National Fire & Marine Insurance Company v. Infini PLC et al, No. 2:2016cv03874 - Document 261 (D. Ariz. 2019)
Court Description: ORDER granting in part and denying in part 171 Lexington's Motion for Summary Judgment. ORDERED granting 178 AIG Claims' Motion for Summary Judgment. The Clerk of Court is directed to terminate AIG from this action. ORDERED grantin g 210 Infini's Cross Motion for Summary Judgment because AIG Claims' conduct is imputed to Lexington on the bad faith claim. ORDERED granting in part and denying in part 226 Wells Fargo Insurance Services' Motion for Summary Judgment. FURTHER ORDERED denying as moot 250 Infini's Motion to Strike. See document for complete details. Signed by Chief Judge G Murray Snow on 1/3/19. (EJA)
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National Fire & Marine Insurance Company v. Infini PLC et al 1 Doc. 261 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 National Fire & and Marine Insurance Company, 10 Plaintiff, 11 v. 12 Infini PLC, et al., 13 Defendants. Infini, PLC, et al., 14 15 No. CV-16-03874-PHX-GMS ORDER Counterclaimants, 16 v. 17 National Fire & Marine Insurance Company, 18 Counterdefendant. 19 20 Infini PLC, et al., Third-Party Plaintiffs, 21 22 v. 23 AIG Claims, Inc., et al., 24 Third-Party Defendants. 25 26 Pending before the Court are Lexington Insurance Company’s Motion for Summary 27 Judgment (Doc. 171), AIG Claims Incorporated’s Motion for Summary Judgment (Doc. 28 178), Wells Fargo Insurance Services USA’s Motion for Summary Judgment (Doc. 226), Dockets.Justia.com 1 and William Hall and Infini PLC’s Cross Motion for Summary Judgment (Doc. 210), and 2 Motion to Strike (Doc. 250).1 3 BACKGROUND 4 Defendant/Counterclaimant, Dr. William Hall, provides cosmetic procedures and 5 surgeries through his company, Infini, PLC (collectively, “Infini”). Since at least 2011, 6 Lexington Insurance Company (“Lexington”) has provided coverage insurance to Dr. Hall 7 for the medical procedures he performs in his practice. To obtain insurance coverage, 8 Infini worked with an insurance broker, Wells Fargo Insurance Services USA (“Wells 9 Fargo”). Lexington uses an independent third-party to adjust its claims, AIG Claims 10 Incorporated (“AIG Claims”), and has an underwriter Smith Bell & Thompson (“SBT”). 11 On July 24, 2014, Wells Fargo sent a renewal application to Infini. (Doc. 228-4 at 12 4). Several weeks later, on September 4, 2014, Infini returned the application. In the 13 application, Infini crossed out certain kinds of liposuction—specifically liposelection and 14 lipodissolve—because Infini did not perform those procedures. (Doc. 228-4 at 22). On 15 the same page, the application noted that Infini performed large quantities of “local 16 anesthesia lipo.” (Id.). CRC Services and Wells Fargo relayed this handwritten application 17 to SBT, Lexington’s underwriter. (Doc. 171, Ex. 30). On September 29, SBT sent CRC 18 Services an email that stated “Attached you will find a renewal quote. The premium 19 increase is due to the significant increase in exposures.” (Doc. 173-33 at 2). But the 20 coverage that SBT produced for CRC and Wells Fargo did not ultimately contain coverage 21 for liposuction. (“2014-2015 Policy”) (Doc. 171 Ex. 11). In the communications between 22 CRC, Wells Fargo and SBT, the parties all referred to the policy as a “renewal.” (Doc. 172, 23 Ex. 33) (“Attached you’ll find the renewal quote.”). And the 2014-2015 Policy from 24 Lexington specifically stated that it was a renewal policy. (Doc. 173, Ex. 34). 25 On October 1, 2014, when filling out additional forms related to the application to 26 27 28 1 The parties’ requests for oral argument are denied because they have had an adequate opportunity to discuss the law and evidence and oral argument will not aid the Court’s decision. See Lake at Las Vegas Investors Group, Inc. v. Pac. Malibu Dev., 933 F.2d 724, 729 (9th Cir. 1991). -2- 1 renew coverage for Dr. Hall, a representative of Wells Fargo Insurance Services noted that 2 she was “aware of [a] circumstance accident or loss . . . which may result in a claim under 3 the insurance coverage.” (Doc. 173-12 at 51). This document specifically noted that there 4 had been a records request to Infini from a lawyer. (Id.). 5 While Infini was corresponding with Wells Fargo about its policy renewal, Dr. Hall 6 performed a liposuction procedure on Donna Willis. After this procedure, Ms. Willis was 7 hospitalized and required additional surgeries. (Doc. 211-1 at 3). In September 2014, Dr. 8 Hall received two requests for medical records from Ms. Willis—first from her husband, 9 and then from a lawyer on her behalf. (Doc. 211-1 at 4). He was also notified that Ms. 10 Willis had been hospitalized about a week after her liposuction procedure. (Doc. 211-1 at 11 3). 12 On January 29, 2015, counsel for Ms. Willis requested the contact information of 13 Infini’s insurance carrier. (Doc. 228-1 at 17). Infini forwarded this to Wells Fargo and 14 Lexington. (Id. at 16). Ms. Willis later filed suit against Dr. Hall and Infini in Maricopa 15 County Superior Court. (Doc. 228-1 at 2). But in May 2015, Lexington informed Infini 16 that the new insurance policy did not cover injuries caused by liposuction, and it would not 17 defend any claim brought by Ms. Willis. Dr. Hall and Infini filed a third-party complaint 18 in this suit arguing that Lexington wrongfully denied coverage for the Medical Incident. It 19 is on that complaint that the various parties bring their motions for summary judgment. 20 21 DISCUSSION I. Legal Standard 22 The purpose of summary judgment is “to isolate and dispose of factually 23 unsupported claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 323–24, 106 S.Ct. 2548, 91 24 L.Ed.2d 265 (1986). Summary judgment is appropriate if the evidence, viewed in the light 25 most favorable to the nonmoving party, shows “that there is no genuine issue as to any 26 material fact and that the movant is entitled to judgment as a matter of law.” FED. R. CIV. 27 P. 56(c). Only disputes over facts that might affect the outcome of the suit will preclude 28 the entry of summary judgment, and the disputed evidence must be “such that a reasonable -3- 1 jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248. 2 “[A] party seeking summary judgment always bears the initial responsibility of 3 informing the district court of the basis for its motion, and identifying those portions of 4 [the record] which it believes demonstrate the absence of a genuine issue of material fact.” 5 Celotex, 477 U.S. at 323. Parties opposing summary judgment are required to “cit[e] to 6 particular parts of materials in the record” establishing a genuine dispute or “show[] that 7 the materials cited do not establish the absence ... of a genuine dispute.” FED. R. CIV. P. 8 56(c)(1). 9 II. Analysis 10 At the summary judgment stage, Plaintiff Infini’s evidence is “to be believed, and 11 all justifiable inferences are to be drawn in [his] favor.” See Anderson, 477 U.S. at 255 12 (1986). Disputed facts are “viewed in the light most favorable to” Infini, the non-moving 13 party. See Scott v. Harris, 550 U.S. 372, 380 (2007). 14 A. 15 In Arizona, the interpretation of an insurance contract is a question of law. Liristis 16 v. Am. Family Mut. Ins. Co., 61 P.3d 22, 25 (Ariz. Ct. App. 2002). Insurance policies are 17 “read as a whole, so as to give a reasonable and harmonious effect to all of its 18 provisions.” Charbonneau v. Blue Cross of Washington and Alaska, 634 P.2d 972, 975 19 (Ariz. Ct. App. 1981). Insurance contracts are interpreted “according to their plain and 20 ordinary meaning.” Keggi v. Northbrook Prop. & Cas. Ins. Co., 13 P.3d 785, 788 (Ariz. 21 Ct. App. 2000). When the insurance policy language is unambiguous, “the court does not 22 create ambiguity to find coverage.” American Family Mut. Ins. Co. v. White, 65 P.3d 449, 23 452 (Ariz. Ct. App. 2003). The insured party bears the burden of establishing coverage, 24 while the insurer bears the burden of establishing that a policy exclusion is applicable. 25 Keggi, 13 P.3d at 788. 26 Lexington Insurance Company’s Motion for Summary Judgment Lexington moves for summary judgment on six of Infini’s claims: (1) breach of 27 contract, (2) bad faith, (3) negligence, (4) breach of fiduciary duty, (5) declaratory relief; 28 and (6) fraud. -4- 1 1. Whether the Medical Incident is covered under the 2013-2014 Policy. 2 3 In its Motion for Summary Judgment, Lexington argues that Infini did not provide 4 adequate notice of the Medical Incident to Lexington under the terms of the 2013-2014 5 Policy, and so it does not have to indemnify Infini. The 2013-2014 Policy outlines Infini’s 6 duties if a claim, suit, or medical incident arises: 7 8 9 If during the policy period, [Infini] shall become aware of any medical incident which may reasonably be expected to give rise to a claim being made against any Insured, [Infini] must notify [Lexington] in writing as soon as practicable. To the extent possible, notice should include: 10 a) How, when, and where the medical incident took place; 11 b) The named and addresses of any injured persons and witnesses; and 12 c) The nature and location of any injury or damage arising out of the medical incident. 13 14 15 16 Any claim arising out of such medical incident which is subsequently made against any Insured and reported to us, shall be considered first made at the time such notice was given to us. (Doc. 173 Ex. 11). 17 On October 1, 2014, when filling out a form related to the renewal of coverage for 18 Infini, a representative of Wells Fargo Insurance Services noted that she was “aware of [a] 19 circumstance accident or loss . . . which may result in a claim under the insurance 20 coverage.” (Doc. 173-12 at 51). This document also specifically noted that a record request 21 had been made by a lawyer. (Id.). 22 This information, however, does not constitute notice under the 2013-2014 Policy. 23 It lacks the relevant facts that might be used by Lexington to process the potential claim— 24 information that the 2013-2014 Policy says that notice should provide. The information is 25 also addressed to Lexington’s underwriter, SBT, which is not charged with processing 26 claims that are made under Lexington’s insurance policy. Lexington offers no evidence to 27 suggest that SBT was its agent for purposes of receiving claims or that Infini had a right to 28 believe that it was. Further, the application does not say “how when and where the medical -5- 1 incident took place,” the identity of the injured person, or the damages that resulted from 2 the medical incident. In similar situations, many courts have rejected the argument that 3 information in a renewal application could provide sufficient notice under an older policy. 4 See Am. Cas. Co. of Reading, v. Continisio, 17 F.3d 62, 69 (3d Cir. 1994); FDIC v. St Paul 5 Fire & Marine Ins. Co., 993 F.2d 155, 160 (8th Cir. 1993) (“Notice that would cause one 6 to investigate a renewal for insurance must surely be different than notice to investigate 7 potential claims.”); LaForge v. Am. Cas. Co. of Reading, 37 F.3d 580, 584 (10th Cir. 1994) 8 (renewal application information not notice because it was provided to “seek coverage 9 from the insurer’s underwriters rather than in a document designed to seek recovery under 10 the policy in effect.”). 11 Because notice was not given during the policy period or during the automatic 12 extension reporting period, there is no coverage for the medical incident under the 2013- 13 2014 Policy. Thus, Lexington’s Motion for Summary Judgment as to the 2013-2014 Policy 14 15 period is granted. 2. Whether Infini reasonably expected liposuction coverage under the 2014-2015 Policy. 16 In Arizona, when insurance policy language unambiguously precludes coverage, 17 that policy may still be read to provide coverage for the insured, but only if the insured had 18 a reasonable expectation of coverage under the policy. Darner Motor Sales, Inc. v. 19 Universal Underwriters Ins. Co., 140 Ariz. 383, 391 682 P.2d 388, 396 (1984). A 20 reasonable expectation “must be limited by something more than the fervent hope usually 21 engendered by loss.” Id. at 395. The “reasonable expectations” doctrine is limited to 22 circumstances where the insurer has reason to believe that the insured would not assent to 23 the policy if the insured knew of the particular policy language. Id. at 396. In Gordinier 24 v. Aetna Casualty & Surety Co., 154 Ariz. 266, 742 P.2d 277 (1987), the Arizona Supreme 25 Court listed specific situations where Darner applies, including: 26 27 28 Where the insured did not receive full and adequate notice of the term in question, and the provision is either unusual or unexpected, or one that emasculates apparent coverage; Where some activity which can be reasonably attributed to the insurer would create an objective impression of coverage in the mind of a reasonable insured; Where some activity reasonably -6- 1 2 3 attributable to the insurer has induced a particular insured reasonably to believe that he has coverage, although such coverage is expressly and unambiguously denied by the policy. Gordinier, 742 P.2d at 272-73 (internal citations omitted). 4 When an insured seeks a renewal of insurance coverage, “an insured has a right to 5 rely on the assumption that, absent sufficient notice to the contrary, the renewal was the 6 same in terms of coverage as the original.” James v. Burlington Northern Sante Fe Ry. Co., 7 2007 WL 2461685, at *6 (D. Ariz. 2007) (citing Lumbermen’s Ins. Co. v. Heiner, 74 Ariz. 8 152, 156 245 P.2d 415, 418 (1952)). 9 To prevail on its motion for summary judgment here, Lexington must demonstrate 10 that it provided “full and adequate notice” to Infini regarding the change in liposuction 11 coverage, or that the change in coverage was not “unusual or unexpected.” See Gordinier, 12 742 P.2d at 273. Lexington must also demonstrate that it did not induce a reasonable belief 13 of coverage through its acts. Id. There remain factual disputes over whether Infini was ever 14 given full and adequate notice of the change in terms, whether the change was unusual or 15 unexpected, and whether Lexington’s conduct caused Infini to reasonably expect it had 16 coverage for liposuction. 17 Lexington points to the language of the quote and policy—which plainly exclude 18 coverage for liposuction—to argue that it gave notice to Infini. But as noted above, 19 Lexington must do more than point to the language of the renewed policy to overcome the 20 reasonable expectations doctrine. It must demonstrate that it provided “full and adequate” 21 notice to Infini that the terms of the policy had changed through something other than the 22 terms of the agreement. Gordinier, 742 P.2d at 273. 23 Several facts in the record could support a finding that Infini did not receive full and 24 adequate notice of the change in coverage. All of Infini’s previous policies with Lexington 25 provided coverage for liposuction. Infini’s rates went up in the 2014-2015 Policy, which 26 would generally indicate the same or better coverage. Indeed, Lexington’s underwriter 27 SBT noted that “the premium increase is due to the significant increase in exposure.” (Doc. 28 173-33 at 2). Notably, this rationale for the premium increase was relayed to Dr. Hall. -7- 1 (Doc. 211-1 at 5). Infini asserts that it was “astonished” to find out that the 2014-2015 2 Policy did not provide coverage for the liposuction procedures it performs. (Id. at 3). 3 Finally, it is hard to believe that Infini would have agreed to the 2014-2015 Policy if he 4 had known that it did not cover his liposuction procedures—which he asserts are the most 5 likely to cause liability. (Id. at 2). 6 Lexington has failed to demonstrate it provided sufficient notice to Infini of the 7 lack of coverage in the 2014-2015 Policy. Nor has it shown that the lack of coverage was 8 not “unusual or unexpected,” given Infini’s previous history of coverage for liposuction. 9 Gordinier, 742 P.2d at 272-73. The fact that Infini’s premiums went up could create an 10 “objective impression of coverage in the mind of a reasonable insured.” Gordinier, 742 11 P.2d at 273. Because a reasonable jury could find that Infini had a reasonable expectation 12 of coverage for liposuction under the 2014-2015 Policy, Lexington’s Motion for Summary 13 Judgment on Infini’s claim of a breach of contract is denied in part.2 14 3. Whether Lexington acted in bad faith 15 In Arizona, insurance contracts include an implied covenant of good faith and fair 16 dealing that requires the parties to refrain from any conduct that would impair the benefits 17 or rights expected from the contractual relationship. See Rawlings v. Apodaca, 726 P.2d 18 565, 570 (Ariz. 1986). The tort of bad faith recognizes that “implicit in the contract and the 19 relationship is the insurer’s obligation to play fairly with its insured.” Id. at 570. To 20 establish bad faith on the part of the insurer, “a plaintiff must show the absence of a 21 reasonable basis for denying benefits of the policy and the defendant’s knowledge or 22 reckless disregard of the lack of a reasonable basis for denying the claim.” Deese v. State 23 24 25 26 27 28 2 Lexington argues that even if Infini had a reasonable expectation of coverage, the Court should still grant it summary judgment on this count because the prior acts exclusion of the 2014-2015 Policy nonetheless precludes coverage. But Lexington misunderstands the reasonable expectations doctrine. If Infini can demonstrate that it had a reasonable expectation of coverage for the medical incident, then a jury may conclude that it is covered regardless of the unambiguous terms of the policy, which includes terms like the prior acts exclusion. Darner, 682 P.2d at 396. To reiterate, a reasonable jury could find that Infini expected coverage for the Medical Incident—especially in the context of renewal, where the insurer made statements that could have caused Infini to believe it was obtaining the same coverage. -8- 1 Farm Mut. Auto. Ins. Co., 172 Ariz. 504, 506 838 P.2d 1265, 1267-68 (1992) (internal 2 quotation marks omitted). The first inquiry involves an objective analysis that focuses on 3 whether the insurer acted unreasonably, while the second involves a subjective analysis as 4 to “whether the insurer knew that its conduct was unreasonable or acted with such reckless 5 disregard that such knowledge could be imputed to it.” Id. at 507 (emphasis in original). 6 Lexington asserts that because there was no breach of contract, there cannot be a 7 finding of bad faith. But in Arizona, bad faith claims against insurers are independent of 8 coverage. Manterola v. Farmers Ins. Exchange, 200 Ariz. 572, 578 30 P.3d 639, 645 (Ariz. 9 Ct. App. 2001). Therefore, "[t]he covenant of good faith and fair dealing can be breached 10 even if the policy does not provide coverage." Lloyd v. State Farm Mut. Auto. Ins. Co., 189 11 Ariz. 369, 377 943 P.2d 729, 737 (Ariz. Ct. App. 1996). 12 A jury could find that Lexington acted unreasonably by first indicating that Infini 13 would be covered under the 2014-2015 Policy by raising its premiums, asserting that the 14 increase in premiums is due to an increase in the risk of exposure, while providing a policy 15 that did not cover a large portion of Infini’s procedures that had been covered under the 16 previous policy terms. Lexington does not offer an alternative explanation for why it raised 17 Infini’s rates in the 2014-2015 Policy, nor does it explain why it decided to omit coverage 18 for liposuction from the 2014-2015 Policy—even though it had provided coverage for 19 Infini’s tumescent liposuction for years. 20 Although a jury could find that the denial of coverage was unreasonable, Infini must 21 point to some facts that could indicate that Lexington either knew that it was unreasonable 22 in denying coverage, or that it acted with reckless disregard as to the reasonableness of its 23 denial of coverage. The email from underwriter SRT, which states that “[t]he increase in 24 premiums is due to the significant increase in exposures,” (Doc. 173-33 at 2), could be used 25 by a jury to demonstrate that Lexington acted with reckless disregard as to the 26 reasonableness of its conduct. 27 “astonished” to find out he did not have coverage. (Doc. 211-1 at 3). A reasonable jury 28 could find that Lexington was reckless as to the reasonableness of its conduct in processing This email, which was relayed to Infini, caused it to be -9- 1 2 Infini’s application for renewal and in its ultimate decision to deny coverage. 4. Negligence 3 Lexington also asks that the Court grant it summary judgment on Infini’s negligence 4 claim. Under Arizona law, an insurance company may not be sued for an independent 5 claim of negligence for mishandling of a claim. See Miel v. State Farm Mut. Auto Ins. Co. 6 185 Ariz. 104, 111 912 P.2d 1333, 1340 (Ariz. Ct. App. 1995). Those kinds of claims must 7 instead be brought as a breach of the covenant of good faith and fair dealing. Id. However, 8 the Court in Miel also acknowledged that a claim for negligent “processing an application 9 for insurance” or “for an agent’s negligent misrepresentation about the scope of the 10 insurance policy” could be brought against an insurance company. See id. (citing Darner, 11 140 Ariz. at 385-386; Continental Life & Acc. Co. v. Songer, 124 Ariz. 294, 302, 603 P.2d 12 921, 929 (1979)). Infini’s third party complaint argues that Lexington acted negligently 13 “by failing to obtain and/or maintain and/or honor the necessary coverage and their 14 promises and duties as to Infini” (Doc. 25 at 17), which could include negligent processing 15 of the claim as well as negligent misrepresentation of coverage and negligent processing 16 of an application. However, under Miel, Infini cannot bring a claim against Lexington for 17 negligent handling of his claim. So Infini’s negligence claim against Lexington is limited 18 to the theories of negligent misrepresentation of coverage and negligent processing of an 19 application for insurance. 20 5. Declaratory Relief 21 Because this order leaves open the possibility that Infini has coverage for the 22 medical incident from Lexington, Lexington’s Motion for Summary Judgment as to 23 declaratory relief is denied. 24 6. Fraud 25 In its Motion for Summary Judgment, Lexington states that because it did not 26 intentionally conceal the fact that the 2014-2015 Policy did not cover tumescent 27 liposuction, Infini’s claim of fraud fails as a matter of law. (Doc. 170 at 28). But 28 intentional concealment is not the standard for fraud in Arizona. Instead, the elements of - 10 - 1 fraud are: “(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's 2 knowledge of its falsity or ignorance of its truth; (5) the speaker's intent that it be acted 3 upon by the recipient in the manner reasonably contemplated; (6) the hearer's ignorance of 4 its falsity; (7) the hearer's reliance on its truth; (8) the right to rely on it; (9) his consequent 5 and proximate injury.” Echols v. Beauty Built Holmes, Inc., 132 Ariz. 498, 500 647 P.2d 6 629, 631 (1982). The email sent by underwriter SRT, which was relayed to Infini, could 7 be used to establish a claim of fraud against Lexington. It was a representation that clearly 8 implied that Infini would be covered under the new policy for claims relating to the 9 “significant increase in risk.” Infini asserts that it relied upon this email, and the email 10 partially caused it to be astonished to discover there was no coverage for liposuction under 11 his new policy. (Doc. 211-1 at 3). Lexington’s Motion for Summary Judgment as it relates 12 to fraud is denied. 13 7. Breach of Fiduciary Duty 14 Infini’s breach of fiduciary duty claim against Lexington fails as a matter of law. 15 See Kovacs v. Sentinel Ins. Co. Ltd., 2016 WL 3570475 (D. Ariz. 2016) (“Insurer owes no 16 fiduciary duties to an insured under Arizona law.”) Thus, Lexington’s Motion for Summary 17 Judgment as to breach of fiduciary duty is granted. 18 B. 19 AIG Claims is a third-party claims adjuster that contracts with Lexington to adjust 20 claims made by persons who are insured by Lexington. In its complaint, Infini alleges six 21 separate claims of liability against AIG Claims. But in its response, Infini PLC only alleges 22 that AIG Claims acted in bad faith when it denied coverage to Infini. AIG Claims has 23 asked for summary judgment on Infini’s claim of bad faith against AIG Claims. Because 24 the Court finds that there are insufficient facts to support a finding of bad faith against AIG, 25 it will grant AIG’s Motion for Summary Judgment. But AIG Claims’ conduct may still be 26 imputed to Lexington for claims of bad faith and breach of contract. 27 /// 28 /// AIG Claims’ Motion for Summary Judgment - 11 - 1 1. 2 Infini’s Claim Against AIG for Bad Faith is Not Supported by Sufficient Facts 3 In Arizona, it is unsettled whether an insurance adjuster can be held liable for bad 4 faith. See IDS Property Cas. Ins. Co. v. Gambrell, 913 F.Supp.2d 748, 753 (D. Ariz. 2012) 5 (“[J]udges have repeatedly concluded that the law surrounding the viability of a bad faith 6 claim against an insurance adjuster is unsettled in Arizona.”). Because AIG Claims conduct 7 did not rise to the level of bad faith, this analysis assumes that an insurance adjuster can be 8 held liable for bad faith. In processing Infini’s request for coverage, AIG Claims adjuster 9 Kristina Kovac simply looked to the 2014-2015 Policy and noted that it did not cover 10 liposuction. While it is possible that Infini may nonetheless be covered under the 2013- 11 2014 Policy, there is no evidence that Ms. Kovac’s knew that she was acting unreasonably 12 in denying coverage, or that she acted with reckless disregard when denying coverage. 13 Infini points to no separate evidence, other than the denial and a failure to consider Infini’s 14 older policies, to support a factual finding that AIG Claims acted in bad faith when it denied 15 coverage. 2. 16 AIG Claims’ Conduct Is Still Imputed to Lexington. 17 Although AIG Claims’ conduct in isolation does not rise to the level of bad faith, it 18 may be considered in determining whether Lexington acted in bad faith. AIG Claims 19 adjusted Infini’s claim on behalf of Lexington, and so its conduct may be imputed to 20 Lexington for purposes of Infini’s claims of breach of contract and bad faith. See Meineke 21 v. GAB Business Services, Inc., 195 Ariz. 564, 568 991 P.2d 267, 271 (Ariz. Ct. App. 2000) 22 (noting that where an adjuster mishandles a claim “the adjuster’s actions are imputed to the 23 insurer.”). The Court will grant Infini’s cross motion for summary judgment on this limited 24 issue, and finds that AIG’s conduct is imputed to Lexington. (Doc. 210 at 22). 25 C. Wells Fargo Insurance Services’ Motion for Summary Judgment 26 Wells Fargo Insurance Services moves for summary judgment against Infini on five 27 claims: (1) Breach of contract, (2) Breach of the covenant of good faith and fair dealing, 28 (3) Breach of Fiduciary Duty, (4) Fraud, and (5) Negligence. - 12 - 1 1. Breach of Contract 2 To establish a claim for breach of contract, Infini must demonstrate the existence of 3 a contract between it and Wells Fargo, its breach, and resulting damages. First Am. Title 4 Ins. Co. v. Johnson Bank, 239 Ariz. 348, 352 372 P.3d 293, 397 (2016). In its Motion for 5 Summary Judgment, Wells Fargo Insurance Services argues that the Court should grant 6 summary judgment on Infini’s breach of contract claim against it because Wells Fargo 7 provided some medical malpractice coverage to Infini, Infini took an unreasonably long 8 time to fill out the application, and Infini failed to read the quote and ultimate policy 9 coverage to ensure it provided sufficient coverage for his practice. 10 There is evidence that indicates that Wells Fargo Insurance Services’ obligation 11 under the contract extended beyond merely providing some medical malpractice coverage. 12 On its website, Wells Fargo advertises services that include “tailoring the right solutions 13 to help protect your company,” and notes that “our experienced teams help businesses 14 navigate smoothly through a myriad of complex issues.” (Doc. 241 at 8-9). Given that 15 Wells Fargo Insurance Services had obtained liposuction coverage for Infini for years, it 16 likely needed to provide coverage for all of his services under the contract. 17 Wells Fargo does not point to any case law that demonstrates an insured’s failure to 18 read the insurance coverage provided by the insurance broker would conclusively 19 demonstrate that the insurance broker did not breach its contract with the insured. Part of 20 the reason that insured persons hire insurance brokers is to have them navigate complex 21 insurance agreements. 22 agreement with Infini by failing to provide it with sufficient coverage for its practices, and 23 Wells Fargo request for summary judgment on this count must be denied. 24 2. A reasonable jury could find that Wells Fargo breached its Good Faith and Fair Dealing 25 Wells Fargo also asks that the Court grant it summary judgment on Infini’s claim 26 that Wells Fargo violated the covenant of good faith and fair dealing. Arizona law “implies 27 a covenant of good faith and fair dealing in every contract. The duty arises by virtue of a 28 contractual relationship.” Rawlings v. Apodaca, 151 Ariz. 149, 153 726 P.2d 565, 569 - 13 - 1 (1986) (internal citations omitted). To bring an action in tort claiming damages for the 2 breach of good faith, a party must establish “a special relationship between the parties 3 arising from elements of public interest, adhesion, and financial responsibility.” Wells 4 Fargo Bank v. Arizona Laborers, 201 Ariz. 474, 491, 38 P.3d 12, 28-29 (2002) 5 Whether a “special relationship” existed between Wells Fargo Insurance Services 6 and Infini is a question of fact. There are sufficient facts in the record that could lead a 7 reasonable jury to find that Wells Fargo Insurance Services had a special relationship with 8 Infini, given that Infini used Wells Fargo Insurance Services to procure insurance since 9 2003 (Doc. 25 at 8), and trusted them to provide insurance coverage for his medical 10 practice. Infini also contacted Wells Fargo Insurance Services after the lawyer’s request 11 for medical records, seeking advice on how to proceed. These facts could lead a jury to 12 find that a special relationship existed between Wells Fargo Insurance Services and Infini. 13 3. Breach of Fiduciary Duty 14 Wells Fargo argues that it is entitled to summary judgment on Infini’s breach of 15 fiduciary duty claim. In Arizona, insurance brokers typically owe a duty to the individual 16 seeking insurance coverage “to exercise reasonable care, skill and diligence in carrying out 17 the agent’s duties in procuring insurance.” Darner, 682 P.2d at 402 (internal citations and 18 quotation marks omitted). While this duty may be used to support a negligence claim 19 against an insurance broker, it is not the same thing as a fiduciary duty. In Darner the 20 Arizona Supreme Court specifically noted that an insurance broker “cannot be held 21 accountable as [the insured’s] fiduciary.” Id. The Court is aware of no Arizona case law 22 where a court found that an insurance broker owed the insured a fiduciary duty, so this 23 claim fails as a matter of law. See also Kovacs v. Sentinel Ins. Co. Ltd.2016 WL 3570475 24 (D. Ariz. 2016) (“Insurer owes no fiduciary duties to an insured under Arizona law.”). 25 4. Fraud 26 Infini does not respond to Wells Fargo’s request for summary judgment on the claim 27 of fraud. There is not sufficient evidence in the record to support a finding that Wells Fargo 28 made false representations that the 2014-2015 Policy provided coverage for liposuction. - 14 - 1 Therefore, the Motion for Summary Judgment as to fraud is granted. 2 5. Negligence 3 Because Wells Fargo Insurance Services did not request summary judgment on 4 Infini’s negligence claim in its initial Motion for Summary Judgment, its request for sua 5 sponte partial summary judgment in its reply motion is denied. 6 7 IT IS THEREFORE ORDERED that Lexington’s Motion for Summary Judgment (Doc. 171) is GRANTED IN PART AND DENIED IN PART as follows: 8 9 1. As to breach of contract is GRANTED IN PART as to coverage under the 2013-2014 Policy. 10 2. As to good faith and fair dealing is DENIED. 11 3. As to negligence is GRANTED IN PART as to the negligent mishandling 12 of a claim, but not as to negligent processing of an application for insurance or negligent 13 misrepresentation of the scope of coverage. 14 4. As to breach of fiduciary duty is GRANTED. 15 5. As to declaratory relief is DENIED. 16 6. As to fraud is DENIED. 17 IT IS FURTHER ORDERED that AIG Claims’ Motion for Summary Judgment 18 (Doc. 178) is GRANTED. The Clerk of Court is directed to terminate AIG from this 19 action. 20 IT IS FURTHER ORDERED that Infini’s Cross Motion for Summary Judgment 21 (Doc. 210) is GRANTED because AIG Claims’ conduct is imputed to Lexington on the 22 bad faith claim. 23 IT IS FURTHER ORDERED that Wells Fargo Insurance Services’ Motion for 24 Summary Judgment (Doc. 226) is GRANTED IN PART AND DENIED IN PART as 25 follows: 26 1. As to breach of contract is DENIED. 27 2. As to good faith and fair dealing is DENIED. 28 3. As to breach of fiduciary duty is GRANTED. - 15 - 1 4. As to negligence sua sponte is DENIED. 2 5. As to fraud is GRANTED. 3 IT IS FURTHER ORDERED that Infini’s Motion to Strike (Doc. 250) is 4 5 DENIED AS MOOT. ated this 3rd day of January, 2019. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 16 -
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