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KnightBrook Insurance Co. v. Payless Car Rental System, Inc.

United States District Court, D. Arizona

April 17, 2015

KnightBrook Insurance Company and Knight Management Insurance Services, LLC, Plaintiffs,
v.
Payless Car Rental System, Inc.; PCR Venture of Phoenix, LLC; ABC Corporations I-X; XYZ Partnerships I-X, Defendants

For KnightBrook Insurance Company, Knight Management Insurance Services LLC, Plaintiffs, Counter Defendants: Alison Rebecca Christian, Stephen M Dichter, LEAD ATTORNEYS, Gena LoPresto Sluga, 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 ATTORNEY, 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 Defendant: 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.

ORDER

David G. Campbell, United States District Judge.

Following summary judgment rulings, Plaintiffs KnightBrook Insurance Company (" KnightBrook" ) and Knight Management Insurance Services, LLC (collectively, the " Knight entities" ) have claims remaining against Defendants Payless Car Rental System, Inc. and PCR Venture of Phoenix, LLC (collectively, the " Payless entities" ) for negligence, negligent misrepresentation, breach of fiduciary duty, and equitable indemnity. The Payless entities have a counterclaim for insurance bad faith. The Court held a bench trial on these claims from March 31 through April 2, 2015. This order will set forth factual findings in Section I and mixed findings of fact and conclusions of law in the remaining sections. The Court will award $970,000 to the Knight entities.

I. Background.

The following background facts are based on stipulations in the parties' proposed final pretrial order (Doc. 325 at 2-6) and evidence presented at trial. Citations to trial exhibits in this order do not mean that the exhibits are the sole basis for the Court's finding. The Court also has taken into account the testimony presented at trial and in deposition excerpts submitted by the parties.

1. KnightBrook Insurance Company issued Commercial Automobile Liability Insurance Policy No. 9SLIKBAZ000101 to PCR Venture for the period from April 1, 2009 to April 1, 2010 (the " SLI Policy" ). PCR Venture is the " Named Insured" in the SLI Policy.

2. On February 17, 2010, the Payless entities rented a car to Michael Bovre.

3. The rental agreement provided Bovre with an opportunity to purchase Supplemental Liability Insurance (" SLI" ) of $1 million.

4. The rental contract 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." Ex. 1 at 1 (emphasis in contract).

5. Bovre did not initial on the line next to this statement.

6. The Payless entities' desk agent, Dennis Fisher, had drawn a circle around the blank space next to the SLI coverage line as an indication of where Bovre should initial. It was in the same relative location as other lines where Bovre did place his initials to accept or decline other benefits offered by the Payless entities.

7. Bovre did not pay for SLI coverage.

8. The only insurance Bovre paid for as part of his rental contract was personal accident insurance. As required under Arizona statutory law, the Payless entities also provided Bovre with liability insurance coverage for minimum financial limits of $15,000/$30,000.

9. The original vehicle that Bovre rented, a Dodge Caravan, was retuned because the tires would not hold air.

10. Bovre brought the Caravan back to the Payless entities and exchanged it for a Dodge Durango.

11. On March 1, 2010, Bovre was driving the Dodge Durango when he collided with a motorcycle driven by Robert and Lorraine McGill.

12. The McGills sustained significant and permanent injuries as a result of the accident.

13. Attorney Jefferson Collins, who was retained by Bovre's personal liability insurance carrier, Travelers Insurance Company (" Travelers" ), communicated with Bovre on June 22, 2010.

14. On July 1, 2010, the Knight entities sent a letter to Bovre indicating that because he did not pay for SLI coverage at the time of the rental, he did not have any coverage for the McGill accident under the SLI Policy.

15. On August 26, 2010, attorney Collins wrote to the Knight entities and explained that Bovre and Travelers were seeking confirmation that SLI coverage would be provided to Bovre based on Bovre's communications with the Payless entities' desk agent, Dennis Fisher.

16. On February 8, 2011, Lorraine and Robert McGill filed a civil action against Bovre seeking damages. The case was captioned McGill, et al. v. Bovre, Maricopa County Superior Court Case No. CV2011-003518 (the " Underlying Lawsuit" ).

17. On the same day, the McGills submitted a settlement demand to Bovre for $1,500,000.

18. Pursuant to this settlement demand, the McGills sought the total available liability limits afforded by (1) Bovre's personal automobile liability insurance policy with Travelers, which had a limit of $500,000; (2) the total available limit of the SLI coverage, which the McGills believed to be $1,000,000; and (3) the Payless entities' mandatory rental car coverage of $30,000.

19. Travelers and the liability insurer for the Payless entities, Great American Assurance Company, offered to pay $530,000 to settle the claims against Bovre.

20. Attorney Collins filed a notice of appearance in the Underlying Lawsuit on September 12, 2011, and an answer on Bovre's behalf on September 21, 2011.

21. The McGills declined to provide a full and final release of all claims for $530,000.

22. To protect his interests, Bovre entered into a Damron settlement agreement with the McGills. See Damron v. Sledge, 105 Ariz. 151, 460 P.2d 997 (Ariz. 1969).

23. The McGills agreed to accept $530,000 and an assignment of any and all claims Bovre had against the Knight and Payless entities under Arizona law, and not to seek further collections from Bovre.

24. As part of the agreement, Bovre and the McGills stipulated to an $8 million judgment against Bovre.

25. On June 28, 2012, the McGills filed a second lawsuit against the Knight entities and the Payless entities.

26. The McGills did not pursue any direct causes of action in this second lawsuit, but instead pursued Bovre's assigned claims for negligence, negligent misrepresentation, breach of contract, and bad faith (among others).

27. Desk agent Dennis Fisher was deposed on January 23, 2013.

28. Fisher did not remember anything specific about the Bovre rental transaction and therefore could not explain why he failed to get ...


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