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Madison Alley Transportation & Logistics Inc. v. Western Truck Insurance Co.

United States District Court, D. Arizona

July 10, 2019

Madison Alley Transportation & Logistics Incorporated, Plaintiff,
Western Truck Insurance Company, et al., Defendants.


          Honorable Susan M. Brnovich, United States District Judge

         At issue is Defendants Western Truck Insurance Company (“Western Truck”) and Robert Dion's (“Mr. Dion”) (collectively, “Defendants”) Motion for Summary Judgment (Doc. 73, “Mot.”). Defendants also submitted a Statement of Facts. (Doc. 74, “DSOF”). Plaintiff Madison Alley Transportation and Logistics Inc. (“Madison Alley” or “Plaintiff”) submitted a Response to the Motion (Doc. 80, “Resp.”), along with a Separate Statement of Facts (Doc. 81, “PSOF”) and a Controverting Statement of Facts (Doc. 82, “CSOF”). Defendants submitted a Reply to Plaintiff's Response. (Doc. 83, “Reply”). Plaintiff alleges Defendants did not properly broker insurance for its warehouse in Phoenix. Plaintiff alleges five claims: (1) Negligence/Insurance Producer Malpractice; (2) Breach of Contract; (3) Breach of the Covenant of Good Faith and Fair Dealing; (4) Negligent Training and Supervision; and (5) Reasonable Expectations. For the reasons that follow, the Court will grant summary judgment on the counts arising out of contract-counts one, three, and five-but deny summary judgment on the tort claims-counts one and four.

         I. Background

         Plaintiff operates a business that stores and delivers goods for large retail merchants. (PSOF ¶ 2). Mindi Peters (“Ms. Peters”) has an ownership interest in Madison Alley, and Jeff Owen (“Mr. Owen”) runs the day-to-day operations. (PSOF ¶¶ 3-4). In June 2015, Plaintiff moved its warehouse operations from New York to Phoenix, Arizona. (PSOF ¶ 5). As part of the move, Plaintiff agreed to a lease for an 8, 329 square foot warehouse for $5, 247.27 per month. (PSOF ¶¶ 6-7). The lease required Plaintiff to obtain insurance for the property. (PSOF ¶ 8). The dispute that brings this case to the Court is whether Defendants procured insurance as requested by Plaintiff.

         In early June 2016, a sublessee of Plaintiff caused a flood in the warehouse. (PSOF ¶¶ 76-78). The flood damaged Madison Alley's business property along with Ms. Peters' and Mr. Owen's personal property and stopped Madison Alley from operating for about five months. (PSOF ¶¶ 79, 81-85). For damages from the flood, Madison Alley entered into a settlement with its sublessee's insurer for $456, 000.

         Prior to the flood, Plaintiff contends Mr. Owen instructed Defendants to procure a policy that complied with the requirements of the lease. (PSOF ¶¶ 8-9). Among other things, the lease required $2.5 million in general liability coverage and insurance for “the loss of the full rental . . . for one year.” (DSOF ¶ 13; PSOF ¶¶ 8-11; CSOF ¶ 13). Defendants procured a policy with $3 million in general liability coverage and $20, 000 in business income coverage. (DSOF ¶ 5). These coverage amounts represented annual limits, but Mr. Owen alleges he interpreted the $20, 000 as weekly coverage based on a conversation he had with Mr. Dion. (PSOF ¶ 22). In that alleged conversation, Mr. Dion told Mr. Owen that business income insurance was calculated “by the week, ” and Mr. Owen told Mr. Dion that Madison Alley generates at least $20, 000 in revenue per week. (Id.).

         Plaintiff also believes Defendants failed to procure adequate insurance because they did not disclose material terms of the policy, including a coinsurance provision for business income coverage and a “business income agreed value clause.” (PSOF ¶¶ 11, 53-54). The business income agreed value clause required a financial worksheet to determine total exposure to the insured. (PSOF ¶¶ 54, 58). The landlord also required a business income worksheet that Mr. Owen forwarded to Mr. Dion, but Mr. Dion did not complete. (PSOF ¶¶ 55-58). Furthermore, the $20, 000 business income coverage would not cover a full year's rental as required by the lease. (PSOF ¶ 9). Plaintiff also alleges it could not have learned of the policy's deficiencies until after the accident, because Defendants sent a copy of the policy to the wrong address. (PSOF ¶¶ 62-63).

         Defendants argue that in the context of Plaintiff's request for insurance, Plaintiff only instructed Mr. Dion to find the cheapest amount of business interruption coverage that would satisfy Madison Alley's landlord and the policy clearly shows that Madison Alley was paying annual premiums for annual coverage limits. (DSOF ¶¶ 12, 14). In Defendants' view, the landlord let Madison Alley move into the warehouse, so they sufficiently performed to the standard of care. (DSOF ¶ 4). They also argue they have no obligation to advise insureds about the appropriateness of their coverage, (Mot. at 10), and Mr. Dion did not agree to fill out the financial worksheets nor could he have because he did not have the required expertise and Madison Alley had not be operating long enough to have the required information, (DSOF ¶¶ 27-28, 34-35).

         II. Legal Standard

         Summary judgment is appropriate when “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). A material fact is any factual issue that might affect the outcome of the case under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a fact is “genuine” if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Id. “A party asserting that a fact cannot be or is genuinely disputed must support the assertion by . . . citing to particular parts of materials in the record” or by “showing that materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Fed.R.Civ.P. 56(c)(1)(A), (B). The court need only consider the cited materials, but it may also consider any other materials in the record. Id. 56(c)(3). 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). Initially, the movant bears the burden of demonstrating to the Court the basis for the motion and “identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact.” Id. at 323. If the movant fails to carry its initial burden, the nonmovant need not produce anything. Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03 (9th Cir. 2000). If the movant meets its initial responsibility, the burden then shifts to the nonmovant to establish the existence of a genuine issue of material fact. Id. at 1103. The nonmovant need not establish a material issue of fact conclusively in its favor, but it “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The nonmovant's bare assertions, standing alone, are insufficient to create a material issue of fact and defeat a motion for summary judgment. Liberty Lobby, 477 U.S. at 247-48. “If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Id. at 249-50 (citations omitted). However, in the summary judgment context, the Court believes the nonmovant's evidence, id. at 255, and construes all disputed facts in the light most favorable to the nonmoving party, Ellison v. Robertson, 357 F.3d 1072, 1075 (9th Cir. 2004). If “the evidence yields conflicting inferences [regarding material facts], summary judgment is improper, and the action must proceed to trial.” O'Connor v. Boeing N. Am., Inc., 311 F.3d 1139, 1150 (9th Cir. 2002).

         III. Analysis

         1. Plaintiff's Contract Claims

         Defendants assert, and the Court agrees, that they cannot be liable for breach of contract (Count 2), breach of the covenant of good faith and fair dealing (Count 3), or reasonable expectations (Count 5) because there is no contract between Defendants and Plaintiff. Further, if there is a contract, the claim still sounds in tort rather than contract because Defendants were hired to provide professional services. At oral argument, Plaintiff said the contract was partially verbal and partially written, but admitted the contract claims were brought as an “alternative theory.” Plaintiff specifically points to a June 9, 2015, letter sent by Defendants that promised “[i]nsurance marketing services, administration of policies, support services to you regarding this insurance, and other risk management consultation.” (PSOF ¶ 25) (emphasis added by Plaintiff). The Court agrees with Defendants.

         A contract requires “an offer, an acceptance, consideration, and sufficient specification of terms so that obligations involved can be ascertained.” K-Line Builders, Inc. v. First Federal Sav. & Loan Ass'n, 677 P.2d 1317, 1320 (Ariz.Ct.App. 1983). Even viewing the facts in the light most favorable to Plaintiff, the Court is unable to ascertain specific terms in order to determine the obligations involved. For example, the letter Plaintiff points to was an insurance quote. It may have promised risk management consultation by Western Truck, but not with enough specificity that the Court can ascertain the obligations involved. Plaintiff does not even allege Mr. Owen asked Mr. Dion for a specific amount or gave an acceptable range of business income coverage that he wanted or needed. Instead, he merely alleges that “[n]either Mr. Owen nor any other representative of [Madison Alley] ...

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