Kruger et al v. USAA Casualty Insurance Company et al

Filing 37

ORDER that Defendant USAA Casualty Insurance Company's Motion for Partial Summary Judgment (Doc. 28 ) is GRANTED. Signed by Judge G Murray Snow on 2/13/2012.(KMG)

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WO

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Plaintiffs,
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vs.
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USAA Casualty Insurance Company; John)
and Jane Does I-X; ABC Corporations 1-)
5; XYZ Partnerships 1-5; and QRS)
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Limited Liability Companies 1-5,
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Defendants.
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Daniel Kruger; Tami Kapphahn,

No. CV-11-113-PHX-GMS
ORDER

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Pending before the Court is Defendant USAA Casualty Insurance Company’s Motion
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for Partial Summary Judgment (Doc. 28). For the reasons discussed below, Defendant’s
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motion is granted.
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BACKGROUND

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On April 7, 2010, Plaintiff Daniel Kruger was injured in an automobile accident while

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a passenger in a Honda Prelude that was being driven by his friend, Jeremy Ramsey. The

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Honda Prelude was insured by Ramsey with Progressive Advance Insurance Company and

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carried liability limits of $15,000 per person and medical payments (“MP”) coverage of

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$10,000. After the accident, Kruger submitted liability and MP claims to Progressive, which

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subsequently paid Kruger the $15,000 liability limits and the $10,000 MP limits under

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Ramsey’s policy. At the time of the accident, Kruger owned a Dodge Stratus that was insured

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by Esurance Insurance Company; under the Esurance policy, Kruger had underinsured

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motorist (“UIM”) coverage of $25,000. After the accident, Kruger submitted a UIM claim

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to Esurance for which Eusurance paid Kruger the full $25,000.

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As of the time of the accident, Kruger was living with Co-Plaintiff Tami Kapphahn.1

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At that time, Kruger and Kapphahn jointly owned a 2006 Dodge Caravan which was insured

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by Defendant USAA Casualty Insurance Company. The Caravan’s insurance policy (the

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“Policy”) had been issued to Kapphahn several years prior and carried UIM benefits of

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$300,000 and MP benefits of $2,000. Kapphahn was listed on the Policy’s Declarations page

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as the “Named Insured” and is the sole person listed in the declarations as an “Operator.”

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(Doc. 29-1, Ex. H at 000006). The Declarations page also identifies “Co-Owner Daniel M

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Kruger” as having an “Addnl Interest” in the Policy and states in relation to him that “ENDT

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A073 applies.” (Id.). ENDT A073 is a form entitled Additional Covered Person Endorsement

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which states that “We agree, with respect to the covered auto described in the Declarations,

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Part A. Liability Coverage, applies to each additional covered person named in the

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Declarations, but only to the extent that such additional covered person qualifies as a

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covered person under Definition No. 3 of covered person in Part A of the policy.” (Doc.

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29-1, Ex. H at 000042) (emphasis in original). Part A’s definition of the term “covered

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person” states as follows:

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Covered person as used in this Part means:
1. You or any family member for the ownership,
maintenance, or use of any auto or trailer.

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2. Any person using your covered auto.

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3. Any other person or organization, but only with
respect to legal liability imposed on them for the acts or
omissions of a person for whom coverage is afforded in
1. or 2. above.

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(Doc. 29-1, Ex. H at 000023) (emphasis in original).
Prior to the accident, Kapphahn twice contacted USAA regarding the addition of
Kruger to her Policy. On June 14, 2005, Kapphahn contacted USAA electronically and
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He has been living with Kapphahn, to whom he is not related or married, since at
least 2006.
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requested a quote to add Kruger and his vehicle to her Policy. USAA responded that it could

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only add Kruger to the Policy under certain circumstances and that it would need additional

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information to determine if Kruger was eligible for coverage. On September 19, 2006,

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Kapphahn called USAA via telephone to again inquire into adding Kruger and his vehicle

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to her Policy. During the September 19 call, “the only eligibility requirement that was given

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was that USAA would not insure a vehicle that was solely owned by Daniel Kruger unless

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Tami and Daniel were married.” (Doc. 29-1, Ex. A, Request No. 8). This inquiry did not

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constitute an inquiry as to whether USAA would insure a vehicle that was jointly owned by

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Kapphahn and Kruger, nor did it constitute an inquiry as to whether Kruger would be entitled

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to UIM coverage if he was considered covered when driving a vehicle jointly owned with

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Kapphahn, but was hit by an underinsured motorist while riding in another car. Neither

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inquiry resulted in Kruger or his vehicle being added to the Policy. On June 18, 2007,

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Kapphahn and Kruger jointly purchased the 2006 Dodge Caravan mentioned above. Upon

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purchasing the Caravan, Kapphahn used USAA’s website to request that USAA remove a

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Dodge Neon that had been listed on her policy and replace it with the Caravan. In July 2007,

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USAA mailed Kapphahn an Automobile Policy Packet to notify her that her requested

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changes had been made.

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The Policy Packet contained an amended copy of her Policy and a copy of the

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Additional Covered Person Endorsement discussed above. The Policy Packet also contained

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a section entitled “IMPORTANT MESSAGES,” which stated:

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Refer to your Declarations Page and endorsements to
verify that coverages, limits, deductibles and other policy
details are correct and meet your insurance needs.
Required information forms are also enclosed for your
review.

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(Doc. 29-1, Ex. P at 0000300). Also enclosed in the Policy Packet was a document

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entitled Arizona Automobile Insurance Identification Cards on which two insurance cards

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were printed. On this document, printed above the insurance cards, is the message:

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The state of Arizona requires you to show evidence of
financial responsibility when registering your motor
vehicle, and upon request of a law enforcement officer.
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To assist you with this requirement, we have attached
two ID cards for each of your motor vehicles insured for
liability. Give one card to the Motor Vehicle Division
when you register your vehicle.

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(Doc. 29-1, Ex. P at 0000302). The insurance cards themselves list both Kapphahn and
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Kruger under the heading “Insured.” (Id.). The back side of the insurance card states
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“Coverage meets the limits required by law.” (Id.). USAA never made any verbal statements
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to Kapphahn that the Policy provided equal amounts of coverage for her and Kruger. Further,
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the document on which the cards were printed specified that the cards only provided
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evidence of the required liability coverage on the vehicle necessary for the vehicles to be
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registered
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On August 31, 2010, Kruger submitted UIM and MP claims to USAA related to the
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injuries he sustained in the April 7, 2010 automobile accident. In October 2010, USAA
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denied both his UIM and MP claims. On December 17, 2010, Plaintiffs filed their Complaint
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in this action in the Maricopa County Superior Court. The action was removed to this Court
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on January 18, 2011, and on April 21, Plaintiffs filed an Amended Complaint. In the
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Amended Complaint, Plaintiffs bring three counts against USAA: 1) Breach of Contract; 2)
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Bad Faith; and 3) Insurance Producer Negligence. Defendant USAA now moves for
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summary judgment on counts One and Three. (Doc. 28).
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DISCUSSION
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I.

Legal Standard

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Summary judgment is appropriate if the evidence, viewed in the light most favorable
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to the nonmoving party, demonstrates “that there is no genuine dispute as to any material fact
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and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a). Substantive
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law determines which facts are material and “[o]nly disputes over facts that might affect the
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outcome of the suit under the governing law will properly preclude the entry of summary
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judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “A fact issue is
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genuine ‘if the evidence is such that a reasonable jury could return a verdict for the
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nonmoving party.’” Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002)
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(quoting Anderson, 477 U.S. at 248). Thus, the nonmoving party must show that the genuine

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factual issues “‘can be resolved only by a finder of fact because they may reasonably be

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resolved in favor of either party.’” Cal. Architectural Bldg. Prods., Inc. v. Franciscan

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Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987) (quoting Anderson, 477 U.S. at 250)

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(emphasis in original).

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II.

Legal Analysis

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1.

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Defendant USAA contends that the Court should enter summary judgment against

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Plaintiffs on their Breach of Contract claim because Kruger does not qualify as a “covered

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person” for UIM or MP benefits under the Policy. (Doc. 28). In their Response, Plaintiffs

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contend that USAA seeks to “avoid coverage because of an exclusion, limitation or

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condition” and therefore has the burden of proof to show that Kruger lacks coverage. (Doc.

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30 at 4). Even if USAA bears the burden of proof, however, it has met its burden. For

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instance, USAA has shown that Kruger is not listed as an insured on the Policy’s

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Declarations page, but only as the holder of an “Addnl Interest.” (Doc. 29-1, Ex. H at

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000006). Defendant has further demonstrated that under the Policy’s Additional Covered

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Person Endorsement, an additional interest holder is only entitled to liability coverage under

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the Policy. (Doc. 29-1, Ex. H at 000042). And Plaintiffs raise no facts that dispute

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Defendants’ assertion that Kruger is not entitled to coverage under the written terms of the

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Policy. Instead, Plaintiffs focus on the argument that Defendant is required to pay Kruger the

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Policy’s UIM and MP benefits under the reasonable expectations doctrine. (Doc. 30 at 5–8).

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Under the doctrine of reasonable expectations, a court may decline to enforce an

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unambiguous boilerplate term in a contract if the court finds that “the drafter had reason to

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believe that the adhering party would not have assented to the particular term had he or she

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known of its presence.” Gordinier v. Aetna Cas. & Sur. Co. 154 Ariz. 266, 272, 742 P.2d

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277, 283 (1987). In Gordinier v. Aetna Casualty & Surety Company, however, the Arizona

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Supreme Court held that where insurance contracts are concerned, courts may only use the

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doctrine of reasonable expectations to refuse enforcement in four types of situations. 154

Count One – Breach of Contract

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Ariz., 266, 272–73 (1987). As discussed below, the instant case does not meet any of those

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standards.

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a.

Contract Terms Cannot Be Understood by Reasonably Intelligent
Consumer

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The first standard laid out by the Arizona Supreme Court under which a court may
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decline to enforce an unambiguous boilerplate term is “[w]here the contract terms, although
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non ambiguous to the court, cannot be understood by the reasonably intelligent consumer
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who might check on his or her rights.” Gordinier, 154 Ariz. at 272. In the instant case,
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Plaintiffs contend that a reasonably intelligent consumer would think, upon reading the
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Policy, that Kruger and Kapphahn have equal coverage under the Policy and therefore are
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both entitled to UIM and MP benefits. (Doc. 30 at 5–6). However, there is no adequate basis
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on which a reasonably intelligent consumer checking on her rights would conclude as much.
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Kapphahn is listed as the “Named Insured” at the top of the declarations page. (Doc. 29-1,
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Ex. H at 000006). Kapphahn is also the only person listed under the heading “Operators,”
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which is near the top of the page. (Id.). After identifying Kapphahn as the named insured and
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operator and describing the insured vehicle and its location, the Declarations Page lists four
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types of coverages and the policy limits for each: Part A – Liability; Part B – Medical
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Payments; Part C – Uninsured and Underinsured Motorists; and Part D – Physical Damages.
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Kruger’s name then appears for the first and only time in the Policy near the bottom of the
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Declarations Page under the heading “Addnl Interest – Co-Owner.” (Id.). Next to his name
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there is a note which states “ENDT A073 Applies.” (Id.).
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ENDT A073 is a form entitled Additional Covered Person Endorsement which is
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attached to the Declarations as part of Plaintiffs’ Policy and which states that “Part A.
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Liability Coverage, applies to each additional covered person named in the Declarations.”
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(Doc. 29-1, Ex. H at 000042) (emphasis added). This endorsement does not, however, in any
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way imply that Parts B, C or D apply to additional covered persons. A reasonably intelligent
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consumer would have understood upon reviewing the Policy that Kruger was only entitled
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to liability coverage and not UIM or MP coverage.
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b.

Insured Did Not Receive Full and Adequate Notice

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The second standard under which a court may decline to enforce a boilerplate term

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is where “the insured did not receive full and adequate notice of the term in question, and the

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provision is either unusual or unexpected, or one that emasculates apparent coverage.”

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Gordinier, 154 Ariz. at 273. In the instant case, Plaintiffs received full and adequate notice

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of the term in question. The front page of their Automobile Policy Packet states, under the

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heading “IMPORTANT MESSAGES”: “Refer to your Declarations Page and endorsements

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to verify that coverages, limits, deductibles and other policy details are correct and meet your

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insurance needs.” (Doc. 29-1, Ex. H at 000002) (emphasis added). As stated, the Declarations

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page identifies Kapphahn as the sole named insured and operator. Kruger, meanwhile is

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identified as the holder of an “Addnl Interest.” (Id., Ex. H at 000006). Although the words

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“Addnl Interest” might be insufficient to provide full notice that Kruger’s benefits under the

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Policy differ from Kapphahn’s, the Declarations page also states that “ENDT A073,” the

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Additional Covered Person Endorsement, applies to Kruger. And, as discussed, this

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endorsement makes clear that Kruger is only entitled to liability coverage under the Policy.

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In short, the front page of the Policy Packet, taken together with the Declarations page and

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the Additional Covered Person Endorsement, provide full and adequate notice to Plaintiffs

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that Kruger is not entitled to UIM or MP benefits.

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c.

Objective Impression of Coverage in Mind of Reasonable Insured

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A third situation in which a court may decline to enforce a boilerplate term is “[w]here

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some activity which can be reasonably attributed to the insurer would create an objective

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impression of coverage in the mind of a reasonable insured.” Gordinier, 154 Ariz. at 273.

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Plaintiffs concede that USAA “never made any verbal statements to Kapphahn that the

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Policy provided equal amounts of coverage for her and for Kruger.” (Doc. 29, ¶ 60; Doc. 31,

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¶ 60). Plaintiffs, contend, however, that during Kapphahn’s September 19, 2006 phone call

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with USAA, the only eligibility requirements that were given for USAA to insure Kruger’s

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vehicle under Kapphahn’s policy were that Kapphahn also be an owner of the vehicle or that

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Kapphahn and Kruger be married. (Doc. 29-1, Ex. A, Request No. 8; Doc. 30 at 7). Plaintiffs
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argue that because these were the only eligibility requirements mentioned by USAA,

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“[w]homever at USAA told Ms. Kapphahn those were the requirements created an objective

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impression that Kruger would be covered [for UIM and MP benefits] if she added him to her

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policy if they bought a car together.” (Doc. 30 at 7). Plaintiffs, however, do not contend that

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Kapphahn ever requested UIM or MP coverage, nor do they produce any evidence to this

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effect. Moreover, Kapphahn placed her 2006 phone call at a time when she and Kruger did

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not jointly own the car she wished to add to her Policy. That USAA told her that she and

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Kruger were not eligible because they were not joint owners may imply that, were they to

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assume joint ownership, Kruger’s vehicle would be eligible for some sort of insurance

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coverage under Kapphahn’s policy. Plaintiffs do not demonstrate, however, how indicating

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that Kruger could add a separately-owned car to Kapphahn’s Policy, if they were married,

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creates a reasonable expectation that he would receive UIM coverage for accidents caused

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by a third-party if Kapphahn insured a car jointly owned by Kapphahn and Kruger with

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USAA. See cf. State Farm Mut. Auto. Ins. Co. v. Wilson, 162 Ariz. 251, 258, 782 P.2d 727,

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734 (1989) (“General liability insurance is separate and distinct from the first party coverage

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provided by either UM or UIM insurance.”). Based on the September 19th phone call alone,

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a reasonable jury could not find that Kapphahn had the objectively reasonable impression

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that Kruger had coverage.

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Plaintiffs further allege that the insurance cards sent to them by USAA created the

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objective impression of equal coverage. (Doc. 30 at 7). These cards were included in the

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Policy Packet and list both Kapphahn and Kruger under the title “insured.” (Doc. 29-1, Ex.

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H at 000004). The insurance cards, however, in no way imply that Kapphahn and/or Kruger

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have UIM or MP coverage. To the contrary, the page on which the cards are printed states

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that the cards are evidence that each insured has liability coverage:

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The State of Arizona requires you to show evidence of financial
responsibility when registering your motor vehicle, and upon
request of a law enforcement officer. To assist you with this
requirement, we have attached two ID cards for each of your
motor vehicles insured for liability.

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(Doc. 29-1, Ex. H at 000004) (emphasis added). Were the Court to hold that the insurance

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identification cards must include all exclusions to one’s general coverage, the cards would

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themselves be transformed into large insurance contracts. This would defeat the identification

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cards’ primary purpose as a quick and simple way to show proof of compliance with the law.

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See cf. Matter of General Acc. Ins. Co. (LaMotta) 149 A.D.2d 322, 324, 539 N.Y.S.2d 370,

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373 (N.Y.A.D. 1989) (“The temporary insurance identification card was not a contract of

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insurance but merely evidence of one’s existence.”).
d.

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Reasonable Belief of Coverage in Mind of Particular Insured

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The fourth situation in which a court may decline to enforce a boilerplate term is

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where “some activity reasonably attributable to the insurer has induced a particular insured

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reasonably to believe that he has coverage, although such coverage is expressly and

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unambiguously denied by the policy.” Gordinier, 154 Ariz. at 273 (emphasis added). This

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fourth standard is similar to the third standard, but seems to cover situations in which the

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insurer’s conduct, while not creating an objective impression of coverage, would create a

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reasonable impression of coverage in the mind of the particular insured. Plaintiffs do not

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contend, however, that they were somehow uniquely situated from other insureds in a way

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that caused them to have such a reasonable impression.2 Rather, Plaintiffs assert that this

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fourth standard is the same as the third. (See Doc. 30 at 8) (“This [fourth] scenario is

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substantially the same as 3. above.”). And as discussed, Plaintiffs are not entitled to relief

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under the third Gordinier standard.

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In sum, Plaintiffs do not contend that Kruger is entitled to UIM or MP benefits under

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the written terms of their insurance policy. And they have not produced evidence “such that

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a reasonable jury could return a verdict for [them]’” under any of the four strands of the

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Gordinier reasonable expectations doctrine. Villiarimo, 281 F.3d at 1061 (quoting Anderson,

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For instance, Plaintiffs do not contend that they suffer from a lack of education or
lack of mental capacity. To the contrary, in their answers to USAA’s interrogatories Plaintiffs
state that Kapphahn has a Bachelor of Science degree from DeVry University and that
Kruger has completed three years of post secondary education at Moorhead State University.
(Doc. 29-1, Ex. E, Request No.19).
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477 U.S. at 248). Summary judgment is therefore granted against them on their Breach of

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Contract claim.

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2.

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Defendant USAA also asks the Court to enter summary judgment against Plaintiffs

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on their third Count, Insurance Producer Negligence. (Doc. 28). “In a negligence action, the

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plaintiff must demonstrate that the defendant breached a duty the defendant owed the

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plaintiff and that the plaintiff was damaged as a result of that breach.” Meineke v. GAB

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Business Services, Inc., 195 Ariz. 564, 566, 991 P.2d 267, 269 (App. 1999). Plaintiffs

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contend that USAA breached its duty of care towards them by 1) “failing to provide . . .

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Kapphahn with the services of an actual agent”; and 2) “using a customer service

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representative who failed to provide adequate information to [Kapphahn] about the coverage

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she sought.” (Doc. 29 at ¶ 63; Doc. 31 at ¶ 63; see also Doc. 30 at 10–11). Even when

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viewed, however, in the light most favorable to Plaintiffs, neither of these facts constitute a

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breach of any duty of care USAA may have had to Plaintiffs.

Count Three – Insurance Producer Negligence

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Plaintiffs first contend that USAA’s failure to provide Kapphahn with the services of

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an insurance agent was a breach of its duty of care. (Doc. 29 at ¶ 63; Doc. 31 at ¶ 63; see also

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Doc. 30 at 10–11). Plaintiffs do not contend, however, that a USAA agent was unavailable

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had they wished to talk to one. They acknowledge that Kapphahn had previously been able

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to contact a USAA representative over the phone. (Doc. 30 at 7). Rather, Plaintiffs’ breach

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of duty argument appears to be based on the sole fact that USAA allows customers to alter

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their insurance policies online. (See id.). Plaintiffs have provided no authority in support of

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this contention, and the Court finds that no reasonable jury could conclude that insurance

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companies breach their duty of care solely by providing customer service via website,

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particularly where those insurance companies also provide access to agents who can answer

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customers’ questions.

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Plaintiffs also contend that USAA breached its duty of care because one of its

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customer service representatives “failed to provide adequate information to [Kapphahn]

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about the coverage she sought.” (Doc. 29 at ¶ 63; Doc. 31 at ¶ 63; see also Doc. 30 at 10–11).
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Plaintiffs state that Kapphahn is prepared to testify at trial that in 2006 she called USAA and

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talked to a customer service representative about the possibility of adding Kruger to her

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insurance policy. (Doc. 30 at 12). Kapphahn is apparently also able to testify that “she was

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told by [the customer service representative] that the ‘eligibility requirement’ for Daniel

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Kruger to be an insured on her policy was either that they be married or own a vehicle

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together.” (Id.). The information sought by Plaintiff during that 2006 call, however,

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concerned a vehicle for which Kruger was the sole owner. It would have been superfluous

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for the USAA representative to elaborate on other potential requirements for eligibility given

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that Kruger’s vehicle was ineligible based on Kapphahn’s lack of an ownership interest

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alone. Moreover, Plaintiffs do not provide an affidavit from Kapphahn in relation to the

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alleged eligibility requirements she received during the phone call. Nor do Plaintiff provide

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any other corroborating evidence. They have therefore failed to produce evidence which

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establishes a genuine issue of whether USAA breached a duty of care. See Villiarimo v.

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Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002) (“This court has refused to find

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a ‘genuine issue’ where the only evidence presented is ‘uncorroborated and self-serving’

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testimony.”) (citing Kennedy v. Applause, Inc., 90 F.3d 1477, 1481 (9th Cir.1996)); Brady

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v. Blue Cross and Blue Shield of Texas, Inc., 767 F.Supp. 131, 135 (N.D.Tex. 1991)

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(“[Plaintiff’s] interrogatory answers are not sworn. The court may not construe them as a

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Rule 56(e) affidavit or as other competent summary judgment proof.”). This alone is fatal to

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their negligence claim. Meineke, 195 Ariz. at 566.

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CONCLUSION

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Plaintiffs have failed to establish genuine issues of fact in relation to their Breach of

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Contract and Insurance Producer Negligence claims which could reasonably be resolved in

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their favor.

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IT IS THEREFORE ORDERED that Defendant USAA Casualty Insurance
Company’s Motion for Partial Summary Judgment (Doc. 28) is GRANTED.
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DATED this 13th day of February, 2012.

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