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St. Paul Guardian Insurance Co. v. Town of Colorado City

United States District Court, D. Arizona

July 13, 2015

St. Paul Guardian Insurance Company, et al., Plaintiffs,
Town of Colorado City, et al., Defendants.


JAMES A. TEILBORG, Senior District Judge.

Pending before the Court are Plaintiffs' Motion for Summary Judgment or, in the Alternative, for Partial Summary Judgment (Doc. 44) and Plaintiffs' Motion for Leave to Supplement the Record with Court Order and for the Court to Take Judicial Notice of the Order (Doc. 57). The Court now rules on the motions.

I. Background

Plaintiffs St. Paul Guardian Insurance Company ("St. Paul") and The Travelers Indemnity Company ("Travelers") filed this declaratory judgment action seeking a determination that they have no duty to defend or indemnify their insured, Defendant Town of Colorado City (the "Town") in ongoing litigation between the Town and a third-party. (Doc. 1).

St. Paul issued an insurance policy to the Town for the period of February 11, 2009 through February 11, 2010 (the "2009/2010 Policy"). St. Paul also issued a policy to the Town for the period from February 11, 2010 through February 19, 2011 (the "2010/2011 Policy"). Travelers issued a policy to the Town for the period from February 19, 2013 through February 19, 2014 (the "2013/2014 Policy"). Collectively, the Court will refer to the 2009/2010 Policy, the 2010/2011 Policy, and the 2013/2014 Policy as the "Policies."

On November 22, 2011, the United States Department of Justice ("DOJ") notified the Town by letter that the DOJ was prepared to file a complaint against the Town for violations of various federal statutes. On June 21, 2012, the United States sued the Town in United States v. Town of Colorado City et al., No. CV12-08123-PCT-HRH in the United States District Court for the District of Arizona (the "Underlying Lawsuit"). The United States alleges in the Underlying Lawsuit that the Town engaged in a pattern or practice of illegal discrimination against individuals who are not members of the Fundamentalist Church of Jesus Christ of Latter-day Saints ("FLDS"). (Doc. 1 Ex. 4 ¶ 4). The United States alleges in the Complaint filed in the Underlying Lawsuit (the "Underlying Complaint") that the Town's police force selectively enforces laws based on the victims' or offenders' religion. ( Id. ¶¶ 16-35). The United States also alleges that the Town engages in discrimination on the basis of religion in the provision of housing and utility service, ( id. ¶¶ 36-41), and denies access to public facilities on the basis of religion, ( id. ¶¶ 42-50).

The United States alleged three causes of action against the Town in the Underlying Complaint. The first cause of action is for a violation of 42 U.S.C. § 14141 by engaging in a pattern or practice of conduct that deprives persons of rights, privileges or immunities secured or protected by the United States Constitution (the "First Cause of Action"). ( Id. ¶ 55). The second cause of action is for a violation of the Fair Housing Act by discriminating on the basis of religion in the availability and rental of housing and by interfering with or intimidating persons exercising their Fair Housing Rights (the "Second Cause of Action"). ( Id. ¶¶ 58-61). The third cause of action is for a violation of the Civil Rights Act by depriving individuals of equal utilization of a public facility. ( Id. ¶ 63). The Court in the Underlying Lawsuit has dismissed the United States' third cause of action, Doc. 39 in No. CV12-08123-PCT-HRH, and the remaining two causes of action are proceeding to trial, Doc. 618 in No. CV12-08123-PCT-HRH.[1]

Plaintiffs filed the present lawsuit seeking a declaratory judgment that Plaintiffs have no duty to defend or indemnify the Town under the 2009/2010 Policy, 2010/2011 Policy, and 2013/2014 Policy for the counts of the Underlying Complaint. (Doc. 1).

II. Legal Standard

A. Summary Judgment

Summary judgment is appropriate when "the movant 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). "A party asserting that a fact cannot be or is genuinely disputed must support that assertion by... citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits, or declarations, stipulations... admissions, interrogatory answers, or other materials, " or by "showing that materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Id. 56(c)(1)(A), (B). Thus, summary judgment is mandated "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 Corp. v. Catrett, 477 U.S. 317, 322 (1986).

Initially, the movant bears the burden of pointing out to the Court the basis for the motion and the elements of the causes of action upon which the non-movant will be unable to establish a genuine issue of material fact. Id. at 323. The burden then shifts to the non-movant to establish the existence of material fact. Id. The non-movant "must do more than simply show that there is some metaphysical doubt as to the material facts" by "com[ing] forward with specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (quoting Fed.R.Civ.P. 56(e) (1963) (amended 2010)). A dispute about a fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The non-movant's bare assertions, standing alone, are insufficient to create a material issue of fact and defeat a motion for summary judgment. Id. at 247-48. However, in the summary judgment context, the Court construes all disputed facts in the light most favorable to the non-moving party. Ellison v. Robertson, 357 F.3d 1072, 1075 (9th Cir. 2004).

B. Interpretation of Insurance Policies

Under Arizona law, insurance policies, as contracts between insurers and insureds, are construed "to effectuate the parties' intent." Liberty Ins. Underwriters, Inc. v. Weitz Co., LLC, 158 P.3d 209, 212 ¶ 8 (Ariz.Ct.App. 2007). "Insurance policy provisions must be read as a whole, giving meaning to all terms. If the contractual language is clear, [the Court] will afford it its plain and ordinary meaning and apply it as written." Id. (citation omitted). "Generally, the insured bears the burden to establish coverage under an insuring clause, and the insurer bears the burden to establish the applicability of any exclusion." Keggi v. Northbrook Prop. & Cas. Ins. Co., 13 P.3d 785, 788 ¶ 13 (Ariz.Ct.App. 2000).

C. Duties Under an Insurance Policy

"An insurance policy imposes on the insurer the duty to defend the insured against claims potentially covered by the policy and the duty to indemnify the insured for covered claims." Colo. Cas. Ins. Co. v. Safety Control Co., 288 P.3d 764, 769 ¶ 13 (Ariz.Ct.App. 2012).

1. Duty to Defend

The duty to defend "arises at the earliest stages of litigation and generally exists regardless of whether the insured is ultimately found liable." Regal Homes, Inc. v. CNA Ins., 171 P.3d 610, 615 ¶ 19 (Ariz.Ct.App. 2007). "[A]n insurer's duty to defend is determined by the language of the insurance policy." Cal. Cas. Ins. Co. v. State Farm Mut. Auto. Ins. Co., 913 P.2d 505, 508 (Ariz.Ct.App. 1996). "[I]f any claim alleged in the complaint is within the policy's coverage, the insurer has a duty to defend the entire suit, because it is impossible to determine the basis upon which the plaintiff will recover (if any) until the action is completed." Lennar Corp. v. Auto-Owners Ins. Co., 151 P.3d 538, 544 ¶ 15 (Ariz.Ct.App. 2007) (quoting W. Cas. & Sur. Co. v. Int'l Spas of Ariz., Inc., 634 P.2d 3, 6 (Ariz.Ct.App. 1981)). There is no absolute duty to defend, however, when facts alleged in a complaint "ostensibly bring the case within the policy coverage but other facts which are not reflected in the complaint plainly take the case outside the policy coverage." Kepner v. W. Fire Ins. Co., 509 P.2d 222, 224 (Ariz. 1973).

2. Duty to Indemnify

As with the duty to defend, when there is an express contract between the parties, the language of that contract determines the scope of the insurer's duty to indemnify. MT Builders, L.L.C. v. Fisher Roofing, Inc., 197 P.3d 758, 763 ¶ 10 (Ariz.Ct.App. 2008). But unlike the duty to defend, the duty to indemnify "hinges not on the facts" alleged in a lawsuit; instead, it hinges "on the facts (proven, stipulated or otherwise established) that actually create the insured's liability." Colo. Cas., 288 P.3d at 772 ¶ 25; see also INA Ins. Co. of N. Am. v. Valley Forge Ins. Co., 722 P.2d 975, 980 (Ariz.Ct.App. 1986) ("Indemnification against liability applies once liability for a cause of action is established; the indemnitee is not required to make actual payment.").

Thus, the duty to defend is broader than the duty to indemnify because a lawsuit may allege "facts that, if true, would give rise to coverage, even though there would ultimately be no obligation to indemnify if the facts giving rise to coverage were not established." Lennar, 151 P.3d 538, 543-44 ¶ 11; see also Quihuis v. State Farm Mut. Auto. Ins. Co., 334 P.3d 719, 727 ¶ 27 (Ariz. 2014).

III. Analysis

Plaintiffs contend that none of the Policies provide coverage for the claims of the Underlying Lawsuit. (Doc. 44 at 1). This requires the Court to compare the two remaining causes of action in the Underlying Complaint against the coverages provided in the Policies.

A. First Cause of Action

As the court in the Underlying Lawsuit found, (Doc. 45-1 at 80-82), the First Cause of Action states a claim for a violation of 42 U.S.C. § 14141, which addresses an unconstitutional "pattern or practice of conduct by law enforcement officers." 42 U.S.C. § 14141(a); (Doc. 1 Ex. 4 ¶¶ 51-56). The United States also alleges in the Underlying Complaint, in part, that the Town's Marshal's Office arrests non-FLDS individuals "without probable cause on the basis of religion." ( Id. ¶ 31).

1. Public Entity General Liability Protection

The Town contends that the First Cause of Action is covered under the personal injury coverage of the Public Entity General Liability Protection ("PEGL") provided in the 2009/2010 Policy and the 2010/2011 Policy. (Doc. 50 at 10-11). Because the language of the 2009/2010 Policy and the 2010/2011 Policy is identical with respect to PEGL coverage, the Court will refer to them jointly as the "2009-11 Policies" when appropriate.

The personal injury liability coverage of the 2009-11 Policies states that St. Paul will "pay amounts any protected person is legally required to pay as damages for covered personal injury that[] results from your operations; and is caused by a personal injury offense committed while this agreement is in effect." (Doc. 1-1 at 103; Doc. 1-3 at 105). The 2009-11 Policies define a "personal injury offense, " in part, as "[f]alse arrest, detention, or imprisonment;" "[w]rongful entry into, or wrongful eviction from, a room, dwelling, or premises that a person occupies, if such entry or eviction is committed by or for the landlord, lessor, or owner of that room, dwelling, or premises;" and "[i]nvasion of the right to private occupancy of a room, ...

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