Schwallie v. American Family Insurance Group et al

Filing 72

ORDER as to Defendant's Response to the Court's Order to Show Cause (Doc. 71 ). ORDERED denying the motion for reconsideration. FURTHER ORDERED discharging the order to show cause. FURTHER ORDERED that summary judgment is granted in favor o f Plaintiff on the issue of liability under the underinsured motorist endorsement. FURTHER ORDERED affirming the deadlines set in the Order Setting Final Pretrial Conference (Doc. 70 ). See order for details. Signed by Judge Neil V. Wake on 8-20-13. (NVW, nb)

Download PDF
1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Todd Schwallie, No. CV-12-00681-PHX-NVW Plaintiff, 10 11 v. 12 American Company, ORDER 13 Family Mutual Insurance Defendant. 14 15 16 Before the Court is Defendant American Family Mutual Insurance Company’s 17 Response to the Court’s Order to Show Cause (Doc. 71). In its prior Order (Doc. 69), the 18 Court denied Defendant’s Motion for Summary Judgment. The Court held that the anti- 19 stacking provision of the underinsured motorist endorsement in Mr. Schwallie’s 20 Motorcycle Policy with Defendant American Family Mutual Insurance Company 21 (American Family) did not comply with the requirements of A.R.S. § 20-259.01(H). As 22 a result, the Court ordered American Family to show cause why summary judgment 23 should not be granted to Mr. Schwallie on the issue of liability. 24 In its Response, American Family contends that an insurer’s failure to notify the 25 insured of his right to select which underinsured motorist coverage should apply does not 26 preclude enforcement of an anti-stacking provision, relying on Farmers Insurance 27 Company of Arizona v. Voss, 188 Ariz. 297, 298, 935 P.2d 875, 876 (Ct. App. 1996). 28 The Arizona Supreme Court has made clear that the burden is on insurers to take 1 affirmative steps to incorporate an anti-stacking provision if they are to be enforced. 2 State Farm Mut. Auto. Ins. Co. v. Lindsey, 182 Ariz. 329, 331, 897 P.2d 631, 633 (1995). 3 In Voss, the state court held that the anti-stacking provisions of underinsured motorist 4 endorsements on four policies an insured had with one insurer could be enforced even 5 when they did not advise the insured of his right to select which policy applies. The Voss 6 court held that the insurer’s failure to include explicit language informing the insured of 7 his right to select which policy should apply was harmless where each policy actually 8 contained an anti-stacking provision and the insurer paid benefits under the policy with 9 the highest limits. 10 American Family’s reliance on Voss is misplaced, however, because the situation 11 in this case is different from Voss in one critical respect: each of the four policies in that 12 case contained an underinsured motorist endorsement, and the accompanying anti- 13 stacking provision, before the insured was injured. 14 Schwallie’s Motorcycle Policy did not contain an underinsured motorist endorsement, 15 and could not contain an anti-stacking provision, until it was reformed after his claim. 16 The Motorcycle Policy’s anti-stacking provision therefore did not comply with the 17 requirements of A.R.S. § 20-259.01(H) not only because it failed to advise Mr. Schwallie 18 of his right to select which policy could apply, but also because it was not incorporated 19 into the policy at all prior to the accident. Mr. Schwallie did not agree to the anti- 20 stacking provision in the Motorcycle Policy, and it was not incorporated into the policy 21 by express agreement of the parties as part of the written acceptance of an underinsured 22 motorist endorsement that contains such a provision. As a result, Mr. Schwallie’s right to 23 select either the Family Car Policy or the Motorcycle Policy to apply was not implicit in 24 each policy, as it was in Voss. In this case, by contrast, Mr. 25 Even more important, American Family cannot rely on Voss because Voss 26 interpreted a previous version of the anti-stacking statute that did not contain an explicit 27 requirement that the insured be notified of his right to select a policy in writing. 188 28 -2- 1 Ariz. at 298, 935 P.2d at 876 (citing A.R.S. § 20-259.01(F) (1994) (amended 1998)). 2 However, two years after Voss was decided the Arizona legislature amended the statute 3 itself to make clear that written notice must be given to the insured if the policy itself did 4 not contain “a statement that informs the insureds of the insured’s right to select one 5 policy or coverage, as required by this subsection . . . .” A.R.S. § 20-259.01(H) (as 6 amended by Ariz. Law 1998, Ch. 288, § 1). The statutory requirement that the policy 7 contain written notice of the insured’s right to select a policy, or that the insurer provide 8 written notice of that right within 30 days of the accident, was therefore not at issue in 9 Voss. 10 The Arizona legislature effectively overruled the Voss court’s holding that an anti- 11 stacking provision could be enforced in some circumstances without written notice 12 immediately after it was decided. American Family’s argument that an insurer’s failure 13 to notify the insured of his right to select a policy is not fatal to the insurer’s ability to 14 enforce an anti-stacking provision is thus contrary to Arizona’s specific statutory 15 command. Failure to notify an insured of his right to select which policy should apply in 16 an anti-stacking provision in writing, either in the policy itself or within 30 days of any 17 claim, prevents an insurer from limiting coverage under Arizona law. American Family 18 did neither in this case, and so is liable under both policies. 19 IT IS THEREFORE ORDERED that Defendant American Family Mutual 20 Insurance Company’s Response to the Court’s Order to Show Cause (Doc. 71) is treated 21 as a Motion to Reconsider and is denied. 22 23 IT IS FURTHER ORDERED that the Court’s Order to Show Cause (Doc. 69) is discharged. 24 IT IS FURTHER ORDERED that summary judgment is granted in favor of 25 Plaintiff, under Rule 56(f)(1), on the issue of American Family’s liability under the 26 underinsured motorist endorsement of Mr. Schwallie’s Family Car Policy. 27 28 -3- 1 IT IS FURTHER ORDERED that the deadlines in the Order Setting a Final 2 Pretrial Conference (Doc. 70), in preparation for trial on the issue of Mr. Schwallie’s 3 damages, are reaffirmed. 4 Dated this 20th day of August, 2013. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -4-

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?