Opinion
CASE NO. C09-1817MJP.
March 11, 2011
ORDER
The above-entitled Court has received and reviewed the following:
1. Defendant's Motion for Summary Judgment (Dkt. No. 21);
2. Plaintiff's Response, including requests to Extend the Deadline to Amend the Complaint, to Amend the Complaint, and Cross-Motion for Summary Judgment (Dkt. No. 25);
3. Plaintiff's Motion for an Order Shortening Time to Consider Plaintiff's Motion to Extend the Deadline for Amending the Complaint and to Amend the Complaint (Dkt. No. 26);
4. Plaintiff's Motion to Strike Portions of Declaration of Jason Skuda (Dkt. No. 27);
5. Plaintiff's Motion to Strike the Declaration of Defendant's Expert, Tom Battisto (Dkt. No. 28);
6. Defendant's Reply in Support of its Motion for Summary Judgment and in Opposition to Plaintiff's Motions (Dkt. No. 32);
7. Plaintiff's Motions in Limine (Dkt. No. 31);
8. Defendant's Opposition to Plaintiff's Motions in Limine (Dkt. No. 34);
9. All related declarations and exhibits; and
10. Oral Argument held March 4, 2011 (Dkt. No. 36.)
IT IS ORDERED that:
1. Defendant's Motion for Summary Judgment is GRANTED and Plaintiff's claims are DISMISSED with prejudice.
2. Plaintiff's Motion to Extend the Deadline to Amend the Complaint is DENIED.
3. Plaintiff's Motion to Amend the Complaint is DENIED.
4. Plaintiff's Cross-Motion for Summary Judgment is DENIED.
5. Plaintiff's Motion for an Order Shortening Time is DENIED.
6. Plaintiff's Motion to Strike Portions of the Declaration of Jason Skuda for Lack of Personal Knowledge is DENIED.
7. Plaintiff's Motion to Strike the Declaration of Defendant's Expert, Tom Battisto is DENIED.
8. Plaintiff's Motions in Limine are STRICKEN as moot.
Background
Plaintiff is the owner of a hop farm in Yakima, Washington. In November 2007, a fire destroyed Plaintiff's shop building and a power company's electrical equipment. (Dkt. No. 24, Griffith Decl. at 2.) Plaintiff contacted its insurance company, Fireman's Fund Insurance Company ("Fireman's Fund"), and was told the building was insured by Fireman's Fund's subsidiary, American Insurance Co. ("Defendant"). (Id.) Fireman's Fund assigned a claim number and an adjuster, John Umland to inspect the damage.(Id.) Defendant submitted payment to Plaintiff for the shop building. (Id.)
In February 2008, as the power company was repairing its equipment, local authorities informed Plaintiff that the power could not be reconnected until Plaintiff upgraded the wiring in the Kiln Building. (Dkt. No. 22, Exs. 8-10.) Plaintiff hired an electrician to upgrade the Kiln Building and submitted a claim to Defendant for coverage of the costs. (Dkt. No. 24, Griffith Decl. at 3.) Defendant refused because the upgrade was not covered under the insurance policy. (Dkt. No. 22, Exs. 8-10.)
In July 2008, Plaintiff discovered four of seven kilns in the Kiln Building were not functioning. (Dkt. No. 22, Ex. 16.) Plaintiff hired an electrician to repair the kilns and discovered the failure was due to short-circuited Mod Motors. (Dkt. No. 24, Griffith Decl. at 3.) Although the first electrician was unable to determine the cause, a second electrician believed the November 2007 fire caused a power surge, which shorted the Mod Motors. (Dkt. No. 22, Exs. 4 5.) Plaintiff replaced the Mod Motors and submitted a claim to Fireman's Fund for damage to the Mod Motors. (Dkt. No. 24, Griffith Decl. at 3.) Fireman's Fund referred the claim under the same claim number and adjuster. (Id.) Based on the terms of the policy, Defendant determined the damage was not covered. (Id.)
In the complaint, Plaintiff alleged Defendant owed for damages covered under policy no. 643 FRM8042833 ("the First Policy"). (Dkt. No. 1.) In its answer, Defendant filed a counterclaim, seeking a declaration that it owed no coverage "under any policy of insurance concerning claims associated with the [K]iln [B]uilding[.]" (Dkt. No. 10, at 4.) Defendant referred to both the First Policy and policy No. 643FRM06648193 ("the Second Policy"), as "American Polic[ies]." (Id. at 3.)
In its motion for summary judgment, Defendant argues American Insurance Co. did not issue the Second Policy. (Def. Mot. Br. at 1-2, n. 1.) Defendant argues the Second Policy, not the First Policy, applies to coverage related to the Kiln Building, and the Second Policy was issued by a different Fireman's Fund subsidiary, National Surety Corporation ("NSC"). (Id.) In the documents exchanged throughout discovery, both parties refer to both policies but not the second company.
Discussion
A. Defendant's Motion for Summary Judgment
Defendant moves for Summary Judgment on all of Plaintiff's claims. Summary judgment is appropriate when it is demonstrated that there is no genuine dispute of material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial responsibility of informing the Court of the basis for the motion and identifying the portions of the record that demonstrate the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The party moving for summary judgment may also carry its initial burden by showing that the opposing party lacks sufficient evidence to carry its ultimate burden at trial. Id. at 323-25. If the moving party meets its initial responsibility, the burden shifts to the oppo sing party to establish that a genuine dispute of fact actually does exist.Matsushita Elec. Ind. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986). If the party opposing summary judgment fails to properly address an assertion of fact, the Court may consider the fact undisputed for purposes of the motion. Fed.R.Civ.P. 56(e).
In addition to attacking each claim on the merits, Defendant argues Plaintiff's losses are not covered by the policy named in the complaint, i.e. the First Policy. The Court agrees.
1. Electrical Equipment
Defendant argues the damaged electrical equipment between the shop building and the Kiln Building is not covered under either insurance policy because the equipment is owned by the power company, not Plaintiff. (Dkt. No. 21 at 5.) Plaintiff does not dispute ownership or provide any argument that the equipment is nevertheless covered. As a result, the Court grants summary judgment in favor of Defendant as to any claim for damages to the electrical equipment.
2. Cost of Upgrades
Defendant argues it does not owe Plaintiff for the cost of electrical upgrades because coverage applies for upgrades only if caused by damage to a covered building. (Dkt. No. 21 at 6.) Plaintiff fails to provide any evidence showing the alleged damage to the Kiln Building caused the required upgrades. The upgrades were necessary because the power company replaced its equipment and the local authorities would not permit the Kiln Building to be connected until it was upgraded. Since Plaintiff has not shown that these upgrades were necessary because of the damage to the Kiln Building, the Court grants Defendant's motion for summary judgment as to the cost of electrical upgrades.
3. Mod Motors
Defendant argues Plaintiff cannot prove the fire caused a power surge, which damaged the Mod Motors. Each party offers an expert opinion as to the cause of damage to the Mod Motors. Each party also asks the Court to find the opposing expert's testimony inadmissible. It is unnecessary to resolve these questions.
Assuming without deciding that Plaintiff's expert is correct and the Mod Motors were damaged by a power surge when the electric equipment was destroyed, Defendant is still entitled to judgment as a matter of law. In this interpretation of events, the damage to the Mod Motors was still caused by damage to the power company's equipment, which was not covered by either policy. As a result, the ensuing damage to the Mod Motors is not covered, and the Court grants Defendant's motion for summary judgment.
4. Extra-Contractual Claims
Defendant requests dismissal of Plaintiff's extra-contractual claims on the basis that Defendant "paid for all covered damage[,] . . . properly denied non-covered aspects of the claim . . . and acted in good faith at all times." (Dkt. No. 21 at 7.) Plaintiff argues that even if Defendant was ultimately correct in determining a lack of coverage, it still breached its duty of good faith by failing to conduct a reasonable investigation.
Failure to investigate could constitute a breach of the covenant of good faith "regardless of whether the insurer was ultimately correct in determining coverage did not exist."Coventry Assocs. v. Am. States Ins. Co., 136 Wn.2d 269, 279 (1998). In such a situation, an insurer is liable only for expenses incurred as a result of its failure to conduct a reasonable investigation. Id. at 284.
Here, Plaintiff's claim fails because (1) Defendant's review of the applicable policies was reasonably sufficient to determine the losses were not covered, (2) Defendant communicated the reasons for its denial and the existence of the Second Policy in communications with Plaintiff's adjuster prior to the present suit, and (3) Plaintiff has not presented any evidence of "expenses incurred as a result of" Defendant's failure to investigate.
Even if a physical investigation of the Mod Motors would have been appropriate, Defendant's failure to conduct one was not a matter of bad faith. Defendant could not examine the Mod Motors because Plaintiff had already replaced them before Defendant denied coverage. (Dkt. No. 22, Ex. 4.) As a result, the Court grants Defendant's motion for summary judgment as to the extra-contractual claims.
B. Plaintiff's Motions to Extend the Deadline and for Leave to Amend its Complaint
Plaintiff moves to modify the pre-trial schedule so that Plaintiff can amend its complaint to include NSC as a defendant and the Second Policy. The deadline for amended pleadings was April 2, 2010. (Dkt. No. 12.) Plaintiff has not explained its failure to include the Second Policy in its pleading before now.
"A schedule may be modified only for good cause and with the judge's consent." Fed.R.Civ.P. 16(b)(4). "Rule 16(b)'s good cause standard primarily considers the diligence of the party seeking the amendment." Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992).
Plaintiff argues good cause exists because it "mistakenly believed that American was the insuring party for the shop building and kiln building losses[.]" (Pl. Opp'n Br. at 10 (emphasis in original).) Defendant argues Plaintiff was aware of the second insurance policy if not the second insurance company.
In communications before and during the present litigation, Defendant denied coverage under both insurance policies and Plaintiff acknowledged the existence of the Second Policy. For example, Mr. Umland wrote to Plaintiff on December 4, 2008, stating the equipment insured by the Second Policy was not damaged by the fire. (Dkt. No. 25 at 23.) Plaintiff himself includes this excerpt in a declaration submitted in opposition to Defendant's motion for summary judgment. (Id.) On April 7, 2008, Plaintiff's public adjuster attached portions of the Second Policy to a letter arguing for coverage of the electrical upgrades. (Dkt. No. 33 Ex. 14.) Defendant referred to both policies by number in its request for declaratory judgment, filed with its answer, (Dkt. No. 10.), and Plaintiff referred to both policies by number multiple times in its interrogatories and requests for production filed on April 15, 2010. (Dkt. No. 33 Ex. 13.)
Since Plaintiff was clearly aware of both policies, Plaintiff's failure to include the Second Policy does not constitute good cause to modify the scheduling order. The Court denies Plaintiff's motion to extend the deadline to amend the complaint.
C. Plaintiff's Cross-Motion for Summary Judgment
In response to Defendant's motion, Plaintiff also requests summary judgment on (1) the breach of contract claim and (2) the bad faith claim. Plaintiff's motion is procedurally and substantively flawed. The deadline for dispositive motions was January 7, 2011. (Dkt. No. 20.) Plaintiff's request was filed as a response on January 31, 2011, with no request for a waiver of the dispositive motions deadline.
Even if it had been timely filed, Plaintiff's motion is without merit. First, Plaintiff provides no rationale justifying a finding that Defendant breached the contract as a matter of law. Second, Plaintiff's argument that "Fireman's Fund is liable for bad faith, as a matter of law" (Pl. Opp'n Br. at 19) fails because Fireman's Fund is not a party to the present lawsuit. Finally, Plaintiff fails to demonstrate the absence of a factual dispute as to whether Defendant conducted either a necessary or reasonable investigation. As a result, the Court denies Plaintiff's motion for summary judgment.
D. Plaintiff's Motions to Strike
In addition to its response to Defendant's motion, Plaintiff filed separate motions to strike portions of Defendant's attorney's declaration and Defendant's expert's declaration. (Dkt. Nos. 27 28.) Local Court Rules direct parties to include motions to strike in responsive briefing. Local Rules, W.D.Wash. 7(g). Because the request to strike was made separately, the Court denies Plaintiff's procedurally improper motions to strike.
E. Plaintiff's Motion for an Order Shortening Time
Plaintiff asks the Court to shorten time for its motion to extend the deadline to amend its complaint. (Dkt. No. 26.) "Motions to shorten time have been abolished." Local Rules, W.D.Wash. 6(e). As a result, the Court denies Plaintiff's motion to shorten time.
Conclusion
Plaintiff has not shown that the damages in question are covered by either insurance policy. Furthermore, Plaintiff has not established that a material question of fact exists as to whether Defendant acted in bad faith. As a result, Defendant's motion for summary judgment is GRANTED and Plaintiff's claims are DISMISSED with prejudice.
The Court DENIES Plaintiff's motions to strike and shorten time and its cross-motion for summary judgment because they are procedurally flawed. Plaintiff had notice of the Second Policy from communications with Defendant before the present suit was filed. As a result, the Court finds no good cause exists to modify the trial schedule and DENIES Plaintiff's motions to extend the deadline and for leave to amend its complaint.
In light of the Court's dismissal of the case, Plaintiff's pending motions in limine are moot, and the Court orders them STRICKEN. The pre-trial conference scheduled for Monday, March 14, 2011 is therefore cancelled.
The clerk is ordered to provide copies of this order to all counsel.
Dated this 11th day of March, 2011.