Cosgrove v. National Fire & Marine Insurance Company

Filing 171

ORDER PARTIAL SUMMARY JUDGMENT MOTIONS - Plaintiff's motion for partial summary judgment 147 was granted as to the Subcontractors Exclusion. But, to the extent that plaintiff has moved to estop defendant from asserting any other coverage defe nses, her motion is denied. The information that was improperly disclosed to defendant only pertained to the Subcontractors Exclusion. Defendant is only estopped from asserting a coverage defense based on the Subcontractors Exclusion. Because plaintiff's motion for partial summary judgment was granted, defendant's motion for partial summary judgment 160 was deemed moot. (See document for further details). Signed by Judge H Russel Holland on 4/10/17. (SLQ)

WO

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA

KAREN COSGROVE, a single person,

)
)
Plaintiff,
)
)
vs.
)
)
NATIONAL FIRE & MARINE INSURANCE )
COMPANY, a foreign insurer,
)
)
Defendant.
)
_______________________________________)

No. 2:14-cv-2229-HRH

ORDER
Partial Summary Judgment Motions
Plaintiff moves for partial summary judgment.1 This motion is opposed,2 and
defendant also moves for partial summary judgment.3 Defendant’s motion for partial
summary judgment is opposed.4 After hearing oral argument on plaintiff’s motion, the court
granted plaintiff’s motion on the record. Defense counsel agreed that in light of the court’s

1

Docket No. 147.

2

Docket No. 150.

3

Docket No. 160.

4

Docket No. 161.
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ruling, defendant’s motion for partial summary judgment was moot. What follows is a
detailed order explaining the court’s decision as to plaintiff’s motion for partial summary
judgment.
Facts
Plaintiff is Karen Cosgrove. Defendant is National Fire & Marine Insurance
Company.
In October 2003, plaintiff hired WTM Construction, which was owned by William
and Lana Marie Mitzel, to remodel her house. Plaintiff contended that WTM did a poor job,
and on April 10, 2009, plaintiff sued WTM Construction and the Mitzels in state court.
WTM was insured by defendant under policy number 72LP156131 for the period of
April 28, 2003 through April 28, 2004. On July 10, 2009, defendant advised WTM that it
would “assume the defense of WTM in the [state-court] Suit subject to a full and complete
reservation” of rights.5 Defendant advised WTM that it had retained Richard Righi to defend
WTM.6 Defendant also advised WTM that the policy contained a Subcontractora Exclusion
(Endorsement M-5095) and thus
[t]o the extent that the damaged alleged in [the state-court Suit]
arose out of operations performed for you by independent
contractors or subcontractors and such independent contractors
or subcontractors did not agree in writing to defend, indemnify
and hold WTM harmless, failed to carry insurance with the
5

Exhibit 4 at NFM-Cosgrove 03082, Plaintiff’s Revised Partial Summary Judgment
Motion [etc.], Docket No. 147.
6

Id.
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provisions required by the Independent Contractors and Subcontractors Coverage Requirement Exclusion endorsement form(s)
or otherwise failed to fulfill the requirements of the endorsement(s) in any respect, the Policy does not provide coverage for
the [state-court] Suit.[7]
The Subcontractors Exclusion provided:
This insurance does not apply to “bodily injury,” “property
damage,” or “personal or advertising injury” arising out of
operations performed for you by independent contractors or subcontractors unless:
(1)

Such independent contractors or sub-contractors agree in
writing to defend, indemnify, and hold harmless you and
your affiliates, subsidiaries, directors, officers, employees, agents, and their representatives from and against all
claims, damages, losses, and expenses attributable to,
resulting from, or arising out of the independent contractor’s or sub-contractor’s operations performed for you,
caused in whole or in part by any act or omission of the
independent contractor or sub-contractor or any one
directly or indirectly employed by any of them or anyone
for whose acts any of them may be liable, regardless of
whether or not it is caused in part by you; and

(2)

Such independent contractors or sub-contractors carry
insurance with coverage and limits of liability equal to or
greater than those carried by you, including commercial
general liability, workers’ compensation and employers’
liability insurance; and

(3)

Such commercial general liability insurance provides
coverage for the independent contractors’ or subcontractors’ indemnity obligations set forth in paragraph (1)
above; and

7

Id. at NFM-Cosgrove 03093-03904.
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(4)

Such commercial general liability insurance names you
as an individual insured with coverage consistent with
the coverage provided in the ISO CG 2009 endorsement.[8]

On June 2, 2009, Mr. Righi wrote to Anne Rohling, the adjuster handling the claim
for defendant, to advise that he had “met with” Mr. Mitzel “to initiate the defense of” the
state-court Suit and that he would “initiate attempts to gather as much information as possible
regarding the plaintiffs’ allegations and the extent to which WTM Construction actually
performed work at the Cosgrove residence.”9 Mr. Righi advised Rohling that “[a]s soon as
I gather this information, I will provide you with an initial analysis for your file.”10
On June 30, 2009, Mr. Righi provided his initial evaluation to Rohling.11 Mr. Righi
advised that he had learned that “[a]ll construction work was done by sub-contractors except
for the framing” and that “[w]e have been unable to locate any sub-contract agreements.”12
Mr. Righi testified that he thought he learned this information both from Mr. Mitzel and from

8

Exhibit 28 at NFM-Cosgrove 02827, Plaintiff’s Revised Partial Summary Judgment
Motion [etc.], Docket No. 147.
9

Letter from Richard L. Righi to Anne Rohling at NFM-Cosgrove 03800, Exhibit 2,
Plaintiff’s Revised Partial Summary Judgment Motion [etc.], Docket No. 147.
10

Id.

11

Letter from Richard L. Righi to Anne Rohling, Exhibit 3, Plaintiff’s Revised Partial
Summary Judgment Motion [etc.], Docket No. 147.
12

Id. at NFM-Cosgrove 01118.
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a “review of the job file.”13 Although the job file was eventually produced to all parties in
the state-court Suit pursuant to Rule 26.1, Arizona Rules of Civil Procedure, the job file had
not been produced in discovery as of June 30, 2009.14
As it turned out, the initial information that Mr. Righi obtained about the subcontractors might not have been completely accurate. In a July 8, 2010 update, Mr. Righi informed
Rohling that “[i]t appears that WTM did not perform the framing on this Project, but rather
retained a company called Extreme Framing.”15 Mr. Righi also advised Rohling that “[w]e
have been unable to locate written contracts between WTM and th[e] subcontractors who
performed work on the project. At this point, we are doubtful any such contracts exist.”16
At his deposition, Mr. Righi was asked what led him to change his conclusion about
whether WTM had done the framing on the project, and he responded:
I’m not exactly sure. What I think happened was Bill Mitzel
must have found some documents and jogged his memory about
the scope of the work and who did what. Because at the
beginning of the case, he just wasn’t clear about a lot of the
details. You know, it was a 6-year old project at that time. And
so he just didn’t have a real specific memory of certain ...

13

Deposition of Richard Louis Righi, Esq. at 99:20-25, Exhibit 1, Defendant National
Fire & Marine Insurance Company’s Response to Plaintiff’s Revised Partial Summary
Judgment Motion [etc.], Docket No. 150.
14

WTM and the Mitzels made their first disclosure in the state-court Suit in September
2009. Exhibit 1, Plaintiffs’ Reply [etc.], Docket No. 165.
15

Letter from Richard L. Righi to Anne Rohling at NFM-Cosgrove 00808, Exhibit 9,
Plaintiff’s Revised Partial Summary Judgment Motion [etc.], Docket No. 147.
16

Id. at NFM-Cosgrove 00809.
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details. And it took a while for us to obtain documents that
would help us sort of recreate the project. And I think that’s
probably what happened is we found some additional materials
or he remembered additional details somehow.[17]
Throughout his representation of WTM, Mr. Righi provided Rohling with updates.18
He testified that his firm “report[s] our cases the same way. We provide information that is
out there in the public domain... Certainly nothing secretive, nothing privileged in the sense
that it could harm the client.”19 Mr. Righi further testified that “we report all the facts, all the
developments, everything that happens, because what we’re reporting is ... in the record. It’s
in a deposition or disclosure or it’s in a depository. It’s out there for public consumption.
So if that’s the case, we report it.”20 But, Mr. Righi testified that “if a client tells me
something privileged, tells me something important, I’m not going to report that.”21 Mr.
Righi did not consider the information about the subcontracts to be confidential or privileged
information because it “was very clear in the documents. It was published to everyone.”22

17

Righi Deposition at 83:23-84:13, Exhibit 25, Plaintiff’s Revised Partial Summary
Judgment Motion [etc.], Docket No. 147.
18

Exhibits 10-11, 13-15, 17, 21, Plaintiff’s Revised Partial Summary Judgment Motion
[etc.], Docket No. 147.
19

Righi Deposition at 63:25-64:6, Exhibit 25, Plaintiff’s Revised Partial Summary
Judgment Motion [etc.], Docket No. 147.
20

Id. at 28:13-17.

21

Id. at 10-12.

22

Righi Deposition at 115:9-12, Exhibit 1, Defendant National Fire & Marine
(continued...)
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In April 2010, Mr. Righi filed a third-party complaint in state court on behalf of WTM
against seven of the subcontractors.23 Mr. Righi testified that such third-party complaints are
filed “[i]n any case where we are representing a general contractor” because “it’s important
to transfer the risk to the extent we can.”24 In the third-party complaint, WTM asserted
common law implied indemnity claims against the subcontractors.25 Mr. Righi testified that
common law implied indemnity claims were asserted, as opposed to express indemnity
claims, because there were no subcontractor agreements.26 Mr. Righi testified that “by filing
a third-party complaint and only having common law claims, it’s obvious that there are no
subcontracts.”27

22

(...continued)
Insurance Company’s Response to Plaintiff’s Revised Partial Summary Judgment Motion
[etc.], Docket No. 150.
23

WTM Construction, Inc.’s Third-Party Complaint, Exhibit 2, Defendant National
Fire & Marine Insurance Company’s Response to Plaintiff’s Revised Partial Summary
Judgment Motion [etc.], Docket No. 150.
24

Righi Deposition at 116:7-19, Exhibit 1, Defendant National Fire & Marine
Insurance Company’s Response to Plaintiff’s Revised Partial Summary Judgment Motion
[etc.], Docket No. 150.
25

Third Party Complaint at 7, Exhibit 2, Defendant National Fire & Marine Insurance
Company’s Response to Plaintiff’s Revised Partial Summary Judgment Motion [etc.], Docket
No. 150.
26

Righi Deposition at 116:24-117:3, Exhibit 1, Defendant National Fire & Marine
Insurance Company’s Response to Plaintiff’s Revised Partial Summary Judgment Motion
[etc.], Docket No. 150.
27

Id. at 117:10-12.
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At some point in time, Rohling determined that defendant had an 80% chance of
defeating coverage based on the Subcontractors Exclusion.28 She testified that two of the
facts she relied on in reaching this determination were that subcontractors had done all or
most of the work on plaintiff’s home and that WTM had no contracts with any of the
subcontractors.29 In fact, Rohling noted that “Coverage Counsel advises that under Arizona
law, [the Subcontractors Exclusion] may exclude coverage on this claim. Per defense
Counsel, WTM did no[t] produce contracts with subcontractors. Therefore, I estimated that
the court would allow the exclusion and decide that there is no coverage under the policy
80% of the time.”30
Rohling’s determination that there was an 80% chance of defeating coverage impacted
settlement negotiations in the state-court Suit. For example, at one point Mr. Righi
recommended settling the state-court Suit for $110,000 and Rohling recommended $23,000.31
Rohling testified that the difference between Mr. Righi’s recommendation and hers was

28

Videotaped Deposition of Anne Rohling at 230:12-17, Exhibit 24, Plaintiff’s
Revised Partial Summary Judgment Motion [etc.], Docket No. 147.
29

Id. at 272:12-274:12.

30

Exhibit 30 at NFM-Cosgrove 03350, Plaintiff’s Revised Motion for Partial Summary
Judgment [etc.], Docket No. 147.
31

Rohling Deposition at 230:8-11, Exhibit 24, Plaintiff’s Revised Motion for Partial
Summary Judgment [etc.], Docket No. 147.
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“[t]he analysis on the coverage.”32 As another example, in February 2011, plaintiff made a
$109,000 Offer of Judgment to settle her claims against WTM.33 Mr. Righi requested
“authority of up to $109,000 with which to negotiate a settlement.”34 But, defendant rejected
the $109,000 offer.35
In April 2013, on the eve of trial, plaintiff, WTM, and the Mitzels settled the statecourt Suit, and on September 17, 2013, “they executed a Morris agreement[,]”36 stipulating
to a judgment of $443,690.37 The state court held a reasonableness hearing, in which
defendant participated. The state court concluded that “a reasonable total settlement would
be $304,373[.]”38 From the $304,373 total settlement, $50,000 was deducted for the $25,000
WTM and the Mitzels had agreed to pay to settle a fraud and misrepresentation claim and the
$25,000 that WTM and the Mitzels agreed to pay “if Cosgrove collected less than $443,690

32

Id. at 230:10-12.

33

Offer of Judgment, Exhibit 12 at NFM_Cosgrove 00776, Plaintiff’s Revised Motion
for Partial Summary Judgment [etc.], Docket No. 147.
34

Letter from Richard L. Righi & Gregory E. Williams to Anne Rohling at NFMCosgrove 00774, Exhibit 13, Plaintiff’s Revised Motion for Partial Summary Judgment
[etc.], Docket No. 147.
35

Rohling Deposition at 281:3-11, Exhibit 24, Plaintiff’s Revised Motion for Partial
Summary Judgment [etc.], Docket No. 147.
36

Complaint at 2, ¶ 12, Exhibit A, Notice of Removal, Docket No. 1.

37

Superior Court Judgment at 3, Exhibit 22, Plaintiff’s Revised Motion for Partial
Summary Judgment [etc.], Docket No. 147.
38

Id. at 5.
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from WTM’s insurance carrier.”39 Thus, the court found that “the net reasonable settlement
is $254,373.”40 “Under the Morris Agreement, WTM assigned to Cosgrove all of its rights,
title, interests, proceeds, causes of action, and claims of any kind whatsoever related to the
project that WTM may have had against its insurers, including [defendant].”41
On July 25, 2014, plaintiff commenced this action in state court. The case was
subsequently removed to this court. In her amended complaint, plaintiff asserts a breach of
contract claim and a bad faith claim against defendant. Plaintiff alleges that defendant has
breached the WTM insurance policy “by failing to meet its indemnity obligations under the
insurance policy and by failing to make payment for the $254,373 judgment.”42 Plaintiff also
alleges that defendant has breached the WTM insurance policy
by waiting an unreasonable amount of time to make a determination as to indemnification and/or giving untimely notice to
WTM that it would not indemnify it for any damages awarded
Cosgrove or judgment entered against WTM, thereby prejudicing and damaging WTM by precluding it from (a) settling the
matter for a lesser amount, (b) avoiding a larger judgment, and
(c) avoiding the $25,000 payment to Cosgrove.[43]

39

Id. at 2-3, 5.

40

Id. at 5.

41

Complaint at 3, ¶ 13, Exhibit A, Notice of Removal, Docket No. 1.

42

Id. at 4, ¶ 26.

43

Id. at ¶ 27.
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Plaintiff alleges that defendant breached its duty of good faith by “seek[ing] to reduce
the amount of judgment from $443,690 to $254,373, thereby ensuring that WTM would be
liable to Cosgrove for the $25,000 payment.”44 Plaintiff further alleges that defendant
breached its duty of good faith when it rejected her $109,000 settlement offer, which was less
than the policy limits.45 Plaintiff alleges that defendant “gave more consideration to its
interests than WTM’s and thereby placed its interests before WTM’s when it rejected the
offer – an offer that was predicated on WTM’s and National Fire’s own assessment of the
damages Cosgrove had incurred as a result of WTM’s conduct on the project.”46
In its answer to plaintiff’s amended complaint, defendant asserted a number of
affirmative defenses, including that it “did not breach the contract; at all relevant times,
National Fire acted in good faith; [and] the policy from which [p]laintiff seeks recovery does
not cover the losses alleged in the Amended Complaint[.]”47 Defendant has also asserted a
counterclaim for declaratory relief. Defendant seeks a declaration that it “has no obligation
to indemnify any party for any judgment or settlement reached” in the state-court Suit and

44

Id. at 5, ¶ 30.

45

Id. at 5-6, ¶¶ 34-40.

46

Id. at 6, ¶ 38.

47

National Fire & Marine Insurance Company’s Answer to Amended Complaint and
Counterclaim at 5, ¶ 54, Docket No. 5.
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that its “policies provide no coverage for the claims asserted in” the state-court Suit “and/or
the stipulated judgment entered” therein.48
Plaintiff moved for summary judgment that defendant is estopped from asserting its
coverage defenses, although her briefing is limited to the coverage defense based on the
Subcontractors Exclusion. And, defendant moved for partial summary judgment on
plaintiff’s breach of contract claim and its counterclaim for declaratory relief.
Discussion
Summary judgment is appropriate when there are no genuine issues of material fact
and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The
initial burden is on the moving party to show that there is an absence of genuine issues of
material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the moving party meets
its initial burden, then the non-moving party must set forth specific facts showing that there
is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).
In deciding a motion for summary judgment, the court views the evidence of the non-movant
in the light most favorable to that party, and all justifiable inferences are also to be drawn in
its favor. Id. at 255. “[T]he court’s ultimate inquiry is to determine whether the ‘specific
facts’ set forth by the nonmoving party, coupled with undisputed background or contextual
facts, are such that a rational or reasonable jury might return a verdict in its favor based on

48

Id. at 13, ¶¶ 1-2.
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that evidence.” T.W. Elec. Service, Inc. v. Pacific Elec. Contractors Ass’n, 809 F.2d 626,
631 (9th Cir. 1987).
Plaintiffs’ motion for partial summary judgment is based on Parsons v. Continental
National American Group, 550 P.2d 94 (Ariz. 1976). There, in March 1967, the Parsons
were assaulted by Michael Smithey. Id. at 95. Michael, who was a minor at the time of the
assault, and his parents were insured by the defendant CNA. Id. In October 1967, the
Parsons filed suit against Michael and his parents alleging assault and negligence claims. Id.
at 96. CNA retained counsel to represent the Smitheys. Id. CNA’s retained counsel
obtained a confidential school file on Michael, after which he advised CNA that he believed
that Michael’s assault on the Parsons had been a deliberate act. Id. After CNA received this
report, it sent a reservation of rights letter to Michael’s parents, stating “that it was possible
the act involved might be found to be an intentional act, and that the policy specifically
excludes liability for bodily injury caused by an intentional act.” Id. Later, in preparing for
trial, CNA’s retained counsel interviewed Michael, after which he wrote to CNA that “‘[h]is
own story makes it obvious that his acts were willful and criminal.’” Id. “CNA also
requested an evaluation of the tort case and the same attorney advised CNA: ‘Assuming
liability and coverage, the injury is worth the full amount of the policy or $25,000.00.’” Id.
The trial court ultimately granted the Parsons’ motion for a directed verdict as to their assault
claim against Michael and judgment was entered against him in the amount of $50,000. Id.
at 96-97. “The Parsons then garnished CNA[.]” Id. at 97. “CNA successfully defended the

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garnishment action by claiming that the intentional act exclusion applied.” Id. “The same
law firm and attorney that had previously represented Michael represented [CNA] in the
garnishment action.” Id.
On appeal, the Parsons argued that “CNA should be estopped to deny coverage” and
found to have “waived the intentional act exclusion because the company took advantage of
its fiduciary relationship between its agent [CNA’s retained counsel] and Michael Smithey.”
Id. The Arizona Supreme Court agreed with the Parsons. Id. The court held that
[w]hen an attorney who is an insurance company’s agent uses
the confidential relationship between attorney and a client to
gather information so as to deny the insured coverage under the
policy ... such conduct constitutes a waiver of any policy
defense, and is so contrary to public policy that the insurance
company is estopped as a matter of law from disclaiming
liability under an exclusionary clause in the policy.
Id. at 99. The court also held that a “reservation of rights agreement is not material [when]
the same attorney was representing conflicting clients.” Id. The court found that an
insurance carrier does not have “the right to engage an attorney to act on behalf of the insured
to defend a claim against the insured while at the same time build a defense against the
insured on behalf of the insurer.” Id.
Plaintiff argues that there has been a Parsons violation here because Mr. Righi
disclosed information that he obtained from Mr. Mitzel (WTM’s agent) during the course of
the attorney-client relationship and defendant is relying on that information to deny coverage.
Defendant argues, however, that Parsons has no application here because it only applies if

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the attorney representing the insured discloses confidential or privileged information, which
the subcontractor information was not.
Defendant relies on Lake Havasu Community Hospital Inc. v. Arizona Title Insurance
and Trust Company, 687 P.2d 371, 384 (Ariz. Ct. App. 1984), disproved on other grounds
by, Barmat v. John and Jane Doe Partners A-D, 747 P.2d 1218, 1219 (Ariz. 1987), in which
the court found a Parsons violation when the lawyer retained to represent the insured in a title
dispute divulged “confidential and privileged information” that it learned from the insured
to the title insurance company. Specifically, the lawyer told the title insurance company that
he “believe[ed the Hospital was] attempting to settle the case and set the title company up
as the prime defendant in a damage action....” Id.
Defendant also argues that this case is similar to American Family Mutual Insurance
Company v. Clancy, Case No. CV-09-01077-PHX-ROS, 2011 WL 13077359 (D. Ariz.
March 9, 2011). There, Clancy and Palmieri built a home that they later sold to the Shapiros.
Id. at *1. Two years later, the Shapiros filed suit against Clancy and Palmieri in state court,
asserting breach of contract, breach of warranty, and tort claims. Id. Clancy and Palmieri
tendered the defense of the Shapiro lawsuit to their insurer, American Family. Id. at *1-2.
American Family defended Clancy and Palmieri under a reservation of rights. Id. at *2.
Beeghley was retained by American Family to represent Clancy and Palmieri in the Shapiro
lawsuit. Id. at *5. The Shapiro lawsuit went to trial and the trial judge found Clancy and
Palmieri liable for $1.09 million in damages. Id. at *2. The parties then settled, and

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American Family brought a declaratory judgment action in federal court, seeking a
declaration that there was no coverage. Id. Clancy and Palmieri argued that, based on
Parsons, American Family was precluded from asserting any policy exclusions because
Beeghley had communicated with American Family during the course of his representation
of Clancy and Palmieri. Id. at *5. The court rejected that argument because Beeghley’s
communications with American Family did “not reveal confidential information he obtained
from his clients through the attorney-client relationship that [American Family] could use to
deny coverage.” Id. The court observed that “[m]uch of the information was public record
contained in briefs or court orders” and that Beeghley’s communications with American
Family “were not to his client’s detriment and did not reveal confidential information used
to deny coverage.” Id. On appeal, the Ninth Circuit confirmed the district court’s holding
that Parsons did not apply because “the information shared” by Beeghley “was information
typically shared between an insured’s attorney and the insurance company. It was not
confidential information.” Amer. Family Mut. Ins. Co. v. Clancy, Case No. 11–16270, 2013
WL 934161, at *1 (9th Cir. March 12, 2013).
Similarly here, defendant argues that the information that Mr. Righi learned about the
subcontractors was not confidential information. Rather, defendant contends that all Mr.
Righi learned was the identity of who had performed the work on the project and that WTM
had no written agreements with its subcontractors. Defendant argues that there is no
evidence that suggests that WTM intended to keep this information confidential or that Mr.

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Mitzel relayed this information to Mr. Righi in confidence. In short, defendant argues that
the information about the subcontractors was simply routine information and that this
information in a construction defect case is almost always a known fact based on the
insured’s job file. Defendant reminds the court that Mr. Righi testified that he thought he
learned this information both from Mr. Mitzel and from a “review of the job file.”49 Thus,
defendant argues that it is not even clear that Mr. Righi learned the information about the
subcontractors from Mr. Mitzel. Defendant suggests that it could have learned this
information if it had, as plaintiff suggests it should have done, completed its own
investigation rather than relying on the information it received from Mr. Righi. If it could
have learned this information on its own, then defendant argues that this information cannot
possibly be considered confidential information.
Defendant is reading Parsons too narrowly. Parsons held that
[w]hen an attorney who is an insurance company’s agent uses
the confidential relationship between attorney and a client to
gather information so as to deny the insured coverage under the
policy ... such conduct constitutes a waiver of any policy
defense, and is so contrary to public policy that the insurance
company is estopped as a matter of law from disclaiming
liability under an exclusionary clause in the policy.
Parsons, 550 P.2d at 99. Here, Mr. Righi used the attorney-client relationship with WTM to
gather information that he gave to defendant, which defendant then used to the detriment of

49

Righi Deposition at 99:20-25, Exhibit 1, Defendant National Fire & Marine
Insurance Company’s Response to Plaintiff’s Revised Partial Summary Judgment Motion re
Estopped Coverage Defenses, Docket No. 150.
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WTM and now wants to use to deny coverage. At the point Mr. Righi disclosed the
subcontractor information to defendant, he knew, or had reason to know, that WTM’s policy
contained the Subcontractors Exclusion and that defendant may attempt to deny coverage
based on this exclusion. Yet despite this knowledge, Mr. Righi communicated to defendant
the very information that defendant would need to deny coverage based on the Subcontractors Exclusion. In fact in his June 2, 2009 communication with Rohling, Mr. Righi expressly
told Rohling that he would attempt to gather information about whether WTM had used
subcontractors on the project.50 Mr. Righi owed his full loyalty to WTM, but it is clear that
this loyalty was “was diluted by his allegiance” to defendant. Lake Havasu, 687 P.2d at 384.
“Such conduct clearly violates the dictates of Parsons.” Id.
Contrary to defendant’s contention, there is no requirement that the information in
question be independently confidential. Parsons only requires that the information have been
obtained via the attorney-client relationship and that the disclosure of the information be to
the detriment of the insured. Defendant’s reliance on Clancy is misplaced because there,
during Beeghley’s communications with the title insurance company, he did “not reveal
confidential information he obtained from his clients through the attorney-client relationship
that [American Family] could use to deny coverage.” Clancy, 2011 WL 13077359, at *5
(emphasis added). Rather, he “shared his predictions about how the trial court would rule,

50

Letter from Richard L. Righi to Anne Rohling at NFM-Cosgrove 03800, Exhibit 2,
Plaintiff’s Revised Partial Summary Judgment Motion [etc.], Docket No. 147.
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and speculated about the reason for the trial court’s ruling.... These communications did not
reveal any confidential information that he learned from his clients as a result of the attorneyclient relationship that [American Family] could use, let alone did, to deny coverage.” Id.
at *5, n.6. Here, in contrast, defendant used the subcontractor information that Mr. Righi
learned as a result of the attorney-client relationship to the detriment of WTM.
The court is mindful that the subcontractor information was used as a basis for
WTM’s third-party complaint, which at that point, made the information a matter of public
record and available to anyone. But by the time WTM’s third-party complaint was filed, the
Parsons violation had already occurred. Mr. Righi first disclosed the information about the
subcontractors to Rohling in 2009, long before the third-party complaint was filed in April
2010. Defendant’s contention that finding a Parsons violation here would mean that Mr.
Righi would have been precluded from filing a third-party complaint is not correct. A lawyer
must obtain his client’s consent to disclose information in pleadings. Disclosing client
information by filing a third-party complaint, to which the client has consented, would not
run afoul of Parsons.
Precluding defendant from asserting a coverage defense based on the Subcontractors
Exclusion may seem like a harsh result. But, if defendant had done its own investigation of
WTM’s claims, rather than relying on the information disclosed by the attorney retained to
represent WTM, defendant would not be precluded from using this information to deny
coverage. Because defendant learned the subcontractor information from Mr. Righi and then

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used that information to the detriment of WTM before the information was ever made public,
defendant is estopped from relying on this information to deny coverage.
Conclusion
Based on the foregoing, plaintiff’s motion for partial summary judgment51 was granted
as to the Subcontractors Exclusion. But, to the extent that plaintiff has moved to estop
defendant from asserting any other coverage defenses, her motion is denied. The information
that was improperly disclosed to defendant only pertained to the Subcontractors Exclusion.
Defendant is only estopped from asserting a coverage defense based on the Subcontractors
Exclusion.
Because plaintiff’s motion for partial summary judgment was granted, defendant’s
motion for partial summary judgment52 was deemed moot.
DATED at Anchorage, Alaska, this 10th day of April, 2017.
/s/ H. Russel Holland
United States District Judge

51

Docket No. 147.

52

Docket No. 160.
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