Opinion
1 CA-CV 23-0412
07-09-2024
DATE STREET CAPITAL, LLC, Plaintiff/Appellant, v. COMMONWEALTH CASUALTY COMPANY, Defendant/Appellee.
Law Office of Adam B. Decker, Tempe By Adam B. Decker Counsel for Plaintiff/Appellant Insurance Defense Law Group, LLC, Scottsdale By Joseph P. Rocco, Jason S. Carr Counsel for Defendant/Appellee
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Maricopa County No. CV2022-013930 The Honorable Bradley H. Astrowsky, Judge
AFFIRMED
Law Office of Adam B. Decker, Tempe By Adam B. Decker Counsel for Plaintiff/Appellant
Insurance Defense Law Group, LLC, Scottsdale By Joseph P. Rocco, Jason S. Carr Counsel for Defendant/Appellee
Judge Kent E. Cattani delivered the decision of the Court, in which Presiding Judge Daniel J. Kiley and Judge D. Steven Williams joined.
MEMORANDUM DECISION
CATTANI, Judge
¶1 Date Street Capital, LLC ("Date Street") financed the purchase of (and retained a security interest in) a used car that was subsequently damaged in an accident. After the purchaser's insurer, Commonwealth Casualty Company ("Commonwealth"), denied coverage, Date Street sought declaratory relief, but the superior court denied the request for relief and instead granted summary judgment in favor of Commonwealth. For reasons that follow, we affirm.
FACTS AND PROCEDURAL BACKGROUND
¶2 In 2018, Reyna Gomez purchased a car and financed the purchase through Date Street. The purchase agreement required Gomez to obtain automobile insurance identifying Date Street as a loss payee or lienholder, and Gomez purchased such a policy from Commonwealth (the "Policy").
¶3 The Policy identified Reyna Gomez as the sole registered owner and driver of the car. Gomez chose to exclude household members from coverage and declined to pay a separate premium to obtain coverage for unlisted non-household members. By declining coverage for other drivers, the policy Gomez secured specifically excluded damage coverage as follows:
Unless drivers are shown on the Declarations Page, physical damage coverage under Part F of the policy will not be afforded.Part F, in turn, clarified that "[Commonwealth] will only pay for loss caused by collision or by comprehensive if those coverages are specified in the Declarations, and a separate premium has been paid for each of those coverages." And it expressly excluded "[l]oss to [the] covered auto, if it is being operated or was last operated, by a person not listed on the declarations page" unless "the option to remove the Named Driver Restriction has been purchased."
¶4 In 2020, Orlando Mejia was driving Gomez's car when he was involved in an accident in which the car was totaled. Gomez and Date Street filed a claim seeking compensation for the loss, but Commonwealth denied it, reasoning that the Policy did not provide coverage for anyone other than Gomez.
¶5 Date Street sued Commonwealth for declaratory relief, asserting its lienholder rights and interests in the Policy and claim. Commonwealth filed a motion for summary judgment based on the driver restriction clause of the Policy, and Date Street filed a cross-motion for summary judgment. The superior court granted Commonwealth's motion and denied Date Street's cross-motion, finding that "there is no genuine dispute of any material fact that is relevant to a determination of the legal issue presented" because "[t]he language of the Policy is clear and unambiguous." The court thus ruled that "[Commonwealth] has no obligation to pay [Date Street], the lienholder" because "the Policy does not provide collision coverage for the accident involved in this matter."
¶6 Date Street timely appealed, and we have jurisdiction under A.R.S. § 12-2101(A)(1).
DISCUSSION
¶7 We review de novo the superior court's grant of summary judgment based on its interpretation of an insurance policy. See Cal. Cas. Ins. Co. v. Am. Fam. Mut. Ins. Co., 208 Ariz. 416, 418, ¶ 5 (App. 2004). Summary judgment is appropriate only if "there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Kalway v. Calabria Ranch HOA, LLC, 252 Ariz. 532, 537, ¶ 9 (2022) (quoting Ariz. R. Civ. P. 56(a)).
¶8 When interpreting an insurance contract, we seek to give effect to the parties' intent as evidenced by the plain meaning of the words in the contract. Liberty Ins. Underwriters, Inc. v. Weitz Co., LLC, 215 Ariz. 80, 83, ¶ 8 (App. 2007); Worldwide Jet Charter, Inc. v. Toulatos, 254 Ariz. 331, 334, ¶ 10 (App. 2022).
I. Coverage and Exclusions.
¶9 Date Street contends the superior court erred by finding that the Policy's language unambiguously precluded coverage. An insurance policy is ambiguous if it is "subject to conflicting reasonable interpretations." Teufel v. Am. Fam. Mut. Ins. Co., 244 Ariz. 383, 385, ¶ 10 (2018) (citation omitted). But where the parties' intent is "expressed in clear and unambiguous language," the court need not engage in further contract construction or interpretation. Mining Inv. Grp., LLC v. Roberts, 217 Ariz. 635, 639, ¶ 16 (App. 2008) (quoting Goodman v. Newzona Inv. Co., 101 Ariz. 470, 472 (1966)).
¶10 Date Street asserts the Declarations Page, the Application for the Policy, and the Loss Payable Clause are ambiguous. Date Street argues in particular that the Declarations Page is ambiguous because it excludes household members by name but does not list Orlando Mejia as an excluded driver. Date Street asserts that because Mejia was not listed as an excluded driver, there is an ambiguity regarding whether he is a covered driver. But as a non-household member, Mejia's status is addressed under a separate "Exclusions" provision in the Policy:
-PART F-
COVERAGE FOR DAMAGE TO YOUR AUTO
....
EXCLUSIONS
We will not pay for:
....
22. Loss to your covered auto, if it is being operated or was last operated, by a person not listed on the declarations page. This exclusion will not apply on a policy where the option to remove the Named Driver Restriction has been purchased. And all the conditions have been met for the restriction to be removed.
¶11 The Policy further clarifies the meaning and purpose of this restriction elsewhere:
NAMED DRIVER RESTRICTION REMOVAL
Unless drivers are shown on the Declarations Page, physical damage coverage under Part F of the policy will not be afforded.
If this option is purchased and is shown on the Declarations Page, exclusion 22 under Part F of this policy will not apply to non-resident permissive drivers. Coverage under Part F
will apply only to licensed drivers who do not reside in your household, and do not frequently operate or have access to operate your covered auto. Verification must be submitted by you that the licensed driver does not reside at the address or addresses listed on the Declarations Page, and does not frequently operate your covered auto.
¶12 Thus, the Policy provided coverage for Reyna Gomez, but not for other members of her household. And it did not provide coverage for non-residential permissive drivers (like Mejia) unless Gomez were to purchase the optional Named Driver Restriction Removal.
¶13 Gomez's decision not to purchase that option is also unambiguous. Gomez placed her initials next to a paragraph within the Application that read:
I understand for vehicles that carry physical damage coverage, I have the option to remove the Named Driver Restriction for an additional premium. If I select not to purchase this option, there will be no physical damage coverage afforded for the vehicle if at the time of the loss an unlisted driver was operating or last operated the vehicle. An unlisted driver is any person not listed on the Declarations Page.
¶14 Thus, under the clear language of the Policy, Gomez did not obtain coverage for anyone other than herself.
II. Loss Payable Clause.
¶15 Date Street argues it was entitled to coverage as a lienholder under the Policy's Loss Payable Clause, further asserting that the superior court failed to consider whether it was a "simple" or "standard" clause. Under a "simple" loss payable clause, a lienholder is identified as a person or entity that may collect insurance proceeds, and the rights of the lienholder are no greater than the rights of the insured. Am. Credit of Sumter, Inc. v. Nationwide Mut. Ins. Co., 663 S.E.2d 492, 494 (S.C. 2008). In contrast, a "standard" clause separately and independently insures the lienholder's interest, and an insured's breach of the policy does not prevent recovery by the lienholder. Id. Here, Date Street does not allege that Gomez breached her agreement with Commonwealth. Thus, the only relevant analysis is Date Street's rights under a "simple" clause analysis, with Date Street's rights limited to those of the insured.
¶16 The Loss Payable Clause reads in relevant part:
We will pay for accident or for damage due under this policy according to your interest and that of the . . . lienholder, if one is shown in the Declarations page. We may then make separate payments according to those interests.
....
Where the accident is otherwise not covered under the terms of this policy or due to any exclusion under this policy, the . . . lienholder's interest will not be protected.
¶17 By the express terms of the Loss Payable Clause, lienholder Date Street was only entitled to payments "due under the policy." And here, no payment was due under the Policy because Gomez did not purchase coverage to remove the Named Driver Restriction.
III. Reasonable Expectation of Coverage.
¶18 Date Street further argues that even if the Policy's terms are clear and unambiguous, they are nevertheless unenforceable because they frustrate Gomez's and Date Street's reasonable expectation of coverage.
¶19 The reasonable expectation doctrine applies when there is a standardized non-negotiated contract. See Gordinier v. Aetna Cas. &Sur. Co., 154 Ariz. 266, 271-72 (1987). The doctrine "relieves an insured from certain clauses of an agreement which he did not negotiate, probably did not read, and probably would not have understood had he read them." State Farm Fire &Cas. Ins. Co. v. Grabowski, 214 Ariz. 188, 192, ¶ 14 (App. 2007) (citation omitted). But the doctrine "necessarily applies to the reasonable expectations of the contracting parties, not to the reasonable expectations of a hopeful insured . . . who is a stranger to the insurance contract." Cullen v. Koty-Leavitt Ins. Agency, Inc., 216 Ariz. 509, 517, ¶ 21 (App. 2007).
¶20 Here, although Date Street required Gomez to purchase an auto insurance policy, Date Street cannot invoke the reasonable expectation doctrine because it was not a contracting party. And even though Gomez was a contracting party, the doctrine does not apply because, as explained above, the Policy's terms are clear and unambiguous. See, e.g., Am. Fam. Mut. Ins. Co. v. White, 204 Ariz. 500, 507, ¶ 19 (App. 2003) ("We find . . . no facts to support a 'reasonable expectations' revision of this insurance policy. The policy language is clear, unambiguous, and objectively reasonable; the exclusion is not lengthy, confusing, complex, or buried in the policy."). Thus, Date Street cannot invoke the reasonable expectation doctrine.
CONCLUSION
¶21 Because the Policy's language is clear and unambiguous, the superior court did not err by granting Commonwealth's motion for summary judgment. Accordingly, we affirm.
¶22 Both parties request attorney's fees and costs on appeal. Because this case arises out of contract and Commonwealth is the prevailing party on appeal, we grant Commonwealth's request and award its reasonable attorney's fees and costs incurred on appeal upon compliance with ARCAP 21. See A.R.S. §§ 12-341.01(A), -342.