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Resolution Inc. of Delaware v. Medical Bridges, Inc.

United States District Court,

E.D. Louisiana.

RESOLUTION INCORPORATED OF DELAWARE

v.

MEDICAL BRIDGES, INC.

 

Civil Action No. 11–2475.

Sept. 12, 2012.

 

Thomas James Wagner, New Orleans, LA, for Resolution Incorporated of Delaware.

 

Robert J. Barbier, Meredith W. Blanque, Phelps Dunbar, LLP, New Orleans, LA, for Medical Bridges, Inc.

 

ORDER AND REASONS

MARTIN L.C. FELDMAN, District Judge.

*1 Before the Court is the defendant’s motion to dismiss for personal jurisdiction, or, in the alternative, failure to state a claim upon which relief can be granted. For the reasons that follow, the motion is GRANTED.

 

Background

This dispute arises out of a contract for the shipment of goods.

 

Plaintiff, Resolution Incorporated of Delaware, is a corporation that provides shipping services as a non-vessel owning common carrier (“NVOCC”). An NVOCC is an intermediary between the shipper of goods and the operator of a vessel that will ultimately carry the goods. Plaintiff usually coordinates shipments by contracting with other NVOCCs, marine carriers, and vessel owners. The majority of goods plaintiff handles are for humanitarian purposes. Plaintiff is authorized to do business in Louisiana, maintains an office in New Orleans, and primarily operates under the trade names “Missionary Expediters” and “Navigation Network.”

 

Defendant, Medical Bridges, Inc., is a nonprofit organization that recovers surplus medical supplies and equipment from the Houston area and donates them to health care providers in foreign countries. If the receiving health care provider is unable to pay for shipping from Medical Bridges’ warehouse in Houston to its clinic location, Medical Bridges helps locate a shipping sponsor. Medical Bridges is organized in Texas with its principal place of business in Houston, Texas. Medical Bridges has never maintained an authorized agent for service of process in Louisiana, is not authorized or licensed to conduct business in Louisiana, and has no bank account or telephone listing in Louisiana. The company also does not employ or pay taxes in Louisiana. Medical Bridges also claims not to place or direct any advertisements toward Louisiana. The record does not contradict this claim.

 

In April 2008, the defendant received a request for supplies from Santo Yusup Hospital in Bandung, Indonesia. This request was submitted by the hospital’s United States fundraising committee, Aku Sinta Indonesia–Houston Committee. The defendant donated the supplies and contracted with the plaintiff to arrange for the movement of medical supplies to Indonesia. Plaintiff contracted with World Cargo Transport to be the NVOCC for the Indonesia shipment. World Cargo in turn contracted with CMA–CGM to act as the ocean carrier. Two bills of lading and one waybill were subsequently issued for the Indonesia shipment: the plaintiff’s Navigation Network bill of lading, the World Cargo bill of lading, and the CMA–CGM waybill.

 

Using the trade name Navigation Network, plaintiff issued a bill of lading designating (1) Aku Sinta Indonesia–Houston Committee as the shipper/exporter of the medical supplies, (2) Santo Yusup Hospital as the consignee of the suppliers, and (3) plaintiff as the forwarding agents.

 

World Cargo then issued a bill of lading designating (1) plaintiff as the shipper, (2) Santo Yusup Hospital as the consignee, and (3) plaintiff as the forwarding agent.

 

*2 The ocean carrier, CMA–CGM, issued a waybill designating (1) World Cargo as the shipper and (2) Santo Yusup Hospital as the consignee.

 

When the shipment arrived in Jakarta, Indonesia, it remained unclaimed. The container was not released by customs, retrieved by the consignee (Santo Yusup Hospital), or stripped by CMA–CGM. The container remained idle and CMA–CGM made a claim for demurrage/detention charges against World Cargo. World Cargo then made demand upon plaintiff for indemnity for its liability to the carrier. In turn, the plaintiff made demand upon defendant for indemnity, but to no avail. Ultimately, World Cargo paid $10,248 to CMA–CGM. The plaintiff paid World Cargo for the entire amount paid by World Cargo to CMA–CGM.

 

Plaintiff sued defendant in this Court on October 31, 2011, pursuant to Rule 9(h) of the Federal Rules of Civil Procedure. Plaintiff alleges that the defendant violated its obligations under the bill of lading, tariff, and shipping documents. The plaintiff asks the Court for a judgment in its favor for $10,248, in addition to interest, costs, and attorney fees. The defendant now seeks to dismiss the plaintiff’s claim for lack of personal jurisdiction, or, alternatively, for failure to state claim.

 

Personal Jurisdiction Standard

Rule 12(b)(2) of the Federal Rules of Civil Procedure allows a defendant to present by motion a defense that the Court lacks personal jurisdiction over it.

 

When a nonresident like the defendant moves to dismiss for lack of personal jurisdiction, the plaintiff seeking to invoke the jurisdiction of this Court bears the burden of establishing it. See Luv N’ Care v. Insta–Mix, Inc., 438 F.3d 465, 469 (5th Cir.2006). The plaintiff may meet its burden by presenting a prima facie case for personal jurisdiction where, as here, the Court decides the matter without an evidentiary hearing. Wilson v. Belin, 20 F.3d 644, 648 (5th Cir.1994). The Court will take all uncontroverted allegations in the complaint as true and resolve any conflicts in the plaintiff’s favor. Id. The Court is not restricted to pleadings, but may consider affidavits, interrogatories, depositions, or any other appropriate method of discovery. Id.; see Jobe v. ATR Mktg., Inc., 87 F.3d 751, 752 (5th Cir.1996).

 

The Court may exercise personal jurisdiction over a nonresident defendant only if two requirements are satisfied: (1) the forum state’s long-arm statute confers personal jurisdiction; and (2) the exercise of jurisdiction does not exceed the boundaries of Due Process. See Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 270 (5th Cir.2006). Because the limits of Louisiana’s long-arm statute are coextensive with the limits of constitutional due process, the inquiry is simply whether this Court’s exercise of jurisdiction over the defendant would offend due process. See LA.REV.STAT. ANN. § 13:3201(B); Luv N’ Care, 438 F.3d at 469; see also Electrosource, Inc. v. Horizon Battery Techs., Ltd., 176 F.3d 867, 871 (5th Cir.1999).

 

*3 The Due Process Clause limits the Court’s power to assert personal jurisdiction over a nonresident defendant. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 413–14 (1994). That is, a nonresident defendant must have meaningful minimum “contacts, ties, or relations” with the forum state in order for jurisdiction to be constitutional. See Luv N’ Care, 438 F.3d at 469 (citing Int’l Shoe Co. v. Wash., 326 U.S. 310, 319 (1945)). The minimum contacts analysis asks whether the nonresident defendant purposefully availed himself of the benefits and protections of the forum.   Wilson v. Belin, 20 F.3d 644, 647 (5th Cir.1994).

 

The minimum contacts test takes two forms, and the constitutional limitations on the exercise of personal jurisdiction differ depending on whether a court seeks to exercise general or specific jurisdiction over the defendant. Specific jurisdiction exists if the plaintiff shows that the defendant has purposely directed its activities toward the forum state and that its cause of action arises out of or results from the defendant’s forum-related contacts. Luv N’ Care, 438 F.3d at 469 (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985) and Nuovo Pignone v. STORMAN ASIA M/V, 310 F.3d 374 (5th Cir.2002)). Once the plaintiff makes this preliminary showing, personal jurisdiction will lie so long as maintaining the suit will not “offend traditional notions of fair play and substantial justice.” Id. General jurisdiction, on the other hand, exists where contacts between the defendant and the forum state have been continuous and systematic to such an extent that the exercise of personal jurisdiction is justified. Dickson Marine, Inc. v. Panalina, Inc., 179 F.3d 331, 339 (5th Cir.1999).

 

I. Discussion

Defendant submits that it lacks the minimum contacts necessary for this Court to exercise personal jurisdiction over them. The Court agrees.

 

A.

The plaintiff argues that the Court has specific personal jurisdiction over the defendant because the defendant purposely directed its activities at the forum state by contracting with the plaintiff in Louisiana, and the cause of action arises out of that business transaction. It is well established within the Fifth Circuit that merely contracting with a resident of the forum state is not in itself sufficient to establish minimum contacts. See, e .g., Burger King, 471 U.S. at 476; Brammer Eng’g, Inc. v. E. Wright Mountain Ltd. P’ship, 307 F. App’x 845, 847–48 (5th Cir.2009); Recetec, LLC v. Allied Erecting & Dismantling Co., No. 07–7126, 2008 WL 2067031, at *3 (E.D.La. May 14, 2008). Therefore, the fact that the defendant has a contract with a Louisiana company is not dispositive of personal jurisdiction. Courts consider the parties’ prior negotiations, contemplated future consequences, terms of the contract, and the parties’ actual course of dealing. See Burger King, 471 U.S. at 479.

 

Defendant hired the plaintiff for the purpose of transporting the medical supplies from the defendant’s warehouse in Houston, Texas to Jakarta, Indonesia. All negotiations of the shipping documents occurred over the internet, phone, or fax. The e-mail communication between the plaintiff and defendant indicates that the plaintiff’s task of arranging shipment was always centered on retrieving the supplies from Texas. The medical supplies and ocean carrier never passed through Louisiana or any port within. There appears little contact by the defendant with the forum state other than the defendant’s e-mails and payments, which are insufficient to constitute minimum contacts. See McFadin v. Gerber, 587 F.3d 753, 760 (5th Cir.2009) (“[C]ommunications relating to the performance of a contract themselves are insufficient to establish minimum contacts.”); Freudensprung v. Offshore Technical Servs., Inc., 379 F.3d 327, 344 (5th Cir.2004) (“[The Fifth Circuit] has repeatedly held that the combination of mailing payments to the forum state, engaging in communications related to the execution and performance of the contract, and the existence of a contract between the nonresident defendant and a resident of the forum are insufficient to establish minimum contacts.”).

 

*4 The fortuity of the plaintiff’s residence in Louisiana is insufficient to support a finding of specific personal jurisdiction over the defendant when the plaintiff has failed to carry its burden of establishing that the plaintiff’s claim arises out of the plaintiff’s mere presence in Louisiana.

 

B.

The plaintiff points to one other related contact that the defendant had with Louisiana, presumably in an attempt to support an argument for the Court’s exercise of general jurisdiction. Earlier in 2008, the defendant contracted with the plaintiff to ship goods from Houston, Texas to San Antonio, Chile. The plaintiff argues that this Chilean transaction, in conjunction with the Indonesian transaction, make it “foreseeable” that the defendant would be haled into court in Louisiana and therefore minimum contacts exist. The argument is a stretch, and the cases plaintiff cites as support for its general jurisdiction argument are distinguishable.

 

In Exposition Partner, LLP v. King LeBlanc & Bland, LLP, an organization was formed in Louisiana by Texas and Louisiana residents. 869 So.2d 934, 44 (La.App. 2 Cir. 3/10/04). Among other things, fifty percent of the company’s ownership was based in Louisiana and a registered office was kept in Louisiana. See id. In this case the defendant has no offices, bank accounts, property, employees, phone numbers, mailing addresses, or registered agents in Louisiana. It is not licensed or qualified to conduct business in Louisiana. It does not advertise in Louisiana or target residents of the state. The second case the plaintiff cites is also unhelpful. The plaintiff in Greenway Leasing, L.P. v. Star Buffet Mgmt., Inc. sued a wholly-owned subsidiary and its parent company. 57 So.3d 397, 400 (La.App. 2 Cir. 1/26/11). The court there held that minimum contacts existed over the parent company because the parent company made frequent visits to Louisiana and began the process to legally acquire the subsidiary in bankruptcy proceedings. See id. No such contacts exist in the case here.

 

Although a contract was entered into with a Louisiana firm, the defendant did not purposefully avail itself of the privilege of conducting activities in Louisiana. Accordingly, the defendant’s motion to dismiss for lack of personal jurisdiction is GRANTED.

Groat v. Global Hawk Ins. Co.

United States District Court,

N.D. New York.

Warren A. GROAT and Victoria Groat, Plaintiffs,

v.

GLOBAL HAWK INSURANCE COMPANY (RRG), Defendant.

 

No. 1:11–CV–1412.

Sept. 12, 2012.

 

James E. Hacker, Esq., Thomas J. Higgs, Esq., Hacker Murphy, LLP, Latham, NY, for Plaintiffs.

 

Joseph Donato, Esq., Morgan Melhuish Abrutyn, New York, NY, for Defendant.

 

MEMORANDUM—DECISION and ORDER

DAVID N. HURD, District Judge.

I. INTRODUCTION

*1 Plaintiffs Warren Groat and his wife (collectively “plaintiffs” or “Groats”) brought this action seeking a judgment for $611,325.60 plus interest pursuant to the Motor Carrier Act of 1980, as amended, 49 U.S.C. §§ 13101–14901, and for breach of an arbitration contract executed in the course of underlying personal injury litigation. Jurisdiction exists pursuant to 28 U.S.C. § 1332, as the parties have diverse citizenship.

 

Plaintiffs moved for summary judgment. Defendant opposed and cross-moved for summary judgment. Plaintiffs replied. Oral argument was heard in Utica, New York, on September 7, 2012.

 

II. BACKGROUND

Defendant Global Hawk Insurance Company (“Global Hawk”) issued a commercial motor vehicle insurance policy to non-party R–Man Logistics, Inc. (“R–Man”) to be effective October 26, 2007, to October 26, 2008. The policy included an MCS– 90 endorsement, as required by the federal Motor Carrier Act for truckers operating in interstate commerce. In part, the MCS– 90 endorsement provided, in keeping with the purpose of the Motor Carrier Act, that essentially nothing would relieve Global Hawk from liability if a judgment was obtained against the insured, R–Man, for public liability relating to operation of covered motor vehicles. The MCS– 90 endorsement states:

 

It is understood and agreed that no condition, provision, stipulation, or limitation contained in the policy, this endorsement or any other endorsement thereon, or violation thereof, shall relieve the company from liability or from the payment of any final judgment within the limits of liability herein described, irrespective of the financial condition, insolvency or bankruptcy of the insured.

 

Compl. Ex. A at 9–10 FN1 (“MCS– 90”). The policy required R–Man to provide driver data to Global Hawk, which must approve the drivers. The policy listed current drivers. In addition, R–Man submitted driver data for additional drivers, on February 8, 2008, and July 17, 2008.

 

FN1. Exhibit A to the Complaint is the policy with the MCS– 90 endorsement. For ease of reference, citations will be to the ECF page numbers.

 

R–Man added Carlos Victoria (“Victoria”) as a driver. However, R–Man never submitted driving record data for him as the insurance policy requires.

 

According to Global Hawk, it would not have approved Victoria as an added driver FN2 because of his poor driving record. He had prior accidents, had his commercial driver’s license suspended, and received at least three convictions for driving with a suspended driver’s license.

 

FN2. While it is unclear the exact date that Victoria became a driver for R–Man, there is no question that it was after the policy was issued. See Deft.’s Mem. at 7 (stating that “Global Hawk would never have consented to the addition of Mr. Victoria as an authorized driver….”); Bain Decl. ¶ ¶ 10–12 (stating “Global Hawk would not have consented to the addition of Mr. Victoria as an authorized driver ….“; “[h]ad Global Hawk known that R. Man Logistics, Inc., was allowing non-endorsed drivers to operate its vehicles it would have cancelled the policy ….“; “[h]ad Global Hawk known that R. Man Logistics, Inc., was allowing Carlos Victoria to operate its vehicles it would have cancelled the policy….”); Deft.’s L.R. 7.1 Statement of Material Facts ¶¶ 9–11 (same).

 

On July 28, 2008, Victoria, while driving an R–Man truck, was involved in an accident with Warren Groat. Plaintiffs brought an action in New York State Supreme Court, Columbia County for negligence and loss of consortium, against R–Man and Victoria. Global Hawk sent a reservation of rights letter to R–Man dated August 8, 2008, but defended the lawsuit. According to Global Hawk, R–Man and Victoria did not participate in the defense of the suit as is required by the policy.

 

The state Supreme Court granted partial summary judgment on liability in favor of the Groats on August 24, 2010. The damages award was determined by an arbitrator, pursuant to a contract entered into between the Groats and Global Hawk (by defense counsel), then confirmed by the state court on November 4, 2011. On November 8, 2011, Global Hawk denied coverage on two grounds: (1) because it was not informed of and did not approve Victoria as a driver, the policy was void ab initio; and (2) R–Man and Victoria failed to aid in the defense of the suit as the policy required. Meanwhile, Global Hawk filed a declaratory judgment action seeking rescission of the policy in California state court on October 26, 2011. Bains Decl. Ex. G (Dkt. No. 9–9). The basis upon which Global Hawk sought rescission in the California case was failure ot R–Man and Victoria to aid in defense of the Groats’ negligence suit (without mentioning failure to obtain approval of Victoria as a driver). Id. On November 29, 2011, the New York state court filed a judgment against R–Man and Victoria, and in favor of plaintiffs, in the amount of $611,325.60. Global Hawk has declined to satisfy the judgment for the above-stated reasons. This action followed.

 

III. DISCUSSION

 

A. Summary Judgment Standard

 

*2 Summary judgment must be granted when the pleadings, depositions, answers to interrogatories, admissions and affidavits show that there is no genuine issue as to any material fact, and that the moving party is entitled to summary judgment as a matter of law. Fed.R.Civ.P. 56; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509–10 (1986). The moving party carries the initial burden of demonstrating an absence of a genuine issue of material fact. Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552 (1986). Facts, inferences therefrom, and ambiguities must be viewed in a light most favorable to the nonmovant.   Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356 (1986).

 

When the moving party has met the burden, the nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts.” Id. at 586, 106 S.Ct. at 1356. At that point, the nonmoving party “must set forth specific facts showing that there is a genuine issue for trial.” Fed.R.Civ.P. 56; Liberty Lobby, Inc., 477 U.S. at 250, 106 S.Ct. at 2511; Matsushita Elec. Indus. Co., 475 U.S. at 587, 106 S.Ct. at 1356. To withstand a summary judgment motion, sufficient evidence must exist upon which a reasonable jury could return a verdict for the nonmovant. Liberty Lobby, Inc., 477 U.S. at 248–49, 106 S.Ct. at 2510; Matsushita Elec. Indus. Co., 475 U.S. at 587, 106 S.Ct. at 1356.

 

B. Analysis

Plaintiffs contend that Global Hawk is obligated to pay the state court judgment based upon the MCS– 90 endorsement which nullifies any conditions or limitations in the policy. Defendant, in disclaiming coverage, relies upon R–Man’s failure to designate drivers (specifically Victoria) for Global Hawk’s approval and failure to cooperate in defense of the negligence action. Defendant’s argument is that R–Man’s failure to designate Victoria as a driver was a material misrepresentation permitting it to rescind the policy (and accompanying MCS– 90 endorsement) under California Insurance Code § 331. FN3

 

FN3. Defendant conceded at oral argument that it was not relying upon non-cooperation as a basis for rescinding the policy under California law. This concession is at odds with Global Hawk’s California state court suit seeking rescission, based solely upon non-cooperation. Moreover, the failure to cooperate by R–Man and Victoria was clearly a subsequent violation of the policy and not a misrepresentation at the outset made to obtain the policy. In any event, given Global Hawk’s concession, only failure to designate Victoria as a driver is considered.

 

The plain language of the MCS– 90 endorsement provides that Global Hawk will pay “any final judgment recovered against [R–Man] for public liability resulting from negligence in the operation” of its insured vehicles subject to the Motor Carrier Act. MCS– 90 at 9. The MCS– 90 endorsement also explicitly negates any condition or limitation in the policy that would (absent the endorsement) permit Global Hawk to disclaim liability.

 

Federal law is applicable to the MCS– 90 endorsement. Pierre v. Providence Washington Ins. Co., 99 N.Y.2d 222, 231 (2002); Global Hawk Ins. Co. v. Century–Nat’l Ins. Co., 203 Cal.App. 4th 1458, 1464 (Cal.Ct.App.2012). In order to recover under an MCS90 endorsement, an injured party need only prove that the injury resulted from an accident caused by negligence and that “a judgment was entered implicating the coverage provisions of the policy and [ MCS– 90] endorsement.” Pierre, 99 N.Y.2d at 231; Green v. Royal Indem. Co., No. 93Civ4335, 1994 WL 267749, at *4 (S.D.N.Y. June 15, 1994) (noting that only a judgment and negligence must be shown to impose liability). Moreover, it need only be shown that someone was negligent; it is not necessary that the insured was negligent. Pierre, 99 N.Y.2d at 231; Green, 1994 WL 267749, at *4.

 

*3 The parties agree that Global Hawk issued the insurance policy with the MCS– 90 endorsement to R–Man. Further, it is undisputed that plaintiffs received a judgment against R–Man and Victoria to compensate them for injuries suffered in an accident caused by Victoria’s negligence. Accordingly, the Groats are entitled to payment from Global Hawk of the final judgment recovered from R–Man and Victoria, see MCS– 90 at 9, unless some other provision of law precludes such entitlement.

 

Global Hawk contends, in support of its cross motion for summary judgment, that under California law, it is entitled to rescind the policy ab initio (and along with it the MCS– 90 endorsement) because of a material misrepresentation made by R–Man; that is, failure to submit Victoria as a driver as required by the policy. Plaintiffs acquiesce to application of California law to the policy.

 

Under California law, concealment entitles an insurer to rescind a policy of insurance, whether the concealment is intentional or unintentional. Cal. Ins.Code § 331 (West 2005). In the making of a contract, if a false misrepresentation as to a material point was made, the contract may be rescinded “from the time the representation becomes false.” Id. § 359. Materiality is subjective, depending only upon the effect the misrepresentations had on the insurer. Imperial Cas. & Indem. Co. v. Sogomonian, 198 Cal.App.3d 169, 179 (Cal.Ct.App.1988) (citing Cal. Ins.Code § 334). Additionally, asking specific questions on an application “is in itself usually sufficient to establish materiality as a matter of law.” Id. Thus, an insurance policy rescinded for material misrepresentations on the application “will avoid liability even on pending claims.” Id. at 182. In sum, “an insurer may rescind the contract of insurance ab initio for a material misrepresentation” regardless of intent. Barrera v. State Farm Mut. Auto. Ins. Co., 71 Cal.2d 659, 666 n.4 (Cal.1969).

 

The allegedly material misrepresentation made by R–Man that, according to Global Hawk, entitles it to rescind the policy was the failure to notify it that Victoria became a driver. Global Hawk has adduced evidence that the policy included a list of approved drivers and required R–Man to supplement the list if it intended to add a driver. It has also put forth the declaration of Pawandip Bains, its policy underwriter, who stated that had R–Man submitted Victoria as a proposed driver, Global Hawk would not have consented to endorsement of Victoria as a driver under the policy, and, in fact, it would have cancelled the policy had it known Victoria was driving R–Man’s vehicles. Bains Decl. ¶¶ 9–12 (Dkt. No. 12–4). According to Global Hawk, under the standard set forth above it is entitled to void the policy ab initio.

 

Global Hawk’s evidence appears on its face to support ab initio rescission of the policy. Plaintiffs’ argument in opposition, that even if the policy is rescinded ab initio the federal MCS– 90 endorsement remains effective, also appears to recognize that defendant’s evidence of a material misrepresentation would entitle it to rescind the policy ab initio. The parties overlook that, under California law, a material misrepresentation must have been made in the procurement of the insurance policy to entitle the insurer to rescission ab initio.

 

*4 Every case cited by Global Hawk regarding ab initio rescission under California law pertains to a prior misrepresentation, made in the procurement of the policy.FN4 In Sogomonian, “defendants made material false statements in their application,” entitling plaintiff to rescission. 198 Cal.App.3d at 182. The Sogomonian Court recognized that the California Insurance Code prescribed a “statutory scheme which reflects a deliberate distinction between ‘rescission’ and ‘cancellation.’ “ Id. (citing Barrera, 71 Cal.2d at 663–64).

 

FN4. It is noted that none of these cases involve an MCS– 90 endorsement.

 

Further, independent research revealed no cases addressing a question of rescission other than those in which an allegedly material misrepresentation was made in an application for a policy upon which the insurer relied. See, e.g., Carolina Cas. Ins. Co. v. RDD, Inc., 685 F.Supp.2d 1052, (N.D.Cal.2010) (finding that defendants’ materially false answers on an application for insurance entitled plaintiff insurer to rescission under California law (emphasis added)); Admiral Ins. Co. v. Debber, 442 F.Supp.2d 958, 966 (E.D.Cal.2006) (stating that pursuant to the California Insurance Code, “a material misrepresentation or concealment in an insurance application … entitles the insurer to rescind the insurance policy ab initio (emphasis added)), aff’d, 295 Fed. Appx. 171 (9th Cir.2008); LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co., 156 Cal.App. 4th 1259, 1270 (Cal.Ct.App.2007) (explaining that in a rescission case, misrepresentations in the application need not be intentional (emphasis added)). Again, it is noted that these cases did not involve an MCS– 90 endorsement.

 

The issue in Barrera was whether an insurer could rescind a policy, after a third-party was injured, for a misrepresentation in the application where, for 1–1/2 years, it negligently failed to discover the misrepresentation. 71 Cal.2d at 662. The court precluded the insurer from defending a suit for payment of the judgment based upon the insurer’s own negligent failure to investigate the application. Id. at 663. Although the issue it faced in Barrera was the duty of an insurer to investigate an application within a reasonable time, the Supreme Court of California noted that insurance code sections 331, 338, and 359 “all involve false statements or material omissions in the procurement of the policy.” Id. at 664 n.3 (emphasis added).

 

In Mirich v. Underwriters at Lloyd’s London, 64 Cal.App.2d 522 (Cal.App.1944), also cited by Global Hawk, the insurer sought rescission based on false statements in the insured’s application. Id. at 524. The court found the insurer entitled to rescind the policy where the insured made a material misrepresentation in his application for the insurance policy upon which the insurer relied in issuing the policy. Id. at 527.

 

Contrary to the facts in the cases relied upon by the defendant, here R–Man’s failure to designate Victoria as a driver was made after the policy (with MCS– 90 endorsement) was issued. This was a violation of the policy’s requirement to do so. However, it was not a misrepresentation made to procure the policy. In other words, rather than a prior misrepresentation on the application for insurance, R–Man’s failure was a subsequent violation of the already-issued policy. Therefore, the cases cited by defendant regarding prior misrepresentations made to procure policies of insurance are inapposite.

 

IV. CONCLUSION

Global Hawk issued an insurance policy to R–Man with an MCS– 90 endorsement. Pursuant to the MCS– 90 endorsement, the Groats are entitled to recover payment of the judgment they obtained against R–Man and Victoria. Global Hawk’s attempt to rescind the policy (and with it the MCS– 90 endorsement) fails because R–Man made no prior misrepresentation or concealment in order to obtain the insurance policy. Rather, R–Man subsequently violated the policy by failing to designate Victoria as a driver. Although a prior concealment may entitle an insurer to rescission of the policy under California law, a subsequent violation of an already-issued policy (such as what R–Man did) does not.

 

*5 Accordingly, it is

 

ORDERED that

 

1. Plaintiffs’ motion for summary judgment is GRANTED;

 

2. Defendant’s cross motion for summary judgment is DENIED;

 

3. The Clerk is directed to enter judgment in favor of plaintiffs Warren A. Groat and Victoria Groat and against defendant Global Hawk Insurance Company (RRG) in the amount of $611,325.60, with interest from November 29, 2011; and

 

4The above judgment may be satisfied by the defendant Global Hawk Insurance Company (RRG) submitting proof that it has satisfied the New York judgment in favor of the plaintiffs Warren A. Groat and Victoria Groat and against R–Man Logistics, Inc. and Carlos Victoria in the sum of $611, 325.60 entered on November 29, 2011.

 

IT IS SO ORDERED.

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