Wojtysiak v. State Farm Mutual Automobile Insurance Co.

          ORDER

          Douglas L. Rayes United States District Judge

         Plaintiffs Martin and Deborah Wojtysiak allege that Defendant State Farm Mutual Automobile Insurance Company (“State Farm”) breached the parties' insurance contract by failing to investigate and make settlement offers on Plaintiffs' underinsured motorists (“UIM”) and Medical Payments (“Med Pay”) claims. (Doc. 1.) Before the Court is State Farm's motion for summary judgment (Doc. 22), which is fully briefed.^[1] For the following reasons, State Farm's motion is granted.

         BACKGROUND

         Martin Wojtysiak started Piper Plastics, an Illinois corporation with its principle place of business in Illinois. (Doc. 23 ¶¶ 5-6.) Piper Plastics registered all its vehicles through a State Farm insurance agent located in Illinois. (¶ 12.)

         Wojtysiak purchased a 2003 Cadillac Escalade in California, where he was living at the time. (¶ 7.) Wojtysiak then drove his Escalade to Illinois for it to be registered and licensed. (¶¶ 8, 17.) The Escalade's Illinois license plate read “Piper II.” (¶ 17.) Wojtysiak also insured the Escalade with State Farm in Illinois, using the same Illinois insurance agent as Piper Plastics. (¶¶ 10-11.) Wojtysiak's Cadillac Escalade insurance policy (“Escalade Policy”) provided for $1, 000, 000 per person per accident in UIM coverage, and $100, 000 in Med Pay coverage. (Doc. 23-1 at 3.) Wojtysiak and Piper Plastics were Named Insureds on the Escalade Policy, and Wojtysiak used Piper Plastics' corporate address in Illinois for the “[l]ocation used to determine rate charged[.]” (Doc. 23 ¶¶ 6, 13-15.) Moreover, Piper Plastics paid Wojtysiak a $400 per month stipend, at least in part, to pay the premium on the Escalade Policy. (¶ 16.)

         In 2006, Wojtysiak moved to Arizona. (¶ 28.) The parties dispute whether Wojtysiak informed State Farm that he was relocating the Escalade to Arizona. Nevertheless, as of 2011, Wojtysiak continued to register the Escalade in Illinois, using Piper Plastics' address. (¶¶ 31-32.) On October 2, 2011, Wojtysiak was involved in a motor vehicle accident with Gerard Sheridan, an underinsured driver. (¶ 29.) At the time of the accident, the Escalade was still registered in Illinois using Piper Plastics corporate address and included the company as a Named Insured under the Escalade Policy. (Doc. 23 ¶¶ 31-32; Doc. 23-1 at 3.)

         In September 2015, Wojtysiak settled with Sheridan for $1, 104, 683.85 (“Sheridan Settlement”). (Doc. 29 ¶ 16; Doc. 23-2 at 12.) Plaintiffs also sought UIM and Med Pay coverage under the Escalade Policy. State Farm declined. Thereafter, Plaintiffs filed suit, alleging breach of contract against State Farm. State Farm now moves for summary judgment on all of Plaintiffs' claims.

         LEGAL STANDARD

         Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates “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). A fact is material if it might affect the outcome of the case, and a dispute is genuine if a reasonable jury could find for the nonmoving party based on the competing evidence. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002). 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).

         The party seeking summary judgment “bears the initial responsibility of informing the district court of the basis for its motion and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact.” Id. at 323. The burden then shifts to the non-movant to establish the existence of a genuine and material factual dispute. Id. at 324. Thus, the nonmoving party must show that the genuine factual issues “‘can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.'” Cal. Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987) (quoting Anderson, 477 U.S. at 250).

         DISCUSSION

         I. UIM Coverage^[2]

         First, State Farm contends that Plaintiffs are not entitled to UIM coverage under the Escalade Policy because State Farm is entitled to set off the Sheridan Settlement against the UIM insurance under the “difference in limits” provision. Under such a provision, an UIM insurer's liability is capped at the UIM coverage limit less those amounts the insured actually recovers under the applicable insurance policies maintained on the underinsured vehicle. 215 ILCS 5/143a-2(4). Plaintiffs argue that the “difference in limits” provision is void under Arizona law. The Escalade Policy, however, states:

Without regard to choice of law rules, the law of the state of:

a. Illinois will control in the event of any disagreement as to the interpretation and application of any provision in this policy . . .

(Doc. 23-1 at 46.) The parties agree that resolution of the “difference in limits” issue requires the Court to determine whether the Escalade Policy's choice of law provision controls.

         A. Choice of Law

         A federal court sitting in diversity applies the choice of law rules of the state in which it sits. Abogados v. AT&T, Inc., 223 F.3d 932, 934 (9th Cir. 2000) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). As this Court sits in Arizona, it applies Arizona choice of law rules. In a contract action, Arizona follows the Restatement (Second) of Conflict of Laws (“Restatement”). Swanson v. Image Bank, Inc., 77 P.3d 439, 441 (Ariz. 2003). Where, as here, the contract includes a choice of law provision, § 187 of the Restatement provides the test for whether that provision is “valid and effective.”^[3]Id. (quoting Cardon v. Cotton Lane Holdings, Inc., 841 P.2d 198, 202 (Ariz. 1992)). Under § 187, the court must first decide whether the “particular issue”-here, a “difference in limits” provision-“is one which the parties could have resolved by an explicit provision in their agreement directed to that issue.” Restatement § 187(1). If the answer to that question is yes, then the choice of law clause is valid and effective.

         In determining whether the parties could have resolved a particular issue by explicit agreement, courts apply “the local law of the state selected by application of the rule of § 188.” Cardon, 841 P.2d at 203 (citing Restatement § 187 cmt. c)). Section 188(2) sets ...