Scottsdale Insurance Company v. Horowitz et al
OPINION & ORDER: Denying Motion for Summary Judgment 10 . Signed on 9/21/2017 by Judge Ann L. Aiken. (ck)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
Civ. No. 1:17-cv-00381-AA
OPINION & ORDER
JAY HOROWITZ; KIM
MOVING SYSTEMS, INC.,
Aiken, District Judge.
This matter comes before the Court on Defendants Jay and Kim Horowitz's Motion for
Summary Judgment. ECF No. 10. For the reasons set forth below, the motion is DENIED.
This is an action for declaratory relief.
Plaintiff Scottsdale Insurance Company
("Scottsdale") is an Arizona-based corporation. Comp!. 2. Scottsdale issued a general liability
insurance policy (the "Policy") to Elite Moving Systems, Inc. ("EMS"), a now-inactive
California corporation. The Policy was to be effective from March 4, 2014, through March 4,
2015 and would provide one million dollars in coverage for bodily injury and property damage.
Jones Deel. Ex. 2, at 9.
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The Policy obliged Scottsdale to defend and indemnify EMS for
qualifying bodily injury and property damage which "occurs during the policy period." Jones
Deel. Ex. 2, at 11.
EMS financed the premium for the policy through IPFS Corporation, a premium finance
Second Jones Deel. Ex. 1.
EMS executed a Premium Finance Agreement (the
"Agreement") with IPFS. Second Jones Deel. Ex. 1. The Agreement included the following
Insured [EMS] irrevocably appoints Lender [IPFS] attorney-in-fact with full
power of substitution and full authority upon default to cancel all policies above
identified, receive all sums assigned to its Lender or in which it has granted
Lender a security interest and to execute and deliver on behalf of the insured
documents, Instruments, forms and notices related to the listed insurance policies
in furtherance of this Agreement.
Second Jones Deel. Ex. 1.
EMS failed to pay IPFS for the premiums and, on April 28, 2014, IPFS mailed a Notice
of Cancellation to EMS, effective May 1, 2014. Jones Deel. Ex. 3. Pursuant to its authority
under the Agreement, IPFS notified Scottsdale on April 28, 2014, that the Policy was cancelled,
effective May 1, 2014. Second Jones Deel. Ex. 2, at 1.
Another California corporation, known as Elite Moving Solutions, Inc. ("Solutions"), was
incorporated on March 19, 2015, and may be the successor entity to the now-defunct EMS.
Jones Deel. Ex. 1.
The Underlying Lawsuit
On July 25, 2013, Jay and Kim Horowitz contracted with EMS and Lile International
Companies ("Lile") to move the Horowitzes' possessions from California to Talent, Oregon.
Lile and/or EMS hired Cmiis Wiles and Jason Morgan to assist in moving the Horowitzes'
property. The Horowitzes allege that Wiles and Morgan had extensive criminal backgrounds and
that EMS and/or Lile failed to perform criminal background checks before hiring them.
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The Horowitzes allege that Wiles and Morgan used information learned during the move
to plan a robbery of the Horowitzes' home. On May 3, 2014, Morgan and a man named James
Turner broke into the home and assaulted the Horowitzes.
Morgan and Turner then stole
approximately $83,000 w011h of personal prope11y, which they planned to divide with Wiles.
The Horowitzes filed suit against EMS and Solutions, among other defendants, in
Jackson County Circuit Court on March 18, 2016, with an amended complaint filed on March
30, 2016 (the "Underlying Lawsuit"). Andersen Deel. Ex. 1, 2. Scottsdale initially unde11ook to
defend EMS and Solutions in the Underlying Lawsuit and Portland attorney Michael Hallinan
was retained to represent EMS and Solutions. Andersen Deel. Ex. 3, 4. Solutions filed a motion
to dismiss based on lack of personal jurisdiction.
Second Jones Deel.
Counsel for the
Horowitzes and Mr. Hallinan discussed dismissing Solutions from the action based on the
understanding that EMS had liability coverage of up to one million dollars. Andersen Deel. Ex.
5. On June 6, 2016, Mr. Hallinan replied that EMS had one million dollars in coverage "and the
adjuster has confirmed no reservation of rights has been asserted." Andersen Deel. Ex. 6. The
parties stipulated to the dismissal of Solutions from the Underlying Lawsuit on June 20, 2016.
Andersen Deel. Ex. 7, at 3-4.
Scottsdale subsequently issued a reservation of rights letter on January 12, 2017. Second
Jones Deel. Ex. 2. In the reservation of rights letter, Scottsdale asse11ed that the Policy was
properly terminated by IPFS on May 1, 2014. Second Jones Deel. Ex. 2, at 1. As the assault and
robbery of the Horowitzes' home occurred on May 3, 2014, Scottsdale claims that the loss is not
covered by the Policy and Scottsdale has no duty to defend or indemnify EMS in the Underlying
Lawsuit. Second Jones Deel. Ex. 2, at 1. This action for declaratory relief followed.
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Summary judgment is appropriate when "there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter oflaw." Wash. Mut. Inc. v. United States,
636 F.3d 1207, 1216 (9th Cir. 2011); Fed. R. Civ. P. 56(a). The moving party must show the
absence of a dispute as to a material fact. Rivera v. Philip Morris, Inc., 395 F.3d 1142, 1146 (9th
Cir. 2005). In response to a properly suppo1ied motion for summary judgment, the nonmoving
party must go beyond the pleadings and show there is a genuine dispute as to a material fact for
trial. Id. "This burden is not a light one .... The non-moving party must do more than show
there is some 'metaphysical doubt' as to the material facts at issue." In re Oracle Corp. Sec.
Litig., 627 F.3d 376, 387 (9th Cir. 2010) (citations omitted).
A dispute as to a material fact is genuine "if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party." Villiarmo v. Aloha Island Air, Inc., 281 F.3d
1054, 1061 (9th Cir. 2002) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
The co mi must draw all reasonable inferences in favor of the non-moving paiiy. Sluimer v.
Verity, Inc., 606 F.3d 584, 587 (9th Cir. 2010). "Summary judgment cannot be granted where
contrary inferences may be drawn from the evidence as to material issues." Easter v. Am. W.
Fin., 381 F.3d 948, 957 (9th Cir. 2004). A "mere disagreement or the bald assertion that a
genuine issue of material fact exists" is not sufficient to preclude the grant of summary
judgment. Harper v. Wallingford, 877 F.2d 728, 731 (9th Cir. 1989). When the non-moving
party's claims are factually implausible, that party must "come forward with more persuasive
evidence than otherwise would be necessary[.]" LVRC Holdings, LLC v. Brekka, 581 F.3d 1127,
1137 (9th Cir. 2009) (quotation marks and citation omitted).
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The substantive law governing a claim or defense determines whether a fact is material.
Miller v. Glenn Miller Prod., Inc., 454 F.3d 975, 987 (9th Cir. 2006). If the resolution of a
factual dispute would not affect the outcome of the claim, the court may grant summary
The Horowitzes move for summary judgment on the basis that Scottsdale has either
waived its right to refuse to defend or indemnify EMS under the Policy, or that it is estopped
from assetiing that right. The parties agree that the Policy should be interpreted under the laws
As a preliminary matter, the Court notes that the Memorandum in Suppoti of the
Horowitzes' Motion contains little in the way of substantive legal argument, much of which is
abandoned in the Horowitzes' Reply in favor of new legal theories and new factual allegations.
"To the extent that [a reply] presents new information, it is improper." Tovar v. U.S. Postal
Serv. 3 F.3d 1271, 1273 n.3 (9th Cir. 1993). However, a court may consider new information in
a reply when the non-moving party has an opportunity to respond. See Provenz v. Miller, 102
F.3d 1478, 1483 (9th Cir. 1996).
In this case, the Horowitzes' Reply was improper. The Court has determined, however,
that the most equitable and efficient remedy is allow Scottsdale to file its requested Sur-Reply.
As a further preliminary matter, the Comi is dismayed to find that it must discuss the
necessity of compliance with this District's Local Rules. "District comis have broad discretion
in interpreting and applying their local rules." Miranda v. S. Pac. Transp. Co., 710 F.2d 516,
Page 5 - OPINION & ORDER
521 (9th Cir. 1983).
Local Rule 7-l(a) requires that, with certain limited and presently
inapplicable exceptions, "every motion must certify that ... the parties made a good faith effort
through personal or telephonic conferences to resolve the dispute and have been unable to do
so." LR 7-l(a)(l)(A). "When confen'ing about a dispositive motion, the parties must discuss
each claim, defense, or issue that is the subject of the proposed motion." LR 7-l(a)(2). "The
Court may deny any motion that fails to meet this certification requirement." LR 7-l(a)(3).
In this case, the Motion for Summary Judgment does not contain the required
certification. The Horowitzes' counsel admits that he failed to confer with Scottsdale's counsel
before filing his motion. In the Reply, the Horowtizes' counsel offers two explanations for this
First, counsel submits that Oregon state law does not require conferral before filing a
motion pursuant to Ore. R. Civ. P. 47 and that he "failed to realize this distinction between state
and federal practice." The Court is unimpressed by this explanation. The Horowitzes' counsel
has been in practice for many years and a survey of ECF reveals that this is far from counsel's
first case in federal cou1t.
Second, counsel offers that "conferring would not have saved either side the expense of a
motion for summary judgment." The Court is even less impressed with this excuse, especially in
light of the fact that counsel goes on to concede that he cited to inapplicable provisions of
California law in his original motion and that his request for attorney fees and sanctions are
without merit. 1 These issues might have been clarified, if not resolved entirely, had counsel
taken the time to confer. The purpose of Local Rule 7-l(a) goes beyond merely "saving the
Counsel also suggests that Scottsdale is at fault for failing to produce certain documents, discussed below, despite
the fact that the Horowitzes filed their Motion only days after the Answer and before substantive discovery could
have taken place. Indeed, Scottsdale produced the relevant document in suppo1t of its Sur-Reply. This issue might
also have been resolved by conferral.
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parties the expense of a motion for summary judgment." The Rule also promotes judicial
economy and efficiency by sparing the Court the necessity of wading through frivolous or
Although the Court will address the substance of the Horowitzes' motion in the following
sections, counsel's failure to comply with LR 7-l(a) supplies an independent basis for denying
the motion. Counsel is instructed to review the Local Rules for the District of Oregon and
familiarize himself with their requirements. The Court expects that counsel will comply with the
Local Rules in any future motions. Failure to confer and certify the fact of conferral in future
motions will result in the denial of that motion without fmiher consideration.
In their original motion, the Horowitzes asse1ied that, pursuant to Cal. Ins. Code §§ 676.2
and 677.2, Scottsdale was required to provide EMS with ten days' notice prior to the cancellation
of the Policy. The Horowitzes argue that, because EMS was given only three days' notice,
Scottsdale's cancellation of the policy was improper and ineffective. The Horowitzes suggest
that this violation of California law was so flagrant and obvious that they are entitled to attorney
fees and the Court should sanction Scottsdale for bringing this action.
In the Response, Scottsdale points out that, because the Policy was financed by IPFS, it is
governed by Cal. Ins. Code § 673, rather than §§ 676.2 or 677.2. Under that statute, a finance
company may, by power of attorney, exercise the right to cancel an insurance contract on behalf
of the insured in the event of non-payment of premiums. Cal. Ins. Code§ 673(a). "The statute
provides that the lender's ... instructions to cancel are conclusive for all purposes with respect to
the insurer." Pac. Auto Ins. Co. v. Wolff, 72 Cal. App. 3d 537, 540, Cal. Rptr. 164 (Cal. Ct. App.
Page 7 - OPINION & ORDER
1977). "Thus, once the lender has instructed the insurer to cancel, the cancellation is effective."
Id. at 540-41.
In their Reply, the Horowitzes concede that § 673 is the applicable statute, but argue that
unless Scottsdale produces the Agreement between EMS and IPFS, "we are left to wonder
whether IPFS ever had the authority to issue a notice of cancellation." 2 If Scottsdale produced
the waiver, the Horowitzes concede, this case will turn on the application of principles of waiver
and estoppel. Scottsdale produced the Agreement in support of its Sur-Reply. Second Jones
Deel. Ex. 1. This disposes of the Horowitzes' statutory argument.
Waiver and Estoppel
The Horowitzes argue first that, by unde1iaking to defend EMS in the Underlying
Lawsuit, Scottsdale has waived its right to dispute whether or not the facts giving rise to that
representation are outside the scope of the Policy.
Next, the Horowitzes argue that the
representations made to them by counsel for EMS regarding liability insurance preclude
Scottsdale from disputing coverage under principles of equitable estoppel.
Under California law, "waiver is the intentional relinquishment of a known right after
knowledge of the facts." Waller v. Truck Ins. Exch., 11 Cal. 4th 1, 31, Cal. Rptr. 2d 370 (Cal.
1995) (internal quotation marks, alterations, and citations omitted). "The burden is on the party
claiming a waiver to prove it by clear and convincing evidence that does not leave the matter to
speculation, and doubtful cases will be decided against a waiver." Id. A waiver may be express
or implied, "based on conduct indicating an intent to relinquish the right." Id. The doctrine of
waiver "cannot be applied to expand coverage." Id. at 32.
The Court notes that documents like the Agreement between EMS and IPFS are normally sought as part of the
discovery process, rather than in the course of briefing a premature motion for summary judgment.
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In Ringler Assocs. Inc. v. Mmyland Cas. Co., the insurer unde1took to defend the insured
for over two years before issuing a reservation of rights. Ringler Assocs., Inc. v. Maryland Cas.
Co., 80 Cal. App. 4th 1165, 1188, 96 Cal. Rptr. 2d 136 (Cal. Ct. App. 2000). The insured argued
that, by undertaking the defense, the insurer had admitted coverage and waived its right to
contest its duty to defend or indemnify. Id.
The California Court of Appeals rejected this
argument as "completely meritless." Id "[T]he courts have repeatedly held that an insurer does
not waive or relinquish any coverage defenses it fails to assert at the time of its acceptance of a
tender of defense, even when it does not make any express and full reservation of rights for a
substantial period of time after the defense has been accepted." Id at 1189.
In this case, the record suggests that the Joss giving rise to the Underlying Lawsuit may
have taken place outside of the period covered by the Policy. As the California Supreme Court
observed, the doctrine of waiver cannot be applied to expand coverage. Consistent with Ringler,
Scottsdale has not waived its waived its rights to contest coverage simply by undertaking to
defend EMS, or by issue a letter reserving its rights months after undertaking the defense of
B. Equitable Estoppel
To demonstrate equitable estoppel, a patty must show "(1) that the person to be estopped
had knowledge of the true facts; (2) that action on his patt intended or reasonably interpreted as
intended to be acted upon by the person asse1ting the estoppel; (3) that the one asserting the
estoppel was ignorant of the true facts; and (4) that there was detrimental reliance on the
estopped person's conduct." Miller v. Elite Ins. Co., 100 Cal. App. 3d 739, 754, 161 Cal. Rptr.
322 (Cal. Ct. App. 1980). In the insurance context, this requires (1) a "reasonable belief' that the
insurer would provide coverage; and (2) a finding of detrimental reliance by the patty asserting
Page 9 - OPINION & ORDER
estoppel. Ringler, 80 Cal. App. 4th at 1190. "The existence of estoppel is a question of fact and
the party asserting estoppel bears the burden of proving it." S. F. Bay Area Rapid Transit Dist. v.
Gen. Reinsurance Corp., 111 F. Supp. 3d 1055, 1070 (N. D. Cal. 2015) (internal citations
"It is the general and quite well settled rule of law that principles of estoppel and implied
waiver do not operate to extend the coverage of an insurance policy after the liability has been
incmTed or the loss sustained." Aetna Cas. & Sur. Co. v. Richmond, 76 Cal. App. 3d 645, 65253, 143 Cal. Rptr. 75 (Cal. Ct. App. 1977) (internal quotation marks, alterations and citations
While this statement of the rule is generally applied, there is a well-established
exception: The general rule supported by the great weight of authority is that if a
liability insurer, with knowledge of a ground of forfeiture or noncoverage under
the policy assumes and conducts the defense of an action brought against the
insured, without disclaiming liability and giving notice of its reservation of rights,
it is thereafter precluded in an action upon the policy from setting up such ground
of forfeiture or non-coverage. In other words, the insurer's unconditional defense
of an action brought against its insured constitutes a waiver of the terms of the
policy and an estoppel of the insurer to assert such grounds.
Miller, 100 Cal. App. 3d at 755 (internal quotation marks and citation omitted).
In this case, Scottsdale did not undertake an "unconditional defense" of EMS, nor is this
a case where Scottsdale is asserting a ground of forfeiture or noncoverage for the first time "in an
action upon the policy." Rather, Scottsdale issued a letter reserving its rights in January 2017,
during the pendency of the Underlying Lawsuit.
In General Reinsurance, the insurer contended that the injury in question had occurred
after the insurance policy ended. Gen. Reinsurance Corp. 111 F. Supp. 3d at 1059. The comt
held that "the doctrines of implied waiver and of estoppel, based upon the conduct or action of
the insurer, are not available to bring within the coverage of a policy risks not covered by its
Page I 0 - OPINION & ORDER
terms, or risks expressly excluded therefrom." Id. at 1071 (quoting Supervalu, Inc. v. Wexford
Underwriting Mgrs., Inc., 175 Cal. App. 4th 64, 77, 96 Cal. Reptr. 3d 316 (Cal. Ct. App. 2009)).
"[T]o the extent that the date of injury falls outside of General Reinsurance's excess coverage
policy, BART cannot use equitable estoppel to find that it does. For this reason, alone, estoppel
does not apply." Id. Here, as in General Reinsurance, the Horowitzes cannot use the doctrine of
equitable estoppel to expand the Policy to cover a loss that appears to have occurred after the
Policy was cancelled. On this record, the motion for summary judgment based on equitable
estoppel must be denied.
Even assuming that equitable estoppel did apply, the record is not sufficiently developed
for the Court to find all of the necessary elements.
"The existence of equitable estoppel
generally is a factual question for the trier of fact to decide, unless the facts are undisputed and
can support only one reasonable conclusion as a matter of law." Schafer v. City of Los Angeles,
237 Cal. App. 4th 1250, 1264, 188 Cal. Rptr. 3d 655 (Cal. Ct. App. 2015). On this limited
record, the Court concludes that factual issues would preclude a grant of summary judgment
based on equitable estoppel.
For the reasons set forth above, Defendants Jay and Kim Horowitz's Motion for
Summary Judgment is DENIED.
It is so ORDERED and DATED this
cX/ sr day of September, 2017.
United States District Judge
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