United States District Court, D. Arizona
Kristen Ruppert, Brian Heider, and Henry Lynn Massey, Plaintiffs,
Markel American Insurance Company, Defendant.
HONORABLE SUSAN M. BRNOVICH, UNITED STATES DISTRICT JUDGE
before the Court is Plaintiffs' Motion For Leave To File
An Amended Complaint and Join Parties To Action. (Doc. 44,
“Mot.”). Plaintiffs seek leave to amend the
complaint to add William and Margaret West (the
“Wests”) as plaintiffs and to add Markel Service,
Incorporated and Markel Corporation as defendants. Defendant
Markel American Insurance Company filed an objection, (Doc.
50, “Resp.”), and Plaintiffs filed a Reply, (Doc.
Complaint was filed on April 5, 2018. (Doc. 1). The claims
arise from the denial of insurance claims made after John
Ruppert was electrocuted on a houseboat on June 9, 2016.
Plaintiffs brought suit against Zephyr Houseboat, L.L.C.
(“Zephyr”), Lake-Time, L.L.C.
(“Lake-Time”), Houseboat Management Services,
Inc. (“HMSI”), and the Wests in the underlying
suit. Defendant disclaimed coverage for Plaintiffs in that
lawsuit. Following the disclaimer, Plaintiffs entered into a
Damron agreement with the defendants in which those
defendants stipulated to a judgment and assigned to
Plaintiffs all claims against Markel American Insurance
Company (“Markel American”) arising out of the
incident. This suit was filed alleging breach of contract and
Wests are the only members, officers, or shareholders of
Zephyr, Lake-Time, and HMSI. The Wests are not insureds under
the policy but obtained the insurance on behalf of Zephyr,
Lake-Time, and HMSI. That insurance was provided by Markel
American. Markel American is a wholly owned subsidiary of
Markel Corporation (“Markel Corp.”). Markel
Service, Incorporated (“Markel Service”) is a
wholly owned subsidiary of Markel Corp.
August 8, 2018, the Court issued its Rule 16 scheduling
order, which set the deadline for joining parties and
amending pleadings at 60 days from the date of the order.
(Doc. 20). This deadline was extended twice, without
objection, and the current deadline for joining parties and
amending pleadings is March 29, 2019. (Doc. 36).
for amendments made “of course” or pursuant to
stipulation, leave of court is required to amend a pleading.
Fed.R.Civ.P. 15(a). “The court should freely give leave
when justice so requires.” Id. “[R]ule
15's policy of favoring amendments to pleadings should be
applied with extreme liberality.” DCD Programs,
Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987)
(quotation marks and citation omitted). The underlying
purpose and policy of Rule 15 is “to facilitate
decision on the merits, rather than on the pleadings or
technicalities.” Nunes v. Ashcroft, 375 F.3d
805, 808 (9th Cir. 2004) (citation omitted). The Court must
consider the following five factors when deciding whether to
grant a motion to amend: (1) bad faith; (2) undue delay; (3)
prejudice to the opposing party; (4) futility of amendment;
and (5) whether the movant has previously amended its
complaint. Id. Not all of the factors are given the
same weight, and the Ninth Circuit gives the greatest weight
when considering any prejudice to the opposing party.
Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d
1048, 1052 (9th Cir. 2003). “Absent prejudice, or a
strong showing of any of the remaining . . . factors, there
exists a presumption under Rule 15(a) in favor of
granting leave to amend.” Id. (citation
omitted) (emphasis in original). The Ninth Circuit has stated
that “[f]utility of amendment can, by itself, justify
the denial of a motion for leave to amend.” Bonin
v. Calderon, 59 F.3d 815, 845 (9th Cir. 1995).
“However, denial on [the ground of futility] is rare
and courts generally defer consideration of challenges to the
merits of a proposed amended pleading until after leave to
amend is granted and the amended pleading is filed.”
Duhn Oil Tool, Inc. v. Cooper Cameron Corp., No.
CV-F-05-1411 OWW/GSA, 2010 WL 596312, at *14 (E.D. Cal. Feb.
16, 2010). “[A] proposed amendment is futile only if no
set of facts can be proved under the amendment to the
pleadings that would constitute a valid and sufficient claim
or defense.” Miller v. Rykoff-Sexton, Inc.,
845 F.2d 209, 214 (9th Cir. 1988), overruled on other
grounds by Ashcroft v. Iqbal, 556 U.S. 662 (2009).
“The power to grant leave to amend . . . is entrusted
to the discretion of the district court, which determines the
propriety of a motion to amend by ascertaining the presence
of any of [the] factors.” Serra v. Lappin, 600
F.3d 1191, 1200 (9th Cir. 2010) (internal quotation marks and
citation omitted). “Generally, this determination
should be performed with all inferences in favor of granting
the motion.” Griggs v. Pace Am. Grp., Inc.,
170 F.3d 877, 880 (9th Cir. 1999).
opposes the proposed amendments arguing that they are futile.
(Resp. at 3). Defendant argues that the Wests are not a party
to the insurance contract and so they lack any basis on which
to sue. (Resp. at 4). Defendant argues that Markel Corp. and
Markel Service should not be added as defendants because
neither of those entities are insurance companies and lack
privity of contract with Plaintiffs. (Resp. at 5). Defendant
further claims that Plaintiffs cannot support the alter-ego
is no allegation in the proposed amended complaint that the
Wests are insured or were party to the insurance contract.
The only allegation is that they were principles in the
companies that were insured. Generally, there must be privity
of contract before one may seek to enforce or defeat the
contract. Samsel v. Allstate Ins. Co., 19 P.3d 621,
625 (Ariz.Ct.App. 2001) (citation omitted), vacated on
other grounds by Samsel v. Allstate Ins. Co.,
59 P.3d 281 (Ariz. 2002). However, as Plaintiffs points out,
a third-party beneficiary may be able to sue to enforce a
contract. Id.; see also Araiza v. U.S. West Bus.
Res., Inc., 904 P.2d 1272, 1278 (Ariz.Ct.App. 1995).
“Whether one is a third-party beneficiary presents a
question of law for the court.” Samsel, 19
P.3d at 625.
argue that the Wests are the intended beneficiaries of the
insurance policy and thus are proper plaintiffs. (Reply at
2). That alone is not enough. Under Arizona law, in order for
a person to recover as a third-party beneficiary under a
contract, the contract itself must indicate an intention to
benefit that person. Norton v. First Fed. Sav., 624
P.2d 854, 856 (Ariz. 1981). “The contemplated benefit
must be both intentional and direct . . ., and ‘it must
definitely appear that the parties intend to recognize the
third party as the primary party in interest.'”
Id. (quoting Irwin v. Murphey, 302 P.2d
534, 538 (Ariz. 1956)). The Wests provide no explanation as
to why they should be considered third-party beneficiaries
other than because they own the companies that were insured.
A conclusory allegation is insufficient. However, leave to
amend will be granted.
Markel Corporation ...