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Adams Craig Acquisitions LLC v. Defendant Atain Specialty Insurance Co.

United States District Court, D. Arizona

September 4, 2019

Adams Craig Acquisitions LLC, et al., Plaintiffs,
v.
Defendant Atain Specialty Insurance Company, et al., Defendants.

          ORDER

          G. Murray Snow Chief United States District Judge

         Pending before the Court are the Motion for (Partial) Summary Judgment of Plaintiffs Adams Craig Acquisitions, LLC (“ACA”) and Adams Craig Technologies, LLC (“ACT”) (Doc. 55.) and the (Cross) Motion for Summary Judgment of Defendants Atain Specialty Insurance Co. (“Defendant Atain”) and Dynamic Claims Services, Inc. (“Defendant Dynamic”) (Doc. 53.). For the following reasons Plaintiffs' Motion is denied, and Defendants' Motions are granted in part and denied in part.

         BACKGROUND

         This case arises out of an insurance contract. Plaintiff ACA purchased a Comprehensive General Liability Policy (“Policy”) from Defendant Atain effective December 17, 2015 through December 17, 2016.

         In March 2014, Plaintiffs[1] contracted to remodel a residence in Paradise Valley. The remodel was completed in June 2016. In August 2016, the homeowners notified Plaintiffs of a water leak in the garage. It was eventually determined that roof caps, incorrectly installed by one of Plaintiffs' subcontractors, JLC Roofing, Inc. (“JLC”), were the cause of the leak. The Arizona Registrar of Contractors (“ROC”) ordered JLC to repair the defective roof caps. JLC complied with the ROC's order. However, JLC refused to repair and denied responsibility for any damage caused by water seepage under the walk deck above the garage. JLC's insurance carrier also refused to participate in resolving the issue. On February 24, 2017, Plaintiffs decided to make a claim under their policy with Atain. Atain promptly hired Defendant Dynamic as an independent adjuster to review the site.

         Defendant Dynamic's representative Mr. Marvin Heinl met with Plaintiffs' principal, Mr. Adams, to inspect the residence. After the inspection, Mr. Heinl told Mr. Adams that he had a duty to “mitigate his damages.” (Doc. 56-5 at 18.) Mr. Heinl then issued the inspection report (“Dynamic Report”) on March 21, 2017. The Dynamic Report acknowledged that “damages to the drywall in the garage [are] directly related to the deficiency in the roof cap installation on the second level roof.” (Doc. 56-6 at 9.) The Dynamic Report further noted that Mr. Adams claimed the deficient roof caps also resulted in damage to the walk deck above the garage. The Dynamic Report did not opine on the cause of the damage to the walk deck, but instead suggested that a third-party expert be hired to evaluate Mr. Adams's assertion. However, the Dynamic Report did explain that much of the evidence “of the waterproof barriers and deck application, and the sealing with the parapets and perimeter wall of the home” had been lost. (Doc. 56-6 at 9.) Defendant Atain did not conduct any further investigation.

         There is some dispute as to the comprehensiveness of the information Plaintiffs provided to Defendant Atain. All parties agree, however, that Defendant Atain sent requests for information on April 4, 2017, May 11, 2017, and June 9, 2017. On July 21, 2017, Defendant Atain issued its initial coverage analysis. Plaintiffs submitted additional information in September 2017. Defendant Atain issued its final coverage determination in a letter on October 11, 2017 and remitted payment for the covered claims. Plaintiffs requested reimbursement for $120, 008.37, and Defendant Atain paid Plaintiffs $28, 362.97.

         Defendant Atain determined there were three categories to ACA's Claim: (1) repairs and costs related to the incorrectly installed roof caps-the source of the water intrusion; (2) repairs and costs to the drywall and insulation resulting from the water intrusion; and (3) repairs and replacement of the walk deck above the garage. Defendant Atain agreed to pay the costs associated with the repairs of the resulting damage to the drywall and insulation but refused to pay the costs associated with repairing the roof caps and the walk deck. Defendant Atain asserted that the denied costs were not covered under the Policy because they were incurred to repair “defective work” rather than “resulting damage.” Defendant Atain also denied Plaintiffs' requests for coverage of their own labor costs in investigating and repairing the leak and other damages.

         Plaintiffs brought suit against Defendant Atain in the Superior Court for Maricopa County alleging breach of contract, breach of the covenant of good faith and fair dealing, promissory estoppel, and negligent misrepresentation. Plaintiffs also assert that Defendant Dynamic aided and abetted Defendant Atain in breaching its insurance contract with Plaintiffs. Defendants timely removed the action to this court. Subsequently, Plaintiffs moved for summary judgment on the breach of contract and bad faith claims, while Defendants cross-moved for summary judgment on all the asserted claims.

         DISCUSSION

         I. Legal Standard

         The purpose of summary judgment is “to isolate and dispose of factually unsupported claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, shows “that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). Only disputes over facts that might affect the outcome of the suit will preclude the entry of summary judgment, and the disputed evidence must be “such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         “[A] party seeking summary judgment always 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.” Celotex, 477 U.S. at 323. Parties opposing summary judgment are required to “cit[e] to particular parts of materials in the record” establishing a genuine dispute or “show[ ] that the materials cited do not establish the absence . . . of a genuine dispute.” Fed. R. Civ. P. 56(c)(1). A district court has no independent duty “to scour the record in search of a genuine issue of triable fact[.]” Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996). “[W]hen simultaneous cross-motions for summary judgment on the same claim are before the court, the court must consider the appropriate evidentiary material identified and submitted in support of both motions, and in opposition to both motions, before ruling on each of them.” Fair Housing Council of Riverside Cnty., Inc. v. Riverside Two, 249 F.3d 1132, 1134 (9th Cir. 2001).

         II. Analysis

         A. Breach of Contract

         The Policy provides, “[w]e will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies.” (Doc. 54-1 at 57.) The ...


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