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Denby v. American Family Insurance

United States District Court, D. Arizona

August 29, 2019

James W Denby, Plaintiff,
American Family Insurance, Defendant.



         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.


         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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