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Prescott Lakes Community Association Incorporated v. Auto-Owners Insurance Co.

United States District Court, D. Arizona

December 16, 2015

Prescott Lakes Community Association Incorporated, Plaintiff,
v.
Auto-Owners Insurance Company, et al., Defendants.

ORDER

JOHN J. TUCHI, District Judge.

At issue is Defendant Auto-Owners Insurance Company's ("Auto-Owners") Motion for Summary Judgment Regarding Morris Agreement (Doc. 40, Mot.), to which Plaintiff Prescott Lakes Community Association, Inc. (the "Association") filed a Response (Doc. 48, Resp.), and Auto-Owners filed a Reply (Doc. 51, Reply). The Court finds these matters appropriate for decision without oral argument. See LRCiv 7.2(f). For the reasons that follow, the Court grants in part and denies in part Defendant Auto-Owners' Motion for Summary Judgment as to the validity of the Settlement Agreement and Stipulated Judgment.

I. BACKGROUND

The following facts are undisputed unless otherwise noted. The insurance dispute at issue arises out of claims asserted in an underlying construction defect lawsuit. See Prescott Lakes Cmty. Assoc., Inc. v. Canavast Builders, Inc. et al., No. CV2011-01685 (the "underlying lawsuit"). The underlying lawsuit involved construction of Willow Park Estates - 23 duplex buildings with 26 single family units - at Prescott Lakes Community. Willow Park Estates was built from 2004 to 2006, and in 2011, the Prescott Lakes Community Association filed the underlying lawsuit naming the following entities as defendants and alleging that they were involved in the development and sale of the property: Canavest Builders, Inc.; Canavest Development, LLC; Canavest Development II, LLC; The Canavest Group; and Willow Park/Canavest, LLLP. The Association alleges construction defects related to the property and claimed damages of $2, 045, 136.74 for the cost to repair all defects and $245, 834.10 for interim repair costs. The Association also claims expert and attorney fees and costs, which it alleges are still accruing.

Auto-Owners issued an insurance policy to The Canavast Group and related entities that was effective August 1, 2004 through August 1, 2010. Canavest Development, LLC, Canavest Development II, LLC, and WPE/Canavest, LLLP were named insured on the policy from August 1, 2004 through August 1, 2006. In the underlying lawsuit, Auto-Owners provided a defense to its insured. It first reserved all of its rights in a 2012 reservation of rights letter; then on June 3, 2013, it issued an updated reservation of rights letter; and then on May 21, 2014, it issued another updated reservation of rights letter (the " Munzer letter").

Auto-Owners maintains that in the 2014 Munzer letter, it withdrew its reservation of rights with respect to certain claims and maintained its reservation as to the remaining claims. The Munzer letter included a section entitled "Withdrawal of Reservation of Rights as to Certain Claims, " and, below that heading, a list of damages/repairs for which Auto-Owners maintains it specifically withdrew its reservation of rights. The Association objects to Auto-Owners' assertion and maintains that Auto-Owners did not specifically withdraw its reservation as to certain damages/repairs because the letter did not identify specific claims or amounts.

On September 24, 2014, the Association and the insureds/defendants in the underlying case entered into a Morris agreement under which the parties settled the claims and the Association obtained an assignment of all claims against Auto-Owners. Under the Morris agreement, the parties entered into a stipulated judgment against Canavest Builders, Inc.; Canavest Development, LLC; Canavest Development II, LLC; The Canavest Group; and Willow Park/Canavest, LLLP for $2.5 million, and a judgment in the underlying case was entered on October 10, 2014.[1] The Association covenanted not to execute against the insureds/defendants in the underlying case. The judgment only provides one lump sum amount against all defendants. The Association alleges that the Morris agreement is valid and reasonable and that the sum set forth in the stipulated judgment is covered under the Auto-Owners' policies.

In its Controverting Statement of Facts, the Association states that, through Canavest's attorneys, it provided Auto-Owners with the following: Prescott Lakes/Willow Park Estate Association's Interim Repair Chart dated March 3, 2014; Nautilus General Contractors' Preliminary Estimate of Costs Willow Park Estates dated May 5, 2014; and Nautilus Building Consultants, Inc.'s Report of Findings for Willow Park Estates dated May 5, 2014.

In its Controverting Statement of Facts, the Association also sets forth the groups of interim repair invoices as listed in Auto-Owners' Munzer letter and states what the Association "guessed" Auto-Owners was referring to. The Association alleges that Auto-Owners did not set forth a specific sum for which it would indemnify Canavest regarding the repair invoices and that the repairs as Auto-Owners listed them excluded additional services and repairs listed in the original invoices. Auto-Owners further alleges that the original invoices did not itemize costs for individual repairs, but only listed one lump sum. The Court now resolves Auto-Owners' Motion for Summary Judgment regarding the Morris agreement.

II. LEGAL STANDARDS

A. Summary Judgment

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate when: (1) the movant shows that there is no genuine dispute as to any material fact; and (2) after viewing the evidence most favorably to the non-moving party, the movant is entitled to prevail as a matter of law. Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir. 1987). Under this standard, "[o]nly disputes over facts that might affect the outcome of the suit under governing [substantive] law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A "genuine issue" of material fact arises only "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Id.

In considering a motion for summary judgment, the court must regard as true the non-moving party's evidence if it is supported by affidavits or other evidentiary material. Celotex, 477 U.S. at 324; Eisenberg, 815 F.2d at 1289. The non-moving party may not merely rest on its pleadings; it must produce some significant probative evidence tending to contradict the moving party's allegations, thereby creating a question of material fact. Anderson, 477 U.S. at 256-57 (holding that the plaintiff must present affirmative evidence in order to defeat a properly supported motion for summary judgment); First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 289 (1968).

"A summary judgment motion cannot be defeated by relying solely on conclusory allegations unsupported by factual data." Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). "Summary judgment must be entered 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 ...


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