Source: http://thecabadvantage.com/articles/category/cases-from-bits/c110-volume-13-edition-3-cases/
Timestamp: 2019-04-19 20:50:07+00:00

Document:
Maria MEDINA, Guillermo Medina, Town Trucking Company, and Jerry Schulman and Mary Falat-Schulman, Co-Administrators of the Estate of Michael Walter Schulman, Deceased, Defendants.
Ira S. Lipsius, Schindel Farman Lipsius Gardner & Rabinovich LLP, New York, NY, Edmund A. Stephan, III, Attorney at Law, Chicago, IL, for Plaintiff.
William L. Barr, Jr., Hilfman, Martin & Barr, PC, William C. Anderson, III, Anderson, Rasor & Partners, LLP, Chicago, IL, for Defendants.
Plaintiff Clarendon National Insurance Company (“Clarendon”) brought suit against Defendants Maria Medina, Guillermo Medina, Town Trucking Company, and Jerry Schulman and Mary Falat Schulman as the co-administrators of the estate of Michael Walter Schulman, deceased (collectively “Defendants”) for a declaratory judgment of its insurance liability under a policy issued to Guillermo Medina. The parties have filed cross-motions for summary judgment. For the reasons set forth below, Clarendon’s Motion for Summary Judgment is granted and Defendants’ Motion is denied.
A bob-tail insurance policy provides coverage for a truck operator after cargo has been delivered and while the truck is being used for personal, rather than business-related, transportation. See R. 42, Def. Memo., at 1 n. 1.
Summary judgment is proper when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ.P 56(c). When determining if a genuine issue of fact exists, the Court must view the evidence and draw all reasonable inferences in favor of the party opposing the motion. Bennington v. Caterpillar Inc., 275 F.3d 654, 658 (7th Cir.2001); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). However, the Court will “limit its analysis of the facts on summary judgment to evidence that is properly identified and supported in the parties’ [Local Rule 56.1] statement.” Bordelon v. Chicago Sch. Reform Bd. of Trustees, 233 F.3d 524, 529 (7th Cir.2000). Where a proposed statement of fact is supported by the record and not adequately rebutted, the court will accept that statement as true for purposes of summary judgment. An adequate rebuttal requires a citation to specific support in the record; an unsubstantiated denial is not adequate. See Albiero v. City of Kankakee, 246 F.3d 927, 933 (7th Cir.2001); Drake v. Minnesota Mining & Mfg. Co., 134 F.3d 878, 887 (7th Cir.1998) (“ ‘Rule 56 demands something more specific than the bald assertion of the general truth of a particular matter[;] rather it requires affidavits that cite specific concrete facts establishing the existence of the truth of the matter asserted.’ ”). On cross-motions for summary judgment, each movant must satisfy Federal Rule of Civil Procedure 56’s requirements. See Cont’l Cos. Co. v. Northwestern Nat’l Ins. Co., 427 F.3d 1038, 1041 (7th Cir.2005).
At the core of the dispute between the parties is the question of whether, at the time of the accident, the 1998 Volvo was “rented” by Guillermo to Town Trucking, or whether he was operating the tractor as an independent contractor. If the tractor was “rented,” then the rental exclusion applies and Clarendon has no liability under the policy, as the parties do not dispute that Guillermo was driving on behalf of Town Trucking, rather than for personal reasons, at the time of the accident. If the rental exclusion applies, then the Court need not decide the other issue contested by the parties, which is whether adequate and timely notice of the accident was given to Clarendon. Thus, the Court will analyze the potentially-dispositive rental issue first.
Even if this issue were disputed, it is clear that a trucker’s assignment does not end at the point of delivery, but “continues at least until the owner-driver returns to the point where the haul originated ….” St. Paul Fire & Marine Ins. Co. v. Frankart, 69 Ill.2d 209, 13 Ill.Dec. 31, 370 N.E.2d 1058, 1062 (Ill.1977).
Title 49 of the Code of Federal Regulations requires that a federally-authorized motor carrier, which Town Trucking is, “may perform authorized transportation in equipment it does not own only under the following conditions ….” 49 C.F.R. § 376.11. Primary among those conditions is a requirement that “[t]here shall be a written lease granting the use of the equipment and meeting the requirements” set for elsewhere in the regulation. Id. § 376.11(a).
Defendants claim that Town Trucking was allowing Guillermo to transport goods on its behalf in a truck that it neither owned nor leased, but only paid Guillermo to operate as an independent contractor. Defendants assert that Guillermo could not possibly have leased the tractor to Town Trucking, because he did not own it and because Maria did not give him explicit permission to sign such a lease. The Contractor Operating Agreement entered into between Guillermo Medina and Town Trucking with Maria’s full knowledge and permission was, Defendants assert, only an agreement that Guillermo would act as an independent contractor, and not a lease.
Defendants do not address in their briefing the necessary implications of this position with respect to Town Trucking’s failure to comply with federal regulations.
Clarendon asserts that as a matter of law, the Contractor Operating Agreement must be a lease, because the vehicle could not have legally operated to transport goods in interstate commerce unless it was leased to Town Trucking. See Cox v. Bond Transp., Inc., 53 N.J. 186, 249 A.2d 579, 587 (N.J.1969) ( “When [ ] a carrier engages an owner-operator of a tractor intending to have him transport goods for it on the public highways in interstate commerce … the [federal] regulations must be deemed included in their contract.”). The agreement itself states that Town Trucking’s business “is subject to regulation by the Federal Government acting through the Federal Motor Carrier Safety Administration of the Department o[f] Transportation ….” (See R.35, Ex. 3, Contractor Operating Agreement, at 1) (hereinafter “COA”). A comparison between the applicable federal regulations and the Contractor Operating Agreement signed here sheds some light on the implicit, if not the nominal, nature of the agreement.
Title 49 C.F.R. § 376.12(a) requires that a lease of a vehicle to an authorized carrier be made between the authorized carrier and the owner of the equipment, and signed by the parties or by their authorized representatives. Here, the Contractor Operating Agreement is signed by Guillermo and by a representative of Town Trucking. There is no evidence in the record demonstrating that Town Trucking was aware that Guillermo was not the legal owner of the tractor at the time the agreement was signed.
Section 376.12(b) states that the “lease shall specify the time and date or the circumstances on which the lease begins and ends.” The Contractor Operating Agreement provides that it shall continue for one year from the date “above written and continuously thereafter on a year-to-year basis unless canceled by at least one days’ written notice” and otherwise provides for the termination of the agreement. COA § 20; 30.
Section 376.12(c) requires that a lease under it grant the carrier-lessee “exclusive possession, control, and use of the equipment for the duration of the lease” and that the carrier-lessee “assume complete responsibility for the operation of the equipment for the duration of the lease.” Section 3(d) of the Contractor Operating Agreement requires the contractor to furnish to the carrier “the exclusive possession, use and control” of the equipment. Section 376.12(d) requires the lease to specify the compensation to be provided; the Contractor Operating Agreement attaches an Addendum B setting forth the compensation in accordance with the specific provisions of the regulation.
The following sections of 49 C.F.R. § 376.12 provide for an array of requirements to be met in any lease between a carrier in interstate commerce and a lessor of equipment. The Contractor Operating Agreement complies with these requirements in all material respects. See, e.g., COA § 5 (complying with 49 C.F.R. § 376.12(f)); COA § 10 (complying in part with 49 C.F.R. § 376.12(e)); COA § 28 (complying with 49 C.F.R. § 376.12(g)); and COA § 29 (complying with 49 C.F.R. § 376.12(i)).
The insurance policy lacks an express choice-of-law provision, but all parties appear to be in agreement that Illinois law governs the resolution of this dispute. This is appropriate, as the policy insured an Illinois driver located in Illinois, the vehicle was registered in Illinois, and all relevant factors including the location of the accident direct an application of Illinois law. See Lapham-Hickey Steel Corp. v. Prot. Mut. Ins. Co., 166 Ill.2d 520, 211 Ill.Dec. 459, 655 N.E.2d 842, 845 (Ill.1995) (quotation omitted).
The Contractor Operating Agreement is thus a lease within the meaning of the applicable federal regulations. Even if it were not, however, a lease between a motor carrier and an individual trucker may be implied where none is written, if the conduct of the parties merits such an implication. See Zamalloa v. Hart, 31 F.3d 911, 917-18 (9th Cir.1994). As described above, the conduct of the parties in entering into an agreement that, for all intents and purposes, appears to be a lease between Guillermo and Town Trucking, provides an ample basis upon which this Court can imply as a matter of law that the Contractor Agreement was, in fact, a lease. See Nissan N. Am., Inc. v. Jim M’Lady Oldsmobile, Inc., 486 F.3d 989, 996 (7th Cir.2007) (“Illinois law [ ] recognizes contracts which owe their existence to and whose terms are defined by the parties’ conduct or actions.”); see, e.g., Northland Ins. Co. v. Bennett, 533 N.W.2d 867, 872 (Ct.App.Minn.1995) (upholding an implied trucking lease on the basis of the totality of the contacts between carrier and lessor and “the strong public policy interests in this area of law”).
However, Defendants argue that the public policy rationale underlying the leasing requirement is to increase the scope of liability arising from trucking accidents by preventing carriers from disclaiming responsibility for the acts of their contractors, and that this public policy would be violated by allowing Clarendon to limit its exposure through the implication of a lease that does not exist. See Zamalloa, 31 F.3d at 917-18;see also Planet Ins. Co. v. Transport Indem., 823 F.2d 285, 286-87 (9th Cir.1987) (the intent of the leasing regulations was “to impose financial responsibility requirements upon authorized carriers to protect the public.”) It is true that finding that there is an implied lease here would work to restrict liability, in the sense that Clarendon’s policy will not cover the accident if the tractor was leased to Town Trucking. However, implying a lease based on the conduct of the parties and a written document that strongly resembles a lease in a sense vindicates the public police of the leasing requirements, because the regulations are intended “to prevent licensed carriers from … claiming that their lessor-drivers [are] independent contractors rather than employees.” St. Paul Fire & Marine Ins. Co. v. Frankart, 69 Ill.2d 209, 13 Ill.Dec. 31, 370 N.E.2d 1058, 1060 (Ill.1977). Thus, the goal of the regulations is not just to maximize liability and protection for members of the public who must share the roads with carriers’ lessors and employees. More broadly, the goal of the regulations is to ensure that carriers cannot disguise their lessors and employees as something that they are not-as independent contractors. But this is precisely what the Defendants are attempting to do here by disguising the lease into which Guillermo Medina and Town Trucking entered as an Independent Contracting Agreement.
Finally, Defendants argue that a lease cannot be implied between Clarendon and a party, Guillermo Medina, who was not the owner of the tractor. In light of the undisputed facts showing that Guillermo used the truck with Maria’s express knowledge and permission, and entered into an agreement with Town Trucking regarding its use with her knowledge and permission, the Court does not find Guillermo’s lack of actual ownership a bar to finding that he entered into a lease with Clarendon. Tellingly, Defendants have presented no legal authority for this proposition. Title 49 C.F.R. § 376.12(a) allows the lease to be signed by the authorized representatives of the carrier and the owner of the equipment at issue, and the facts clearly demonstrate that Guillermo was the representative of Maria Medina in all matters having to do with the tractor.
The Contractor Operating Agreement entered into between Guillermo and Town Trucking therefore constituted a lease by operation of federal regulations and basic principles of contract law. Because the parties do not actively dispute that Guillermo was operating the tractor on Town Trucking’s behalf at the time of the accident, Guillermo was therefore operating the tractor while in the business of someone to whom the tractor was leased at the time of the accident. As a result, the rental exclusion of the Clarendon insurance policy relieves Clarendon from any obligation to provide coverage in this instance.
Due to its holding that the rental exclusion of the policy applies, the Court need not decide the parties’ alternative argument, that Clarendon is excused from providing coverage because of the Medinas’ failure to adequately comply with the notice provision.
The Contractor Operating Agreement under which Guillermo Medina operated his wife’s tractor on behalf of Town Trucking constitutes a lease both pursuant to applicable federal regulations and by operation of law. Guillermo was operating the tractor in Town Trucking’s business at the time of the accident that resulted in the death of Michael Walter Schulman. As a result, the rental exclusion of the bob-tail insurance policy that Guillermo obtained from Clarendon applies, and Clarendon has no obligation to provide coverage under the policy.
Clarendon’s Motion for Summary Judgment is granted in its entirety. Defendants’ Motion for Summary Judgment is denied.
Jose CARCAMO et al., Defendants and Appellants.
Dawn Diaz was seriously injured when she was struck by a car that had jumped a freeway center divider following its collision with a truck. She sued Karen Tagliaferri, the driver of the car that struck her, and Jose Carcamo, the driver of the truck with which Tagliaferri collided. Diaz also sued Carcamo’s employer, Sugar Transport, alleging it was vicariously liable as Carcamo’s employer. She further alleged that Sugar Transport was liable for its independent negligence in its hiring and retention of Carcamo. The jury returned a verdict against each defendant awarding plaintiff a total of $22,566,373 in damages. Pursuant to Proposition 51 it apportioned fault among Tagliaferri, Carcamo, and Sugar Transport.
Appellant, Sugar Transport, contends that because it admitted it was vicariously liable for Carcamo’s conduct on a theory of respondeat superior, the trial court erred in permitting Diaz to proceed against it for its negligent hiring and retention of Carcamo. It claims that this error was compounded by admitting evidence of Carcamo’s background. Relying on Jeld-Wen, Inc. v. Superior Court (2005) 131 Cal.App.4th 853, 32 Cal.Rptr.3d 351, Sugar Transport contends that its concession of vicarious liability removed all question of its independent fault and rendered evidence of Carcamo’s character and conduct prior to the accident inadmissible. (Evid.Code, § 1104.) Sugar Transport also asserts that the trial court erred by giving a spoliation of evidence instruction regarding a missing tachograph chart. We affirm.
Respondent Dawn Diaz was seriously injured in an automobile accident as she and two passengers were driving southbound on the 101 freeway in Camarillo. Jose Carcamo was driving a truck northbound on the 101 freeway. He was making a delivery for his employer, Sugar Transport. Tagliaferri had moved to the number one lane to pass Carcamo and was attempting to return to the number two lane in front of Carcamo when her right rear bumper came into contact with Carcamo’s left front tire. Tagliaferri lost control of her vehicle, and flew over the median landing on top of Diaz’s car.
Diaz sued alleging that Carcamo was negligent and that Sugar Transport was vicariously liable as his employer. The complaint also alleged that Sugar Transport was directly negligent in its hiring and retention of Carcamo. Sugar Transport answered denying liability, that it was Carcamo’s employer, and that Carcamo was acting in the course and scope of his employment when the collision occurred. At trial, it abandoned the last two contentions.
The cause of the accident was hotly disputed. Diaz asserted that the collision occurred because Carcamo was not driving in the truck lane, was speeding and inattentive, failed to yield the right-of-way, and failed to take evasive action to avoid the collision. Carcamo and Sugar Transport contended that Tagliaferri was the sole cause of the collision because she pulled in front of Carcamo’s truck without allowing for adequate clearance between her car and the truck.
After a lengthy trial, the jury returned a special verdict awarding Diaz $22,566,373 in damages comprising $17,566,373 in economic damages and $5 million in noneconomic damages. As required by Proposition 51, the jury apportioned 45 percent of fault for the accident to Tagliaferri, 20 percent to Carcamo, and 35 percent to Sugar Transport. The trial court denied Carcamo and Sugar Transport’s motion for a new trial.
On appeal, Sugar Transport contends that having admitted that it was vicariously liable as Carcamo’s employer under the doctrine of respondeat superior, the trial court erred in admitting evidence of Carcamo’s prior employment, driving, and accident history as well as by instructing the jury on the theory of negligent hiring and retention. It also asserts the trial court erred in instructing the jury on Diaz’s theory of evidence spoliation relative to the disappearance of Carcamo’s tachograph chart.
Sugar Transport contends the trial court erred as a matter of law in denying its motion in limine to exclude evidence of Carcamo’s involvement in several prior accidents and an evaluation from Carcamo’s previous employer who dismissed Carcamo after three months and gave him a poor performance review. Relying on Armenta v. Churchill (1954) 42 Cal.2d 448, 267 P.2d 303, and Jeld-Wen, Sugar Transport contends that because it had admitted it was liable for Carcamo’s conduct this evidence was irrelevant.
In Armenta a road-paving worker was killed when a dump truck backed over him. The defendants were the truck driver and his wife, who was the driver’s employer and registered owner of the truck. The complaint charged husband with negligence while acting in the course and scope of his employment. The complaint also alleged negligence against wife for entrusting the truck to her husband who she knew was a careless, negligent and reckless driver. Defendants admitted in their answer that husband was wife’s employee and was acting within the scope of employment at the time of the accident. They denied the allegations of the wife’s independent negligence. At trial, plaintiff offered evidence that husband had been found guilty of 37 traffic violations, including a conviction for manslaughter, and that wife knew these facts. Defendants objected on the ground that this evidence was directed to an issue which had been removed from the case by their admission in the pleadings that husband was acting in the course and scope of his employment.
*3Jeld-Wen also involved negligent entrustment of a truck driven by an employee in the course and scope of his employment. Defendants moved for summary adjudication of the issue on the ground that, before trial, the defendant employer had admitted vicarious liability for the acts of the driver under the doctrine of respondent superior. The trial court denied the motion and defendants sought a writ of mandate. They asserted that they were entitled to summary adjudication as a matter of law because negligent entrustment was not a separate, independent tort, but rather a theory of vicarious liability. Relying on Armenta, they argued that the pretrial admission by the employer that its employee was acting in the course and scope of his employment at the time of the accident made the negligent entrustment theory superfluous.
The court in Jeld-Wen granted the petition. In doing so it distinguished the earlier opinion of a sister panel in Syah v. Johnson (1966) 247 Cal.App.2d 534, 543-545, 55 Cal.Rptr. 741, which held that the tort of negligent entrustment was a distinct tort and imposed direct liability on the owner of a vehicle. The court in Jeld-Wen concluded that plaintiffs’ negligent entrustment claim against the employer could not be separately pursued because the employer had made a binding pre-trial admission of responsibility under the doctrine of respondeat superior. It concluded that the admission ended any question of its liability in the event its employee was found liable.
The case is factually inapposite. Here, it is not a contractor’s employee who was injured and seeking damage as in Camargo, but a third party who was injured by the contractor’s employee. Thus, the policy reason underlying the decision-it would be unfair to subject the hirer of an independent contractor to liability for negligent hiring when the independent contractor, because of our workers’ compensation system, is immune from suit-is absent.
An employer’s duty of care in hiring is breached “when the employer knows, or should know, facts which would warn a reasonable person that the employee presents an undue risk of harm to third persons in light of the particular work to be performed.” (Federico v. Superior Court (1997) 59 Cal.App.4th 1207, 1214, 69 Cal.Rptr.2d 370.) Where, as here, knowledge of a fact has important bearing upon the issues, evidence is admissible which relates to the question of the existence or nonexistence of such knowledge. (Larson v. Solbakken (1963) 221 Cal.App.2d 410, 418, 34 Cal.Rptr. 450.) In this case, the evidence was not offered to show Carcamo’s propensity to be involved in accidents, but to show that Sugar Transport had knowledge of Carcamo’s involvement in prior accidents before he was hired.
 Here, evidence of Carcamo’s prior employment and driving history had substantial probative value in determining whether Sugar Transport was negligent in hiring or retaining Carcamo as a driver. Indeed, such evidence is likely the only way this could be shown. (Lehmuth v. Long Beach Unified School Dist. (1960) 53 Cal.2d 544, 554, 2 Cal.Rptr. 279, 348 P.2d 887.) The record demonstrates that at a lengthy Evidence Code section 402 hearing, the trial court carefully balanced the probative value of the evidence against the potential for prejudice resulting from its improper use by the jury. The evidence was introduced not for the purpose of showing Carcamo’s negligence but rather for the purpose of showing Sugar Transport’s disregard of Carcamo’s checkered past when it hired him and the unreasonable danger to which others were exposed by his driving.
It is evident that the trial court was properly concerned with the ramifications flowing from the admission of this evidence and exercised care in its admission. It did so with a full recognition that plaintiff was proving Sugar Transport’s independent and direct negligence-its own responsibility for Diaz’s injuries. In California, negligent hiring and retention are theories of direct liability, independent of vicarious liability. Therefore, the court did not err in admitting evidence and instructing the jury regarding those issues.
Pursuant to Civil Code section 1431.1, the jury was required to apportion fault amongst the defendants to insure that each bore its share of responsibility for noneconomic damages “in … proportion to their degree of fault.” (Id. at subd. (c).) Plaintiff relied on distinct theories of independent tort liability to implicate defendants. One of the theories was negligent hiring and retention, a theory of fault which plaintiff claimed imposed greater responsibility on Sugar Transport than would be attributed to it for simply being Carcamo’s employer. Absent proof of negligent hiring and retention, the required apportionment of fault would have been impossible. But such proof raised the likelihood of prejudicing the jury. The trial judge sought to resolve this tension in his detailed examination of the evidence and his admonitions and instructions to the jury. Unlike Armenta, while Sugar Transport’s concession of liability for Carcamo’s driving established the fact of its liability, it did not establish the degree of its liability for noneconomic damages. There was no error.
On this issue, the court gave the standard instruction on willful suppression of evidence, as follows: “You may consider the abilities of each party to provide evidence. If a party provided weaker evidence when it could have presented stronger evidence, you may distrust the weaker evidence.
*9 “Evidence of the actions and conduct of a party, particularly as to the rate of speed and method of driving an automobile just before a collision occurs, is admissible if not too remote.” (Larson v. Solbakken, supra, 221 Cal.App.2d at p. 421, 34 Cal.Rptr. 450.) Here, the tachograph evidence would have been relevant to show whether Carcamo sped up to prevent Tagliaferri from passing him. Sugar Transport cross-examined Diaz’s experts about weaknesses in his interpretation. In addition, it had the opportunity to present evidence that the tachograph was unintentionally lost rather than intentionally destroyed, and to argue to the jury the weight of the evidence.
The judgment is affirmed. Respondent shall recover costs on appeal.
We concur: GILBERT, P.J., and COFFEE, J.
Tagliaferri settled with Diaz prior to trial and is not a party to this appeal.
Because we resolve the issue on the merits, we need not address the procedural arguments made by the parties.

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