United States District Court, D. Arizona
KnightBrook Insurance Company and Knight Management Insurance Services, LLC, Plaintiffs,
Payless Car Rental System, Inc.; PCR Venture of Phoenix, LLC; ABC Corporations I-X; XYZ Partnerships I-X; and John and Jane Does I-X, Defendants
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For KnightBrook Insurance Company, Plaintiff: Alison Rebecca Christian, Stephen M Dichter, LEAD ATTORNEYS, Gena LoPresto Sluga, Jeffrey O Hutchins, Christian Dichter & Sluga PC, Phoenix, AZ.
For Knight Management Insurance Services LLC, Plaintiff: Alison Rebecca Christian, Gena LoPresto Sluga, Stephen M Dichter, LEAD ATTORNEYS, Jeffrey O Hutchins, Christian Dichter & Sluga PC, Phoenix, AZ.
For Payless Car Rental System Incorporated, PCR Venture of Phoenix LLC, Defendants: Arron Burt Nesbitt, Kyle Paul Seedorf, LEAD ATTORNEYS, Taylor Anderson LLP, Scottsdale, AZ; Jeffrey A Williams, Mary K Vossberg, Taylor Anderson LLP - Denver, CO, Denver, CO.
For PCR Venture of Phoenix LLC, Counter Claimant: Arron Burt Nesbitt, Kyle Paul Seedorf, LEAD ATTORNEYS, Taylor Anderson LLP, Scottsdale, AZ; Jeffrey A Williams, Mary K Vossberg, Taylor Anderson LLP - Denver, CO, Denver, CO.
For Knight Management Insurance Services LLC, KnightBrook Insurance Company, Counter Defendants: Alison Rebecca Christian, Gena LoPresto Sluga, Stephen M Dichter, LEAD ATTORNEYS, Jeffrey O Hutchins, Christian Dichter & Sluga PC, Phoenix, AZ.
David G. Campbell, United States District Judge.
Defendants Payless Car Rental System, Inc. (" Payless" ) and PCR Venture of Phoenix, LLC (" PCR" ) (collectively, the " Payless entities" ) have filed a motion for
summary judgment (Doc. 193), as have Plaintiffs KnightBrook Insurance Company (" KnightBrook" ) and Knight Management Insurance Services, LLC (collectively, the " Knight entities" ) (Doc. 232). The motions are fully briefed. The Court will grant the Payless entities' motion in part and deny it in part. The Court will deny the Knight entities' motion.
The Payless entities have filed a motion in limine to exclude the testimony of Plaintiffs' expert Thomas Zlaket. Doc. 242. Defendants have filed a motion for leave to file a surreply. Doc. 253. Plaintiffs have filed a motion requesting that the Court adopt negative inferences. Doc. 227. Defendants have filed a motion for jury trial. Doc. 256. The Court will deny these motions.
I. Motions for Summary Judgment.
On February 17, 2010, Michael Bovre rented a vehicle from Payless. Doc. 116, ¶ 8. The rental agreement stated: " BY INITIALING HERE, YOU DECLINE TO PURCHASE SUPPLEMENTAL LIABILITY INSURANCE AND YOU AGREE TO BE PRIMARILY RESPONSIBLE FOR ALL DAMAGE OR INJURY YOU CAUSE TO OTHERS OR THEIR PROPERTY." Id., ¶ 10. Bovre did not initial on the line next to this statement. Id., ¶ 12. Bovre believed that Dennis Fisher, the Payless desk agent, had advised him that the rental agreement provided Supplemental Liability Insurance (" SLI" ) coverage. Id., ¶ 13. Bovre did not pay for SLI coverage. On March 1, 2010, Bovre was driving the rental car when he collided with a motorcycle driven by Robert and Lorraine McGill. The McGills sustained significant and permanent injuries. Id., ¶ 15.
The McGills commenced an action against Bovre on February 8, 2011. Id., ¶ 16. On the same day, the McGills submitted a settlement demand to Bovre for $1,500,000. Id., ¶ 17. The demand was for an amount within the total available liability limits and protection afforded by the following: (1) Bovre's personal liability insurance limit of $500,000 provided by Travelers Insurance Company (" Travelers" ), (2) SLI coverage of $1,000,000 provided by Sonoran National Insurance Group, National Specialty and/or KnightBrook, and (3) Payless' mandatory rental car coverage of $30,000 pursuant to A.R.S. § 28-2166. Id. In response to the settlement demand, Travelers and Payless agreed to make $530,000 immediately available in exchange for a full and final release of all claims against Bovre and a dismissal of the lawsuit. Id., ¶ 18. Sonoran, National Specialty, KnightBrook, and Payless denied SLI coverage to Bovre and denied any responsibility to defend or indemnify him in the McGills' lawsuit. Id., 19. The McGills declined to provide a full and final release of all claims in exchange for $530,000.
Bovre sought to protect his interests by entering into a settlement agreement with the McGills. Id., ¶ 21. The McGills agreed to limit their claims against Bovre by entering into a Damron agreement in exchange for the $530,000 payment from Travelers and Payless and an assignment of any and all rights Bovre had against the SLI insurers under Arizona law. Id.; see Damron v. Sledge, 105 Ariz. 151, 460 P.2d 997 (Ariz. 1969). In connection with the Damron agreement, the parties entered into an
$8 million stipulated judgment. Doc. 116, ¶ 22.
On June 28, 2012, the McGills filed an action in state court against, among others, the Knight entities and the Payless entities. Doc. 40. The McGills asserted Bovre-assigned claims for breach of the insurance contract and bad faith against the Knight entities. Doc. 1-2 at 40-42. They also asserted Bovre-assigned claims for negligence against the Payless entities. Id. at 40-41. On August 6, 2012, the action was removed to this Court on the basis of diversity jurisdiction.
On March 14, 2013, the McGills sent a time-limited settlement demand for $1 million to the Payless and Knight entities that would resolve all claims. The settlement demand was set to expire on March 29, 2013. Doc. 116, ¶ 24. Upon request by the Knight entities, the McGills reduced their demand to $970,000. Id., ¶ 25. The Knight entities requested that the Payless entities contribute to the settlement, but the Payless entities refused. Id., ¶ 26. As a result, the Knight entities funded the $970,000 settlement on their own. Id., ¶ 27. The settlement agreement assigned all of the Bovre claims to the Knight entities, including Bovre claims against the Payless entities. Id., ¶ 28.
As a result of the Knight entities' settlement and assignment agreement, the parties in this case have been reshuffled. The Knight entities, which formerly were defendants, are now the plaintiffs, and will be referred to in the remainder of this order as " Plaintiffs." On June 14, 2013, Plaintiffs filed a complaint asserting two types of claims against the Payless entities, who will be referred to in the remainder of this order as " Defendants" : (1) Bovre's assigned claims for breach of contract, breach of oral contract, negligent misrepresentation, and negligence; and (2) Plaintiffs' own claims for equitable indemnification and breach of fiduciary duty. Id., ¶ 30-76. Defendants filed an answer on July 1, 2013. Doc. 116. Defendants later filed an amended answer asserting a counterclaim for bad faith against Plaintiffs. Doc. 144, ¶ ¶ 22-26.
B. 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, 106 S.Ct. 2548, 91 L.Ed.2d 265 (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). 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, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
1. Assigned Negligence Claims.
In counts one and two of their complaint, Plaintiffs assert claims for negligence and negligent misrepresentation that originally belonged to Bovre. Doc. 116, ¶ ¶ 30-35, 36-42. The negligence claim arises from Payless desk agent Dennis Fisher's failure to complete Bovre's paperwork carefully. Id., ¶ 32. The negligent misrepresentation claim arises from Fisher's alleged misrepresentation that SLI was included in the car rental notwithstanding Bovre's failure to pay for it. Id.,
¶ 37-39. Because Plaintiffs obtained the negligence claims through an assignment from Bovre, they must stand in Bovre's shoes. See K.B. v. State Farm Fire & Cas. Co., 189 Ariz. 263, 941 P.2d 1288, 1292 (Ariz. Ct. App. 1997) (quoting Stephens v. Textron, Inc., 127 Ariz. 227, 619 P.2d 736, 739 (Ariz. 1980)) (Assignee " 'can stand in no better position than the assignor and an assignment cannot alter the defenses or equities of the third party.'" ). Defendants argue that both claims are barred by the statute of limitations. Doc. 193 at 5. The Court agrees.
In Arizona, tort claims sounding in negligence are subject to a two-year limitations period. See A.R.S. § 12-542(3); ELM Ret. Ctr., LP v. Callaway, 226 Ariz. 287, 246 P.3d 938, 941 (Ariz. Ct. App. 2010). Arizona's " discovery rule" tolls the limitations period " until the plaintiff possesses a minimum knowledge sufficient to recognize that a 'wrong occurred and caused injury.'" Ritchie v. Krasner, 221 Ariz. 288, 211 P.3d 1272, 1288 (Ariz. Ct. App. 2009) (quoting Walk v. Ring, 202 Ariz. 310, 44 P.3d 990, 996 (Ariz. 2002)). " The discovery rule, however, does not permit a party to hide behind its ignorance when reasonable investigation would have alerted it to the claim." Callaway, 246 P.3d at 941. Instead, a tort claim accrues when a plaintiff knows or " with reasonable diligence should know" of the defendant's wrongful conduct. Doe v. Roe, 191 Ariz. 313, 955 P.2d 951, 960 (Ariz. 1998).
Defendants argue that Bovre knew or should have known of Fisher's allegedly wrongful conduct on April 19, 2010, when Bovre admitted in a recorded statement that he " evidently [did] not" purchase SLI from Payless. Doc. 193 at 6; Doc. 194 at 5. Although he claimed the SLI was given to him for free, Bovre admitted there was " nothing [in the Rental Contract] to indicate that." Doc. 193 at 6; Doc. 194 at 5-7. Defendants also argue that Bovre knew or should have known of the allegedly wrongful conduct in May 2010 when he was actively investigating his claims and the issues surrounding SLI. As part of Bovre's investigation, he engaged an attorney, Jefferson Collins. Doc. 193 at 7; Doc. 194-8 at 2-4; Doc. 194-9 at 1. Subsequently, Collins sent two letters, one to Bovre on June 22, 2010 confirming his representation (Doc. 194-9 at 1), and another to Payless on June 24, 2010 demanding payment on the SLI policy (Doc. 194-10 at 1-4). Defendants argue that the negligence claims accrued, at the very latest, on June 24, 2010, when it is clear from Bovre's attorney's letter that Bovre knew or should have known of the alleged wrong. Doc. 193 at 7. Because the initial complaint was not filed until more than two years later, June 28, 2012, Defendants argue the negligence claims are time-barred. Id.; Doc. 1-2 at 36.
Plaintiffs argue that the negligence claims did not accrue until after July 1, 2010, when Knight Management Insurance Services, LLC (" KMIS" ) sent a letter denying SLI coverage. Doc. 223 at 3. Plaintiffs assert that the negligence claims could not have accrued before that date because " any question regarding whether [Bovre] had SLI coverage was unresolved; consequently, any claim that he had relating to Payless' negligence would have been mere supposition before July 1, 2010." Id. Bovre's August 23, 2010 affidavit states that he did not know SLI coverage would not be provided until after he received the July 1, 2010 letter from KMIS. Id. at 5; Doc. 224-2 at 27. Because the parties dispute the date Bovre discovered his alleged harm, Plaintiffs argue that the issue cannot be resolved on summary judgment. Doc. 223 at 3; see Logerquist v. Danforth, 188 Ariz. 16, 932 P.2d 281, 287-88 (Ariz. Ct. App. 1996) (" Application of the discovery
rule often depends on resolution of . . . factual issues, and this court's function is not to resolve disputed facts." ).
Plaintiffs' emphasis on the July 1, 2010 letter is misplaced. The relevant date is not when Bovre had written confirmation from KMIS that he lacked SLI coverage, but when a reasonable person in Bovre's position would have been on notice to investigate a claim for negligence. Walk, 44 P.3d at 996. The negligence claims accrued when Bovre was aware that Fisher had engaged in negligent acts or had made negligent misrepresentations. It is clear from the record that Bovre knew Fisher failed to " carefully complete" the rental agreement or made misrepresentations regarding the rental contract before June 24, 2010. Bovre's decision to investigate these facts and hire an attorney shows his awareness of their potential legal significance. The Court concludes that the claims for negligence and negligent misrepresentation accrued on or before June 24, 2010 and are time-barred. The Court will enter summary judgment on counts one and two.
2. Assigned Breach of Contract Claims.
In counts three and four, Plaintiffs assert breach of contract claims that were assigned from Bovre. Doc. 116, ¶ ¶ 43-48, 50-56. Plaintiffs argue that Bovre's written rental contract included SLI coverage. Doc. 116, ¶ ¶ 52-54. In the alternative, Plaintiffs argue that Bovre was orally promised SLI coverage and that this promise constitutes an enforceable contract. Id., ¶ ¶ 45-46. Defendants argue that Plaintiffs' assigned breach of contract claims fail as a matter of law for two reasons: (1) SLI was not included in any contract between Bovre and Payless, and (2) the breach of contract claims are barred by the doctrine of accord and satisfaction. Doc. 193 at 8, 12.
a. Contract Interpretation.
In a breach of contract claim, " the plaintiff has the burden of proving the existence of a contract, breach of the contract, and resulting damages." Chartone, Inv. v. Bernini, 207 Ariz. 162, 83 P.3d 1103, 1111 (Ariz. Ct. App. 2004). The interpretation of a contract is a question of law, Taylor v. State Farm Mutual Automobile Insurance Company, 175 Ariz. 148, 854 P.2d 1134, 1138 (Ariz. 1993) (en banc), that is not limited to the words set forth in the document, Darner Motor Sales, Inc. v. Universal Underwriters Insurance Company, 140 Ariz. 383, 682 P.2d 388, 398 (Ariz. 194) (en banc). In Arizona, contract interpretation follows a two-step process. First, the Court must consider " the evidence that is alleged to determine the extent of integration, illuminate the meaning of the contract language, or demonstrate the parties' intent." Taylor, 854 P.2d at 1139. The Court must " apply a standard of reasonableness to contract language" and construe the contract " in its entirety and in such a way that every part is given effect." Goddard v. R.J. Reynolds Tobacco Co., 206 Ariz. 117, 75 P.3d 1075, 1078 (Ariz. Ct. App. 2003) (internal quotation marks and citations omitted). The Court must consider any relevant extrinsic evidence and, if " the contract language is 'reasonably ...