Prosight-- Syndicate 1110 at Lloyd's v. American Builders and Developers LLC

          ORDER

          Honorable Steven P. Logan United States District Judge

         Plaintiff Prosight-- Syndicate 1110 At Lloyd's (the “Plaintiff”) filed suit against American Builders and Developers LLC (“ABD”) seeking a declaratory judgment that it is not liable to indemnify ABD for any damages awarded pursuant to Maria Virginia Huizache and Florenciano Axinicuilteco's (the “Claimants”) lawsuit. The Claimants filed their Second Motion for Summary Judgment (the “Claimants' MSJ”) (Doc. 197), and the Plaintiff filed a separate Motion for Summary Judgment (the “Plaintiff's MSJ”) (Doc. 199). Both motions were fully briefed on October 15, 2019, and oral argument was requested. (Docs. 206, 209, 213, 214) Because it would not assist in resolution of the instant issues, the Court finds the pending motions are 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

         The Plaintiff issued an owner controlled insurance policy (the “Policy”), often referred to as a wrap policy, to ABD. (Doc. 197 at 3) Wrap policies allow for a general contractor to purchase an insurance policy for a construction project and enroll multiple subcontractors for insurance coverage under the policy. (Doc. 188 at 11) ABD's wrap policy was originally effective from March 31, 2013 to March 31, 2016, and the Policy covered two separate construction sites, the Trio Condominium property located in Scottsdale, Arizona, and the Clearwater Hills property located in Paradise Valley, Arizona. (Doc. 197 at 3) ABD hired Paladin Risk Management Limited, LLC (“Paladin”) to be the administrator of the Policy. (Doc. 188 at 11) ABD enrolled subcontractor Diamond House Painting, LLC (“DHP”) in the Policy in November 2014. (Doc. 197 at 5)

         In January 2016, one of DHP's employees was killed in an incident at the Trio Condominium property. (Doc. 197 at 2) The Claimants, as the decedent's parents, brought a wrongful death action against ABD, among others, in Arizona state court. (Doc. 197 at 2) ABD settled the Claimants' lawsuit against it by turning over its rights against the Plaintiff and Paladin to the Claimants. (Doc. 197 at 8) ABD also agreed for a stipulated judgment to be entered against it for $3.5 million. (Doc. 197 at 8)

         The Plaintiff initiated this lawsuit for declaratory judgment seeking a determination that it is not liable to indemnify ABD for any damages awarded pursuant to the Claimants' lawsuit. (Doc. 1) The Claimants filed counterclaims against the Plaintiff and Paladin, arguing that they were each liable for the $3.5 million stipulated judgment. (Doc. 188) However, in July 2019, the Claimants and Paladin entered into a settlement agreement (the “Settlement Agreement”) in which the Claimants agreed to dismiss their claims against Paladin in exchange for a settlement payment of approximately $37, 500. (Doc. 203 at 51-57) On August 30, 2019, the Plaintiff and the Claimants filed cross-motions for summary judgment on all claims and counterclaims before the Court. (Doc. 197; Doc. 199)

         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

         In the Claimants' MSJ, the Claimants request for the Court to make certain findings of law, including (i) that the Plaintiff's insurance policy provided coverage to ABD for the Claimants' lawsuit, (ii) that the Plaintiff breached its duty to indemnify ABD, and (iii) that the Plaintiff is obligated to pay the $3.5 million judgment against ABD. (Doc. 197 at 2) In the Plaintiff's MSJ, the Plaintiff argues that (i) the Claimants are judicially estopped from pursuing claims against the Plaintiff, (ii) by the plain terms of the Policy, DHP was not enrolled under the Policy, and (iii) the Plaintiff has no duty to indemnify ABD for the result of the Claimants' lawsuit. (Doc. 199-1 at 5-8)

         The Plaintiff argues that the Claimants cannot recover against the Plaintiff as a matter of law because the Claimants successfully recovered on their claims for relief against Paladin. (Doc. 206 at 4; Doc. 199-1 at 9-10) The Plaintiff identifies the Settlement Agreement between Paladin and the Claimants, in which Paladin sought to settle the Claimants' negligence and breach of contract claims against it. (Doc. 203 at 51) The Plaintiff argues that the Claimants are judicially estopped from pursuing their claims against the Plaintiff because they obtained a favorable settlement against Paladin on a mutually exclusive theory of liability. (Doc. 199-1 at 14) In response, the Claimants argue that they have not asserted inconsistent positions against Paladin and the Plaintiff. (Doc. 209 at 10) The Claimants argue that they have simply asserted alternative theories of liability against Paladin and the Plaintiff, which is permissible pursuant to Federal Rule of Civil Procedure 8(d). (Doc. 209 at 10)

         Plaintiffs are allowed to plead alternative and even inconsistent claims, but parties are not allowed to disavow claims and then argue from them. Fed.R.Civ.P. 8(d); Martinez v. Maricopa Cty. Cmty. Coll. Dist., 2018 WL 2119338, at *4 (D. Ariz. May 8, 2018); Revive You Media LLC v. Esquire Bank, 2018 WL 2164379, at *5 (D. Ariz. May 10, 2018). Judicial estoppel precludes a party from gaining an advantage by taking one position and then seeking a second advantage by taking an incompatible position. Gagne v. Zodiac Mar. Agencies, Ltd., 274 F.Supp.2d 1144, 1148 (S.D. Cal. 2003) (citing Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597, 600 (9th Cir.1996)). Judicial estoppel is used “because of ‘general consideration[s] of the orderly administration of justice and regard for the dignity of judicial proceedings,' and to ‘protect against a litigant playing fast and loose with the courts.'” Id. (citing Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir. 2001)). Further, double recovery is disfavored, and it should be particularly avoided where punitive and compensatory damages are assessed. Kissell Co. v. Gressley, 591 F.2d 47, 51 (9th Cir. 1979); Hosp. Mktg. Concepts, LLC v. Six Continents Hotels, Inc., 2016 WL 9045621, at *6 (C.D. Cal. Jan. 28, 2016) (stating double recovery is precluded when alternative theories seeking the same relief are pleaded and tried together).

         The Supreme Court of the United States has established certain factors that district courts may take into consideration when deciding whether judicial estoppel is appropriate in a given case: (1) a party's later position is “clearly inconsistent” with its earlier position; (2) the first tribunal accepted and relied upon the prior inconsistent position; and (3) the party maintaining the inconsistent position stands to gain an unfair advantage over the opposing party. Id. (citing New Hampshire v. Maine, 532 U.S. 742, 750-51 (2001)). These factors, however, are not exhaustive. Id. The inconsistent positions need not come from the same litigation, and a favorable settlement constitutes judicial reliance. Id. (citing Hamilton, 270 F.3d at 783; Rissetto, 94 F.3d at 605). The purpose of judicial estoppel is to protect the ...