gambro, Inc. , 428 F.3d 933, 935 (10th Cir. 2005). "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quotation marks and citation omitted). The Court examines the record and makes all reasonable inferences in the light most favorable to the nonmoving party. Gutierrez v. Cobos , 841 F.3d 895, 900 (10th Cir. 2016).

The Court applies New Mexico substantive law in this diversity case. See Erie R. Co. v. Tompkins , 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Where no controlling state decision exists, the Court ascertains and applies New Mexico law and predicts what the New Mexico Supreme Court would do if faced with the specific issues. Wankier v. Crown Equip. Corp. , 353 F.3d 862, 866 (10th Cir. 2003). In an action regarding an insurance policy, "[t]he insured party initially bears the burden to show that coverage is established under a provision of coverage." Nilson v. Peerless Indem. Ins. Co. , 484 F. Supp. 3d 1050, 1080–81 (D.N.M. 2020) (citing Battishill v. Farmers All. Ins. Co. , 139 N.M. 24, 127 P.3d 1111, 1113 (2006) ). "The insurer then bears the burden of proving the policy excludes coverage." Id. (citing Battishill , 127 P.3d at 1113 ).

III. The Court will grant summary judgment to UFCC because the accident did not arise out of the ownership, maintenance or use of the covered autos.

UFCC argues that the Policy does not cover the explosion that injured Smith. (Doc. 102 at 9.) The Policy covers accidents that "aris[e] out of the ownership, maintenance or use of [the] insured auto." (Doc. 1-A at 10.) Smith contends that "[t]he explosion occurred out of the ordinary use of the truck and trailer consistent with the foreseeable uses of the insured autos." (Doc. 105 at 4.) The Court sides with UFCC.

Smith argues that Avila-Grado's use of the gauge line falls under the definition of "use" of an insured auto. (Id. at 4–5.) Under New Mexico law, coverage is determined by analyzing "whether the use made of the vehicle at the time of the accident logically flows from and is consistent with the foreseeable uses of that vehicle." Am. Gen. Fire & Cas. Co. v. Progressive Cas. Co. , 110 N.M. 741, 799 P.2d 1113, 1115 (1990) (citing Sanchez v. Herrera , 109 N.M. 155, 783 P.2d 465, 467 (1989) ). In Sanchez , the owner of an insured truck and two companions drove the truck on a hunting trip. 783 P.2d at 465. On their way home, they unloaded their guns in the cab of the truck. See id. In the process, one of the men accidentally fired his gun, injuring another man. Id. The insurer...