Opinion
Case No. 2:02CV1169.
July 16, 2003.
MEMORANDUM DECISION AND ORDER
This matter is before the court on Plaintiff's Motion for Summary Judgment. A hearing on the motion was held July 7, 2003. Plaintiff HE Equipment Services LLC ("ICM" or "Plaintiff") was represented by Joseph C. Rust, and Defendant KCI Insurance Agency, Inc. ("KCI" or "Defendant") was represented by Phillip S. Ferguson. Before the hearing, the court considered carefully the memoranda and other materials submitted by the parties. Since taking the motion under advisement, the court has further considered the law and facts relating to the motion. Now being fully advised, the court renders the following Memorandum Decision and Order.
Because Plaintiff HE Equipment Services, LLC is the successor-in-interest of CM Equipment Company, LLC, Plaintiff will be referred to as "ICM" for purposes of this Order.
I. BACKGROUND
ICM is a limited liability company organized in Louisiana, authorized to do and doing business in Utah, and KCI is a New Jersey corporation with its principal place of business in New Jersey. KCI is an insurance broker, and it receives submissions for insurance from clients or other insurance brokers to procure insurance coverage. Upon receipt of a submission, KCI transfers it to an insurance company's managing general agent, a company or individual authorized by an insurer to provide insurance quotes.
In February or March 2002, Dann Insurance forwarded to Mike Brownewell ("Mr. Brownewell") of Risk and Insurance Management a submission for excess automobile insurance coverage for the period of March 20, 2002 to March 20, 2003 on behalf of ICM. Mr. Brownewell then forwarded the submission to KCI. KCI forwarded the submission to Southwest Property and Casualty ("Southwest"), who KCI asserts was represented to be the managing general agent for General Star Indemnity Company ("Gen Star"). KCI states that Southwest then forwarded an insurance quote for ICM's excess automobile insurance from Gen Star to KCI who then sent it back to Mr. Brownewell of Risk and Insurance Management. Mr. Brownewell approved the purported Gen Star quote on behalf of ICM.
On March 22, 2002, KCI issued a binder and certificate of insurance to ICM. The policy was for $500,000 in excess automobile insurance from Gen Star for the period of March 20, 2002 to March 20, 2003. The binder listed KCI as the "producer" of coverage, ICM as the "insured," and Gen Star as the insurance "company." ICM paid $188,270 of premium and surplus lines of taxes and fees of $8,472.15 for a total of $196,742.15.
However, ICM received a letter dated June 20, 2002 from Derek R. Broaddus ("Mr. Broaddus"), Assistant Vice President for Gen Star, that disclaimed any coverage due under the purported policy of insurance and stated that Gen Star is not an insurer of ICM and had not released or authorized an insurance quotation for ICM. Mr. Broaddus further stated that Gen Star did not bind coverage, issue a policy of insurance, or possess a record of receipt of any premium associated with an account for ICM. In addition, Mr. Broaddus claimed that Southwest did not have, and has never had, authority with regard to the business of Gen Star.
KCI never delivered the excess automobile insurance policy to ICM. KCI failed to return premiums and other monies paid by ICM to KCI for the nonexistent insurance policy. ICM brought an action against KCI and subsequently filed this motion for summary judgment.
II. STANDARD OF REVIEW
A motion for summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). While the party moving for summary judgment bears the burden of demonstrating that there are no issues of material fact, the party opposing summary judgment must set forth specific facts showing that there is a genuine issue for trial. Celotex Corp., 477 U.S. at 325. "An issue of material fact is `genuine' if a `reasonable jury could return a verdict for the nonmoving party.'" Universal Money Ctrs., Inc. v. ATT Co., 22 F.3d 1527, 1529 (10th Cir. 1994) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The specific evidence must be identified by reference to source, such as affidavit, deposition transcript, or exhibit. United States v. Simons, 129 F.3d 1386, 1389 (10th Cir. 1997). The evidence must be of some substance; a scintilla of evidence will not defeat a summary judgment motion. Shearson Lehman Bros., Inc. v. Wasatch Bank, 788 F. Supp. 1184, 1189 (D. Utah 1992). In examining the factual record, all facts are construed and reasonable inferences are made in the light most favorable to the nonmoving party. See Beyers v. City of Albuquerque, 150 F.3d 1271, 1274 (10th Cir. 1998).
III. DISCUSSION
Plaintiff moves this court to grant its motion for summary judgment for failure of consideration, breach of fiduciary duty, conversion, and unjust enrichment. Plaintiff asserts that it is undisputed that KCI agreed to procure excess automobile insurance for KCI, ICM paid KCI for the insurance coverage, ICM did not receive the policy from KCI, and KCI never returned the monies paid to it by ICM. Defendant argues that there is a material factual dispute as to whether ICM did have insurance coverage through Gen Star during the relevant time. KCI asserts that ICM was in fact covered and prematurely canceled the coverage in December 2002.
ICM argues that it may rescind the insurance binder agreement because there is a failure of consideration on the part of KCI. In Utah, when there is a failure of consideration, a contract ceases to exist and the party who does not receive the benefit of the contract may rescind it. Aquagen International, Inc. v. Calrae Trust, 972 P.2d 411 414 (Utah 1998). "Failure of consideration . . . exists wherever one who has either given or promised to give some performance fails without his fault to receive in some material respect the agreed exchange for that performance." Id. (citations omitted).
In the instant case, it is undisputed that KCI represented to ICM that it had obtained excess automobile insurance for ICM through the binder agreement. As stated above, the binder agreement clearly identifies KCI as the "producer" of the binder agreement, ICM as the "insured," and Gen Star as the insurance "company." Further, it is undisputed that ICM paid KCI $196,742.15 in consideration for the purported insurance coverage. Moreover, ICM was never covered during the relevant time period despite KCI's representations, and KCI has failed to return the monies paid to it by ICM.
Defendant argues that Plaintiff may not rely upon the letter from Mr. Broaddus, Assistant Vice President of Gen Star, to support its contention that ICM was not covered by Gen Star because the letter is unauthenticated. However, Defendant provides no support for that assertion other than an affidavit statement by Gerard Stechmann ("Mr. Stechmann"), Secretary for KCI. Specifically, Mr. Stechmann states "[w]ith regard to ICM's excess automobile coverage with Gen Star, I was subsequently informed that ICM did, in fact, have effective coverage and chose to terminate the policy prematurely in December, 2002." (Stechman Aff. ¶ 11). KCI may not rely upon the affidavit statement by Mr. Stechmann to create a question of fact as to whether the policy existed or not. The nonmoving party may not rely upon "`generalized, unsubstantiated, non-personal affidavits'" to defeat a motion for summary judgment. Thomas v. IBM, 48 F.3d 478, 485 (10th Cir. 1995) (quoting Stevens v. Barnard. 512 F.2d 876, 879 (10th Cir. 1975)).
Further, the court has no reason to doubt the authenticity of the Gen Star letter nor has Defendant provided any reason for doing so. The Gen Star letter is admissible in that it falls under the business exception to the hearsay rule. See Fed.R.Evid. 803(6). See also United States v. Samaniego, 187 F.3d 1222, 1224 (10th Cir. 1999) (noting that a foundation for admissibility may be established by judicial notice). Moreover, the Gen Star letter is also admissible under the residual exception to the hearsay rule. See Fed.R.Evid. 807. The court finds that the Gen Star letter meets the requirements of Rule 807 in that (1) the letter is offered as evidence of a material fact; (2) the letter is more probative on the point for which it is offered than any other evidence that ICM could procure through reasonable means; and (3) the general purposes and interests of justice will be best served by finding the statement admissible. Id. Furthermore, Rule 807 provides that a statement may only be admitted if the proponent of the statement "makes known to the adverse party sufficiently in advance of the . . . hearing to provide the adverse party with a fair opportunity to prepare to meet it, the proponent's intention to offer the statement and the particulars of it, including the name and address of the declarant." Id. The court finds that Defendant has had more than a fair opportunity to prepare to meet the Gen Star letter but has failed to sufficiently refute it.
Therefore, because the court finds that KCI agreed to procure insurance coverage for ICM, consideration was paid by ICM to KCI, and KCI failed to deliver the contracted coverage, Plaintiff's motion for summary judgment is granted.
IV. CONCLUSION
For the foregoing reasons, IT IS HEREBY ORDERED that Plaintiff's motion for summary judgment GRANTED. Plaintiff is directed to file a proposed form of judgment in the amount of 196,742.15 and prejudgment interest at the legal rate from the date ICM paid the premium.