Opinion
No. CV-20-00465-TUC-JGZ
2022-10-31
FARWEST PUMP COMPANY, et al., Plaintiffs, v. SECURA INSURANCE, Defendant.
Benjamin C. Calleros, Bradley A. Cosman, Perkins Coie LLP, Phoenix, AZ, David Jeffrey Leonard, Leonard & Felker PLC, Tucson, AZ, Rohit Talwar, Talwar Law PLLC, Tucson, AZ, for Plaintiff Farwest Pump Company. David Jeffrey Leonard, Leonard & Felker PLC, Tucson, AZ, Rohit Talwar, Talwar Law PLLC, Tucson, AZ, for Plaintiff David J. Leonard PLC. Jennifer Marie Bahling, Kevin Charles Barrett, Amanda Jean Taylor, Barrett & Matura PC, Scottsdale, AZ, John J. Daller, Lewis Brisbois Bisgaard & Smith LLP, Phoenix, AZ, for Defendant.
Benjamin C. Calleros, Bradley A. Cosman, Perkins Coie LLP, Phoenix, AZ, David Jeffrey Leonard, Leonard & Felker PLC, Tucson, AZ, Rohit Talwar, Talwar Law PLLC, Tucson, AZ, for Plaintiff Farwest Pump Company. David Jeffrey Leonard, Leonard & Felker PLC, Tucson, AZ, Rohit Talwar, Talwar Law PLLC, Tucson, AZ, for Plaintiff David J. Leonard PLC. Jennifer Marie Bahling, Kevin Charles Barrett, Amanda Jean Taylor, Barrett & Matura PC, Scottsdale, AZ, John J. Daller, Lewis Brisbois Bisgaard & Smith LLP, Phoenix, AZ, for Defendant.
ORDER
Jennifer S. Zipps, United States District Judge
This case involves a dispute about the extent of employee-theft coverage in a commercial insurance policy. Plaintiffs Farwest Pump Company and David Leonard (collectively "Farwest") seek coverage from Defendant Secura Insurance ("Secura"). Pending before the Court are Farwest's Motion for Partial Summary Judgment, (Doc. 64), and Secura's Cross-Motion for Summary Judgment. (Doc. 74.) The Motions are fully briefed. (Docs. 78, 80.) On September 15, 2022, the Court heard Oral Argument on the Motions. For the following reasons, the Court will deny Farwest's Motion and grant Secura's Motion. I. Background
The facts contained in this section are undisputed and are taken from the parties' submissions of facts. The parties filed a Joint Stipulated Statement of Facts in Support of Cross-Motions for Summary Judgment. (Doc. 57.) Plaintiffs filed a Separate Statement of Facts. (Doc. 65.) Defendant filed a Response to Plaintiffs' Separate Statement of Facts and a Separate Statement of Facts. (Doc. 75.) Plaintiffs subsequently filed a Reply in Support of Plaintiffs' Separate Statement of Facts and Controverting Statement of Facts, (Doc. 79), which the Court struck by separate Order. The Court's striking of this document has no bearing on the resolution of the pending motions. Farwest's filing does not raise a genuine issue of material fact and Farwest only cites to the filing in relation to its argument that Doug Gnas was an agent of Secura, an issue that the Court need not decide to resolve the pending motions.
During the relevant time period, Channa Vaught was the President and CEO of Farwest. (Doc. 65-1 at 106.) Ms. Vaught worked with Doug Gnas, then an insurance agent at Webb and Greer, to purchase insurance for Farwest. (Docs. 65-1 at 106; 75-3 at 4-5, 7.)
At issue in this lawsuit is a Secura Commercial Insurance Policy issued to Farwest, effective April 2012 to April 2013 ("the Policy"). (Doc. 57 ¶ 1.) The Policy's Commercial Property Coverage ("Property Policy") includes $202,100 in Business Personal Property Coverage, provided pursuant to Form CP 00 10 06 07; and $220,000 in Business Income Coverage, provided pursuant to Form CP 00 30 06 07. (Id. ¶¶ 2-5.) The Property Policy includes a Causes of Loss - Special Form (CP 10 30 06 07), which excludes employee theft. (Id. ¶ 6; Doc. 57-1 at 95.) The Policy also includes $250,000 in Commercial Crime Coverage ("Crime Coverage"), pursuant to Form CR 00 21 05 06, and $25,000 in Elite Contractor Wrap Coverage, providing additional employee dishonesty coverage, pursuant to Form CPT 7550 1001. (Id. ¶¶ 7-10.)
Secura had previously issued Commercial Insurance Policies to Farwest for policy periods April 2009 to April 2010, April 2010 to April 2011, and April 2011 to April 2012 ("the Prior Policies"). (Id. ¶ 11-12.) The Prior Policies each include separate Crime Coverage with a $100,000 policy limit for employee theft. (Id.) When Farwest renewed its Policy for 2012 to 2013, it increased its separate Crime Coverage for employee theft to $250,000, and included the Elite Contractor Wrap Coverage, with additional employee-dishonesty coverage of $25,000. (Doc. 57 ¶¶ 7-9.)
During the 2012-2013 Policy Period, Farwest discovered acts of employee theft that had been occurring since about 1998. (Doc. 75 ¶ 39.) Secura processed Farwest's claim arising out of the theft under the 2012-2013 Policy and paid Farwest a total of $276,011.40, consisting of the Crime Coverage's $250,000 policy limit, the Elite Contractor Wrap's $25,000 policy limit, and interest. (Doc. 75 ¶ 42.) Farwest asserts that it is entitled to further coverage for employee theft under the Property Policy. (Doc. 64 at 3.) Farwest also argues that it is entitled to the Prior Policies' Crime Coverage limits for each Policy Period in which employee theft occurred. (Doc. 64 at 15.) The parties rely on the written Policy in support of their positions.
Like most insurance policies, the Property Policy starts with declarations pages, which provide a general outline of what losses it insures. (See Doc. 57-1 at 38-41.) Under a column entitled "CAUSE OF LOSS," the declarations pages state "SPECIAL-Incl theft," indicating the inclusion of theft coverage. (Id.) Towards the end, the declarations identify "FORMS AND ENDORSEMENTS, APPLYING TO COMMERCIAL PROPERTY COVERAGE PART AND MADE PART OF THIS POLICY AT TIME OF ISSUE," including Form CP1030 (06-07). (Doc. 57-1 at 43.) Below the list of forms, the declarations pages include another statement warning readers that the forms contain conditions related to the coverages provided in the Property Policy:
THESE DECLARATIONS AND THE COMMON POLICY DECLARATIONS, IF APPLICABLE, TOGETHER WITH THE COMMON POLICY CONDITIONS, COVERAGE FORM(S) AND ENDORSEMENTS, IF ANY, ISSUED TO FORM A PART THEREOF, COMPLETE THE ABOVE NUMBERED POLICY.(Id.)
Form CP1030 (06-07) is entitled "CAUSE OF LOSS - SPECIAL FORM." (Doc. 57-1 at 93.) The first page of the Form presents a list of "1. Exclusions" and "2. Limitations." (Id.) The Form excludes and limits coverage in a variety of circumstances, such as "[e]arthquakes," "nuclear reaction or radiation," "civil war," "[f]loods," and "fungus." (Doc. 57-1 at 93-95.) In Section B.2.h., the Form specifically excludes "theft by employees":
2. We will not pay for loss or damage caused by or resulting from any of the following: . . . .
h. Dishonest or criminal act by you, any of your partners, members, officers, managers, employees (including leased employees), directors, trustees, authorized representatives or anyone to whom you entrust the property for any purpose:
(1) Acting alone or in collusion with others; or
(2) Whether or not occurring during the hours of employment.
(Doc. 57-1 at 95.)
This exclusion does not apply to acts of destruction by your employees (including leased employees); but theft by employees (including leased employees) is not covered.
The 2012-2013 Policy also contains language explaining when and how Secura insures losses that occurred prior to coverage under the Policy, such as the employee theft that occurred at Farwest prior to 2012. (Doc. 51-1 at 247-49.) The parties dispute whether this language allows Farwest to aggregate the limits of all Policies during which employee theft occurred. (Docs. 64 at 15; 74 at 1.)
The parties agree that Policy Section E.1.k applies to the losses at issue—losses incurred during prior Secura-insured Policy Periods. (Docs. 57-1 at 247; 64 at 22; 74 at 15.) Section E.1.k states:
In settling loss subject to this Condition:(Doc. 57-1 at 247.) Section E.1.k also includes an example to illustrate this condition:
. . .
The most we will pay for the entire loss is the highest single Limit of Insurance applicable during the period of loss, whether such limit was written under this insurance or was written under the prior insurance issued by us.
(Doc. 57-1 at 248.)
EXAMPLE NO. 2:
The Insured sustained a covered loss of $250,000 resulting directly from an "occurrence" taking place during the terms of Policy A and Policy B.
POLICY A . . . Limit of Insurance of $125,000 . . . .
POLICY B . . . Limit of Insurance of $150,000 . . . .
The highest single Limit of Insurance applicable to this entire loss is $150,000 written under Policy B . . . .
The most we will pay for this loss is $150,000.
In their Motion for Partial Summary Judgment, Farwest relies on a different section—Section E.1.l—to support its interpretation of Section E.1.k and its argument that it is entitled to not just the 2012-2013 Policy's Crime Coverage but also each Prior Policies' Crime Coverage. Policy Section E.1.l explains how Secura will cover losses incurred during prior non-Secura-insured policy periods. (Doc. 57-1 at 249.) Section E.1.l states: "The amount recoverable under this Condition is part of, not in addition to, the Limit of Insurance applicable to the loss covered under this insurance . . . ." (Id. (emphasis added).) Farwest argues that because Section E.1.k lacks the limiting phrase "part of, not in addition to," Section E.1.k should not be read to prohibit the aggregation of policy limits. (See Docs. 57-1 at 247; 64 at 22.)
On June 25, 2020, Farwest filed this breach-of-contract and declaratory judgment action against Secura in Pima County Superior Court. (Doc. 1-3 at 4-21.) Farwest alleges that Secura failed to fully pay claims under the Policy and requests that the Court interpret the Policy in Farwest's favor. (Doc. 1-3 at 4-5, 17-20.)
On October 28, 2020, Secura removed the action from state to federal court. (Doc. 1.) This Court has jurisdiction pursuant to 28 U.S.C. § 1332.
On May 17, 2022, Farwest filed the pending Motion for Partial Summary Judgment to address the two coverage issues: whether the Property Policy insures employee theft, and whether Farwest may aggregate the Crime Coverage policy limits from each Prior Policy Period during which employee theft occurred. (Doc. 64.) If the Court concludes that the Policy does not provide for this coverage, Farwest argues in the alternative that it is entitled to coverage under the doctrine of reasonable expectations. (Doc. 64 at 11-12, 14, 24-25.) In support of its reasonable-expectations argument, Farwest submits the declaration of Ms. Vaught. (Doc. 65-1 at 106.) As President and CEO of Farwest, Ms. Vaught avers:
2. When I, acting on behalf of Farwest, purchased the Package Policy from Secura for the Current Period, 2012-2013 through Doug Gnas, I was told, and believed, as confirmed by the
Declarations for the 2012-2013 Policy Period, that Farwest was insured for theft of Commercial Personal Property under both the Commercial Crime Coverage and the Commercial Personal Property Coverage.(Id.)
3. When I, acting on behalf of Farwest, purchased the Commercial Crime Coverage for the Current Period, 2012-2013 from Secura, through Doug Gnas, I was told, and believed, that purchasing continuing Crime coverage from Secura would give Farwest greater protection because Secura covered crime losses sustained within prior policy periods.
4. I had no reason to believe, and did not believe, that Current Losses and Prior Losses under the Insuring Agreement for Employee Theft were, together, limited to $275,000.
On June 28, 2022, Secura filed its Cross-Motion for Summary Judgment seeking summary judgment on Farwest's claims. (Doc. 74.) Secura asserts that it has paid Farwest the applicable limit of insurance and nothing more is due. (Doc. 74 at 1-2.)
II. Discussion
Both parties agree that summary judgment is the appropriate mechanism for resolving this case because the issues presented require the interpretation of the language of the Policy and that is a question of law for the Court to decide. (Docs. 64 at 2; 74 at 2-3.)
Summary judgment will be granted when the movant has shown "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); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A dispute is "genuine" if there is sufficient evidence for a reasonable jury to return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). At summary judgment, the court must not weigh the evidence but determine whether there is a genuine issue for trial. Id. at 294, 106 S.Ct. 2505. A court presented with cross-motions for summary judgment should review each motion separately, giving the nonmoving party for each motion the benefit of all reasonable inferences from the record. ACLU of Nev. v. City of Las Vegas, 466 F.3d 784, 790-91 (9th Cir. 2006).
A. Interpretation of the Insurance Policies
When interpreting an insurance contract, the court begins with the language of the policy. See First Am. Title Ins. Co. v. Johnson Bank, 239 Ariz. 348, 372 P.3d 292, 294 (2016). The court must interpret the language according to its "plain and ordinary meaning" and "from the viewpoint of an individual untrained in law or business." Teufel v. Am. Fam. Mut. Ins. Co., 244 Ariz. 383, 419 P.3d 546, 548 (2018). The court also interprets the terms in the context of the entire contract. Apollo Educ. Grp., Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 250 Ariz. 408, 480 P.3d 1225, 1228 (2021). If the terms are clear, the court enforces them unless the contract is illegal or violates public policy. Id.
An insurance policy is ambiguous if it presents conflicting reasonable interpretations. State Farm Mut. Auto. Ins. Co. v. Wilson, 162 Ariz. 251, 782 P.2d 727, 734 (1989). If the policy is ambiguous, the court examines the "transaction as a whole." Teufel, 419 P.3d at 548. If the ambiguity remains, the court generally construes it against the insurer, particularly when the ambiguity involves an exclusionary clause. Id. However, "a court may not take 'the easy way out' by inventing ambiguity, and then resolving it to find coverage where none exists under the policy." Sec. Ins. Co. of Hartford v. Andersen, 158 Ariz. 426, 763 P.2d 246, 248 (1988). The interpretation of an insurance contract is a question of law for the court to decide. Odom v. Farmers Ins. Co. of Ariz., 216 Ariz. 530, 169 P.3d 120, 122 (Ariz. Ct. App. 2007).
1. Exclusion for Employee Theft
The Property Policy unambiguously excludes coverage for employee theft. Although it may appear from the declarations pages that the Property Policy insures all theft, review of the Property Policy as a whole clearly shows that it excludes theft by employees. The declarations pages include a "CAUSE OF LOSS" column indicating the types of losses that Secura will insure, and under that column is the notation "SPECIAL-Incl theft." (See Doc. 57-1 at 38-41.) This notation does not represent the entire Property Policy, and the length of the Property Policy would suggest to a reasonable person that the notation does not fully describe the extent of coverage. The declarations pages also include "FORMS AND ENDORSEMENTS, APPLYING TO COMMERCIAL PROPERTY COVERAGE PART," which are "MADE PART OF THIS POLICY AT TIME OF ISSUE." (Doc. 57-1 at 43.) The list of forms that follows includes CP1030 (06-07). (Id.) The list of forms is followed with a second conspicuous warning that Secura bases coverage on these forms and not only the declarations pages:
THESE DECLARATIONS AND THE COMMON POLICY DECLARATIONS, IF APPLICABLE, TOGETHER WITH THE COMMON POLICY CONDITIONS, COVERAGE FORM(S) AND ENDORSEMENTS, IF ANY, ISSUED TO FORM A PART THEREOF, COMPLETE THE ABOVE NUMBERED POLICY.(Id.)
Reading the declarations pages and Form CP1030 (06-07) together, it is apparent that the Property Policy excludes employee theft. Right after the declarations pages, the Property Policy includes a "FORMS SCHEDULE," identifying "CP1030 (06-07)" as "CAUSE OF LOSS - SPECIAL FORM." (Doc. 57-1 at 62.) This Form presents a list of "1. Exclusions" and "2. Limitations"—a type of boilerplate or fine-print provision found in most insurance policies. (Doc. 57-1 at 93.) Under limitation B.2.h, the Property Policy explicitly excludes coverage for employee theft. (Doc. 57-1 at 95.)
When interpreting whether the Property Policy covers employee theft, the Court must consider the Property Policy as a whole, including the declarations pages and boilerplate provisions. See Apollo Educ. Grp., Inc., 480 P.3d at 1228; Green v. Mid-Am. Preferred Ins. Co., 156 Ariz. 265, 751 P.2d 581, 584-85 (Ariz. Ct. App. 1987). The Green decision is particularly instructive because it rejects arguments like those presented by Farwest in this action. Green involved the interpretation of an auto insurance policy after a fatal motorcycle accident. Id. at 582. The decedent's wife and two children filed a claim with the insurer under a policy that included underinsured motorist coverage of $100,000 for each person and $300,000 for each accident. Id. The wife and children argued that they should each recover $100,000, up to $300,000 for the accident, as those were the limits stated on the policy's declarations page. Id. at 584. However, the policy also included a "Split Underinsured Motorists Limits" endorsement that limited the underinsured motorist coverage to "damages for bodily injury sustained by any one person in any one accident." Id. (emphasis added). This endorsement prevented the deceased's wife and children, who were not in the accident, from each recovering $100,000 under separate derivative claims for emotional injury or loss of companionship. Id. The wife and children contended that the declarations page, not the boilerplate endorsement, should govern. Id.
The Green court held that the policy was unambiguous, and refused to read the declarations page without the context of the boilerplate provision. Id. at 584-85. The court explained that the "declarations page sets forth the basic coverage" and the boilerplate endorsement provides the "explanation." Id. at 584. The court reasoned that "[i]t is neither possible nor practical to include every detail of coverage on a declarations page" and "the declarations page would be meaningless without a referral to and explanation in the endorsement, or boilerplate." Id. at 585. The court thus held that the policy was not ambiguous, confusing, or conflicting when considered as a whole. Id. The policy offered coverage of $100,000 for each person and $300,000 for each accident, as stated in the declarations page, but subject to the endorsement's limitations. Id.
Like the declarations page in the policy at issue in Green, which broadly suggested that all claimants had $100,000 in underinsured motorist coverage, here the Property Policy's declarations pages broadly indicate coverage for theft by stating "SPECIAL-Incl theft" under the Cause of Loss column. (Doc. 57-1 at 38-41.) However, like the unambiguous boilerplate provision in Green, which clarified that only claimants in the accident receive $100,000 in coverage, the remaining portions of the Property Policy are also clear and unconfusing, setting forth limitations that apply to theft coverage. Specifically, the endorsements and limitations are clear that the Property Policy extends coverage for theft only if the dishonest actor is not the insured or "any of [its] partners, members, officers, managers, [or] employees . . . ." (Doc. 57-1 at 95.) Because the Court must interpret the extent of coverage in the context of the entire contract, the Court concludes that the Property Policy does not provide coverage for employee theft.
2. Policy Limits for Crime Coverage
Secura issued Farwest four Policies with Crime Coverage. (Doc. 57 ¶¶ 1, 7, 11-12.) These four Policies each ran for one year, spanning from 2009 to 2013. (Id.) The Crime Coverage in the first three Policies, the Prior Policies, have a limit of $100,000 for employee theft; and the fourth policy, the 2012-2013 Policy, has a limit of $250,000 for employee theft. (Id.) The parties disagree as to whether Farwest is entitled to the cumulative total of the policy limits from the four Policy Periods or the single highest available policy limit. (Docs. 64 at 15; 74 at 15-16.) Farwest contends that, if a loss occurred during a Policy Period, it is entitled to that Policy Period's coverage. (Doc. 64 at 15.) And when a loss occurred during multiple Policy Periods, Farwest argues it is entitled to the cumulative total of the coverage from all of those Policy Periods. (Id.) Secura, on the other hand, asserts that Farwest is entitled to the single highest available policy limit, pursuant to the terms of the 2012-2013 Policy. (Doc. 74 at 15-16.)
The 2012-2013 Policy unambiguously prohibits insureds from aggregating policy limits for a claim that occurred during multiple Policy Periods. Farwest's interpretation of the Policy's Crime Coverage conflicts with Section E.1.k's clear terms and illustrative examples. Section E.1.k.1 of the Policy explains that Secura will pay for a loss sustained during a prior Policy Period. (Doc. 57-1 at 247.) Yet Section E.1.k.3 adds a condition: "The most we will pay for the entire loss is the highest single Limit of Insurance applicable during the period of loss . . . ." (Id.) In clear terms, the Policy states that Farwest may claim the highest single policy limit from 2009 to 2013 but cannot claim the cumulative total of those policy limits.
Farwest argues that the " 'period of loss' is the Policy Period in which the loss is 'taking place.' " (Doc. 78 at 11.) That is, Farwest believes a period of loss may only span a single Policy Period, and as soon as a loss carries into the next Policy Period, it creates a new period of loss with a new policy limit. (See Doc. 78 at 10-11.) The plain language of E.1.k.3 does not support Farwest's argument. The interpretation of Section E.1.k.3 turns on the phrase: "the highest single Limit of Insurance applicable during the period of loss." (Doc. 57-1 at 247.) The word "highest" denotes a comparison of policy limits and a comparison requires more than one applicable policy limit. Further, there can only be more than one applicable policy limit if the period of loss spans multiple Policy Periods. Therefore, contrary to Farwest's argument, a "period of loss" cannot mean the single Policy Period in which the loss occurs.
Farwest also argues that the absence of language expressly prohibiting Farwest from aggregating policy limits creates ambiguity. (Doc. 64 at 16.) Farwest points to a related Policy provision, Section E.1.l.3, which explains how Secura will cover losses incurred during prior non-Secura-insured policy periods. (Doc. 64 at 20.) Farwest notes that this provision provides: "the amount recoverable under this Condition is part of, not in addition to, the Limit of Insurance applicable to the loss covered under this insurance . . . ." (Doc. 57-1 at 249 (emphasis added); see also Doc. 64 at 20.) Although Section E.1.l.3 does not apply here, Farwest contends it is significant that the Policy expressly prohibits aggregating policy limits when discussing past policy periods covered by another insurer. (Doc. 64 at 16.)
Indeed, the Policy does not use the same language in E.1.k to expressly prohibit the aggregation of policy limits for claims arising out of past Policy Periods covered by Secura. (See Doc. 57-1 at 247.) Even so, the absence of such language does not leave room for any ambiguity because the Policy's terms are clear and include direct examples. As discussed above, E.1.k.3 states that "the highest single Limit" applies, not a cumulative total of the policy limits. The Policy also includes an on-point example in Section E.1.k.4:
(Doc. 57-1 at 248.) This example clearly explains that, even when a loss spans more than one Policy Period, an insured cannot aggregate the applicable policy limits. Instead, the insured will receive coverage in the amount of the single highest relevant policy limit. The Policy is not ambiguous because this is the only reasonable interpretation of Section E.1.k presented by the parties. See Wilson, 782 P.2d at 734. The Court will not create ambiguity and resolve it to find coverage where none exists. See Andersen, 763 P.2d at 248.
EXAMPLE NO. 2:
The Insured sustained a covered loss of $250,000 resulting directly from an "occurrence" taking place during the terms of Policy A and Policy B.
POLICY A . . . Limit of Insurance of $125,000 . . . .
POLICY B . . . Limit of Insurance of $150,000 . . . .
The most we will pay for this loss is $150,000.
B. Reasonable Expectations
Arizona recognizes the doctrine of reasonable expectations. Farwest argues that, if the Court finds the Policy unambiguous, it should still extend coverage under this doctrine. (Doc. 64 at 11-12, 14, 24-25.) The Court concludes that Farwest did not have a reasonable expectation for coverage of employee theft under the Property Policy or a reasonable expectation for coverage, in the form of cumulative policy limits, under the Policy's Crime Coverage.
The Arizona Supreme Court recognized the doctrine of reasonable expectations in Gordinier v. Aetna Casualty & Surety Co., holding that Arizona courts will not enforce an insurance policy's unambiguous boilerplate terms in four "limited" situations:
1. Where the contract terms, although not ambiguous to the court, cannot be understood by the reasonably intelligent consumer who might check on his or her rights, the court will interpret them in light of the objective, reasonable expectations of the average insured;154 Ariz. 266, 742 P.2d 277, 283-84 (1987) (emphasis original) (internal citations omitted). Farwest fails to establish that the coverage it seeks falls into one of these situations.
2. 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;
3. 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;
4. Where some activity reasonably 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.
1. Understood by a Reasonably Intelligent Consumer
A reasonably intelligent consumer who reads the Property Policy would understand that it does not cover employee theft. See id. As discussed in Part II.A.1, although the declarations pages state "SPECIAL-incl theft," the declarations also condition coverage with a list of forms and endorsements. (Doc. 57-1 at 38-41, 43.) One of the forms is the Cause of Loss form, which specifically excludes and limits coverage for a variety of circumstances, including "theft by employees." (See Doc. 57-1 at 93-95.) Along with other major coverage exclusions and limitations, the exclusion for employee theft is clear and easy to locate for reasonably intelligent consumers checking on their rights.
A reasonably intelligent consumer who reads the Policy would also understand that it does not aggregate the policy limits for Crime Coverage claims arising in multiple Policy Periods. See Gordinier, 742 P.2d at 283-84. As discussed in Part II. A.2, E.1.k.3's language plainly states that "the highest single Limit" applies, not a cumulative total of the policy limits. (See Doc. 57-1 at 247.) And, to add further clarity, the Policy illustrates this with "EXAMPLE NO. 2." (Doc. 57-1 at 248.)
2. Full and Adequate Notice
Even if the employee-theft exclusion and aggregating prohibition "emasculates apparent coverage," Farwest offers no evidence showing that it did not have full and adequate notice of these provisions. See Gordinier, 742 P.2d at 284. The Property Policy and overall Policy use clear language to exclude employee theft and prohibit the aggregation of policy limits for Crime Coverage claims arising in multiple Policy Periods. Secura did not scatter the employee-theft exclusion or the aggregating prohibition throughout the Policy or obscure them with technical terms. Cf. id. at 284-85 (finding a reasonable expectation of coverage where the limitation was "inconspicuous," "scattered over the policy," and "difficult to comprehend"). Even though Ms. Vaught appears to have read only the declarations pages, (see Doc. 75-4 at 6), Secura provided her with full and adequate notice of the relevant provisions.
Notably, the warning language in the declarations pages should have alerted Ms. Vaught that additional conditions and limitations were included in the Policy. (See Doc. 57-1 at 43.)
3. Activity Reasonably Attributed to Secura
Finally, Farwest presents no evidence of "activity which can be reasonably attributed" to Secura that (1) induced Farwest to believe it had coverage or (2) would create an objective impression of coverage in the mind of a reasonable insured. See Gordinier, 742 P.2d at 284. Farwest relies on Ms. Vaught's declaration to support its argument that it had a reasonable expectation of coverage. (Doc. 64 at 14, 24-25.) But Ms. Vaught's declaration fails to raise a genuine dispute of material fact as to her reasonable expectation of coverage.
Although the Court considers Ms. Vaught's declaration in its analysis, it recognizes the declaration's questionable credibility. "The general rule in the Ninth Circuit is that a party cannot create an issue of fact by an affidavit contradicting his prior deposition testimony." Van Asdale v. Int'l Game Tech., 577 F.3d 989, 998 (9th Cir. 2009). In her deposition, Ms. Vaught repeatedly answered questions about what Mr. Gnas told her with "I can't recall" and "I don't remember." (Doc. 75-4 at 4, 8). This testimony may contradict Ms. Vaught's declaration, in which she makes specific statements about what Mr. Gnas told her years ago. (See Doc. 65-1 at 106.) However, because neither party provided the Court with the entire deposition transcript, and because the Court must consider the record in the light most favorable to Farwest, see Anderson, 477 U.S. at 249, 106 S.Ct. 2505, the Court includes Ms. Vaught's declaration in its analysis.
In her declaration, Ms. Vaught asserts that she
was told, and believed, as confirmed by the Declarations for the 2012-2013 Policy Period, that Farwest was insured for theft of Commercial Personal Property under both the Commercial Crime Coverage and the Commercial Personal Property Coverage.(Doc. 65-1 at 106.) Ms. Vaught's declaration establishes only that she believed that the Property Policy insures theft generally. Ms. Vaught fails to identify any misrepresentation by Mr. Gnas or Secura with respect to this belief; in fact, it is undisputed that the Property Policy and Crime Coverage both do insure for theft. Ms. Vaught also does not state that Mr. Gnas or Secura told her or caused her to believe that Secura covers employee theft under the Property Policy. The material issue is whether Mr. Gnas or Secura's alleged representations—that both the Property Policy and Crime Coverage insure theft—led Ms. Vaught, or would have led a reasonable person, to believe that the Property Policy insures employee theft specifically. Ms. Vaught's declaration offers no evidence on this issue and therefore fails to present a genuine dispute of material fact.
The Court does not address whether Mr. Gnas' activity can be "reasonably attributed" to Secura, see Gordinier, 742 P.2d at 284, because resolution of the issue is not necessary to a ruling on the pending motions. The Court's analysis in Part II.B assumes, without deciding, that Mr. Gnas' activity can be reasonably attributed to Secura. Even so, Farwest fails to raise a genuine dispute of material fact on the question of its reasonable expectations.
Similarly, Ms. Vaught's declaration does not present a disputed issue of material fact as to Farwest's expectations about the aggregation of claims for employee theft under the Prior Policies' Crime Coverage. Ms. Vaught makes two statements relevant to this issue. First she avers:
I was told, and believed, that purchasing continuing Crime coverage from Secura would give Farwest greater protection because Secura covered crime losses sustained within prior policy periods.(Doc. 65-1 at 106.) No material issue of fact is presented by this statement because it is undisputed that the Policy does cover crime losses sustained by Farwest during prior Policy Periods, thereby providing greater protection than if the Policy did not extend coverage outside the 2012-2013 Policy Period. Although the Policy includes some conditions on the extended protection, it remains true that the Policy provides greater protection by covering crime losses from prior Policy Periods.
Second, Ms. Vaught avers:
I had no reason to believe, and did not believe, that Current Losses and Prior Losses under the Insuring Agreement for Employee Theft were, together, limited to $275,000.(Id.) This assertion does not establish that Mr. Gnas or Secura's representatives made statements that led Ms. Vaught to believe that the employee-theft coverage for each Policy Period could be aggregated without limit. Rather, Ms. Vaught's declaration evidences only that no one told her what the coverage cap was under the Policy, and that she did not read the Policy herself. Ms. Vaught's bare assertion that she believed that Farwest's coverage for employee theft was not limited to $275,000, but was some unknown higher amount, is more appropriately characterized as a "fervent hope," as opposed to "a reasonable expectation," for more coverage. See Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co., 140 Ariz. 383, 682 P.2d 388, 395 (1984) ("Of course, if not put in proper perspective, the reasonable expectations concept is quite troublesome, since most insureds develop a 'reasonable expectation' that every loss will be covered by their policy. Therefore, the reasonable expectation concept must be limited by something more than the fervent hope usually engendered by loss.").
III. Conclusion
For the foregoing reasons, the Court concludes that Symetra is entitled to summary judgment as a matter of law.
IT IS ORDERED:
1. Plaintiffs' Motion for Partial Summary Judgment (Doc. 64) is DENIED. 2. Defendant's Cross-Motion for Summary Judgment (Doc. 74) is GRANTED. 3. The Clerk of Court must enter judgment accordingly and close its file in this action.