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Fall v. First Mercury Insurance Co.

United States District Court, D. Arizona

December 2, 2016

Ibrahima Fall, Plaintiff,
First Mercury Insurance Company, Defendant.


          David G. Campbell United States District Judge.

         Plaintiff Ibrahima Fall filed this breach of contract action against Defendant First Mercury Insurance Company, alleging that First Mercury improperly refused to defend Gin-Cor, LLC (“Gin-Cor, ” or the “Insured”) in the underlying tort action, Fall v. Gin-Cor, LLC d/b/a/ Myst Nightclub, et. al., Maricopa County Superior Court No. CV2012-OI2552. Doc. 1-1. The parties have filed cross-motions for summary judgment. Docs. 11, 20. The request for oral argument is denied because the issues are fully briefed (Docs. 12-19, 20-22, 26-28) and oral argument will not aid the Court's decision. See Fed. R. Civ. P. 78(b); Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998). For the reasons that follow, the Court will deny both parties' motions.

         I. Background.

         A. The Underlying Incident.

         On April 28, 2012, Plaintiff was “a business invitee and guest” of Gin-Cor's nightclub. Doc. 12, ¶ 1; Doc. 22 at 1-2. Around 1:55 a.m., after speaking with a female patron of the nightclub, Plaintiff was approached by a nightclub bouncer and informed that the female patron was the bouncer's girlfriend. Doc. 12, ¶ 4. Before Plaintiff could respond, “multiple additional men who . . . were also security officers/bouncers and employed by [Gin-Cor], then attacked, assaulted, and violently hit the Plaintiff by punching him, kicking and stomping on him, and ultimately, dragging him out of the nightclub and dumping him on the sidewalk.” Id., ¶ 6. Police investigated the incident, but no charges were filed because “it was not obvious that there was excessive force used by the bouncers of the nightclub in removing [Plaintiff][.]” Id., ¶ 7.

         Plaintiff was taken to a hospital by ambulance and an imaging study revealed a “comminuted fracture through the lateral tibial plateau, with slight depression of the fracture fragments and slight impaction in this area.” Id., ¶ 9. On May 2, 2012, Plaintiff underwent surgery to correct the fracture. Id., ¶ 11. Plaintiff alleges that he “incurred $38, 829.01 in medical bills as a result of his injuries, and further suffered lost wages of approximately $11, 000, for a total of $49, 829.01 in special damages.” Id., ¶ 13.

         B. The Underlying Litigation and Damron Agreement.

         On September 10, 2012, Plaintiff filed a complaint against Gin-Cor. Plaintiff amended the complaint three days later. Id., ¶ 15. Plaintiff alleged five claims: “(1) Assault; (2) Battery; (3) Negligence - Failure to Train; (4) Negligence - Unsafe Condition/Failure to Supervise; (5) Punitive Damages.” Id., ¶ 16. After being served, Gin-Cor attempted to tender the defense of all claims to First Mercury. Id., ¶ 20. Gin-Cor believed it was insured by First Mercury through commercial general liability policy number EPCA000805 with liability limits of $1, 000, 000 per occurrence and $2, 000, 000 in the aggregate for the policy period from June 27, 2011 to June 27, 2012 (the “Policy”). Id., ¶ 19. On December 20, 2012, First Mercury issued a letter denying any duty to defend or indemnify Gin-Cor for the claims asserted by Plaintiff. Id., ¶ 20; Doc. 19 at 7 (“Exhibit J”). First Mercury denied coverage based on exclusions in the Policy for “Expected or Intended Injury, ” “Assault & Battery, ” and “Punitive Damages.” Doc. 12, ¶ 21.

         On August 22, 2013, Gin-Cor answered the amended complaint. Doc. 15 at 10 (Exhibit H - Gin-Cor's answer is dated August 22, 2013). But see Doc. 12, ¶ 17 (“The nightclub answered the amended complaint on August 22, 2012.”). Gin-Cor denied liability, but admitted that: “(1) it owed Plaintiff a duty of reasonable care by adequately training its employees in proper security measures; and (2) it owed a duty of reasonable care to maintain a safe environment for all of its business invitees.” Doc. 12, ¶ 18. On July 30, 2014, Plaintiff and Gin-Cor stipulated to a judgment against Gin-Cor for $250, 000. Id., ¶ 23. Gin-Cor assigned its rights under the Policy to Plaintiff, Plaintiff covenanted to not execute the judgment against Gin-Cor, and Plaintiff retained the right to seek collection of the judgment from First Mercury under the Policy. Id., ¶¶ 21-23. This type of agreement is known in Arizona as a Damron agreement. See Damron v. Sledge, 460 P.2d 997 (Ariz. 1969); see also Parking Concepts, Inc. v. Tenney, 83 P.3d 19, 20 & n.1 (Ariz. 2004).

         On December 11, 2015, Plaintiff filed this action against First Mercury, alleging breach of contract and bad faith. Doc. 1-1, ¶¶ 22-31. Plaintiff now moves for partial summary judgment on his breach of contract claims. Doc. 11. First Mercury has filed a response and cross-motion for summary judgment on all of Plaintiff's claims, arguing that the underlying action is not covered under the Policy and Plaintiff's bad faith claim is time-barred. Doc. 20.

         II. Legal Standards.

         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).

         No party contests that Arizona law applies to this case. Under Arizona law, insurance contracts are interpreted according to their plain and ordinary meaning. Keggi v. Northbrook Prop. & Cas. Ins. Co., 13 P.3d 785, 788 (Ariz.Ct.App. 2000). “If a clause is susceptible to different constructions, [a court will attempt] to discern the meaning of the clause ‘by examining the purpose of the exclusion in question, the public policy considerations involved and the transaction as a whole.'” State Farm Mut. Auto. Ins. Co. v. Connolly, 132 P.3d 1197, 1198 (Ariz.Ct.App. 2006) (quoting Ohio Cas. Ins. Co. v. Henderson, 939 P.2d 1337, 1339 (Ariz. 1997)). “If all else fails, and the clause remains ambiguous, the insurance policy will be construed to provide coverage.” Id. “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, 13 P.3d at 788.

         III. Analysis.

         Plaintiff argues that he is entitled to partial summary judgment “because the claims for negligence asserted in the amended complaint triggered First Mercury's duty to defend its insured, but First Mercury wrongfully breached that duty.” Doc. 11 at 7. First Mercury denies that it had any duty to defend Gin-Cor because (1) the Policy's assault and battery exclusion precludes coverage for all claims asserted by Plaintiff in the underlying action, including ...

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