Allen v. Country Mutual Insurance Company Incorporated et al

Filing 24

ORDER that Defendant's 9 Motion for Summary Judgment is granted without prejudice to Allen refiling this action upon his compliance with the terms of his contract. ORDERED that the Clerk terminate this action. Signed by Judge G Murray Snow on 12/31/2013. (LFIG)

1

WO

2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7

FOR THE DISTRICT OF ARIZONA

8
9

12
13
14

ORDER

Plaintiff,

10
11

No. CV-13-01015-PHX-GMS

Derrick Allen,

v.
Country Mutual Insurance Company, Inc., a
foreign corporation dba Country Mutual
Insurance Company dba Country Financial;
et al.,
Defendants.

15
16

Pending before this Court is Defendant’s Motion to Dismiss (Doc. 9) which this

17

Court converted to a motion for summary judgment (Doc. 16). Pursuant to that change,

18

the parties filed supplemental briefing. (Docs. 17–23.) For the following reasons, the

19

Motion is granted without prejudice to Allen re-filing his claim upon compliance with the

20

terms of his insurance policy.

21

BACKGROUND

22

Plaintiff Derrick Allen alleges bad faith against his insurance company, Defendant

23

Country Mutual Insurance Company, Inc. (“Country Mutual”), in their handling of his

24

claim based on the theft of his two motorcycles and motorcycle trailer. (Doc. 1-1.) The

25

theft occurred on November 2, 2012, and there is no dispute that the motorcycles and

26

trailer were covered under Allen’s policy with Country Mutual. (Doc. 17 at 1–2; Doc. 18

27

at 2.) Allen reported the theft to the police and Country Mutual that day. (Doc. 18 at 2.)

28

There is a dispute as to the value of the motorcycles. Allen states in his declaration

1

that before insuring the motorcycles, Country Mutual had an underwriter evaluate them

2

and determined that they were of “show quality” and that each had a market value of

3

$55,000. (Doc. 19 at 7.) Country Mutual ignores this allegation and points to other

4

indicators of the motorcycles’ value, such as their initial purchase prices of $10,000 and

5

$23,000. (Doc. 17 at 2.) Country Mutual hired an appraiser after the theft, who appears to

6

have determined that they were worth $32,815.05 and $24,148.75 respectively. (Id. at 5.)

7

On December 5, Country Mutual sent Allen a letter requesting documentation to

8

verify improvements made to the motorcycles and trailer. (Doc. 17, Ex. G.) Five days

9

later, Country Mutual sent a Notice of Reservation of Rights regarding each motorcycle.

10

(Id., Ex. H.) In those notices, Country Mutual informed Allen that his claim may not be

11

covered and generally cited various sections of his policy, but did not cite any specific

12

problems or concern. (Id.) On the same day it sent these notices that the claims may not

13

be covered at all, Country Mutual also sent two Automobile Proof of Loss statements for

14

Allen to sign which listed the values of the motorcycles as $32,815.05 and $24,148.75.

15

(Id., Ex. I.) These forms included a place for Allen to sign whereby he was

16

acknowledging receipt of the payment of those amounts as the contractual obligation.

17

(Id.)

18

Allen acquired representation by an attorney, who sent a demand letter on January

19

16, 2013, asking for payment of the alleged full value of $55,000 per motorcycle by

20

February 1. (Id., at Ex. J.) For the next several months, Allen’s attorney exchanged

21

multiple emails and letters with Country Mutual. (Id., Exs. J–X.) On January 21, Country

22

Mutual asked the attorney to have Allen complete an Automobile Proof of Loss, which

23

he did on March 19. (Doc. 17–1, at 6–7.) On March 7, Country Mutual received a

24

National Insurance Crime Bureau Hotline Tip indicating that an anonymous caller felt

25

that Allen was fraudulently reporting his motorcycles as stolen. (Doc. 71, Ex. M.) On

26

March 28, the attorney for Country Mutual contacted Allen’s attorney to request and

27

schedule an Examination Under Oath (“EUO”) pursuant to the terms of his policy. (Id.,

28

Ex. O.)

-2-

1

On April 8, over five months from the time of the theft, Allen filed the present suit

2

in Maricopa County. (Id., Exs. P–U; Doc. 1-1, at 3–7.) Allen’s counsel asserted that

3

Allen could comply with the policy’s EUO requirement by submitting to a deposition

4

during the course of this bad faith lawsuit. (Doc. 17, Ex. R.) Country Mutual then

5

removed the case to this court (Doc. 1) and made the Motion to Dismiss (Doc. 9).

6

Briefing is now complete on the converted motion to dismiss which will now be

7

addressed as a motion for summary judgment. (Docs. 17–23.)
DISCUSSION

8
9

I.

LEGAL STANDARD

10

Summary judgment is appropriate if the evidence, viewed in the light most

11

favorable to the nonmoving party, demonstrates “that there is no genuine dispute as to

12

any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ.

13

P. 56(a). “[A] party seeking summary judgment always bears the initial responsibility of

14

informing the district court of the basis for its motion, and identifying those portions of

15

[the record] which it believes demonstrate the absence of a genuine issue of material

16

fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

17

Substantive law determines which facts are material and “[o]nly disputes over

18

facts that might affect the outcome of the suit under the governing law will properly

19

preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

20

248 (1986). “A fact issue is genuine ‘if the evidence is such that a reasonable jury could

21

return a verdict for the nonmoving party.’” Villiarimo v. Aloha Island Air, Inc., 281 F.3d

22

1054, 1061 (9th Cir. 2002) (quoting Anderson, 477 U.S. at 248). Thus, the nonmoving

23

party must show that the genuine factual issues “‘can be resolved only by a finder of fact

24

because they may reasonably be resolved in favor of either party.’” Cal. Architectural

25

Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987)

26

(quoting Anderson, 477 U.S. at 250).

27

Furthermore, the party opposing summary judgment “may not rest upon the mere

28

allegations or denials of [the party’s] pleadings, but . . . must set forth specific facts

-3-

1

showing that there is a genuine issue for trial.” Fed. R. Civ. P. 56(e); see Matsushita Elec.

2

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87 (1986); Brinson v. Linda Rose

3

Joint Venture, 53 F.3d 1044, 1049 (9th Cir. 1995).

4

When a summary judgment motion is filed “before a party has had any realistic

5

opportunity to pursue discovery relating to its theory of the case, district courts should

6

grant any Rule [56(d), formerly] 56(f) motion fairly freely.” Burlington N. Santa Fe R.

7

Co. v. Assiniboine & Sioux Tribes of Fort Peck Reservation, 323 F.3d 767, 773 (9th Cir.

8

2003). However, the burden is on the nonmoving party to show “by affidavit or

9

declaration that, for specified reasons, it cannot present facts essential to justify its

10

opposition.” Fed. R. Civ. P. 56(d); Margolis v. Ryan, 140 F.3d 850, 853 (9th Cir. 1998).

11

The request to defer consideration must “clearly show ‘what information is sought and

12

how it would preclude summary judgment.’” Spear v. United States, No. CIV. 11–1742–

13

PHX–PGR, 2012 WL 2029747, at *2 (D. Ariz. June 6, 2012) (citing Margolis, 140 F.3d

14

at 853). More specifically, the nonmoving party must set forth in affidavit form the

15

specific facts it hopes to elicit from further discovery and show that these facts are

16

essential to overcoming summary judgment. Family Home & Fin. Ctr., Inc. v. Fed. Home

17

Loan Mortg. Corp., 525 F.3d 822, 827 (9th Cir. 2008).

18

II.

ANALYSIS

19

Allen’s complaint asserts a single claim of bad faith and prays for judgment for

20

breach of contract and bad faith. Country Mutual asks for summary judgment on the

21

claim for bad faith or breach of contract because it alleges that Allen was contractually

22

prohibited from bringing this suit until Allen complied with its request for an EUO.

23

Country Mutual points to the provision in its policy contract which provides that “[n]o

24

suit or action for recovery of any claim may be brought against us until the insured has

25

fully complied with all the terms of this policy.” (Doc 17, Ex. A (“Auto Insurance

26

Policy”) §4, Conditions, 8.) The only term of the policy with which Allen has not

27

complied is the request for an EUO. The EUO provision in the contract requires that the

28

insured party making a claim must “submit to an [EUO] as often as [Country Mutual]

-4-

1

reasonably require[s].” Allen argues that the reasonableness of Country Mutual’s request

2

in light of its actions should be a question of fact for the jury. But the Ninth Circuit has

3

rejected that argument and held that a court may determine reasonableness as a matter of

4

law in the context of an insurance company’s request for an EUO. West v. State Farm

5

Fire & Cas. Co., 868 F.2d 348, 351 (9th Cir. 1989) (“reasonableness becomes a question

6

of law appropriate for determination on motion for summary judgment when only one

7

conclusion about the conduct’s reasonableness is possible”).

8

Here, Country Mutual did not ask for an EUO until March 28. Nevertheless, the

9

EUO was permissible if reasonable and an EUO would be reasonable given the high

10

dollar amount of the claim even without the existence of the tip that fraud might be

11

involved. It is also reasonable for Country Mutual to wait until it had the signed Proof of

12

Loss statements before requesting the EUO. Country Mutual permissibly asked Allen to

13

submit to an EUO, and that occurred before Allen filed his suit against Country Mutual.

14

The parties have the right to contractually agree to an EUO as one of the terms of

15

their contract, and insurers have been including such provisions as a condition of

16

coverage for years. Warrilow v. Superior Court of State of Ariz. In & For Pima Cnty.,

17

142 Ariz. 250, 253, 689 P.2d 193, 196 (Ct. App. 1984). “[T]he law is well settled that a

18

failure or refusal of the insured to comply with his obligation of cooperation under such

19

a[n EUO] provision will constitute a bar to any recovery against the insurance company.”

20

Id. In Warrilow, the insured refused to answer certain question during his EUO and later

21

brought a suit against his insurer. Id. at 252–53, 689 P.2d at 194–95. The court found that

22

a motion for summary judgment should have been granted because the refusal

23

“constituted a breach of the terms of the insurance contract which, as a matter of law,

24

bars any recovery on his claim.” Id. at 255, 689 P.2d at 198.

25

Allen argues that he should be allowed to proceed with this suit because Country

26

Mutual denied or refused his claim. See U.S. Fid. & Guar. Co. v. Powercraft Homes,

27

Inc., 141 Ariz. 71, 75, 685 P.2d 136, 140 (Ct. App. 1984) (recognizing an implied waiver

28

of the need for compliance with insurance company’s requests after a denial of coverage).

-5-

1

Allen provides, however, no facts from which a reasonable jury could conclude that

2

Country Mutual has yet actually denied his claim, and merely repeating the assertion that

3

it has done so does not take the place of admissible evidence. There was no actual denial

4

here because neither the Reservation of Rights nor the failure to meet the demanded

5

payout date set by Allen’s attorney constituted a denial. In fact Country Mutual was still

6

investigating the claim, as evidenced by its continued demands for the Proof of Loss

7

statements and the eventual demand for an EUO. Allen appears to be making an

8

argument that the claims were constructively or effectively denied by Country Mutual’s

9

course of conduct. But the case Allen cites makes it clear that the implied waiver “rule

10

requires only that the insurer communicate to the insured its intent not to pay the claim.”

11

Id. Here, Country Mutual never communicated its intent not to pay and its investigation

12

of the claim did not imply an intent not to pay.

13

Allen’s request to defer consideration of this motion under Rule 56(d) is denied

14

because the facts he cites would not preclude summary judgment. Specifically, Allen

15

wants to discover more about the anonymous tip to the National Insurance Crime Bureau

16

and the underwriting process before insuring the motorcycles. As just noted, the request

17

for an EUO would have been reasonable even without a tip. The information surrounding

18

the tip would not change the determination in this case that Allen needed to comply with

19

the EUO request before bringing suit.

20

Allen’s uncontroverted allegation that Country Mutual already determined the

21

value of the motorcycles before issuing the policy will, if proved, likely play a role in

22

establishing the amount of the covered loss in this case, and possibly bear on his claim

23

for bad faith. However, it does not prevent the grant of summary judgment at this time.

24

Summary judgment is not granted on the merits of the claim but, rather, on the

25

contractual limitations on the timing of filing this suit. That the Court grants summary

26

judgment, therefore, does not, in and of itself, prevent Allen from re-filing his claim upon

27

compliance with the terms of his policy.

28

-6-

1

IT IS HEREBY ORDERED that Defendant’s Motion for Dismiss as converted

2

to a motion for summary judgment (Doc. 9) is granted without prejudice to Allen re-

3

filing this action upon his compliance with the terms of his contract.

4

IT IS FURTHER ORDER that the Clerk terminate this action.

5

Dated this 31st day of December, 2013.

6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

-7-