Selective Way Insurance v. Travelers Property Casualty Co. of America (724 F. Supp. 2d 520, 2010)

MEMORANDUM

McLAUGHLIN, District Judge.

This declaratory judgment action involves an insurance coverage dispute between the plaintiff, Selective Way Insurance Company (“Selective Way”) and the defendant, Travelers Property and Casualty Company of America (“Travelers”), after an automobile accident in Tunkhannoek, Pennsylvania that occurred on October 3, 2005. The accident gave rise to a state civil action, and Selective Way, the insurer for the named defendants, settled the lawsuit for $14.25 million.

Selective Way filed the instant action because it claims that Travelers had an obligation to provide a defense and indemnity to two defendants, Keith Stalker and Stafursky Paving, Inc. (“Stafursky Paving”). Selective Way and Travelers both move for summary judgment. For the reasons stated below, the Court will grant Travelers’ motion.

I. Summary Judgment Record

Stafursky Paving is a Pennsylvania corporation that primarily provides excavation, construction and paving services. It also provides hauling services to third-party companies. David Stafursky is the President of Stafursky Paving. Dep. of Keith Stalker 10:1-18 (“Stalker Dep.”), Ex. G to Pl.’s M.; Dep. of David Stafursky 5:3-9 (“Stafursky Dep.”), Ex. H. to Pl.’s M.

At the time of the accident, Stafursky Paving had approximately ten tri-axle dump trucks, which were kept at its business address in Archibald, Pennsylvania. The trucks were licensed in the company’s name, and they were maintained and owned by Stafursky Paving. Stalker Dep. 13:1-24; Stafursky Dep. 10:13-18.

At the time of the accident, States Aggregate (“S.A.”) was a business that produced crushed stone and asphalt materials for roads. Since approximately some time in the 1980s, S.A. would occasionally contact Stafursky Paving to haul materials. To schedule a truck for hauling, Vernon Tompkins, an employee of S.A., would contact Stafursky Paving by telephone and request a dump truck for a specific day. S.A. would then have the truck and driver for that day for as long as necessary. Dep. of Vernon Tompkins 9:5-9, 10:23-11:24, 8:5-14, 13:19-25, 15:24-17:6 (“Tompkins Dep.”), Exhibit I to Pl.’s M.

The Friday before October 3, 2005, Mr. Stafursky spoke with Mr. Tompkins regarding hauling for an ongoing paving project. The exchange was an oral exchange, and there is no written contract memorializing the terms of the agreement. Stafursky Dep. 7:10-24, 12:3-19; Tompkins Dep. 10:23-11:24.

Pursuant to the conversation with Mr. Tompkins, Mr. Stafursky assigned Keith Stalker, a Stafursky Paving employee, to report to the S.A. blacktop plant in Clifford, Pennsylvania on October 3, 2005, at 7 a.m. Mr. Stafursky also determined which Stafursky Paving dump truck Mr. Stalker would use. S.A. never chose the truck or the driver for its hauling projects, but, theoretically, S.A. could call Stafursky Paving if it sent a truck that was not a dump truck or sent a driver who did not perform properly. Such problems, however, had never occurred and did not occur on the day of the accident. Stafursky Dep. 7:3 — 8:4; Stalker Dep. 22:7-9, 19:18— 20:6, 23:10-12; Tompkins Dep. 25:18-30:14.

Mr. Stalker determined his own route to drive to the S.A. plant on October 3, 2005. When Mr. Stalker arrived at the plant around 7 a.m., an S.A. employee told him when to load and where he was going. After Mr. Stalker’s truck was loaded with asphalt, he received a bill of lading with the delivery address. Mr. Stalker was to deliver the material to a resurfacing project on State Road 29/309. Stalker Dep. 20:17-21:5, 23:16-25:14; Tompkins Dep. 32:21-25, 33:14-23.

Mr. Stalker left to deliver the materials around 8:30 a.m. When he arrived at the delivery location, he provided an S.A. employee with the bill of lading for signing. He then waited his turn to dump the materials. Any driver, including S.A.’s own employees who performed hauling, would follow these procedures. Stalker Dep. 25:8-10, 26:3-9, 28:11-20; Tompkins Dep. 33:1-13, 59:20-60:9.

After Mr. Stalker unloaded his truck, he returned to S.A. to obtain another load to be hauled to the same location. After delivering the second load, he returned to S.A. to obtain a third load. Mr. Stalker deposited the third load, and he left the job site at 2:55 p.m., having completed the hauling for S.A. A truck driver would know that he was done hauling if he was not told to get another load; he would then be signed out. Stalker Dep. 26:13-29:23, 33:5-24, 34:6-9; Tompkins Dep. 25:14-17.

Mr. Stalker intended to drive back to Stafursky Paving in Archibald, Pennsylvania. In all of his driving, to the S.A. plant, to and from the hauling points, and back to Stafursky Paving, Mr. Stalker chose his own route. Mr. Tompkins explained in his deposition that S.A., as a matter of business practice, did not designate a driver’s route for hauling because the drivers know the particular weight limit restrictions of each road and bridge. After repeated questions asking whether, theoretically, Mr. Tompkins could tell a driver to take a particular route, Mr. Tompkins responded, “Theoretically I could tell the driver anything I wanted to.” Stalker Dep. 34:14-19, 25:25-26:2, 27:11-12, 33:1-4, 35:6-11; Tompkins Dep. 18:23-21:25.

On his way back from the S.A. worksite to the Stafursky Paving plant, prior to arriving there, Mr. Stalker’s truck was involved in an accident. Stalker Dep. 35:20-22.

Mr. Stalker did not perform any hauling for any other company other than S.A. that day. Mr. Stalker did not perform any other duties for Stafursky Paving that day. Because of the agreement with S.A., Stafursky Paving would not have been able to lease the truck that Mr. Stalker drove or Mr. Stalker himself to any other person or company that day. At the same time, Mr. Stalker was is Stafursky Paving’s dispatch, in that he could communicate with the company through radio. If Stafursky Paving had another job for Mr. Stalker after he completed the hauling for S.A., then it could have directed Mr. Stalker to the new job, and Mr. Stalker would have complied. Stalker Dep. 40:7-13, 38:16-39:1; Stafursky Dep. 16:13-18, 13:22-14:13, 10:4-12.

S.A. paid Stafursky Paving $6.25 per ton of material hauled. This amount accounted for all of Stafursky Paving’s overhead costs for the project, including the costs of paying Mr. Stalker. Stafursky Paving provided Mr. Stalker with a weekly paycheck, from which it deducted taxes. Mr. Stalker was never paid directly by S.A. for his services. Stalker Dep. 37:11-21, 22:16-23:3, 35:17-19; Stafursky Dep. 8:20-9:1, 13:11-16, 19:7-18.

In full force and effect at the time of the accident was a commercial automobile policy issued by Travelers to the Estate of Donald B. Stabler, Q-Tip Trust and/or Stabler Companies (“Travelers policy”). Also in effect was a “Broadened Named Insured Endorsement,” which modified “insured” in the Travelers policy to include “any organization, other than a partnership or joint venture, over which you maintain ownership or majority interest on the effective date of the policy.” Travelers Policy, Ex. C to Pl.’s M.; Traveler’s Endorsement, Ex. D to Pl.’s M.

It is undisputed that, as of the effective date of the policy, Stabler Companies maintained an ownership interest in S.A. It is also undisputed that S.A. qualified as an insured under the Travelers policy, and that S.A. was an insured on the date of the automobile accident. Pl.’s Request for Admissions, Ex. E to PL’s M.

With respect to business auto coverage, the Travelers policy provides:

A. Coverage

We will pay all sums an “insured” legally must pay as damages because of “bodily injury” or “property damage” to which the insurance applies, caused by an “accident” and resulting from an ownership, maintenance or use of a covered “auto”.

Travelers Policy, Business Auto Coverage Form at 2, Ex. F to PL’s M. The policy further provides:

. 1. Who Is An Insured

The following are “insureds”:

a. You for any covered “auto”.

b. Anyone else while using with your permission a covered “auto” you own, hire or borrow ...

c. Anyone liable for the conduct of an “insured” described above but only to the extent of that liability.

Ex. F at 2.

II. Analysis

Selective Way argues that both Mr. Stalker and Stafursky Paving are insureds under the Travelers policy. First, it asserts that Mr. Stalker is an insured pursuant to the terms of the policy because S.A. “hired” the truck that Mr. Stalker used at the time of the accident, and individuals who operate “hired autos” are insureds. It argues that the term “hire” does not include an element of control, but that even if the Court finds “hire” to contain this element, then S.A. controlled and had the right to control both Mr. Stalker and the Stafursky Paving dump truck.

Second, it asserts that Mr. Stalker is an insured under the policy pursuant to Pennsylvania’s “borrowed servant doctrine,” where an employee of one company becomes an employee of a second company if the second company controlled or had a right to control the employee. It argues that because S.A. had the right to control Mr. Stalker and did control him, Mr. Stalker is an insured. It asserts that if Stalker is an insured under either rationale, then Stafursky Paving is also an insured because the policy covers anyone liable for the conduct of an insured.

Travelers argues both in its motion for summary judgment and its opposition to the plaintiffs motion for summary judgment that Mr. Stalker did not operate a “hired auto.” It asserts that courts evaluate whether an auto is “hired” based on the degree of control a company exerts over the driver and vehicle. Because S.A. did not have control over Mr. Stalker or the Stafursky Paving dump truck, Travelers is not liable for any insurance coverage. Travelers also argues that, if the Court finds coverage under the Travelers policy, the policy’s “other insurance” clause bars any collection or indemnification.

Under Rule 56 of the Federal Rules of Civil Procedure, a party moving for summary judgment must show that there is no genuine issue as to any material fact and that judgment is appropriate as a matter of law. Fed.R.Civ.P. 56(c). The moving party bears the initial burden of demonstrating the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once a properly supported motion for summary judgment is made, the burden then shifts to the non-moving party, who must set forth specific facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The burdens of proof do not change in cases where a court is considering cross-motions for summary judgment. Peters Twp. Sch. Dist. v. Hartford Accident & Indem. Co., 833 F.2d 32, 34 (3d Cir.1987). On cross-motions for summary judgment, the court must construe the motions independently, viewing the evidence presented by each moving party in the light most favorable to the nonmovant. Pichler v. UNITE, 542 F.3d 380, 386 (3d Cir.2008).

A. Interpretation of the Traveler’s Insurance Policy

Pursuant to the Travelers policy, an insured is “anyone ... while using with your permission a covered ‘auto’ you own, hire, or borrow.” Because the Travelers policy does not define the term “hire,” the Court must interpret its meaning.

Under Pennsylvania law, an insurance policy must be read as a whole and construed according to the plain meaning of its terms. C.H. Heist Caribe Corp. v. Am. Home Assurance Co., 640 F.2d 479, 481 (3d Cir.1981). Words of common usage in an insurance policy are to be construed in their natural, plain, and ordinary sense, and courts may inform their understanding of such words by consulting a dictionary. Madison Constr. Co. v. Harleysville Mut. Ins. Co., 557 Pa. 595, 735 A.2d 100, 108 (1999). Ambiguous terms in a contract are to be construed in favor of the insured and against the insurer. Bateman v. Motorists Mut. Ins. Co., 527 Pa. 241, 590 A.2d 281, 283 (1991). Courts, however, should not read ambiguity into contracts. Madison Constr. Co., 735 A.2d at 106 (“We will not, however, distort the meaning of the language or resort to a strained contrivance in order to find an ambiguity.”). Contractual language is ambiguous only “if it is reasonably susceptible of different constructions and capable of being understood in more than one sense.” Hutchison v. Sunbeam Coal Co., 513 Pa. 192, 519 A.2d 385, 390 (1986).

The plaintiff asserts that the Court should look to dictionaries to determine the meaning of “hire,” and that none of the definitions contain explicitly the word “control.” It also argues that the term “hire” is ambiguous because it is not defined in the Travelers policy. It should be construed against Travelers, the drafter, and not found to contain an element of control.

The plaintiffs arguments fail. First, although dictionaries may not use the word “control” when defining “hire,” and Pennsylvania courts have provided little guidance in interpreting the term, the Court finds that the term “hire” contains an element of control. According to the Oxford English Dictionary, the term “hire” means: “To procure the temporary use of (any thing) for stipulated payment.” Oxford English Dictionary (2d ed. 1989). The Merriam-Webster Dictionary provides: “To engage the temporary use of for a fixed sum.” Webster’s Third New Int’l Dictionary (1997). To use something requires a degree of control. As explained in a treatise on insurance, “[T]he key inquiry regarding whether an automobile will fall within the hired automobiles provision of the policy is whether the insured exercised dominion, control or the right to direct the use of the vehicle.” Lee R. Russ & Thomas F. Segalla, COUCH ON INSURANCE § 118.46, at 118-74 (3d ed. 1997) (quoted in Holmes v. Brethren Mut. Ins. Co., 868 A.2d 155, 158 (D.C.Ct.App.2005)).

The majority of courts that apply the plain meaning of “hire” when interpreting policies like the one at issue have found the term to contain an element of control. E.g., U.S. Fid. & Guar. Co. v. Heritage Mut. Ins. Co., 230 F.3d 331, 333-35 (7th Cir.2000); (evaluating “hired auto” under Indiana law based on plain meaning of term and amount of control when one company was hauling materials for another company); Chicago Ins. Co. v. Farm Bureau Mut. Ins. Co., 929 F.2d 372, 374-75 (8th Cir.1991) (evaluating control to determine whether company was an independent contractor or “hired auto”); Wolverine Ins. Co. v. State Auto. Mut. Ins. Co., 415 F.2d 1182, 1184 (6th Cir.1969) (“The right to control of equipment is generally regarded as the critical distinction between the ‘hired automobile’ and the ‘nonowned automobile’ for insurance contract purposes.”); Earth Tech, Inc. v. U.S. Fire Ins. Co., 407 F.Supp.2d 763, 771-73 (E.D.Va. 2006) (evaluating “hired auto” under Virginia law based on degree of control); Occidental Fire & Cas. Co. v. Westport Ins. Corp., No. 02-8923, 2004 WL 2028616, at *5-9 (E.D.Pa. Sept. 10, 2004) (evaluating “hired auto” under Pennsylvania law based on dictionary definition and amount of control when one company subcontracted with another company for hauling).

The plaintiff cites to only one case, Pawtucket Mutual Insurance Company v. Hartford Insurance Company, 147 N.H. 369, 787 A.2d 870 (2001), where a court did not consider control when determining whether a car was a “hired auto” for insurance policy purposes. Pawtucket, however, did not involve a hauling scenario, unlike the above-referenced cases. Further, courts note that Pawtucket is known for its “distinctly minority view” with respect to this issue. Holmes, 868 A.2d at 158 n. 3; see Earth Tech, 407 F.Supp.2d at 771-72 & n. 13.

Second, the Court does not find the term “hire” to be ambiguous, such that it should be construed against Travelers. A term is not ambiguous under Pennsylvania law simply because it is undefined; it is ambiguous when it is susceptible to two different meanings. Hutchison, 519 A.2d at 390. Courts should not distort the meaning of a word to find an ambiguity. Madison Constr. Co., 735 A.2d at 106. Further, a finding of ambiguity would not require the Court to ignore the element of control because courts have still considered the degree of control upon holding that the term “hire” is ambiguous. E.g., Kresse v. Home Ins. Co., 765 F.2d 753, 755-56 (8th Cir.1985) (finding “hire” ambiguous, then evaluating term based on degree of control); Toops v. Gulf Coast Marine Inc., 72 F.3d 483, 486-87 (5th Cir.1996) (holding contract should be construed against insurer and evaluating “hired auto” through degree of control).

B. Whether S.A. “Hired” the Stafursky Paving Truck

Courts evaluating “hired auto” clauses in the hauling context look to a variety of factors to determine whether a company in S.A.’s position had control, such that the auto was “hired.” They consider the degree of control exerted over the vehicle, driver, and route, and note that minimal levels of control do not render an auto “hired.”

In United States Fidelity & Guaranty Company v. Heritage Mutual Insurance Company, 230 F.3d 331, the Court of Appeals for the Seventh Circuit evaluated whether Irving Materials, Inc. (“IMI”) hired a truck owned by V & S Transport, Inc. (