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United States Liability Insurance Co. v. Gong

United States District Court, D. Arizona

August 15, 2019

United States Liability Insurance Company, Plaintiff,
Xiangnan Gong, et al., Defendants.



         Plaintiff United States Liability Insurance Company (the “Plaintiff”) initiated this lawsuit against defending parties Xiangnan Gong (“Gong”), Zhuo Zhan Kuang, Jane Doe Kuang, [1] and Healthy Chinese Herbs Company Incorporated seeking a declaratory judgment. (Doc. 1) The Plaintiff moved for summary judgement on declaratory judgment relief (the “Motion”). (Doc. 39) The Motion was fully briefed on December 18, 2018. (Docs. 50, 53, 58, 59) Because it would not assist in resolution of the instant issues, the Court finds the pending motion is suitable for decision without oral argument. See LRCiv. 7.2(f); Fed.R.Civ.P. 78(b); Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998). The Court's ruling is as follows.

         I. Background[2]

         Defendant Zhuo Zhan Kuang (“Z.Z. Kuang”) and Jane Doe Kuang operate a health and natural food store named Healthy Chinese Herbs Company, Inc. (“HCHC, ” and together with Z.Z. Kuang and Jane Doe Kuang, the “Defendants”). (Doc. 40 at 1-2; Doc. 51 at 2) HCHC sells Chinese herbal medicines, ointments, packaged teas, and herbs. (Doc. 40 at 2) The Plaintiff alleges that Z.Z. Kuang held himself out to be a medical or naturopathic doctor, and Z.Z. Kuang was known as “Doctor Kuang” throughout the Chinese community. (Doc. 40 at 2)

         A woman named Jie Xu sought out Z.Z. Kuang to receive treatment for neck pain. (Doc. 40 at 2) Z.Z. Kuang “examined and treated Xu at HCHC for neck pain on multiple occasions and prescribed various remedies, herbs, and/or medicines to Xu which were dispensed” by HCHC. (Doc. 40 at 2) Z.Z. Kuang “advised Xu [of] his various remedies, herbs, and/or medicines, asserting the substances would heal and cure her condition” and instructed Xu not to seek out medical care. (Doc. 40 at 2) On May 30, 2017, Xu was found unconscious in her home and transported to the hospital for medical treatment. (Doc. 40 at 3) At the hospital, Xu was diagnosed with severe septic shock with organ failure, among many other ailments, and she died on May 31, 2017. (Doc. 40 at 3) On April 30, 2018, Gong, Xu's husband, filed an amended complaint against the Defendants in the Maricopa County Superior Court (the “Wrongful Death Lawsuit”), alleging causes of action for negligence per se and fraudulent misrepresentation, among other claims. (Doc. 40 at 1)

         The Plaintiff issued a Commercial General Liability Policy to HCHC effective August 1, 2016 to August 1, 2017 (the “ Insurance Policy”). (Doc. 40 at 4) The Plaintiff is providing the Defendants with a defense to the Wrongful Death Lawsuit under a reservation of rights, but the Plaintiff initiated this lawsuit seeking a declaratory judgment that it has no duty to defend or indemnify the Defendants for the Wrongful Death Lawsuit pursuant to the terms of the Insurance Policy. (Doc. 40 at 9; Doc. 1)

         II. Legal Standard

         A court shall grant summary judgment if the pleadings and supporting documents, viewed in the light most favorable to the non-moving party “show 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); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Material facts are those facts “that might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine dispute of material fact arises if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

         The party moving for summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the record, together with affidavits, which it believes demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. If the movant is able to do such, the burden then shifts to the non-movant who, “must do more than simply show that there is some metaphysical doubt as to the material facts, ” and instead must “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).

         III. Analysis

         A. Appropriateness of Summary Judgment Ruling

         The Plaintiff seeks a declaratory judgment from the Court finding that the Insurance Policy does not require the Plaintiff to defend the Wrongful Death Lawsuit pending against the Defendants. (Doc. 39 at 1) The Defendants and Gong argue that the Motion is premature because Arizona law requires the Court to consider facts not yet developed in discovery in its analysis of whether the Plaintiff has a duty to defend under the Insurance Policy. (Doc. 50 at 4; Doc. 53 at 6-7) In response, the Plaintiff argues (i) that Arizona courts have found that summary judgment is appropriate on the issue of an insurer's duty to defend prior to the conclusion of an underlying case, and (ii) summary judgment is appropriate because there are no genuine issues of material fact between the parties to this case.

         First, the Court notes that there are no genuine disputes of material fact between the parties. The primary question before the Court is whether the complaint in the Wrongful Death Lawsuit alleges any claim within the Insurance Policy's coverage. The Court notes that the Insurance Policy states that the Plaintiff has “the right and duty to defend the insured against any ‘suit'” seeking damages for bodily injury or property damage covered under the Insurance Policy. (Doc. 40-4 at 21) In Arizona, if any claim alleged in the complaint is within the policy's coverage, the insurer has a duty to defend the entire suit, because it is impossible to determine the basis upon which the insurer will recover (if any) until the action is completed.” Nat'l Fire Ins. Co. of Hartford v. James River Ins., 162 F.Supp.3d 898, 913 (D. Ariz. 2016) (citing Nucor Corp. v. Employers Ins. Co., 296 P.3d 74, 83-84 (Ct. App. 2012)). Furthermore, the interpretation of an insurance contract is a question of law for the Court to decide. Id. at 903 (citing Liristis v. Am. Family Mut. Ins. Co., 61 P.3d 22, 26 (Ct. App. 2002)).

         The Court also notes that, in similar cases where an insurer sought a declaratory judgment abdicating its duty to defend an insured party, precedent supports addressing a motion for summary judgment independent of the progress in the underlying lawsuit. See Nat'l Fire, 162 F.Supp.3d at 901-902 (finding that the insurer had a duty to defend the insured even after the underlying case settled); 757BD LLC v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 330 F.Supp.3d 1143, 1148 (D. Ariz. 2018) (stating “Summary judgment is particularly appropriate to resolve questions of insurance coverage, since the interpretation of a written contract is a matter of law to be determined by the court” and upholding an insurer's decision to not defend the insured party prior to the underlying lawsuit's resolution); Kepner v. W. Fire Ins. Co., 509 P.2d 222, 225 (1973) (stating “a testing of the insurer's ...

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