Geurden et al v. Quantum Transportation LP et al

Filing 62

ORDER: IT IS ORDERED that the motion to supplement is granted (Doc. 55 ). IT IS FURTHER ORDERED that the motion to intervene for the limited purpose of opposing the stipulated judgment (Doc. 46 ) is granted. IT IS FURTHER ORDERED that the stipulation (Doc. 42 ) is denied without prejudice. The settling parties may, within 14 days, file a motion for entry of a stipulated judgment [see attached Order for details]. Signed by Senior Judge James A Teilborg on 9/19/17.(MAW)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Yves Geurden, et al., No. CV-16-00642-PHX-JAT Plaintiffs, 10 ORDER 11 v. 12 Quantum Transportation LP, et al., 13 Defendants. 14 15 I. Stipulated Judgment 16 On June 26, 2017, Plaintiffs and Defendant Vahik Alaverdyan and Quantum 17 Transportation L.P. (“Quantum”) agreed to enter into a stipulated judgment against these 18 two Defendants. 19 defendants Jane Doe Alaverdyan (Vahik Alaverdyan’s wife) or Dole Fresh Fruit 20 Company (“Dole”). However the stipulation itself says pursuant to an agreement of the 21 “parties,” and the judgment does not contain language pursuant to Federal Rule of Civil 22 Procedure 54(b), so presumably this judgment would resolve the whole case, with no 23 judgment being entered against either Mrs. Alaverdyan or Dole. (Doc. 42). The proposed stipulated judgment does not mention 24 In their stipulation, the parties acknowledged that they were entering into a 25 “Damron Agreement.” (Doc. 42). The Court inquired whether it had any duty to 26 investigation the reasonableness of the amount of the stipulated judgment (in this case 27 $25,000,000.00) before entering the judgment. (Doc. 43). 28 1 II. Damron v. Morris Agreements 2 Plaintiffs, Defendant Quantum, and Defendant Vahik Alaverdyan (“the settling 3 parties”) responded to the Court’s inquiry and argued that when the parties enter into a 4 Damron Agreement, the Court does not conduct a reasonableness inquiry. (Doc. 48 at 4- 5 6). Conversely, the settling parties concede that when the parties enter into a Morris 6 Agreement, the Court does have a duty to conduct a reasonableness inquiry. (Doc. 48 at 7 4-6). The settling parties further noted that a Damron Agreement is used when the 8 insurance company has refused to defend, and a Morris Agreement is used when the 9 insurance company is defending under a reservation of rights. (Doc. 48 at 4-6). 10 Dole responded to the Court’s inquiry by stating that it is not a party to the 11 Damron Agreement. (Doc. 49). Further Dole argued that neither defense of this action, 12 nor a request for indemnification, have been tendered to Dole. (Doc. 49). Finally, citing 13 nothing, Dole stated that a reasonableness hearing on the Damron agreement would be 14 required in this case, but then went on to explain why a reasonableness hearing is 15 required between an indemnitor and indemnitee. (Doc. 49 at 2). 16 Also in response to the Court’s inquiry, two insurance companies moved to 17 intervene: Greenwich Insurance Company and XL Specialty Insurance Company 18 (hereinafter “intervenors”). (Docs. 46 and 47). The intervenors made several arguments 19 in opposition to the Court entering the stipulated judgment. 20 A. 21 The first argument made by intervenors is that they had no duty to defend. (Doc. 22 47 at 3). The Court finds that issue is the subject of another case (CV 17-2270) and not 23 relevant to whether the stipulated judgment may be entered in this case.1 Specifically, the 24 Court rejects the intervenor’s argument that this Court must find a duty to defend on the 25 part of a non-party insurance company before the Court ever enters a judgment pursuant Coverage 26 27 28 1 This Court has already denied intervenors’ request (part of Doc. 47-2) that this case be stayed pending the resolution of CV 17-2270. (Doc. 57 at n.1). -2- 1 to a Damron Agreement.2 2 B. 3 Next, intervenors argue that defense of this action was never tendered to them. 4 (Doc. 47-2 at 6). In response, the settling parties provided a copy of a June 15, 2016 5 letter from counsel for Quantum and Mr. Alaverdyan tendering the defense of this case to 6 intervenors. (Doc. 55-2 at 2-3). Intervenors reply to this evidence by claiming that that 7 XL never received the letter. (Doc. 56 at 9). Tender 8 The settling parties also provided a copy of a November 14, 2016 letter counsel 9 for Hallmark sent to XL formally tendering defense of this case to Greenwich. (Doc. 55-3 10 at 2-3). While intervenors admit to receiving this letter, they argue it should not “count” 11 as a tender because it was not sent by counsel for Quantum or Mr. Alaverdyan. (Doc. 56 12 at 9-10). However, in responding to the November 14, 2016 letter, intervenors’ claims 13 specialist said, “XL Catlin, on behalf of Greenwich Insurance Company, acknowledges 14 receipt of the attached letter … wherein you tender defense and indemnity on behalf of 15 Quantum Transportation… for the case styled Yves Geurden, et al., v. Quantum 16 Transportation, et al.” (Doc. 55-4 at 2). 17 The Court finds that Quantum’s insurance company, Hallmark, could and did 18 tender defense of this case on Quantum’s behalf; and, moreover, intervenors accepted 19 such letter as formal tender of defense and indemnity. Accordingly, the Court finds that 20 defense of this case was tendered to intervenors. Further, the Court finds that either by 21 the June 15, 2016 letter, or by the November 14, 2016 letter, Mr. Alaverdyan tendered 22 defense and indemnity to intervenors. Specifically, on March 9, 2017, intervenors wrote 23 Mr. Alaverdyan a seven page single spaced letter denying coverage. (Doc. 54-1). While 24 that letter disputes formal tender, clearly intervenors were on notice of the claim and the 25 current lawsuit and knew that Mr. Alaverdyan sought coverage under intervenors’ policy. 26 Thus, intervenors argument that they did not received the June 15, 2016 letter, which 27 28 2 As a result of this finding, the Court will not address in this case any arguments regarding waiver or assignment of rights under the policies. -3- 1 clearly and unequivocally tendered defense of this case, is belied by the fact that they 2 formally denied coverage. 3 Alaverdyan tendered defense and indemnity of this case to intervenors. Thus, the Court concludes that both Quantum and Mr. 4 C. 5 Further, intervenors argue that the settling parties cannot enter into a Damron 6 Agreement because, as an excess policy, intervenors’ duty to defend was not triggered 7 until the primary and other underlying policies were exhausted. (Doc. 47). In later 8 briefing, it became clear that the Wesco and Hallmark insurance policies have been 9 exhausted. (Doc. 60). Thus, the Court finds that, to the extent intervenors had a duty to 10 Trigger defend (which they dispute), it has been triggered as of the filing at Doc. 60. 11 The Court, however, must decide whether intervenors’ duty to defend was 12 “triggered” by tender or by exhaustion of the primary and other excess policies. This 13 timing is critical in this case because intervenors are now prepared to take over the 14 defense of this case (under a reservation of rights). (Doc. 61). However, the settling 15 parties argue that the intervenors, having already denied coverage and having refused to 16 participate in the mediation of this case following tender, should not be allowed to revisit 17 that decision for purposes of thwarting a Damron Agreement. (Doc. 60 at 3-6). 18 The settling parties rely on Colorado Casualty Insurance Co. v. Safety Control 19 Company, 288 P.3d 764 (Ariz. 2013), to argue that the parties can enter into a Damron 20 Agreement when one insurance company refuses to defend, even if another insurance 21 company is providing a defense. However, the Court finds this case inapposite because 22 in Colorado Casualty the excess insurer defended when a primary carrier denied 23 coverage. Thus, that case does not address when a second excess company’s duty to 24 defend is triggered. 25 The March 9, 2017 letter intervenors sent to Vahik Alaverdyan denying coverage 26 (Doc. 54-1 at 1-7) denied coverage under the intervenors’ policy for a myriad of reasons.3 27 28 3 Also on March 9, 2017, intervenors sent a similar denial letter to Quantum. (Doc. 48-2 at 1-7). -4- 1 One of the reasons specifically referenced in the letter was that the policy was excess to 2 other policies that were currently providing a defense. (Doc. 54-1 at 6). This basis for 3 denying coverage at least left open the door that if the other policies were exhausted, 4 intervenors’ policy would be triggered. Conversely, the letter certainly does not indicate 5 that if all primary policies were exhausted, intervenors would step in and provide a 6 defense. Instead, the letter listed many other reasons coverage was being denied. Thus, 7 nothing in the letter indicated that “re-tender” after exhaustion would produce a different 8 result. 9 At this point, as far as the Court can summarize, intervenors’ position is that they 10 are permitted, now that the other policies are exhausted, to take over the defense in this 11 case (under a reservation of rights). Intervenors’ position is that their prior denials of 12 coverage have no effect on their ability to change their minds and begin defense now that 13 exhaustion has occurred. The settling parties’ position is that intervenors previously 14 denied coverage, and that the prior denial is binding and final. 15 intervenors cannot wait for a Damron Agreement (which was entered into by the settling 16 parties in reliance on intervenors’ prior denial) to recant the prior denial; thereby 17 allowing intervenors to assume defense of this case (presumably solely for the 18 intervenors’ own benefit of converting the Damron Agreement into a Morris Agreement). 19 In the Court’s view, neither party has adequately briefed this timing/trigger issue. 20 Thus, the Court will order supplemental briefing that must address: 1) the timing of when 21 a duty to defend is triggered for an excess carrier (at the point of tender, the point of 22 exhaustion of other policies, or at some other time); and, 2) whether, even if the 23 triggering of the duty to defend does not arise until exhaustion of any primary or first 24 excess 25 coverage/defense/indemnity decision on which the parties relied in reaching a settlement. policies, the excess carrier is permitted to In other words, recant a prior 26 D. 27 Finally, while intervenors vehemently dispute whether the agreement in this case 28 is in fact a Damron Agreement; intervenors appear to agree that no reasonableness Reasonableness Hearing -5- 1 hearing is necessary in Damron Agreement cases (and instead reasonableness hearings 2 are conducted only in Morris Agreement cases). (Doc. 47-2 at 6-10). Thus, if the Court 3 determines this is a Damron Agreement, the Court will not hold a reasonableness hearing. 4 III. 5 Based on the foregoing, 6 IT IS ORDERED that the motion to supplement is granted (Doc. 55). 7 IT IS FURTHER ORDERED that the motion to intervene for the limited 8 Conclusion purpose of opposing the stipulated judgment (Doc. 46) is granted. 9 IT IS FURTHER ORDERED that the stipulation (Doc. 42) is denied without 10 prejudice. The settling parties may, within 14 days, file a motion for entry of a stipulated 11 judgment. In that motion, the settling parties must address the timing/triggering issues 12 discussed above. 13 judgment, which must include ALL defendants. Intervenors must respond to the motion 14 in 14 days.4 The settling parties may reply in 7 days from the response.5 15 The settling parties must also submit a new proposed stipulated Dated this 19th day of September, 2017. 16 17 18 19 20 21 22 23 24 25 4 26 27 28 Intervenors should not use their response to re-raise the issues of coverage or tender as those have been addressed by this Order. 5 The Court admonishes all counsel that they must comply with the Administrative Policies and Procedures Manual and submit paper courtesy copies to the Court. To date, only intervenors have been submitting courtesy copies. However, intervenors are admonished to bind all courtesy copies and quit sending 100s of pages in loose form. -6-

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