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Pekin Insurance Company v. Estate of Krager

United States District Court, D. Arizona

March 6, 2019

Pekin Insurance Company, Plaintiff,
Estate of Harley Krager, et al., Defendants.


          Douglas L. Rayes. United States District Judge

         Before the Court is Plaintiff Pekin Insurance Company's (“Pekin”) motion for summary judgment (Doc. 95), which is fully briefed. Pekin requested oral argument, but after reviewing the parties' briefing and the record, the Court finds oral argument unnecessary. See Fed. R. Civ. P. 78(b); LRCiv. 7.2(f). For the reasons stated below, Pekin's motion is granted.

         I. Legal Standard

         Summary judgment is appropriate when there is no genuine dispute as to any material fact and, viewing those facts in a light most favorable to the nonmoving party, the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). Summary judgment may also 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 trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material if it might affect the outcome of the case, and a dispute is genuine if a reasonable jury could find for the nonmoving party based on the competing evidence. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         The 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, 477 U.S. at 323. The burden then shifts to the non-movant to establish the existence of material factual issues that “can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Anderson, 477 U.S. at 250. The non-movant “must do more than simply show that there is some metaphysical doubt as to the material facts, ” and instead “come 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) (internal quotation and citation omitted). Conclusory allegations, unsupported by factual material, are insufficient to defeat summary judgment. Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). If the non-movant's opposition fails to cite specifically to evidentiary materials, the court is not required to either search the entire record for evidence establishing a genuine issue of material fact or obtain the missing materials. See Carmen v. S.F. Unified Sch. Dist., 237 F.3d 1026, 1028-29 (9th Cir. 2001); Forsberg v. Pac. N.W. Bell Tel. Co., 840 F.2d 1409, 1417-18 (9th Cir. 1988).

         II. Background

         In 2013, Harley and Mary Krager purchased a homeowner's insurance policy (“Policy”) from Pekin. (Docs. 96-5; 96-7.) In doing so, the Kragers completed and signed Pekin's insurance application (“Application”), which included the following acknowledgment: “I have read the above application and I declare to the best of my knowledge and belief all of the foregoing statements are true, and that these statements are offered as an inducement to [Pekin] to issue the policy for which I am applying.” (Doc. 96-7.) The Application asked a series of questions, including whether the Kragers conducted any business out of their home. The Kragers answered that they did not.

         On May 6, 2016, while insured under the Policy, the Kragers' residence was destroyed by a fire. Harley died in the fire. Afterward, Mary submitted a claim to Pekin on behalf of herself and the Krager Revocable Living Trust. As part of its investigation, Pekin hired BrightClaim to do an inventory of the personal property loss at the Krager residence. (Doc. 97-1.)

         BrightClaim's field representative, Clay Olson, met with Mary and her son, Bruce Krager, to conduct an inventory. (Doc. 97-4.) The group substantially completed an inventory of the main floor of the house, which consisted of the living area. According to Olson, Mary and Bruce still needed to “come up with ages and costs of things we weren't able to determine today.” (Id. at 2.) The inventory for the house's lower level, which consisted of the garage and workshop, proved much more complicated. (Id.) Olson noted that “[n]ot only are there incredible amounts of different parts of firearms, but the amount of ammunition, in every size, shape, and color . . . is spread everywhere.” (Id.) Olson added, “[i]t is very easy to see[] that the average person cannot look at this material[] and identify it . . . .” (Id.) As a result, the inventory could not be completed until someone capable of identifying these items was present. (Id.) O n J u ly 5, 2016, BrightClaim emailed Phillip Craft at Pekin, notifying him that the Kragers still had “a number of unfinished, unsigned, inventory sheets” that could not be completed without Bruce. (Doc. 97-6.)

         Based on the large inventory of firearms, ammunition, and specialized machinery on the premises, Pekin elected to investigate the nature of Harley's firearm activities. On June 14, 2016, Pekin sent a letter to Mary requesting that she provide various documents related to Harley's firearms activities. (Doc. 97-5.) More than two months later, Bruce responded via letter, offering some of the requested documents and stating that the remaining documents requested were a “work in progress” and that after he went through Harley's office he would “provide applicable records that survived enough to be legible. . . .” (Doc. 97-7.) Bruce's letter also recognized that the Kragers' “personal property inventories are in progress, but the severity of the fire has made identification of items difficult and time consuming.” (Id.) Bruce promised to “provide inventories as they are completed.” (Id.)

         Subsequently, Pekin sent a letter to Mary's attorney, requesting that she produce the outstanding documents concerning Harley's firearm activities, allow for inspection of fire damaged items, and sit for an Examination Under Oath (“EUO”). (Doc. 97-8.) Pekin requested that Mary comply with its requests by no later than December 14, 2016. (Id.) On December 13, 2016, Mary's attorney responded to Pekin's letter, requesting that the document inspection and EUO“be continued until the end of January 2017, when [Bruce] believes he will have all of the documentation [] requested . . . and the inventory completed.” (Doc. 97-9 at 3.) According to the letter, Bruce still needed 6-8 weeks to complete the inventory. (Id. at 2.)

         On January 17, 2017, Pekin sent another letter to Mary's attorney, requesting an EUO with Bruce, who had “formally succeeded to the [Federal Firearm License (“FFL”)]” of Harley, production of the inventories and specific documents related to Harley's firearms activities, and inspection of fire damaged items. (Doc. 97-10.) The letter proposed that production of documents occur no later than February 1, 2017, and the EUO by no later than February 3, 2017. (Id.) On February 3, 2017, Mary and Bruce sat for EUOs with Pekin. (Doc. 98-2.) Thereafter, Pekin sent transcripts of the EOUs to be signed by Mary and Bruce, requesting a response by no later than March 8, 2017. (Doc. 98-3.)

         On March 1, 2017, Pekin received a letter from Mary's attorney demanding a coverage decision by no later than March 17, 2017. (Doc. 98-4.) Pekin requested an extension to March 31 and reminded Mary and Bruce that they still needed to submit signature pages for the EUOs. (Doc. 98-5.) On April 5, 2017, Pekin notified Mary that it intended “to deny the claim and to seek Declaratory Relief . . . .” (Doc. 98-7.)

         On April 10, 2017, Pekin filed this action, asserting that it is entitled to rescind the Policy because the Kragers materially misrepresented their business activities in the home and, alternatively, that Defendants are estopped from denying that the Kragers conducted business out of their home. For relief, Pekin seeks a declaratory judgment that the Policy has been rescinded and therefore Pekin need not cover the loss. (Doc. 1.) Defendants the Estate of Harley Krager, the Krager Revocable Living Trust, and Mary filed counter-claims for breach of contract and bad faith, arguing that coverage exists, Pekin breached the Policy by denying coverage, ...

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