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Racquet Club at Scottsdale Ranch Condominium Association Inc. v. Philadelphia Indemnity Insurance Co.

United States District Court, D. Arizona

January 22, 2019

The Racquet Club at Scottsdale Ranch Condominium Association, Inc., Plaintiff,
Philadelphia Indemnity Insurance Company, Defendant.



         This case involves an insurance coverage dispute stemming from a 2010 hail storm in the metro-Phoenix area. Plaintiff Racquet Club at Scottsdale Ranch asserts breach of contract and bad faith claims against Defendant Philadelphia Indemnity Insurance Company. Defendant has filed a motion for summary judgment. Doc. 49. The motion is fully briefed (Docs. 51, 54), and oral argument will not aid the Court's decision. See Fed. R. Civ. P. 78(b); LRCiv 7.2(f). For reasons stated below, the motion will be granted in part and denied in part.

         I. Background.

         The following facts are not disputed for purposes of summary judgment. See Docs. 50, 53. Plaintiff operates a condominium complex in Scottsdale, Arizona. The property spans nearly forty acres and has seventy buildings within five subdivisions: Hampton Courts, Casitas, Townhomes, Hammocks, and Villas. On October 5, 2010, a hail storm caused damage to the property. Defendant had issued a commercial insurance policy to Plaintiff that covered physical damage caused by hail.

         Precision Roofing maintained the property at the time of the storm and for several years thereafter, but never alerted Plaintiff to the presence of hail damage. Plaintiff began working with Paramount Roofing in early 2015. Paramount found hail damage to two buildings in the Villas and apprised Plaintiff of the damage in February 2015.

         Plaintiff notified Defendant of the hail damage on June 30, 2015. Defendant sent its adjuster, Engle Martin & Associates, to inspect the property one week later. Defendant's roofing expert, Roof Technical Services, inspected the property in late August. Engle Martin issued a report in September that found a net loss of $2, 390.15 ($10, 361.89 total loss less depreciation and the $5, 000 deductible). Defendant paid this amount four days later.

         Plaintiff was sent a proof of loss form to sign on October 23, 2015. One month later, Defendant closed the file because it had not received a signed proof of loss.

         In February 2016, Plaintiff retained Pride Adjusters to inspect the property and represent Plaintiff on the claim. Defendant reopened the file in March and sent Pride a letter with Defendant's damages estimate and a request for Pride's competing estimate. Pride submitted its report five months later, estimating a loss of nearly $4 million. Defendant rejected this estimate in early September 2016.

         The parties agreed to joint inspections of the property, several of which occurred over the next two months. Core Consulting Group inspected the property on behalf of Defendant. Core issued a report on January 18, 2017, estimating the total cost of repairs to be $13, 971.47. Defendant paid Plaintiff $6, 351.32 on February 8, 2017.

         Plaintiff filed suit two months later. Doc. 1. Plaintiff asserts breach of contract and bad faith claims, and seeks both compensatory and punitive damages. Id. ¶¶ 46-72. Defendant moves for summary judgment on each claim and the request for punitive damages. Doc. 49. With respect to the breach of contract claim, Defendant contends that coverage is precluded because Plaintiff breached the policy by waiting nearly five years after the storm to notify Defendant of the loss, and the delay prejudiced Defendant. Id. at 8-13. Defendant further contends that the evidence does not support a finding of bad faith or an award of punitive damages. Id. at 13-16.

         II. Summary Judgment Standard.

         A party seeking summary judgment “bears the initial responsibility of informing the 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 moving 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.

         The evidence must be viewed in the light most favorable to the nonmoving party, and all justifiable inferences are drawn in that party's favor. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). “Credibility determinations, the weighing of evidence, and the drawing of inferences from the facts are jury functions.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). To avoid summary judgment, the factual dispute must be genuine - that is, the evidence must be sufficient for a reasonable jury to return a verdict for the nonmoving party. Id. at 248.

         III. Discussion.

         A. Notice of Loss.

         Under Arizona law, an insurer is not contractually obligated to provide coverage where (1) the insured breached the policy by failing to provide timely notice of a loss, and (2) the delay prejudiced the insurer. See Lindus v. N. Ins. Co. of N.Y., 438 P.2d 311, 315 (Ariz. 1968); Globe Indem. v. Blomfield, 562 P.2d 1372, 1374 (Ariz.Ct.App. 1977); Liberty Mut. Fire Ins. v. Mandile, 963 P.2d 295 (Ariz.Ct.App. 1997); Salerno v. Atl. Mut. Ins., 6 P.3d 758, 764 (Ariz.Ct.App. 2000). The insurer has the burden of proving both the breach and resulting prejudice. See Lindus, 438 P.2d at 315 (“[T]he burden of proving prejudice is on the insurance company.”); Carpenter v. Super. Ct., 422 P.2d 129, 132 (Ariz. 1966) (“The insurer has the burden of proving the insured's breach . . . in order to ...

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