Scottsdale Insurance Company v. Horowitz et al
Filing
50
OPINION AND ORDER: Defendants' Motion to Strike and to Supplement the Record 41 is DENIED. Plaintiff's Motion for Summary Judgment 38 is GRANTED. Scottsdale is not obliged either to defend or to indemnify Defendant Elite Moving Systems, Inc. for the injuries alleged by Defendants Jay Horowitz and Kim Horowitz in Jackson County Circuit Court Case Number 16CV08738. Final judgment shall be entered accordingly. Signed on 7/29/2019 by Judge Ann L. Aiken. (ck)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
MEDFORD DIVISION
Civ.No.1:17-cv-00381-AA
SCOTTSDALE INSURANCE
COMPANY,
OPINION & ORDER
Plaintiff,
v.
JAY HOROWITZ; KIM
HOROWITZ; ELITE
MOVING SYSTEMS, INC.,
Defendants.
AIKEN, District Judge.
This matter comes before the Cou1t on a Motion for Summary Judgment, ECF No. 38,
filed by Plaintiff Scottsdale Insurance Company ("Scottsdale") and a Motion to Strike and to
Supplement the Record, ECF No. 41, filed by Defendants Jay Horowitz and Kim Horowitz
(collectively, the "Horowitzes").
Defendant Elite Moving Systems, Inc. ("EMS") has not
appeared in this case or responded to the motions. Oral argument was held on the motion on
July 10, 2019. ECF No. 49. For the reasons set fotth below, the Horowitzes' Motion to Strike is
DENIED and Scottsdale's Motion for Summary Judgment is G:RANTED.
BACKGROUND
Plaintiff Scottsdale is an insurance corporation organized under the laws of Ohio, with its
principal place of business in Arizona. Defendant EMS is a now-inactive corporation organized
Page I - OPINION & ORDER
under the laws of California with its principal place of business in California. Defendants Jay
and Kim Horowitz are residents of Oregon.
I.
The Policy
In 2014, Scottsdale issued a general liability insurance policy to EMS, policy number
CPS1851193, which was to run from March 4, 2014, to March 4, 2015 (the "Policy"). First Am.
Comp!. ("FAC") Ex. B. ECF No. 34-2. The Policy covered "bodily injury" and "prope1iy
damage" occurring "during the policy period." FAC Ex. B, at 10.
EMS financed the premium for the Policy through IPFS Corporation ("IPFS"), a
premium finance company. EMS executed a Premium Finance Agreement (the "Agreement"),
which set fo1ih the terms of the premium financing relationship between EMS and IPFS,
including terms granting power of attorney to IPFS with respect to the Policy and establishing
IPFS 's right to cancel the Policy if EMS defaulted on its obligations to IPFS. Second Jones
Deel. Ex. 1. ECF No. 22.
EMS subsequently failed to pay installments to IPFS as required by the Agreement.
Pursuant to the tenns of the Agreement, IPFS mailed a Notice of Cancellation to EMS on April
28, 2014. FAC Ex. C. In the Notice of Cancellation, IPFS exercised its authority under the
Agreement and notified Scottsdale that the Policy was cancelled, effective May 1, 2014.
II.
The Underlying Action
On July 25, 2013, the Horowitzes contracted with EMS to move their belongings from
West Hills, California, to Talent, Oregon. FAC Ex. A., at 1. In August or September 2013,
EMS hired Cmiis Wiles and Jason Morgan to unload the Horowitzes' belongings in Talent and
paid Wiles and Morgan "under the table in cash." Id EMS did not perfonn background checks
and so did not discover that Morgan and Wiles had criminal histories or were otherwise unsuited
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for their positions. Id. at 2. While unloading the Horowitzes' property, Morgan and Wiles
leamed about the layout of the Horowitzes' home and the value of the Horowitzes' property. Id.
On May 3, 2014, Morgan and an accomplice named James Tumer entered the
Horowitzes' home and stole prope1iy wo1ih $83,000. 1 Id. at 2-3. During the robbery, Morgan
and Tumer brutally assaulted Jay Horowitz, leaving him with severe physical and psychological
injuries and considerable medical expenses. Id.
On March 18, 2016, the Horowitzes filed a complaint in Jackson County Circuit Court
against EMS, Case Number 16CV08738 (the "Underlying Action"). In an amended state comi
complaint, filed March 30, 2016, the Horowitzes alleged a claim against Elite Moving Solutions,
Inc. ("Solutions"), a successor entity to the now-defunct EMS. Comp!. Ex. A. ECF No. 1.
On May 5, 2016, the Horowitzes' counsel was contacted by attomey Michael B.
Hallinan, who identified himself as counsel for EMS. Am. Ans. Ex. 3. ECF No. 35-3. Hallinan
informed the Horowitzes that he had "not yet received a file from our client's insurer, and we
have not reviewed any investigation in this matter." Id. A follow-up letter on May 16, 2016,
indicated that Hallinan was also counsel for Solutions. Am. Ans. Ex. 4.
On June 6, 2016, Hallinan and the Horowitzes' counsel agreed to dismiss Solutions in
favor of retaining EMS as a defendant in the Underlying Action on the understanding that EMS
had liability insurance coverage. Am. Ans. Ex. 5. In reply, Hallinan wrote "I can confirm $1
million in coverage, and will send the dee page/policy [sic], and the adjuster has confirmed no
reservation of rights has been asse1ied." Am. Ans. Ex. 6.
1
The operative second amended state court complaint alleges that Wiles "inspired" Morgan and Turner to commit
the robbery.
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On June 20, 2016, the Horowitzes entered into a stipulated motion to dismiss Solutions
from the Underlying Action and substitute EMS as the defendant, which was accepted by the
state court. Am Ans. Exs. 7, 8.
On January 12, 2017, Scottsdale's coverage counsel sent a letter to EMS notifying it that
Scottsdale was asse1iing a reservation ofrights on the basis that the robbery of the Horowitzes'
home occurred on May 3, 2014, which was two days after IPFS cancelled the Policy. Second
Jones Deel. Ex. 2. In that letter, Scottsdale reserved its right to deny coverage and to withdraw
from EMS's defense in the Underlying Action. Id Scottsdale also reserved the right to file a
declaratory judgment action to dete1mine its rights and obligations under the Policy. Id. The
Horowitzes learned of the reservation of rights on January 19, 2017. Anderson Deel. ECF No.
39-3.
The present action followed on March 7, 2017. ECF No. 1. On May 17, 2017, the
Horowitzes moved for summary judgment, which was denied in an Opinion and Order issued on
September 21, 2017. ECF Nos. 10, 25. The present Motion for Summary Judgment, this time
filed by Scottsdale, followed.
LEGAL STANDARD
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 of law." Wash. lvfut. Inc. v. United States,
636 F.3d 1207, 1216 (9th Cir. 2011); Fed. R. Civ. P. 56(a). The moving pmiy must show the
absence of a dispute as to a material fact. Rivera v. Philip ,vforris, 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 pmiy must do more than show
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there is some 'metaphysical doubt' as to the material facts at issue." In re Oracle C01p. 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 paiiy." 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 couti must draw all reasonable inferences in favor of the non-moving party. 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 asse1iion 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 paiiy 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).
The substantive law governing a claim or defense determines whether a fact is material.
1\1iller 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
judgment. Id.
DISCUSSION
Scottsdale seeks a declaratory judgment that it has no obligation to defend or indemnify
EMS in the Underlying Action. Scottdale has filed a Motion for Summaiy Judgment and the
Horowitzes have filed a Motion to Strike. The parties agree that the Policy should be interpreted
under the laws of California.
Page 5 - OPINION & ORDER
I.
Motion to Strike and Supplement the Record
A. Motion to Strike
The Horowitzes have filed a Motion to Strike, ECF No. 41, in which they seek to strike
the Reply and its supporting Jones Declaration, ECF No. 40. The Reply and Jones Declaration
state that Scottsdale issued a liability insurance policy to Solutions, but that the policy was issued
on August 14, 2015. Scottsdale asserts that the Horowitzes' injury would therefore fall outside
of Scottsdale's obligation to defend and indemnify Solutions, even if Solutions had been retained
as a defendant in the Underlying Action. The Horowitzes contend that this "new allegation of
fact, raised for the first time in a Reply, gives [defendant] no opportunity to respond with factual
inquiry or challenges."
Although portions of a reply brief that present new information are improper, see Tovar
v. US. Postal Serv., 3 F.3d 1271, 1273 n.3 (9th Cir. 1993), the effective date for Solutions's
insurance policy was not raised for the first time in the Reply. That factual detail is in the
"Statement of Facts" section of Scottsdale's Motion for Summary Judgment:
Scottsdale retained counsel to defend EMS under general liability policy number
CPS1851193, issued for the policy period March 4, 2014 to March 4, 2015 (the
'Policy') and to defend Solutions under general liability policy number
CPS2236769, effective August 14, 2015, to August 14, 2016.
Pl. Mot. Summ. J. 2. (emphasis added, internal citation omitted).
The same fact, articulated using the same language, was previously raised in Scottsdale's
Response to the Horowitzes' Motion for Summmy Judgment, ECF No. 15, which was filed on
June 14, 2017.
If the Horowitzes wished to explore the contours of the insurance policy
Scottsdale issued to Solutions, they were notified of the policy's effective dates nearly two years
before the Reply was filed. The Horowitzes' Motion to Strike is DENIED.
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B. Motion to Supplement the Record
The Horowitzes' Motion to Strike also contains a Motion to Supplement the Record,
which amounts to a belated attempt to resmTect a previously-conceded argument concerning the
notice required to cancel the Policy. The Horowitzes acknowledge that this argument should
have been raised in their Response to the Motion for Summary Judgment, but urge the Court to
consider it anyway. The Court has considered the Horowitzes' untimely arguments and finds
them easily resolved.
The Horowitzes assert that, under the te1ms of the Policy, Scottsdale was required to
provide EMS with ten days' notice prior to the cancellation of the Policy for non-payment of
premiums. Scottdale was pe1mitted to cancel the Policy with written notice of cancellation at
least ten days before the effective date of cancellation, if the cancellation was for non-payment of
a premium. Mot. to Strike Ex. 1, at 3-4. ECF No. 41-1. The Horowitzes argue that, because
EMS was only given three days' notice, Scottdale's cancellation of the policy was improper and
ineffective.
The cited provisions are, however, inapplicable, because the Policy was not cancelled by
Scottsdale for non-payment of premiums. Indeed, the Notice of Cancellation shows that IFPS
paid the premiums to Scottsdale as required by the Agreement. FAC Ex. C. Rather the Policy
was cancelled by IPFS on behalf of Elv!S, pursuant to the power of attorney granted to IFPS
under the Agreement. 2
Because the Policy was cancelled by IFPS acting on behalf of EMS, and not by
Scottsdale, the provisions governing advance notice in the event of cancellation by Scottsdale do
2
While the Policy requires either ten days' or thirty days' written notice before Scottsdale could cancel coverage, no
such limitations are imposed when the insured cancels the Policy. In that case, all the Policy requires is "advanced
written notice of cancellation" stating the effective date of cancellation. Mot. to Strike, Ex. I, at 3. ECF No. 41-1;
FAC Ex. B, at 37. These requirements are satisfied by the Notice of Cancellation sent to Scottsdale by IPFS. FAC
Ex.C.
Page 7 - OPINION & ORDER
not apply. With respect to Scottsdale, the Policy was properly cancelled as of May 1, 2014. The
Horowitzes' Motion to Supplement the Record is DENIED.
II.
Motion for Summary Judgment
Scottsdale moves for summary judgment on the basis that the injury alleged by the
Horowitzes in the Underlying Action occmTed after the Policy was cancelled and therefore falls
outside of the covered period. In response, the Horowitzes argue that, by undertaking to defend
EMS in the Underlying Action, Scottsdale has waived its right to dispute whether the facts
giving rise to that representation are outside the scope of the Policy. The Horowitzes fmiher
argue that the representations made to them by EMS' s prior counsel regarding liability insurance
preclude Scottsdale from disputing coverage under principles of equitable estoppel.
As Scottsdale points out, the Comi resolved the questions of estoppel and waiver in favor
of Scottsdale when it denied Horowitzes' previous motion for summary judgment. The Couti
has reviewed the record and finds no new factual disputes or legal developments that justify a
different conclusion on waiver and estoppel when raised in opposition to Scottsdale's motion for
summary judgment.
A. Waiver
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 of a right 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.
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The California Comt of Appeals rejected a similar waiver argument in Ringler Assocs.
Inc. v. Maryland Cas. Co., 80 Cal. App. 4th 1165, 1188, 96 Cal. Rptr. 2d 136 (Cal. Ct. App.
2000). In that case, the insurer unde1took to defend the insured for over two years before issuing
a reservation of rights. Id. The insU1'ed 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 court
rejected this argument as "completely meritless." Id. "[T]he comts have repeatedly held that an
insU1'er 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 shows that the loss giving rise to the Underlying Action occmTed
outside of the period covered by the Policy. Consistent with Ringler, Scottsdale did not waive its
rights to contest coverage simply by unde1taking to defend EMS, or by issuing a letter reserving
its rights months after undertaking the defense of EMS.
B. Equitable Estoppel
To demonstrate equitable estoppel, a party 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 assetting 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." 1vfiller v. Elite Ins. Co., 100 Cal. App. 3d 739, 754, 161 Cal. Rptr.
322 (Cal. Ct. App. 1980). In the insU1'attce context, this requires (1) a "reasonable belief' that the
insurer would provide coverage; and (2) a finding of detrimental reliance by the party asse1ting
estoppel. Ringler, 80 Cal. App. 4th at 1190. "The existence of estoppel is a question of fact and
the patty asserting estoppel bears the burden of proving it." S. F Bay Area Rapid Transit Dist. v.
Page 9 - OPINION & ORDER
Gen. Reinsurance Corp., 111 F. Supp. 3d 1055, 1070 (N. D. Cal. 2015) (internal citations
omitted).
"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
incuned 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
omitted). The general rule is subject to a well-established exception:
[I]f 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.
lvliller, 100 Cal. App. 3d at 755 (internal quotation marks and citation omitted).
In this case, Scottsdale did not unde1take an "unconditional defense" of EMS, nor is this
a case where Scottsdale is asse1ting 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 Action.
The doctrine of equitable estoppel similarly cannot be used to cover injuries that occurred
after the policy ended. In S. F Bay Area Rapid Transit Dist., the insurer contended that the
iajury in question had occuned after the insurance policy ended. S. F Bay Area Rapid Transit
Dist., 111 F. Supp. 3d at 1059. The court 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 terms, or risks expressly excluded therefrom." Id at
1071 (quoting Supervalu, Inc. v. We;iford Underwriting Mgrs., Inc., 175 Cal. App. 4th 64, 77, 96
Page 10 - OPINION & ORDER
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.
In this case, as in S. F Bay Area Rapid Transit Dist., the Horowitzes cannot use the
doctrine of equitable estoppel to expand the Policy to cover a loss that occuned after the Policy
was cancelled.
As the Horowitzes' injmy occuned after the Policy was cancelled, it falls outside of the
policy period. For the reasons set forth above, neither waiver nor equitable estoppel will serve to
bring that injury back within the period covered by the Policy. Scottsdale's Motion for Surnmaiy
Judgment is therefore GRANTED.
CONCLUSION
For the reasons set forth above, Defendants' Motion to Strike and to Supplement the
Record, ECF No. 41, is DENIED. Plaintiffs Motion for Summary Judgment is GRANTED.
ECF No. 38. Scottsdale is not obliged either to defend or to indemnify Defendant Elite Moving
Systems, Inc. for the injuries alleged by Defendants Jay Horowitz and Kim Horowitz in Jackson
County Circuit Court Case Number 16CV08738. Final judgment shall be entered accordingly.
It is so ORDERED and DATED this
,'fl'ch...
day of July, 2019.
Ann Aiken
United States District Judge
Page 11 - OPINION & ORDER
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