McGee v. Zurich American Insurance Co.

          ORDER

          DAVID G. CAMPBELL, SENIOR UNITED STATES DISTRICT JUDGE

         Plaintiff James McGee sued Defendant Zurich American Insurance Company for breach of contract and bad faith, alleging that Defendant improperly refused to defend Elizabeth Foutz in an underlying tort action brought against her by Plaintiff. Defendant has filed a motion for summary judgment. Doc. 49. The motion is fully briefed (Docs. 51, 56), and oral argument will not aid in the Court's decision. See Fed R. Civ. P. 78(b). For the following reasons, the Court will grant the motion.

         I. Background.

         Defendant issued a general insurance policy to Underwood Bros, Inc., doing business as AAA Landscape (hereinafter “AAA”). Doc. 52 at ¶ 60. The Policy provides business auto liability coverage for bodily injury or property damages caused by an accident “resulting from the ownership or maintenance of a covered auto.” Id. at ¶ 61. The Policy defines “insured” as “[a]nyone . . . using with your permission a covered ‘auto' you own.” Doc. 52 at ¶ 64.

         In September 2012, AAA assigned a company vehicle to its employee Elizabeth Foutz. Doc. 52 at ¶ 47. Foutz signed AAA's Driver Policy and Agreement (“the Agreement”), which allows authorized employees to drive a company vehicle subject to certain terms and conditions. Id. The Agreement states that employees are responsible for the “safe and legal transportation of the vehicle.” Doc. 50 at ¶ 2. It also requires drivers to “abide by all laws.” Doc. 52 at ¶ 43.

         On January 16, 2015, Foutz was involved in a car accident with Plaintiff. Doc. 52 at ¶¶ 1-10. Plaintiff was found at fault for the accident because he did not stop at a stop sign (Doc. 50 at ¶ 4), and Foutz was cited for driving while intoxicated. Doc. 52 at ¶ 10. She eventually pled guilty to driving while under extreme intoxication. Id. On August 17, 2016, Plaintiff sued Foutz for personal injury, and Defendant was asked to evaluate whether it had a duty to defend Foutz under AAA's business auto coverage policy. Doc. 50 at ¶ 6.

         After learning that Foutz was driving while intoxicated, Defendant requested an internal coverage opinion and the matter was referred to Defendant's coverage counsel. Counsel requested additional investigation into whether Foutz had her own vehicle, whether she signed the Agreement, whether AAA's employees regularly violated the Agreement, and whether AAA overlooked such violations. Doc. 50 at ¶¶ 9-12. Defendant presented these questions to George McNeely (“McNeely”), AAA's Human Resources Manager. Doc. 50 at ¶ 13-14. McNeely responded that Foutz signed the Agreement, that AAA disciplined her for violating company policy while using her vehicle, and that Foutz was the only employee who used her AAA vehicle while intoxicated. Doc. 50 at ¶¶ 15, 32-33, 36.

         After receiving McNeely's responses, Defendant concluded that Foutz did not qualify as an insured under the Policy because she exceeded any permissible use by driving while intoxicated. Doc. 50 at ¶ 16-17. Foutz and Plaintiff then entered into an agreement in which Foutz assigned her rights against Defendant to Plaintiff, the parties stipulated to a $5 million judgment, and Plaintiff agreed not to execute the judgment against Foutz. Id. at ¶ 18. Plaintiff then filed this suit against Defendant, seeking to recover the $5 million judgment and asserting the assigned claims for breach of contract and bad faith. Doc. 1-1.

         Remarkably, Plaintiff's response to the summary judgment motion emphasizes that he, not Foutz, caused the underlying accident. Doc. 51 at 2. For example, Plaintiff admits that “[s]everal witnesses confirmed McGee had pulled directly into Foutz's path and ‘she had no time to stop, '” that “McGee ran a stop sign and appeared right in front of Foutz, ” and that “Foutz could not have avoided the crash, even if sober.” Id. at 2, 13 (citation omitted). Citing case law, Plaintiff further asserts that “a driver like [Foutz] - confronted by a sudden emergency - is only liable if she acts unreasonably, ” and “Foutz had no chance to act unreasonably.” Id. at 13. He further maintains that “driving under the influence of alcohol, in and of itself, is not a tort.” Id. He states with emphasis that “Foutz was not at fault” and “drove safely.” Id. at 15 (emphasis in original).

         Plaintiff never explains why, if these admissions are true, he sued Foutz for causing the accident. He concedes that he had no valid claim against her. Plaintiff presumably views his sole responsibility for the accident as irrelevant now that he has trained his aim on Defendant and its alleged insurance bad faith toward Foutz. But the Court cannot help observing that the purpose of Arizona's insurance-claim assignment law is, at least in part, to make whole an underlying meritorious plaintiff who was denied recovery because the underlying defendant could not pay a judgment and her insurer wrongfully denied coverage. It assuredly is not to permit a plaintiff who has no valid claim to file a lawsuit and create an insurance coverage dispute from which he might profit. In light of the concessions Plaintiff makes in his summary judgment brief, the Court views this case as a misuse of Arizona law. The Court nonetheless will address the summary judgment motion without regard to the admitted lack of merit in Plaintiff's underlying claim.

         II. Summary Judgment Standard.

         Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, shows “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 Corp. v. Catrett, 477 U.S. 317, 322 (1986). Only disputes over facts that might affect the outcome of the suit will preclude 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).

         III. Discussion.

         A. ...