Empire Talent-Modeling Agency, LLC; Maria (Marisa) Sclafani, Plaintiffs,
Auto-Owners Insurance Company, Defendant.
DAVID G. CAMPBELL, District Judge.
On February 15, 2013, Defendant Auto-Owners Insurance Company filed a motion for summary judgment. Doc. 57. Empire Talent-Modeling Agency, LLC, and Maria Sclafani (collectively "Plaintiffs") filed a joint response on April 1, 2013. Doc. 62. On April 26, 2013, Defendant filed a reply. For the reasons that follow the Court will grant Defendant's motion in part and deny it in part.
Plaintiff Empire Talent was insured by Defendant under Property Policy No. 47-905-554-00 from January 1, 2010 to January 1, 2011. On March 16, 2010, Plaintiff Sclafani's car was vandalized and two binders were stolen. Doc. 58 ¶¶ 3-4. Plaintiffs claim that the binders contained talent portfolios and written contracts of Plaintiffs' clients. Id. Plaintiffs notified Defendant of the incident and a claim was initiated. Id. ¶ 5. Because Plaintiffs believed the data was backed up on a hard drive, they did not pursue the claim. Id. Thereafter, Defendant called Plaintiffs to inform them that Defendant needed documentation on the amount of the loss if it was to process the claim. Id. ¶ 7. Sclafani told Defendant that it cost approximately $800 to shoot the original photographs contained in the talent portfolios. Doc. 63 ¶ 8. Plaintiffs elected to not move forward with the claim at that time. Doc. 58 ¶ 12.
On September 1, 2010, Plaintiffs' laptop computer and external hard drive simultaneously failed. Doc. 63 ¶ 13. The computer and hard drive contained digital copies of talent profiles, client data, and contact information. Doc. 58 ¶ 15. Defendant states that a claim was initiated on November 1, 2010 ( id. ¶ 16), while Plaintiffs believe the claim was initiated on the same day as the loss, September 1 (Doc. 63 ¶ 16).
Plaintiffs bring three claims arising from the manner in which Defendant handled the claim adjustment process. Plaintiffs allege breach of the covenant of good faith and fair dealing, breach of contract, and intentional infliction of emotional distress. Plaintiffs also seek punitive damages.
II. Legal Standard.
A party seeking summary judgment "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, shows "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Summary judgment is also appropriate against a party who "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322. Only disputes over facts that might affect the outcome of the suit will preclude the entry of summary judgment, and the disputed evidence must be "such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Defendant asserts that Plaintiff Sclafani is not a named insured on the business personal property section of the policy. Defendant argues that she therefore lacks standing under Arizona law to bring a bad faith action related to the policy. Doc. 57 at 8 (citing Stratton v. Inspiration Consol. Copper Company, 683 P.2d 327 (Ariz. App. 1984)).
Plaintiffs argue that under an endorsement affixed to the policy, members and managers of a limited liability company can be considered an insured for purposes of duties related to the conduct of the business. Doc. 58-1 at 108. But as Defendant notes, the endorsement applies specifically to the "Businessowners Liability Coverage Form" and makes no mention of the "Businessowners Special Property Coverage" portion of the policy. Id; see also Doc. 58-1 at 5-25 (text of the Special Property Coverage). Plaintiff concedes that Defendant Empire is the named insured on the declarations page (Doc. 62 at 7), and provides no other evidence that Defendant Sclafani is a named insured for the purposes of the property coverage. The Court finds that she lacks standing to bring suit for breach of the property coverage portion of the policy or for breach of the covenant of good faith and fair dealing implied in that portion of the policy.
B. Covenant of Good Faith and Fair Dealing.
Under Arizona law, the covenant of good faith and fair dealing applies particularly to insurance contracts. Rawlings v. Apodaca, 726 P.2d 565, 569-70 (Ariz. 1986) ("implicit in the contract and the relationship is the insurer's obligation to play fairly with its insured."). "The carrier has an obligation to immediately conduct an adequate investigation, act reasonably in evaluating the claim, and act promptly in paying a legitimate claim... It should not force an insured to go through needless adversarial hoops to achieve its rights under the policy." Zilisch v. State Farm Mut. Auto. Ins. Co., 995 P.2d 276, 280 (Ariz. 2000). Where the insurance company has a reasonable basis for denying or failing to ...