United States District Court, D. Arizona
ORDER
HONORABLE SUSAN M. BRNOVICH, UNITED STATES DISTRICT JUDGE
Pending
before the Court is Defendant American Family Insurance's
Motion for Summary Judgment, (Doc. 74), and Plaintiff James
Denby's Partial Motion for Summary Judgment, (Doc. 76).
Plaintiff moves for summary judgment on the breach of
contract count, while Defendant moves for summary judgment on
all counts. Oral argument was held on August 23, 2019. Both
motions are fully briefed and ripe for ruling.
I.
BACKGROUND
Defendant
issued a homeowner's policy to Plaintiff effective April
9, 2014 to April 9, 2015 (the “Policy”) for
Plaintiff's residence located in Casa Grande, Arizona
(the “Residence”). The Policy provided
replacement cost coverage for the dwelling in the amount of
$189, 200 and for personal property on the premises in the
amount of $141, 900. Within the Policy is a provision that
limits coverage for certain costs incurred “due to the
enforcement of any ordinance, law, or regulation, ” as
well as a provision which limits certain coverage involving
land. (Doc. 75-2 at 4, 22).
On
December 17, 2014, the Casa Grande Police Department and
Pinal County Regional SWAT caused damage to the Residence and
Plaintiff's personal property while trying to apprehend a
domestic violence suspect. Plaintiff reported the damage to
Defendant on the same day. The claim was assigned to
Defendant's adjuster Logan Perrill to investigate,
evaluate, and settle. On December 19, 2014, Defendant
retained independent adjuster Silverado Claims to contact
Plaintiff and inspect the Residence. On December 29, 2014,
Silverado Claims reported its findings from an initial
inspection of the Residence which was conducted on December
23, 2014.
On
February 17, 2015, Defendant reviewed the Silverado Claims
report which provided an estimate to repair the Residence.
According to Silverado Claims, the cost to repair the
Residence was $65, 230.97, with an actual cash value of $30,
085.67. The estimated cost to repair the separate guesthouse
was $1, 234.22, with an actual cash value $411.41. On
February 19, 2015, Defendant noted that it had opportunity to
review estimates by Silverado Claims, EFI Global (retained to
provide a report on structural damage), American
Technologies, Inc. (retained to compare the estimate for
mitigation of the Residence prepared by Silverado Claims),
and Service Master Casa (retained to develop protocol to
clean the Residence). On the same day, Defendant informed
Plaintiff of the results of its investigation and told him it
would issue payment based on the estimates in the reports.
Plaintiff informed Defendant that Flood Impact Experts and
Arizona Indoor Environmental Testing advised him the
Residence should be destroyed and completely rebuilt.
Plaintiff believed he was entitled to the full replacement
cost policy limits under the Policy. Defendant tendered four
checks to Plaintiff totaling $65, 571.30 for settlement.
On
April 23, 2015, Defendant sent Plaintiff a letter that copied
and pasted sections of the Policy and also contained the
following paragraph:
Your Homeowner's policy limits the amount of coverage
available to you in regards to the increased cost of repairs
or replacement as required by ordinance, law, or regulation.
The policy only provides coverage for upgrades to the system
or building material that was damaged as a result of the
covered loss. In regards to your specific loss, the plumbing,
electrical, truss, and floor joist systems found in your home
were not directly damaged by the release of tear gas or
intrusion of tear gas projectiles. Your homeowner's
policy also specifically excludes coverage for land and the
value of land which applies specifically to the testing,
removing, or replacement of soils at your property.
(Doc. 75-8 at 2). On April 30, 2015, Plaintiff retained James
F. O'Toole Co., Inc. to assist in the adjustment of his
claim. On May 8, 2015, Defendant provided O'Toole with a
copy of repair estimates from its vendors. On May 11, 2015,
O'Toole submitted an estimate to completely demolish and
rebuild the Residence. On May 18, 2015, Defendant reviewed
the estimate and sent a response to O'Toole disputing the
amount of their estimation. On May 21, 2015, O'Toole
demanded appraisal under the Policy's Appraisal
Clause.[1] The disagreement that led to Plaintiff
invoking the appraisal process was over whether the house
should be razed and rebuilt or whether it could be repaired
to its pre-loss state. O'Toole hired Joe Rezzonico as the
appraiser and Defendant retained Grant Trussler as its
appraiser. A hearing was held on March 31, 2016. Rezzonico
and the umpire signed an appraisal award for the dwelling of
$177, 500 replacement cost and $142, 000 actual cash value
(the “Appraisal Award”). As for the contents,
Plaintiff was awarded $23, 613 replacement cost and $23, 131
actual cash value. The award was stated in lump sum amounts
and was not itemized. Defendant asserts that it was unable to
determine the amount of the covered loss based upon the lump
sum Appraisal Award because the costs for uncovered damages
were not itemized.
The
parties dispute whether Trussler, Defendant's appraiser,
stressed to the umpire during the appraisal process that the
award needed to be broken down so that Defendant could review
for coverage issues. After the hearing, on April 15, 2016,
Defendant requested the appraisal panel to modify the
Appraisal Award so Defendant could pay the covered portion of
the loss. On April 25, 2016, Defendant again followed up on
its request for a breakdown of the Appraisal Award, but the
breakdown was not provided. On August 16, 2017, Defendant
issued an additional payment of $24, 369.68 to
Plaintiff's counsel.
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
A.
Breach of Contract
In the
Complaint, Plaintiff alleges that Defendant breached the
Policy by failing to provide benefits to Plaintiff as
provided for in the Policy. Both Plaintiff and Defendant move
for summary judgment on Plaintiff's breach of contract
claim. Plaintiff asserts that it is entitled to summary
judgment because there is no dispute that Plaintiff properly
invoked the appraisal provision of the Policy and followed
the specified procedures; that the umpire and one of the
appraisers agreed on the amount of the loss and signed the
Appraisal Award; and that Defendant has not paid the full
amount of the loss as stated in the Appraisal Award to
Plaintiff. Defendant does not appear to contest any of
Plaintiff's assertions, but rather states that it was
unable to pay the Appraisal Award because there were coverage
issues and the award was presented as a lump sum. Defendant
asserts that it is entitled to summary judgment because
Plaintiff has not provided any evidence disputing that the
amount already paid to him is “accurate for the covered
damages.” (Doc. 74 at 12).
Much of
the caselaw presented by counsel involves disputes between
parties arising prior to the parties entering the appraisal
process. This case presents unique questions however because
the parties agreed to enter the appraisal process and now
dispute whether Defendant is contractually obligated to pay
the full “amount of loss” as determined by the
Appraisal Award.
1.
Legal Standard
Under
Arizona law, a court's “purpose in interpreting a
contract is to ascertain and enforce the parties'
intent.” ELM Ret. Ctr., LP v. Callaway, 246
P.3d 938, 941 (Ariz.Ct.App. 2010). “To determine the
parties' intent, we ‘look to the plain meaning of
the words as viewed in the context of the contract as a
whole.'” Id. at 941-42 (quoting United
Cal. Bank v. Prudential Ins. Co., 681 P.2d 390, 411
(Ariz.Ct.App. 1983)). “Contracts are ‘to be read
in light of the parties' intentions as reflected by their
language and in view of all circumstances; if the intention
of the parties is clear from such a reading, there is no
ambiguity.'” In re Estate of Lamparella,
109 P.3d 959, 963 (Ariz.Ct.App. 2005), as amended
(June 20, 2005) (quoting Harris v. Harris, 991 P.2d
262, 265 (Ariz.Ct.App. 1999)). “Language in a contract
is ambiguous only when it can reasonably be construed to have
more than one meaning.” Id. “When the
terms of a contract are plain and unambiguous, its
interpretation is a question of law for the court.”
ELM, 246 P.3d at 942. “[W]here the provisions
of the contract are plain and unambiguous upon their face,
they must be applied as written, and the court will not
pervert or do violence to the language used, or expand it
beyond its plain and ordinary meaning or add something to the
contract which the parties have not put there.”
Heard v. Farmers Ins. Exch. Co., 496 P.2d 619,
621-22 (Airz. Ct. App. 1972) (emphasis omitted). “[A]
court should not interpret a contract so as to render
meaningless the language used by the parties, if a reasonable
construction can be effected utilizing all the language of
the contract.” Tucker v. Byler, 558 P.2d 732,
735 (Ariz.Ct.App. 1976). “If the contract language is
reasonably susceptible to more than one meaning, extrinsic
evidence may be admitted to interpret the contract.”
ELM, 246 P.3d at 942.
2.
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